As filed with the Securities and Exchange Commission on September 20, 1996.
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
_________________________
Wireless One, Inc.
(Exact name of registrant as specified in its charter)
Delaware 11301 Industriplex Boulevard, Suite 4 72-1300837
(State or other Baton Rouge, Louisiana 70809-4115 (I.R.S. Employer
jurisdiction of (504) 293-5000 Identification Number)
incorporation or (Address, including zip code, and
organization) telephone number, including area
code, of registrant's principal
executive offices)
Mr. Hans J. Sternberg Copy to:
Chairman of the Board Brad J. Axelrod
Wireless One, Inc. Jones, Walker, Waechter, Poitevent,
11301 Industriplex Boulevard Carrere & Denegre, L.L.P.
Suite 4 Four United Plaza
Baton Rouge, Louisiana 70809-4115 8555 United Plaza Boulevard
(504) 293-5000 Baton Rouge, Louisiana 70809-7000
(Name, address, including zip code, (504) 231-2000
and telephone number, including
area code, of agent for service)
_________________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this registration statement
If any of the securities being registered on this Form are
to be offered on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of 1933, other than securities
offered only in connection with dividend or interest reinvestment
plans, check the following box. [X]
If this Form is filed to register additional securities
for an offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant
to Rule 462(c) under the Securities Act, check the following box
and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.
[ ]
If delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Amount maximum maximum
Title of each to be offering aggregate Amount of
class of securities registered price per offering registration
to be registered share<F1> price<F1> fee <F2>
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value
per share 450,000 shares $15.00 $6,750,000 $2,328
</TABLE>
<F1> Estimated solely for the purpose of calculating the
registration fee pursuant to Rule 457(c) under the
Securities Act of 1933, based on the average of the high
and low prices per share of the Common Stock as reported
on the Nasdaq Stock Market National Market on September
17, 1996.
<F2> Pursuant to Rule 429 under the Securities Act of 1933, as
amended, the Prospectus included herein also relates to
$14,452,100 of Common Stock registered under Registration
Statement No. 333-05109. If any of such previously
registered securities are offered prior to the effective
date of this Registration Statement, the amount of such
securities will not be included in any prospectus
hereunder. The amount of any securities being registered,
together with any securities registered under Registration
Statement No. 333-05109, represents the maximum amount of
securities that are expected to be offered for sale
pursuant to the Prospectus included herein. Filing fees
aggregating $4,983.48 were previously paid in connection
with the registration of $14,452,100 of Common Stock by
the registrant under Registration No. 333-05109.
The registrant hereby amends this registration statement
on such date or dates as may be necessary to delay its effective
date until the registrant shall file a further amendment which
specifically states that this registration statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
Pursuant to Rule 429 under the Securities Act of 1933, the
Prospectus included in this Registration Statement will also be
used in connection with the issuance of Common Stock registered
pursuant to Registration Statement No. 333-05109 previously filed
by the Registrant on Form S-1. This Registration Statement,
which is a new registration statement, also constitutes Post-
Effective Amendment No. 1 to Registration Statement No. 333-
05109, and such Post-Effective Amendment shall hereafter become
effective concurrently with the effectiveness of this
Registration Statement in accordance with Section 8(c) of the
Securities Act of 1933.
Subject to Completion September 20, 1996
PROSPECTUS
994,059 Shares
Wireless One, Inc.
Common Stock
($0.01 par value per share)
This Prospectus relates to 994,059 shares of common stock, $0.01 par
value per share (the "Common Stock"), of Wireless One, Inc. (the "Company"),
which may be offered from time to time by the Company exclusively to the
holders, and upon the exercise, of certain warrants previously issued by the
Company.
In October 1995, the Company issued units consisting of $1,000 principal
amount of 13% Senior Notes due 2003 (the "13% Notes") and three warrants to
purchase Common Stock (the "1995 Debt Offering," and together with the initial
public offering of the Company's Common Stock in October 1995, the "1995
Offerings"). Each warrant issued as part of the 1995 Debt Offering entitles the
holder to purchase one share of Common Stock at $11.55 per share (the "1995
Warrants"). The 1995 Warrants are exercisable at any time after October 24,
1996, until 5:00 p.m. Baton Rouge local time on October 24, 2000. There are
currently 450,000 1995 Warrants outstanding. In August 1996, the Company issued
units consisting of $1,000 principal amount of 13-1/2% Senior Discount Notes due
2006 (the "Discount Notes") and one warrant to purchase 2.274 shares of Common
Stock (the "1996 Debt Offering"). Each Warrant issued as part of the 1996 Debt
Offering entitles the holder to purchase 2.274 shares of Common Stock at
$16.6375 per share (the "1996 Warrants"). The 1996 Warrants are exercisable at
any time after the first anniversary of the consummation of the 1996 Debt
Offering and will expire on the fifth anniversary thereof. There are currently
239,252 1996 Warrants outstanding, which entitle their holders to purchase, in
the aggregate, 544,059 shares of Common Stock. All of the shares of Common
Stock offered hereby are being offered by the Company exclusively to holders of
the 1995 and 1996 Warrants.
The Common Stock is listed for quotation on the Nasdaq Stock Market
National Market under the symbol "WIRL." On September 17, 1996, the last
reported sales price of the Common Stock on the Nasdaq Stock Market National
Market was $15.25.
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN
EVALUATING AN INVESTMENT IN THE COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OR THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Underwriting
Price to Discounts and Proceeds to
Public Commissions<F1> Company<F2>
_______________________________________________________________________________
Per share, upon exercise of:
1995 Warrant $11.55 $0.00 $11.55
1996 Warrant $16.6375 $0.00 $16.6375
Total $5,197,500 $0.00 $5,197,500
$9,051,781 $0.00 $9,051,781
_______________________________________________________________________________
<F1> The Common Stock underlying the 1995 and 1996 Warrants is being offered
by the Company through the Prospectus and no commissions, bonuses, or
other fees will be paid to any person in connection with the offer and
sale of the Common Stock.
<F2> Before deducting expenses estimated at $ 60,000.
The date of this Prospectus is September _____, 1996.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities
laws of any such State.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements (including the notes thereto) appearing
elsewhere in this Prospectus. On July 29, 1996, the Company and TruVision
Wireless, Inc. ("TruVision") completed a merger of a subsidiary of the Company
with TruVision (the "TruVision Transaction"), whereupon TruVision became a
subsidiary of the Company. Unless otherwise indicated, all information
contained in this Prospectus (i) reflects consummation of the TruVision
Transaction and (ii) assumes consummation of all other pending acquisitions
(the "Acquisitions") more fully detailed under "Acquisitions." Unless the
context otherwise requires, references to the "Company" mean Wireless One,
Inc., its subsidiaries (including TruVision) and predecessors.
The Company
The Company acquires, develops, owns and operates wireless cable television
systems, primarily in small to mid-size markets in the southeastern United
States. The Company's 80 markets (including 10 through a limited liability
company which is 50% owned by the Company) are located in Texas, Louisiana,
Mississippi, Tennessee, Kentucky, Alabama, Georgia, Arkansas, North Carolina,
South Carolina and Florida and represent approximately 9.6 million households
(including households in markets held through such limited liability company).
The Company believes that approximately 7.3 million households (1.1 million of
which are in markets held through such limited liability company) can be
served by line-of-sight ("LOS") transmissions. LOS transmissions generally
require a direct, unobstructed transmission path from the central transmitting
antenna to an antenna at the subscriber's location. The Company believes that
certain of its Louisiana, Mississippi, Tennessee, Alabama, Georgia and Florida
markets comprise one of the largest contiguous geographic clusters in the
wireless cable industry, covering approximately 204,000 square miles.
The Company operates in and targets small to mid-size markets with a
significant number of LOS households that are unpassed by traditional hard-
wire cable. The Company estimates that approximately 25% of its LOS
households are unpassed by traditional hard-wire cable. By comparison, in the
20 largest hard-wire cable markets in the United States, only approximately 2%
of all households are unpassed by traditional hard-wire cable. Many of the
households in the Company's Markets (as defined), particularly in rural areas,
also have limited access to local off-air VHF/UHF programming from ABC, NBC,
CBS and Fox affiliates, and typically do not have access to subscription
television service except via satellite television operators, whose equipment
and subscription fees generally are more costly than those of wireless cable,
and which are unable to retransmit local off-air channels. In many of the
Company's rural Markets, the Company believes a significant number of
households passed by cable are served by local cable operators with lower
quality service and limited reception and channel lineups. As a result, the
Company believes that its wireless cable television service is an attractive
alternative to existing television choices for both passed and unpassed
households.
At June 30, 1996, the Company's markets included (i) 24 markets in which
the Company had systems in operation (the "Operating Systems"), (ii) 9 markets
in which the Company's systems were under construction and in which the
Company expects to begin operations by the end of November 1996 (the "Systems
Under Construction"), (iii) 17 markets in which the Company believes that it
has obtained sufficient wireless cable channel rights to launch commercially
viable systems (the "Near-Term Launch Markets"), and (iv) 20 markets in which
the Company believes that it has obtained sufficient wireless cable channel
rights to launch commercially viable systems, but which are subject to the
receipt of certain FCC approvals and third party consents (the "Long-Term
Launch Markets" and, together with the Operating Systems, the Systems Under
Construction, and the Near-Term Launch Markets, the "Markets"). Since June
30, 1996, the Company has launched four of the Systems Under Construction. In
addition, the Company owns a 50% interest in a limited liability company which
holds channel rights to serve 10 markets in North Carolina, all of which are
Long-Term Launch Markets. See "Risk Factors -- Need for Additional Financing
for Growth; Certain Covenants," "-- Uncertainty of Ability to Obtain FCC
Authorizations." During the six months ended June 30, 1996, the Company
increased its aggregate number of subscribers through internal growth and new
system launches from approximately 23,725 to 40,253, representing a 139%
annualized growth rate and a penetration rate of approximately 1.8% of the LOS
households in the Operating Systems at June 30, 1996.
While none of the Company's Operating Systems currently generate
operating income or positive cash flow from operations, as of June 30, 1996
three of the Company's Operating Systems, Delta and Jackson, Mississippi, and
Huntsville, Alabama generate positive System EBITDA (as defined in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations"). EBITDA is presented because it is a widely accepted financial
indicator of a company's ability to service and/or incur indebtedness. EBITDA
is not intended to represent cash flows, as determined in accordance with
generally accepted accounting principles, nor has it been presented as an
alternative to operating income or cash flow from operations or as an
indicator of operating performance. EBITDA should not be considered as a
substitute for measures of performance prepared in accordance with generally
accepted accounting principles. Based on its brief operating history, the
Company believes that its typical Operating Systems will generate positive
System EBITDA upon the achievement of 2,500 to 3,000 subscribers, however,
there can be no assurance this level of subscribers will continue to result in
positive System EBITDA in the future. As of June 30, 1996, the Company had
40,253 subscribers in its 24 Operating Systems.
<TABLE>
<CAPTION>
Average
Monthly
Estimated Extimated Approximate Revenue per
Operating Date of Current Total LOS Subscribers at Subscriber for
Systems Launch Channels<F1> Households<F2> Households<F3> June 30, 1996 June 1996
_________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Brenham, TX February 20 39,500 32,100 857 $33.69
1996
Bryan/College May 1995 32 102,700 65,600 2,899 33.66
Station, TX
Milano, TX October 20 40,900 36,800 1,659 32.34
<F4> 1995
Wharton, TX June 21 102,300 92,000 2,114 34.28
1994
Bunkie, LA December 20 94,700 81,600 1,498 33.17
1995
Lafayette, LA January 11 180,300 153,200 697 23.15
<F5> 1994
Lake Charles, April 17 111,600 92,500 555 30.66
LA 1994
Monroe, LA October 23 114,100 89,600 1,806 30.64
<F4> 1995
Jackson, MS June 29 211,500 176,900 10,745 30.06
1994
Delta, MS <F6> July 31 100,800 92,800 4,096 28.97
1995
Gulf Coast, January 24 132,300 121,700 1,672 21.59
MS <F7> 1996
Natchez, MS June 20 76,500 60,000 2 ---
1996
Oxford, MS June 20 60,100 53,500 23 ---
1996
Bucks, AL April 20 150,800 113,700 454 33.32
1996
Demopolis, AL April 28 17,500 15,600 266 20.25
1996
Dothan, AL June 23 100,500 81,200 1 ---
1996
Huntsville, February 27 196,800 181,900 4,014 31.25
AL 1991
Fort Walton May 1996 15 64,200 54,600 70 ---
Beach, FL
Gainesville, January 24 138,700 115,200 986 26.56
FL <F8> 1996
Panama City, September 23 108,300 83,300 1,751 30.08
FL 1995
Pensacola, FL July 28 217,400 157,900 2,041 35.88
1995
Jeffersonville,March 20 189,300 147,000 247 32.35
GA 1996
Lawrenceburg, June 20 76,400 44,100 397 30.08
TN 1995
Tullahoma, TN November 20 109,600 73,600 1,403 31.36
1995 _________ _________ ______
TOTAL 2,736,800 2,216,400 40,253
========= ========= ======
</TABLE>
___________________________
<F1>Includes wireless cable channels and, where applicable, local off-air
VHF/UHF channels that are not retransmitted by the Company via wireless cable
frequencies.
<F2>Estimated Total Households represents the Company's estimate of the total
number of households that are within the Company's Intended Service Area.
Intended Service Area includes (i) areas that are presently served, (ii) areas
where systems are not presently in operation but where the Company intends to
commence operations and (iii) areas where service may be provided by signal
repeaters or, in some cases, pursuant to FCC applications.
<F3>Estimated LOS Households represents the Company's estimate of the number of
households that can receive an adequate signal from the Company in its
Intended Service Area (determined by applying a discount to the Estimated
Total Households to account for those homes that the Company estimates will be
unable to receive service due to certain characteristics of the market). The
calculation of Estimated LOS Households assumes (i) the grant of pending
applications for new licenses or for modifications of existing licenses and
(ii) the grant of applications for new licenses and license modification
applications which have not yet been filed with the FCC.
<F4>Acquired from Heartland Division in October 1995 as part of the Heartland
Transaction (as defined). The Milano system was acquired by Heartland
Division in December 1994. The Monroe System was constructed in March 1993.
These systems were not actively marketed until being acquired by the Company
as part of the Heartland Transaction.
<F5>The Company is not actively marketing its service in the Lafayette Market
and does not intend to do so until an increase in the number of channels is
achieved, which the Company expects to occur within 6 months from the date
hereof.
<F6>Eight channels currently utilized in the Delta System are operated under
special temporary FCC authorization.
<F7>Four channels currently utilized in the Gulf Coast System were granted by
the FCC without acting on an objection filed by a third party.
<F8>Ten channels currently utilized in the Gainesville System are operated
under special temporary FCC authorization.
Business Strategy
The Company's primary business objective is to acquire, develop, own
and operate wireless cable television systems in rural markets in which the
Company believes it can achieve positive System EBITDA upon achieving 2,500 to
3,000 subscribers. The Company intends to accomplish this business objective
through implementation of the following operating strategies.
Rural market focus. The Company obtains wireless cable channel
rights and locates operations in geographic clusters of small to mid-size
markets that have a significant number of households not currently passed by
traditional hard-wire cable. The Company believes that such markets have less
competition from alternative forms of entertainment and are characterized by a
relatively high number of "value conscious" consumers, and that the Company's
low-priced service is the most economical subscription television alternative
for many consumers in such markets. Furthermore, the Company believes that
its Markets typically have a stable base of subscribers, which have allowed
the Company to maintain an average turnover or "churn" rate below 2.5% per
month for the six months ended June 30, 1996, as compared to a churn rate of
approximately 3% per month typically experienced by traditional hard-wire
cable operators. Lower churn rates result in reduced installation and
marketing expenses.
Contiguous geographic cluster. The Company believes that through its
large contiguous geographic cluster it is able to achieve significant cost
savings through centralization of operations. The Company further believes
that its contiguous cluster simplifies its market launch program by
facilitating the movement of skilled personnel from one launch market to
another. The Company also believes that a contiguous cluster is more
attractive to regional advertisers and offers greater opportunities for
telecommunications and other sources of revenue.
Low cost structure. Wireless cable systems typically cost
significantly less to build and operate than traditional hard-wire cable
systems because, unlike traditional hard-wire cable systems, they do not
require an extensive network of coaxial or fiber optic cable, amplifiers and
related equipment (the "Cable Plant") for the transmission of programming.
Once the Company constructs a headend for a system, the Company estimates that
each additional subscriber requires a capital expenditure of approximately
$375 to $475, consisting of, on average, $240 to $340 of equipment and $135 of
installation labor and overhead charges. The Company also believes that its
cost structure compares favorably with that of direct broadcast satellite
("DBS") operators, which must incur the fixed cost of a satellite and the
variable cost of subscriber receive site equipment, which is typically twice
the cost of the Company's receive site equipment.
Focused operating strategy. The Company attempts to manage
subscriber growth in order to make the most efficient use of its assets,
assure customer satisfaction and minimize churn. Within a Market, the Company
initially targets selected geographic sub-markets characterized by a
significant number of households that are unpassed by cable or are served by
smaller independent hard-wire cable operators and focuses marketing on such
sub-markets so that subscribers generally wait no more than ten days from
initial inquiry to commencement of service. The Company seeks to maintain
high levels of customer satisfaction in installation, maintenance and customer
service and to minimize churn by charging up-front installation fees and, in
certain cases, performing credit checks on potential subscribers.
Experienced management team. The Company intends to capitalize on
its experienced management to implement its business strategy. The Company's
top four senior managers have an average of 12 years of senior management
experience in both hard-wire and wireless cable systems.
Ownership
Principal stockholders of the Company include (i) affiliates of The
Chase Manhattan Corporation ("Chase"), (ii) Heartland Wireless Communications,
Inc. ("Heartland") and (iii) Mississippi Wireless T.V., L.P. ("MWTV").
Chase Manhattan Capital Corporation ("CMCC"), an indirect subsidiary
of Chase, presently owns approximately 10.5% of the Common Stock on a fully-
diluted basis, Chase Venture Capital Associates, L.P. ("CVCA"), an affiliate
of CMCC, owns 7.9% of the Company's Common Stock on a fully-diluted basis, and
Chase Capital Partners ("CCP"), which is the general partner of CVCA, has
voting discretion with respect to the 2.0% of the Common Stock of the Company
on a fully-diluted basis owned by Baseball Partners. In total, affiliates of
Chase own 20.4% of the outstanding Common Stock on a fully-diluted basis.
Heartland presently owns approximately 18.0% of the Company's Common
Stock on a fully-diluted basis as a result of the transaction in October 1995
by which the Company acquired the wireless cable assets and all related
liabilities of Heartland with respect to certain of Heartland's markets in
exchange for approximately 3.5 million shares of the Company's Common Stock
(the "Heartland Transaction").
MWTV owns approximately 8.8% of the Company's Common Stock on a
fully-diluted basis. Wireless TV, Inc. ("WTV"), a corporation controlled by
Henry Burkhalter, the Company's President and Vice Chairman of its Board of
Directors, is the general partner of MWTV. As a result, of the Company's
initial public offering of Common Stock in October 1995, the public owns
approximately 17.9% of the Company's Common Stock on a fully-diluted basis.
Recent Developments
TruVision Transaction. Pursuant to the TruVision Transaction, which
was consummated on July 29, 1996, a subsidiary of the Company exchanged
approximately 3.4 million shares of the Company's Common Stock for all of
TruVision's outstanding shares and merged with and into TruVision, at which
time TruVision became a wholly-owned subsidiary of the Company. The TruVision
Transaction and certain acquisitions described below have added and are
expected to add 21 Markets representing approximately 1.9 million LOS
households to the Company's portfolio of wireless cable markets. See
"Acquisitions" and "The TruVision Transaction." Of these Markets, eight were
in operation as of June 30, 1996, with an aggregate of 21,215 subscribers.
BTA Auction. In March 1996, The Company and TruVision participated
in an auction (the "BTA Auction") conducted by the Federal Communications
Commission ("FCC") for the exclusive right to apply for available Multipoint
Distribution Services ("MDS") commercial channels in certain designated Basic
Trading Areas ("BTAs"), subject to compliance with the FCC's interference
standards and other rules. The Company and TruVision were the winning bidders
for FCC authorizations in 66 BTA markets (the "BTA Markets"), and such
authorizations, which primarily will increase the number of expected channels
in the Company's Markets upon FCC approval, are reflected in the information
set forth in this Prospectus. Subsequent to the BTA Auction and consistent
with FCC rules, the Company filed applications for authorizations in each BTA
Market. There can be no assurance that the FCC will approve these
applications. See "Risk Factors -- Uncertainty of Ability to Obtain FCC
Authorizations." The Company's winning bids in the BTA Auction aggregated
approximately $30.3 million (net of a small business bidding credit), 80% of
which will be financed through indebtedness provided to the Company by the
United States government. See "Management's Discussion and Analysis of
Financial Condition and Results of Operation - Liquidity and Capital
Resources" and "Wireless Cable Industry -- Regulatory Environment -- Licensing
Procedures."
Applied Video Acquisition. On May 15, 1996, the Company acquired
100% of the stock of Applied Video Technologies (the "Applied Video
Acquisition") for a total purchase price of approximately $6.5 million in
cash. The Applied Video Acquisition added wireless cable rights covering one
Operating System (Dothan, Alabama), one System Under Construction (Albany,
Georgia) and one Near-Term Launch Market (Montgomery, Alabama). These three
Markets cover approximately 263,100 LOS households.
For a description of certain pending and recently completed
acquisitions, see "Acquisitions."
Financing. On August 12, 1996, the Company consummated the 1996 Debt
Offering in which the Company issued $239,252,000 in principal amount of its
Discount Notes and 239,252 1996 Warrants. The net proceeds from the 1996 Debt
Offering (after deduction of discounts, commissions and expenses of such
offering payable by the Company) were $118.6 million. The Company applied the
proceeds of the 1996 Debt Offering to repay $18 million of the indebtedness of
TruVision and is using the remaining net proceeds of $100.6 million to finance
the launch and initial development of the Markets.
The Company will require additional financing to finance the launch
and initial development of all of the Markets described in this Prospectus and
to continue to add subscribers to the Markets in accordance with its current
business plan. The Company may elect to invest its capital in building
subscriber levels in selected Markets prior to investing capital in the launch
of systems in all of the Markets described in this Prospectus. The indenture
that governs the 13% Notes (the "1995 Indenture") and the indenture that
governs the Discount Notes (the "1996 Indenture," and, together with the 1995
Indenture, the "Indentures") limit, but do not prohibit, the incurrence of
additional indebtedness, secured and unsecured, by the Company and its
subsidiaries. The Indentures also limit, to some extent, the business
purposes for which proceeds from the 1996 Debt Offering and the 1995 Debt
Offering may be used. The Company reserves the right to allocate its capital
to different business purposes as opportunities arise and business conditions
change. See "Risk Factors - Substantial Indebtedness of the Company," "--
Need for Additional Financing; Certain Covenants." The Company intends to use
the proceeds, if any, from this offering of Common Stock (the "Offering"), to
finance the launch, initial development and expansion of the Company's
Markets. See "Use of Proceeds."
The Company's executive offices are located at 11301 Industriplex
Boulevard, Suite 4, Baton Rouge, Louisiana 70809-4115, and its telephone
number at such address is (504) 293-5000.
THE OFFERING
Common Stock Offered...........................................944,059 shares
Common Stock outstanding upon the
exercise of the 1995 and 1996 Warrants<F1>................19,265,169 shares
Proceeds<F2>.......................................................$14,249,281
Use of Proceeds.................................The Company intends to use the
net proceeds of this Offering,
if any, as working capital.
See "Use of Proceeds."
Nasdaq National Market Symbol............................................WIRL
______________________
<F1> Includes shares issuable upon the exercise of (i) the 1995 and 1996
warants, (ii) warrants issued to Gerard Klauer Mattison & Co., LLC in October
1995 (the "GKM Warrants") and (iii) certain director, managment and employee
options.
<F2> There can be no assurance that any of the 1995 or 1996 Warrants will
be exercised before such Warrants expire and, as a result, that the Company
will receive any proceeds from this Offering. Even if exercised, the Company
cannot predict when the 1995 or 1996 Warrants will be exercised and the
proceeds received.
Risk Factors
See "Risk Factors" for a discussion of certain factors that should be
considered in evaluating an investment in the Common Stock including, but not
limited to, risks related to the substantial indebtedness of the Company; the
Company's limited operating history, its lack of profitable operations, its
negative cash flow and the early stage of the Company's development; the
Company's need for additional financing; the Company's need to manage its
growth and successfully integrate TruVision; the possible inability of the
Company to consummate its pending acquisitions and the uncertainty of the
Company's ability to obtain certain FCC authorizations.
Summary Consolidated Financial and Operating Data
The following table sets forth summary consolidated historical and
pro forma financial and operating data of the Company. The summary
consolidated historical statement of operations data for the period from
February 4, 1993 (inception) to December 31, 1993 and the years ended December
31, 1994 and 1995 were derived from the consolidated financial statements of
the Company which were audited by KPMG Peat Marwick LLP, independent certified
public accountants, and which are included elsewhere in this Prospectus. The
summary consolidated historical statement of operations data for six months
ended June 30, 1995 and 1996 and balance sheet data as of June 30, 1996, were
derived from the unaudited consolidated financial statements of the Company,
which are included elsewhere in this Prospectus, and which, in the opinion of
management of the Company, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results of
such unaudited interim periods. The statement of operations data for interim
periods are not necessarily indicative of results for subsequent periods or
for the full year.
The summary unaudited pro forma combined statement of operations
data, as adjusted, gives effect to (each as defined) (i) the 1995 Offerings,
(ii) the Heartland Transaction, (iii) the TruVision Transaction, (iv) the
Madison Purchase, (v) the BarTel Purchase, (vi) the Shoals Purchase, (vii) the
conversion of the TruVision convertible preferred stock into TruVision common
stock, and (viii) the 1996 Debt Offering, in each case as if such transactions
had occurred on January 1, 1995. The summary unaudited pro forma combined
balance sheet data gives effect to (i) the TruVision Transaction, (ii) the
Madison Purchase, (iii) the Shoals Purchase, (iv) the conversion of the
TruVision convertible preferred stock into TruVision common stock, (v) the AWS
Purchase, (vi) the Flippin Purchase, (vii) the Jacksonville Purchase, (viii)
the Chattanooga Purchase, (ix) the Gadsden Purchase, (x) the SkyView Purchase,
(xi) the Applied Video Acquisition, (xii) the channel rights to be purchased
by the Company via the BTA Auction and the incurrence of associated
indebtedness, and (xiii) the 1996 Debt Offering, as if all such transactions
occurred as of June 30, 1996 (collectively, the "Pro Forma Events"). The
information contained in this table should be read in conjunction with
"Formation of the Company," "The TruVision Transaction," "Acquisitions,"
"Unaudited Pro Forma Condensed Combined Financial Information," "Selected
Historical Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements
(including the notes thereto) appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Year Ended December 31, Six Months Ended June 30,
Period from ________________________________________ ____________________________________________
February 4, 1993 Pro Forma Pro Forma
(inception) to Combined Combined
December 31, As Adjusted As Adjusted
1993 1994 1995 1995<F1> 1995 1996 1996<F1>
_________ ___________ ___________ ____________ ___________ ____________ ____________
Statement of Operations Data:
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues........... $ --- $ 380,077 $1,343,969 $ 6,387,670 $ 491,995 $ 2,372,132 $ 5,740,899
Total operating
expenses......... 162,199 2,489,430 7,056,724 16,944,381 2,144,496 9,058,856 16,609,918
Operating loss..... (162,199) (2,109,353) (5,712,755) (10,556,711) (1,652,501) (6,686,724) (10,869,019)
Interest expense
and other, net... (411) (152,460) (1,979,719) (4,678,660) (97,043) (6,090,166) (9,852,278)
Net loss........... (162,610) (2,261,813) (7,692,474) (10,093,835) (1,749,544) (12,776,890) (14,032,546)
Net loss applicable
to common stock.. (162,610) (2,261,813) (8,478,863) (10,093,835) (2,114,855) (12,776,890) (14,032,546)
Other Data:
EBITDA<F2>......... (134,710) (1,695,529) (3,929,689) (5,404,662) (1,211,209) (4,424,218) (5,957,425)
Depreciation and
amortization..... 27,489 413,824 1,783,066 5,152,049 441,292 2,262,506 4,911,594
Capital expenditures 442,977 8,116,896 16,567,472 73,256,958 5,453,754 30,403,301 41,131,301
Deficiency of earnings
to fixed charges. 162,610 2,261,813 8,478,863 15,235,371 2,114,855 12,776,890 14,032,546
Operating Data at End of Period:
Number of Operating
System........... --- 3 10 14 4 16 24
Estimated LOS
households in
Operating Systems --- 337,700 926,100 1,421,800 403,300 1,469,90 2,216,400
Subscribers in
Operating Systems --- 2,504 7,525 23,725 2,860 19,038 40,253
</TABLE>
June 30, 1996
________________________________________________
Pro Forma
Historical Combined As Adjusted
Balance Sheet Data: _____________ ____________ _____________
Working capital, excluding
restricted cash $ 65,647,001 $ 7,456,818 $ 126,081,818
Resticted Cash <F4> 45,471,404 45,471,404 45,471,404
Total assets 202,540,406 298,607,462 412,058,216
Current portion of
long-term debt 392,105 12,477,138 477,138
Long-term debt 151,116,860 174,829,740 294,776,353
Total stockholders' equity 42,872,797 92,475,750 97,529,137
__________________
<F1> The summary pro forma combined as adjusted statement of operations data
gives effect to the issuance of the Discount Notes and the related
interest expense only to the extent proceeds therefrom are to be used to
repay $12.0 million of TruVision indebtedness outstanding as of June 30,
1996. At the time of the consummation of the TruVision Transaction,
there was $18.0 million of TruVision indebtedness outstanding. No pro
forma interest expense has been reflected on indebtedness incurred to
acquire channel rights in the BTA Auction. Giving full effect to (i) the
issuance of the 13% Notes and amortization of the related debt issuance
costs, (ii) the issuance of the Discount Notes and amortization of the
related debt issuance costs and amortization of the debt discount
resulting from the issue price allocated to the 1996 Warrants and (iii)
the incurrence of BTA Auction indebtedness, as if such indebtedness
had been incurred, and the issuance of the Discount Notes and the 13%
Notes, as if these had been issued on January 1, 1995, interest expense
on a pro forma basis would have been $42.7 million and $22.6 million,
respectively, for the year ended December 31, 1995 and for the six
months ended June 30, 1996.
<F2> "EBITDA" represents operating loss before depreciation and amortization.
EBITDA is presented because it is a widely accepted financial indicator
of a company's ability to service and/or incur indebtedness. However,
EBITDA should not be considered as an alternative to net income as a
measure of operating results or cash flows as a measure of liquidity.
<F3> In calculating the deficiency of earnings to fixed charges, earnings
consist of net losses prior to income taxes and fixed charges. Fixed
charges consist of interest expense, amortization of debt issuance
costs and one-third of rental payments on operating leases (such amount
having been deemed by the Company to represent the interest portion of
such payments).
<F4> Represents a portion of net proceeds realized from the issuance of the
13% Notes through October 15, 1998, which was deposited by the Company
into an escrow account for the benefit of the holders of the 13% Notes.
RISK FACTORS
Prospective investors should carefully consider the following
factors, in addition to other information contained in this Prospectus,
regarding an investment in the Common Stock offered hereby.
Substantial Indebtedness of the Company
After giving effect to the Pro Forma Events, as of June 30, 1996, the
Company had approximately $295.3 million of consolidated indebtedness. The
Company expects that it and its subsidiaries will incur substantial additional
indebtedness in the future. On a combined basis, since its inception the
Company has sustained substantial net losses and therefore has been unable to
cover fixed charges. The Company does not anticipate being able to generate
net income until after 2001, and there can be no assurance that other factors,
such as, but not limited to, economic conditions, the inability to raise
additional financing or disruption in operations, will not result in further
delays in generating positive net income. Losses may increase as operations
in additional Markets are commenced or acquired. Many factors, some of which
will be beyond the Company's control (such as prevailing economic conditions),
may affect its performance. See "Selected Historical Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Limited Operating History; Lack of Profitable Operations; Negative Cash Flow;
Early Stage Company
Other than the Company's limited operating history with the Operating
Systems, it has no wireless cable operations in the Markets. Prospective
investors, therefore, have limited historical financial information about the
Company upon which to base an evaluation of the Company's performance and the
investment in the Common Stock offered hereby. Since its inception, the
Company has sustained substantial net losses and negative consolidated EBITDA
due primarily to start-up costs, interest expense and charges for depreciation
and amortization arising from the development of its wireless cable systems.
After adjusting for the Pro Forma Events, the Company's accumulated deficit as
of June 30, 1996 was $22.9 million. The Company currently has only three
Operating Systems that generate positive System EBITDA. The Company expects
to continue to experience negative consolidated EBITDA through at least the
third quarter of 1998, and may continue to do so thereafter while it develops
and expands its wireless cable systems, even if additional individual systems
of the Company become profitable and generate positive System EBITDA.
Prospective investors should be aware of the difficulties encountered by
enterprises in the early stages of development, particularly in light of the
intense competition characteristic of the subscription television industry.
There can be no assurance that realization of the Company's business plan,
including an increase in the number of subscribers or the launch of additional
wireless cable systems, will result in profitability or positive consolidated
EBITDA for the Company in future years. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business" and
"Wireless Cable Industry."
Need for Additional Financing; Certain Covenants
In order to finance the capital expenditures and related expenses
needed for subscriber growth and system development, the Company will require
substantial investment on a continuing basis. The Company will need to obtain
additional financing in 1998 in order to continue to complete the launch of
Markets, to add subscribers in its new and existing Markets and to cover
ongoing operating losses and debt service requirements. The amount and timing
of the Company's future capital requirements will depend upon a number of
factors, many of which are not within the Company's control, including
programming costs, capital costs, marketing expenses, staffing levels,
subscriber growth, churn rates and competitive conditions. There can be no
assurance that the Company's future capital requirements will not increase as
a result of unexpected developments with respect to its Markets. For example,
the Company's capital costs may increase due to a need to implement digital
technology in certain Markets to meet competitive demands. There can be no
assurance that the Company's future capital requirements will be met or will
not increase as a result of future acquisitions, if any. The Indentures
restrict the amount of additional indebtedness the Company may incur. Failure
to obtain any required additional financing could adversely affect the growth
of the Company and, ultimately, could have a material adverse effect on the
Company. See "--Substantial Indebtedness of the Company; Insufficient
Earnings to Cover Fixed Charges" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
Need to Manage Growth and Ability to Successfully Integrate TruVision
Successful implementation of the Company's business plan will require
management of rapid growth, which will result in an increase in the level of
responsibility for management personnel. To manage its growth effectively,
the Company will be required to continue to implement and improve its
operating and financial systems and controls and to expand, train and manage
its employee base. There can be no assurance that the management, systems and
controls currently in place, or to be implemented, will be adequate for such
growth, or that any steps taken to hire personnel or to improve such systems
and controls will be sufficient. Additionally, there can be no assurance that
the Company will be able to integrate successfully the properties obtained in
the TruVision Transaction with its existing and contemplated operations.
Inability to Consummate the Pending Acquisitions
The description of the Company included in this Prospectus assumes
the consummation of transactions related to acquisition agreements more fully
described in "Acquisitions." The consummation of each of these pending
acquisitions is subject to certain conditions the satisfaction of which, in
some cases, is beyond the Company's control, including obtaining FCC approvals
and third-party consents. In particular, consummation of the Company's
acquisition of (i) the Jackson, Tennessee Market, (ii) the Auburn, Alabama
Market, (iii) the Jacksonville, North Carolina Market, (iv) certain channel
rights in the Valdosta and Vidalia, Georgia Markets and (v) the Hot Springs,
Arkansas Market, are conditioned upon obtaining consents of channel lessors.
Consummation of the acquisition of (i) the Jackson and Chattanooga, Tennessee
Markets and (ii) the BTAs subject to the Wireless Ventures Transaction (as
defined) are contingent upon the Company being able to obtain certain consents
from the FCC. There can be no assurance that the Company will be able to
obtain such approvals and consents, and failure to do so could have a material
adverse effect on the Company's ability to consummate the pending acquisitions
or on the Company's operations in the affected Markets. In addition, there
can be no assurance that the FCC will approve the pending applications
relating to the lease rights that the Company is acquiring in the
Acquisitions, although the approval of such applications is not a condition to
completing the Acquisitions. There can be no assurance that, in the case of
the Valdosta and Vidalia, Georgia Markets and certain BTA authorizations to be
acquired in the Wireless Ventures Transaction, binding agreements will be
entered into, or that in the case of purchase and sale agreements, such
transactions will be consummated. See "--Uncertainty of Ability to Obtain FCC
Authorizations."
Uncertainty of Ability to Obtain FCC Authorizations
Wireless cable systems transmit programming over some or all of the
33 MDS and instructional television fixed service ("ITFS") channels that are
licensed by the FCC. Generally, the Company believes that a minimum of 12
wireless cable channels is necessary to offer a commercially viable wireless
cable service in its Markets. All of the channels comprising a wireless cable
system must operate from the same transmitter site so that subscribers may
receive a clear picture on all channels offered. In some of its Markets, the
Company does not currently have the right to operate a sufficient number of
channels from the same transmitter site, and in certain other Markets, the
Company contemplates relocating all of its channels to a new transmitter site.
In these Markets, the Company is dependent upon (i) the grant of pending
applications for new licenses or for modification of existing licenses, and
(ii) the grant of applications for new licenses and license modification
applications which have not yet been filed with the FCC. Certain pending
applications cannot be granted by the FCC until interference agreements with
nearby license holders are secured. Eight of the ITFS applications for the
Gadsden Market, sixteen of the ITFS applications for the Baton Rogue Market
and twelve of the ITFS applications for the Natchitoches Market are the
subject of competing applications. There can be no assurance that any or all
of these applications will be granted by the FCC. Although the Company does
not believe that the denial of any single application will adversely affect
the Company, the denial of several of such applications, particularly if
concentrated in one or a few of the Company's Markets, could have a material
adverse effect on the ability of the Company to serve such Market or Markets.
See "Wireless Cable Industry--Regulatory Environment--Licensing Procedures."
In certain cases, FCC approval may be dependent upon the Company's
ability to engineer its use of a wireless cable channel to avoid interference
with the reception of another channel that has been licensed or for which an
application is pending. In addition, intervening license grants and/or
auctions of MDS channels may adversely affect some of the Company's planned
applications due to interference considerations. No assurance can be given
that the Company will be able to engineer all of its channels so as to avoid
interference. See "--Interference Issues."
In addition, there is no limit on the time that may elapse between
the filing of an application with the FCC for a modification or a new license
and action thereon by the FCC. Delay by the FCC in processing applications
could delay or materially adversely affect the Company's plans with respect to
one or more of its Markets. If modification of an unbuilt station license is
anticipated, it is frequently necessary to obtain from the FCC an extension of
the period specified in the license for construction of the station. In such
case, absent FCC grant of such an extension, the license will expire. There
can be no assurance that the FCC will grant an extension in any particular
instance. In addition, FCC licenses must be renewed every ten years and,
while such renewals generally have been granted on a routine basis in the
past, there is no assurance that licenses will continue to be renewed
routinely in the future. The failure of the Company's channel lessors to
renew their respective licenses or of the FCC to grant such extensions could
have a material adverse effect on the Company.
The FCC recently concluded an auction for each of 493 BTAs. Auction
winners obtained the exclusive right to apply for all available MDS channels
in such BTAs, subject to compliance with interference standards and other
rules. The Company and TruVision were the winning bidders for FCC
authorizations in 66 BTA Markets. As is the case with other MDS and ITFS
applications, in some of the BTA Markets the Company presently lacks the right
to use a site for the location of a transmission facility. In some instances,
it may be necessary for the Company to obtain the consent of other parties to
the acceptance of interference. There can be no assurance that the Company
will be able to secure a transmission site, obtain all necessary interference
consents or secure FCC approval of its applications. Furthermore, even though
the Company was the successful bidder in the BTA Markets, the Company may not
acquire sufficient channel rights to have a viable system in each of those
Markets. See "--Interference Issues."
Government Regulation
The wireless cable industry is extensively regulated by the FCC. The
FCC governs, among other things, the issuance, renewal, assignment and
modification of licenses necessary for wireless cable systems to operate and
the time afforded license holders to construct their facilities. The FCC
imposes fees for certain applications and licenses, and mandates that certain
amounts of educational, instructional or cultural programming be transmitted
over certain of the channels used by the Company's existing and proposed
wireless cable systems. The FCC also has the authority, in certain
circumstances, to revoke and cancel licenses and impose monetary fines for
violations of its rules. No assurance can be given that new regulations will
not be imposed or that existing regulations will not be changed in a manner
that could have a material adverse effect on the wireless cable industry as a
whole and on the Company in particular. See "Wireless Cable
Industry-Regulatory Environment." In addition, wireless cable operators and
channel license holders are subject to regulation by the Federal Aviation
Administration ("FAA") with respect to construction, marking and lighting of
transmission towers and to certain local zoning regulations affecting the
construction of towers and other facilities. There also may be restrictions
imposed by local authorities, neighborhood associations and other similar
organizations limiting the use of certain types of reception equipment used by
the Company and new taxes imposed by state and local authorities. Certain
states, including Florida, have legislated that no resident of a multiple
dwelling unit ("MDU") should be denied access to programming provided by hard-
wire cable systems, notwithstanding the fact that the MDU entered into an
exclusive agreement with a non-hard-wire cable video program distributor. It
is possible that such laws will be enacted in other states in the future. In
several courts, mandatory access laws have been held unconstitutional. Such
laws could increase the competition for subscribers in MDUs. Future changes
in the foregoing regulations or other regulations applicable to the Company or
its business could have a material adverse effect on the Company's results of
operations and financial condition. See "Wireless Cable Industry-Regulatory
Environment-Other Regulations."
Interference Issues
Under current FCC regulations, a wireless cable operator may install
receive-site equipment and serve any point where its signal can be received.
Interference from other wireless cable systems can limit the ability of a
wireless cable system to serve any particular point. In licensing ITFS and
MDS stations, a primary concern of the FCC is avoiding situations where
proposed station signals are predicted to cause interference to the reception
of previously proposed station signals. The Company's business plan involves
moving the authorized transmitter sites of various of its MDS and ITFS
licensed stations and obtaining the grant of licenses for new stations that
the Company will use in its wireless cable systems. The FCC's interference
protection standards may make one or more of these proposed relocations or new
grants unavailable. In that event, it may be necessary to negotiate
interference agreements with the licensees of the stations which would
otherwise block such relocations or grants. There can be no assurance that
the Company will be able to obtain all necessary interference agreements with
terms acceptable to the Company. In the event that the Company cannot obtain
interference agreements required to implement the Company's plans for a
Market, the Company may have to curtail or modify operations in the Market,
which could have a material adverse effect on the growth of the Company. In
addition, while the Company's leases with MDS and ITFS licensees require their
cooperation, it is possible that one or more of the Company's channel lessors
may hinder or delay the Company's efforts to use the channels in accordance
with the Company's plans for the particular Market.
Competition
The subscription television industry is highly competitive. Wireless
cable systems face or may face competition from several sources, such as
traditional hard-wire cable systems, DBS systems, satellite master antenna
television ("SMATV") systems, other wireless cable systems and other
alternative methods of distributing and receiving video programming.
Furthermore, premium movie services offered by cable television systems have
encountered significant competition from the home video cassette recorder
("VCR") industry. In areas where several local off-air VHF/UHF broadcast
channels can be received without the benefit of subscription television, hard-
wire and wireless cable systems also have experienced competition from the
availability of broadcast signals generally and have found market penetration
to be more difficult. In addition, within each market, the Company must
compete with others to acquire, from the limited number of wireless cable
channel licenses issued or issuable, rights to a minimum number of wireless
cable channels needed to establish a commercially viable system. Legislative,
regulatory and technological developments may result in additional and
significant competition, including competition from a proposed new wireless
service known as local multipoint distribution service ("LMDS"). In some
areas, exchange telephone companies offer video programming services via radio
communications without regulation of rates or services, offer hardwire or
fiber optic cable service for hire by video programmers and provide
traditional cable service subject to local franchising requirements.
In the Operating Systems, the Company initially has targeted its
marketing to households that are unpassed by traditional hard-wire cable and
that have limited access to local off-air VHF/UHF programming. Certain of the
hard-wire cable companies operating in the Company's Markets currently offer a
greater number of channels to their customers than the Company offers. DBS
providers currently offer a substantially greater number of channels than
hard-wire or wireless cable providers with a high picture quality. Aggressive
price competition or the passing of a substantial number of presently unpassed
households by any existing or new subscription television service could have a
material adverse effect on the Company's results of operations and financial
condition.
New and advanced technologies for the subscription television
industry, such as DBS, LMDS, digital compression and fiber optic networks, are
in operation or are in various stages of development. As they are developed,
these new technologies could have a material adverse effect on the demand for
wireless cable services. Many actual and potential competitors have greater
financial, marketing and other resources than the Company. There can be no
assurance that the Company will be able to compete successfully with existing
competitors or new entrants in the market for subscription television
services.
Dependence on Channel Leases; Need for License Extensions; Loss of Licenses by
Lessors
The Company is dependent on leases with unaffiliated third parties
for substantially all of its wireless cable channel rights. The use of
wireless cable channels by the license holders is subject to regulation by the
FCC, and the Company is dependent upon the continuing compliance by channel
license holders with applicable regulations, including the requirement that
ITFS license holders must meet certain educational use requirements in order
to lease transmission capacity to wireless cable operators.
The Company's channel leases typically cover four ITFS channels
and/or one to four MDS channels each. Under a policy adopted by the FCC, the
term of the Company's ITFS channel leases cannot exceed ten years from the
time the lessee begins using the channel. The remaining initial terms of most
of the Company's ITFS channel leases are approximately five to ten years.
There is no restriction on the length of MDS channel leases, which frequently
extend beyond the term of the underlying MDS license. However, in the event
an MDS license is not renewed or is otherwise terminated, the authorization
will no longer be valid, and the Company will have no rights under its lease
to transmit on channels that are subject to such nonrenewed or terminated
license.
ITFS licenses generally are granted for a term of ten years and are
subject to renewal by the FCC. Existing MDS licenses generally will expire on
May 1, 2001 unless renewed. BTA authorizations expire ten years from the
grant thereof, unless renewed. FCC licenses also specify construction
deadlines which, if not met, could result in the loss of the license.
Requests for additional time to construct a channel may be filed and are
subject to review pursuant to FCC rules. Certain of the Company's channel
rights are subject to pending extension requests and it is anticipated that
additional extensions will be required. There can be no assurance that the
FCC will grant any particular extension request or license renewal request.
The termination or non-renewal of a channel lease or of a channel license, or
the failure to grant an application for an extension of the time to construct
an authorized station, would result in the Company being unable to deliver
programming on the channels authorized pursuant thereto.
TruVision contracts with Mississippi EdNet Institute, Inc. ("EdNet")
for the commercial use of 20 ITFS channels in each of its Markets in the state
of Mississippi (the "EdNet Agreement"). The term of the EdNet Agreement is 10
years from the date of issuance of certain construction permits, each of which
was granted in 1992. The Company anticipates that, pursuant to the EdNet
Agreement, the lease term will terminate on or about April 1, 2002, unless
renewed prior thereto. The commercial use of these channels represents the
majority of the Company's channels in Mississippi and the termination of, or
inability to renew, the EdNet Agreement would have a material adverse effect
on the Company's operations in its Mississippi Markets. Under the EdNet
Agreement, the Company must, at its sole expense, (i) install, operate and
maintain a system sufficient to serve 95% of the population of the licensed
geographic area of Mississippi, (ii) provide, install and maintain up to 1,100
standard receive sites, up to 11 studio transmitter links, up to 11 electronic
classrooms (each at a cost of up to $20,000) and pay up to $1.5 million for 11
duplex, two-channel links, (iii) acquire and install a minimum of five 10-watt
transmitters per transmit site and (iv) apply for CARS Band microwave
authorizations to EdNet use, among other obligations. To date, the Company
has built out five of the required transmit sites, installed a studio-to-
transmitter link connecting the EdNet studio with the Company's transmit
facility in the Jackson System and has begun to install receive-site
equipment. The Company must complete and have operations in such system by
July 1, 1998. The Company has granted EdNet a security interest in all of its
Mississippi equipment, transmitters and rights to use certain wireless cable
channels (the "EdNet System") in order to secure the Company's performance
under the EdNet Agreement. In the event of a default by the Company under the
EdNet Agreement, EdNet will have the right to operate the EdNet System and
derive all income from its operation. If EdNet assumes the operation of the
EdNet System, the Company will be required to assign its interest in the EdNet
Agreement and the EdNet System or to forfeit its interests in such assets.
Although the Company does not believe that the termination of or failure to
renew a single channel lease, other than that with EdNet, would materially
adversely affect the Company, several of such terminations or failures to
renew in one or more Markets that the Company actively serves could have a
material adverse effect on the Company. In addition, the termination,
forfeiture, revocation or failure to renew or extend an authorization or
license held by the Company's lessors could have a material adverse effect on
the Company.
Dependence on Program Suppliers
In connection with its distribution of television programming, the
Company is dependent on fixed-term contracts with various program suppliers
such as CNN, ESPN and HBO. Although the Company has no reason to believe that
any such contracts will be canceled or will not be renewed upon expiration, if
such contracts are canceled or not renewed, the Company will have to seek
program material from other sources. There can be no assurance that other
program material will be available to the Company on acceptable terms or at
all or, if so available, that such material will be acceptable to the
Company's subscribers. The likelihood that program material will be
unavailable to the Company is significantly mitigated by the Cable Television
Consumer Protection and Competition Act of 1992 (the "1992 Cable Act") and
various FCC regulations issued thereunder which, among other things, impose
limits on exclusive programming contracts and generally prohibit cable
programmers, in which a cable operator has an attributable interest (a
"vertically integrated cable operator"), from discriminating against cable
competitors with respect to the price, terms and conditions of the sale of
programming. Only a few of the major cable television programming services
carried by the Company are not directly or indirectly owned by a vertically
integrated cable operator. The program access provisions of the 1992 Cable
Act are the subject of a legal challenge and, if the challenged provisions
were found to be unconstitutional or unlawful, program suppliers might raise
their prices or make their program material unavailable to the Company. See
"Wireless Cable Industry-Availability of Programming."
Difficulties and Uncertainties of a New Industry
Wireless cable is a new industry with a short operating history.
Potential investors should be aware of the difficulties and uncertainties that
are normally associated with new industries, such as lack of consumer
acceptance, difficulty in obtaining financing, increasing competition,
advances in technology and changes in laws and regulations. There can be no
assurance that the wireless cable industry will develop or continue as a
viable or profitable industry.
Physical Limitations of Wireless Cable Transmission
Wireless cable programming is transmitted via microwave frequencies
from a headend to a small receive-site antenna at each subscriber's location.
Reception of wireless cable programming generally requires a direct,
unobstructed LOS from the headend to the subscriber's receive-site antenna.
Therefore, in communities with tall trees, hilly terrain, tall buildings or
other obstructions in the transmission path, wireless cable transmission can
be difficult or impossible to receive at certain locations. Consequently, the
Company may not be able to supply service to certain potential subscribers.
While the Company intends to employ low power repeaters to overcome LOS
obstructions, there can be no assurance that it will be able to secure the
necessary FCC authorizations. Based on the Company's installation and
operating experience, the Company believes that its signal can be received
directly by approximately 80% of the households within the Company's signal
pattern in the Markets served by the Operating Systems. The Company also
estimates that its signals in its other Markets will be receivable by an
average of approximately 70% of the households within the Company's expected
signal patterns for such Markets. The terrain in most of the Company's
Markets is generally conducive to wireless cable transmission. In addition to
limitations resulting from terrain, in limited circumstances extremely adverse
weather can damage transmission and receive-site antennas, as well as other
transmission equipment.
Dependence on Existing Management
The Company is dependent in large part on the experience and
knowledge of existing management. The loss of the services of one or more of
the Company's current executive officers could have a material adverse effect
upon the Company. The Company has employment agreements with and is dependent
on certain senior managers. Such employment agreements provide, among other
things, that the executive will not compete with the Company or its
subsidiaries within a specified area during the period of employment and for
two years thereafter. See "Management-Employment Agreements." The Company
has recently added new members to its management team. See
"Management-Executive Officers and Directors." The Company believes that it
will require additional management personnel as it commences operations in new
Markets. The failure of the Company to attract and retain such personnel
could have a material adverse effect on the Company.
Control by Principal Stockholders
Affiliates of Chase, Heartland and MWTV collectively beneficially own
48.6% of the outstanding Common Stock on a fully diluted basis. In connection
with the Heartland Transaction, CMCC, Baseball Partners, Premier Venture
Capital Corporation ("PVCC"), affiliates of Advantage Capital Corporation
("ACC"), Mr. Sternberg and Mr. Reilly, each of whom was a former stockholder
of Old Wireless One, Heartland and certain of its subsidiaries entered into a
stockholders agreement (the "Initial Stockholders Agreement"). The Initial
Stockholders Agreement was amended and restated in connection with the
execution of the TruVision Merger Agreement, with CVCA, VanCom, Inc., MWTV and
Messrs. Burkhalter, Byer, Eilers and Woolhiser (Messrs. Eilers and Woolhiser
are members of TruVision's management team) (collectively "Former TruVision
Stockholders") becoming parties thereto. In such amended and restated
agreement (the "New Stockholders Agreement"), the parties thereto, among other
things, agreed to vote their Common Stock so that the Board of Directors of
the Company will have up to nine members, up to three of whom will be
designated by Heartland (at least one of whom must be independent of the
parties to the Initial Stockholders Agreement), up to three of whom will be
designated by a majority of the Old Wireless One stockholders who are parties
to the New Stockholders Agreement other than CMCC and Baseball Partners (at
least one of whom must be independent of the parties to the Initial
Stockholders Agreement), up to two of whom will be designated by CMCC,
Baseball Partners and CVCA, collectively, and one of whom may be designated by
the Former TruVision Stockholders other than CVCA. As a result, such
stockholders will be able to control the election of the Company's Board of
Directors and to generally exercise control over the Company's affairs. Such
concentration of ownership could also have the effect of delaying, deterring
or preventing a change in control of the Company that might otherwise be
beneficial to stockholders. See "Formation of the Company,"
"Management-Stockholders Agreement" and "Principal Stockholders."
Possible Volatility of Common Stock Price
The trading price of the Common Stock could be subject to wide
fluctuations in response to variations in the Company's quarterly operating
results, changes in earnings estimates by analysts, conditions in the wireless
cable industry, regulatory trends or general market or economic conditions.
In addition, in recent years the stock market has experienced extreme price
and volume fluctuations. These fluctuations have had a substantial effect on
the market prices for many emerging growth companies, often unrelated to the
operating performance of the specific companies. Such market fluctuations
could adversely affect the market price for the Common Stock.
Shares Eligible for Future Sale
The Company has a total of 19,265,169 shares of Common Stock
outstanding (assuming the exercise of (i) the 1995 Warrants, (ii) the GKM
Warrants (iii) the 1996 Warrants, and (iv) certain director, management and
employee options). Of these shares 4,492,811 shares are freely transferable
by persons other than affiliates of the Company without restriction or
registration under the Securities Act (inlcuding the 944,059 shares issuable
upon exercise of the 1995 and 1996 Warrants). The remaining shares (except
for shares issuable upon the exercise of director, management and employee
options) are "restricted securities" as that term is defined by Rule 144 under
the Securities Act and may not be sold other than pursuant to an effective
registration statement under the Securities Act or pursuant to an exemption
from such registration requirement. None of such shares of Common Stock will
be eligible for sale under Rule 144 for two years following the date of
issuance. All such shares will be entitled to demand and piggyback
registration rights. See "Description of Capital Stock-Registration Rights."
Sales of restricted securities under Rule 144 following such two-year period
will be subject to the conditions of Rule 144. The Company has agreed to
maintain the effectiveness of this registration statement, which covers the
shares of Common Stock issuable upon conversion of the 1995 and 1996 Warrants
until October 24, 2000, with respect to the 1995 Warrants, and August 12,
2001, with respect to the 1996 Warrants. As a result, the Common Stock
issuable upon exercise of the 1995 and 1996 Warrants will be freely
transferable by the holders thereof (other than affiliates of the Company).
Sales of a substantial number of shares of Common Stock in the public market
or under Rule 144 or otherwise, or the perception that such sales could occur,
could adversely affect the prevailing market price of the Common Stock. See
"Shares Eligible for Future Sale" and "Plan of Distribution."
Dilution
On a pro forma combined basis, at June 30, 1996, the net tangible
book value of the Common Stock was $(3.05) per share. Assuming that all of
the 1995 and 1996 Warrants were exercised at exercise prices of $11.55 and
$16.6375 per share, respectively, the adjusted pro forma net tangible book
value per share would have been $(1.99) as of that date. Accordingly, holders
of Common Stock issuable upon the exercise of the 1995 and 1996 Warrants would
experience immediate dilution in net tangible book value of $13.54 and $17.77
per share, respectively. See "Dilution."
Certain Provisions of the Company's Certificate of Incorporation and By-laws
and the DGCL
The Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") and By-laws (the "By-laws") and the Delaware
General Corporation Law (the "DGCL") contain provisions which may have the
effect of delaying, deterring or preventing a future takeover or change in
control of the Company unless such takeover or change in control is approved
by the Company's Board of Directors. Such provisions may also render the
removal of directors and management more difficult. The Company's Certificate
of Incorporation and By-laws provide for, among other things, a classified
Board of Directors serving staggered terms of three years, removal of
directors only for cause and only by the affirmative vote of the holders of a
majority of the voting power of the then outstanding voting capital stock of
the Company, voting together as a single class, exclusive authority of the
Board of Directors to fill vacancies on the Board of Directors (other than in
certain limited circumstances), advance notice requirements for stockholder
nominations of candidates for election to the Board of Directors and certain
other stockholder proposals, restrictions on who may call a special meeting of
stockholders and a prohibition on stockholder action by written consent.
Amendments to certain provisions in the Certificate of Incorporation require
the affirmative vote of the holders of at least 80% of the total votes
eligible to be cast in the election of directors, voting together as a single
class. In addition, the Company's Board of Directors has the ability to
authorize the issuance of up to 10 million shares of preferred stock in one or
more series and to fix the voting powers, designations, preferences and
relative, participating, optional and other special rights and qualifications,
limitations or restrictions thereof without stockholder approval, which
ability could be used to deter, delay or prevent a change in control of the
Company. The DGCL also contains provisions preventing certain stockholders
from engaging in business combinations with the Company, subject to certain
exceptions. See "Description of Capital Stock."
Forward-Looking Statements
The Prospectus contains certain forward-looking statements concerning
the Company's operations, economic performance and financial condition,
including in particular, the integration of the Company's recent and pending
acquisitions into the Company's existing operations. Such statement are
subject to various risks and uncertainties. Actual results could differ
materially from those currently anticipated due to a number of factors,
including those identified under "Risk Factors" and elsewhere in this
Prospectus.
FORMATION OF THE COMPANY
The Company's predecessor, (together with its subsidiaries, "Old
Wireless One"), was formed on December 23, 1993 in conjunction with a merger
with its predecessor, Wireless One, L.L.C., a limited liability company.
Wireless One, L.L.C. was formed on February 4, 1993 with six members including
Hans J. Sternberg, Chairman of the Company, and William C. Norris, Senior Vice
President-System Launches and Secretary of the Company. In January 1994, Old
Wireless One completed a private placement of common stock with a group of
investors that included 12 independent telephone companies, certain of which
are based in the Company's targeted Markets, for cash commitments and other
consideration totaling approximately $10 million. Proceeds from that offering
were used primarily to construct the Lafayette, Lake Charles and Wharton
Systems and to purchase additional wireless cable channel rights.
In April 1995, certain investors including CMCC, PVCC, affiliates of
ACC, and certain members of Mr. Sternberg's immediate family purchased
redeemable convertible preferred stock and warrants to acquire common stock of
Old Wireless One in a private placement resulting in net proceeds of
approximately $14 million to Old Wireless One. All such preferred shares and
warrants to purchase shares of common stock were converted into shares of
Common Stock of the Company in the Heartland Transaction (defined below).
Concurrent with the closing of that private placement, Old Wireless One
purchased channel rights from Heartland in one Texas and four Louisiana
markets for approximately $2.8 million. The Company was incorporated in June
1995 for the purpose of effecting the Heartland Transaction.
In October 1995, Heartland and all the stockholders of Old Wireless
One consummated the Heartland Transaction, whereby the Company acquired (i)
all of the outstanding capital stock of Old Wireless One (which retained all
of its assets and liabilities except its wireless cable television assets and
certain related liabilities with respect to the Springfield, Missouri market
which Heartland acquired) through the merger of a subsidiary of the Company
with Old Wireless One and (ii) the wireless cable television assets and all
related liabilities of certain subsidiaries of Heartland with respect to
certain of Heartland's markets located in Texas, Louisiana, Alabama, Georgia
and Florida (the "Heartland Division"). In connection with the Heartland
Transaction, the contributing subsidiaries of Heartland and the stockholders
of Old Wireless One received an aggregate of approximately 3.5 million and
approximately 6.5 million shares of Common Stock, respectively, with an
aggregate of 200,000 of such shares of Common Stock placed in escrow to be
distributed to either the Old Wireless One stockholders or the contributing
subsidiaries of Heartland, but not to the Company.
Also in October 1995, the Company consummated an initial public
offering of 3,450,000 shares of its Common Stock and a concurrent offering of
150,000 units consisting of $150 million aggregate principal amount of 13%
Notes and 450,000 1995 Warrants, which may be exercised for, in the aggregate,
450,000 shares of Common Stock.
In August 1996, the Company consummated the 1996 Debt Offering
pursuant to which it issued 239,252 units consisting of approximately $239
million principal amount of Discount Notes and the 239,252 1996 Warrants,
which may be exercised for, in the aggregate, 544,059 shares of Common Stock.
FORMATION OF TRUVISION
In August 1993, Vision Communications, Inc. ("VCI"), a Mississippi
corporation controlled by Henry M. Burkhalter entered into the EdNet Agreement
with EdNet. Subsequently, VCI assigned its rights under the EdNet Agreement
with respect to certain markets to MWTV. In December 1993, VanCom, Inc.
("VanCom"), a Mississippi corporation controlled by William J. Van Devender,
who became a Director of the Company upon the consummation of the TruVision
Transaction, invested approximately $1.1 million in MWTV in exchange for a
limited partnership interest. In June 1994, MWTV commenced commercial
operation of the Jackson System (as defined). TruVision was formed in April
1994 and, in August 1994, (i) MWTV contributed all of its assets, including
the Jackson System, to TruVision in exchange for shares of common stock of
TruVision, (ii) VCI assigned to TruVision its rights under the EdNet Agreement
with respect to certain other markets, principally in exchange for TruVision's
agreement to pay $4.5 million upon consummation of an initial public offering
by TruVision in the event development of such markets had not commenced by the
time of such offering (the "Phase II Payment") and (iii) CVCA made an $8
million investment in TruVision in exchange for shares of TruVision
convertible preferred stock. The terms of the Phase II Payment to VCI were
subsequently amended in connection with the TruVision Transaction. See "The
TruVision Transaction." In October 1995, CVCA and VanCom invested $3.0
million in cash in TruVision pursuant to a prior commitment in exchange for
additional shares of TruVision convertible preferred stock. In February 1996,
CVCA provided TruVision with an interim financing facility of up to $12
million (the "Interim Facility").
THE TRUVISION TRANSACTION
TruVision acquires, develops, owns and operates wireless cable
television systems within the southeastern United States. TruVision (i)
operates wireless cable systems in eight Markets located in Jackson,
Mississippi, Delta, Natchez, Oxford and the Gulf Coast regions of Mississippi,
Demopolis and Huntsville, Alabama, and Lawrenceberg, Tennessee (ii) holds
wireless cable channel rights for other areas of Mississippi, for Memphis and
Flippin, Tennessee and for Gadsden and Tuscaloosa, Alabama and (iii) has
acquisition transactions pending in a number of additional Markets including
Jackson and Chattanooga, Tennessee, Hot Springs, Arkansas, and Jacksonville,
North Carolina.
On April 25, 1996, pursuant to an Agreement and Plan of Merger among
the Company, TruVision and Wireless One MergerSub, Inc. (the "TruVision Merger
Agreement"), the Company agreed to acquire all of the outstanding capital
stock of TruVision through a merger of a subsidiary of the Company with and
into TruVision, with TruVision becoming a wholly-owned subsidiary of the
Company. Upon consummation of the TruVision Transaction, the Company issued
to the then TruVision shareholders 3,262,945 shares of Common Stock, subject
to certain adjustments and escrow arrangements relating to TruVision's
ownership of certain assets and the closing of TruVision's pending acquisition
transactions. See "Acquisitions." Shares of Common Stock placed in escrow
and not distributed to the then TruVision shareholders will be returned to the
Company.
In addition, in connection with the consummation of the TruVision
Transaction, the Company issued to VCI 180,000 shares of Common Stock and paid
to VCI $1.8 million in cash, in each case in satisfaction of the Phase II
Payment. Upon the consummation of the TruVision Transaction, the Company
entered into employment agreements with Mr. Burkhalter and Bill R. Byer, Jr.,
the former Executive Vice President and Chief Operating Officer of TruVision
who became Executive Vice President-Operations of the Company. Upon the
consummation of the TruVision Transaction, the Company also assumed the non-
qualified stock options issued by TruVision, which, as assumed by the Company,
covered the following number of shares of Common Stock at a weighted average
exercise price of $6.82 per share: Mr. Burkhalter-78,015, Mr. Byer-62,411,
all other persons-54,800. All such options are fully vested. The then
shareholders of TruVision, the persons who received such options, and VCI are
collectively referred to as the "TruVision Stockholders."
ACQUISITIONS
TruVision has entered into several definitive agreements with holders
of wireless cable channel rights to expand the Company's markets in the
southeastern United States from Mississippi to western Tennessee and portions
of Alabama and Arkansas. The agreements relating to the Acquisitions include
(i) a purchase and sale agreement with SkyView Wireless Cable, Inc. to acquire
rights to 22 wireless cable channels and a substantially completed
transmission facility in the Jackson, Tennessee Market for approximately $2.7
million in cash and to acquire rights to 20 wireless cable channels in the Hot
Springs, Arkansas Market for approximately $1.5 million in cash (the "SkyView
Purchase"), (ii) a purchase and sale agreement with Arden Cable, Ltd.
("Arden") to acquire rights to 16 wireless cable channels in the Jacksonville,
North Carolina Market for approximately $820,000 in cash (the "Jacksonville
Purchase") and (iii) a purchase and sale agreement with Arden to acquire
rights to 12 wireless cable channels in the Chattanooga, Tennessee Market for
$517,000 in cash (the "Chattanooga Purchase").
In addition, TruVision recently consummated the acquisition of (i)
rights to 20 wireless cable channels in the Gadsden, Alabama Market for
aggregate consideration of approximately $950,000 in cash (the "Gadsden
Purchase"), which acquisition closed on July 10, 1996, (ii) rights to wireless
cable channels and equipment in the Memphis, Tennessee Market for aggregate
consideration of $3.9 million in cash (the "AWS Purchase"), which acquisition
closed on May 6, 1996, (iii) wireless cable channels and certain other related
assets in the Flippin, Tennessee Market, for aggregate consideration of $1.5
million in cash (the "Flippin Purchase"), which acquisition closed on May 6,
1996, (iv) all the outstanding shares of BarTel, Inc. ("BarTel") which held
rights to wireless cable channels in the Demopolis, Alabama and Tuscaloosa,
Alabama Markets for aggregate consideration of $1.7 million in cash and
$652,000 five-year 8% per annum promissory note (the "BarTel Purchase"), which
acquisition closed on February 20, 1996, (v) all of the outstanding shares of
Shoals Wireless, Inc. ("Shoals"), whose principal asset is a wireless cable
system in the Lawrenceburg, Tennessee Market, for approximately $1.2 million
in cash and a note (the "Shoals Purchase"), which acquisition closed on August
2, 1996 and (vi) a wireless cable system and a hard-wire cable system
currently operating in the Huntsville, Alabama Market (the "Madison Purchase")
for approximately $6.0 million in cash, which acquisition closed on August 2,
1996.
The Company has entered into several agreements with holders of
wireless cable channel rights, including (i) a letter of intent with Wireless
Ventures, L.L.C. ("Wireless Ventures") to acquire a fifty percent interest in
Wireless Ventures, which holds BTA authorizations in certain markets in
Georgia for approximately $1.0 million in cash ("Wireless Ventures
Transaction") and (ii) a letter of intent with a court appointed receiver to
acquire rights to 11 MDS channels and filings for 20 ITFS licenses and related
transmission tower leases and approvals in Auburn/Opelika, Alabama for $0.6
million. In addition, the Company has consummated the acquisition of (i)
rights to 11 wireless cable channels in the Macon, Georgia Market for
aggregate consideration of approximately $0.6 million and (ii) rights to eight
wireless cable channels in the Bowling Green, Kentucky Market for aggregate
consideration of $0.3 million.
The Company is participating with a group of investors in FCC
auctions of 10 MHz personal communication services ("PCS") licenses which
began August 26, 1996. The Company invested $1.5 million in this venture.
There can be no assurance that the pending transactions described
above will be completed, or when such transactions will be completed. See
"Risk Factors-Inability to Consummate Pending Acquisitions."
USE OF PROCEEDS
The net proceeds to the Company, if any, from the Offering will be up
to $14,249,614 net of estimated expenses of the Offering payable by the
Company. The Company currently intends to use the net proceeds of the Stock
Offering, if any, to finance the launch, initial development and expansion of
the Company's Markets. There can be no assurance that any of the 1995 or 1996
Warrants will be exercised before such Warrants expire and, as a result, that
the Company will receive any proceeds from this Offering. Even if exercised,
the Company cannot predict when the 1995 or 1996 Warrants will be exercised
and the proceeds received.
DIVIDENDS AND PRICE RANGE OF COMMON STOCK
The Common Stock began trading on the Nasdaq Stock Market National
Market in October 1995 under the symbol of "WIRL" at a price of $10.50 per
share. The following table sets forth the high and low sales prices of the
Common Stock on the Nasdaq Stock Market National Market.
Market Price
---------------------
Fiscal Period High Low
- ------------- ---- ---
1995:
Fourth Quarter (from October 18, 1995)............... $ 17-1/4 $ 11-3/4
1996:
First Quarter........................................ $ 16-3/4 $ 13-3/4
Second Quarter....................................... $ 20-1/4 $ 13
Third Quarter (through September 12, 1996)........... $ 15-1/4 $ 14-1/2
The Company has never declared or paid any cash dividends on the
Common Stock and does not presently intend to pay cash dividends on the Common
Stock in the foreseeable future. The Company intends to retain future
earnings for reinvestment in its business. In addition, the Company's ability
to declare or pay cash dividends is affected by the ability of the Company's
present and future subsidiaries to declare and pay dividends or otherwise
transfer funds to the Company since the Company conducts its operations
entirely through its subsidiaries. Certain agreements related to the
Company's indebtedness significantly restrict the Company's ability to pay
dividends on the Common Stock. Future loan facilities, if any, obtained by
the Company or its subsidiaries may prohibit or restrict the payment of
dividends or other distributions by the Company to its stockholders and the
payment of dividends or other distributions by the Company's subsidiaries to
the Company. Subject to such limitations, the payment of cash dividends on
the Common Stock will be within the discretion of the Company's Board of
Directors and will depend upon the earnings of the Company, the Company's
capital requirements, applicable requirements of the DGCL and other factors
that are considered relevant by the Company's Board of Directors.
DILUTION
On a pro forma combined basis after giving effect to the consummation
of the TruVision Transaction, the net tangible book value of the Company at
June 30, 1996 would have been $(53.5 million), or $(3.05) per share of Common
Stock. "Net tangible book value per share" represents the amount of the
Company's total tangible assets less the Company's total liabilities
(excluding deferred tax liabilities) divided by the number of shares of Common
Stock outstanding. After giving effect to the exercise of all of the 1995 and
1996 Warrants at exercise prices of $11.55 and $16.6375 per share,
respectively, the pro forma net tangible book value of the Company at June 30,
1996 would have been $(36.9) or $(1.99) per share, representing an immediate
increase in net tangible book value of $1.05 per share to existing
stockholders and an immediate, substantial dilution of $13.54 and $17.77 per
share, respectively, to investors exercising 1995 or 1996 Warrants, as the
case may be. Dilution in net tangible book value represents the difference
between the price per share to be paid by purchasers upon exercise of the 1995
and 1996 Warrants and the pro forma combined net tangible book value as of
June 30, 1996.
CAPITALIZATION
The following table sets forth (i) the cash and the historical
capitalization of the Company at June 30, 1996, (ii) the pro forma combined
cash and capitalization of the Company at June 30, 1996 and (iii) the pro
forma combined cash and capitalization of the Company at June 30, 1996 as
adjusted to give effect to the 1996 Debt Offering. This table should be read
in conjunction with the financial statements of the Company, the Heartland
Division, TruVision, Madison Communications, Inc., Beasley Communications,
Inc. and BarTel (including the notes thereto) appearing elsewhere in this
Prospectus. See "Unaudited Pro Forma Condensed Combined Financial
Information" and "Index to Financial Statements."
<TABLE>
<CAPTION>
June 30, 1996
--------------------------------------------
Pro Forma
Pro Forma Combined
Historical Combined As Adjusted
------------- ------------- -------------
<S> <C> <C> <C>
Cash and cash equivalents,
excluding restircted cash.............. $ 73,877,954 $ 32,682,539 $ 138,833,293
Restricted cash <F1>..................... 45,471,404 45,471,404 45,471,404
------------- ------------- -------------
Total cash and cash equivalents...... $ 119,349,358 $ 78,153,943 $ 184,304,697
============= ============= =============
Short-term debt.......................... $ 392,105 $ 12,477,138 $ 477,138
------------- ------------- -------------
Long-term debt:
Discount Notes <F2>...................... -- -- 119,946,613
13% Notes <F3>........................... 148,266,586 148,266,586 148,266,586
Other <F4>............................... 2,850,274 26,563,154 26,563,154
------------- ------------- -------------
Total long-term debt................. 151,116,860 174,829,740 294,776,353
------------- ------------- -------------
Common stock, $.01 par value;
50,000,000 shares authorized;
13,498,752 issued and outstanding
on a historical basis.................. 134,988 -- --
16,941,697 issued and outstanding
pro forma as adjusted <F5>............. -- 169,417 169,417
Additional paid-in capital............... 65,631,596 115,200,120 115,200,120
Warrants <F2>............................ -- -- 5,053,387
Accumulated defifict..................... (22,893,787) (22,893,787) (22,893,787)
------------- ------------- -------------
Total stockholders' equity 42,872,797 92,475,750 97,529,137
------------- ------------- -------------
Total capitalization............. $ 194,381,762 $ 279,782,628 $ 392,782,628
============= ============= =============
</TABLE>
____________________
<F1> Represents a portion of the net proceeds realized from the sale of the 13%
Notes that was placed in escrow to pay interest on the 13% Notes through
October 1998.
<F2> Gives effect to 1996 Warrants, which have been valued at $5.1 million.
<F3> Net of unamortized discount.
<F4> On a pro forma basis, includes $23,712,880 of BTA Auction indebtedness
to the U.S. Government.
<F5> Excludes (i) 1,400,000 shares of Common Stock reserved for issuance upon
the exercise of stock options available for grant under the Company's
stock option plans (the "Stock Option Plans"), as to which options
covering 834,187 shares of Common Stock have been granted and are
outstanding on the date hereof, (ii) 300,000 shares of Common Stock
issuable upon exercise of the GKM Warrants, (iii) 450,000 shares of Common
Stock issuable upon exercise of the 1995 Warrants, (iv) 195,226 shares of
Common Stock relating to options assumed by the Company in the TruVision
Transaction and (v) 544,059 shares of Common Stock issuable upon exercise
of the 1996 Warrants. See "Management -- Stock Option Plans."
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial
information consists of an Unaudited Pro Forma Condensed Combined Balance
Sheet as of June 30, 1996 and Unaudited Pro Forma Condensed Combined
Statements of Operations for the year ended December 31, 1995 and the six
months ended June 30, 1996 (collectively, the "Pro Forma Statements"). The
Unaudited Pro Forma Condensed Combined Statements of Operations give effect to
(i) the 1995 Offerings and the Heartland Transaction, (ii) the TruVision
Transaction, (iii) the Madison Purchase, (iv) the BarTel Purchase, (v) the
Shoals Purchase and (vi) the conversion of the TruVision convertible preferred
stock into TruVision common stock, in each case as if such transactions had
occurred on January 1, 1995. The Unaudited Pro Forma Condensed Combined
Balance Sheet gives effect to (i) the TruVision Transaction, (ii) the Madison
Purchase, (iii) the Shoals Purchase, (iv) the conversion of the TruVision
convertible preferred stock into TruVision common stock, (v) the AWS Purchase,
(vi) the Flippin Purchase, (vii) the Jacksonville Purchase, (viii) the
Chattanooga Purchase, (ix) the Gadsden Purchase, (x) the SkyView Purchase,
(xi) the Applied Video Acquisition, and (xii) the channel rights to be
purchased by the Company via the BTA Auction and the incurrence of associated
indebtedness. All transactions are accounted for under the purchase method of
accounting.
The Unaudited Pro Forma Condensed Combined Statements of Operations,
as adjusted, give effect to the issuance of the Discount Notes to the extent
proceeds therefrom were used to repay $12.0 million of TruVision indebtedness
outstanding on June 30, 1996. At the time of the consummation of the
TruVision Transaction, there was $18.0 million of TruVision indebtedness. No
pro forma interest expense has been reflected on indebtedness incurred to
acquire channel rights in the BTA auction. Giving full effect to (i) the
issuance of the 13% Notes and amortization of the related debt issuance costs,
(ii) the issuance of the Discount Notes and amortization of the related debt
issuance costs and amortization of the debt discount resulting from the issue
price allocated to the 1996 Warrants, and (iii) the incurrence of BTA Auction
indebtedness, as if such indebtedness had been incurred, and the issuance of
the 13% Notes and Discount Notes, as if these had been issued, on January 1,
1995, interest expense on a pro forma basis would have been $42.7 million and
$22.6 million, respectively, for the year ended December 31, 1995 and for the
six months ended June 30, 1996.
The Pro Forma Statements and accompanying notes should be read in
conjunction with the Company's consolidated financial statements, Heartland
Division's financial statements, TruVision's financial statements, Madison
Communications, Inc. and Beasley Communications, Inc.'s combined financial
statements and BarTel, Inc.'s financial statements, in each case, including
the notes thereto, appearing elsewhere in this Prospectus. The Pro Forma
Statements do not purport to represent what the Company's results of
operations or financial position would actually have been if the
aforementioned transactions or events occurred on the dates specified or to
project the Company's results of operations or financial position for any
future periods or at any future date. The pro forma adjustments are based
upon available information and certain adjustments that the Company believes
are reasonable. In the opinion of the Company, all adjustments have been made
that are necessary to present fairly the Pro Forma Statements.
<TABLE>
<CAPTION>
WIRELESS ONE, INC.
Unaudited Pro Forma Condensed Combined Balance Sheet
June 30, 1996
TruVision
Wireless One TruVision Madison Shoals Pro Formas
Historical Historical Historical Historical Adjustments
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash
equivalents $ 73,877,954 $ 241,600 $ 100,644 $ 1,477 $ (10,221,295)(1)
Marketable investment
securities-restricted 17,670,036 --- --- --- ---
Other current assets 1,319,796 708,498 287 670 ---
------------ ------------ ----------- --------- -------------
Total current assets 92,867,786 950,098 100,931 2,147 (10,221,295)
Property and equipment, net 33,066,456 15,933,868 1,046,110 351,015
Intangibles 36,454,732 8,982,332 63,332 20,006 33,352,436(1)
4,015,000(2)
Marketable investment
securities-restricted 27,801,368 --- --- --- ---
Note receivable 5,722,482 --- --- --- (5,722,482)
Other assets 7,627,582 4,791,659 1,835 --- 4,125,000(1)
------------ ------------ ----------- --------- -------------
Total assets $203,540,406 $ 30,657,957 $ 1,212,208 $ 373,168 $ 25,548,659
============ ============ =========== ========= =============
Current liabilities:
Short-term debt $ 392,105 $ 22,485,810 $ 75,000 $ --- $ (10,400,777)
Other current liabilities 9,158,644 6,576,190 411,150 36,622 ---
------------ ------------ ----------- --------- -------------
Total current liabilities 9,550,749 29,062,000 486,150 36,622 (10,400,777)
Deferred income taxes --- --- --- --- 4,015,000(2)
BTA Auction Indebtedness --- --- --- --- ---
Long-term debt 151,116,860 --- --- 423,456
Stockholders' equity:
Preferred stock --- 11,000 --- --- (11,000)(1)
Common stock 134,988 24,000 1,000 300 22,949(1)
(24,000)(1)
Additional paid-in capital 65,631,596 10,698,679 2,475,192 155,521 32,105,721(1)
(10,698,679)(1)
1,401,723
Warrants --- --- --- --- ---
Accumulated deficit (22,893,787) (9,137,722) (1,750,134) (242,731) 9,137,722(2)
------------ ------------ ----------- --------- -------------
Total stockholders' equity 42,872,797 1,595,957 726,058 (86,910) 31,934,436
----------- ------------ ----------- --------- -------------
Total liabilities and
stockholders' equity $203,540,406 $ 30,657,957 $ 1,212,208 $ 373,168 $ 25,548,659
============ ============ =========== ========= =============
</TABLE>
<TABLE>
<CAPTION>
WIRELESS ONE, INC.
Unaudited Pro Forma Condensed Combined Balance Sheet
June 30, 1996
(continued)
Adjustments for
Acquisition
License and 1996 Debt Pro Forma
Channel Rights Pro Forma Offering Combined
Purchases Combined Adjustments Adjustmnets
<S> <C> <C> <C> <C>
Current assets:
Cash and cash
equivalents $ (31,215,720)(3) $ 32,682,539 $ 118,625,000 $ 138,833,293
(102,121)(4) (12,474,246)(8)
Marketable investment
securities-restricted --- 17,670,036 --- 17,670,036
Other current assets 32,000(5) 2,061,251 --- 2,061,251
-------------- -------------- -------------- --------------
Total current assets (31,285,841) 52,413,826 106,150,754 158,564,580
Property and equipment, net 580,000(5) 50,977,449 --- 50,977,449
Intangibles 69,918,405(5) 152,806,243 --- 152,806,243
Marketable investment
securities-restricted --- 27,801,368 --- 27,801,368
Note receivable --- --- --- ---
Other assets (1,012,500)(6) 15,533,576 6,375,000(8) 21,908,576
-------------- -------------- -------------- --------------
Total assets $ 38,200,064 $ 299,532,462 $ 112,525,754 $ 412,058,216
============== ============== ============== ==============
Current liabilities:
Short-term debt $ (75,000)(4) $ 12,477,138 $ (12,000,000)(8) $ 477,138
Other current liabilities (447,772)(4) 15,734,834 (474,246)(8) 15,260,588
-------------- -------------- -------------- --------------
Total current liabilities (522,772) 28,211,972 (12,474,246)(8) 15,737,726
Deferred income taxes --- 4,015,000 --- 4,015,000
BTA Auction Indebtedness 23,712,880(6) 23,712,880 --- 23,712,880
Long-term debt (423,456)(4) 151,116,860 119,946,613 (8) 271,063,473
Stockholders' equity:
Preferred stock --- --- --- ---
Common stock 11,480(7) 169,417 --- 169,417
(1,300)(7)
Additional paid-in capital 16,061,080(8) 115,200,120 --- 115,200,120
(2,630,713)(7)
Warrants --- --- 5,053,387 5,053,387
Accumulated deficit 1,992,865(7) (22,893,787) --- (22,893,787)
------------- -------------- -------------- --------------
Total stockholders' equity 15,433,412 92,475,750 5,053,387 97,529,137
------------- -------------- -------------- --------------
Total liabilities and
stockholders' equity $ 38,200,064 $ 299,532,462 $ 112,525,754 $ 412,058,216
============= ============== ============== ==============
</TABLE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(1) Represents the elimination of TruVision's historical equity
and the issuance of 2,294,905 shares (excludes the 1,148,040
shares of Common Stock described in Note 7 below) of Common
Stock, at $14 per share, by the Company for the purchase of
all outstanding common stock of TruVision, including the
payment of $1,800,000 to VCI and other expenses related to the
merger including but not limited to bond holder consent fees
with respect to certain amendments to the 1995 Indenture. The
Company issued options to certain TruVision employees in
exchange for the TruVision options as set forth in the
TruVision Merger Agreement. A value of $1,401,723 has been
assigned to these options. For purposes of the Pro Forma
Statements the Company has tentatively considered the fair
value of the acquired tangible assets to approximate their
historical carrying value, with the excess acquisition costs
being attributable to channel rights and license agreements.
It is the Company's intention, subsequent to the acquisition,
to more fully evaluate the acquired assets and, as a result,
the allocation of the acquisition costs among tangible and
intangible assets acquired may change.
(2) Reflects the recognition of deferred income taxes at an
estimated 35% effective tax rate on the excess of book value
over tax basis relating to the TruVision net assets. The
related increase in intangibles will be amortized over an
estimated useful life of 20 years.
(3) Reflects cash to be paid in the Madison Purchase ($5.7
million), Shoals Purchase ($1.2 million), Applied Video
Acquisition ($6.5 million) and the TruVision Transaction,
including the AWS Purchase ($3.9 million), the SkyView
Purchase ($4.2 million), the Flippin Purchase ($1.5 million),
the Gadsden Purchase ($1.0 million) and the Jacksonville
Purchase ($0.8 million), and the cash portion of the purchase
price for rights to be obtained via the BTA Auction ($4.6
million).
(4) Reflects the elimination of certain assets and liabilities
that the Company will not acquire as part of the Madison
Purchase and the Shoals Purchase as set forth in the
respective agreements.
(5) This adjustment represents the estimated fair value of the
equipment and the other assets acquired, and the excess of
cost over tangible assets acquired, as part of the TruVision
Transaction ($10.8 million), the Applied Video Acquisition
($6.5 million), the Madison Purchase and Shoals Purchase ($7.0
million), the Gadsden Purchase, SkyView Purchase and AWS
Purchase (collectively $14.4 million), and the acquisition of
other channel and license rights primarily through the BTA
Auction ($29.6 million). Also reflects investment to acquire
PCS license ($1.5 million). For purposes of the Pro Forma
Statements, the Company has tentatively considered the fair
value of the acquired tangible assets to approximate their
historical carrying value, with the excess acquisition costs
being attributable to channel rights and license agreements.
It is the Company's intention, subsequent to the acquisition,
to more fully evaluate the acquired assets and, as a result,
the allocation of the acquisition costs among tangible and
intangible assets acquired may change.
(6) Represents debt to the United States government to finance
$23,712,880 of the purchase price of, and the utilization of
$1,012,500 of deposits for, the channel rights to be purchased
via the BTA Auction.
(7) Represents the elimination of Madison's and Shoals'
historical equity and the issuance of 1,148,040 shares of
Common Stock, at $14 per share to be issued in connection with
the Madison Purchase, Shoals Purchase and certain other
license and channel rights purchases.
(8) Reflects the 1996 Debt Offering, net of estimated debt
issuance costs of $6.4 million, and the application of $12.0
million of the proceeds therefrom to repay TruVision
indebtedness outstanding on March 31, 1996. At the time of
the consummation of the TruVision Transaction, there was $18.0
million of TruVision indebtedness. The 1996 Warrants have
been valued at $5.1 million.
<TABLE>
<CAPTION>
WIRELESS ONE, INC.
Unaudited Pro Forma Condensed Combined Statement of Operations
Year Ended December 31, 1995
Heartland
Wireless One Division TruVision Madison BarTel Shoal
Historical Historical Historical Historical Historical Historical
----------- ---------- ------------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 1,343,969 $ 632,173 $ 3,081,614 $ 1,582,147 $ 150,000 $ 83,867
Operating Expenses:
Systems operations 841,819 397,574 2,103,053 888,707 67,720 53,015
Selling, general
and administrative 4,431,839 348,447 2,086,200 404,804 59,485 49,915
Depreciation and
amortization 1,783,066 193,962 1,266,301 577,240 42 61,306
----------- ---------- ------------ ----------- --------- ----------
Total operating
expenses 7,056,724 939,983 5,455,554 1,870,751 127,247 164,236
----------- ---------- ------------ ----------- --------- ----------
Operating income (loss) (5,712,755) (307,810) (2,373,940) (288,604) 22,753 (80,369)
----------- ---------- ------------ ----------- --------- ----------
Interest income 2,024,116 --- 15,063 --- --- ---
Interest expense (4,070,184) --- (143,505) (17,440) --- (35,137)
Other 66,349 --- --- 36,271 --- ---
----------- --------- ------------ ----------- --------- ----------
Income (loss) before
income taxes (7,692,474) (307,810) (2,502,382) (269,773) 22,753 (115,506)
Income tax
(expense) benefit --- 113,890 --- --- (5,039) ---
----------- ---------- ------------ ----------- --------- ----------
Net income (loss) (7,692,474) (193,920) (2,502,382) (269,773) 17,714 (115,506)
Preferred stock
dividends and discount
accreation (786,389) --- (687,000) --- --- ---
----------- ---------- ------------- ------------ --------- ----------
Net income (loss)
applicable to common
stock $(8,478,863) $ (193,920) $ (3,189,382) $ (269,773) $ 17,714 $ (115,506)
=========== ========== ============= ============ ========= ==========
Net loss per common
share $ (2.02)
============
Weighted average common
shares outstanding 4,187,736
============
</TABLE>
<TABLE>
<CAPTION>
WIRELESS ONE, INC.
Unaudited Pro Forma Condensed Combined Statement of Operations
Year Ended December 31, 1995
(continued)
Adjustments
Heartland for
Transaction Acquisition
and the Old License and 1996 Debt Pro Forma
Offerings TruVision Channel Rights Pro Forma Offering Combined
Adjustments Adjustments Purchases Combined Adjustments As Adjusted
----------- ----------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues --- $ (486,100)(5) $ --- $ 6,387,670 $ --- $6,387,670
Operating Expenses:
Systems operations 194,541(1) (134,787)(5) --- 4,411,642 --- 4,411,642
Selling, general
and administrative --- --- --- 7,380,690 --- 7,380,690
Depreciation and
amortization --- (35,131)(6) 338,642 (7) 5,152,049 --- 5,152,049
421,354 (7)
545,267(8)
----------- ------------ ----------- ------------ ---------- ------------
Total operating
expenses 194,541 796,703 338,642 16,944,381 --- 16,944,381
----------- ------------ ----------- ------------ ---------- ------------
Operating income (loss) (194,541) (1,282,803) (338,642) (10,556,711) --- (10,556,711)
----------- ------------ ----------- ------------ ---------- ------------
Interest income --- --- --- 2,039,179 --- 2,039,179
Interest expense (668,427)(2) --- --- (4,934,693) (1,885,766)(10) (6,820,459)
Other --- --- --- 102,620 --- 102,620
----------- ------------ ----------- ------------ ---------- -----------
Income (loss) before
income taxes (862,968) (1,282,803) (338,642) (13,349,605) (1,855,766) (15,235,371)
Income tax
(expense) benefit (113,890)(3) 4,481,520(11) 5,039(3) 4,481,520 660,016 (11) 5,141,536
----------- ------------ ----------- ------------ ---------- ------------
Net income (loss) (976,858) 3,198,717 (333,603) (8,868,085) (1,225,750) (10,093,835)
Preferred stock
dividends and discount
accreation 786,389(4) 687,000(9) --- --- --- ---
Net income (loss) ----------- ------------- ------------ ------------- ----------- -------------
applicable to common
stock $ (190,469) $ 3,885,717 $ (333,603) $ (8,868,085) $(1,225,750) $ (10,093,835)
=========== ============= ============ ============= =========== =============
Net loss per common
share $ (1.16) $ (1.32)
============ =============
Weighted average common
shares outstanding 2,294,905 1,148,040 7,630,681 7,630,681
============ ============ ============= ============
</TABLE>
<TABLE>
<CAPTION>
WIRELESS ONE, INC.
Unaudited Pro Forma Condensed Combined Statement of Operations
Six Months Ended June 30, 1996
Wireless One TruVision Madison BarTel Shoal
Historical Historical Historical Historical Historical
------------- ------------ ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues $ 2,372,132 $ 2,807,256 $ 782,283 $ 8,500 $ 79,722
Operating Expenses:
Systems operations 1,266,626 2,015,657 301,840 5,090 19,688
Selling, general
and administrative 5,529,724 2,102,118 374,095 3,351 80,135
Depreciation and
amortization 2,262,506 1,439,974 256,784 17 136,211
------------- ----------- ------------ ---------- ----------
Total operating
expenses 9,058,856 5,557,749 932,719 8,458 236,034
------------- ----------- ------------ ---------- ----------
Operating income (loss) (6,686,724) (2,750,493) (150,436) 42 (156,312)
------------- ----------- ------------ ---------- ----------
Interest income 3,863,777 --- --- --- ---
Interest expense (10,021,497) (728,085) (5,204) --- (28,826)
Other 67,554 (2,515,000) 30,060 --- ---
------------- ----------- ----------- ---------- ----------
Income (loss) before
income taxes (12,776,890) (5,993,578) (125,580) 42 (185,138)
Income tax
(expense) benefit --- --- --- --- ---
------------- ----------- ----------- ---------- ----------
Net income (loss) (12,776,890) (5,993,578) (125,580) 42 (185,138)
Preferred stock
dividends and discount
accreation --- (440,000) --- --- ---
------------- ----------- ------------ ------------ -----------
Net income (loss)
applicable to common
stock $ (12,776,890) $ (6,433,578) $ (125,580) $ 42 $ (185,138)
============= ============ ============ ============ ===========
Net loss per common
share $ (0.95)
==============
Weighted average common
shares outstanding 13,498,752
==============
</TABLE>
<TABLE>
<CAPTION>
WIRELESS ONE, INC.
Unaudited Pro Forma Condensed Combined Statement of Operations
Six Months Ended June 30, 1996
(continued)
Adjustments
for
Acquisition
License and 1996 Debt Pro Forma
TruVision Channel Rights Pro Forma Offering Combined
Adjustments Purchases Combined Adjustments As Adjusted
----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues $ (308,994)(5) $ -- $ 5,740,899 $ --- $ 5,740,899
Operating Expenses:
Systems operations --- --- 3,608,901 --- 3,608,901
Selling, general
and administrative --- --- 8,089,423 --- 8,089,423
Depreciation and
amortization (35,131)(6) 170,989 (7) 4,911,594 --- 4,911,594
407,611(7)
272,633(8)
------------ ----------- ----------- ----------- ------------
Total operating
expenses 645,113 170,989 16,609,918 --- 16,609,918
------------ ----------- ----------- ----------- ------------
Operating income (loss) (954,107) (170,989) (10,869,019) --- (10,869,019)
------------ ----------- ----------- ----------- ------------
Interest income --- --- 3,863,777 --- 3,863,777
Interest expense --- --- (10,783,612) (515,057)(10) (11,298,669)
Other --- --- 2,417,386 --- (2,417,386)
------------ ----------- ----------- ----------- ------------
Income (loss) before
income taxes (954,107) (170,989) (20,206,240) (515,057) (20,721,297)
Income tax
(expense) benefit 6,508,486(11) --- 6,508,486 180,265(11) 6,688,751
------------ ----------- ----------- ----------- -------------
Net income (loss) 5,554,379 (170,989) (13,697,754) (334,792) (14,032,546)
Preferred stock
dividends and discount
accreation 440,000(9) --- --- --- ---
Net income (loss) ------------ ----------- ------------ ------------ -------------
applicable to common
stock $ 6,355,978 $ (170,989) $(13,697,754) $ (334,792) $ (14,032,546)
============ =========== ============ ============ =============
Net loss per common
share $ (0.81) $ (0.83)
============ =============
Weighted average common
shares outstanding 2,294,905 1,148,040 16,941,697 16,941,697
============ ============ ============ =============
</TABLE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENTS OF OPERATIONS
(1) Reflects the additional channel lease expense associated
with the Heartland Transaction.
(2) Reflects additional interest expense on the 13% Notes at a
rate of 13%, amortization of debt issuance costs and
amortization of debt discount associated solely with the
portion of the proceeds of the 1995 Offerings utilized to pay
$7 million of notes payable to Heartland.
(3) Reflects the adjustment of income tax benefit as a result
of the Heartland Transaction and the BarTel Purchase.
(4) Reflects the elimination of the preferred stock dividends
and discount accretion related to the redeemable convertible
preferred stock of Old Wireless One which was converted to
Common Stock at the time of the 1995 Offering.
(5) Reflects the elimination of TruVision's, Madison's and
Shoals' installation revenue and direct commissions from the
statement of operations in order to conform accounting
policies for the capitalized costs of subscriber installations
to the Company's accounting policies.
(6) Reflects the reduction in depreciation expense as a result
of the conforming adjustments in Note 5 above.
(7) Reflects the amortization of the intangible assets acquired
in the TruVision Transaction, Madison Purchase, Shoals
Purchase, and certain other channel rights purchases. For
purposes of these Pro Forma Statements, lives of 20 years have
been used for licenses and channel rights. Amortization of
intangible assets has only been recorded in those Markets
acquired which are Operating Systems.
(8) Reflects the amortization of excess purchase price over the
fair value of net identifiable assets acquired in the
TruVision Transaction over 20 years.
(9) Reflects the elimination of the preferred dividend
requirements as a result of the conversion of TruVision's
convertible preferred stock into TruVision common stock.
(10) Reflects additional interest expense on the Discount Notes
and amortization of debt issuance costs and amortization of
debt discount resulting from the issue price allocated to the
1996 Warrants associated solely with the portion of the
proceeds from the 1996 Offering used to repay $10.0 million of
TruVision indebtedness. Giving full effect to (i) the
issuance of the 13% Notes and amortization of the related debt
issuance cost, (ii) the issuance of the Discount Notes and
amortization of the related debt issuance costs, and (iii) the
incurrence of BTA Auction indebtedness as if such indebtedness
had been incurred, and the Existing Notes and the Notes had
been issued, on January 1, 1995, interest expense on a pro
forma basis would have been $42.7 million and $22.6 million,
respectively, for the year ended December 31, 1995 and the six
months ended June 30, 1996.
(11) Reflects adjustment to income tax benefit related to the
pro forma adjustments. Income tax benefit reflects the
recognition of deferred tax assets to the extent such assets
can be realized through reversals of existing taxable
temporary differences.
SELECTED HISTORICAL FINANCIAL DATA
Wireless One
The selected consolidated historical financial data
presented below as of December 31, 1994 and 1995 and for the
period from February 4, 1993 (inception) to December 31, 1993
and the years ended December 31, 1994 and 1995 were derived
from the consolidated financial statements of the Company
which were audited by KPMG Peat Marwick LLP, independent
certified public accountants which are included elsewhere in
this Prospectus. The selected historical consolidated
financial data presented below as of June 30, 1996 and for the
six months ended June 30, 1995 and 1996 were derived from the
unaudited consolidated financial statements of the Company,
which are included elsewhere in this Prospectus and which, in
the opinion of the Company include all adjustments, consisting
only of normal recurring adjustments, necessary for a fair
presentation of the results for such unaudited interim
periods. The statement of operations data for interim periods
are not necessarily indicative of results for subsequent
periods or for the full year. This selected consolidated
historical financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements
(including the notes thereto) of Wireless One, Inc., contained
elsewhere in this Prospectus. See "Index to Financial
Statements."
<TABLE>
<CAPTION>
Period from
February 4, 1993
(inception) to Year Ended December 31, Six months ended June 30,
December 31, ----------------------------- ----------------------------
1993 1994 1995 1995 1996
------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:...................... $ --- $ 380,077 $ 1,343,969 $ 491,995 $ 2,372,132
Operating expenses:
Systems operations........... 24,429 274,886 841,819 488,348 1,266,626
Selling, general and
administrative............. 110,281 1,800,720 4,431,839 1,214,856 5,529,724
Depreciation and
amortization............... 27,489 413,824 1,783,066 441,292 2,262,506
------------- ------------ ------------- ------------ -------------
Total operating expenses....... 162,199 2,489,430 7,056,724 2,144,496 9,058,856
------------- ------------ ------------- ------------ -------------
Operating loss................. (162,199) (2,109,353) (5,712,755) (1,652,501) (6,686,724)
Interest expense, net.......... (411) (152,460) (1,979,719) (97,043) (6,090,166)
------------- ------------ ------------- ------------ -------------
Net loss...................... $ (162,610) $ (2,261,813) $ (7,692,474) $ (1,749,544) (12,776,890)
Preferred stock dividends
and discount accretion...... --- --- (786,389) (365,311) ---
Net loss applicable to
common stock................ $ (162,610) $ (2,261,813) $ (8,478,863) $ (2,114,855) $ (12,776,890)
============= ============ ============= ============ =============
Deficiency of earnings
to fixed charges............ $ 162,610 $ 2,261,813 $ 8,478,863 $ 2,114,855 $ 12,776,890
============= ============ ============= ============ =============
Net loss per share............ (0.30) (1.21) (2.02) (1.05) (0.95)
============= ============ ============= ============ =============
Shares used in computing
net loss per share.......... 538,127 1,863,512 4,187,736 2,013,950 13,498,752
============= ============ ============= ============ =============
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------------------------
1994 1995 June 30, 1996
------------- ------------- -------------
<S> <C> <C> <C>
Balance Sheet Data:
Working capital (deficit),
excluding restricted cash................. $ (1,537,244) $ 104,446,672 $ 65,647,001
Restricted cash............................. --- 53,393,344 45,471,404
Total assets................................ 8,914,224 213,799,874 203,540,406
Current portion of long-term debt........... 1,457,295 376,780 392,105
Long-term debt.............................. 2,839,602 150,871,267 151,116,860
Total stockholders' equity.................. 4,343,713 55,649,687 42,872,797
</TABLE>
Heartland Division
The selected financial data presented below as of
December 31, 1993 and 1994 and for the year ended December 31,
1993, the period from January 1, 1994 to August 18, 1994 and
the period from August 19, 1994 to December 31, 1994 were
derived from the financial statements of Heartland Division,
which were audited by KPMG Peat Marwick LLP, independent
certified public accountants, and which are included elsewhere
in this Prospectus. The selected financial data presented
below as of September 30, 1995 and for the period from August
19, 1994 to September 30, 1994 and the nine months ended
September 30, 1995 were derived from the unaudited financial
statements of Heartland Division, which are included elsewhere
in this Prospectus and which, in the opinion of the management
of Heartland, include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair
presentation of the results for such unaudited interim
periods. The statement of operations data for interim periods
are not necessarily indicative of results for subsequent
periods or for the full year. On August 19, 1994, a new cost
basis was established for certain assets comprising a portion
of Heartland Division due to a business combination accounted
for as a purchase. As a result of such acquisition, financial
information of Heartland Division for periods after August 18,
1994 is presented on a different cost basis than that for
periods before August 18, 1994 and, therefore, such
information is not comparable. This selected financial data
should be read in conjunction with the financial statements
(including the notes thereto) of Heartland Division contained
elsewhere in this Prospectus. See "Index to Financial
Statements."
<TABLE>
<CAPTION>
January 1, August 19, August 19, Nine months
Year Ended 1994 to 1994 to 1994 to ended
December 31, August 18, December 31, September 30, September 30,
1993 1994 1994 1994 1995
----------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue ................... $ 850,167 $ 616,223 $ 291,012 $ 80,095 $ 632,173
Operating expenses:
Systems operations....... 397,503 340,539 197,429 54,601 397,574
Selling, general
and administrative..... 557,466 320,701 184,859 50,065 348,447
Depreciation and
amortization........... 211,464 166,358 22,659 193,962 77,995
----------- ---------- ---------- --------- ----------
Total operating expenses... 1,166,433 827,598 460,283 127,325 939,983
----------- ---------- ---------- --------- ----------
Operating loss............. (316,266) $ (211,375) $ (169,271) (47,230) $ (307,810)
Income tax benefit......... --- --- 62,630 17,475 113,890
----------- ---------- ---------- --------- ----------
Net loss................... $ (316,266) $ (211,375) $ (106,641) $ (29,755) $ (193,920)
=========== ========== ========== ========= ==========
Deficiency of earnings
to fixed charges......... $ 316,266 $ 211,375 $ 169,271 $ 47,230 $ 307,810
========== ========== ========== ========= ==========
</TABLE>
December 31, December 31, September 30,
1993 1994 1995
---------- ---------- -----------
Balance Sheet Data:
Working capital.............. $ 20,830 $ 62,810 $ 240,457
Total assets................. 2,400,573 9,179,806 14,256,367
Division equity.............. 2,302,227 8,857,709 14,044,155
TruVision
The selected financial data presented below as of
August 24, 1994 and for the period January 1, 1994 through
August 24, 1994 were derived from the financial statements of
MWTV, and the selected financial data presented below as of
December 31, 1994 and December 31, 1995 and for the period
August 25, 1994 through December 31, 1994 and the year ended
December 31, 1995 were derived from the financial statements
of TruVision, which in each case were audited by Arthur
Andersen LLP, independent certified public accountants, and
which are included elsewhere in this Prospectus. The selected
financial data presented below as of June 30, 1996 were
derived from the unaudited consolidated financial statements
of TruVision, which are included elsewhere in this Prospectus
and which, in the opinion of management of TruVision, include
all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results
for such unaudited interim periods. The statement of
operations data for interim periods are not necessarily
indicative of results for subsequent periods or for the full
year. This selected financial data should be read in
conjunction with the financial statements (including the notes
thereto) of TruVision contained elsewhere in this Prospectus.
See "Index to Financial Statements."
<TABLE>
<CAPTION>
MWTV TruVision
------------ -----------------------------------------
January 1, August 25,
1994 1994
to to Year Ended Six Months
August 24, December 31, December 31, Ended
1994 1994 1995 June 30, 1996
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Results of Operations:
Total revenues............... $ 73,3700 $ 430,534 $ 3,081,614 $ 2,807,256
System operating
expesnes................. 278,000 425,603 2,103,053 2,015,657
Selling, general and
administrative........... 668,009 534,431 2,086,200 2,102,118
Depreciation and
amortization............. 82,196 167,990 1,266,301 1,439,974
------------ ----------- ------------ ------------
Total operating expenses..... 1,028,205 1,128,024 5,455,554 5,557,749
------------ ----------- ------------ ------------
Operating loss............... (954,835) (697,490) (2,373,940) (2,750,493)
Interest income
(expense), net............. 6,632 55,728 (128,442) (728,085)
Costs of aborted offering.... - - - (2,515,000)
------------ ----------- ------------ ------------
Net loss..................... $ (948,203) $ (641,762) $ (2,502,382) $ (5,993,578)
============ =========== ============ ============
August 24, December 31, December 31, June 30,
1994 1994 1995 1996
------------ ----------- ------------ ------------
Balance Sheet Data:
Working capital (deficit).... $ (2,696,905) $ 1,948,892 $ (4,770,468) $(28,111,902)
Total assets................. 4,252,144 7,983,059 12,877,217 30,657,957
Current portion of
long-term debt............. 3,308,000 --- 4,531,464 22,485,810
Long-term debt............... --- --- --- ---
Convertible preferred
stock..................... --- 8,000 11,000 11,000
Total stockholders'
equity..................... 495,040 7,091,917 7,589,535 1,595,957
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction
with the financial statements (including the notes thereto)
included elsewhere in this Prospectus. See "Index to
Financial Statements."
The Company
The Company acquires, develops, owns and operates
wireless cable television systems. The Company has targeted
small to mid-size markets, located in Texas, Louisiana,
Mississippi, Tennessee, Kentucky, Alabama, North Carolina,
South Carolina, Georgia, Arkansas and Florida, with
approximately 25% of the households not currently passed by
traditional hard-wire cable systems. In addition, the Company
has Operating Systems located in Brenham, Bryan/College
Station, Milano and Wharton, Texas; Bunkie, Lafayette, Monroe,
Alexandria, Houma and Lake Charles, Louisiana; Jackson, Delta,
Gulf Coast, Natchez, Meridian and Oxford, Mississippi; Bucks,
Demopolis, Dothan and Huntsville, Alabama; Ft. Walton Beach,
Gainesville, Panama City and Pensacola, Florida;
Jeffersonville and Albany, Georgia and Tullahoma and
Lawrenceburg, Tennessee.
Except for the preceding paragraph and "-Pro Forma
Results of Operations," this Management's Discussion and
Analysis of Financial Condition and Results of Operations
solely reflects the historical results of the Company and does
not give effect to any of the Pro Forma Events, including,
without limitation, the TruVision Transaction and the
Acquisitions. Due to the limited operating history, startup
nature and rapid growth of the Company, period-to-period
comparisons of financial data are not necessarily indicative
of results for subsequent periods and should not be relied
upon as an indicator of the future performance of the Company.
Overview
Since its inception, the Company has sustained
substantial net losses, due primarily to start-up costs,
interest expense and charges for depreciation and
amortization, and has experienced negative consolidated
EBITDA. At December 31, 1995, none of the Operating Systems
had positive cash flow from operations, primarily as a result
of their early stage of development. There can be no
assurance that any system or the Company as a whole will
generate positive cash flow. The Company expects to continue
to experience negative consolidated EBITDA through at least
the third quarter of 1998, and may continue to do so
thereafter while it develops and expands its wireless cable
systems, even if individual systems of the Company generate
positive System EBITDA. As the Company continues to develop
systems, positive cash flow from more mature systems is
expected to be partially or completely offset by operating
losses from less developed systems and from development costs
associated with establishing systems in new markets. This
trend is expected to continue until the Company has a
sufficiently large subscriber base to absorb operating and
development costs of recently launched systems. The Company
does not anticipate being able to generate positive net income
until after 2001, and there can be no assurance that other
factors, such as, but not limited to, economic conditions, its
inability to raise additional financing or disruptions in its
operations, will not result in further delays in operating on
a profitable basis. Losses may increase as operations in
additional systems are commenced or acquired. See "Risk
Factors-Limited Operating History; Lack of Profitable
Operations; Negative Cash Flow; Early Stage Company."
"System EBITDA" means net income (loss) plus interest
expense, income tax expense, depreciation and amortization
expense and all other non-cash charges, less any non-cash
items which have the effect of increasing net income or
decreasing net loss, for a system and includes all selling,
general and administrative expenses attributable to employees
employed in that system. For the periods presented there are
no such non-cash items. Information with respect to EBITDA is
included herein because it is a widely accepted financial
indicator of a company's ability to service and/or incur
indebtedness. EBITDA is not intended to represent cash flows,
as determined in accordance with generally accepted accounting
principles, nor has it been presented as an alternative to
operating income or as an indicator of operating performance
and should not be considered as a substitute for measures of
performance prepared in accordance with generally accepted
accounting principles.
Six Months Ended June 30, 1996 Compared to Same Period Ended
1995
The table below sets forth for each of the Operating
Systems the later of the date of launch or acquisition by the
Company and the approximate number of subscribers at June 30,
1995 and June 30, 1996.
<TABLE>
<CAPTION>
Approximate Approximate
Launch or Subscribers at Subscribers at
Market Acquisition Date June 30, 1995 June 30, 1996
- ------ ---------------- ------------- -------------
<S> <C> <C> <C>
Brenham, TX.................. February 1996 - 857
Bryan/College Station, TX.... May 1995 212 2,899
Milano, TX................... October 1995 - 1,659
Wharton, TX.................. June 1994 1,518 2,114
Bunkie, LA................... December 1995 - 1,498
Lafayette, LA................ January 1994 522 697
Lake Charles, LA............. April 1994 608 555
Monroe, LA................... October 1995 - 1,806
Gainesville, FL.............. January 1996 - 986
Panama City, FL.............. September 1995 - 1,751
Pensacola, FL................ July 1995 - 2,041
Jeffersonville, GA........... March 1996 - 247
Tullahoma, TN................ November 1995 - 1,403
Bucks, AL.................... April 1996 - 454
Fort Walton Beach, FL........ May 1996 - 70
Dothan, AL................... May 1996 - 1
----- ------
TOTAL..................... 2,860 19,038
===== ======
</TABLE>
_____________________________
Revenue Information
Six Months Approximate Average
Ended June 30, Revenue Per
-------------- Subscriber for
1995 1996 June 1996
---- ---- ---------
Subscription Revenues:
Brenham, TX.................. $ - $ 58,928 $33.69
Bryan/College Station, TX.... 5,733 407,399 33.66
Milano, TX................... - 290,534 32.24
Wharton, TX.................. 331,401 375,634 34.28
Bunkie, LA................... - 134,754 33.17
Lafayette, LA................ 56,407 85,958 23.15
Lake Charles, LA............. 98,454 87,483 30.66
Monroe, LA................... - 217,750 30.64
Gainesville, FL.............. - 53,079 26.56
Panama City, FL.............. - 219,726 30.08
Pensacola, FL................ - 285,443 35.88
Jeffersonville, GA........... - 8,488 32.35
Tullahoma, TN................ - 126,861 31.36
Bucks, AL.................... - 19,423 33.32
Fort Walton Beach, FL........ - 672 -
Dothan, AL................... - - -
--------- ----------
TOTAL...................... $ 491,995 $2,372,132
========= ==========
_______________________________
Revenues. Revenues consist primarily of subscription
revenues which principally consist of monthly fees paid by
subscribers for the basic programming package and for premium
programming services. Subscription revenues for the six
months ended June 30, 1996 were $2,372,132 as compared to
$491,995 for the comparable period of 1995, an increase of
$1,880,137 or 382%. This increase is principally attributable
to the increase in the average number of subscribers for the
six months ended June 30, 1996 compared to the same period in
1995, resulting from the launch of 9 new systems during the
remaining six months of 1995 and the first half of 1996. In
addition, the contributions of two Operating Systems from
Heartland in October 1995, attributed to this increase in the
average number of subscribers for the first six months of
1996.
Systems Operations Expense. Systems operations expense
includes programming costs, channel lease payments, tower site
rentals, and repairs and maintenance. Programming costs and
channel lease payments (with the exception of minimum
payments) are variable expenses which increase as the number
of subscribers increases. Systems operations expense for the
six months ended June 30, 1996 was $ 1,266,626 as compared to
$488,348 for the same period of 1995, reflecting an increase
of $778,278 or 159%. This increase is attributable primarily
to the increase in the number of new subscribers for such
period in 1996 compared to such period in 1995 resulting from
the launch of new Markets as described above.
Selling, General and Administrative Expense. Selling,
general and administrative ("SG&A") expenses for the six
months ended June 30, 1996 were $5,529,724 compared to
$1,214,856 for the same period of 1995, an increase of
$4,314,868 or 355%. The Company has experienced increasing
SG&A expenses as a result of its increased wireless cable
activities and associated administrative costs, including
costs related to opening and maintaining additional offices
and additional compensation expense. The increase is due
primarily to increased personnel costs, advertising and
marketing expenses and other overhead expenses required to
support the expansion of the Company's operations. The
Company believes such SG&A costs will not stabilize until 1998
when all Markets are expected to be launched. At that time,
administrative expenses should remain constant, with selling
and general expense stabilizing as desired penetration rates
are achieved. In order for such stabilization to occur within
this time period, however, the current system launch schedule
must be met and desired penetration rates must be achieved.
There can be no assurance that the Company will meet the
current launch schedule or that desired penetration rates will
be achieved or, consequently, that SG&A expenses will
stabilize within this time period.
Depreciation and Amortization Expense. Depreciation and
amortization expense for the six months ended June 30, 1996
was $2,262,506 versus $441,292 for the same period of 1995, an
increase of $1,821,214 or 413%. This increase is due to
additional amortization of channel rights from systems
launched plus amortization of amounts related to systems
acquired from Heartland. In addition, depreciation increased
due to costs associated with the increase in subscribers and
the purchase of equipment for newly launched markets.
Interest Expense. Interest expense increased to
$10,021,497 from $198,177 as compared to the same period ended
in 1995. This increase in interest expense is due to the
issuance in October 1995 of $150 million principal amount of
the Company's 13% Notes.
Interest Income. Interest income of $3,863,777 consists
of interest earned on the proceeds from the 1995 Offerings.
Results of Operations Since Inception
The results of operations for the years ended December
31, 1993, 1994 and 1995 were prepared based on the historical
results of the Company for the period from February 4, 1993
(inception) to December 31, 1993 and the years ended December
31, 1994 and 1995. On October 18, 1995, the Company acquired
the Heartland Division in exchange for approximately 3.5
million shares of Common Stock and $10 million in notes, which
were repaid from the proceeds of the 1995 Offerings. As a
result, the results of operations for the year ended December
31, 1995 includes the operating results of the Company for the
period from January 1, 1995 through October 18, 1995 and the
combined operating results of the Company and the Heartland
Division for the period from October 19, 1995 through December
31, 1995. Period-to-period comparisons of the Company's
financial results are not necessarily meaningful and should
not be relied upon as an indication of future performance due
to the acquisition of the Heartland Division and the
development of the Company's business and system launches
during the periods presented.
Historically, the Company subscribers have been located
in single-family homes. The number of subscribers located in
multiple-dwelling units ("MDUs") in the Operating Systems
increased as a percentage of total subscribers from
approximately 1.5% at December 31, 1994 to approximately 1.9%
at December 31, 1995. MDU subscribers typically generate
lower per subscriber revenue than single-family units.
The table below sets forth for each of the Operating
Systems, the later of the date of launch or acquisition by the
Company and the approximate number of subscribers at December
31, 1994 and 1995 and June 30, 1996.
<TABLE>
<CAPTION>
Launch or Approximate Approximate Approximate
Acquisition Subscribers at Subscribers at Subscribers at
Market Date December 31, 1994 December 31, 1995 June 30, 1996
- ------ -------------- ----------------- ----------------- -------------
<S> <C> <C> <C> <C>
Brenham, TX............. February 1996 --- --- 857
Bryan/College Station, TX May 1995 --- 1,445 2,897
Milano, TX <F1>......... October 1995 --- 1,297 1,659
Wharton, TX............. June 1994 1,401 1,579 2,114
Bunkie, LA.............. December 1995 --- 62 1,498
Lafayette, LA <F2>...... January 1994 500 593 697
Lake Charles, LA........ April 1994 603 487 555
Monroe, LA <F1>......... October 1995 --- 829 1,806
Gainesville, FL......... January 1996 --- --- 986
Panama City, FL......... September 1995 --- 442 1,751
Pensacola, FL........... July 1995 --- 658 2,041
Jeffersonville, GA...... March 1996 --- --- 247
Tullahoma, TN........... November 1995 --- 133 1,403
Bucks, AL............... April 1996 --- --- 454
Fort Walton Beach, FL... May 1996 --- --- 70
Dothan, AL.............. May 1996 --- --- 1
----- ----- ------
Total 2,504 7,525 19,038
===== ===== ======
</TABLE>
_____________________
<F1> These Systems were acquired by the Company from Heartland
in October 1995.
<F2> The Company is not actively marketing, and does not
currently intend to actively market, its service in the
Lafayette Market until an increase in the channel offering
is achieved, which the Company expects to occur within six
months from the date hereof.
Revenue Information
Approximate
Year Ended December 31, Average
-------------------------------- Revenue Per
Subscriber for
1993 1994 1995 December 1995
Subscription Revenues: ---- ---- ---- -------------
Brenham, TX............... $ --- $ --- $ --- $ ---<F1>
Bryan/College
Station, TX............. --- --- 185,195 33.70
Milano, TX................ --- --- 89,798 31.40
Wharton, TX............... --- 159,507 620,650 35.90
Bunkie, LA................ --- --- 554 ---<F2>
Lafayette, LA ............ --- 46,057 125,727 22.60
Lake Charles, LA.......... --- 48,739 182,760 30.10
Monroe, LA <F1>........... --- --- 66,124 27.40
Gainesville, FL........... --- --- --- ---<F1>
Panama City, FL........... --- --- 11,644 31.90
Pensacola, FL............. --- --- 59,814 37.50
Jeffersonville, GA........ --- --- --- ---<F1>
Tullahoma, TN............. --- --- 1,703 ---<F2>
--------- --------- ----------- --------
Total.................. $ --- $ 254,303 $ 1,343,969
____________
<F1> Operating System not launched at December 31, 1995.
<F2> Number not meaningful due to timing of subscribers being
put on service.
Revenues. The Company had no operating revenues for
the period from February 4, 1993 (inception) through December
31, 1993. The Company's revenues for the year ended December
31, 1994 were $380,077. Subscription revenues from new
subscribers totaled $254,303 or 67% of revenues. Equipment
sales and other revenues accounted for $103,837 and $21,937,
respectively, in 1994. All revenues were related to the
Lafayette, Lake Charles and Wharton Systems, each of which was
launched during 1994.
For the year ended December 31, 1995 revenues, which
were all subscription revenues, were $1,343,969. The increase
in subscription revenues of $1,089,666 or 428% over 1994 was
primarily attributable to the acquisition of the Heartland
Division in October 1995, the launch of the Bryan/College
Station and Pensacola Systems and the increase in revenues
from the Company's existing Operating Systems. This increase
in revenues from existing Operating Systems was primarily due
to the Wharton and Lake Charles Systems being operational for
12 months in 1995 versus seven and eight months, respectively,
for 1994, and an increase in average monthly subscribers in
1995 over 1994 for the Lafayette System.
Systems Operations Expense. The Company incurred
$24,429 of systems operations expense during 1993, primarily
representing channel lease expense. For 1994, the Company
incurred $274,886 of systems operations expense. The increase
from 1993 to 1994 was attributable to 11 additional months of
operation in 1994.
For the year ended December 31, 1995, systems
operations expense amounted to $841,819 as compared to
$274,886 for the prior-year period. The increase was
primarily attributable to the increase in the number of
subscribers and new market launches.
Selling General and Administrative Expense. The
Company has experienced increasing SG&A expense since its
inception as a result of its increasing wireless cable
activities and associated administrative costs, including
costs related to opening and maintaining additional offices
and additional compensation expense. The Company believes
such SG&A expenses will not stabilize until 1998 when all
systems are expected to be launched. At that time,
administrative expenses should remain constant, with selling
and general expense stabilizing as desired penetration rates
are achieved. In order for such stabilization to occur within
this time period, however, the current system launch schedule
must be met and desired penetration rates must be achieved.
There can be no assurance that the Company will meet the
current launch schedules or that desired penetration rates
will be achieved or, consequently, that such SG&A expenses
will stabilize within this time period. SG&A increased from
$110,281 in 1993 to $1,800,720 in 1994, primarily due to a
longer operating period in 1994. For the year ended December
31, 1995, SG&A was $4,431,839 as compared to $1,800,720 for
the prior period. The $2,631,119 increase was due primarily
to increase in personnel costs, advertising and marketing
expenses and other overhead expenses required to support the
expansion of the Company's operations.
Depreciation and Amortization Expense. Depreciation
and amortization expense for 1994 amounted to $413,824 as
compared to $27,489 in the partial year 1993.
For the year ended December 31, 1995, depreciation
and amortization expense totaled $1,783,066 compared to
$413,824 for the same period in 1994. The increase was
primarily attributable to additional costs incurred by the
Company through its acquisition of the Heartland Division and
the development and implementation of the Company's operating
plan.
Interest Income. For the year ended December 31,
1995, the Company earned $1,473,432 on its cash equivalents
and $550,684 from the funds escrowed in connection with the
offering of the 13% Notes.
Interest Expense. Interest expense incurred during
1993 and 1994 amounted to $411 and $171,702, respectively.
During 1994, the Company established a $3.0 million revolving
credit facility from a bank secured by subscription
receivables. The revolving credit facility accounted for
$52,485 of interest expense in 1994. The outstanding balance
on the facility at December 31, 1994 amounted to $1.1 million.
Additionally, the Company has two discount notes that relate
to the acquisition of channel rights in Pensacola and Panama
City, Florida. The discount notes have a face value of $3.7
million and are due in installments through 1997. Interest
expense related to the notes during 1994 amounted to $104,767.
Finally, the subsidiary of the Company that owns and operates
the Bryan/College Station System has outstanding a $150,000
convertible debenture that bears interest at the prime rate.
The debenture is convertible at the option of the holder into
a 20% minority interest in such subsidiary and is callable at
a fixed price.
On an aggregate basis, for the year ended December
31, 1995, interest expense totaled $4,070,184. The revolving
credit facility was repaid in full from the proceeds of the
private placement of redeemable convertible preferred stock in
April 1995. Interest expense of $41,858 was incurred in 1995
from this revolving credit facility. In October 1995, the
Company issued an aggregate principal amount of $150,000,000
of its 13% Notes. At December 31, 1995, interest expense of
$3,683,333 had been accrued for the 13% Notes. Interest
expense for the two discount notes described above was
$289,170 for the year ended December 31, 1995. Interest
expense on the convertible debenture related to the
Bryan/College Station System was $13,046 for the year ended
December 31, 1995.
Net Loss. During 1993, the Company had no revenues
and incurred a loss of $162,610, primarily due to SG&A.
During 1994, the Company had total revenues of $380,077 and an
operating loss of $2,109,353. The net loss for the Company
during 1994 amounted to $2,261,813. For the year ended
December 31, 1995, the Company had an operating loss of
$5,712,755 on total revenues of $1,343,969. The net loss for
the Company during 1995 amounted to $7,692,474.
Liquidity and Capital Resources
The wireless cable television business is a capital
intensive business. The Company's operations require
substantial amounts of capital for (i) the installation of
equipment at subscribers' locations, (ii) the construction of
additional transmission and headend facilities and related
equipment purchases, (iii) the funding of start-up losses and
other working capital requirements, (iv) the acquisition of
additional wireless cable channel rights and systems and (v)
investments in, and, maintenance of, vehicles and
administrative offices. Since inception, the Company has
expended funds to lease or otherwise acquire channel rights in
various markets, to construct or acquire its Operating
Systems, to commence construction of operating systems in
different markets and to finance initial operating losses.
In order to finance the expansion of its Operating
Systems and finance the launch of additional markets, in
October 1995 the Company consummated its initial public
offering of 3,450,000 shares of Common Stock at $10.50 per
share (the "Initial Public Offering"). The Company received
approximately $32.3 million in net proceeds from the Initial
Public Offering. Concurrent with the Initial Public Offering,
the Company issued 150,000 units consisting of $150 million
aggregate principal amount of 13% Notes and 450,000 1995
Warrants, which entitle their holders to purchase, in the
aggregate, 450,000 shares of Common Stock at an exercise
price of $11.55 per share. The Company placed approximately
$53.2 million of the approximately $143.8 million of net
proceeds realized from the 1995 Debt Offering into an escrow
account to cover the first three years' interest payments as
required by terms of the 1995 Indenture.
In August 1996, the Company issued 239,252 Units
consisting of $239,252,000 principal amount of the Discount
Notes and warrants to purchase, in the aggregate, 544,059
shares of Common Stock at an exercise price of $16.6375 per
share. Net proceeds to the Company were approximately $118.6
million.
On July 29, 1996, the Company consummated a merger
with TruVision whereby a subsidiary of the Company exchanged
approximately 3.4 million shares of the Company's common stock
for all of TruVision's common stock. The Company merged with
and into TruVision, at which time TruVision became a wholly
owned subsidiary of the Company. The Company does not
anticipate immediate reductions in SG&A, including reductions
in its number of employees, as a consequence of the TruVision
transaction.
Prior to the consummation of the merger, the Company
committed to provide a bridge loan to TruVision of up to $15
million. This loan was to be secured by certain assets of
TruVision and its subsidiaries. At June 30, 1996, the Company
had funded approximately $5.7 million of this loan.
In March 1996, the Company and TruVision participated
in an auction conducted by the FCC for the exclusive right to
apply for MDS commercial channels in certain BTAs, subject to
compliance with the FCC's interference standards and other
rules. Successful bidders will receive a blanket
authorization to serve an entire BTAs on all MDS channels
within that BTA. The Company and TruVision were the winning
bidders for FCC authorizations in 66 BTAs with bids totaling
approximately $30.3 million (net of small business bidding
credit) for BTA's. The Company has filed applications with
the FCC on May 10, 1996, to secure these BTA's. Assuming all
BTA authorizations are granted to the Company, the Company
will be required to make total down payments of 20% of the $16
million bid with the remaining 80% being financed over a 10
year term. During this ten-year period, the Company will be
required to make quarterly interest payments for the first two
years and then quarterly principal and interest payments for
the remaining term. The interest rate charged will be equal
to the 10 year U.S. Treasury rate at the time of the issuance
of the BTA authorization plus 2 1/2%.
The Company has experienced negative cash flow from
operations in each year since its formation, and the Company
expects to continue to experience negative consolidated cash
flow from operations due to operating costs associated with
system development and costs associated with expansion and
acquisition activities. Until sufficient cash flow is
generated from operations, the Company will be required to
utilize its current capital resources or external sources of
funding to satisfy its capital needs. The Company currently
believes that the aggregate net proceeds from the Company's
1995 Offerings and the 1996 Debt Offering will be sufficient
to meet its expected capital needs at least over the next
twelve months.
Historically, the Company has generated operating and
net losses and can be expected to do so for at least the
foreseeable future, as it continues to develop additional
operating systems. Such losses may increase as operations in
additional systems are commenced or acquired. There can be no
assurance that the Company will be able to achieve or sustain
positive net income in the future. As the Company continues
to develop systems, positive System EBITDA from more mature
systems is expected to be partially or completely offset by
operating losses from less developed systems and from
development costs associated with establishing systems in new
markets. This trend is expected to continue until the Company
has a sufficiently large subscriber base to absorb operating
and development costs of recently launched systems. Based on
its current system launch schedule and targeted penetration
and subscriber revenue rates, the Company believes it will
reach a subscriber level in its more mature systems (those
systems with positive System EBITDA) in the second half of
1997 that will generate revenues sufficient to offset these
operating and development costs. There can be no assurance,
however, that the Company will meet its system launch schedule
or achieve the penetration and subscriber revenue rates
necessary to acquire this subscriber base or that revenues
will be sufficient to offset such costs by that time. EBITDA
is a commonly used measure of performance in the wireless
cable industry. However, EBITDA does not purport to represent
cash provided by or used by operating activities and should
not be considered in isolation or as a substitute for measures
of performance prepared in accordance with generally accepted
accounting principles.
Subject to the limitations relating to the 13% Notes
and the Discount Notes, in order to accelerate its growth rate
and to finance general corporate activities and the launch or
build-out of additional systems, the Company may supplement
its existing sources of funding with financing arrangements at
the operating system level or through additional borrowings,
the sale of additional debt or equity securities, including a
sale to a strategic investor, joint ventures or other
arrangements, provided such financing is available to the
Company on satisfactory terms.
As a result of the 1995 Offerings and the 1996 Debt
Offering, and the possible incurrence of additional
indebtedness, the Company will be required to satisfy certain
debt service requirements. Following the disbursement in
October 1998 of all of the funds in the escrow account
established in connection with the 1995 Indenture, a
substantial portion of the Company's cash flow will be devoted
to debt service on the13% Notes. Additionally, beginning on
August 1, 2001, interest will begin to accrue on the Discount
Notes, and thereafter, a substantial portion of the Company's
cash flow will be devoted to such debt service. The ability
of the Company to make payments of principal and interest will
be largely dependent upon its future performance. Many
factors, some of which will be beyond the Company's control
(such as prevailing economic conditions), may affect its
performance. There can be no assurance that the Company will
be able to generate sufficient cash flow to cover required
interest and principal payments when due on the 13% Notes, the
Discount Notes, or other indebtedness of the Company,
including $23,712,880 of indebtedness to be incurred to the
federal government in connection with the Company's winning
bids in the BTA Auction. If the Company is unable to make
interest and principal payments in the future, it may,
depending upon the circumstances which then exist, seek
additional equity or debt financing, attempt to refinance its
existing indebtedness or sell all or part of its business or
assets to raise funds to repay its indebtedness. The
incurrence of additional indebtedness is restricted by the
Indentures.
In managing its wireless cable assets, the Company
may, at its option, exchange or trade existing wireless cable
channel rights for channel rights in Markets that have a
greater strategic value to the Company. The Company
continually evaluates opportunities to acquire, either
directly or indirectly through the acquisition of other
entities, wireless cable channel rights. There is no
assurance that the Company will not pursue any such
opportunities that may utilize capital currently expected to
be available for its current Markets.
For the six months ended June 30, 1995, cash used in
operating activities was $.9 million consisting primarily of a
net loss of $1.7 million and offset by an increase in accounts
payable and accrued expenses of $.2 million, non-cash expenses
of $.14 million, other assets of $.02 million and depreciation
and amortization expenses of $.4 million. For the six months
ended June 30, 1995, cash used in investing activities was
$5.5 million, consisting primarily of capital expenditures and
payments for licenses and organizational costs of
approximately $2.5 million and $3 million, respectively.
These capital expenditures were principally related to the
construction of new markets and certain license and
organizational costs. For the six months ended June 30, 1995
cash provided by financing activities was $14.7 million,
consisting primarily of $2.1 million in proceeds from the
subscription of Common Stock, $13.7 million in proceeds from
the issuance of preferred stock, and offset by $1.1 million in
principal payments of long-term debt.
For the six months ended June 30, 1996, cash used in
operating activities was $8.4 million consisting primarily of
a net loss of $12.8 million and an increase in accounts
payable and accrued expenses of $2.2 million, a decrease in
receivables and prepaids of $.002 million, an increase in
deposits of $.02 million, depreciation and amortization of
$2.3 million, non-cash income of $.4 million and non-cash
expenses of $.3 million. For the six months ended June 30,
1996, cash used in investing activities was $27.9 million,
consisting primarily of capital expenditures and payments for
licenses and organization costs of approximately $20.2 million
and $10.2 million, respectively. In addition, the Company
issued an acquisition note receivable of $5.7 million and made
investments and purchased other assets at a cost of
approximately $.2 million. Cash was provided by proceeds from
maturities of securities of $8.4 million. These investing
activities were principally related to the acquisition of
equipment in certain of the Company's Operating Systems, as
well as those Systems Under Construction or Near-Term Launch
Markets and certain license and organization costs related to
those Markets. For the six months ended June 30, 1996, cash
used in financing activities was $.096 million, consisting of
$.002 million from the repayments of long-term debt and $.094
million in payments for debt issue costs.
For the year ended December 31, 1993, cash used in
operating activities was $0.11 million, consisting primarily
of a net loss of $0.16 million and prepaid expenses of $0.01
million, offset by accounts payable and accrued expenses of
$0.04 million and depreciation and amortization of $0.03
million. For the year ended December 31, 1993, cash used in
investing activities was $0.44 million, consisting primarily
of capital expenditures and payments for licenses and
organization costs of approximately $0.28 million and $0.15
million, respectively. These capital expenditures principally
related to the construction of new Markets and certain
license and organization costs related to those Markets. For
the year ended December 31, 1993 cash provided by financing
activities was $0.63 million, consisting primarily of the
proceeds from the issuance of 538,127 shares of Common Stock
upon the Company's merger with Wireless One, L.L.C., and
proceeds from the issuance of long-term debt.
For the year ended December 31, 1994, cash used in
operating activities was $1.7 million consisting primarily of
a net loss of $2.3 million and an increase in receivables and
prepaid expenses of $0.2 million, offset by an increase in
accounts payable and accrued expenses of $0.2 million,
depreciation and amortization of $0.4 million, and non-cash
expenses of $0.16 million. For the year ended December 31,
1994, cash used in investing activities was $8.2 million,
consisting primarily of capital expenditures and payments for
licenses and organization costs of approximately $3.0 million
and $5.1 million, respectively. These investing activities
principally related to the acquisition of equipment in certain
of the Company's Operating Systems, as well as Systems Under
Construction or Near-Term Launch Markets and certain license
and organization costs related to those Markets. Fort the
year ended December 31, 1994, cash provided by financing
activities was $9.8 million, consisting primarily of $5.6
million from the issuance of 1,475,823 shares of Common Stock
and $4.3 million from the issuance of long-term debt
associated with license acquisition costs in Near-Term Launch
Markets.
For the year ended December 31, 1995, cash used in
operating activities was $0.6 million, consisting primarily of
a net loss of $7.7 million and an increases in receivables and
prepaid expenses of $0.6 million and $0.5 million,
respectively, offset by an increase in accounts payable and
accrued expenses of $6 million, an increase in depreciation
and amortization of $1.8 million, and net non-cash expenses of
$0.3 million. For the year ended December 31, 1995, cash used
in investing activities was $71.3 million, consisting
primarily of $53.1 million applied to purchase marketable
investment securities to establish the escrow account relating
to the 13% Notes and capital expenditures and payments for
licenses and organizational costs of approximately $9.8
million and $6.8 million, respectively. The capital
expenditures and acquisition costs principally related to the
purchase of equipment in certain of the Company's Operating
Systems, as well as Systems Under Construction or Near-Term
Launch Markets and certain license and organizational costs
related to those Markets. For the year ended December 31,
1995, cash flows provided by financing activities was $182.3
million. These financing activities are described in detail
in the second paragraph of this discussion on liquidity and
capital resources.
Pro Forma Results of Operations
The results of operations for the year ended
December 31, 1995 and for the six months ended June 30, 1996
were prepared based on the Unaudited Pro Forma Condensed
Combined Statements of Operations and reflect the pro forma
adjustments made therein. See "Unaudited Pro Forma Condensed
Combined Financial Information." As a result, the pro forma
results of operations for the year ended December 31, 1995 and
the six months ended June 30, 1996 are not directly comparable
with the actual results experienced in such periods. The pro
forma results of operations do not purport to represent what
the Company's results of operations or financial position
would actually have been if the aforementioned transactions or
events had occurred on the dates specified or to project the
Company's results of operations or financial position for any
future periods or at any future date.
Six Months Ended June 30, 1996
Revenues. For the six months ended June 30, 1996,
revenues were $5,740,899. Subscription revenues from
subscribers accounted for $5,431,905, or approximately 95% of
total revenues.
Systems Operations Expense. The Company incurred
$3,608,901 of systems operations expense.
SG&A Expense. The Company recorded SG&A expense
in the amount of $8,089,423 for the six months ended June 30,
1996.
Depreciation and Amortization Expense.
Depreciation and amortization expense totaled $4,911,594 for
the period.
Interest Income. For the six-month period, the
Company earned $2,585,967 on its cash equivalents and
$1,277,810 from the escrowed funds.
Interest Expense. Interest expense incurred
during the period amounted to $11,298,669. This amount gives
pro forma effect to the issuance of the 13% Notes and the
Discount Notes only to the extent that the net proceeds of
such offerings were used to repay indebtedness of the Company.
No pro forma interest expense has been reflected on
indebtedness to be incurred to acquire channel rights in the
BTA Auction. Giving full effect to (i) the issuance of the
13% Notes and amortization of the related debt issuance costs,
(ii) the issuance of the Discount Notes and amortization of
the related debt issuance costs and amortization of the debt
discount resulting from the issue price allocated to the 1996
Warrants, and (iii) the incurrence of BTA Auction indebtedness
as if such indebtedness had been incurred, and the issuance of
the 13% Notes and Discount Notes, as if these had been issued,
on January 1, 1995, interest expense on a pro forma basis
would have been $22.6 million for the six months ended June
30, 1996.
Net Loss. As a result of the excess of expenses
over revenues detailed above, the Company incurred a net loss
of $14,032,546 for the six months ended June 30, 1996.
Twelve Months Ended December 31, 1995
Revenues. For the twelve months ended
December 31, 1995, revenues were $6,387,670. Subscription
revenues from new subscribers accounted for $5,901,370, or
approximately 92% of total revenues.
Systems Operations Expense. The Company incurred
$4,411,642 of systems operating expenses, primarily related to
channel lease payments.
SG&A Expense. The Company recorded SG&A expense
in the amount of $7,380,690 for the twelve months ended
December 31, 1995.
Depreciation and Amortization Expense.
Depreciation and amortization expense totaled $5,152,049 for
the period.
Interest Income. For the twelve months ended
December 31, 1995, the Company earned $1,488,495 on its cash
equivalents and $550,684 from the escrowed funds.
Interest Expense. Interest expense incurred
during the period amounted to $6,820,459. This amount gives
pro forma effect to the issuance of the13% Notes and the
Discount Notes only to the extent that the net proceeds of
such offerings were used to repay indebtedness of the Company.
No pro forma interest expense has been reflected on
indebtedness incurred to acquire channel rights in the BTA
Auction. Giving full effect to (i) the issuance of the 13%
Notes and amortization of the related debt issuance costs,
(ii) the issuance of the Discount Notes and amortization of
the related debt issuance costs and amortization of the debt
discount resulting from the issue price allocated to the 1996
Warrants, and (iii) the incurrence of BTA Auction indebtedness
as if such indebtedness had been incurred, and the 13% Notes
and Discount Notes had been issued, on January 1, 1995,
interest expense on a pro forma basis would have been $42.7
million for the year ended December 31, 1995.
Net Loss. As a result of the excess of expenses
over revenues detailed above, the Company incurred a net loss
of $10,093,835 for the twelve months ended December 31, 1995.
BUSINESS
Except where noted, the following discussion of the
business of the Company is presented as of June 30, 1996.
The Company acquires, develops, owns and operates
wireless cable television systems, primarily in small to mid-
size markets in the southeastern United States. The Company's
80 markets (including 10 held by a limited liability company
is 50% owned by the Company) are located in Texas, Louisiana,
Mississippi, Tennessee, Kentucky, Alabama, Georgia, Arkansas,
North Carolina, South Carolina and Florida and represent
approximately 9.6 million households (including households in
markets held through such limited liability company). The
Company believes that approximately 7.3 million (1.1 million
of which are in markets held through such limited liability
company) can be served by LOS transmissions. LOS
transmissions generally require a direct, unobstructed
transmission path from the central transmitting antenna to an
antenna at the subscriber's location. The Company believes
that certain of its Mississippi, Tennessee, Alabama,
Louisiana, Georgia and Florida markets comprise one of the
largest contiguous geographic clusters in the wireless cable
industry, covering approximately 204,000 square miles.
The Company operates in and targets small to mid-size
markets with a significant number of LOS households that are
unpassed by traditional hard-wire cable. The Company
estimates that approximately 25% of its LOS households are
unpassed by traditional hard-wire cable. By comparison, in
the 20 largest hard-wire cable markets in the United States,
only approximately 2% of all households are unpassed by
traditional hard-wire cable. Many of the households in the
Company's Markets, particularly in rural areas, also have
limited access to local off-air VHF/UHF programming from ABC,
NBC, CBS and Fox affiliates, and typically do not have access
to subscription television service except via satellite
television operators, whose equipment and subscription fees
generally are more costly than those of wireless cable, and
which are unable to retransmit local off-air channels. In
many of the Company's rural Markets, the Company believes a
significant number of households passed by cable are served by
local cable operators with lower quality service and limited
reception and channel lineups. As a result, the Company
believes that its wireless cable television service is an
attractive alternative to existing television choices for both
passed and unpassed households.
At June 30, 1996, the Company's Markets included (i)
24 Operating Systems, (ii) 9 Systems Under Construction, (iii)
17 Near-Term Launch Markets, and (iv) 20 Long-Term Launch
Markets. Since June 30, 1996, the Company has launched four
of the Systems Under Construction. In addition, the Company
owns a 50% interest in a limited liability company which holds
channel rights to serve 10 markets in North Carolina, all of
which are Long-Term Launch Markets. See "Risk Factors-Need
for Additional Financing for Growth; Certain Covenants", "-
Uncertainty of Ability to Obtain FCC Authorizations",
"Wireless Cable Industry-Government Regulation." During the
six months ended June 30, 1996, the Company increased its
aggregate number of subscribers through internal growth and
new system launches from approximately 23,725 to 40,253,
representing a 139% annualized growth rate and a penetration
rate of approximately 1.8% of the LOS households in the
Operating Systems at June 30, 1996.
While none of the Company's Operating Systems
currently generate operating income or positive cash flow from
operations, three of the Company's Operating Systems, Delta
and Jackson, Mississippi, and Huntsville, Alabama currently
generate positive System EBITDA. EBITDA is presented because
it is a widely accepted financial indicator of a company's
ability to service and/or incur indebtedness. EBITDA is not
intended to represent cash flows, as determined in accordance
with generally accepted accounting principles, nor has it been
presented as an alternative to operating income or cash flow
from operations as an indicator of operating performance.
EBITDA should not be considered as a substitute for measures
of performance prepared in accordance with generally accepted
accounting principles. Based on its brief operating history,
the Company believes that its Operating Systems, which are
summarized below, will generate positive System EBITDA upon
the achievement of 2,500 to 3,000 subscribers. However, there
can be no assurance that the achievement of this level of
subscribers will result in a system generating positive System
EBITDA. As of June 30, 1996, the Company had 40,253
subscribers in its 24 Operating Systems.
Operating Systems and the Company's Markets
The table below provides information regarding the
Company's Markets. "Estimated Total Households" represents
the Company's estimate of the total number of households that
are within the Company's Intended Service Area. "Intended
Service Area" includes (i) areas that are presently served,
(ii) areas where systems are not presently in operation but
where the Company intends to commence operations and (iii)
areas where service may be provided by signal repeaters or, in
some cases, pursuant to FCC applications. "Estimated LOS
Households" represents the Company's estimate of the number of
households that can receive an adequate signal from the
Company in its Intended Service Area (determined by applying a
discount to the Estimated Total Households in order to account
for those homes that the Company estimates will be unable to
receive service due to certain characteristics of the
particular market). The calculation of Estimated LOS
Households assumes (i) the grant of pending applications for
new licenses or for modifications of existing licenses and
(ii) the grant of applications for new licenses and license
modification applications which have not yet been filed with
the FCC.
The Company holds few FCC channel licenses directly.
For a majority of its channel rights, the Company has acquired
the right to transmit over those channels under leases with
holders of channel licenses and applicants for channel
licenses. Although the Company has obtained or anticipates
that it will be able to obtain access to a sufficient number
of channels to operate commercially viable wireless cable
systems in its Markets, if a significant number of the
Company's channel leases are terminated or not renewed, a
significant number of pending FCC applications in which the
Company has rights are not granted or the FCC terminates,
revokes or fails to extend or renew the authorizations held by
the Company's channel lessors, the Company may be unable to
provide a commercially viable programming package to customers
in some or all of its Markets. In addition, with the
cooperation of the Company, certain channel lessors may file
applications with the FCC to modify certain channel licenses
in the Company's Markets to allow for the relocation of some
channels from their currently authorized transmission site.
While the Company's leases with such licensees require their
cooperation, it is possible that one or more of such lessors
may hinder or delay the Company's efforts to use the channels
in accordance with the Company's plans for the particular
market. Further, FCC interference protection requirements may
impact efforts to modify licenses.
<TABLE>
<CAPTION>
Estimated Estimated Approximate
Total LOS Launch Current Expected Subscribers at
Households<F1> Households<F2> Date Channels<F3> Channels<F3><F4> June 30, 1996
-------------- -------------- ------ ------------ ---------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Operating Systems <F5>:
Brenham, TX 39,500 32,100 February 1996 20 32 857
Bryan/College Station, TX 102,700 65,600 May 1995 32 32 2,899
Milano, TX<F6> 40,900 36,800 October 1995 20 32 1,659
Wharton, TX 102,300 92,000 June 1994 21 24 2,114
Bunkie, LA 94,700 81,600 December 1995 20 20 1,498
Lafayette, LA<F7> 180,300 153,200 January 1994 11 26 697
Lake Charles, LA 111,600 92,500 April 1994 17 31 555
Monroe, LA<F6> 114,100 89,600 October 1995 17 30 1,806
Jackson, MS 211,500 176,900 June 1994 29 32 10.745
Delta, MS<F8> 100,800 92,800 July 1995 31 32 4,096
Gulf Coast, MS<F9> 132,300 121,700 January 1996 24 32 1,672
Natchez, MS 76,500 60,000 June 1996 20 31 2
Oxford, MS 60,100 53,500 June 1996 20 32 23
Bucks, AL 150,800 113,700 April 1996 20 25 454
Demopolis, AL 17,500 15,600 April 1996 28 31 266
Dothan, AL 100,500 81,200 June 1996 23 27 1
Huntsville, AL<F10> 196,800 181,900 February 1991 27 28 4,014
Fort Walton Beach, FL 64,200 54,600 May 1996 15 31 70
Gainesville, FL<F11> 138,700 115,200 January 1996 24 28 986
Panama City, FL 108,300 83,300 September 1995 23 31 1,751
Pensacola, FL 217,400 157,900 July 1995 28 29 2,041
Jeffersonville, GA 189,300 147,000 March 1996 20 32 247
Lawrenceburg, TN<F10> 76,400 44,100 June 1995 20 32 397
Tullahoma, TN 109,600 73,600 November 1995 20 20 1,403
Albany, GA 92,900 55,800 July 1996 21 24 ---
Alexandria, LA 31,700 26,900 August 1996 16 28 ---
Houma, LA 81,700 69,500 July 1996 18 26 ---
Meridian, MS 73,300 44,800 September 1995 20 31 ---
--------- --------- ------
Total Operating Systems 3,016,400 2,413,400 40,253
========= ========= ======
</TABLE>
<TABLE>
<CAPTION> Expected
Estimated Estimated LOS Channels
Households<F1> Households<F2> <F3><F4>
----------- ---------- --------
<S> <C> <C> <C>
Systems Under Construction<F12>:
Florence, AL 62,000 55,800 24
Ocala, FL(13) 275,500 186,200 24
Starkville, MS 84,100 65,200 32
Tupelo, MS 130,900 90,600 30
Chattanooga, TN 276,100 200,600 31
---------- ---------
Total Systems Under Construction 828,600 610,200
========== =========
Estimated Estimated Expected
Total LOS Channels
Households<F1> Households<F2> <F3><F4>
---------- ---------- --------
Near-Term Launch Markets<F14>:
Bedian/Huntsville, TX 89,000 50,200 32
Freeport, TX 192,700 173,400 29
Hattiesburg, MS 121,400 88,800 32
Flippin, TN 56,700 49,600 20
Jackson, TN 123,900 86,400 22
Memphis, TN 433,200 382,200 23
Bankton, AL 64,800 41,300 20
Gadsden, AL<F13> 198,100 133,300 29
Montgomery, AL 149,200 114,300 27
Selma, AL 35,700 26,000 32
Charing, GA 41,100 38,400 31
Groveland, GA<F15> 172,800 136,000 20
Hoggards Mill, GA 22,600 13,000 20
Matthews, GA 193,600 158,700 31
Tarboro, GA 81,500 65,200 20
Valdosta, GA<F16> 103,200 81,300 29
Mariana, FL 56,700 44,900 24
---------- ---------
Total Near-Term Launch Markets 2,136,200 1,683,000
---------- ---------
Long-Term Launch Markets<F17>:
Auburn, AL<F18> 62,200 47,700 27
Birmingham, AL 308,400 276,900 28
Mobile, AL<F13><F19> 66,100 40,400 21
Six Mile, AL 32,600 27,000 20
Tuscaloosa, AL 87,100 69,600 28
Woodville, AL 29,700 25,000 17
Hot Springs, AR 103,800 71,200 16
Pine Bluff, AR<F20> 86,30 57,900 16
Tallahassee, FL 129,800 115,000 29
Columbus, GA 160,100 116,500 32
Vidalia, GA<F21> 50,800 34,500 24
Bowling Green, KY<F22> 126,900 68,300 20
Abita Springs, LA 217,300 116,800 20
Amite, LA 50,100 34,400 20
Baton Rouge, LA<F13><F19> 261,700 235,500 20
Leesville, LA 43,500 26,700 28
Natchitoches, LA<F13> 30,600 24,800 25
Ruston, LA 44,700 24,300 22
Tallulah, LA 19,500 17,600 20
Moorehead City, NC 82,700 55,900 16
---------- ---------
Total Long-Term Launch Markets 1,993,900 1,486,000
---------- ---------
Company Totals 7,975,100 6,192,600
========== =========
</TABLE>
____________
<F1> Estimated Total Households represents the Company's
estimate of the total number of households that are within the
Company's Intended Service Area. Intended Service Area
includes (i) areas that are presently served, (ii) areas where
systems are not presently in operation but where the Company
intends to commence operations and (iii) areas where service
may be provided by signal repeaters or, in some cases,
pursuant to FCC applications.
<F2> Estimated LOS Households represents the Company's estimate
of the number of households that can receive an adequate
signal from the Company in its Intended Service Area
(determined by applying a discount to the Estimated Total
Households in order to account for those homes that the
Company estimates will be unable to receive service due to
certain characteristics of the particular market). The
calculation of Estimated LOS Households assumes (i) the grant
of pending applications for new licenses or for modification
of existing licenses and (ii) the grant of applications for
new licenses and license modification applications which have
not yet been filed with the FCC.
<F3> Includes wireless cable channels and, where applicable,
local off-air VHF/UHF channels that are not retransmitted by
the Company via wireless cable frequencies.
<F4> Expected Channels include (i) Current Channels (see note 3
above) and (ii) channels with respect to which the Company has
a lease with a channel license holder or applicant for a
channel license or which the Company has the exclusive right
to apply for as a result of being the high bidder at the BTA
Auction. Certain licenses cannot be issued until interference
agreements with nearby licensees or applicants can be secured.
There can be no assurance that such interference agreements
will be secured or that applications for channel licenses will
be granted. See "Prospectus Summary--BTA Auction" and "Risk
Factors--Uncertainty of Ability to Obtain FCC Authorizations."
<F5> Operating Systems include markets in which the Company is
providing commercial wireless cable service. The Jackson
System, Delta System, Gulf Coast System, Natchez System,
Oxford System, Huntsville System, Demopolis System, Meridian
System and Lawrenceburg System are part of the TruVision
Transaction and pending acquisitions. See "The TruVision
Transaction" and "Acquisitions."
<F6> Acquired from Heartland Division in October 1995 as part
of the Heartland Transaction. The Milano System was acquired by
Heartland Division in December 1994. The Monroe System was
constructed in March 1993. These Systems were not actively
marketed until being acquired by the Company as part of the
Heartland Transaction.
<F7> The Company is not actively marketing, and does not
currently intend to actively market, its service in the
Lafayette Market until an increase in the channel offering is
achieved, which the Company expects to occur within six months
from the date hereof.
<F8> Eight channels currently utilized in the Delta System are
operated under special temporary FCC authorization.
<F9> Four channels currently utilized in the Gulf Coast System
were granted by the FCC without acting on an objection filed
by a third party.
<F10> The Company recently acquired this system. See
"Acquisitions."
<F11> Ten channels currently utilized in the Gainesville,
Florida System are operated under special temporary FCC
authorization.
<F12> Systems Under Construction include Markets in which the
system headend is under construction and in which the Company
expects to complete construction and begin commercial
operations by the end of November 1996. The Tupelo and
Starkville, Mississippi Markets are part of the TruVision
Transaction. See "The TruVision Transaction."
<F13> Four of the ITFS channels for the Ocala Market, four of
the ITFS channels for the Mobile Market, four of the ITFS
channels for the Gadsden Market, sixteen of the ITFS channels
for the Baton Rouge Market and twelve of the ITFS channels for
the Natchitoches Market are subject to comparative disposition
with competing applications. The outcome of these
dispositions cannot be reliably projected at this time.
<F14> Near-Term Launch Markets include Markets in which the
Company believes that it has obtained rights to use a
sufficient number of wireless cable channels to launch
commercially viable systems. The Hattiesburg, Mississippi
market, the Flippin, Jackson and Memphis, Tennessee markets
and the Gadsden, Alabama market are part of the TruVision
Transaction. See "The TruVision Transaction." The Jackson,
Tennessee market, which is also part of the TruVision
Transaction, is the subject of a pending acquisition. See
"Acquisitions."
<F15> Objections to the Company's lessors' requests for
extension of time to construct twelve channels are pending
before the FCC. The outcome of these matters cannot be
determined.
<F16> The Company has entered into a letter of intent to acquire
rights to 9 channels in Valdosta, Georgia. There can be no
assurance that the Company will enter into a definitive
agreement with respect to such channels. See "Risk Factors--
Inability to Consummate the Pending Transactions" and
"Acquisitions."
<F17> Long-Term Launch Markets include Markets in which the
Company believes that it has obtained or expects to obtain,
subject to the receipt of necessary FCC approvals and third
party consents, rights to use a sufficient number of wireless
cable channels to launch commercially viable systems. The
Tuscaloosa, Alabama and Hot Springs and Pine Bluff, Arkansas
markets are part of the TruVision Transaction. The Hot
Springs, Arkansas Market, which is also part of the TruVision
Transaction, is the subject of a pending acquisition. See
"Acquisitions."
<F18> The Company has entered into a letter of intent to acquire
rights to 11 MDS channels and 20 ITFS channels and related
transmission tower leases and approvals in Auburn/Opelika,
Alabama. There can be no assurance that the Company will
enter into a definitive agreement with respect to such
channels. See "Risk Factors--Inability to Consummate the
Pending Transactions" and "Acquisitions."
<F19> An existing wireless cable operator is serving
approximately 300 subscribers in this market with an 11
channel MDS system.
<F20> The Company believes that another entity has leased rights
to 20 other channels that are the subject of pending ITFS
applications.
<F21> The Company has entered into a letter of intent to acquire
rights to 20 channels in Vidalia, Georgia. There can be no
assurance that the Company will enter into a definitive
agreement with respect to such channels. See "Risk Factors--
Inability to Consummate the Pending Transactions" and
"Acquisitions."
<F22> The Company currently leases eight channels in the Bowling
Green Market, and has filed applications for 12 commercial
channels pursuant to the BTA Auction that cannot be granted
until interference agreements with unaffiliated third parties
in nearby markets can be secured. There can be no assurance
that such interference agreements can be secured or that
applications for these 12 channels will be granted. See
"Prospectus Summary--BTA Auction" and "Risk Factors--
Uncertainty of Ability to Obtain FCC Authorizations."
_____________________
Operating Systems
The following discussion does not reflect channel
rights attributable to the BTA Auction.
Brenham System. The Company launched service in the
Brenham, Texas System in February 1996. The Brenham System
serves portions of Washington, Austin, Waller, Burleson, Lee,
Fayette and Colorado counties in Texas. The Brenham System
had approximately 857 subscribers on June 30, 1996.
The Company leases 20 of the wireless cable channels
available for the Brenham market. The Company transmits on
all 20 channels. The Brenham System currently offers an 18
channel basic package, including five local off-air VHF/UHF
channels which are being retransmitted, for $19.95 per month.
In addition, a subscriber may purchase one premium service
channel, HBO, for $9.95. The Brenham System also offers one
pay-per-view channel. The Brenham System transmits at 10
watts of power from the 665 foot level of a 709 foot tower,
located 0.2 miles southwest of Brenham, Texas. The Brenham
System's signal pattern covers a radius of approximately 40
miles, encompassing approximately 39,500 households, of which
the Company believes approximately 32,100 can be served by LOS
transmissions. The principal hard-wire cable competitor in the
city of Brenham is Northland Cable TV.
Bryan/College Station System. The Company launched
service in the Bryan/College Station, Texas System in May
1995. The Bryan/College Station System serves all of Brazos,
Grimes and Burleson counties and parts of Washington, Madison,
Robertson, Milano and Lee counties in Texas. The
Bryan/College Station System had approximately 2,899
subscribers on June 30, 1996, primarily in single-family
homes.
The Company leases 32 of the wireless cable channels
available for the Bryan/College Station market. The Company
transmits on all 32 of these channels. The Bryan/College
Station System currently offers a 27 channel basic package,
including five local off-air VHF/UHF channels which are being
retransmitted, for $19.95 per month. In addition, a
subscriber may purchase up to four premium service channels,
HBO, the Disney Channel, Showtime and Starz, for $9.95, $5.95,
$6.95 and $4.95 per month, respectively. The Bryan/College
Station System also offers one pay-per-view channel. The
Bryan/College Station System transmits at 10 watts of power
from the 484 foot level of a 499 foot tower, three miles
southwest of Bryan/College Station. The Bryan/College Station
System's signal pattern covers a radius of approximately 40
miles, encompassing approximately 102,700 households, of which
the Company believes approximately 65,600 can be served by LOS
transmissions. The principal hard-wire cable competitor in
the city of Bryan/College Station is TCA Cable TV, Inc.
Milano System. The Company acquired the Milano,
Texas System in October 1995. Prior thereto, the Milano
System was operated by Heartland since December 1994. The
Milano System serves all of the Milano area and parts of
Milan, Burleson, Bell and Brazos counties. The Milano System
had approximately 1,659 subscribers on June 30, 1996,
primarily in single-family homes.
The Company leases 20 of the wireless cable channels
available for the Milano market. The Company transmits on all
20 of these channels. The Milano System currently offers an
18 channel basic package, including five local off-air VHF/UHF
channels which are being retransmitted, for $19.95 per month.
In addition, a subscriber may purchase one premium service
channel, HBO, for $9.95 per month. The Milano System also
offers one pay-per-view channel. The Milano System transmits
at 10 watts of power from the 695 foot level of a 700 foot
tower, two miles northeast of Milano. The Milano signal
pattern covers a radius of approximately 39 miles,
encompassing approximately 40,900 households, of which the
Company believes approximately 36,800 can be served by LOS
transmissions. The principal hard-wire cable competitor in
the city of Milano is Cable Video Enterprises.
Wharton System. The Company launched service in the
Wharton, Texas System in June 1994. The Wharton System serves
all of Wharton county and parts of Fort Bend, Matagorda,
Brazoria and Colorado counties. The Wharton System had
approximately 2,114 subscribers on June 30, 1996, primarily in
single-family homes.
The Company leases 21 of the wireless cable channels
available for the Wharton market. The Company transmits on
all 21 of these channels. The Wharton System currently offers
an 18 channel basic package, including five local off-air
VHF/UHF channels which are being retransmitted, for $19.95 per
month. In addition, a subscriber may purchase up to two
premium service channels, HBO and Showtime, for $10.95 and
$6.95 per month, respectively. The Wharton System also offers
one pay-per-view channel. The Wharton System transmits at 50
watts of power from the 436 foot level of a 440 foot tower,
4.2 miles southeast of Wharton. The Wharton System's signal
pattern covers a radius of approximately 39 miles,
encompassing approximately 102,300 households, of which the
Company believes approximately 92,000 can be served by LOS
transmissions. The principal hard-wire cable competitor in
the city of Wharton is Falcon Cable.
Bunkie System. The Company launched service in the
Bunkie, Louisiana System in December 1995. The Bunkie System
serves all of Evangeline parish and parts of Acadia, Allen,
Avoyelles, Point Coupee, Rapides and St. Landry parishes in
Louisiana. The Bunkie System had approximately 1,498
subscribers on June 30, 1996, primarily in single-family
homes.
The Company leases 20 of the wireless cable channels
available for the Bunkie market. The Bunkie System currently
offers an 18 channel basic package, including five local off-
air VHF/UHF channels which are being retransmitted, for $19.95
per month. In addition, a subscriber may purchase one premium
service channel, HBO, for $9.95 per month. The Bunkie System
also offers one pay-per-view channel. The Bunkie System
transmits at 50 watts of power from the 705 foot level of a
709 foot tower, located 3.1 miles east of Bunkie, Louisiana.
The Bunkie System's signal pattern covers a radius of
approximately 40 miles, encompassing approximately 94,700
households, of which the Company believes approximately 81,600
can be served by LOS transmissions. The principal hard-wire
competitor is the City of Bunkie's Laribay Cablevision
Limited.
Lafayette System. The Company launched service in
the Lafayette, Louisiana System in January 1994. The
Lafayette System serves all of Lafayette, St. Martin, Iberia,
Vermillion and Acadia parishes, and parts of St. Landry and
St. Mary parishes in Louisiana. The Lafayette System had
approximately 697 subscribers on June 30, 1996, primarily in
single-family homes.
The Company leases 26 of the wireless cable channels
available for the Lafayette market. The Company transmits on
six of these channels. Co-location applications were recently
granted for four channels. Co-location applications are
pending for eight additional channels. New station
applications are pending for eight channels. The Lafayette
System currently offers an 11 channel basic package,
consisting of six wireless cable channels and five local off-
air VHF/UHF channels, for $15.95 per month. The Lafayette
System transmits at 10 watts of power from the 220 foot level
of a 228 foot tower, 2.8 miles west of Lafayette. The
Company has filed and anticipates approval of modification
applications to increase to 50 watts of power, to transmit at
the 588 foot level of a 604 foot tower and to move 8.6 miles
south of Lafayette. Upon such modifications, the Lafayette
System's signal pattern will cover a radius of approximately
38 miles, encompassing approximately 180,300 households, of
which the Company believes approximately 153,200 can be served
by LOS transmissions. These LOS household counts do not
differ materially from the Company's present transmission
site. The principal hard-wire cable competitor in the city of
Lafayette is TC Cable TV, Inc.
Lake Charles System. The Company launched service in
the Lake Charles, Louisiana System in April 1994. The Lake
Charles System serves all of Calcasieu, Jefferson Davis and
Cameron parishes, and parts of Beauregard and Allen parishes
in Louisiana. The Lake Charles System had approximately 555
subscribers on June 30, 1996, primarily in single-family
homes.
The Company leases 31 of the wireless cable channels
available for the Lake Charles market. The Company transmits
on nine of these channels. Co-location applications were
recently granted for six channels and new station applications
were recently granted for the remaining sixteen channels. The
Lake Charles System currently offers a 16 channel basic
package, consisting of eight wireless cable channels and eight
local off-air VHF/UHF channels, for $19.95 per month. In
addition, a subscriber may purchase one premium service
channel, HBO, for $9.95 per month. The Lake Charles System
transmits at 50 watts of power from the 407 foot level of a
411 foot tower, 5.5 miles west of Lake Charles. Applications
have been filed to operate the remaining 20 channels at 50
watts of power from the same tower. The Lake Charles System's
signal pattern covers a radius of approximately 38 miles,
encompassing approximately 111,600 households, of which the
Company believes approximately 92,500 can be served by LOS
transmissions. The principal hard-wire cable competitor in
the city of Lake Charles is TCI Cable TV, Inc.
Monroe System. The Company acquired the Monroe
System in October 1995. Construction of the Monroe System was
completed by Heartland in March 1993. The Monroe System had
approximately 1,806 subscribers on June 30, 1996, primarily in
single-family homes.
The Company leases 30 of the wireless cable channels
available for the Monroe market. The Company transmits on 17
of these channels. A co-location application is pending for
one channel, and new station applications are pending for the
remaining 12 channels. [UPDATE] Four of these channels also
are subject to an administrative petition that, if granted,
could result in the loss of the license therefor. The Monroe
System currently offers a 21 channel basic package, consisting
of 15 wireless cable channels and six local off-air VHF/UHF
broadcast channels, for $19.95 per month. In addition, a
subscriber may purchase one premium service channel, HBO, for
$9.95 per month. The Monroe System also offers one pay-per-
view channel. The Monroe System transmits at 50 watts of
power from the 650 foot level of a 906 foot tower, located ten
miles north of Monroe. The Monroe system's signal pattern
covers a radius of approximately 39 miles, encompassing
approximately 114,100 households, of which the Company
believes approximately 89,600 can be served by LOS
transmissions. The principal hard-wire cable competitor in
the city of Monroe is Louisiana Cablevision.
Jackson System. The Company launched service in
Jackson, Mississippi System in June 1994. The Jackson System
serves all of the metropolitan area of Jackson, Mississippi,
including all or parts of Rankin, Hinds, Madison, Copiah,
Simpson, Scott, Yazoo, Warren and Claiborne counties. The
Jackson System had approximately 10,745 subscribers on
June 30, 1996, primarily in single-family homes.
The Company leases 29 of the 32 wireless cable
channels available for the Jackson market. The Jackson System
currently offers a 26 channel basic package, including five
local off-air VHF/UHF channels which are being retransmitted,
for $19.95 per month. In addition, a subscriber may purchase
up to three premium service channels, HBO, Showtime and The
Disney Channel, for $8.95, $8.95 and $4.95 per month,
respectively. In the Jackson System, the Company also offers
its subscribers event pay-per-view service on one channel
shared with WMVT, a local independent television station. The
Jackson System began to generate positive System EBITDA in
March 1995, approximately 10 months after commencement of
service. The Jackson System transmits at 50 watts of power
from a height of 1,040 feet above ground level. The Jackson
System's signal pattern covers a radius of approximately 40
miles, encompassing approximately 211,500 households, of which
the Company believes approximately 176,900 can be served by
LOS transmissions. The principal hard-wire cable competitor
in the city of Jackson is Capitol Cablevision, a Time Warner
Cable affiliate.
Delta System. The Company launched service in the
Delta, Mississippi System in July 1995. The Delta System
serves that portion of the Delta region which includes all or
parts of Humphreys, Holmes, Sunflower, Washington and Yazoo
counties in Mississippi. The Delta System had approximately
4,096 subscribers on June 30, 1996, primarily in single-family
homes.
The Company leases 20 of the 32 wireless cable
channels available for use in the Delta market, owns three of
the channels, and operates an additional eight channels
pursuant to a special temporary FCC authorization. The Delta
System currently offers a 27 channel basic package, including
five local off-air VHF/UHF channels which are being
retransmitted, for $19.95 per month. In addition, a
subscriber may purchase up to three premium service channels,
HBO, Showtime and The Disney Channel for $8.95, $8.95 and
$4.95 per month, respectively. In the Delta System, the
Company also offers its subscribers an event pay-per-view
channel and intends to offer its subscribers a full-time pay-
per-view channel beginning in the fourth quarter of 1996. The
Delta System began to generate positive System EBITDA in
February 1996, seven months after commencement of service.
The Delta System transmit at 50 watts of power from a height
of 805 feet above ground level. The Delta System's signal
pattern covers a radius of approximately 40 miles,
encompassing approximately 100,800 households, of which the
Company believes approximately 92,800 can be served by LOS
transmissions. The hard-wire cable competitors in the Delta
region are generally smaller operators, unaffiliated with
large multiple system cable operators ("MSOs").
Gulf Coast System. The Company launched service in
the Gulf Coast, Mississippi System in January 1996. The Gulf
Coast System serves the entire Gulf Coast region of
Mississippi, including all or parts of Harrison, Hancock,
Jackson, Stone and Pearl River counties. The Gulf Coast
System had approximately 1,672 subscribers on June 30, 1996,
primarily in single family homes.
The Company leases 24 of the 32 wireless cable
channels available for the Gulf Coast market. The Gulf Coast
System currently offers a 22 channel basic package, including
five local off-air VHF/UHF channels which are being
retransmitted, for $19.95 per month. In addition, a
subscriber may purchase up to two premium service channels,
HBO and The Disney Channel, for $8.95 and $4.95 per month,
respectively. The Gulf Coast System transmits at 50 watts of
power from a height of 1,285 feet above ground level. The
Gulf Coast System's cardioid or heart-shaped signal pattern,
designed to maximize converge of the population densities
along the coast, encompasses approximately 132,300 households,
of which the Company believes approximately 121,700 can be
served by LOS transmissions. The principal hard-wire cable
competitor in the Gulf Coast region is Post-Newsweek Cable,
Inc.
Natchez System. The Company launched service in the
Natchez, Mississippi System in June 1996. The Natchez System
serves all or parts of Franklin, Adams, Amite, Pike, Lincoln,
Jefferson, Wilkinson, Claiborne and Copiah counties. The
Natchez System had approximately two subscribers on June 30,
1996.
The Company currently leases 20 of the wireless cable
channels available for the Natchez, Mississippi market. All
20 channels are granted and co-located. The Natchez System
currently offers an 18 channel basic package, including five
local off-air VHF/UHF channels which are being retransmitted,
for $19.95 per month. In addition, a subscriber may purchase
up to two premium service channels, HBO and the Disney
Channel, for $8.95 and $4.95 per month, respectively. The
Company is currently authorized to transmit 50 watts of power
using a dual antenna system mounted at the 805 and 795 foot
levels of a 1,066 foot tower located 8.3 miles southeast of
Bude, Mississippi. The Company has filed modification
applications to increase the centerline height of each antenna
100 feet, to change the omnidirectional antenna to a similar
model with additional gain and change the polarization of the
directional parabolic antenna to vertical. Upon such
modification, the Natchez system's signal pattern will cover a
radius of approximately 40 miles, encompassing approximately
76,500 households, of which the Company believes approximately
60,000 can be served by LOS transmissions. The principal
hard-wire cable competitor in the area of Natchez, Mississippi
is Marcus Cable.
Oxford System. The Company launched service in the
Oxford, Mississippi System in June 1996. The Oxford System
serves all or parts of Lafayette, Yalobusha, Union, Pontotac,
Marshall, Panola, Tate and Tallahatchie counties. The Oxford
System had approximately 23 subscribers on June 30, 1996.
The Company currently leases 20 of the wireless cable
channels available for the Oxford, Mississippi market. All 20
channels are granted and co-located. The Oxford System
currently offers an 18 channel basic package, including five
local off-air VHF/UHF channels which are being retransmitted,
for $19.95 per month. In addition, a subscriber may purchase
up to two premium service channels, HBO and the Disney
Channel, for $8.95 and $4.95 per month, respectively. The
Company is currently authorized to transmit 50 watts of power
using a dual antenna system mounted at the 1,055 and 1,045
foot levels of a 1,304 foot tower located 7.0 miles west
northwest of Taylor, Mississippi. The Company has filed
modification applications to increase the centerline height of
each antenna 145 feet, to change the omnidirectional antenna
to a similar model with additional gain and change the
polarization of the directional parabolic antenna to vertical.
Upon such modification, the Oxford System's signal pattern
will cover a radius of approximately 40 miles, encompassing
approximately 60,100 households, of which the Company
believes approximately 53,500 can be served by LOS
transmissions. The principal hard-wire cable competitor in
the area of Oxford, Mississippi is TCI of North Mississippi.
Bucks System. The Company launched service in the
Bucks, Alabama System in April 1996. The Bucks System serves
parts of Washington, Mobile, Baldwin and Clarke counties in
Alabama. The Bucks System had approximately 454 subscribers
on June 30, 1996.
The Company currently leases 20 of the wireless cable
channels available for the Bucks, Alabama market. The Company
transmits on all 20 of these channels. The Bucks System
currently offers an 18 channel basic package, consisting of 13
wireless cable channels and five local off-air VHF/UHF
channels for $19.95 per month. In addition, a subscriber may
purchase one premium service channel, HBO, for $10.95 per
month. The Bucks System transmits at 10 watts of power from
the 853 foot level of an 859 foot tower, located 9.6 miles
northwest of Bucks, Alabama. Modification applications to
increase power to 50 watts are pending before the FCC. Upon
such modification, the Bucks System's signal pattern will
cover a radius of approximately 36 miles, encompassing 150,800
households, of which the Company believes approximately
113,700 can be served by LOS transmissions. The principal
hard-wire cable competitor in the area of Bucks is
Cablevision.
Demopolis System. The Company commenced commercial
operations of the Demopolis System, a wireless cable system in
the Demopolis, Alabama area, in April 1996. The Demopolis
System serves Marengo, Sumter, and Hale counties and portions
of Perry, Choctow, Green, Dallas, and Wilcox counties. As a
result of the signal testing conducted earlier in 1996, the
Demopolis System had approximately 266 subscribers on June 30,
1996, primarily in single-family homes.
The Company leases 28 of the wireless cable channels
available for Demopolis market. The Demopolis System offers a
25 channel basic package, including five local off-air VHF/UHF
channels which are being retransmitted, for $19.95 per month.
In addition, the Company expects that a subscriber may
purchase up to three premium service channels, HBO, Showtime
and The Disney Channel for $8,95, $8.95 and $4.95 per month,
respectively. The Demopolis System transmits at 25 watts of
power from a height of 943 feet above ground level. The
Demopolis System's signal pattern covers a radius of
approximately 40 miles, encompassing approximately 17,500
households, of which the Company believes approximately 15,600
can be served by LOS transmissions. The Demopolis region is
currently served by several relatively small hard-wire cable
franchise operators each serving less than 2,000 subscribers.
Dothan System. The Company launched service in the
Dothan, Alabama System in June 1996. The Dothan System serves
parts of Early, Miller, Geneva, Barbour, Clay, Calhoun and
Jackson Counties in Alabama and all of Dale, Henry and Houston
Counties in Alabama. The Dothan System had approximately 1
subscriber on June 30, 1996.
The Company currently leases 23 of the wireless cable
channels available for the Dothan, Alabama market. All 23
channels are granted and co-located. The Company transmits 10
watts of power from the 900 foot level of a 1,021 foot tower,
located 5.5 miles northeast of Dothan, Alabama. The Company
has filed and anticipates approval of modification
applications to increase 50 watts of power. Upon such
modifications, the Dothan System's signal pattern will cover a
radius of approximately 35 miles, encompassing approximately
100,500 households, of which the Company believes
approximately 81,200 can be served by LOS transmissions. The
principal hard-wire cable competitor in the area of Dothan,
Alabama is Comcast Cablevision of Dothan, Inc.
Huntsville System. The Company acquired an operating
wireless cable system (the "Huntsville Wireless System"),
together with an operating hard-wire system (the "Huntsville
Wired System") on August 2, 1996. The Huntsville Wireless
System had approximately 2,577 subscribers on June 30, 1996,
and the Huntsville Wired System had approximately 1,437
subscribers on June 30, 1996.
The Company leases 24 and owns three of the wireless
cable channels for the Huntsville market. The Huntsville
Wireless System offers a 27 channel package, including five
local off-air VHF/UHF channels, which are being retransmitted,
and three premium service channels (The Movie Channel, The
Disney Channel and Showtime) for $29.95 per month. The
Huntsville System transmits at 10 watts of power from a height
of approximately 350 feet above ground level and has been
authorized to transmit at 50 watts of power. The Huntsville
System's signal pattern covers a radius of approximately 40
miles, encompassing approximately 196,800 households, of which
the Company believes approximately 181,900 can be served by
LOS transmissions. The principal hard-wire cable competitor
in the Huntsville region is Comcast Cablevision.
Fort Walton Beach System. The Company launched
service in the Fort Walton Beach, Florida System in May 1996.
The Fort Walton Beach System serves parts of Okalossa and
Walton counties in Florida. The Fort Walton Beach System had
approximately 70 subscribers on June 30, 1996 primarily in
single family homes.
The Company currently leases 23 of the channels
available for the Fort Walton, Florida market. The Company
transmits on 15 of these channels. New station applications
are pending for the remaining eight channels. The Fort Walton
System currently offers a 13 channel basic package, consisting
of eight wireless cable channels and five local off-air
VHF/UHF channels for $15.95 per month. In addition, a
subscriber may purchase one premium service channel, HBO, for
$10.95 per month. The Fort Walton System also offers one pay-
per-view channel. The Fort Walton System transmits at 50
watts of power from the 276 foot level of a 279 foot tower,
located four miles northeast of Fort Walton Beach, Florida.
The Fort Walton Beach System's signal pattern covers a radius
of approximately 39 miles, encompassing 64,200 households, of
which the Company believes approximately 54,600 can be served
by LOS transmissions. The principal hard-wire cable
competitor in the area of Fort Walton Beach is Emerald Coast
Cable.
Gainesville System. The Company launched service in
the Gainesville, Florida System in January 1996. The
Gainesville System serves parts of Clay, Duval, Gilchrist,
Dixie, Levy, Lafayette, Putnam, Swannee, Hamilton and Marion
and all of Alachua, Bradford, Baker, Columbia and Union
counties in Florida. The Gainesville System had approximately
986 subscribers on June 30, 1996, primarily in single family
homes.
The Company leases 28 of the wireless cable channels
available for the Gainesville, Florida market. The Company
transmits on 24 of these channels. Modification applications
are pending for the remaining four channels and for ten
channels operating pursuant to special temporary
authorization. The Gainesville System currently offers a 22
channel basic package, including four local off-air VHF/UHF
channels which are being retransmitted, for $19.95 per month.
In addition, a subscriber may purchase HBO and Showtime for
$9.95 and $6.95 per month, respectively. The Gainesville
System transmits at 50 watts of power from the 706 foot level
of a 709 foot tower, located 24.0 miles southeast of Lake
City, Florida. The Gainesville System's signal pattern covers
a radius of approximately 40 miles, encompassing approximately
138,700 households, of which the Company believes
approximately 115,200 can be served by LOS transmissions. The
principal hard-wire cable competitor in the area of
Gainesville is Warner Cable.
Panama City System. The Company launched service in
Panama City, Florida System in September 1995. The Panama
City System serves all of Bay County and parts of Calhoun,
Gulf, Holmes, Jackson, Walton and Washington counties in
Florida. The Panama City System had approximately 1,751
subscribers on June 30, 1996, primarily in single-family
homes.
The Company leases 27 of the wireless cable channels
available for the Panama City market. The Company transmits
on 23 of these channels. The Panama City System currently
offers a 21 channel basic package, including five off-air
VHF/UHF channels which are being retransmitted, for $19.95 per
month. In addition, a subscriber may purchase HBO for $9.95
per month and Showtime for $6.95 per month. The Panama City
System transmits at 50 watts of power from the 450 foot level
of a 500 foot tower, located 9.7 miles north of Panama City.
The Panama City System's signal pattern covers a radius of
approximately 40 miles, encompassing approximately 108,300
households, of which the Company believes approximately
83,300 can be served by LOS transmissions. The principal
hard-wire cable competitor in the city of Panama City is
Comcast.
Pensacola System. The Company launched service in
the Pensacola, Florida System in July 1995. The Pensacola
System serves all of Escambia and Santa Rosa counties in
Florida, and parts of Okaloosa and Baldwin counties in
Alabama. The Pensacola System had approximately 2,041
subscribers on June 30, 1996, primarily in single-family
homes.
The Company leases 28 of the wireless cable channels
available for the Pensacola market. The Company transmits on
all 28 of these channels. The Pensacola System currently
offers a 22 channel basic package, including six local off-air
VHF/UHF channels which are being retransmitted, for $19.95 per
month. In addition, a subscriber may purchase HBO and a five
channel Showtime package, for $9.95 and $10.95 per month,
respectively. The Pensacola system transmits at 50 watts of
power from the 493 foot level of a 499 foot tower, located
11.0 miles north of Pensacola. The Pensacola System's signal
pattern covers a radius of approximately 38 miles,
encompassing approximately 217,400 households, of which the
Company believes approximately 157,900 can be served by LOS
transmissions. The principal hard-wire cable competitor in
the city of Pensacola is Cox Cable Communications.
Jacksonville System. The Company launched service in
the Jeffersonville, Georgia System in March 1996. The
Jeffersonville system serves portions of Laurens, Peach,
Macon, Crawford, Monroe, Jones, Baldwin and Johnson and all of
Beckly, Wilkinson, Houston, Twiggs and Bibb counties in
Georgia. The Jeffersonville System had approximately 247
subscribers on June 30, 1996.
The Company leases 20 of the wireless cable channels
available for the Jeffersonville, Georgia market. The Company
transmits on all 20 channels. The Jeffersonville System
currently offers an 18 channel basic package, including five
local off-air VHF/UHF channels which are being retransmitted,
for $19.95 per month. In addition, a subscriber may purchase
one premium service channel, HBO, for $10.95. The
Jeffersonville System also offers one pay-per-view channel.
The Jeffersonville System transmits at 50 watts of power from
the 706 foot level of a 709 foot tower, located 3.3 miles
northeast of Jeffersonville, Georgia. The Jeffersonville
System's signal pattern covers a radius of approximately 39
miles, encompassing 189,300 households, of which the Company
believes approximately 147,000 can be served by LOS
transmissions. The principal hard-wire cable competitor in
the area of Jeffersonville is Cox Cable.
Lawrenceburg System. On August 2, 1996, the Company
acquired all of the outstanding capital stock of Shoals, whose
principal asset is the Lawrenceburg System, a wireless cable
system currently operating in the Lawrenceburg, Tennessee area
with approximately 397 subscribers as of June 30, 1996. See
"Acquisitions."
The Company leases 20 of the wireless cable channels
available for the Lawrenceburg market. The Lawrenceburg
System offers a 20 channel package, including five local off-
air VHF/UHF channels which are being retransmitted and one
premium service channel, Showtime, for $29.95 per month. The
Lawrenceburg System transmits at 10 watts of power from a
height of approximately 40 miles, encompassing approximately
76,400 households, of which the Company believes approximately
44,100 can be served by LOS transmissions. The principal
hard-wire cable competitor in the Lawrenceburg region is
Rifkin Cable.
Tullahoma System. The Company launched service in
the Tullahoma, Tennessee system in November 1995. The
Tullahoma System serves parts of Coffee, Cannon, Beford,
Moore, Franklin, Grundy and Warren counties in Tennessee. The
Tullahoma System had approximately 1,403 subscribers on
June 30, 1996, primarily in single-family homes.
The Company leases 20 of the wireless cable channels
available for the Tullahoma, Tennessee market. The Company
transmits on all 20 channels. The Tullahoma System currently
offers an 18 channel basic package, including five local off-
air VHF/UHF channels which are being retransmitted, for $19.95
per month. In addition, a subscriber may purchase one premium
service channel, HBO, for $9.95. The Tullahoma System also
offers one pay-per-view channel. The Company transmits at 10
watts of power from the 751 foot level of a 755 foot tower,
located 7.5 miles east of Tullahoma, Tennessee. The Tullahoma
System's signal pattern covers a radius of approximately 40
miles, encompassing approximately 109,600 households, of
which the Company believes approximately 73,600 can be served
by LOS transmissions. The principal hard-wire cable
competitor in the city of Tullahoma is Tullahoma Cablevision.
Albany System. The Company launched service in the
Albany, Georgia market in July 1996. The Albany System offers
a 20 channel basic package, including five local off-air
VHF/UHF channels which are being retransmitted, for $15.95 per
month. In addition, a subscriber may purchase one premium
service channel, HBO, for $10.95. The Albany System transmits
at 50 watts of power from the 453 foot level of a 520 foot
tower, located four miles north of Albany, Georgia. The
Albany System's signal pattern covers a radius of
approximately 35 miles, encompassing 92,900 households, of
which the Company believes approximately 67,600 can be served
by LOS transmissions. The Company serves parts of Stewart,
Webster, Sumter, Dooly, Calhoun, Early, Randolph, Crisp,
Baker, Turner, Miller, Mitchell and Colovett counties in
Georgia, and all of Terrell, Lee, Dougherty and Worth counties
in Georgia. The principal hard-wire cable competitor in the
area of Albany, Georgia is TCI Georgia.
Alexandria System. The Company launched the
Alexandria System in August 1996. The Alexandria System
offers a 15 channel basic package, including five local off-
air VHF/UHF channels which are being retransmitted for $15.95
per month. In addition, a subscriber may purchase one premium
service channel, HBO, for $10.95. The Alexandria System
transmits at 50 watts of power from the 750 foot level of a
1,329 foot tower, located 18 miles northwest of Alexandria,
Louisiana. The Alexandria System's signal pattern covers a
radius of approximately 40 miles, encompassing 31,700
households, of which the Company believes approximately 26,900
can be served by LOS transmissions. The principal hard-wire
cable competitor in the area of Alexandria, Louisiana is Time
Warner Cable.
Houma System. The Company launched the Houma System
in July 1996. The Houma System offers a 17 channel basic
package, including five local off-air VHF/UHF channels which
are being retransmitted for $15.95 per month. In addition, a
subscriber may purchase one premium service channel, HBO, for
$10.95. The Company transmits at 10 watts of power from the
496 foot level of a 500 foot tower, located 19.5 miles
northwest of Houma, Louisiana. The Houma system's signal
pattern coves a radius of approximately 40 miles, encompassing
81,700 households, of which the Company believes approximately
69,500 can be served by LOS transmissions. The principal
hard-wire cable competitor in the area of Houma, Louisiana is
Time Warner Cable.
Meridian System. The Company launched service in the
Meridian, Mississippi System in September 1996. The Meridian
System serves all or parts of Lauderdale, Clarke, Newton,
Jasper, Neshoba and Kemper counties.
The Company currently leases 20 of the wireless cable
channels available for the Meridian, Mississippi market. All
20 channels are granted and co-located. The Meridian System
currently offers an 18 channel basic package, including five
local off-air VHF/UHF channels which are being retransmitted,
for $19.95 per month. In addition, a subscriber may purchase
up to two premium service channels, HBO and the Disney
Channel, for $8.95 and $4.95 per month, respectively. The
Company is currently authorized to transmit 50 watts of power
from a 320 foot level. The Meridian system's signal will
cover a cardiod pattern to the west of approximately 40 miles,
encompassing approximately 73,300 households, of which the
Company believes approximately 44,800 can be served by LOS
transmissions. The principal hard-wire cable competitor in
the area of Meridian, Mississippi is TV Selection Systems,
Inc., an affiliate of Comcast Corp.
Systems Under Construction
The Company currently has nine additional systems
under construction, which are located in Florence, Alabama;
Albany, Georgia; Ocala, Florida; Alexandria and Houma,
Louisiana; Starkville and Tupelo, Mississippi; and
Chattanooga, Tennessee. In each of the systems, the Company
expects to begin to transmit on its channels in such Markets
by November 30, 1996. The following discussion does not
reflect channel rights attributable to the BTA Auction.
Florence System. The Company currently leases 20 of
the wireless cable channels available for the Florence,
Alabama market. Four channels are granted and co-located. New
station applications are pending for the remaining 16
channels. The Company expects to launch this system during
October 1996. The Company will transmit at 10 watts of power
from the 671 foot level of a 820 foot tower, located four
miles east of Florence, Alabama. The Florence system's signal
pattern covers a radius of approximately 40 miles,
encompassing 62,000 households, of which the Company believes
approximately 55,800 can be served by LOS transmissions.
The Company will serve parts of Lawrence, Limestone,
Marion, Morgan and Winston counties in Alabama, parts of
Itawanba and Tishomingo counties in Mississippi, parts of
Hardin, Lawrence and Wayne counties in Tennessee, and all of
Colbert, Franklin and Lauderdale counties in Alabama. The
principal hard-wire cable competitor in the area of Florence,
Alabama is Comcast Cable of the Shoals, Inc.
Ocala System. The Company currently leases 24 of the
wireless cable channels available for the Ocala, Florida
market. Of these, 8 channels are in the process of being
modified to co-locate, and 12 channels are granted and
co-located. A new station application is pending for the
remaining 4 channels. The Company expects to launch this
system by September 30, 1996. The Company will serve parts of
Citrus, Sumpter, Putnam, Alachua, and Lake counties in Florida
and all of Marion county in Florida. The Company will
transmit 10 watts of power from the 296 foot level of a 299
foot tower, located in Ocala, Florida. The Ocala System's
signal pattern covers a radius of approximately 39 miles,
encompassing 275,500 households, of which the Company believes
approximately 186,200 can be served by LOS transmissions. The
principal hard-wire cable competitor in the area of Ocala,
Florida is Cox Cable.
Starkville System. The Company currently leases 20
of the wireless cable channels available for the Starkville,
Mississippi market. All 20 channels are granted and
co-located. The Company expects to launch this system by
October 1996. The Company is licensed to transmit at 20 watts
of power from the 280 foot level. Modifications are pending
FCC approval to move the stations closer to the population
center, increase antenna height to 680 feet and increase
output power to 50 watts. A tower lease is currently under
negotiation at a tower site in the Starkville area. Upon
completion of these negotiations and FCC approval, the
Starkville System's signal pattern will cover a radius of
approximately 40 miles encompassing 84,100 households, of
which the Company believes approximately 65,200 households can
be served by LOS transmissions. The principal hard-wire cable
competitor in the Starkville, Mississippi area is Northland
Cable TV.
Tupelo System. The Company currently leases 20 of
the wireless cable channels available for the Tupelo,
Mississippi market. All 20 channels are granted and
co-located. The Company expects to launch this System by
October 1996. The Company is licensed to transmit at 50 watts
of power from the 320 foot level. The Tupelo System's signal
pattern covers a radius of approximately 40 miles,
encompassing 139,900 households, of which the Company believes
approximately 90,600 households can be served by LOS
transmissions. The principal hard-wire cable competitor in
the Tupelo, Mississippi area is Comcast Cablevision of Tupelo.
Chattanooga System. The Company currently leases 31
of the wireless cable channels available for the Chattanooga,
Tennessee market. Of these channels, 15 are granted and
co-located and eight are subject to pending modification
applications. New station application are pending for the
remaining 12 channels. The Company expects to launch this
system by November 1996. The Company will transmit at 50
watts of power from the 309 foot level of a 579 foot tower,
located 12.0 miles north of Chattanooga, Tennessee. The
Chattanooga System's signal pattern covers a radius of
approximately 40 miles, encompassing 276,100 households, of
which the Company believes approximately 200,600 households
can be served by LOS transmissions. The Company will serve
parts of DeKalb, Jackson, Catoosa, Dad and Walker counties.
The principal hard-wire cable competitor in the area of
Chattanooga, Tennessee is Chattanooga Cable T.V., Inc.
Near-Term and Long-Term Launch Markets
In these Markets, the Company has obtained or expects
to obtain, subject to necessary FCC approvals, the rights to a
sufficient number of wireless cable channels to launch
commercially viable systems. In the Near-Term Launch Markets,
the Company believes that it has obtained such wireless cable
channel rights. Many of the Company's channel rights in the
Long-Term Launch Markets are in the form of lease agreements
with qualified, non-profit education organizations that have
licenses for channels which must be modified by the FCC to be
utilized by the Company as planned, that have pending
applications for ITFS channels that have not yet been granted
or for which application to the FCC has yet to be made. The
Company is considering modifying certain channel licenses in
Near-Term Launch Markets and Long-Term Launch Markets to allow
for the relocation of some channels from their currently
authorized or proposed transmission sites. While the Company
believes that the relocation would increase the total number
of potential subscribers in those systems, the Company does
not intend to delay construction of a new system if the
modifications are not approved by the FCC.
Currently, the FCC will not accept applications for
new ITFS licenses or "major" modifications of ITFS licenses
which affects channel rights in several of the Company's Long-
Term Launch Markets. The most recent five-day window for
filing ITFS applications was completed on October 20, 1995, in
which the Company's lessors filed the majority of the
applications required to effectuate its long-term launch
plans. The Company's currently pending ITFS applications are
expected to undergo review by FCC engineers and staff
attorneys over the next 24 months. If the FCC staff
determines that an application meets certain basic technical
and legal qualifications, the staff will then determine
whether the application proposes facilities that would result
in signal interference to facilities proposed in other pending
applications. If so, the conflicting applications undergo a
comparative criteria that includes whether an applicant is
located in the community to be served and is an accredited
educator proposing to serve its own students. Historically,
the outcome of the selection process when two or more
qualified applicants are competing for the same channels has
been somewhat predictable based on the particular facts and
circumstances. A small number of the Company's lease
agreements involve applications for channel licenses for which
competing applications have been filed. The Company therefore
anticipates that a substantial number of the pending
applications will be granted. However, no assurance can be
given as to the precise number of applications that will be
granted. The failure of the Company to obtain a sufficient
number of channel rights in a particular Market could have a
material adverse effect on the growth of the Company.
The Company currently expects to construct and to
begin operations in the Near-Term Launch Markets by
November 30, 1996 and 20 to 24 Long-Term Launch Markets in
1997. Construction will entail the construction of a
transmission building near a transmission tower and the
installation of transmission equipment and, in certain cases,
the construction of the transmission tower. The construction
of the transmission facility will enable the Company to launch
wireless cable service in such Markets. For the remaining
Markets, the Company expects to begin operations by the end of
1998. The Company is analyzing the appropriate construction
schedule for the remaining Long-Term Launch Markets. This
analysis is being performed based upon multiple factors
including, but not limited to, the expiration dates of channel
leases and FCC construction authorizations, the number of
potential subscribers in each Market, the availability of
capital and the proximity of a market to Operating Systems and
other Markets ready for construction. In managing its
wireless cable channel assets, the Company may, at is option,
trade or exchange existing channel rights in order to acquire,
directly or indirectly, channel rights in Markets that have
greater strategic value to the Company.
Wireless One of North Carolina, L.L.C.
On October 10, 1995, the Company entered into a
Limited Liability Company Agreement with CT Wireless Cable,
Inc., a North Carolina corporation, and O. Gene Gabbard, for
the purpose of forming Wireless One of North Carolina, L.L.C.,
a Delaware limited liability company ("WONC"), to (i) develop
and operate wireless cable systems in the state of North
Carolina and in the markets encompassing Greenville and
Spartanburg, South Carolina, (ii) enter into lease agreements
with various educational organizations for the use of ITFS
wireless cable channels, (iii) bid for, purchase, or otherwise
acquire the use of licenses for commercial wireless cable
channels, and (iv) develop and operate wireless cable systems
using the leased ITFS and acquired commercial wireless cable
channels. The Company holds a 50% interest in WONC, CT
Wireless Cable, Inc. holds a 48% interest in WONC, and O. Gene
Gabbard holds a 2% interest in WONC.
Based on WONC's ITFS filings and channel
acquisitions, the TruVision Transaction and BTA Auction high
bids, the Company believes that WONC will have sufficient
channel capacity to launch wireless cable systems in the
following markets:
Estimated
Total Estimated LOS
Market Households Households
- ------ ---------- -------------
Asheville, NC..................... 246,700 93,300
Fayetteville, NC.................. 245,300 179,700
Greenville, NC.................... 99,200 57,500
Hickory, NC....................... 376,800 162,700
Jacksonville, NC.................. 136,700 116,200
Rocky Mount, NC................... 199,100 178,900
Roanoke Rapids, NC................ 44,700 38,000
Wilmington, NC.................... 136,900 123,400
Rockingham, NC.................... 93,200 86,600
Elizabeth City, NC................ 63,800 35,500
---------- ----------
Total........................... 1,642,300 1,071,700
========== ==========
WNOC has also filed for ITFS channels and has
agreements to acquire channels in Charlotte, Greensboro and
Raleigh, North Carolina and Spartanburg, South Carolina;
however, the Company does not believe that WONC has sufficient
channel capacity to launch systems in these four markets.
System Costs
The Company estimates that the current cost per
market for transmission (or headend) equipment and a headend
build-out in a typical 20 channel system will be approximately
$570,000. In addition, the Company expects to spend
approximately $2.8 million on beam benders in 1996 and 1997.
Beam benders permit reception of the Company's signal in areas
which would otherwise be unable to receive transmission due to
terrain or other obstacles. The additional cost to expand a
system to a full 32 channels is approximately $180,000. The
Company estimates that, as of December 31, 1995, each
additional wireless cable subscriber with a single set-top
converter required an incremental capital expenditure of
approximately $375 to $475, consisting of, on average, $240 to
$340 of materials and $135 of installation labor and overhead
charges.
The operating costs for wireless cable systems are
generally lower than those for comparable traditional hard-
wire systems. This is attributable to lower system network
maintenance and depreciation expense. Programming is
generally available to traditional hard-wire and wireless
cable operators on comparable terms, although operators that
have a smaller number of subscribers often are required to pay
higher per subscriber fees. Accordingly, operators in the
initial operating stage generally pay higher programming fees
on a per subscriber basis. The Company believes that its
Markets typically have a stable base of subscribers which have
allowed it to maintain an average churn rate below 2.5% per
month for the six months ended June 30, 1996, as compared to a
churn rate of approximately 3% per month typically experienced
by traditional hard-wire cable operators, resulting in reduced
installation and marketing expenses. By locating its
operations in geographic clusters, the Company believes that
it can further contain costs by taking advantage of economies
of scale in management, sales and customer service. For each
Operating System, the Company employs a general manager,
salespersons and installation and repair personnel. All other
functions are centralized, including engineering, marketing,
billing, customer service, finance and administration.
Programming
The Company seeks to offer popular programming at
affordable prices. The Company's typical channel offering
includes 20 to 31 channels, which include 19 to 26 basic
channels, up to three premium channels (HBO, The Disney
Channel and Showtime) and up one full-time pay-per-view
channel. Local news programs are broadcast over the VHF/UHF
channels which in turn are retransmitted over the Company's
wireless cable channels. Thus subscribers to the Company's
services have access to local news, including weather news.
The Company believes that being able to provide such access
gives it an important competitive advantage over DBS
competitors, which do not rebroadcast such programming.
The following chart depicts the Company's current
programming line-up in a typical Market.
Company Channel Offerings
BASIC
ABC (local network affiliate) The Learning Channel (education)
AMC (classic movies) Mind Extension University (education)
Black Entertainment Television The Nashville Network (music)
(special interest)
CBS (local network affiliate) NBC (local network affiliate)
Country Music Television Nickelodeon (children's)
CNN (news) PBS (education, general interest)
C-SPAN (public affairs) SportSouth (southeast U.S. sports)
Discovery (science) TBS Superstation (sports, movies)
The Disney Channel (1) TNT (sports, movies)
ESPN (sports) USA (general interest)
The Family Channel (family The Weather Channel (weather)
entertainment)
Fox (local network affiliate)
PREMIUM PAY-PER-VIEW
Home Box Office Viewer's Choice
Showtime
The Disney Channel<F1>
_____________________
<F1> The Disney Channel is part of the basic package except in the Company's
Mississippi Markets and certain other Markets where it is offered as a
premium channel.
Operations
Installation. Once a potential subscriber has requested
service, a pre-survey to determine the feasibility of LOS
transmission at such subscriber's location is carried out and
the potential subscriber is informed on the day of the survey
whether service can be provided at the subscriber's location.
Assuming service can be provided, an installation is then
scheduled. The Company provides two installation options. One
installation option features a standard rooftop mount linked to
a down converter located at the subscriber's location. For
cases where the subscriber's location is surrounded by trees
which would normally render LOS reception impossible, or upon
subscriber request, the Company has developed a tree mount,
which consists of a 20 foot mast which is bracketed to the
upper part of a tree. A wire is then run from the mast to the
ground and back to the subscriber's location. Each
installation option includes grounding the receiving antenna in
accordance with national electrical codes. The installation
process is contemplated, and service commences, typically
within ten days of the initial request.
Billing. The Company believes that its billing procedures are
an integral part of its strategy to minimize churn.
Subscribers are billed on the first day of the month for that
month's service with payment due on the fifteenth of the month.
The Company seeks to encourage delinquent accounts to pay by
disconnecting either premium or full service after a period of
non-payment coupled with a calling program by customer service
representatives to encourage delinquent accounts to pay and
continue receiving service.
Marketing. Prior to commencing operations in a new
system, the Company develops a plan designed to manage
subscriber growth by maintaining a manageable backlog of
installations (so that subscribers generally wait no more than
ten days from initial inquiry to commencement of service) which
ensures that the quality of installations and customer service
remains high. The Company prioritizes areas of the market
according to the number of unpassed homes, the relative
strength of any traditional hard-wire competitors, the
existence of terrain or obstructions that would impede LOS
transmissions, the economic demographics of the area, and the
percentage of single family homes. On the basis of such
analysis the market is divided into sub-markets of
approximately 5,000 households and the sub-markets are
prioritized on the basis of their attractiveness to the
Company.
In each sub-market, the Company's marketing staff develops
a targeted marketing plan that typically includes direct
mailings, telemarketing follow-up calls and selected door-to-
door sales. In certain markets, the Company uses television
and newspaper advertisements. A separate marketing team
focuses on adding commercial subscribers (such as restaurants,
business offices and auto dealers) and MDU contracts.
The Company markets its wireless cable service by
highlighting four major competitive advantages over traditional
hard-wire cable services and other subscription television
alternatives: customer service, picture quality and
reliability, programming features and price.
Customer Service. The Company has established the goal of
maintaining high levels of customer satisfaction. In
furtherance of that goal, that Company emphasizes responsive
customer service and convenient installation scheduling. The
Company has established customer retention and referral
programs in an effort to obtain and retain new subscribers.
Because traditional hard-wire cable companies enjoyed virtual
monopolies in the past, few have had an incentive to provide as
high levels of customer service as the Company provides. The
regulations promulgated under the 1992 Cable Act require
traditional hard-wire cable companies to provide improved
customer service which may decrease the Company's competitive
advantage in this area.
Picture Quality and Reliability. Wireless cable
subscribers enjoy substantially outage-free, highly reliable
picture quality because there is no Cable Plant between the
headend and the subscriber's location, as in the case of
traditional hard-wire cable. Within the signal range of the
Operating Systems, the picture quality of the Company's service
is generally equal or better in quality to that typically
received by traditional hard-wire cable subscribers because,
absent any LOS obstruction, there is less opportunity for
signal degradation between the Company's headend and the
subscriber.
Programming Features. In the Operating Systems and
Systems Under Construction, the Company believes that it has
assembled sufficient channel rights and programming agreements
to provide a programming package competitive with those offered
by traditional hard-wire cable operators. Additionally, the
Company uses equipment which (when channel availability is
sufficient) enables it to offer pay-per-view programming and
addressability not currently offered by many of the rural hard-
wire cable operators with which it competes.
Price. The Company offers its subscribers a programming
package consisting of basic service, enhanced basic service and
premium programs. The Company can offer a price to its
subscribers for basic service and enhanced basic service that
is typically lower than prices for the same services offered by
traditional rural hard-wire cable operators because of lower
operating costs. The rates charged by cable operators for
their programming services are regulated pursuant to the 1992
Cable Act, as modified by the 1996 Act. The Company is unable
to predict precisely what effect FCC rate regulations will have
on the rates charged by traditional hard-wire cable operators.
Notwithstanding the regulations, however, the Company believes
it will continue to be price competitive with traditional rural
hard-wire cable operators with respect to comparable
programming.
EdNet Agreement
The EdNet Agreement provides exclusive rights to use all
excess airtime (that portion of a channel's airtime available
for commercial programming under FCC rules and policies) for
the 20 ITFS channels located in each of the Company's
Mississippi Markets. The Company believes that the EdNet
Agreement presents the Company with a number of strategic
benefits. The Company's rights under the agreement to the
available commercial use of 20 of the 32 available wireless
frequencies throughout Mississippi provide it with the critical
mass of channels necessary to operate in each of its
Mississippi Markets and create a significant competitive
advantage relative to other potential wireless cable operators
in such Markets. The large contiguous nature of the cluster of
Markets encompassing Mississippi will allow the Company to
centralize operations and achieve substantial economics of
scale in Mississippi and surrounding Markets. The Company
believes its transmission of programming involving job
training, literacy projects and other continuing education
programs enjoys the support of the Mississippi state
authorities and will general substantial goodwill in the
community and enhance the Company's identity as a local
provider of subscription television service.
Employees
As of June 30, 1996, the Company had a total of 627
employees. None of the Company's employees is subject to a
collective bargaining agreement. The Company has experienced
no work stoppages and believes that it has good relations with
its employees. The Company also utilizes the services of
unaffiliated independent contractors to build and install its
wireless cable systems and to market its service.
Properties
The Company leases approximately 15,746 square feet of
office space for its corporate headquarters in Baton Rouge,
Louisiana under a lease that expires on April 23, 2001. The
Company pays approximately $131,500 per year for such space.
The Company currently leases approximately 10,400 square feet
for its administrative and regional offices in Jackson,
Mississippi, which lease expires on April 30, 1998. The
Company currently does and will, in the future, purchase or
lease additional office space in other locations where it
launches additional systems. In addition to office space, the
Company also leases space on transmission towers located in its
various markets. The Company believes that office space and
space on transmission towers is readily available on acceptable
terms in the Markets.
Legal Proceedings
The Company is not a party to any litigation that would
have a material adverse effect on its business, results of
operations, or financial condition.
Trademarks
The Company owns certain trademarks; however, the Company
believes that its business is not materially dependent upon its
ownership of any single trademark or group of trademarks.
WIRELESS CABLE INDUSTRY
Subscription Television Industry
The subscription television industry began in the late
1940s to serve the needs of residents of predominantly rural
areas having limited access to local off-air VHF/UHF channels.
The industry subsequently expanded to metropolitan areas
because its systems were able to offer better reception and
more programming than local off-air VHF/UHF channels, among
other reasons. Currently, subscription television systems
typically offer a variety of services including basic service,
enhanced basic service, premium service and, in some instances,
pay-per-view service.
Typically, subscription television providers charge
customers an installation fee plus a fixed monthly fee for
basic service. The monthly fee for basic service is based on
the number of channels provided, operating and capital costs of
the provider, and competition within the market, among other
factors. Subscribers who purchase enhanced basic service or
premium services usually are charged additional monthly fees
corresponding thereto. Monthly fees for basic, enhanced basic
and premium services constitute the major source of revenue for
subscription television providers. Subscribers normally may
discontinue service at any time. Converter rentals, remote
control rentals, installation charges and reconnect charges
also comprise a portion of a subscription television provider's
revenues, but generally do not comprise a major component of
revenues.
Traditional Hard-wire Cable Technology
Most subscription television systems are hard-wire cable
systems which currently use coaxial cable to transmit
television signals, although many have upgraded or are
considering upgrading to fiber optic cable with greater channel
capacity than coaxial cable. Traditional hard-wire systems
have headends which receive signals for programming services,
such as CBS, NBC, ABC, HBO, Cinemax, CNN, etc., which signals
have been transmitted to the headend by local broadcast or
satellite transmissions. A headend consists of a signal
reception, decryption, retransmission, encoding and related
equipment. The operator then delivers the signal from the
headend to customers via a Cable Plant. The use of a network
of coaxial cable inherently results in signal degradation and
increases the possibility of outages. Specifically, signals
can be transmitted via coaxial cable only a relative short
distance without amplification. However, each time a
television signal passes through an amplifier, some measure of
noise is added. A series or "cascade" of amplifiers between
the headend and a customer leads to progressively greater noise
and for some viewers, a degraded picture. Also, an amplifier
must be properly balanced or the signal may be improperly
amplified. Failure of any one amplifier in the chain of a
Cable Plant will black out the transmission signal from the
failed amplifier to the end of the cascade. Regular system
maintenance is required due to water ingress, temperature
changes and other equipment problems, all of which may affect
the quality of a signal. Some hard-wire cable companies have
begun installing fiber optic networks, which will substantially
reduce the transmission and reception problems currently
experienced by traditional hard-wire cable systems and will
expand the channel capacity of their systems. However, the
installation of such networks will require a substantial
investment by hard-wire cable operators.
Wireless Cable Development
Although regulatory and other obstacles impeded the growth
of the wireless cable industry through the 1980s, during the
1990s several developments have facilitated the growth of the
wireless cable industry, including (i) regulatory reforms by
the FCC intended to encourage the growth of the wireless cable
industry and its ability to compete with hard-wire cable
operators, (ii) Congressional scrutiny of the rates and
practices of the hard-wire cable industry, (iii) the increasing
availability of programming for wireless cable systems on non-
discriminatory terms, (iv) consumer demand for alternatives to
hard-wire cable service, (v) the aggregation by wireless cable
operators of a sufficient number of channels in certain markets
to create a competitive service, and (vi) the increased
availability of capital to wireless cable operators in the
public and private markets. According to the 1995 Cable TV
Financial Data Book, published by Paul Kagan Associates, Inc.
("Kagan"), approximately 150 wireless cable systems presently
operate in the United States, with wireless cable serving
approximately 400,000 customers at the end of 1993 and
approximately 600,000 customers at the end of 1994. In
addition, the 1995 Wireless Cable Databook estimated that
wireless cable would be serving approximately 950,000 customers
at the end of 1995.
Like a traditional hard-wire cable system, a wireless
cable system receives programming at a headend. Unlike
traditional hard-wire cable systems, however, programming is
then retransmitted by microwave transmitters operating in the
2150-2162 MHz and 2500-2686 MHz portions of the electromagnetic
radio spectrum from antennas located on a tower or building to
a small receiving antenna located at a subscriber's premises.
At the subscriber's location, the signals are descrambled,
converted to frequencies that can be viewed on a television set
and relayed to a subscriber's television set by coaxial cable.
Because the microwave frequencies used will not pass through
trees, hills, buildings or other obstructions, wireless cable
systems require a clear LOS from the headend to a subscriber's
receiving antenna. To ensure the clearest LOS possible, in the
Company's markets, the Company has placed, or plans to place,
its transmitting antennas on towers and/or tall buildings.
There exists, in each of the Company's operating and targeted
markets, a number of acceptable locations for the placement of
its towers, and the Company does not believe that the failure
to secure any one location for such placement in any single
market will materially affect the Company's operation in such
market. Additionally, many LOS obstructions can be overcome
with the use of signal repeaters which retransmit an otherwise
blocked signal over a limited area. Because wireless cable
systems do not require an extensive network of coaxial cable
and amplifiers, wireless cable operators can provide
subscribers with a reliable signal having a few transmission
disruptions, resulting in a television signal of a quality
comparable or superior to, and at a significantly lower system
capital cost per installed subscriber than, traditional hard-
wire cable systems.
Regulatory Environment
General. The wireless cable industry is subject to
regulation by the FCC pursuant to the Communications Act of
1934, as amended (the "Communications Act"). The
Communications Act empowers the FCC, among other things, to
issue, revoke, modify and renew licenses within the spectrum
available to wireless cable; to approve the assignment and/or
transfer of control of such licenses; to approve the location
of wireless cable systems; to regulate the kind, configuration
and operation of equipment used by wireless cable systems; and
to impose certain equal employment opportunity and reporting
requirements on channel license holders and wireless cable
operators.
The FCC has determined that wireless systems are not
"cable systems" for purposes of the Communications Act.
Accordingly, a wireless cable system does not require a local
franchise and is subject to fewer local regulations than a
hard-wire cable system. All transmission and reception
equipment for a wireless cable system can be located on private
property; hence, there is no need to make use of utility poles,
dedicated easements or other public rights of way. Although
wireless cable operators typically must lease from the holders
of channel licenses the right to use wireless cable channels,
unlike hard-wire cable operators they do not have to pay local
franchise fees. Recently, legislation has been introduced in
several states to authorize state and local authorities to
impose on all video program distributors (including wireless
cable operators) a tax on such distributors' gross receipts
comparable to the franchise fees that hard-wire cable operators
must pay. Similar legislation might be enacted in states where
the Company does business or intends to do business. Efforts
are underway by the Wireless Cable Association International,
Inc. to have Congress preempt the imposition of such taxes by
enacting new federal legislation. In addition, the industry is
opposing the state bills as they are introduced. However, it
is not possible to predict whether new state laws will be
enacted that impose new taxes on wireless cable operators.
Channels Available for Wireless Cable. The FCC licenses
and regulates the use of channels used by channel license
holders and wireless cable operators to transmit video
programming and other services. In 50 large markets in the
U.S., 33 analog channels are available for wireless cable (in
addition to any local off-air VHF/UHF broadcast channels that
are not retransmitted over wireless cable channels). In each
other market, 32 analog channels are available for wireless
cable (in addition to any local off-air VHF/UHF broadcast
channels that are not retransmitted over wireless cable
channels). The actual number of wireless cable channels
available for licensing in any market is determined by the
FCC's interference protection and channel allocation rules.
Except in limited circumstances, 20 ITFS channels in each
geographic area are generally licensed to qualified educational
organizations. In general, each of these channels must be used
an average of at least 20 hours per week for educational
programming. The educational requirement may be satisfied by
such programming as the Discovery Channel, PBS and C-SPAN. The
remaining air time ("excess air time") on each ITFS channel may
be leased to wireless cable operators for commercial use,
without further restrictions (other than the right of the ITFS
license holder, at its option, to recapture up to an additional
20 hours of air time per week for educational programming).
Lessees of ITFS excess air time, including the Company,
generally have the right to transmit to their customers at no
incremental cost the educational programming provided by the
lessor on one or more of its ITFS channels, thereby providing
wireless cable operators who lease such channels, including the
Company, with greater flexibility in their use of ITFS
channels. The remaining MDS channels available in most of the
Company's operating and targeted markets are made available by
the FCC for full-time commercial usage without educational
programming requirements. ITFS excess capacity leases
generally cannot exceed terms of 10 years. The FCC does not
impose any restrictions on the terms of MDS channel leases,
other than the requirement that the licensee maintain
effective control of its MDS station. The same FCC control
requirements applies to ITFS licensees. In addition, ITFS
excess capacity leases cannot exceed a term of 10 years from
the time that the lessee begins using the channel capacity.
The Company's ITFS leases generally grant the Company a right
of first refusal to match any new lease offer after the end of
the lease term and require the parties to negotiate in good
faith to renew the lease.
Licensing Procedures. The FCC awards ITFS and MDS
licenses based upon applications demonstrating that the
applicant is legally, technically and financially qualified to
hold the license and that the operation of the proposed station
will not cause impermissible interference to other stations or
proposed stations entitled to interference protection.
The FCC accepts applications for new ITFS stations or
major modifications to authorized ITFS stations in designated
filing "windows." Where two or more ITFS applicants file for
the same channels and the proposed facilities cannot be
operated without impermissible interference, the FCC employs a
set of comparative criteria to select from among the competing
applicants.
Recently, the FCC adopted a competitive bidding mechanism
under which initial MDS licenses for 493 designated BTAs were
auctioned to the highest bidder. The BTA Auction concluded on
March 28, 1996 after 181 rounds of bidding. High bidders were
required to submit specified down payments to the FCC by April
5, 1996. The Company was the high bidder for the BTA Markets
and timely tendered the required down payment. BTA Auction
winners obtain the exclusive right to apply for available MDS
channels with such BTA, subject to compliance with FCC
interference protection, construction and other rules. The
Company timely filed applications for MDS channels in the BTA
Markets, and such applications are pending before the FCC.
Financing is available to certain qualified entities from the
United States government for rights purchased in the BTA
Auction.
Construction of ITFS stations generally must be completed
within 18 months of the date of grant of the authorization.
Construction of MDS stations licensed pursuant to initial
applications filed before the implementation of the BTA Auction
rules generally must be completed within 12 months. If
construction of MDS or ITFS stations is not completed within
the authorized construction period, the licensee must file an
application with the FCC seeking additional time to construct
the station, and demonstrate therein compliance with certain
FCC standards. If the extension application is not filed or is
not granted, the license will be deemed forfeited. FCC rules
prohibit the sale for profit of a conditional commercial
license or of a controlling interest in the conditional license
holder prior to construction of the station or, in certain
instances, prior to the completion of one year of operation.
However, the FCC does permit the leasing of 100% of a
commercial license holder's spectrum capacity to a wireless
cable operator and the granting of options to purchase a
controlling interest in a license even before such holding
period has lapsed. The construction requirements applicable to
MDS stations licensed pursuant to the BTA Auction are
substantially different. The licensee must build stations
covering two-thirds of the area within its control in the BTA
within five years.
ITFS and commercial licenses generally have terms of 10
years. Applications for renewal of MDS and ITFS licenses must
be filed within a certain period prior to expiration of the
license term, and petitions to deny applications for renewal
may be filed during certain periods following the filing of
such applications. Licenses are subject to revocation or
cancellation for violation of the Communications Act or the
FCC's rules and policies. Conviction of certain criminal
offenses may also render a licensee or applicant unqualified to
obtain renewal of a license. The Company's lease agreements
with license holders typically require the license holders, at
the Company's expense, to use their best efforts, in
cooperation with the Company, to make various required filings
with the FCC in connection with the maintenance and renewal of
licenses. The Company believes that such a requirement reduces
the likelihood that a license would be revoked, canceled or not
renewed by the FCC.
Wireless cable transmissions are subject to FCC
regulations governing interference and transmission quality.
Other than a limited number of experimental and developmental
systems, wireless cable systems transmit in a standard analog
format. On July 11, 1996, acting on a request of the Company
and numerous other wireless cable operators, educators and
equipment manufacturers, the FCC adopted interim guidelines for
the implementation of certain digital transmission formats.
These guidelines are intended to facilitate the rapid
implementation of digital wireless cable systems capable of
providing more programming sources on the same channel
bandwidth and improving signal quality.
The FCC also regulates transmitter locations and signal
strength. The operation of a wireless cable television system
requires the co-location of a commercially viable number of
transmitting antennas and operations with common technical
characteristics (such as power and polarity). In order to
commence the operations of certain of the Company's Markets,
applications have been filed or must be filed with the FCC to
relocate and modify authorized transmission facilities.
Under current FCC regulations, a wireless cable operator
generally may serve any location within the LOS of its
transmission facility, provided that it complies with the FCC's
interference protection standards. An MDS station generally is
entitled to interference protection within a 35-mile radius
around its transmitter site. Generally, an ITFS facility is
entitled to the same 35-mile protected area during excess
capacity use by a wireless cable operator, as well as
interference protection for all of its FCC-registered receive-
sites. In launching or upgrading a system, the Company may
wish to relocate its transmission facility, or increase its
height or signal power in order to serve one or more of its
targeted markets. If such changes would result in interference
to any previously proposed station, the consent of such station
must be obtained before the FCC will grant the proposed
modification. There can be no assurance that any necessary
consents will be received. In addition, such modifications
will be subject to the interference protection rights of BTA
Auction winners.
The 1992 Cable Act. The 1992 Cable Act imposed additional
regulation on traditional hard-wire cable operators and permits
regulation of hard-wire cable rates in markets in which there
is no "effective competition." The 1992 Cable Act, among other
things, directed the FCC to adopt comprehensive new federal
standards for local regulation of certain rates charged by
traditional hard-wire cable operators. The 1992 Cable Act also
deregulated traditional hard-wire cable in a given market once
other subscription television providers serve, in the
aggregate, at least 15% of the cable franchise area. Rates
charged by wireless cable operators, typically already lower
than traditional hard-wire cable rates, are not subject to
regulation under the 1992 Cable Act. Pursuant to the 1992
Cable Act, the FCC has required traditional hard-wire cable
operators to implement rate reductions.
The 1996 Act. The Telecommunications Act of 1996 became
law on February 8, 1996. A principal focus of the 1996 Act is
freeing local telephone companies and long distance telephone
companies from barriers to competing in each other's lines of
business, and preempting State restrictions on competition in
the provision of local telephone service. In addition, the
1996 Act contains provisions which amend the 1992 Cable Act and
which affect wireless cable operators.
A significant potential effect on the Company of the 1996
Act may result from its provisions exempting traditional
hardwire cable systems from rate regulation. In particular,
the 1996 Act will end rate regulation of all but basic cable
service by 1999, and immediately removes virtually all rate
regulation of "Small cable operators" - those cable systems not
owned by MSOs and serving 50,000 or fewer subscribers. The
Company believes that cable systems in many of the Company's
Markets will qualify for small system rate deregulation. The
Company anticipates that some number of such cable systems will
raise their rates, although the Company cannot predict the
number of its cable system competitors which will raise service
rates, the timing of the rate increases or the amounts of the
rate increases. The Company regards the 1996 Act's rate
deregulation of cable systems as generally positive because it
can be expected to improve the Company's price advantages over
competing traditional hard-wire cable services.
The 1996 Act also contains provisions allowing local
exchange telephone companies to offer cable service within
their telephone service areas. Under the 1992 Cable Act,
exchange telephone companies were free to offer wireless cable
service anywhere, but could offer wired cable service only
outside of their exchange telephone areas or solely as common
carriers, subject to FCC authorization. The 1996 Act allows
exchange telephone companies to offer video programming
services via radio communications (such as wireless cable)
without regulation of rates or services, to offer hard-wire or
fiber cable service channels for hire by video programmers, to
offer their own hardwire or fiber cable service over networks
with channels also available for use by other video program
services providers under a modified regulatory scheme, and to
provide traditional cable service subject to local franchising
requirements. It is difficult to predict the impact (if any)
of final FCC regulations with regard to local exchange
telephone companies in these respects on the Company.
FCC rules generally prohibit hard-wire cable operators
from providing wireless cable service in areas where the hard-
wire cable franchise area overlaps with the 35-mile protected
service area of a wireless cable system. In certain
circumstances, the FCC may grant waivers of such restriction,
or the common ownership of hard-wire and wireless cable systems
may otherwise be exempt. Rules adopted by the FCC pursuant to
the 1996 Act permit cable operators to offer wireless cable
service in such overlap areas where the cable company is
subject to "effective competition." Telephone companies are
not subject to any such cross-ownership restrictions.
The 1996 Act offers wireless cable operators and satellite
programmers relief from private and local governmentally-
imposed restrictions on the placement of receive-site antennas.
In some instances, wireless cable operators have been unable to
serve areas due to laws, zoning ordinances, homeowner
association rules or restrictive property covenants banning the
erection of antennas on or near homes. The FCC has initiated
proceedings to promulgate rules implementing Congress' intent
and such rules are expected to be adopted by August 8, 1996.
The Company cannot predict if any FCC rules ultimately adopted
will materially improve the Company's access to homes subject
to receive-site antenna placement restrictions.
Finally, the 1996 Act requires wireless cable companies
and traditional hardwire cable companies to "scramble" or
encrypt channels which ordinarily carry indecent or sexually
explicit adult programming. The Company does not anticipate
any adverse impact from that provision.
Other Regulations. Wireless cable license holders are
subject to regulation by the Federal Aviation Administration
with respect to the construction, marking and lighting of
transmission towers and to certain local zoning regulations
affecting construction of towers, receive-site antennas and
other facilities. There may also be restrictions imposed by
local authorities and private covenants. There can be no
assurance that the Company will not be required to incur
additional costs in complying with such regulations and
restrictions.
Due to the regulated nature of the subscription television
industry, the Company's growth and operations may be adversely
impacted by the adoption of new, or changes to existing, laws
or regulations or the interpretations thereof.
Availability of Programming
Once a wireless cable operator has obtained the right to
transmit programming over specified frequencies, the operator
must then obtain the right to use the programming to be
transmitted.
General. Currently, with the exception of the
retransmission of VHF/UHF broadcast signals, programming is
made available to wireless cable operators in accordance with
contracts with program suppliers under which the system
operator generally pays a royalty based on the number of
customers receiving service each month. Individual program
pricing varies from supplier to supplier; however, more
favorable pricing for programming is generally afforded to
operators with larger customer bases. The likelihood that
program material will be unavailable to the Company has been
significantly mitigated by the 1992 Cable Act and various FCC
regulations issued thereunder which, among other things, impose
limits on exclusive programming contracts and prohibit
vertically integrated cable operators from discriminating
against cable competitors with respect to the price, terms and
conditions of the sale of programming. Only a few of the major
cable television programming services carried by the Company
are not currently directly or indirectly owned or controlled by
vertically integrated cable operators, and the Company
historically has not had difficulty in arranging satisfactory
contracts for these services. The Company believes that it
will have access to sufficient programming to enable it to
provide full channel lineups in its markets through 1996 and
for the foreseeable future. Current fair access to programming
rules imposed by the 1992 Cable Act and the 1996 Act only apply
to programming that is owned or controlled by a cable company
or common carrier and is delivered by satellite. The basic
programming package offered by the Company's operating systems
is comparable to that offered by the local hard-wire cable
operators with respect to the most widely watched channels.
However, several of such local hard-wire cable operators may,
because of their greater channel capacity, currently offer more
basic, enhanced basic, premium, pay-per-view and public access
channels than the Company. Certain hard-wire cable companies
competing in the Company's Markets currently offer a greater
number of channels to their customers, compared to the 24 to 31
wireless cable channels offered by the Company in its Operating
Systems. The Company's programming is supplied by numerous
separate distributors.
Copyright. Under the federal copyright laws, permission
from the copyright holder generally must be secured before a
video program subject to such copyright may be retransmitted.
Under Section 111 of the Copyright Act, certain "cable systems"
are entitled to engage in the secondary transmission of
programming without the prior permission of the holders of
copyrights in the programming. In order to do so, a cable
system must secure a compulsory copyright license. Such a
license may be obtained by filing certain reports with and
paying certain fees to the U.S. Copyright Office. In 1994,
Congress enacted the Satellite Home Viewers Act of 1994 which
clarified that wireless cable operators may rely on the cable
compulsory license provisions of Section 111 of the Copyright
Act. The Company relies on Section 111 to retransmit two
superstations and five local off-air broadcast signals.
Retransmission Consent. Under the retransmission
provisions of the 1992 Cable Act, wireless cable and hard-wire
cable operators seeking to retransmit certain commercial
broadcast signals must first obtain the permission of the
broadcast station. The FCC has exempted wireless cable
operators from the transmission consent rules, if the receive-
site antenna is either owned by the subscriber or within the
subscriber's control and available for purchase by the
subscriber upon the termination of service. In all other
cases, wireless cable operators must obtain consent to
retransmit local broadcast signals. The Company has obtained
such consents with respect to the Operating Systems where it is
retransmitting local VHF/UHF channels. Although there can be
no assurances that the Company will be able to obtain requisite
broadcaster consents, the Company is of the view that in most
cases it will be able to do so for little or no additional
cost.
Subscription Television Industry Trends
The Company's business will be affected by subscription
television industry trends and, in order to maintain and
increase its customer base in the years ahead, the Company will
need to adapt rapidly to industry trends to remain competitive.
Addressability and Pay-Per-View. "Addressability" means
the ability to implement specific orders from or send other
communications to each subscriber without having to modify a
subscriber's equipment. While the Company, like many wireless
cable operators, provides all subscribers with addressable
convertors, only approximately 35% of traditional hard-wire
cable operators use addressability. Without addressability, a
traditional hard-wire cable customer not subscribing to a
premium channel must make two trips to the traditional hard-
wire cable operator's offices, once to obtain the descrambling
device and once to return it. A customer subscribing to a
premium channel must telephone the traditional hard-wire cable
operator in advance. The Company believes this lack of
convenience has hindered pay-per-view sales. Pay-per-view is
expected to become more popular as additional exclusive events
become available for distribution on pay-per-view. Digital
compression technology will greatly expand the channel capacity
available for such programming. The Company believes that
traditional hard-wire cable operators will incur significant
expenditures to upgrade their systems to be able to offer
addressability.
Digital Compression. Several equipment manufacturers are
developing digital compression technology which would allow
several programs to be carried within the same bandwidth which
presently can accommodate only one program without digital
compression technology. Manufacturers have projected varying
compression ratios for future equipment, ranging from four-to-
one to ten-to-one, which would increase the channels available
to be carried on a wireless cable system using digital
compression technology from 31 to between 124 and 310 channels.
Interactivity. Certain traditional hard-wire cable
operators have announced their intentions to develop
interactive features for use by their customers. Interactivity
would allow customers to utilize their televisions for two-way
communications such as video games, home shopping and video-on-
demand. Extensive use of interactivity will likely require the
development and utilization of digital compression and
cellularization. Wireless cable operators may be able to
utilize return paths which the FCC has made available for
interactive communications. At this time, the Company believes
that the widespread commercial availability of many interactive
products is at least several years away.
Advertising. Local and national advertising continues to
grow as a source of revenue for hard-wire and wireless cable
operators. The Company recently began generating advertising
revenue and expects to increase this amount over time as its
systems mature. The Company believes its regional cluster
strategy should benefit its efforts in this regard because of
its ability to deliver advertising throughout its entire region
and not just isolated markets.
Competition
In addition to competition from traditional hard-wire
cable television systems, wireless cable television operators
face competition from a number of other sources, including
potential competition from emerging trends and technologies in
the subscription television industry, some of which are
described below.
Direct-to-Home ("DTH"). DTH satellite television services
originally were available via satellite receivers which
generally were seven to 12 foot dishes mounted in the yards of
homes to receive television signals from orbiting satellites.
Until the implementation of encryption, these dishes enabled
reception of any and all signals without the payment of fees.
Having to purchase decoders and to pay for programming has
reduced the popularity of DTH, although the Company will
compete to some degree with these systems in marketing its
services.
DBS. DBS involves the transmission of an encoded signal
directly from a satellite to the customer's premises. Because
the signal is at a higher power level than DTH signals, its
reception can be accomplished with a relatively small (18 inch
to three foot) dish mounted on a rooftop or in the yard. Four
DBS services currently are available nationwide, and one more
is expected to be launched in 1996. DBS currently has
approximately 2.3 million subscribers nationwide. AT&T Corp.
has announced plans to invest $137.5 million in DirecTV, Inc.,
a leading provider of DBS service, in exchange for a 2.5
percent equity interest and options to acquire up to a total of
a 30% equity interest. MCI Communications Corp. has announced
that it has entered into a DBS joint venture arrangement with
News Corp., using a license that MCI recently won in an FCC
auction for which MCI will pay $682.5 million. DBS cannot, for
technical and legal reasons, provide local VHF/UHF broadcast
channels as part of its service, although many customers
receive such channels from standard over-the-air antennas. If
a subscriber is unable to receive local network signals off-
air, due to such subscriber's geographic location, the
subscriber would be able to receive the network signals through
DBS transmissions, but such transmissions would be limited to
distant, rather than local, network signals. For example, a
potential subscriber in the Jackson, Mississippi area who was
unable to receive the off-air broadcasts of the local Jackson
NBC affiliate would be able to subscribe to Primestar, a DBS
provider, and receive NBC broadcasts, but such broadcasts would
be limited to those of the Boston, Massachusetts NBC affiliate.
Private Cable. Private cable, also known as SMATV, is a
multichannel subscription television service where the
programming is received by satellite receiver and then
transmitted via coaxial cable through private property, often
MDUs, without crossing public rights of way. Private cable
operates under an agreement with a private landowner to service
a specific MDU, commercial establishment or hotel. The FCC
permits point-to-point delivery of video programming by private
cable operators and other video delivery systems in the 18 GHz
band. Private cable operators compete with the Company for
rights of entry into MDUs, commercial establishments and
hotels.
Telephone Companies. The 1996 Act permits Local Exchange
Carriers ("LECs") to provide video service in their telephone
service areas. Under existing FCC rules LECs may provide
"video dialtone" service, thereby allowing LECs to make
available to multiple service providers, on a nondiscriminatory
common carrier basis, a basic platform that will permit end
users to access video program services provided by others.
Several large telephone companies have announced plans to
either (i) enhance their existing distribution plant to offer
video dialtone service, (ii) construct new distribution plants
in conjunction with a local cable operator to offer video
dialtone service or (iii) acquire or merge with existing
franchise cable systems outside of the telephone companies'
respective telephone service areas. While the competitive
effect of the offering by telephone companies of video dialtone
and fiber optic based subscription television services is still
uncertain, the Company believes that wireless cable technology
will continue to offer a lower cost alternative to video
dialtone and fiber optic distribution technologies.
Two LECs, Bell Atlantic and NYNEX, have invested, in the
aggregate, $100 million in CAI Wireless Systems, Inc., which
operates wireless cable systems in large urban markets which
are primarily located in Bell Atlantic's and NYNEX's areas of
operations. Bell Atlantic and NYNEX announced that their
investment will allow them to enter the market for consumer
video services more quickly than by constructing a coaxial
fiber option network. In April 1995, Pacific Telesis
("PacTel"), and LEC based in California announced it would
acquire Cross Country Wireless, Inc., which operates a wireless
cable system and holds channel rights in southern California,
for approximately $175 million. Similar to Bell Atlantic and
NYNEX, PacTel announced that its acquisition of Cross Country
will allow PacTel to enter the market for consumer video
services on an expedited basis. In November 1995, PacTel
announced it would acquire Wireless Holdings, Inc., which
operates wireless cable systems and holds channel rights in
California, Washington, Florida and South Carolina, for
approximately $170 million. Bell Atlantic and NYNEX owns a 10%
equity interest in CS Wireless Systems, Inc., which operates
and is developing wireless cable systems primarily in the
midwestern United States. In May 1996, BellSouth Corp.
announced it would acquire the New Orleans, Louisiana wireless
cable system for approximately $12 million. The competitive
effect of the entry of telephone companies in to the
subscription television business, including wireless cable, is
uncertain.
Local Off-Air VHF/UHF Broadcasts. Local off-air VHF/UHF
broadcasts (from ABC, NBC, CBS and Fox affiliates) provide free
programming to the public. In some areas, several low power
television ("LPTV") stations authorized by the FCC are used to
provide multichannel subscription television service to the
public. LPTV transmits on conventional VHF/UHF broadcast
channels, but is restricted to very low power levels, which
limits the area where a high quality signal can be received.
Local Multi-Point Distribution Service ("LMDS"). In 1993,
the FCC initially proposed to redesignate a portion of the 28
GHz band to create a new video programming delivery service
referred to as LMDS. In July 1995, the FCC proposed to award
licenses in each of 493 BTAs pursuant to auctions. Sufficient
spectrum for up to 49 analog channels has been designated for
the LMDS service. The FCC has not determined how many licenses
it will award in each BTA. Final rules for LMDS have not been
established. Auctions are not expected to begin any earlier
than the third quarter of 1996.
Video Stores. Retail stores rent VCRs and/or video tapes
and are major participants in the video distribution industry.
According to Kagan, as of the end of 1994 there were over 75.5
million households with VCRs in the United States.
MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information as of
the date of this Prospectus with respect to each person who is
an executive officer or director of the Company:
Name Age Position
Hans J. Sternberg<F1>........... 60 Chairman of the Board
Henry M. Burkhalter............. 48 President and Vice Chairman of
the Board
Sean E. Reilly.................. 35 Chief Executive Officer and
Director
Alton C. Rye.................... 52 Executive Vice President-
Operations
Bill R. Byer, Jr................ 39 Executive Vice President -
Operations
William C. Norris, Jr., Ph.D.... 61 Senior Vice President-System
Launches
Michael C. Ellis................ 30 Vice President-Controller and
Secretary
Arnold L. Chavkin<F1><F3>....... 44 Director
William K. Luby<F1><F2><F3>..... 35 Director
J. R. Holland, Jr.<F1><F2>...... 52 Director
Daniel L. Shimer<F2>............ 51 Director
William J. Van Devender<F3>..... 47 Director
David E. Webb<F1>............... 49 Director
____________________
<F1> Member of Operating Committee.
<F2> Member of the Compensation Committee.
<F3> Member of the Audit Committee.
Hans J. Sternberg has served as Chairman of the Company
since its founding in June 1995 and as Chairman of the Board of
Old Wireless One since its founding in late 1993. He has also
served as the Chairman and Chief Executive Officer of Starmount
Life Insurance Company since 1983. He is a former owner and
President and Chief Executive Officer of Maison Blanche
Department Stores, a chain of 24 department stores which had
annual revenues of approximately $480 million prior to its 1992
sale. He invested in cellular telephones in the early 1980s,
began in cable television in 1972 as a founding partner and
director of Cablesystems of Hammond, Inc., and later helped
found Cablesystems of Alabama, Inc. He was an owner and a
director of radio stations WQXY, KQXY, WLCS and WWUN.
Henry M. Burkhalter became a Director of the Company in
April 1996 and President and Vice Chairman upon the
consummation of the TruVision Transaction on July 29, 1996.
Mr. Burkhalter had been Chairman of the Board of Directors,
President and Chief Executive Officer of TruVision since its
incorporation in April 1994. He has been the Chairman of
Pacific Coast Paging, Inc. since 1990. From 1974 through 1992,
he was the President and founder of Burkhalter & Company, a
certified public accounting firm.
Sean E. Reilly has served as Chief Executive Officer,
President and Director of the Company since its founding in
June 1995 and as Chief Executive Officer and President of Old
Wireless One since its founding in late 1993. Upon the
consummation of the TruVision Transaction, Mr. Reilly stepped
down as President of the Company. Prior to joining Old
Wireless One, Mr. Reilly served as Vice-President of Real
Estate/Mergers and Acquisitions for Lamar Advertising Company
("Lamar"), an outdoor advertising company, and continues to
serve as a member of the Lamar board of directors. Mr. Reilly
served in the Louisiana Legislature as a State Representative
from March 1988 to January 1996.
Alton C. Rye became Executive Vice President-Operations
of the Company in August 1995. Prior to joining the Company,
Mr. Rye served as Vice President-Operations for Sammons
Communications, Inc. ("Sammons"), of Dallas, Texas, which is
the twelfth largest cable television company in the United
States, from August 1993 to August 1995 and was responsible for
Sammons' largest operating division, which serviced
approximately 350,000 subscribers. From May 1988 to August
1993, Mr. Rye served as Vice President-Finance, Chief Financial
Officer and Treasurer of Sammons.
Bill R. Byer, Jr. became Executive Vice President-
Operations of the Company upon the consummation of the
TruVision Transaction on July 29, 1996. Mr. Byer had been
Executive Vice President and Chief Operating Officer of
TruVision since 1994. From 1989 to 1994, he served as General
Manager for MultiMedia CableVision, Inc., which operated a
wireless cable system serving Oklahoma City, Oklahoma. From
1984 to 1989, he served as General Manager of Argonox
Communications/Technivision, a wireless cable company, and from
1979 to 1984, he served as General Manager of Movie Systems,
Inc., a wireless cable company serving the Milwaukee,
Wisconsin, Indianapolis, Indiana, Oklahoma City, Oklahoma and
Ft. Lauderdale and West Palm Beach, Florida markets. In total,
he has over 15 years of experience in the wireless cable
industry, managing several systems with an aggregate number of
subscribers in excess of 50,000.
William C. Norris, Jr. Ph.D. has served as Senior Vice
President-System Launches of the Company since its founding in
June 1995 and as Chief Operating Officer and Secretary of Old
Wireless One since its founding in late 1993. Prior to working
at Old Wireless One, he developed cable systems in Texas,
Louisiana, Mississippi and Alabama over a 25-year period. He
was an investor in, and functioned as the Chief Executive
Officer of, those systems. He is a board member and
stockholder in the Baton Rouge Cellular Telephone Company.
Michael C. Ellis has served as Vice President-Controller
of the Company since joining the Company in November of 1995
and Secretary since August 1996. Prior to joining the Company,
he was an associate partner in the financial reporting and
consulting division of Postlethwaite and Netterville, a
regional accounting and consulting firm. He was employed with
Postlethwaite and Netterville from August 1988 to November
1995.
Arnold L. Chavkin became a Director of the Company in
April 1996. He has been a General Partner of CCP since January
1992 and has served as the President of Chemical Investments,
Inc. since March 1991. Prior to joining CCP, Mr. Chavkin was a
member of Chemical Bank's merchant banking group and a
generalist in its corporate finance group specializing in
mergers and acquisitions and private placements for the energy
industry. His experience prior to Chemical Bank included
corporate development for Freeport-McMoRan as well as positions
with Gulf and Western Industries and Arthur Young & Company.
Mr. Chavkin is also a director of Reading & Bates Corporation,
American Radio Systems Corporation, Inc., Bell Sports, Inc.,
Envirotest Systems, Forcenergy Gas Exploration, Inc. and
several privately held firms.
William K. Luby became a director of the Company in June
1995 and a director of Old Wireless One in April 1995. From
June 1992 to March 1996, Mr. Luby was a managing director at
CMCC. From 1985 to 1992, Mr. Luby held various positions in
the Leveraged Lending and Restructuring groups at The Chase
Manhattan Bank, N.A. He is currently a director of numerous
private companies.
J. R. Holland, Jr. became a Director of the Company in
June 1995. He began advising Heartland as a consultant in
October 1992 and became Chairman of the Board of Directors of
Heartland in October 1993. Mr. Holland has been employed as
President of Unity Hunt, Inc. since September 1991. Unity Hunt
is a large international, private holding company with
interests in entertainment, cable television, retail,
investments, real estate, natural resources and energy
businesses. Mr. Holland is also the President of Hunt Capital,
a principal stockholder of Heartland. From November 1988 to
September 1991, Mr. Holland was Chairman of the Board and Chief
Executive Officer of Nedinco, Inc., a large diversified
international holding company. Prior to that, Mr. Holland was
President and a director of KSA Industries, Inc., a private,
diversified company involved in entertainment, retail,
transportation and energy businesses, and President and a
director of Western Services International, Inc., a company
involved in energy services, equipment and chemicals. Mr.
Holland began his career with Booz-Allen & Hamilton, Inc., a
major management consulting firm. In addition, Mr. Holland is
currently a director of Placid Refining Company, Optical
Securities Group, Inc., TNP Enterprises, Inc. and several
private companies.
Daniel L. Shimer became a Director of the Company in
February 1996. Mr. Shimer is President of Shimer Capital
Partners, Inc., a private investment firm he founded in 1996.
From April 1994 to September 1996 he served as Executive Vice
President and a founding shareholder of COREStaff, Inc.
(NASD:CSTF). COREStaff was formed in 1994 and rapidly grew,
principally through acquisition to a $600 million top ten
provider of staffing services. Previously, Mr. Shimer served
as the Executive Vice-President and President of National
Accounts for Brice Foods, Inc. From 1983 to 1991, he was
associated with Bard & Company, Inc. in various senior
financial capacities among its publicly traded affiliates,
including Foxmeyer Corporation (NYSE), CoastAmerica Corporation
(NYSE), and Computerland Corporation (NYSE).
William J. Van Devender became a Director of the Company
upon the consummation of the TruVision Transaction on July 29,
1996. Mr. Van Devender had been a Director of TruVision since
August 1994. He controls VanCom, a limited partner of MWTV.
In addition, Mr. Van Devender has founded or served in senior
executive positions with Van Petroleum, Inc., Green Acres
Farms, Inc., Gulf Coast Plywood, Inc. and Coastal Paper
Company. Mr. Van Devender also serves on the Board of
Directors of Alaska-3 Cellular LLC, CelluTissue Holdings, Inc.
and Pacificom LLC, and various bank and community
organizations.
David E. Webb became a Director of the Company in June
1995. He is a co-founder of Heartland, and has been President
and Chief Executive Officer and a director of Heartland since
its founding in September 1990. During 1989 and 1990, Mr. Webb
began acquiring rights to wireless cable channels. From 1979
to January 1989, Mr. Webb was a shareholder, director and
manager of Durant Cablevision, Inc. and its predecessor, a
traditional hard-wire cable system company. Mr. Webb has been
a shareholder and director of several media/communications
companies involved in network and independent television
stations, AM and FM radio stations, paging and telephony.
The Board of Directors of the Company is divided into
three classes, as nearly equal in number as possible, having
terms expiring at the annual meeting of the Company's
stockholders in 1997 (comprised of Messrs. Luby, Holland and
Van Devender), 1998 (comprised of Messrs. Reilly, Burkhalter
and Shimer) and 1999 (comprised of Messrs. Sternberg, Chavkin
and Webb). At each annual meeting of stockholders, successors
of the class of Directors whose term expires at such meeting
will be elected to serve for three-year terms and until their
successors are elected and qualified. All current Directors
were elected or appointed pursuant to the terms of a
stockholders agreement. See "- Stockholders Agreement."
Non-employee Directors of the Company receive an annual
fee of $5,000 and a meeting fee of $500 per meeting attended,
plus reimbursement of out-of-pocket expenses, for their
services as Directors of the Company. In addition, each non-
employee Director of the Company who does not serve on the
Compensation Committee is eligible to receive stock options
under the Company's 1995 Directors' Stock Option Plan (the
"Directors' Plan"). See "-Stock Option Plans-1995 Directors'
Stock Option Plan." Directors who are also employees do not
receive any additional compensation for their services as
directors. In addition, Directors do not receive any
additional compensation for committee participation.
Stockholders Agreement
In connection with the Heartland Transaction, CMCC,
Baseball Partners, PVCC, affiliates of ACC, Mr. Sternberg and
Mr. Reilly, each of whom was a former stockholder of Old
Wireless One, and Heartland and certain of its subsidiaries
entered into a stockholders agreement (the "Initial
Stockholders Agreement"). The Initial Stockholders Agreement
was amended and restated in connection with the execution of
the TruVision Merger Agreement, with CVCA, VanCom, MWTV and
Messrs. Burkhalter, Byer, Eilers and Woolhiser (Messrs. Eilers
and Woolhiser are members of TruVision's management team)
(collectively "Former TruVision Stockholders") becoming parties
thereto. In such amended and restated agreement (the "New
Stockholders Agreement"), the parties thereto, among other
things, agreed to vote their Common Stock so that the Board of
Directors of the Company will have up to nine members, up to
three of whom will be designated by Heartland (at least one of
whom must be independent of the parties to the Initial
Stockholders Agreement), up to three of whom will be designated
by a majority of the Old Wireless One stockholders who are
parties to the Stockholders Agreement other than CMCC and
Baseball Partners (at least one of whom must be independent of
the parties to the Initial Stockholders Agreement), up to two
of whom will be designated by CMCC, Baseball Partners and CVCA,
collectively, and one of whom may be designated by the Former
TruVision Stockholders other than CVCA. The current Directors
proposed by Heartland are Messrs. Holland, Shimer and Webb; the
current Directors proposed by the Old Wireless One stockholders
and Messrs. Sternberg, Reilly and Luby; the current Directors
proposed by CMCC, Baseball Partners and CVCA are Messrs. Van
Devender and Chavkin, and the current Director proposed by the
Former TruVision Stockholders is Mr. Burkhalter.
Based upon certain filings made by the parties to the New
Stockholders Agreement with the Securities and Exchange
Commission (the "Commission"), the Company believes that the
parties to the New Stockholders Agreement collectively
beneficially own an aggregate of 11,225,987 shares of Common
Stock (including 249,089 shares of Common Stock issuable upon
the exercise of presently exercisable stock options held by
Messrs. Sternberg and Reilly and certain of the Former
TruVision Stockholders), which represents approximately 65.6%
of the outstanding Common Stock. As a result, such
stockholders are able to control the election of the members of
the Company's Board of Directors and to generally exercise
control over the Company's affairs. The New Stockholders
Agreement also provides that, without the prior approval of the
Board and until October 24, 1998, the parties to the New
Stockholders Agreement may not, without the approval of a
majority of the Directors, (i) acquire equity securities of the
Company (or rights or options to acquire equity securities of
the Company, other than equity securities issued or issuable
with respect to such Common Stock, securities issued to them
pursuant to Board-approved option plans and the acquisition of
up to 250,000 shares of Common Stock by each of Heartland or
ACC), (ii) solicit proxies or consents in opposition to
solicitations made by or on behalf of the Board or (iii) other
than in connection with the New Stockholders Agreement, act
together with any other person to acquire, hold, vote or
dispose of securities of the Company.
Registration Agreement
In connection with the Heartland Transaction, the
Company, Heartland, the contributing Heartland subsidiaries and
all of the former stockholders of Old Wireless One entered into
a registration agreement (the "Initial Registration
Agreement"). The Initial Registration Agreement was amended
and restated in connection with the execution of the TruVision
Merger Agreement, with the former TruVision Stockholders
becoming parties thereto. Under such amended and restated
registration agreement (the "New Registration Agreement"), at
any time after October 24, 1997, any of (a) the holders of a
majority of the Common Stock issued to the former stockholders
of Old Wireless One (other than CMCC and Baseball Partners) in
the Heartland Transaction, (b) the holders of a majority of the
Common Stock issued to Heartland or certain of Heartland's
subsidiaries in the Heartland Transaction, (c) the holders of a
majority of the Common Stock issued to the Former TruVision
Stockholders (other than CVCA) in the TruVision Transaction, or
(d) the holders of a majority of the Common Stock issued to
CMCC and Baseball Partners in the Heartland Transaction or
issued to CVCA in the TruVision Transaction, shall each have
the right, subject to certain conditions, to require the
Company to register any or all of such Common Stock under the
Securities Act of 1933, as amended (the "Securities Act") on
Form S-1 on three occasions at the Company's expense and on
Form S-2 or S-3 on an additional three occasions at the
Company's expense. The holders of any such shares of Common
Stock are also entitled to request the inclusion of any Common
Stock subject to the Registration Agreement in any registration
statement at the Company's expense whenever the Company
proposes to register any of its equity securities under the
Securities Act, subject to certain conditions. After October
24, 1996, the holders of a majority of the shares of Common
Stock granted to VCI in satisfaction of the Phase II Payment
shall be entitled to request registration of such shares under
the Securities Act.
Summary Compensation Table
The table below provides information relating to
compensation for the Company's last two fiscal years for the
Company's Chief Executive Officer. No other executive officers
of the Company received compensation in excess of $100,000 in
either of those years. The amounts shown include compensation
for services in all capacities that were provided to the
Company or Old Wireless One and their respective subsidiaries.
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
---------------------------
Annual Compensation Restricted Securities
Name and --------------------------- Stock Underlying All Other
Principal Position Year Salary Bonus Awards Options Compensation
- ------------------ ------ -------- ------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Sean E. Reilly 1995 $87,692 --- --- 201,395<F1> ---
Chief Executive Officer 1994 $35,000<F2> --- --- 113,144<F3> ---
</TABLE>
____________________
<F1> Such options were originally issued in April 1995 and were to purchase
shares of common stock of Old Wireless One. Such options were assumed
by the Company under its 1995 Long-Term Performance Incentive Plan (the
"Incentive Plan") in October 1995 in connection with the Heartland
Transaction.
<F2> Mr. Reilly began receiving compensation from Old Wireless One on June 1,
1994.
<F3> Such options were originally issued in September 1994 and were to
purchase shares of common stock of Old Wireless One. Such options were
assumed by the Company under its Incentive Plan in October 1995 in
connection with the Heartland Transaction.
____________________
Stock Option Grants
The following table provides information relating to the stock options
awarded to the Chief Executive Officer during the Company's last fiscal year.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Number of
Securities Percent of
Underlying Total Options
Options Granted in Exercise Expiration
Name Granted <F2> Fiscal Year Price Date <F3> 5% 10%
---- ------------ ----------- ----- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Sean E. Reilly. . . 201,395 <F4> 36.3% <F5> 4/14/01 $57,196 $199,784
</TABLE>
____________________
<F1> Amounts reflect certain assumed rates of appreciation set forth in
the Commission's executive compensation disclosure rules. Actual
gains, if any, on stock option exercises depend on future
performance of the Company's Common Stock and overall market
conditions. The fair market value of the common stock on the date
of grant was estimated to be $4.16 per share. See Note (4) below.
At an annual rate of appreciation of 5% per year for the option
term, the stock price would be $5.57 per share. At an annual rate
of appreciation of 10% per year for the option term, the stock
price would be $7.37 per share.
<F2> All options vest in five equal installments, with accelerated
vesting in the event of a change in control of the Company.
<F3> All options listed in the table also expire one year following the
termination of employment with the Company of such holder for any
reason.
<F4> Such options were originally issued in April 1995 and were to
purchase shares of common stock of Old Wireless One. Such options
were assumed by the Company under its Incentive Plan in October
1995 in connection with the Heartland Transaction.
<F5> The exercise price of such options varies depending upon the date
such options become exercisable. The exercise price with respect
to the first 20% installment of options is $4.16 per share, which
is increased 35% per year for each of the remaining four
installments.
Stock Option Holdings
The following table sets forth information with respect to the
Chief Executive Officer concerning the stock options held as of December
31, 1995. There were no stock options exercised during the last fiscal
year of the Company.
Aggregated Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options
Fiscal Year-End at Fiscal Year-End
------------------------- ------------------------------
Name Exercisable/Unexercisable Exercisable/Unexercisable <F2>
---- ------------------------- ------------------------------
<S> <C> <C>
Sean E. Reilly <F1> . . . . . 62,908/251,631 $729,893/$2,088,212
</TABLE>
____________________
<F1> Of these shares underlying the options held by Mr. Reilly, options
for 113,144 shares are exercisable at a price of $6.21 per share
and options for 201,395 shares are exercisable at various prices
depending upon the date such options became exercisable. The
first 20% installment of options are exercisable at an exercise
price of $4.16 per share, which is increased 35% per year for each
of the remaining four installments.
<F2> The closing sale price of the Common Stock on December 29, 1995
was $16.50 as reported by the Nasdaq Stock Market National Market.
The value of such options at the fiscal year end is calculated on
the basis of the difference between the option exercise price and
$16.50 multiplied by the number of shares of Common Stock
underlying the option.
Employment Agreements
In connection with the consummation of the Heartland Transaction,
the Company entered into employment agreements with Messrs. Sternberg,
Reilly and Norris. In connection with the consummation of the TruVision
Transaction, the Company entered into employment agreements with Messrs.
Burkhalter and Byer and made certain amendments to its employment
agreements with Messrs. Sternberg, Reilly and Norris. The employment
agreements provide for payment of a base salary indexed to inflation and
bonuses awarded at the sole discretion of the Company's Compensation
Committee and based upon the executive's performance and the Company's
operating results. The term of each agreement ends on April 14, 1998,
subject to automatic annual renewal through April 14, 2005. Each
employment agreement provides that each executive may be terminated with
or without cause, and will provide that the executive will not compete
with the Company or its subsidiaries within a specified area during the
period of employment and for the two years thereafter. Each executive
will be entitled to receive a severance payment in the event of a
resignation caused by the relocation of the Company's office at which
the executive is employed to a location more than 60 miles from its
present location.
Compensation Committee Interlocks and Insider Participation
The members of the Company's Compensation Committee are Messrs.
Holland, Luby, and Mr. Shimer. No officers or employees of the Company
serve on the Compensation Committee. The Compensation Committee was
established in October 1995 in connection with the Company's initial
public offering. Previous compensation levels for Messrs. Sternberg,
Reilly and Norris, were established pursuant to the terms of their
respective employment agreements. See "Employment Agreements." The
compensation for Messrs. J. Robert Gary and Alton C. Rye, the other
executive officers of the Company, was approved by the full Board of
Directors upon the recommendation of the Compensation Committee.
Executive officers who are also Directors of the Company did not
participate in discussions relating to their individual compensation
arrangements. No Director who served as a member of the Compensation
Committee was a party to any reportable interlock during 1995.
Stock Option Plans
1995 Long-Term Performance Incentive Plan. The Board of Directors
has adopted and the stockholders of the Company have approved the 1995
Long-Term Performance Incentive Plan (the "Incentive Plan"), which
provides for the grant to key employees of the Company of (i) both
"incentive stock options," as defined by Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and stock options that
are non-qualified for federal income tax purposes, (ii) stock
appreciation rights, (iii) restricted stock, (iv) performance grants and
(v) any other type of award deemed by the Compensation Committee to be
consistent with the purpose of the Incentive Plan. The total number of
shares of Common Stock which may be granted pursuant to the Incentive
Plan is 1,300,000, subject to certain adjustments reflecting changes in
the Company's capitalization. The Incentive Plan will terminate upon
the earlier of the adoption of a Board of Director's resolution
terminating the Incentive Plan or the tenth anniversary of the date of
adoption, unless extended for an additional five-year period for grants
of awards other than incentive stock options, and is administered by the
Compensation Committee of the Board of Directors. The Compensation
Committee has broad powers under the Incentive Plan, including exclusive
authority (except as otherwise provided in the Incentive Plan) to
establish performance objectives and to determine (i) which of the
Company's employees will receive awards, (ii) the type, size and terms
of awards, and (iii) the time when awards will be granted. Members of
the Compensation Committee will not be eligible to receive awards under
the Incentive Plan. Directors who are also employees are eligible to
receive awards under the Incentive Plan. Non-employee directors are not
eligible to receive options under the Incentive Plan, but may be
eligible to receive awards under the Directors' Plan.
The exercise price of incentive stock options is determined by the
Compensation Committee, but may not be less than 100% of the fair market
value of the Common Stock on the date of grant, and the term of any such
option may not exceed 10 years from the date of grant. With respect to
any employee who owns stock representing more than 10% of the voting
power of the outstanding capital stock of the Company, the exercise
price of any incentive stock option may not be less than 110% of the
fair market value of such shares on the date of grant, and the term of
such option may not exceed five years from the date of grant. The
exercise price of non-qualified stock options is determined by the
Compensation Committee on the date the option is granted.
Options and stock appreciation rights granted under the Incentive
Plan are nontransferable, unless otherwise specified in the award
instrument, and, with certain exceptions in the event of the death or
disability of the participant, may be exercised by the participant only
during employment, subject to vesting requirements established by the
Compensation Committee. Restrictions on awards granted under the
Incentive Plan will also generally vest upon a proposed sale of
substantially all of the assets of the Company, or the merger of the
Company with or into another corporation.
The Company has assumed all non-qualified options issued by Old
Wireless One. Such options are now covered by the Incentive Plan and
cover 691,988 shares with a weighted average exercise price per share of
$7.54. Such options vest over a five-year period which period commenced
on February 1, 1995. The options expire on April 14, 2001. In October
1995 the Company issued non-qualified stock options for 50,000 shares of
Common Stock, with an exercise price equal to the initial public
offering price, to two employees of the Company. Such options are
scheduled to vest in equal installments over a five-year period from the
date of grant. In addition, upon the consummation of the TruVision
Transaction, the Company assumed the non-qualified options issued by
TruVision. Such options are now covered by the Incentive Plan and cover
195,226 shares at a weighted average exercise price of $6.82. All such
options are fully-vested and expire on June 8, 2004.
1996 Non-Employee Directors' Stock Option Plan. The Board of
Directors has adopted and the stockholders of the Company have approved
the 1996 Non-Employee Directors' Stock Option Plan (the "Directors'
Plan"). The Directors' Plan is administered by the Board of Directors.
Those directors of the Company who are not employees of the Company (a
"Director Participant") are eligible to receive options under the
Directors' Plan. The total number of shares of Common Stock for which
options may be granted under the Directors' Plan is 100,000 subject to
certain adjustments reflecting changes in the Company's capitalization.
Options granted under the Directors' Plan will be non-qualified
options for federal income tax purposes. The exercise price of options
will be determined as specified in the Plan and will be at least 100% of
the fair market value of the Common Stock on the date of grant.
Options granted under the Directors' Plan may be subject to
vesting and certain other restrictions at the Board of Directors' sole
discretion. Subject to certain exceptions, the right to exercise an
option generally terminates at the earlier of (i) the first date on
which the initial grantee of such option is no longer a director of
either the Company or any subsidiary of the Company for any reason other
than death, permanent disability, or termination with "cause" (as
defined in the Directors' Plan) or (ii) the expiration date of the
option. Options granted under the Directors' Plan will also generally
vest upon a "change in control" of the Company (as defined in the
Directors' Plan). No options have been granted under the Directors'
Plan to date.
General. The Board of Directors generally has the power and
authority to amend the Incentive Plan and the Directors' Plan
(collectively, the "Stock Option Plans") at any time without approval of
the Company's stockholders; provided, that the Board of Directors may
not amend the Stock Option Plans in such a manner as to materially
increase the benefits or number of shares under the Stock Option Plans
or to modify the eligibility requirements without the affirmative
approval of the Company's stockholders. In addition, the Board of
Directors may not amend the Stock Option Plans to materially and
adversely affect the rights of an option holder under such option
without the consent of such option holder.
Except as otherwise provided in an option agreement, if a director
holding an option under the Directors' Plan dies or suffers a permanent
disability while still employed by or a director of the Company or any
subsidiary, then the right to exercise all unexpired installments of
such option shall be accelerated and shall accrue as of the date of such
death or the later of the date of such permanent disability or discovery
of such permanent disability, and such option shall be exercisable,
subject to certain exceptions, for 90 days after such date. In
addition, except as otherwise provided in an option agreement, if a
Director Participant in the Directors' Plan who holds an option granted
under such Plan is terminated without "cause" (as defined in the
Directors' Plan), then he will have the right to exercise any option
which is currently exercisable at the time of such termination for 30
days after the date of such termination.
Also, except as otherwise provided in an option agreement, if an
employee holding an award granted under the Incentive Plan dies or
suffers a permanent disability while still employed by the Company or
any subsidiary, then such award may be exercised, to the extent the
employee was entitled to do so at the termination of employment, by the
employee, his legal guardian (unless such exercise would disqualify an
option as an incentive stock option), or his legatee, legal
representative or distributee (whichever is applicable), at any time
within one year after the date of death or disability (but in no event
later than the date on which such award terminates).
CERTAIN TRANSACTIONS
In connection with the Heartland Transaction, Heartland and the
Company entered into an agreement whereby (i) the Company agreed not to
compete with Heartland or any of Heartland's subsidiaries in the
wireless cable television business in specified markets in which
Heartland and its subsidiaries operate or have significant channel
rights, (ii) Heartland agreed not to compete with the Company in the
wireless cable television business in specified markets, including
substantially all of the Markets described herein and (iii) if at any
time a wireless cable television system operated by the Company
interferes with the signal transmission of a wireless cable television
system operated by Heartland or one of Heartland's subsidiaries (or vice
versa), then the Company, Heartland and their respective subsidiaries
will use their best efforts to negotiate and enter into an appropriate
non-interference agreement.
In connection with the Heartland Transaction, the Company entered
into the Initial Registration Agreement with Heartland, the contributing
Heartland subsidiaries and all of the former stockholders of Old
Wireless One, which was amended and restated in connection with the
TruVision Transaction, with the Former TruVision Stockholders becoming
parties thereto. See "Management-Registration Agreement."
In connection with the Heartland Transaction, the Company,
Heartland and certain of the Old Wireless One stockholders entered into
the Stockholders Agreement, which was amended and restated in connection
with the TruVision Transaction, with the Former TruVision Stockholders
becoming parties thereto. See "Management-Stockholders Agreement."
In February 1996, CVCA provided TruVision the Interim Facility in
the principal amount of up to $12.0 million.
In connection with the execution of the TruVision Merger
Agreement, the Company agreed to make certain loans to TruVision pending
the consummation of the TruVision Transaction. On May 6, 1996, the
Company made such a loan to TruVision in the amount of approximately
$1.5 million, of which TruVision used $1.0 million of the proceeds of
such loan to repay borrowings under a working capital facility which was
guaranteed by Mr. Burkhalter, and that guarantee was terminated and
released. On the date of, but prior to, the consummation of the
TruVision Transaction, the Company made such a loan to TruVision in the
amount of approximately $1.5 million, and TruVision used the proceeds of
that borrowing to pay accrued dividends on its preferred stock to CVCA
and VanCom in the amounts of approximately $1.4 million and $18,000,
respectively. See Note 11 of the Notes to the Financial Statements of
TruVision included elsewhere in this Prospectus.
Upon consummation of the TruVision Transaction, the Company issued
to VCI 180,000 shares of Common Stock and paid to VCI $1.8 million in
cash, in satisfaction of TruVision's obligation to make the Phase II
Payment.
The terms of the transactions described above were determined by
the parties thereto, and the Company believes that such transactions
involving affiliates were on terms no less favorable to the Company than
could have been obtained from unaffiliated third parties in arms-lengths
transactions. The Company expects that all future transactions between
the Company and its officers, Directors, principal stockholders and
affiliates will be on terms no less favorable to the Company than could
be obtained from unaffiliated third parties.
Chase Securities, Inc. ("CSI"), an affiliate of CMCC, CVCA and
Baseball Partners, who own, on a fully diluted basis, approximately
10.5%, 7.9% and 2.0%, respectively, of the outstanding Common Stock,
served as one of the lead underwriters for the 1996 Debt Offering. In
addition, Mr. Arnold L. Chavkin, a Director of the Company, is a general
partner of CCP, which is also affiliated with CSI. Under Conduct Rule
2720 ("Rule 2720") of the National Association of Securities Dealers,
Inc. (the "NASD"), when a NASD member, such as CSI, participates in the
distribution of a public offering of the securities of an affiliate of
such member, such offering must be conducted in accordance with the
applicable provisions of Rule 2720. Accordingly, by virtue of CSI's
participation in the 1996 Debt Offering and Chase's ownership interest
in the Company, the 1996 Debt Offering was conducted in accordance with
the applicable provisions of Rule 2720. Prudential Securities
Incorporated acted as a qualified independent underwriter for the 1996
Debt Offering, as required by Rule 2720. The Company believes that CSI
participated in the 1996 Debt Offering on terms and received fees and
commissions from the Offering on a basis that was no less fair to the
Company than was available from other non-affiliated underwriters.
PRINCIPAL STOCKHOLDERS
Except as otherwise noted, the following table sets forth certain
information as of May 30, 1996 as to the security ownership of those
persons owning of record or known to the Company to be the beneficial
owner of more than five percent of the voting securities of the Company
and the security ownership of equity securities of the Company by (i)
each of the Directors of the Company, (ii) each of the executive
officers named in the Summary Compensation Table, and (iii) all
Directors and executive officers as a group. All information with
respect to beneficial ownership has been furnished by the respective
Director, executive officer or five percent beneficial owner, as the
case may be. Unless otherwise indicated, the persons named below have
sole voting and investment power with respect to the number of shares
set forth opposite their names. Beneficial ownership of the Common
Stock has been determined for this purpose in accordance with the
applicable rules and regulations promulgated under the Exchange Act.
Common Stock <F1>
---------------------
Directors, Officers Number of Percent
and 5% Stockholders Shares of Class
------------------- ------ --------
Heartland Wireless Communications, Inc. <F2><F3>... 3,361,538 20.1%
903 North Bowser, Suite 140
Richardson, Texas 75081
Chase Manhattan Capital Corporation <F2><F4>....... 3,902,895 23,3%
380 Madison Avenue, 12th Floor
New York, New York 10017
Chase Venture Capital Associates L.P. <F2><F5>..... 3,902,895 23.3%
380 Madison Avenue, 12th Floor
New York, New York 10017
Baseball Partners <F2>............................. 393,226 2.3%
380 Madison Avenue, 12th Floor
New York, New York 10017
Premier Venture Capital Corporation <F2><F6>....... 754,268 4.5%
451 Florida Street
Baton Rouge, Louisiana 70821
Advantage Capital Corporation<F2><F7>.............. 630,489 3.8%
LL&E Tower
909 Poydras Street, Suite 2230
New Orleans, Louisiana 70112
Mississippi Wireless TV, L.P. <F2><F8>............. 1,702,406 10.2%
VanCom, Inc. <F2><F9>.............................. 42,560 *
Henry M. Burkhalter <F2><F8>....................... 1,960,421 11.7%
Hans J. Sternberg <F2><F10>........................ 374,193 2.2%
Sean E. Reilly <F2><F11>........................... 101,755 *
Arnold L. Chavkin <F5> ............................ 3,902,895 23.3%
J. R. Holland, Jr. <F12>........................... 3,361,538 20.1%
William K. Luby <F13> ............................. 393,226 2.3%
Daniel L. Shimer .................................. 4,800 *
William J. Van Devender <F9> ...................... 42,560 *
David E. Webb <F14>................................ 3,361,538 20.1%
All Directors and executive
officers as a group (13 persons)................. 10,496,874 62.0%
____________________
* Less than one percent.
<F1> Percentages reflect outstanding Common Stock except for an
aggregate of 200,000 of such shares currently being held in
escrow, pursuant to the Heartland Transaction. Such shares will be
distributed to either the Old Wireless One stockholders or the
Heartland subsidiaries. The distribution of shares held in escrow
will depend upon certain working capital post-closing adjustments.
<F2> Heartland and certain of its subsidiaries, CMCC, CVCA, Baseball
Partners, MWTV, VanCom, PVCC, Advantage Capital Partners Limited
Partnership and Advantage Capital Partners II Limited Partnership,
Mr. Sternberg, Mr. Reilly and Mr. Burkhalter, each of whose
ownership of Common Stock is disclosed in the table, are parties
to the New Stockholders Agreement. See "Management-Stockholders
Agreement." Each of the parties to the Stockholders Agreement
disclaims beneficial ownership of the shares of Common Stock owned
by the other paries to such agreement.
<F3> Heartland reported on a Schedule 13G filed with the SEC, as of
December 31, 1995, shared voting and dispositive power with
respect to an aggregate of 3,361,538 shares of Common Stock owned
by certain direct and indirect subsidiaries of Heartland. The
address for Heartland is 903 North Bowser, Suite 140, Richardson,
Texas 75081.
<F4> CMCC reported on a Schedule 13G filed with the SEC, as of December
31, 1995, shared voting and dispositive power with respect to
1,991,690 shares of Common Stock, together with the Chase
Manhattan Bank, N.A., the direct parent of CMCC, and Chase, the
ultimate parent of CMCC. The address for CMCC, CVCA and Baseball
Partners is 380 Madison Avenue, 12th Floor, New York, New York
10017.
<F5> Reflects 3,902,895 shares owned by CVCA, CMCC and Baseball
Partners. Mr. Chavkin is a general partner of CCP, the general
partner of CVCA. CCP has investment and voting discretion with
respect to the shares held by CMCC. Baseball Partners has agreed
to grant a proxy with respect to the Shares held by it to CCP.
Mr. Chavkin disclaims beneficial ownership of the Shares held by
CVCA, CMCC and Baseball Partners. The address for Mr. Chavkin is
380 Madison Avenue, 12th Floor, New York, NY 10017.
<F6> As reported on a Schedule 13G filed with the SEC with respect to
the shares of Common Stock held by PVCC as of December 31, 1995.
PVCC is an indirect wholly owned subsidiary of Banc One
Corporation, which is a publicly-traded corporation. The address
for PVCC is 451 Florida Street, Baton Rouge, Louisiana 70821.
<F7> ACC, as the sole general partner of Advantage Capital Partners
Limited Partnership and Advantage Capital Limited Partners II
Limited Partnership, reported on a Schedule 13G filed with the
SEC, as of December 31, 1995, sole voting and dispositive power
with respect to the shares held by such partnerships. Mr. Steven
T. Stull is the majority stockholder of ACC. The address for ACC
is LL&E Tower, 909 Poydras Street, Suite 2230, New Orleans,
Louisiana 70112.
<F8> MWTV owns 1,702,406 shares of Common Stock. The general partner
of MWTV is WTV. Mr. Burkhalter is the President and controlling
stockholder of WTV. WTV has the power to vote and dispose of the
shares of Common Stock held by MWTV. Therefore, Mr. Burkhalter
may be deemed to beneficially own all shares of Common Stock held
by MWTV. Mr. Burkhalter disclaims beneficial ownership of any
such shares of Common Stock. In addition, Mr. Burkhalter owns
currently exercisable options to acquire 78,015 shares of Common
Stock. See "Management." The address for MWTV and Mr. Burkhalter
is c/o TruVision, 1080 River Oaks Drive, Suite A150, Jackson, MS
39208.
<F9> VanCom is the limited partner of MWTV and has a right to 22.9167%
of allocations and distributions of the Partnership. Mr. Van
Devender is the President and controlling stockholder of VanCom.
Mr. Van Devender's address is c/o VanCom, Inc., P.O. Box 5327,
Jackson, Mississippi 39296.
<F10> Includes 12,520 shares owned by Mr. Sternberg's wife and 85,537
shares issuable upon the exercise of presently exercisable
options.
<F11> Includes 85,537 shares issuable upon the exercise of presently
exercisable options.
<F12> Includes 3,361,538 shares beneficially owned by Heartland. Mr.
Holland is the Manager and President of Hunt Capital Group,
L.L.C., a principal stockholder of Heartland. Mr. Holland is the
Chairman of the Board of Heartland. Mr. Holland disclaims
beneficial ownership of shares owned by Heartland. The address
for Mr. Holland is 4000 Thanksgiving Tower, Dallas, TX 75201.
<F13> Reflects shares of Common Stock beneficially owned by Baseball
Partners. Mr. Luby is a general partner of Baseball Partners and
therefore may be deemed to be a beneficial owner of such shares.
Mr. Luby disclaims beneficial ownership of all of the shares of
Common Stock owned by Baseball Partners in which Mr. Luby has no
pecuniary interest. Certain affiliates of CMCC are general
partners of Baseball Partners.
<F14> Includes 3,361,538 shares beneficially owned by Heartland. Mr.
Webb is President and Chief Executive Officer and a director and
principal stockholder of Heartland. Mr. Webb disclaims beneficial
ownership of the shares of Common Stock owned by Heartland and in
which Mr. Webb has no pecuniary interest. The address for Mr.
Webb is 224 West Evergreen #270, Durant, Oklahoma 74701.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of (i)
50,000,000 shares of Common Stock and (ii) 10,000,000 shares of
Preferred Stock, $0.01 par value (the "Preferred Stock").
The statements under this caption are brief summaries, do not
purport to be complete and are subject to, and are qualified in their
entirety by reference to, the more complete descriptions contained in
the Certificate of Incorporation and By-laws which are filed as exhibits
to the Registration Statement of which this Prospectus is a part.
Common Stock
Holders of Common Stock are entitled to one vote per share on all
matters on which the holders of Common Stock are entitled to vote and do
not have any cumulative voting rights. Subject to the prior rights of
the holders of any Preferred Stock, holders of Common Stock are entitled
to receive such dividends as may from time to time be declared by the
Board of Directors of the Company out of funds legally available
therefor. Holders of Common Stock have no preemptive, conversion,
redemption or sinking fund rights. In the event of a liquidation,
dissolution or winding-up of the Company, holders of Common Stock are
entitled to share ratably in the assets of the Company which are legally
available for distribution, if any, remaining after the payment of all
debts and liabilities of the Company and the liquidation preference of
any outstanding series of Preferred Stock. The rights, preferences and
privileges of holders of Common Stock are subject to any class or series
of Preferred Stock which the Company may issue in the future.
The Common Stock is quoted and traded on the Nasdaq Stock Market
National Market under the symbol "WIRL." The transfer agent and
registrar for the Common Stock is First Chicago Trust Company of New
York.
Preferred Stock
The Board of Directors is authorized to issue Preferred Stock in
classes or series and to fix the designations, preferences,
qualifications, limitations, or restrictions of any class or series with
respect to the rate and nature of dividends, the price and terms and
conditions on which shares may be redeemed, the amount payable in the
event of voluntary or involuntary liquidation, the terms and conditions
for conversion or exchange into any other class or series of stock,
voting rights and other terms.
Certain Effects of Authorized but Unissued Stock
Under the Certificate of Incorporation, there are approximately
31.3 million shares of Common Stock and 10 million shares of Preferred
Stock available for future issuance without stockholder approval. These
additional shares may be utilized for a variety of corporate purposes,
including future public offerings to raise additional capital or to
facilitate corporation acquisitions.
One of the effects of the existence of unissued and unreserved
Common Stock and Preferred Stock may be to enable the Board of Directors
to issue shares to persons friendly to current management which could
render more difficult or discourage an attempt to obtain control of the
Company by means of a merger, tender offer, proxy contest or otherwise,
and thereby protect the continuity of the Company's management. Such
additional shares also could be used to dilute the stock ownership of
persons seeking to obtain control of the Company.
The Board of Directors is authorized without any further action by
the stockholders to determine the rights, preferences, privileges and
restrictions of the unissued Preferred Stock. The purpose of
authorizing the Board of Directors to determine such rights and
preferences is to eliminate delays associated with a stockholder vote on
specific issuances. The Board of Directors may issue Preferred Stock
with voting and conversion rights which could adversely affect the
voting power of the holders of Common Stock, and which could, among
other things, have the effect of delaying, deterring or preventing a
change in control of the Company.
The Company does not currently have any plans to issue additional
shares of Common Stock or Preferred Stock other than shares of Common
Stock which may be issued upon the exercise of the 1995 Warrants, the
GKM Warrants, the 1996 Warrants or options which have been granted or
which may be granted in the future to the Company's employees or
Directors.
Certain Provisions of the Certificate of Incorporation and By-laws
The Certificate of Incorporation provides that the Company shall
indemnify each officer and director of the Company to the fullest extent
permitted by applicable law, except as may be otherwise provided in the
By-laws. In furtherance thereof, the Board of Directors is expressly
authorized to amend the By-laws to give full effect to any changes in
applicable law, notwithstanding possible self-interest of the directors
in the action being taken. The Certificate of Incorporation also
provides that, to the fullest extent permitted by the DGCL, a director
of the Company shall not be liable to the Company or its stockholders
for monetary damages for breach of fiduciary duty as a director to the
Company or its stockholders. Such limitation does not affect the
liability of a director (i) for any transaction from which the director
derives an improper personal benefit, (ii) for acts or omissions not in
good faith or that involve intentional misconduct or a knowing violation
of law, (iii) for improper payment of dividends or redemption of shares
or (iv) for any breach of a director's duty of loyalty to the Company or
its stockholders.
As described below, the Certificate of Incorporation and By-laws
contain certain provisions that are intended to enhance the likelihood
of continuity and stability in the composition of the Company's Board of
Directors and which may have the effect of delaying, deterring or
preventing a future takeover or change in control of the Company unless
such takeover or change in control is approved by the Company's Board of
Directors. Such provisions may also render the removal of the directors
and management more difficult.
Pursuant to the Certificate of Incorporation, the Board of
Directors of the Company is divided into three classes serving staggered
three-year terms. Directors can be removed from office only for cause
and only by the affirmative vote of the holders of a majority of the
voting power of the then outstanding shares of capital stock of the
Company entitled to vote generally in the election of directors, voting
together as a single class. Vacancies on the Board of Directors may
only be filled by the affirmative vote of the majority of the remaining
directors or by a sole remaining director and not by the stockholders,
except that in the case of newly created directorships, if the remaining
directors fail to fill any such vacancy, the stockholders may do so at
the next annual or special meeting called for the purpose of election of
directors.
The By-laws establish an advance notice procedure with regard to
the nomination, other than by or at the direction of the Board of
Directors, of candidates for election as directors and with regard to
certain matters to be brought before an annual meeting of stockholders
of the Company. In general, notice must be received by the Company not
less than 130 days prior to the meeting and must contain certain
specified information concerning the person to be nominated or the
matter to be brought before the meeting and concerning the stockholder
submitting the proposal.
Special meetings of stockholders may be called only by the
Chairman of the Board, the President of the Company or the Board of
Directors. The Certificate of Incorporation provides that stockholders
may act only at an annual or special meeting and stockholders may not
act by written consent. The Certificate of Incorporation provides that
the affirmative vote of the holders of at least 80% of the total votes
eligible to be cast in the election of directors is required to amend,
alter, change or repeal certain provisions of the Certificate of
Incorporation. This requirement of a super-majority vote to approve
amendments to the Certificate of Incorporation could enable a minority
of the Company's stockholders to exercise veto powers over such
amendments.
Registration Rights
In connection with the offering and sale of the 1995 and 1996
Warrants, the Company has agreed that for a period of four years from
the first anniversary dates of the respective issuances of the 1995
Warrants and the 1996 Warrants, it will maintain the effectiveness of a
registration statement or statements with respect to the shares of
Common Stock issuable from time to time upon exercise of the Warrants.
This registration statement, of which this Prospectus forms a part, has
registered such shares in satisfaction of this agreement. In addition,
the Company has also granted "piggy-back" registration rights to the
holders of the GKM Warrants, covering any Common Stock received by such
holders upon exercise of the GKM Warrants. GKM has waived its
registration rights with respect to this Registration Statement.
In connection with the Heartland Transaction, the Company,
Heartland, the contributing Heartland subsidiaries and the former
stockholder of Old Wireless One entered into the Initial Registration
Agreement. The Initial Registration Agreement was amended and restated
in connection with the execution of the TruVision Merger Agreement, with
the Former TruVision Stockholders becoming parties thereto. Under the
New Registration Agreement, at any time after October 24, 1997, any of
(a) the holders of a majority of the Common Stock issued to the former
stockholders of Old Wireless One (other than CMCC and Baseball Partners)
in the Heartland Transaction, (b) the holders of a majority of the
Common Stock issued to Heartland and/or certain of Heartland's
subsidiaries in the Heartland Transaction, (c) the holders of a majority
of the Common Stock issued to the Former TruVision Stockholders (other
than CVCA) in the TruVision Transaction, and/or (d) the holders of a
majority of the Common Stock issued to CMCC and Baseball Partners in the
Heartland Transaction or issued to CVCA in the TruVision Transaction,
shall each have the right, subject to certain conditions, to require the
Company to register any or all of such Common Stock under the Securities
Act on Form S-1 on three occasions at the Company's expense and on Form
S-2 or S-3 on an additional three occasions at the Company's expense.
The holders of any such shares of Common Stock are also entitled to
request the inclusion of any Common Stock subject to the Registration
Agreement in any registration statement at the Company's expense
whenever the Company proposes to register any of its securities under
the Securities Act, subject to certain conditions. After October 24,
1996, the holders of a majority of the shares of Common Stock granted to
VCI in satisfaction of the Phase II Payment shall be entitled to request
registration of such shares under the Securities Act.
Delaware Anti-Takeover Law
The Company is subject to the "business combination" statute of
the DGCL. In general, such statute prohibits a publicly held Delaware
corporation from engaging in various "business combination" transactions
with any "interested stockholder" for a period of three years after the
date of the transaction in which the person became an "interested
stockholder," unless (i) the transaction is approved by the board of
directors of the corporation prior to the date the interested
stockholder obtained such status, (ii) upon consummation of the
transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the
outstanding voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number
of shares outstanding those shares owned by (a) persons who are
directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer, or (iii) on or subsequent to such date, the business
combination is approved by the Board of Directors and authorized at an
annual or special meeting of stockholders, and not by written consent,
by the affirmative vote of at least 66 2/3 % of the outstanding voting
stock which is not owned by the interested stockholder. A "business
combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to a stockholder. An "interested
stockholder" is a person who, together with affiliates and associates,
owns (or, within three years, did own) 15% or more of the corporation's
voting stock. The statute could prohibit or delay the accomplishment of
a merger or other takeover or change in control attempts with respect to
the Company and, accordingly, may discourage attempts to acquire the
Company. Because CMCC, CVCA, Baseball Partners and Heartland acquired
their shares in a transaction approved by the Board for purposes of the
"business combination" statute, CMCC, CVCA, Baseball Partners and
Heartland are not subject to the restrictions of such statute.
SHARES ELIGIBLE FOR FUTURE SALE
The Company has a total of 19,265,169 shares of Common Stock
outstanding (assuming the exercise of the 1995 Warrants, the GKM
Warrants, the 1996 Warrants, and certain director, management and
employee options). Of these shares, 4,442,811 (including shares
issuable upon exercise of the 1995 and 1996 Warrants) shares are freely
transferable by persons other than affiliates of the Company without
restriction or registration under the Securities Act. All of the
remaining shares (except those issuable upon the exercise of director,
management and employee options) are "restricted securities" as that
term is defined by Rule 144 promulgated under the Securities Act and may
not be sold other than pursuant to an effective registration statement
under the Securities Act or pursuant to an exemption from such
registration requirement. None of such shares of Common Stock will be
eligible for sale under Rule 144 for two years following the date of
issuance. All such shares are subject to demand and piggyback
registration rights. See "Description of Capital Stock-Registration
Rights." Sales of restricted securities under Rule 144 following such
two-year period will be subject to the conditions of Rule 144.
In general, under Rule 144 as currently in effect, a person (or
persons whose shares are aggregated), including any person who may be
deemed to be an "affiliate" of the Company, is entitled to sell within
any three month period "restricted" shares beneficially owned by him or
her in an amount that does not exceed the greater of (i) 1% of the then
outstanding shares of Common Stock or (ii) the average weekly trading
volume in shares of Common Stock during the four calendar weeks
preceding such sale, provided that at least two years have elapsed since
such shares were acquired from the Company or an affiliate of the
Company. Sales are also subject to certain requirements as to the
manner of sale, notice and the availability of current public
information regarding the Company. However, a person who has not been
an affiliate of the Company at any time within three months prior to the
sale is entitled to sell his or her shares without regard to the volume
limitations or other requirements of Rule 144, provided that at least
three years have elapsed since such shares were acquired from the
Company or an affiliate of the Company.
PLAN OF DISTRIBUTION
The Common Stock offered hereby is being offered by the Company
exclusively to the holders of the Company's 1996 and 1995 Warrants. The
Company does not have any agreement with any underwriter or other party
for the distribution of the Common Stock offered hereby. The Common
Stock is being offered by the Company through the Prospectus, and no
commissions or other remunerations will be paid to any person for
soliciting the exercise of the 1996 and 1995 Warrants and the sale of
the Common Stock.
Certain persons who acquire Common Stock upon exercise of the 1996
and 1995 Warrants may be deemed to be "issuers" under the Securities Act
of 1933, as amended (the "Securities Act") because of their relationship
with the Company ("Affiliates") and, therefore, may be required to
deliver a copy of this Prospectus, including a Prospectus Supplement, to
any person who purchases shares of Common Stock acquired by such
Affiliate through exercise of the 1996 and/or 1995 Warrants ("Restricted
Shares"). In addition, any broker or dealer participating in any
distribution of the Restricted Shares may be deemed to be an
"underwriter" within the meaning of the Securities Act and, therefore,
may be required to deliver a copy of this Prospectus, including a
Prospectus Supplement, to any person who purchases any Restricted Shares
from or through such broker or dealer.
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed
upon for the Company by Jones, Walker, Waechter, Poitevent, Carrere &
Denegre L.L.P., New Orleans, Louisiana.
EXPERTS
The consolidated financial statements and schedule of Wireless
One, Inc. and subsidiaries as of December 31, 1994 and 1995 and for the
period from February 4, 1993 (inception) through December 31, 1993 and
the years ended December 31, 1994 and 1995 and the financial statements
of Heartland Division as of December 31, 1993 and 1994 and for the years
ended December 31, 1992 and 1993, the period from January 1, 1994 to
August 18, 1994 and the period from August 19, 1994 to December 31, 1994
have been included herein and in the Registration Statement in reliance
upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, appearing herein and in the Registration Statement and upon
the authority of said firm as experts in accounting and auditing.
The report of KPMG Peat Marwick LLP covering the financial
statements of Heartland Division contains an explanatory paragraph that
refers to a business combination in 1994 accounted for as a purchase
involving assets comprising a portion of Heartland Division. As a
result of the acquisition, financial information of Heartland Division
for periods after August 18, 1994 is presented on a different cost basis
than that for periods before August 18, 1994 and, therefore, such
information is not comparable.
The audited financial statements of TruVision Wireless, Inc.,
Madison Communications, Inc. And Beasley Communications, Inc., and
BarTel, Inc. included in this Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto and are included herein in reliance upon
the authority of such firm in giving such reports.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act, and in accordance therewith, files, reports, proxy
statements and other information with the Commission. Such reports,
proxy statements and other information may be inspected by anyone
without charge at the Public Reference Section of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional offices of the Commission located at 7 World Trade
Center, Suite 1300, New York, New York 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. A Registration Statement
on Form S-1 under the Securities Act, including amendments thereto,
relating to the Common Stock offered hereby has been filed by the
Company with the Commission. This Prospectus does not contain all of
the information set forth in the Registration Statement and the exhibits
and schedules thereto. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to such
Registration Statement and exhibits and schedules filed as a part
thereof. Copies of all or any portion of the Registration Statement may
be obtained from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
Additionally, the Commission maintains a web site (http://www.sec.gov)
that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the
Commission, including the Company. The Company's Common Stock is quoted
on the Nasdaq National Market, and such reports, proxy statements and
other information regarding the Company can be inspected at the offices
of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.
INDEX TO FINANCIAL STATEMENTS
Page
----
Wireless One, Inc.
Independent Auditors' Report............................................. F-3
Consolidated Balance Sheets as of December 31, 1994 and 1995
and June 30, 1996 (unaudited).......................................... F-4
Consolidated Statements of Operations for the period from
February 4, 1993 (inception) to December 31, 1993, the years
ended December 31, 1994 and 1995 and the six months ended
June 30, 1995 and 1996 (unaudited)..................................... F-5
Consolidated Statements of Stockholders' Equity for the period
from February 4, 1993 (inception) to December 31, 1993, the
years ended December 31, 1994 and 1995 and the six months ended
June 30, 1996 (unaudited).............................................. F-6
Consolidated Statements of Cash Flows for the period from
February 4, 1993 (inception) to December 31, 1993, the years
ended December 31, 1994, and 1995 and the six months ended
June 30, 1995 and 1996 (unaudited)..................................... F-7
Notes to Consolidated Financial Statements............................... F-8
Heartland Division
Independent Auditors' Report............................................ F-19
Balance Sheets as of December 31, 1993 and 1994 and
September 30, 1995 (unaudited)......................................... F-20
Statements of Operations and Division Equity for the years
ended December 31, 1992 and 1993, the period from January 1,
1994 to August 18, 1994, the period August 19, 1994 to September
30, 1994 (unaudited), and the period from August 19, 1994 to
December 31, 1994 and the nine months ended September 30, 1995
(unaudited)............................................................. F-21
Statements of Cash Flows for the years ended December 31, 1992
and 1993, the period from January 1, 1994 to August 18, 1994,
the period August 19, 1994 to September 30, 1994 (unaudited),
and the period from August 19, 1994 to December 31, 1994 and the
nine months ended September 30, 1995 (unaudited)....................... F-22
Notes to Financial Statements............................................ F-23
TruVision Wireless, Inc.
Report of Independent Public Accountants................................. F-27
Balance Sheets as of December 31, 1994 and 1995 and unaudited
June 30, 1996.......................................................... F-28
Statements of Operations for the periods from Inception
(November 2, 1993) to December 31, 1993, January 1, 1994
through August 24, 1994 and August 25, 1994 through December
31, 1994 and for the year ended December 31, 1995 and unaudited
for the six months ended June 30, 1995 and 1996........................ F-29
Statements of Partners' Capital for the periods from Inception
(November 2, 1993) to December 31, 1993 and January 1, 1994
through August 24, 1994................................................ F-30
Statements of Changes in Stockholders' Equity for the period
from August 25, 1994 through December 31, 1994 and for the
year ended December 31, 1995 and unaudited for the six months
ended June 30, 1996.................................................... F-31
Statements of Cash Flows for the periods from Inception
(November 2, 1993) to December 31, 1993, January 1, 1994
through August 24, 1994, and August 25, 1994 through December
31, 1994 and for the year ended December 31, 1995 and unaudited
for the six months ended June 30, 1995 and 1996........................ F-32
Notes to Financial Statements............................................ F-33
Madison Communications, Inc. and Beasley Communications, Inc.
Report of Independent Public Accountants................................. F-43
Combined Balance Sheets as of December 31, 1994 and 1995 and
unaudited June 30, 1996................................................ F-44
Combined Statements of Operations and Accumulated Deficit for
the years ended December 31, 1993, 1994 and 1995 and unaudited
for the six months ended June 30, 1995 and 1996........................ F-45
Combined Statements of Cash Flows for the years ended
December 31, 1993, 1994 and 1995 and unaudited for the
six months ended June 30, 1995 and 1996................................ F-46
Notes to Combined Financial Statements................................... F-47
BarTel, Inc.
Report of Independent Public Accountants................................. F-51
Balance Sheet as of December 31, 1995.................................... F-52
Statement of Income and Retained Earnings for the year
ended December 31, 1995................................................ F-53
Statement of Cash Flows for the year ended December 31, 1995............. F-54
Notes to Financial Statements............................................ F-55
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Wireless One, Inc.:
We have audited the accompanying consolidated balance sheets of Wireless One,
Inc. and subsidiaries as of December 31, 1994 and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the period from February 4, 1993 (inception) through December 31, 1993 and the
years ended December 31, 1994 and 1995. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Wireless
One, Inc. and subsidiaries as of December 31, 1994 and 1995, and the results of
their operations and their cash flows for the period from February 4, 1993
(inception) through December 31, 1993 and the years ended December 31, 1994 and
1995, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New Orleans, Louisiana
March 22, 1996, except
as to Note 15 which is
as of August 12, 1996
WIRELESS ONE, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
-------------------------- June 30,
1994 1995 1996
------------ ------------- -----------
(unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents.............................. $24,481 $110,380,329 $73,877,954
Marketable investment securities-restricted
(note 3)............................................. - 17,637,839 17,670,036
Subscriber receivables, less allowance for doubtful
accounts of $4,000, $73,641 and $27,549 at
December 31, 1994 and 1995 and June 30, 1996,
respectively......................................... 110,219 143,633 295,021
Accrued interest and other receivables................. 3,450 405,241 353,440
Prepaid expenses....................................... 55,515 796,389 671,335
------------ ------------- -------------
Total current assets................................. 193,665 129,363,431 92,867,786
Property and equipment, net (note 4)..................... 3,078,523 14,266,755 33,066,456
Leased license investment, net of accumulated
amortization of $230,902, $548,283 and $1,028,631 at
December 31, 1994 and 1995 and June 30, 1996,
respectively.......................................... 5,540,036 26,724,238 36,454,732
Marketable investment securities-restricted (note 3).... - 35,755,505 27,801,368
Other assets (note 5)................................... 102,000 7,689,945 13,350,064
------------ ------------- -------------
$8,914,224 $213,799,874 $203,540,406
============ ============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable....................................... $228,835 $2,356,707 $3,788,385
Accrued expenses....................................... 44,779 862,100 1,199,426
Accrued interest....................................... - 3,683,333 4,170,833
Current maturities of long-term debt (note 6).......... 1,457,295 376,780 392,105
------------ ------------- -------------
Total current liabilities............................ 1,730,909 7,278,920 9,550,749
Long-term debt (note 6).................................. 2,839,602 150,871,267 151,116,860
------------ ------------- -------------
4,570,511 158,150,187 160,667,609
------------ ------------- -------------
Redeemable convertible preferred stock, $.01 par value;
15,000 shares amortized, no shares issued or
outstanding (note 8)................................... - - -
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares
authorized, no shares issued or outstanding.......... - - -
Common stock, $0.01 par value, 50,000,000 shares
authorized, 2,013,950, 13,498,752, and
13,498,752 shares issued and outstanding at
December 31, 1994 and 1995 and June 30,
1996, respectively................................... 20,139 134,988 134,988
Additional paid-in capital............................. 9,979,861 65,631,596 65,631,596
Subscriptions receivable............................... (3,231,864) - -
Accumulated deficit.................................... (2,424,423) (10,116,897) (22,893,787)
------------ ------------- -------------
Total stockholders' equity........................... 4,343,713 55,649,687 42,872,797
Commitments and contingencies (note 11)................
------------ ------------- -------------
$8,914,224 $213,799,874 $203,540,406
============ ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
WIRELESS ONE, INC.
Consolidated Statements of Operations
February 4,
1993 Years ended December 31, Six months ended June 30,
(inception --------------------------- -------------------------
December 31,
1993 1994 1995 1995 1996
------------ ------------- ------------- ------------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Revenues...................... $ - $ 380,077 $ 1,343,969 $ 491,995 $ 2,372,132
------------ ------------- ------------- ------------- -------------
Operating expenses:
Systems operations.......... 24,429 274,886 841,819 488,348 1,266,626
Selling, general and
administrative............ 110,281 1,800,720 4,431,839 1,214,856 5,529,724
Depreciation and
amortization.............. 27,489 413,824 1,783,066 441,292 2,262,506
------------ ------------- ------------- ------------- -------------
162,199 2,489,430 7,056,724 2,144,496 9,058,856
------------ ------------- ------------- ------------- -------------
Operating loss................ (162,199) (2,109,353) (5,712,755) (1,652,501) (6,686,724)
------------ ------------- ------------- ------------- -------------
Other income (expense):
Interest expense............ (411) (171,702) (4,070,184) (198,177) (10,021,497)
Interest income............. - - 2,024,116 - 3,863,777
Other....................... - 19,242 66,349 101,134 67,554
------------ ------------- ------------- ------------- -------------
Total other income
(expense)............... (411) (152,460) (1,979,719) (97,043) (6,090,166)
------------ ------------- ------------- ------------- -------------
Net loss.................. (162,610) (2,261,813) (7,692,474) (1,749,544) (12,776,890)
Preferred stock dividends and
discount accretion (note 8). - - (786,389) 365,311 -
------------ ------------- ------------- ------------- -------------
Net loss applicable to common
stock....................... $(162,610) $(2,261,813) $(8,478,863) $(2,114,855) $(12,776,890)
============ ============= ============= ============= =============
Net loss per common share..... $(.30) $(1.21) $(2.02) $ (1.05) $ (.95)
============ ============= ============= ============= =============
Weighted average common
shares outstanding.......... 538,127 1,863,512 4,187,736 2,013,950 13,498,752
============ ============= ============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
WIRELESS ONE, INC.
Consolidated Statements of Stockholders' Equity
Additional
Common paid-in Subscriptions Accumulated
stock capital receivable deficit Total
-------- ------------ ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Issuance of 538,127 shares of
common stock and
recapitalization upon merger
with Wireless One, L.L.C.
(note 1(a)).................. $ 5,381 $ 834,619 $ (219,020) $ - $ 620,980
Net loss....................... - - - (162,610) (162,610)
-------- ------------ ------------- -------------- -------------
Balance at December 31,
1993......................... 5,381 834,619 (219,020) (162,610) 458,370
Issuance of 1,475,823 shares
of common stock.............. 14,758 9,145,242 (8,660,000) - 500,000
Collections of subscriptions
receivable................... - - 5,647,156 - 5,647,156
Net loss....................... - - - (2,261,813) (2,261,813)
-------- ------------ ------------- -------------- -------------
Balance at December 31,
1994......................... 20,139 9,979,861 (3,231,864) (2,424,423) 4,343,713
Collections of subscriptions
receivable................... - - 3,231,864 - 3,231,864
Conversion of redeemable
preferred stock and warrants
into 4,524,512 shares of
common stock................. 45,246 14,453,442 - - 14,498,688
Issuance of 3,450,000 shares
of common stock pursuant to
initial public offering...... 34,500 32,340,708 - - 32,375,208
Issuance of 750,000
warrants..................... - 3,015,000 - - 3,015,000
Issuance of 3,510,290 shares
of common stock in
purchase transactions........ 35,103 6,628,974 - - 6,664,077
Preferred stock dividends and
accretion of discount........ - (786,389) - - (786,389)
Net loss....................... - - - (7,692,474) (7,692,474)
-------- ------------ ------------- -------------- -------------
Balance at December 31,
1995......................... 134,988 65,631,596 - (10,116,897) 55,649,687
Net loss (unaudited)........... - - - (12,776,890) (12,776,890)
-------- ------------ ------------- -------------- ------------
Balance at June 30, 1996
(unaudited).................. $134,988 $65,631,596 $ - $(22,893,787) $42,872,797
======== ============ ============= ============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
WIRELESS ONE, INC.
Consolidated Statements of Cash Flows
Six months
February 4, 1993 Years ended December 31, ended June 30,
(inception) through -------------------------- ---------------------------
December 31, 1993 1994 1995 1995 1996
----------------- ------------- ------------- ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss....................................... $(162,610) $(2,261,813) $(7,692,474) $(1,749,544) $(12,776,890)
Adjustments to reconcile net loss to
net cash used in operating activities:
Bad debt expense........................... - 54,608 196,281 - 23,694
Depreciation and amortization.............. 27,489 413,824 1,783,066 441,292 2,262,506
Amortization of debt discount.............. - 104,767 328,301 147,344 263,598
Non-cash interest income................... - - (213,230) - (447,297)
Changes in assets and liabilities:
Receivables.............................. - (167,277) (571,957) 4,720 (123,281)
Prepaid expenses......................... (9,000) (46,515) (468,707) 23,820 101,343
Accounts payable and accrued expenses.... 36,236 237,378 6,004,541 216,465 2,256,504
------------- ------------ ------------ ------------ -------------
Net cash used in operating activities.. (107,885) (1,665,028) (634,179) (915,903) (8,439,823)
------------- ------------ ------------ ------------ -------------
Cash flows from investing activities:
Purchase of investments and other assets....... - (102,000) (1,533,446) - (209,021)
Capital expenditures........................... (288,123) (2,960,842) (9,805,057) (2,480,582) (20,192,427)
Acquisition of intangible assets............... (154,854) (5,156,054) (6,762,415) (2,973,172) (10,210,874)
Proceeds from maturities of securities......... - - - - 8,369,237
Issuance of note receivable.................... - - - - (5,722,482)
Purchase of marketable investment securities... - - (53,180,114) - -
-------------- ------------ ------------ ------------ -------------
Net cash used in investing activities.. (442,977) (8,218,896) (71,281,032) (5,453,754) (27,965,567)
-------------- ------------ ------------ ------------ -------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt
and warrants................................. 20,722 4,275,819 150,014,902 - -
Principal payments on long-term debt........... (1,104) (103,306) (11,502,054) (1,159,580) (2,680)
Debt issuance costs............................ - - (5,593,839) - (94,305)
Issuance of common stock....................... 619,980 5,647,156 35,008,396 2,155,243 -
Issuance of redeemable preferred stock......... - - 14,343,654 13,738,565 -
-------------- ------------ ------------ ------------ -------------
Net cash provided by financing activities... 639,598 9,819,669 182,271,059 14,734,228 (96,985)
-------------- ------------ ------------ ------------ -------------
Net increase (decrease) in cash............. 88,736 (64,255) 110,355,848 8,364,571 (36,502,375)
Cash and cash equivalents at
beginning of period......................... - 88,736 24,481 24,481 110,380,329
-------------- ------------ ------------ ------------ -------------
Cash and cash equivalents at end of period....... $ 88,736 $ 24,481 $110,380,329 $ 8,389,052 $ 73,877,954
============== ============ ============ ============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
WIRELESS ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1995
(1) Description of Business and Summary of Significant Accounting Policies
(a) Description of Organization
Wireless One Inc. was formed in June 1995 by the shareholders of a
predecessor company (Old Wireless One) and Heartland Wireless Communications,
Inc. (Heartland) for the purpose of further developing, owning, and operating
wireless cable television systems primarily in select southern and southeastern
markets. Old Wireless One had been formed on December 23, 1993, in conjunction
with the merger of its predecessor, Wireless One, L.L.C., a Limited Liability
Company (LLC). LLC had been formed on February 4, 1993 with six members and on
December 23, 1993, Old Wireless One acquired all of the net assets and
outstanding interests of LLC in a tax free reorganization. Accordingly, the
accompanying consolidated financial statements include results of operations of
Wireless One, Inc. and its predecessor companies since February 4, 1993. Unless
otherwise indicated, references to the Company include Wireless One, Inc. and
its predecessors.
(b) Consolidation Policy
The consolidated financial statements include the accounts of the Company and
its majority-owned subsidiaries. All significant intercompany balances and
transactions are eliminated in consolidation.
(c) Property and Equipment
Property and equipment are stated at cost and include the cost of
transmission equipment as well as subscriber installations. The Company
capitalizes the excess of direct costs of subscriber installations over
installation fees. These direct costs include reception materials and equipment
on subscriber premises, installation labor and overhead charges and direct
commissions. Prior to 1995, installation fees were recognized in revenues and
commissions were expensed. The effect of the above change had no material
effect on the 1994 and 1995 results of operations.
Depreciation and amortization are recorded on a straight-line basis for
financial reporting purposes over the estimated useful lives of the assets. Any
unamortized balance of the nonrecoverable portion of the cost of a subscriber
installation is fully depreciated upon subscriber disconnect and the related
cost and accumulated depreciation are removed from the balance sheet. Repair
and maintenance costs are charged to expense when incurred; renewals and
betterments are capitalized.
Equipment awaiting installation consists primarily of accessories, parts and
supplies for subscriber installations, and is stated at the lower of average
cost or market.
(d) Leased License Investment
Leased license investment consists primarily of costs incurred in connection
with the Company's acquisition of channel rights. Channel rights represent the
right to utilize all of the capacity on channels operated under a license
received from the Federal Communications Commission ("FCC"). These assets are
recorded at cost and amortized using the straight-line method over the assets'
estimated useful lives, usually 10-20 years, beginning with inception of
service in each market. As of December 31, 1994 and 1995, approximately
$4,686,000 and $17,809,000 of channel rights were not subject to amortization.
The Company periodically evaluates the propriety of the carrying amounts of
the leased license investment in each market, as well as the amortization
period based on estimated undiscounted future cash flows to determine whether
current events or circumstances warrant adjustments to the carrying amounts
or a revised estimate of the useful life. If warranted, an impairment loss
would be recognized to reduce the carrying amount of the related assets to
management's estimate of the fair value of the individual market.
(e) Revenue Recognition
Revenues from subscribers are recognized in the month that the service is
provided.
(f) Income Taxes
The Company utilizes the asset and liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
A valuation allowance is provided to reduce the carrying value of deferred
tax assets to an amount which more likely than not will be realized. Changes in
the valuation allowance represent changes in an estimate and are reflected as
an adjustment to income tax expense in the period of the change.
The Company files a consolidated federal income tax return which includes all
of its subsidiaries. Losses incurred from inception through December 22, 1993
were attributed directly to the members of the L.L.C., and, accordingly, are
not available to offset the Company's future taxable income.
(g) Net Loss Per Common Share
Net loss per common share is based on the net loss applicable to common stock
divided by the weighted average number of common shares outstanding during the
period presented. All share and per share data, including the weighted average
number of common shares outstanding, for all periods prior to the Heartland
Transaction (see note 2) give retroactive effect to the exchange of
approximately one share of Old Wireless One common stock for 4 shares of
Wireless One, Inc. Shares issuable upon exercise of stock options and warrants
are antidilutive and have been excluded from the calculation.
(h) Debt Issuance Costs
Costs incurred in connection with issuance of the Company's 13% Senior Notes
are included in other assets and are being amortized using the interest method
over the term of the notes.
(i) Cash and Cash Equivalents
Cash and cash equivalents includes cash and temporary cash investments that
are highly liquid and have original maturities of three months or less.
(j) Use of Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(k) Marketable Investment Securities
Investments in marketable securities at December 31, 1995 consist of U.S.
Treasury securities which mature periodically through October 1998. The Company
has the ability and intent to hold these investments until maturity and,
accordingly, has classified these investments as held-to-maturity investments.
Held-to-maturity investments are recorded at amortized cost, adjusted for
amortization of premiums or discounts. Premiums and discounts are amortized
over the life of the related held-to-maturity investment as an adjustment to
yield using the effective interest method. A decline in market value of the
Company's investments below cost that is deemed other than temporary results in
a reduction in carrying amount to fair value. The impairment is charged to
earnings and a new cost basis for the investment is established.
(l) Interim Financial Information
In the opinion of management, the accompanying unaudited consolidated
financial information of the Company contains all adjustments, consisting only
of those of a normal recurring nature, necessary to present fairly the
Company's financial position as of June 30, 1996 and the results of its
operations and cash flows for the six month periods ended June 30, 1995 and
1996, and changes in stockholders' equity for the six months ended June 30,
1996. These results are not necessarily indicative of the results to be
expected for the full fiscal year.
(2) Initial Public Offering and Heartland Transaction
During October, 1995, the Company completed a series of transactions which
included (i) the issuance of 3,450,000 shares of common stock at $10.50 per
share in an initial public offering; (ii) the issuance of $150,000,000 of 13%
Senior Notes due in 2003 and warrants to purchase 450,000 shares of the
Company's common stock, and (iii) the acquisition of certain wireless cable
television assets and related liabilities of certain subsidiaries of Heartland
for common stock of the Company and notes (the Heartland Transaction).
The consummation of the Heartland transaction included the Company's
acquisition of all of the outstanding capital stock of Old Wireless One and
certain wireless cable television assets and related liabilities in Heartland's
markets in Texas, Louisiana, Alabama, Georgia and Florida. In connection with
the Heartland transaction, the shareholders of Old Wireless One received
approximately 6.5 million shares of the Company's common stock and Heartland
received approximately 3.5 million shares of the Company's common stock. In
addition, Heartland received notes in the amount of $10,000,000, which were
subsequently repaid by the Company from the proceeds of the offerings of the
Company's common stock and Senior Notes.
The Heartland transaction has been accounted for as a business combination
using the purchase method of accounting. In accordance with Staff Accounting
Bulletin No. 48, the Heartland assets and liabilities acquired have been
recorded using the historical cost basis previously reported by Heartland,
reduced by the amount of notes issued to Heartland in connection with the
transaction. The assets acquired consist primarily of systems and equipment and
various wireless cable channel rights. The following is a summary of the net
assets acquired:
Current assets.................................... $ 318,892
Current liabilities............................... (35,956)
Systems and equipment, net........................ 2,392,711
Leased license investment and other intangibles... 13,476,534
--------------
Net assets acquired............................. 16,152,181
Notes issued to Heartland....................... (10,000,000)
--------------
$ 6,152,181
==============
The 1995 financial statements of Wireless One, Inc. include the results of
operations of the business interests acquired in the Heartland Transaction
since October 18, 1995. Pro forma unaudited consolidated operating results of
the Company and the Heartland business acquired for the years ended December
31, 1994 and 1995, assuming the transaction had been completed as of January 1,
1994 and 1995, are summarized below:
1994 1995
------------- -------------
Total revenues........................ $ 1,287,312 $ 1,976,142
Operating expenses:
Systems operations.................. 1,052,799 1,433,934
Selling, general and administrative. 2,306,280 4,780,286
Depreciation and amortization....... 658,177 1,977,028
------------- -------------
Total operating expenses.......... 4,017,256 8,191,248
------------- -------------
Operating loss........................ (2,729,944) (6,215,106)
Interest expense...................... (1,065,967) (4,738,611)
Interest income and other............. 19,242 2,090,465
------------- -------------
Net loss.......................... $(3,776,669) $(8,863,252)
============= =============
Net loss per share................ $(0.29) $(0.68)
============= =============
These pro forma results have been prepared for comparative purposes only and
include an adjustment for additional interest expense associated with the
portion of the proceeds of the notes utilized to repay $7 million of notes to
Heartland. They do not purport to be indicative of the results of operations
which actually would have resulted had the combination been in effect on
January 1, 1994 and 1995 or of future results of operations of the consolidated
entities.
(3) Marketable Investment Securities-Restricted
Marketable investment securities-restricted at December 31, 1995 consists of
U.S. Treasury securities placed in escrow pursuant to the bond indenture
relating to the 13% Senior Notes due 2003. The investments have been deposited
into an escrow account and, pending disbursement, the collateral agent has a
first priority lien on the escrow account for the benefit of the holders of the
notes. Such funds may be disbursed from the escrow account only to pay interest
on the Notes and, upon certain repurchases or redemptions of the Notes, to pay
principal of and premium, if any, thereon. The maturities of the securities
purchased have been matched to the interest payment dates of the notes.
A summary of the Company's restricted marketable securities as of December
31, 1995 follows:
Amortized Unrealized Unrealized Fair
Cost Loss Gain Value
----------- ---------- ---------- -----------
U.S. Treasury Notes..... $22,343,879 $(1,110) $113,163 $22,455,932
Other Debt Securities... 31,049,415 - 199,185 31,248,600
----------- ---------- ---------- -----------
$53,393,294 $(1,110) $312,348 $53,704,532
=========== ========== ========== ===========
Scheduled maturities for the marketable securities held at December 31, 1995,
are as follows:
Amortized Fair
Cost Value
----------- -----------
Maturing in less than 1 year........ $11,471,559 $17,665,069
Maturing from 1-5 years............. 41,921,735 36,039,463
----------- -----------
$53,393,294 $53,704,532
=========== ===========
(4) Property and Equipment
Major categories of property and equipment at December 31, 1994 and 1995 are
as follows :
Estimated
Life 1994 1995
--------- ------------- -------------
Equipment awaiting installation.... 5 $ 422,109 $ 2,230,144
Subscriber premises equipment and
installation costs............... 5 1,021,382 3,561,714
Transmission equipment and system
construction costs............... 10 1,534,028 8,092,890
Office furniture and equipment..... 7 219,629 1,270,131
Buildings and leasehold
improvements..................... 31.5 91,723 523,203
------------- -------------
3,288,871 15,678,082
Less accumulated depreciation...... (210,348) (1,411,327)
------------- -------------
$ 3,078,523 $14,266,755
============= =============
(5) Other Assets
Other assets at December 31, 1994 and 1995 consist of the following:
1994 1995
------------- -------------
Debt issuance costs, net of accumulated
amortization of $163,927................... $ - $ 6,053,898
Deposits..................................... - 1,410,543
Other........................................ 102,000 225,504
------------- -------------
$ 102,000 $ 7,689,945
============= =============
(6) Long-term Debt
Long-term debt consists of the following:
1994 1995
------------- -------------
13% Senior Notes due 2003; face value of
$150,000,000, net of unamortized discount.. $ - $148,149,131
Subordinated non-interest bearing notes (face
value of $3,700,000), discounted to an 8%
effective rate, principal and interest due
in installments through July 1997.......... 2,949,986 2,939,156
$3,000,000 revolving line of credit, due
September 30, 1995, with interest due
quarterly at the prime rate, (7.25% at
December 31, 1994) secured by assignment
of stock subscriptions receivable.......... 1,106,243 -
Other........................................ 240,668 159,760
------------- -------------
4,296,897 151,248,047
Less current maturities...................... (1,457,295) (376,780)
------------- -------------
Long-term debt, excluding current
maturities................................. $ 2,839,602 $150,871,267
============= =============
Long term debt matures as follows:
1996................................ $ 376,780
1997................................ 2,572,136
1998................................ -
1999................................ 150,000
2000................................ -
Thereafter.......................... 148,149,131
Interest on the Senior Notes (the "Notes") is payable semi-annually on April
15 and October 15 of each year, commencing April 15, 1996. The Notes are
redeemable at the option of the Company, in whole or in part, at any time on or
after October 15, 1999, at variable redemption prices in excess of par. On or
prior to October 15, 1998, the Company may redeem up to 30% of the aggregate
principal amount of the Notes with the proceeds from a sale to a strategic
investor, as defined. In addition, upon the occurrence of a change of control,
as defined, each holder of Notes may require the Company to repurchase all or a
portion of such holder's Notes at 101% of the principal amount thereof, plus
accrued and unpaid interest.
The notes are issued and outstanding under an indenture which contains
certain covenants, including limitations on the incurrence of indebtedness, the
making of restricted payments, transactions with affiliates, sale and leaseback
transactions, the existence of liens, disposition of proceeds of asset sales,
the making of guarantees and pledges by restricted subsidiaries, transfers and
issuance of stock of subsidiaries, investments in unrestricted subsidiaries,
the conduct of the Company's business and certain mergers and sales of assets.
(7) Income Taxes
The Company has not recognized any income tax benefit for any of the periods
presented due to management's conclusion that a 100% valuation allowance for
the net deferred tax asset is warranted. Statement of Financial Accounting
Standards ("SFAS") 109 provides that the tax benefit of net operating loss
carryforwards is recorded as an asset only to the extent that management
assesses the realization of such carryforwards to be "more likely than not."
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are presented below:
1994 1995
----------- ------------
Deferred tax assets:
Net operating loss carryforwards.................... $ 808,064 2,955,166
Allowance for bad debts............................. - 25,038
Reserve for obsolescence in equipment............... - 68,000
Accrued liabilities deductible when paid............ - 152,320
----------- ------------
808,064 3,200,524
Less valuation allowance.............................. (224,410) (2,136,029)
----------- ------------
Deferred tax asset.................................... 583,654 1,064,495
----------- ------------
Deferred tax liabilities:
Fixed assets, principally due to differences
in depreciation and underlying basis................ 10,737 11,700
Intangibles, due to differences in basis and
amortizable lives................................... 572,917 440,795
Purchase accounting adjustments resulting in
differences in basis of underlying assets........... - 612,000
----------- ------------
Deferred tax liabilities.............................. 583,654 1,064,495
----------- ------------
Net deferred tax asset................................ $ - -
=========== ============
The net changes in total valuation allowance for the years ended December 31,
1994 and 1995 were increases of $224,410 and $1,911,619, respectively. In
assessing the realizability of deferred tax assets, the Company considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. The Company considers the
scheduled reversal of deferred tax liabilities, projected future taxable income
and tax planning strategies in making this assessment. Based upon these
considerations, the Company has recognized deferred tax assets to the extent
such assets can be realized through future reversals of existing taxable
temporary differences.
The Company had net operating loss carryforwards for Federal income tax
purposes of approximately $8,700,000 as of December 31, 1995. The carryforwards
expire in years 2008-2010.
(8) Redeemable Convertible Preferred Stock
On April 14, 1995, the Company completed a private placement of 14,781.75
shares of redeemable convertible preferred stock and 591,270 warrants to
purchase common stock (collectively the "Units") at a price of $1,000 per Unit.
The proceeds from the issue were $13,866,000, net of issuance costs. The excess
of the liquidation value over the carrying value was accreted by periodic
charges to additional paid-in capital during the period the stock was
outstanding. Contemporaneously with the closing of the initial public offering
of common stock in October 1995, the preferred stock and warrants were
converted into approximately 4,524,512 shares of common stock.
(9) Stockholders' Equity
In connection with the sale of the 13% Senior Notes due 2003, the company
issued warrants to acquire 450,000 shares of its common stock. Each warrant
entitles the holder to purchase one share of common stock at $11.55 per share.
The warrants are exercisable at any time on or after October 24, 1996 and
will expire on October 24, 2000. For financial reporting purposes, these
warrants were valued at $1,890,000.
In connection with the Heartland transaction, the Company issued warrants
(the "GKM Warrants") to purchase 300,000 shares of common stock to an
underwriter for nominal consideration. The GKM Warrants are initially
exercisable at $12.60 per share through October 18, 2000. For financial
reporting purposes, these warrants were valued at $1,125,000.
In connection with the Heartland Transaction, certain of the shareholders of
the Company with beneficial ownership of approximately 56% of the Company's
outstanding common stock at December 31, 1995 have entered into an agreement
whereby, among other things, they have agreed to vote their common stock to
elect a specified slate of directors, which will be designated by the parties
to the stockholders agreement.
(10) Stock Option Plan
The Company has adopted the 1995 Long-Term Performance Incentive Plan (the
"Incentive Plan"), which provides for the grant to key employees of the Company
of stock options, appreciation rights, restricted stock, performance grants and
any other type of award deemed to be consistent with the purpose of the
Incentive Plan.
The total number of shares of Common Stock which may be granted pursuant to
the Incentive Plan is 1,300,000. The Incentive Plan will terminate upon the
earlier of the adoption of a Board of Directors' resolution terminating the
Incentive Plan or on the tenth anniversary of the date of adoption, unless
extended for an additional five-year period for grants of awards other than
incentive stock options.
The exercise price of stock options is determined by the Compensation
Committee of the Board of Directors, but may not be less than 100% of the fair
market value of the Common Stock on the date of the grant and the term of any
such option may not exceed 10 years from the date of grant. With respect to any
employee who owns stock representing more than 10% of the voting power of the
outstanding capital stock of the Company, the exercise price of any incentive
stock option may not be less than 110% of the fair market value of such shares
on the date of grant and the term of such option may not exceed five years from
the date of grant.
Awards granted under the Incentive Plan will generally vest upon a proposed
sale of substantially all of the assets of the Company, or the merger of the
Company with or into another corporation. Options generally vest over a
five-year period commencing on the date of grant and expire ten years from the
date of grant.
Directors of the Company who are not employees of the Company are eligible to
receive options under the Directors' Plan. The total number of shares of Common
Stock for which options may be granted under the Directors' Plan is 100,000.
Options granted under the Directors' Plan may be subject to vesting and
certain other restrictions. Subject to certain exceptions, the right to
exercise an option generally terminates at the earlier of (i) the first date on
which the initial grantee of such option is no longer a director of either the
Company or any subsidiary for any reason other than death or permanent
disability or (ii) the expiration date of the option. Options granted under the
Directors' Plan will also generally vest upon a "change in control" of the
Company. No options have been granted under the Directors' Plan as of December
31, 1995.
Information regarding the Company's stock option plans is summarized as
follows:
Number of shares
--------------------
Exercise
Incentive Directors' Price
Plan Plan Range
--------- ---------- -----------
Outstanding at December 31, 1993.............. - - $ -
1994 activity:
Granted..................................... 248,917 - 6.21
--------- ---------- -----------
December 31, 1994 outstanding............... 248,917 - 6.21
1995 activity:
Granted..................................... 555,270 - 4.16-13.83
--------- ---------- -----------
December 31, 1995 outstanding............... 804,187 - $4.16-13.83
========= ========== ===========
Exercisable at December 31, 1995............ 138,395 - $4.16-13.83
========= ========== ===========
Available for future grants at
December 31, 1995......................... 495,813 100,000
========= ==========
(11) Commitments and Contingencies
The Company leases, from third parties, channel rights licensed by the FCC.
Under FCC policy, the base term of these leases cannot exceed the term of the
underlying FCC license. FCC licenses for wireless cable channels generally must
be renewed every five to ten years, and there is no automatic renewal of such
licenses. The use of such channels by third parties is subject to regulation by
the FCC and, therefore, the Company's ability to enjoy the benefit of these
leases is dependent upon the third party lessor's continuing compliance with
applicable regulations. The remaining terms of the Company's leases range from
approximately five to twenty years. Most of the Company's leases provide for
rights of first refusal for their renewal. The termination of or failure to
renew a channel lease or termination of the channel license would result in the
Company being unable to deliver television programming on such channel.
Although the Company does not believe that the termination of or failure to
renew a single channel lease could adversely affect the Company, several of
such terminations or failures in one or more markets that the Company actively
serves could have a material adverse effect on the Company. Channel rights
lease agreements generally require payments based on the greater of specified
minimums or amounts based upon various factors, such as subscriber levels or
subscriber revenues.
Payments under the channel rights lease agreements generally begin upon the
completion of construction of the transmission equipment and facilities and
approval for operation pursuant to the rules and regulations of the FCC.
However, for certain leases, the Company is obligated to begin payments upon
grant of the channel rights. Channel rights lease expense was $9,000, $179,172,
and $380,346 for the period from February 4, 1993 (inception) to December 31,
1993, and for the years ended December 31, 1994 and 1995, respectively.
The Company also has certain operating leases for office space, equipment and
transmission tower space. Rent expense incurred in connection with other
operating leases was $6,996, $79,791 and $183,003 for the period from February
4, 1993 (inception) to December 31, 1993 and for the years ended December, 1994
and 1995, respectively.
Future minimum lease payments due under channel rights leases and other
noncancelable operating leases at December 31, 1995 are as follows:
Channel Other
Year ending rights operating
December 31, leases leases
------------ ---------- ----------
1996.................... $1,097,075 $487,666
1997.................... 1,146,307 515,916
1998.................... 1,167,319 515,955
1999.................... 1,175,415 523,625
2000.................... 1,165,755 520,344
---------- ----------
$5,751,871 $2,563,506
========== ==========
The Company has entered into various service agreements to obtain programming
for delivery to customers of the Company. Such agreements require a per
subscriber fee to be paid by the Company on a monthly basis. These agreements
range in life from two to ten years.
The Company is involved in various other claims and legal actions arising in
the ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position, results of operations or liquidity.
The Company is actively competing in the FCC auction program designed to
award initial licenses for MDS channels. Successful bidders will receive a
blanket authorization to serve entire "Basic Trading Areas" or "BTA's" on all
MDS channels. The Company estimates its commitment related to this auction of
BTA's to be approximately $16,000,000 to $18,000,000. At the conclusion of the
auction, the Company will be required to remit 20% of the total committed
amount (less its deposit of $900,000 remitted prior to December 31, 1995) with
the remaining 80% being paid out over a 10 year period. Over this ten year
period commencing on the date the BTA is authorized by the FCC, the Company
will be required to make quarterly interest only payments for the first two
years and then quarterly payments of principal and interest over the remaining
years of the agreement. The interest rate related to this installment plan is
equal to the ten year U.S. Treasury rate at the time of the issuance of the BTA
authorization plus 2-1/2%.
(12) Concentrations of Credit Risk
Financial instruments which potentially expose the Company to concentrations
of credit risk consist primarily of cash, temporary cash investments, and
accounts receivable. The Company places its cash and temporary cash investments
with high credit quality financial services companies. Collectibility of
subscriber accounts receivable is impacted by economic trends in each of the
Company's markets. Such receivables are typically collected within thirty days,
and the Company has provided an allowance which it believes is adequate to
absorb losses from uncollectible accounts.
(13) Supplemental Cash Flow Information
Cash interest payments made in 1993, 1994, and 1995 totaled $143, $168,512
and $351,178, respectively.
During 1995, the Company paid $288,104 in cash and issued 48,752 shares of its
common stock in connection with the acquisition of channel rights in Tennessee.
The cost of the channel rights and other intangible assets acquired was
$800,000 based on the initial public offering price per share of $10.50.
(14) Disclosures About Fair Value Of Financial Instruments
The following table presents the carrying amounts and estimated fair values
of the Company's financial instruments at December 31, 1995. The fair value of
a financial instrument is defined as the amount at which the instrument could
be exchanged in a current transaction between willing parties.
At December 31, 1995
----------------------------
Carrying Estimated
Amount Fair Value
------------ ------------
Marketable investment securities.......... $ 53,393,344 $ 53,704,532
Long-term debt............................ 151,248,047 160,598,916
The estimated fair value amounts have been determined by the Company using
available market information and appropriate valuation methodologies as
follows:
* The carrying amounts of cash and cash equivalents, subscriber receivable,
accrued interest and other receivables, accounts payable and accrued expenses
approximate fair value because of the short maturity of these items.
* The fair values of the Company's marketable investment securities are based
on quoted market prices.
* The fair value of long-term debt is based upon market quotes obtained from
dealers.
Fair value estimates are subject to inherent limitations. Estimates of fair
value are made at a specific point in time, based on relevant market
information and information about the financial instrument. The estimated fair
values of financial instruments presented above are not necessarily indicative
of amounts the Company might realize in actual market transactions. Estimates
of fair value are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.
(15) Subsequent events (unaudited)
TruVision Transaction - On Juy 29, 1996, the Company consummated a merger
with TruVision Wireless, Inc. ("TruVision") whereby a subsidiary of the Company
exchanged approximately 3.4 million shares of the Company's common stock for
all of TruVision's common stock. The Company merged with and into TruVision,
at which time TruVision became a wholly owned subsidiary of the Company.
The TruVision transaction has been accounted for as a business combination
using the purchase method of accounting. The assets acquired consist primarily
of wireless cable channel rights.
Prior to the consummation of the merger, the Company committed to provide a
bride loan to TruVision of up to $15 million. This loan was to be secured by
certain assets of TruVision and its subsidiaries. At June 30,1996, the Company
had funded approximately $5.7 million of this loan.
Units Offering - On August 12, 1996, the Company completed issuance of
239,252 Units consisting of $239,252,000 of 13.5% Senior Discount Notes due in
2006 (the "New Unit Offering") and warrants to purchase, in aggregate, 544,059
shares of the Company's common stock.
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Heartland Wireless Communications, Inc.:
We have audited the accompanying balance sheets of Heartland Division as of
December 31, 1993 and 1994, and the related statements of operations and
division equity and cash flows for the years ended December 31, 1992 and 1993,
the period from January 1, 1994 to August 18, 1994 and the period from August
19, 1994 to December 31, 1994. These financial statements are the
responsibility of Heartland Division's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Heartland Division as of
December 31, 1993 and 1994, and the results of its operations and its cash
flows for the years ended December 31, 1992 and 1993, the period from January
1, 1994 to August 18, 1994 and the period from August 19, 1994 to December 31,
1994, in conformity with generally accepted accounting principles.
As discussed in note 1 to the financial statements, on August 19, 1994,
RuralVision Joint Venture, a general partnership in which Heartland Wireless
Communications, Inc. had a 50% interest, purchased certain wireless cable
television assets, including assets comprising a portion of Heartland Division,
in a business combination accounted for as a purchase. As a result of the
acquisition, financial information for periods after August 18, 1994 is
presented on a different cost basis than that for the periods before August 18,
1994 and, therefore, such information is not comparable.
KPMG Peat Marwick LLP
Dallas, Texas
June 20, 1995
<TABLE>
<CAPTION>
HEARTLAND DIVISION
Balance Sheets
December 31, December 31, September 30,
Assets 1993 1994 1995
- ---------------------------------------------------------- ------------ ------------ -------------
(unaudited)
<S> <C> <C> <C>
Current assets:
Subscriber receivables, net of allowance for doubtful
accounts of $16,596 in 1993, $28,504 in 1994 and
$53,641 in 1995....................................... $ 52,642 $ 22,984 $ 42,909
Prepaid expenses and other.............................. 66,534 149,553 311,280
------------ ------------ -------------
Total current assets.................................. 119,176 172,537 354,189
------------ ------------ -------------
Systems and equipment, net (note 2)..................... 1,774,427 1,590,303 2,658,065
Leased license investment, net of accumulated
amortization of $4,909 in 1993, $22,476 in 1994
and $63,210 in 1995 (note 1(d))....................... 469,105 7,394,107 11,244,107
Other assets, net....................................... 37,865 22,859 6
------------ ------------ -------------
Total assets.......................................... $ 2,400,573 $ 9,179,806 $ 14,256,367
============ ============ =============
Liabilities and Division Equity
- ----------------------------------------------------------
Current liabilities-accounts payable and accrued
expenses................................................ $98,346 $109,727 $113,732
Deferred income tax liability to Heartland (note 4)....... - 212,370 98,480
Division equity (note 1(a))............................... 2,302,227 8,857,709 14,044,155
Commitments (notes 3 and 6)
------------ ------------ -------------
Total liabilities and division equity..................... $2,400,573 $9,179,806 $14,256,367
============ ============ =============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
HEARTLAND DIVISION
Statements of Operations and Division Equity
Year ended
December 31, January 1, August 19, Nine months
----------------------- 1994 to 1994 to August 19 ended
August 18, December 31, 1994 to September 30,
1992 1993 1994 1994 September 30, 1994 1995
----------- ------------ -------------- ------------- ------------------- ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Revenues......................... $ 349,244 $ 850,167 $ 616,223 $ 291,012 $ 80,095 $ 632,173
----------- ------------ -------------- ------------ ------------ ------------
Operating expenses:
Systems operations.............. 290,898 397,503 340,539 197,429 54,601 397,574
Selling, general and
administrative................ 352,226 557,466 320,701 184,859 50,065 348,447
Depreciation and
amortization.................. 105,860 211,464 166,358 77,995 22,659 193,962
----------- ----------- -------------- ------------ ------------ -------------
Total operating expenses.......... 748,984 1,166,433 827,598 460,283 127,325 939,983
----------- ----------- -------------- ------------ ------------ -------------
Loss before income taxes.......... (399,740) (316,266) (211,375) (169,271) (47,230) (307,810)
Income tax benefit (note 4)....... - - - 62,630 17,475 113,890
----------- ----------- -------------- ------------ ------------ -------------
Net loss.......................... (399,740) (316,266) (211,375) (106,641) (29,755) (193,920)
Division equity at beginning
of period....................... - 1,673,924 2,302,227 2,202,789 2,202,789 8,857,709
Elimination of RuralVision
equity (note 1(a)).............. - - - (1,551,486) (1,551,486) -
Net investment in and advances
from parents.................... 2,073,664 944,569 111,937 8,313,047 8,279,220 5,380,366
----------- ----------- -------------- ------------ ------------ -------------
Division equity at end of
period.......................... $1,673,924 $2,302,227 $ 2,202,789 $8,857,709 $8,900,768 $14,044,155
============ =========== ============== ============ ============ =============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
HEARTLAND DIVISION
Statements of Cash Flows
Year ended
December 31, January 1, August 19, August 19, Nine months
----------------------- 1994 to 1994 to 1994 to ended
August 18, December 31, Sept. 30, Sept. 30,
1992 1993 1994 1994 1994 1995
------------ ----------- ----------- ------------ ------------ -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss....................................... $ (399,740) $(316,266) $(211,375) $ (106,641) $ (29,755) $(193,920)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization................ 105,860 211,464 166,358 77,995 22,659 193,962
Deferred tax benefit......................... - - - (62,630) (17,475) (113,890)
Changes in assets and liabilities:
Subscriber receivables..................... (7,657) (44,985) (16,731) 46,389 8,779 (19,925)
Prepaid expenses and other................. (25,871) (40,663) (35,161) (47,858) (248) (161,727)
Accounts payable and accrued expenses...... 65,000 33,346 1,283 10,098 (1,543) 4,005
------------ ---------- ----------- ------------ ------------- -------------
Net cash used in operating activities.......... (262,408) (157,104) (95,626) (82,647) (17,583) (291,495)
Cash flows from investing activities-capital
expenditures................................. (1,811,256) (787,465) (16,311) (8,505,400) (8,261,637) (4,988,871)
Cash flows from financing activities-net
investment in and advances from parents...... 2,073,664 944,569 111,937 8,588,047 8,279,220 5,280,366
------------ ---------- ----------- ------------ ------------ -------------
Cash at beginning and end of period............ $ - $ - $ - $ - $ - $ -
============ ========== =========== ============ ============ =============
</TABLE>
See accompanying notes to financial statements.
(1) General and Summary of Significant Accounting Policies
(a) General and Basis of Presentation
Heartland Wireless Communications, Inc. ("Heartland") develops, owns and
operates wireless cable television systems. Heartland and Wireless One
Operating Company ("Old Wireless One") have proposed entering into an agreement
to form a new corporation ("Wireless One") for the purpose of developing,
owning and operating wireless cable television systems. Prior to the closing of
Wireless One's initial public offering, Old Wireless One and Heartland would
consummate a transaction whereby Wireless One would acquire (i) all of the
outstanding capital stock of Old Wireless One (which would retain all of its
assets and liabilities except its wireless cable television assets and certain
related liabilities with respect to the Springfield, Missouri market which
Heartland will acquire), and (ii) wireless cable television assets and all
related liabilities with respect to certain of Heartland's markets located in
Alabama, Florida, Georgia, Louisiana and Texas ("Heartland Division").
The accompanying financial statements reflect the historical financial
position, results of operations and cash flows of the assets and liabilities
comprising Heartland Division. Until August 19, 1994, the assets and
liabilities comprising Heartland Division were owned by either Heartland or
RuralVision South, Inc. Accordingly, the financial information as of December
31, 1993 and for the years ended December 31, 1992 and 1993 and the period from
January 1, 1994 to August 18, 1994 includes historical financial information
from both Heartland and RuralVision South, Inc. with respect to the assets and
liabilities comprising Heartland Division.
On August 19, 1994, RuralVision Joint Venture, a general partnership in which
each of Heartland and an unrelated third party had a 50% interest, purchased
certain wireless cable television assets, including assets comprising a portion
of Heartland Division, from RuralVision Central, Inc. and RuralVision South,
Inc. ("RuralVision"). RuralVision Joint Venture accounted for the acquisition
as a purchase and, accordingly, established a new cost basis with respect to
the assets purchased from RuralVision. Subsequent to August 19, 1994, the
assets and liabilities comprising Heartland Division were owned by either
Heartland or RuralVision Joint Venture. Accordingly, the financial information
as of December 31, 1994 and for the period from August 19, 1994 to December 31,
1994, the period from August 19, 1994 to September 30, 1994 and the nine months
ended September 30, 1995 includes historical financial information from both
Heartland and RuralVision Joint Venture with respect to the assets and
liabilities comprising Heartland Division. As a result of the acquisition and
the different cost basis with respect to the assets and liabilities comprising
Heartland Division, financial information for periods before and after August
19, 1994 is not comparable.
Subsequent to December 31, 1994, all Heartland Division assets and
liabilities previously owned by RuralVision Joint Venture had either been
purchased by or transferred to Heartland. Such purchases and transfers were
recorded by Heartland at RuralVision Joint Venture's historical carrying
amounts for such assets and liabilities. Accordingly, subsequent to December
31, 1994, all Heartland Division assets and liabilities are owned by Heartland.
The accompanying financial statements include the assets, liabilities,
revenues and expenses that are directly related to Heartland Division. The
financial statements do not include general unallocated corporate assets,
liabilities, revenues and expenses of the various parent entities which are not
directly related to Heartland Division or debt financing and associated
not necessarily reflect what the financial position, results of operations and
cash flows of Heartland Division would have been had it been a separate,
stand-alone entity during the periods covered by the financial statements.
(b) Cash Management
Heartland Division utilized central cash management systems of its parent
entities to finance its operations. Cash requirements were satisfied by
transactions between Heartland Division and its parent entities. The
transactions are included in the division equity account in the balance sheets
and as net investment in and advances from parents in the statements of cash
flows.
(c) Systems and Equipment
Systems and equipment are stated at cost and include the cost of transmission
equipment as well as subscriber installations. Receive-site equipment on
subscriber premises and costs associated with initial subscriber installations
are capitalized. Upon subscriber disconnect, Heartland Division continues to
depreciate the full capitalized installation cost subsequent to the
disconnection. Depreciation and amortization are recorded on a straight-line
basis for financial reporting purposes over useful lives ranging from 6 to 10
years. Repair and maintenance costs are charged to expense when incurred;
renewals and betterments are capitalized.
(d) Leased License Investment
Leased license investment includes costs incurred to acquire wireless cable
channel rights. Such costs were incurred by the parent entities on behalf of
Heartland Division and have been allocated to Heartland Division on a
proportional basis under a method that Heartland's management believes is
systematic and rational. Cost incurred to acquire channel rights issued by the
Federal Communications Commission ("FCC") are deferred and amortized ratably
over estimated useful lives of 20 years beginning with inception of service. As
of December 31, 1993 and 1994, approximately $405,000 and $6,500,000 of leased
license investment was not subject to amortization. Heartland Division
continually reevaluates the propriety of the carrying amounts of the leased
license investment based on estimated undiscounted future cash flows as well as
the amortization period to determine whether current events or circumstances
warrant adjustments to the carrying amounts or a revised estimate of the useful
life.
(e) Revenue Recognition
Revenues from subscribers are recognized in the period service is provided.
(f) Channel Leases
Prepayments on granted channel leases are expensed ratably in the year to
which they relate.
(g) Systems Operations
Systems operations expenses consist principally of programming fees, channel
lease costs, tower rental and other costs of providing services. Such amounts
are charged to expense in the period incurred.
(h) Income Taxes
Deferred income taxes are recognized for the tax consequences in future years
of differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using the enacted tax rates applicable to the periods
in which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.
HEARTLAND DIVISION
Notes to Financial Statements, Continued
(Information as of September 30, 1995 and for the period from August 19, 1994
to September 30, 1994 and the nine-month period ended September 30, 1995 is
unaudited)
The results of operations of Heartland Division have been included in the
federal income tax returns of Heartland, RuralVision South, Inc. or RuralVision
Joint Venture. Total current and deferred income taxes have been allocated to
Heartland Division as if such taxes were calculated on a separate return basis
using the accounting principles in Statement of Financial Accounting Standards
No. 109.
(i) Interim Financial Information
In the opinion of management, the accompanying unaudited condensed financial
information of Heartland Division contains all adjustments, consisting only of
those of a recurring nature, necessary to present fairly Heartland Division's
financial position as of September 30, 1995, and the results of operations and
cash flows for the period from August 19, 1994 to September 30, 1994 and the
nine-month period ended September 30, 1995. These results are not necessarily
indicative of the results to be expected for the full fiscal year.
(2) Systems and Equipment
Systems and equipment consists of the following at December 31, 1993 and
1994:
1993 1994
----------- -----------
Equipment awaiting installation..................... $ 70,112 $ 124,025
Subscriber premises equipment and installation
costs............................................. 921,644 637,778
Transmission equipment and system construction
costs............................................. 1,051,488 859,673
Other, principally office furniture and equipment... 30,698 51,417
----------- -----------
2,073,942 1,672,893
Accumulated depreciation............................ (299,515) (82,590)
----------- -----------
$1,774,427 $1,590,303
=========== ===========
(3) Leases
Heartland Division leases from third parties channel rights licensed by the
FCC. Heartland Division, through affiliates, has entered into leases with
channel license holders and leases with applicants for channel licenses. Under
FCC policy, the base term of most leases cannot exceed 10 years from the time
the lessee begins using the leased channel rights. FCC licenses for wireless
cable channels generally must be renewed every ten years, and there is no
automatic renewal of such licenses. The use of such channels by the lessors is
subject to regulation by the FCC and, therefore, Heartland Division's ability
to continue to enjoy the benefits of these leases is dependent upon the
lessors' continuing compliance with applicable regulations. The remaining
initial terms of Heartland Division's leases range from 6 to 10 years. Most of
Heartland Division's leases grant Heartland Division a right of first refusal
to match another lease offer after expiration of the lease and/or require the
parties to negotiate renewal in good faith. The termination of or failure to
renew a channel lease or termination of the channel license would result in
Heartland Division being unable to deliver television programming on such
channel. Although Heartland Division does not believe that the termination of
or failure to renew a single channel lease could adversely affect Heartland
Division, several of such terminations or failures in one or more markets that
Heartland Division actively serves could have a material adverse effect on
Heartland Division. Channel rights lease agreements generally require payments
based on the greater of specified minimums or amounts based on various
subscriber levels.
Payments under the channel rights lease agreements generally begin upon
either the completion of construction of the transmission equipment and
facilities and approval for operation pursuant to the rules and regulations of
the FCC or the grant of the channel rights. Channel rights lease expense was
$34,461, $101,338, $108,611 and $94,500 for the years ended December 31, 1992
and 1993, the period from January 1, 1994 to August 18, 1994 and the period
from August 19, 1994 to December 31, 1994, respectively.
Future minimum lease payments due under channel rights leases in effect at
December 31, 1994 are as follows:
Year ending
December 31,
------------
1995.................. $402,000
1996.................. 485,000
1997.................. 485,000
1998.................. 478,000
1999.................. 472,000
Heartland Division also has certain operating leases for office space and
transmission tower space which are generally cancellable or with terms less
than one year. Rent expense incurred in connection with these leases was
$71,969, $43,795, $27,058 and $14,673 for the years ended December 31, 1992 and
1993, the period from January 1, 1994 to August 18, 1994 and the period from
August 19, 1994 to December 31, 1994, respectively.
(4) Income Taxes
Income tax benefit of $62,630 for the period from August 19, 1994 to December
31, 1994 consists of a deferred tax benefit.
Heartland Division has recognized deferred tax assets to the extent such
assets can be realized through future reversals of existing taxable temporary
differences.
(5) Liquidity
The growth of Heartland Division's business requires substantial investment
on a continuing basis to finance capital expenditures and related expenses for
subscriber growth and system development. These activities may be financed in
whole or in part by Heartland Division through cash flows from operations or
other sources of financing. The amount and timing of Heartland Division's
future capital requirements will depend upon a number of factors, many of which
are not within Heartland Division's control, including programming costs,
equipment costs, marketing expenses, staffing levels, subscriber growth and
competitive conditions. Failure to obtain any required additional financing
could have a material adverse affect on the growth of Heartland Division and
the development of its markets.
(6) Commitments
Heartland Division has entered into a series of noncancellable agreements to
purchase entertainment programming for retransmission which expire in 1995
through 1998. The agreements generally require monthly payments based upon the
number of subscribers to Heartland Division's systems, subject to certain
minimums.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of TruVision Wireless, Inc.:
We have audited the accompanying balance sheets of TruVision Wireless, Inc.
(a Delaware corporation formerly named TruVision Cable, Inc.) as of December
31, 1994 and 1995, and the related statements of operations, changes in
stockholders' equity and cash flows for the period from inception (August 25,
1994) through December 31, 1994 and for the year ended December 31, 1995. We
have also audited the statements of operations, partners' capital and cash
flows of Mississippi Wireless TV L. P. (the predecessor entity to TruVision
Wireless, Inc.) for the period from inception (November 2, 1993) to December
31, 1993 and the period from January 1, 1994 through August 24, 1994. TruVision
Wireless, Inc. and Mississippi Wireless TV L. P. are hereinafter together
referred to as "the Company." These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of TruVision Wireless, Inc. as of
December 31, 1994 and 1995, and the results of its operations and its cash
flows for the period from inception (August 25, 1994) through December 31, 1994
and for the year ended December 31, 1995, and the results of operations and
cash flows of Mississippi Wireless TV L. P. for the period from inception
(November 2, 1993) through December 31, 1993 and the period from January 1,
1994 through August 24, 1994, all in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Jackson, Mississippi,
March 26, 1996 (except with respect to
the matter discussed in Note 11,
as to which the date is April 25,
1996).
TRUVISION WIRELESS, INC.
<TABLE>
<CAPTION>
BALANCE SHEETS
(Data with respect to June 30, 1996 are unaudited)
December 31, June 30,
------------------------
1994 1995 1996
----------- ------------ ------------
ASSETS (unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents................................. $2,712,851 $88,882 $ 193,100
Short-term investments.................................... 75,000 36,300 48,500
Accounts receivable (less allowance for doubtful accounts
of $34,000, $150,426 and $217,211, respectively)........ 41,178 283,656 398,472
Other current assets...................................... 11,005 108,376 310,026
----------- ------------ ------------
Total current assets.................................... 2,840,034 517,214 950,098
----------- ------------ ------------
Property, plant and equipment:
Transmission equipment.................................... 1,197,425 3,029,214 4,487,166
Subscriber premises equipment and installation costs...... 1,841,868 6,866,806 10,603,107
Office furniture and equipment............................ 263,743 437,169 1,007,267
Vehicles.................................................. 223,996 215,344 223,346
Buildings and improvements................................ 204,340 326,090 378,837
----------- ------------ ------------
3,731,372 10,874,623 16,699,723
Less: accumulated depreciation............................ (217,676) (1,375,402) (2,475,099)
----------- ------------ ------------
3,513,696 9,499,221 14,224,624
Uninstalled subscriber premises equipment................. 1,006,854 546,316 1,709,244
----------- ------------ ------------
4,520,550 10,045,537 15,933,868
----------- ------------ ------------
License costs, net-Notes 2 and 3............................ 157,480 179,592 8,803,889
Organizational costs, net................................... 374,654 285,318 178,443
Deferred costs, net and other assets-Note 7................. 90,341 1,849,556 4,791,659
----------- ------------ ------------
Total assets............................................ $7,983,059 $12,877,217 $30,657,957
=========== ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable.................................... $813,471 $713,218 $4,791,081
Accrued expenses.......................................... 77,671 43,000 1,785,109
Short-term debt........................................... - 4,531,464 22,485,810
----------- ------------ ------------
Total current liabilities............................... 891,142 5,287,682 29,062,000
----------- ------------ ------------
Commitments and contingencies
Stockholders' equity-Notes 5 and 6:*
Series A, Convertible Preferred Stock, $.01 par value;
800,000 authorized, issued and outstanding;
(liquidation preference of $8,000,000).................. 8,000 8,000 8,000
Series B, Convertible Preferred Stock, $.01 par value;
300,000 authorized, issued and outstanding in 1995
and 1996 (liquidation preference of $3,000,000)......... - 3,000 3,000
Common Stock, $.01 par value; 6,000,000 shares authorized,
2,400,000 shares issued and outstanding................. 24,000 24,000 24,000
Additional paid-in capital................................ 7,701,679 10,698,679 10,698,679
Accumulated deficit....................................... (641,762) (3,144,144) (9,137,722)
----------- ------------ ------------
Total stockholders' equity.............................. 7,091,917 7,589,535 1,595,957
----------- ------------ ------------
Total liabilities and stockholders' equity.............. $7,983,059 $12,877,217 $30,657,957
=========== ============ ============
</TABLE>
- ------
* Restated to reflect the 2-for-1 common stock split. See Note 2.
The accompanying notes are an integral part of these financial statements.
TRUVISION WIRELESS, INC.
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS (NOTE 1)
(Data with respect to June 30, 1995 and 1996 are unaudited)
Mississippi Wireless TV L.P. TruVision Wireless, Inc.
--------------------------------------- --------------------------------------------------------------
Period from
Inception
(November 2, 1993) January 1, 1994 to August 25, 1994 to Year Ended Six Months Ended
to December 31, 1993 August 24, 1994 December 31, 1994 December 31, 1995 June 30,
-------------------- ------------------ ------------------ ----------------- ------------------------
1995 1996
----------- -------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Service revenues...... $ - $ 16,233 $ 264,491 $ 2,595,514 $ 915,833 $ 2,513,555
Installation
revenues............ - 57,137 166,043 486,100 216,606 293,701
-------------------- ------------------ ------------------ ----------------- ----------- -------------
Total revenues...... - 73,370 430,534 3,081,614 1,132,439 2,807,256
-------------------- ------------------ ------------------ ----------------- ----------- -------------
Expenses:
System operating
expenses............ 116,733 278,000 425,603 2,103,053 781,121 2,015,657
Selling, general
and administrative
expenses............ 111,186 668,009 534,431 2,086,200 547,266 2,102,118
Depreciation and
amortization........ - 82,196 167,990 1,266,301 439,355 1,439,974
-------------------- ------------------ ------------------ ----------------- ----------- -------------
Total operating
expenses.......... 227,919 1,028,205 1,128,024 5,455,554 1,767,742 5,557,749
-------------------- ------------------ ------------------ ----------------- ----------- -------------
Loss from operations.... (227,919) (954,835) (697,490) (2,373,940) (635,303) (2,750,493)
Interest income......... - 6,632 55,728 15,063 14,621 -
Interest expense........ - - - (143,505) (8,939) (728,085)
Costs of aborted offering - - - - - (2,515,000)
-------------------- ------------------ ------------------ ----------------- ----------- -------------
Net loss................ (227,919) (948,203) (641,762) (2,502,382) (629,621) (5,993,578)
Preferred dividend
requirement........... - - (227,000) (687,000) (320,000) (440,000)
-------------------- ------------------ ------------------ ----------------- ----------- -------------
Net loss attributable to
common stockholders... $(227,919) $(948,203) $(868,762) $(3,189,382) $(949,621) $(6,433,578)
==================== ================== ================== ================= =========== =============
Loss per common
share*................ N/A N/A $(0.36) $(1.33) $(0.40) $(2.68)
==================== ================== ================== ================= =========== =============
Weighted average
shares outstanding*... N/A N/A 2,400,000 2,400,000 2,400,000 2,400,000
==================== ================== ================== ================= =========== =============
</TABLE>
- ------
* Restated to reflect the 2-for-1 common stock split. See Note 2.
The accompanying notes are an integral part of these financial statements.
MISSISSIPPI WIRELESS TV L.P.
STATEMENTS OF PARTNERS' CAPITAL (NOTE 1)
For the Period from Inception (November 2, 1993) through December 31, 1993 and
the Period from January 1, 1994 through August 24, 1994
Total
General Limited Partners'
Partner Partner Capital
----------- ----------- -----------
Initial investment................ $ - $1,081,000 $1,081,000
Net loss.......................... (2,279) (225,640) (227,919)
----------- ----------- -----------
Balance, December 31, 1993........ (2,279) 855,360 853,081
Net loss.......................... (170,677) (777,526) (948,203)
Partners' contributions........... 229,162 361,000 590,162
----------- ----------- -----------
Balance, August 24, 1994.......... $ 56,206 $ 438,834 $ 495,040
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
TRUVISION WIRELESS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (NOTE 1)
(Data with respect to June 30, 1996 are unaudited)
<TABLE>
<CAPTION>
Series A Series B
Convertible Convertible
Preferred Stock Preferred Stock Common Stock* Additional
--------------- --------------- ------------------ Paid-in Accumulated
Shares Amount Shares Amount Shares Amount Capital* Deficit
-------- ------ -------- ------ ---------- ------- ---------- -----------
<S>
Exchange of the net assets of <C> <C> <C> <C> <C> <C> <C> <C>
Mississippi Wireless TV L.P.
for common stock of the
Company......................... - $ - - $ - 2,400,000 $24,000 $ 471,040 $ -
Sale of preferred stock, net of
issuance costs of $761,361 ..... 800,000 8,000 - - - - 7,230,639 -
Net loss for the period from
inception through December 31,
1994............................ - - - - - - - (641,762)
-------- ------ -------- ------ ---------- ------- ----------- -------------
*Balance, December 31, 1994....... 800,000 8,000 - - 2,400,000 24,000 7,701,679 (641,762)
Net loss.......................... - - - - - - - (2,502,382)
Sale of preferred stock........... - - 300,000 3,000 - - 2,997,000 -
-------- ------ -------- ------ ---------- ------- ----------- -------------
Balance, December 31, 1995........ 800,000 8,000 300,000 3,000 2,400,000 24,000 10,698,679 (3,144,144)
Net loss.......................... - - - - - - - (5,993,578)
-------- ------ -------- ------ ---------- ------- ----------- -------------
Balance, June 30, 1996............ 800,000 $8,000 300,000 $3,000 2,400,000 $24,000 $10,698,679 $(9,137,722)
======== ====== ======== ====== ========== ======= =========== =============
</TABLE>
- ------
* Restated to reflect the 2-for-1 common stock split. See Note 2.
The accompanying notes are an integral part of these financial statements.
TRUVISION WIRELESS, INC.
STATEMENTS OF CASH FLOWS (NOTE 1)
(Data with respect to June 30, 1995 and 1996 are unaudited)
<TABLE>
<CAPTION>
Mississippi Wireless TV L.P. TruVision Wireless, Inc.
----------------------------------- -------------------------------------------------------------
Period from
inception Six Months Ended
(November 2, 1993) January 1, 1994 August 25, 1994 June 30,
through to to Year Ended
December 31, 1993 August 24, 1994 December 31, 1994 December 31, 1995 1995 1996
------------------ --------------- ----------------- ----------------- ------------ ------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss...................... $ (227,919) $ (948,203) $ (641,762) $ (2,502,382) $ (629,621) $(5,993,578)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation and
amortization.............. - 82,196 167,990 1,266,301 439,355 1,439,974
Provision for losses on
accounts receivable....... - - 34,000 126,370 22,722 22,038
Changes in operating assets
and liabilities:
Decrease (increase) in
accounts receivable..... - (105,395) (23,783) (368,848) (88,384) (136,854)
Decrease (increase) in other
current assets.......... - (76,969) 63,014 (97,371) (118,923) (201,650)
Increase (decrease) in
accounts payable........ 17,785 431,319 364,367 (100,254) 170,938 4,077,863
Increase (decrease) in
accrued liabilities..... - - 77,671 (34,671) (59,747) 1,742,109
------------------ --------------- ----------------- ----------------- ------------ -------------
Cash provided by (used in)
operating activities: ........ (210,134) (617,052) 41,497 (1,710,855) (263,660) 949,902
------------------ --------------- ----------------- ----------------- ------------ -------------
Cash flows from investing activities:
Capital expenditures.......... (177,000) (2,555,318) (1,896,615) (6,682,712) (3,391,291) (6,988,028)
Payments for license and
organizational costs........ - (541,823) (165,505) - - (8,352,000)
Increase in deferred costs and
other assets................ - - - (1,250,566) (342,370) (1,947,802)
Deposits for acquisitions..... - - - (100,000) - (1,500,000)
Deposit for FCC auction....... - - - (450,000) - -
Proceeds from short-term
investments................. - - - 38,700 38,700 -
Purchase of short-term
investments................. - - (75,000) - - (12,200)
------------------ --------------- ----------------- ----------------- ------------ -------------
Net cash used in investing
activities.................... (177,000) (3,097,141) (2,137,120) (8,444,578) (3,694,961) (18,800,030)
------------------ --------------- ----------------- ----------------- ------------ -------------
Cash flows from financing activities:
Proceeds from issuance of
preferred stock............. - - 8,000,000 3,000,000 - -
Preferred stock issuance
costs....................... - - (761,361) - - -
Principal payments on notes
payable..................... - - (3,308,000) - - -
Proceeds from issuance of
short-term debt............. - 3,308,000 - 4,531,464 1,396,302 17,954,346
Proceeds from partners'
contributions............... 1,081,000 590,162 - - - -
------------------ --------------- ----------------- ----------------- ------------ ------------
Net cash provided by financing
activities.................... 1,081,000 3,898,162 3,930,639 7,531,464 1,396,302 17,954,346
------------------ --------------- ----------------- ----------------- ------------ -------------
Net increase (decrease) in
cash and cash equivalents..... 693,866 183,969 1,835,016 (2,623,969) (2,562,319) 104,218
Cash and cash equivalents at
beginning of period........... - 693,866 877,835 2,712,851 2,712,851 88,882
------------------ --------------- ----------------- ----------------- ------------ -------------
Cash and cash equivalents
at end of period.............. $ 693,866 $ 877,835 $ 2,712,851 $ 88,882 $ 150,532 $ 193,100
================== =============== ================= ================= ============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
TRUVISION WIRELESS, INC.
NOTES TO FINANCIAL STATEMENTS
(Data with respect to June 30, 1996 and 1995 are unaudited)
NOTE 1: THE COMPANY
History and Organization
TruVision Cable, Inc. ("TruVision" or the "Company"), a Delaware corporation,
was incorporated in April 1994, and began business activities on August 25,
1994. The Company's name was changed to TruVision Wireless, Inc. on February 6,
1996. The Company is engaged in building, managing and owning wireless cable
systems which retransmit television and programming received at a head-end via
encryptic microwave signals from multichannel broadcast towers to subscribers
within an approximate 40 mile radius of each tower. The Company has exclusive
lease rights to substantially all of the ITFS wireless cable channels in the
State of Mississippi licensed by the Federal Communications Commission ("FCC").
Mississippi Wireless TV L. P. ("MWTV"), a Mississippi limited partnership,
was formed on November 2, 1993. For the period from inception through August
24, 1994, MWTV's business activities consisted primarily of development and
initial operational activities related to certain of its wireless cable rights
which had been assigned to it by an affiliate.
TruVision began business activities upon the contribution of all of the net
assets of MWTV in exchange for 1,200,000 shares (2,400,000 after the 2-for-1
common stock split-see Note 2) of common stock in the Company. At the same
time, an unrelated party, Chase Venture Capital Associates ("CVCA") (formerly
Chemical Venture Capital Associates), a California limited partnership,
contributed $8,000,000 cash in exchange for 800,000 shares of Series A
Convertible Preferred Stock. This transfer of the net assets of MWTV to
TruVision has been accounted for as a transfer of net assets between related
parties, and accordingly, the Company has recorded the net assets received in
the exchange at MWTV's historical carrying values.
The Company is developing its Mississippi wireless cable operations in two
phases. Phase I will consist of five markets which cover West, Central and
South Mississippi. In May 1994, the Company placed its first market in
operation in the Jackson, Mississippi area. In July 1995, the Company placed
its second market in operation in the Delta area. A third market, serving
portions of the Gulf Coast, is expected to begin operations in the first
quarter of 1996. Construction plans call for the development of the additional
markets within the Phase I area.
Plans for the development of Phase II, which consists of four markets
primarily in North Mississippi, have not been finalized. Pursuant to a
stockholders' agreement between CVCA and MWTV, the Company has the option to
complete development of Phase II within a five-year period. Under the terms of
the option, each of the parties to the agreement will contribute their
respective portions of the development costs in cash. In the event the Company
participates in an initial public offering or sale prior to commencing
development of each cell of Phase II, Vision Communications, Inc. ("VCI"), an
entity owned primarily by the general partner of MWTV, will be eligible to
receive a payment (the "Phase II Payment") for its contribution of frequency
rights equal to $1,125,000 per market (total of $4.5 million), payable in cash
or in shares of Common Stock of the Company based on the fair value of such
shares at the time of the Phase II Payment. See Note 10.
Risks and Other Factors
The Company has recorded net losses in each period of its operations. At
December 31, 1995, the Company's accumulated deficit was approximately
$3,144,000 ($9,137,722 at June 30, 1996). Losses incurred since inception are
attributable primarily to start-up costs, marketing and sales costs
and depreciation of assets used in the Company's wireless cable systems in
various markets. The Company expects to continue to experience net losses while
it develops and expands its wireless cable systems, although mature individual
systems of the Company may reach profitability sooner than the Company on a
consolidated basis. In the opinion of management, the Company will ultimately
achieve positive cash flow and net income sufficient to realize its investment
in its assets; however, there can be no assurance that the Company will
generate sufficient operating revenues to achieve positive cash flow or net
income.
The growth of the Company's business requires substantial investment on a
continuing basis to finance capital expenditures and related expenses for
expansion of the Company's customer base and system development. Management
expects that the Company will require significant additional financings,
through debt or equity financings, joint ventures or other arrangements, to
achieve its targeted subscriber levels in its current business plans in its
operating systems and target markets and to cover ongoing operating losses.
Additional debt or equity also may be required to finance future acquisitions
of wireless cable companies, wireless cable systems or channel rights. While
management believes the Company will be able to obtain additional debt or
equity capital on satisfactory terms to meet its future financing needs, there
can be no assurance that either additional debt or equity capital will be
available.
The Company is dependent on leases with unaffiliated third parties for
substantially all of its wireless cable channel rights. ITFS licenses generally
are granted for a term of 10 years and are subject to renewal by the FCC. MDS
licenses generally will expire on May 1, 2001 unless renewed. FCC licenses also
specify construction deadlines which, if not met by the Company or extended by
the FCC, could result in the loss of the license. There can be no assurance
that the FCC will grant any particular extension request or license renewal
request. The remaining initial terms of most of the Company's ITFS channel
leases are approximately five to 10 years. The Company's MDS leases generally
are for substantially longer terms and the Company has acquired options to
purchase a majority of the underlying MDS licenses. The use of wireless cable
channels by the license holders is subject to regulation by the FCC and the
Company is dependent upon the continuing compliance by channel license holders
with applicable regulations. The termination or non-renewal of a channel lease
or of a channel license, or the failure to grant an application for an
extension of the time to construct an authorized station, would result in the
Company being unable to deliver programming on the channels authorized pursuant
thereto. Although the Company does not believe that the termination of or
failures to renew a single channel lease other than that with EdNet would
materially adversely affect the Company, several of such terminations or
failure to renew in one or more markets that the Company actively serves or
intends to serve could have a material adverse effect on the Company. In
addition, the termination, forfeiture, revocation or failure to renew or extend
an authorization or license held by the Company's lessors could have a material
adverse effect on the Company.
The Company contracts for the commercial use of 20 ITFS channels in various
markets throughout the state of Mississippi with EdNet. The commercial use of
these channels represents the majority of the Company's channels in Mississippi
and the loss of, or inability to renew, the EdNet Agreement would have a
material adverse effect on the Company's operations. See Note 3.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that effect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Revenue Recognition
Revenues from monthly service charges are recognized as the service is
provided to the customer. Customers are billed in the month services are
rendered. Installation fees are recognized as income to the extent the Company
has incurred direct selling costs.
Allowance for Doubtful Accounts
The Company recognizes an allowance for doubtful accounts to the extent it
believes receivables are not collectible. The provision for doubtful accounts
was approximately $34,000 and $126,000 for 1994 and 1995, respectively. No
writeoffs were made in 1994. Writeoffs of accounts receivable were
approximately $45,000 in 1995.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities
of 90 days or less to be cash equivalents.
Short-term Investments
Short-term investments represent certificates of deposit of approximately
$75,000 in 1994, $36,000 in 1995 and $49,000 in 1996 restricted for use under
a programming contract.
System Operating Expenses
System operating expenses consist principally of programming fees, license
fees, tower rental, maintenance, engineering and other costs incidental to
providing service to customers. Administrative and marketing expenses incurred
by systems during their launch period are expensed as incurred.
System Launch Costs
The costs incurred to prepare a market for launch (marketing, pre-opening
administration, training, etc.) are expensed in the period incurred.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is recorded on
the straight-line basis for financial reporting purposes. Costs incurred for
repair and maintenance of property, plant and equipment are charged to expense
when incurred. Costs incurred for renewals and improvements are capitalized.
Costs of subscriber equipment, including installation labor and other direct
installation costs, are capitalized. Subscriber premises equipment and
installation costs are depreciated using a composite method over five years
which factors in the Company's estimates of useful lives of recoverable
equipment and average subscriber lives of nonrecoverable installation costs.
Materials and supplies used to provide service to customers are included in
office furniture and equipment and are valued at the lower of cost or market.
Depreciation is recorded over the estimated useful lives as follows:
Transmission equipment................................. 5-10 years
Subscriber premises equipment and installation costs... 5 years
Office furniture and equipment......................... 10 years
Vehicles............................................... 5 years
Buildings and improvements............................. 31 years
License and Organizational Costs
License costs include the costs of acquiring the rights to use certain FCC
frequencies to broadcast programming to the Company's customers. These costs,
net of amortization of $6,000 and $25,000 at December 31, 1994, and 1995,
respectively, and $250,000 at June 30, 1996, are being amortized over a
ten-year period beginning with inception of service in a market. The Company
from time to time reevaluates the carrying amounts of the licenses based on
estimated undiscounted future cash flows as well as the amortization period to
determine whether current events or circumstances warrant adjustments to the
carrying amounts or a revised estimate of the useful life.
Organizational costs include legal fees and other professional fees and
expenses incident to organizing the Company. These costs, net of amortization
of $28,000 and $118,000 at December 31, 1994 and 1995, respectively, and
$225,000 at June 30, 1996, are being amortized over a five-year period.
Income Taxes
Income taxes are provided using an asset and liability approach. The current
provision for income taxes represents actual or estimated amounts payable or
refundable on tax returns filed or to be filed for each year. Deferred tax
assets and liabilities are recorded for the estimated future tax effects of (a)
temporary differences between the tax basis of assets and liabilities and
amounts reported in balance sheets, and (b) operating loss and tax credit carry
forwards. The overall change in deferred tax assets and liabilities for the
period measures the deferred tax expense for the period. Effects of changes in
enacted tax laws on deferred tax assets and liabilities are reflected as
adjustments to tax expense in the period of enactment. The measurement of
deferred tax assets may be reduced by a valuation allowance based on judgmental
assessment of available evidence if deemed more likely than not that some or
all of the deferred tax assets will not be realized.
The following summarizes the Company's deferred tax assets and liabilities as
of December 31, 1994 and 1995:
December 31,
---------------------
1994 1995
-------- ----------
Deferred tax assets:
Net operating loss carryforwards........ $287,820 $1,827,540
Allowance for bad debt.................. 13,260 62,400
-------- ----------
Total tax assets..................... 301,080 1,889,940
Valuation allowance.................. 249,990 1,224,210
-------- ----------
51,090 665,730
-------- ----------
Deferred tax liabilities:
Depreciation............................ 25,350 540,150
Deferred cost........................... 25,740 125,580
-------- ----------
Total deferred tax liabilities...... 51,090 665,730
-------- ----------
Net deferred tax asset.................... $ - $ -
======== ==========
The Company recognizes a deferred tax asset to the extent such amounts offset
deferred tax liabilities. The $974,000 change in the valuation allowance from
December 31, 1994 to December 31, 1995 is due primarily to the increase in the
net operating loss carryforwards, which gives rise to deferred tax assets, over
the increase in the temporary differences related to depreciation, which gives
rise to deferred tax liabilities.
The Company has net operating loss carryforwards for Federal income tax
purposes of approximately $4,686,000 as of December 31, 1995. The carryforwards
expire in years 2009 and 2010.
Stock Split
On March 26, 1996, the Board of Directors authorized a 2-for-1 stock split in
the form of a 100% stock dividend which will be distributed on April 15, 1996
to shareholders of record on March 15, 1996. Unless otherwise indicated, all
per share data, number of common shares and the statements of stockholders'
equity have been retroactively adjusted to reflect this stock split.
Net Loss Per Common Share
Net loss per common share is based on the net loss attributable to the
weighted average number of common shares outstanding during the period
presented (2,400,000 as of December 31, 1994 and 1995 and June 30, 1995 and
1996.) Conversion of the Series A and B Convertible Preferred Stock into Common
Stock is not assumed because the impact is antidilutive. Shares issuable upon
exercise of stock options are antidilutive and have been excluded from the
calculation. For all periods presented, fully diluted loss per common share and
primary loss per common share are the same.
Statement of Cash Flows
In 1994, the Company issued 2,400,000 shares of Class B Common Stock to MWTV
in exchange for assets with a carrying amount of $4,252,144 and liabilities of
$3,757,104. This exchange has been treated as a non-cash transaction except for
the cash balances of $877,835 acquired from MWTV. No interest or income taxes
were paid in 1994. Interest of $137,385 was paid during the year ended December
31, 1995 of which approximately $65,000 was capitalized. For the six months
ended June 30, 1996 interest of $152,832 was paid. No interest was paid for the
six months ended June 30, 1995 and no interest was capitalized for the six
month periods ended June 30, 1995 and 1996. No income taxes were paid for any
period presented.
Disclosure about the Fair Value of Financial Instruments
The fair value of the Company's financial instruments (which consist of cash,
accounts receivable and payable, and short-term debt) approximate their
carrying amounts.
Recently Issued Accounting Standards
In 1995, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of.
The Statement does not apply to deferred acquisition costs or deferred tax
assets. The Company plans to adopt this statement effective January 1, 1996;
however, management believes that its adoption will not have a material effect
on the Company's financial statements.
In October 1995, the FASB issued SFAS No. 123, Accounting for Stock Based
Compensation, which generally requires disclosure of additional information
concerning stock based employee compensation arrangements. The Company plans to
adopt SFAS No. 123 effective January 1, 1996.
Unaudited Interim Financial Statements
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and Rule 10.01 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the six months ended June 30, 1996 are not necessarily
indicative of the results that will be expected for the year ending December
31, 1996.
NOTE 3: LICENSE CONTRACTS
In August 1993, VCI signed a renewable long-term agreement with the
Mississippi EdNet Institute, Inc. ("EdNet"), a non-profit, quasi-governmental
body which manages the licenses designated to various state educational
entities. Subsequently, VCI assigned its rights under the EdNet agreement to
the Company. See Note 1. This lease gives the Company exclusive rights to
utilize excess air time (that portion of a channel's airtime available for
commercial broadcasting according to FCC regulations) on the 20 ITFS channels
in Mississippi. The terms of the channel leases are 10 years, commencing in
1992. The contract provides for the monthly payment of $0.05 per subscriber per
channel or, beginning one year after operating the first market, a minimum of
$7,500 per month. Expense for 1994 and 1995 related to this agreement was
$9,300 and $69,000, respectively.
The contract also requires TruVision to make advances to EdNet during the
first 24 months of operations in the amount of $6,000 per month. These advances
are being recovered as a credit against license fees owed to EdNet.
The agreement with EdNet contains the following major provisions and
requirements to be met by TruVision:
* The system is to ultimately cover at least 95% of the population of the
licensed Mississippi geographic coverage area (including the areas designated
as Phase II by the Company).
* The system must be interconnected by a two-way audio/video link between
TruVision/EdNet transmission sites and Mississippi Authority for Educational
Television headquarters in Jackson, Mississippi. The cost of this
interconnection must be borne by TruVision within certain limits.
* TruVision will provide standard installations at locations as EdNet may
designate.
* TruVision will install and equip an electronic classroom in each of its
Mississippi Markets.
* TruVision will complete the network by July 1, 1998.
The Company capitalizes the cost incurred to comply with the facility
installation and interconnection requirements of the EdNet Agreement and
depreciates such cost over the estimated life of the related equipment.
NOTE 4: SHORT-TERM DEBT
Short-term debt consists of the following:
December 31,
--------------- June 30,
1994 1995 1996
---- ---------- ---------
Borrowings under $6,000,000 revolving
line of credit with a bank, due June 30,
1996, with interest due monthly at 1%
above the bank's prime rate (9.50% at
December 31, 1995)........................... $ - $4,531,464 $4,026,795
Borrowings under the Interim Credit
Facility with CVCA, due on demand after
June 30, 1996, with interest of 10% due
at maturity. See Note 10..................... - - 12,000,000
Borrowings under interim credit facility
with Wireless One, Inc. See Note 11.......... - - 5,722,482
Other.......................................... - - 736,533
The borrowings under the revolving line of credit are secured by
substantially all of the assets of the Company, including licenses, accounts
receivable, inventory, property and equipment, and contract rights.
Additionally, the borrowings are guaranteed by the Company's president and a
stockholder. The Company may prepay its obligations without penalty at any
time.
NOTE 5: STOCK OPTION PLANS AND EMPLOYMENT CONTRACTS
The Company has established a stock option plan for executives and other key
employees. The plan provides for a maximum of 250,000 shares of Common Stock to
be reserved for such options. Terms and conditions of the Company's options
generally are at the discretion of the board of directors; however, no options
are exercisable after June 8, 2004.
In August 1994, the Company granted options totaling 191,490 shares to two
key employees at an exercise price of $5.00 per share. In June 1995 and August
1995, options to purchase shares of 30,000 and 20,000, respectively, were
granted to two additional key employees at a price of $5.00 per share. The
options granted in 1995 vest over a five-year period. As of December 31, 1995,
options for 140,426 shares are exercisable. No compensation expense has been
recorded on these options granted since the option price was equal to the
estimated fair market value of the option shares on the date the options were
granted.
NOTE 6: PREFERRED AND COMMON STOCK RIGHTS
In October 1995, the Company issued 300,000 shares of Series B Convertible
Preferred Stock for gross proceeds of $3,000,000. Pursuant to a prior
commitment, CVCA acquired 270,000 shares and 30,000 shares were issued to a
common stockholder. MWTV has pledged its shares of the Company's Common Stock
to CVCA.
Series A and Series B Convertible Preferred Stock is senior to all other
shares of stock. Convertible Preferred Stock dividend rights are cumulative at
8% per annum based on a stated value of $10 per share. As of December 31, 1994
and 1995, the aggregate amount of Convertible Preferred Stock dividends in
arrears was approximately $227,000 and $914,000, respectively ($547,000 and
$1,354,000, respectively, at June 30, 1995 and 1996). No preferred dividends
have been declared. See Note 11.
In the event of any liquidation, holders of Series A and Series B Convertible
Preferred Stock would first be entitled to receive the greater of (i) the total
$11,000,000 liquidation preference ($8,000,000 for Series A and $3,000,000 for
Series B) plus all accrued but unpaid dividends, or (ii) the amount that would
have been paid, or the value of property that would have been distributed if,
prior to liquidation, the shares had been converted to Common Stock plus all
accrued but unpaid dividends.
Each share of Convertible Preferred Stock carries voting rights as if
converted into shares of Common Stock and, at the option of the holder, is
convertible at any point in time into one fully paid, nonassessable share (two
shares after the 2-for-1 common stock split-see Note 2) of Common Stock plus
cash equal to accrued but unpaid dividends. If the conversion is not made
pursuant to an initial public offering, TruVision may, at its option, issue a
promissory note in lieu of paying the dividends.
The holders of Convertible Preferred Stock are also entitled to elect two of
the five member Board of Directors of the Company. Pursuant to the terms of a
stockholder's agreement certain restrictions have been placed on the
stockholders' ability to vote on specified matters.
In October 1995, the corporate charter was amended to combine Class A and
Class B Common Stock into a single class of $0.01 par value, Common Stock.
Holders of Common Stock are not eligible to receive dividends as long as any
shares of Convertible Preferred Stock are outstanding.
In the event of liquidation, after distribution in full of preferential
amounts to be distributed to holders of Convertible Preferred Stock, the
holders of Common Stock would receive distributions in proportion to the number
of shares held.
NOTE 7: DEFERRED COSTS AND OTHER ASSETS
December 31,
------------------
June 30,
1994 1995 1996
------- ---------- ----------
Deferred costs and other assets
consist of:
Deferred merger, financing and
acquisition costs -Note 11............... $ - $1,027,216 $2,464,637
Advances to EdNet-Note 3................... 84,000 132,000 102,924
Deposits for future acquisitions
-Note 10................................. - 100,000 142,153
FCC auction deposit........................ - 450,000 1,450,000
Other...................................... 6,341 140,340 631,945
------- ---------- ----------
$90,341 $1,849,556 $4,791,659
======= ========== ==========
Deferred acquisition costs consist primarily of professional fees,
engineering costs, travel costs and other related costs associated with the
acquisition of channel rights, licenses and related cable systems which are
currently subject to letters of intent or definitive agreements (see Note 10).
Such costs will be amortized over periods ranging from five to 10 years,
beginning when each acquisition is consummated, or, if the acquisition is not
consummated, written off. At June 30, 1996 deferred merger and financing costs
relate to a proposed public offering of common stock and Senior Discount Notes
and the pending merger with Wireless One, Inc. See Note 11.
NOTE 8: COMMITMENTS AND CONTINGENCIES
The Company leases office space, antenna space and certain channel broadcast
rights under noncancelable operating leases with remaining terms ranging from
four to eight and one-half years. The following is a schedule by years of
future minimum rentals due under the leases at December 31, 1995:
1996............................... $369,920
1997............................... 397,744
1998............................... 309,657
1999............................... 190,228
2000............................... 132,502
Thereafter......................... 225,711
Rent under these leases was $55,004 for the period August 25, 1994 to
December 31, 1994 and $254,512 for the year ended December 31, 1995.
The Company is participating in an auction conducted by the FCC for rights to
obtain use of available MDS commercial channels in certain basic trading areas.
The Company's outstanding bids for these rights aggregate approximately $16
million. If the Company is the highest bidder in any, or all, of the areas, the
Company will be required to pay up to $14 million (net of a small business
bidding credit), a portion of which will be financed by the U.S. government.
The Company is involved in certain legal proceedings generally incidental to
its business. While the results of any litigation contain an element of
uncertainty, management believes that the outcome of any known or threatened
legal proceeding will not have a material effect on the Company's financial
position or results of operations.
NOTE 9: CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially expose the Company to concentrations
of credit risk, consist primarily of cash and accounts receivable. The Company
has not experienced any losses on its deposits. Subscriber accounts receivable
collectibility is impacted by economic trends in each of the Company's markets.
Such receivables are typically collected within 30 days, and the Company has
provided an allowance which it believes is adequate to absorb losses from
uncollectible accounts.
NOTE 10: BUSINESS COMBINATIONS AND PROPOSED FINANCING TRANSACTIONS
In February 1996, TruVision acquired all the outstanding common stock of
BarTel, Inc., a company holding wireless cable license rights in the Demopolis
and Tuscaloosa, Alabama Markets for cash of approximately $1.7 million and, if
certain conditions are met, notes payable of $652,000. Accordingly, BarTel,
Inc.'s financial position at June 30, 1996 and the results of its operations
for the period from the date of the consummation of the acquisition to June 30,
1996, are reflected in the Company's results for the six months ended June 30,
1996. Additionally, TruVision has entered into a definitive agreement to
purchase substantially all of the assets of Madison Communications, Inc. and
Beasley Communications, Inc. ("Madison"), a wired and wireless cable provider
located near Huntsville, Alabama, for approximately $6.0 million.
In March 1996, the Company entered into a letter of intent to acquire
substantially all of the assets of Shoals Wireless, Inc., a wireless cable
provider located in Lawrenceburg, Tennessee, for $1,180,000 in cash.
TruVision has also entered into agreements to purchase licenses, channel
rights and equipment in several other markets for cash of approximately $11.9
million. None of these markets is currently operating and no significant
liabilities are expected to be assumed in connection with these asset
acquisitions.
The Company expects to finance the acquisitions described above with the
short-term line of credit discussed in Note 4 and with an Interim Facility of
up to $12.0 million provided by CVCA in the form of a 10% note payable (due on
demand after June 30, 1996). See Notes 4 and 11.
NOTE 11: SUBSEQUENT EVENTS
On April 25, 1996, the Company entered into an agreement and plan of merger
(the "Agreement") with Wireless One, Inc. ("Wireless One"), in which Wireless
One will exchange approximately 3.4 million shares of its common stock for all
of the Company's outstanding shares in a transaction valued at $45 million. The
transaction is expected to close by late July 1996. In connection with the
consummation of the Agreement it is expected that all of the Shares of Series A
and B Convertible Preferred Stock will be converted into shares of Common Stock
and all accrued and unpaid preferred dividends ($1,354,000 at June 30, 1996)
will be paid.
On May 6, 1996, Wireless One issued the Company two short-term lines of
credit, a $1.5 million line of credit which is to be used to fund working
capital purposes and pay off the borrowings under the bank revolving line of
credit ("Working Capital Line of Credit") and a $9 million line of credit to be
used to fund acquisition needs ("Acquisition Line of Credit"), together the
"Lines of Credit". The Acquisition Line of Credit will increase to $15 million
upon repayment of the Working Capital Line of Credit. The Lines of Credit are
secured by substantially all of the assets of the Company and accrue interest
at Wireless One's borrowing rate of 13%. Principal and interest are due on the
tenth business day following the earliest of (1) the date of the consummation
of the Agreement, (2) December 31, 1996, or (3) the date the Agreement is
rescinded.
Prior to the Agreement, the Company was pursuing a public offering of Common
Stock and Senior Discount Notes (the "Offerings"). Concurrent with the
Agreement, the Company withdrew the Offerings. Certain costs related to the
Offerings and the Agreement of approximately $474,000 were deferred at June 30,
1996. Costs related to the Offerings which did not relate to the Agreement or
a related public offering of Wireless One were written off.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Madison Communications, Inc. and
Beasley Communications, Inc.:
We have audited the accompanying combined balance sheets of Madison
Communications, Inc. and Beasley Communications, Inc. (Alabama corporations) as
of December 31, 1994 and 1995 and the related combined statements of operations
and accumulated deficit and cash flows for the years ended December 31, 1993,
1994 and 1995. These combined financial statements are the responsibility of
the Companies' management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Madison
Communications, Inc. and Beasley Communications, Inc. as of December 31, 1994
and 1995 and the combined results of their operations and their combined cash
flows for the years ended December 31, 1993, 1994 and 1995, in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
Jackson, Mississippi,
January 19, 1996 (except with respect
to the matter discussed in note 6,
as to which the date is February 6,
1996).
MADISON COMMUNICATIONS, INC. AND BEASLEY COMMUNICATIONS, INC.
COMBINED BALANCE SHEETS (Note 1)
(Data with respect to June 30, 1996 are unaudited)
<TABLE>
<CAPTION>
December 31, June 30,
--------------------------- -------------
1994 1995 1996
------------- ------------- -------------
(unaudited)
ASSETS
<S> <C> <C> <C>
Current assets:
Cash......................................... $ 5,705 $ 39,711 $ 100,644
Accounts receivable (less allowance for
doubtful accounts of $16,302, $13,888 and
$19,673, respectively)..................... 1,068 3,513 -
Other current assets......................... 7,804 13,401 287
------------- ------------- -------------
Total current assets......................... 14,577 56,625 100,931
------------- ------------- -------------
Property, plant and equipment:
Cable system-wireless...................... 2,337,362 2,462,318 2,500,569
Cable system-wired......................... 1,042,923 1,062,824 1,065,641
Machinery and equipment.................... 155,753 130,494 130,494
Buildings, leasehold improvements, office
furniture and equipment.................. 34,605 40,071 40,071
Land....................................... 50,000 50,000 50,000
------------- ------------- -------------
3,620,643 3,745,707 3,786,775
Less: accumulated depreciation............. (1,944,781) (2,499,752) (2,753,203)
------------- ------------- -------------
1,675,862 1,245,955 1,033,572
Uninstalled subscriber premises equipment.... 18,195 10,431 12,538
------------- ------------- -------------
1,694,057 1,256,386 1,046,110
------------- ------------- -------------
License costs, net-(note 2).................. 73,333 66,666 63,332
Other assets................................. 1,835 1,835 1,835
------------- ------------- -------------
Total assets............................. $ 1,783,802 $ 1,381,512 $ 1,212,208
============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................... $ 84,042 $ 64,874 $ 60,613
Accrued expenses, primarily programming
costs.................................... 275,294 319,424 332,977
Deferred income............................ 28,055 20,576 17,560
Borrowings under line of credit (note 3)... 275,000 125,000 75,000
------------- ------------- -------------
Total current liabilities................ 662,391 529,874 486,150
------------- ------------- -------------
Commitments and contingencies (note 4)
Stockholders' equity
Common Stock; $1 par value; 1,000 shares
authorized issued and outstanding........ 1,000 1,000 1,000
Additional paid-in capital................. 2,475,192 2,475,192 2,475,192
Accumulated deficit........................ (1,354,781) (1,624,554) (1,750,134)
------------- ------------- -------------
Total stockholders' equity............... 1,121,411 851,638 726,058
------------- ------------- -------------
Total liabilities and stockholders'
equity................................. $ 1,783,802 $ 1,381,512 $ 1,212,208
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
MADISON COMMUNICATIONS, INC. AND BEASLEY COMMUNICATIONS, INC.
COMBINED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(Data with respect to June 30, 1995 and 1996 are unaudited)
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
----------------------------------------- ---------------------------
1993 1994 1995 1995 1996
------------- ------------- ------------- ------------- -------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Service revenues........................ $ 1,426,971 $ 1,493,337 $ 1,543,470 $ 777,592 $ 782,283
Installation revenues................... 68,026 63,400 38,677 - -
------------- ------------- ------------- ------------- -------------
Total revenues........................ 1,494,997 1,556,737 1,582,147 777,592 782,283
------------- ------------- ------------- ------------- -------------
Expenses:
System operating expenses............... 727,124 814,715 888,707 311,901 301,840
General and administrative
expenses.............................. 386,911 402,897 404,804 305,642 374,095
Depreciation and amortization........... 578,739 626,531 577,240 296,193 256,784
------------- ------------- ------------- ------------- -------------
Total operating expenses.............. 1,692,774 1,844,143 1,870,751 913,736 932,719
------------- ------------- ------------- ------------- -------------
Loss from operations...................... (197,777) (287,406) (288,604) (136,144) (150,436)
Other income (expense):
Other income............................ 40,793 43,180 43,414 19,430 30,060
Gain (loss) on sale of assets........... 103,583 - (7,143) - -
Interest (expense)...................... (55,465) (31,090) (17,440) (10,619) (5,204)
------------- ------------- ------------- ------------- -------------
Net loss.................................. (108,866) (275,316) (269,773) (127,333) (125,580)
Accumulated deficit-beginning of period... (970,599) (1,079,465) (1,354,781) (1,354,781) (1,624,554)
------------- ------------- ------------- ------------- -------------
Accumulated deficit-end of period......... $(1,079,465) $(1,354,781) $(1,624,554) $(1,482,114) $(1,750,134)
============= ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
MADISON COMMUNICATIONS, INC. AND BEASLEY COMMUNICATIONS, INC.
COMBINED STATEMENTS OF CASH FLOWS
(Data with respect to June 30, 1995 and 1996 are unaudited)
<TABLE>
<CAPTION> Six Months
Year Ended December 31, Ended June 30,
----------------------------------- ----------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows provided by operating activities:
Net loss............................................... $(108,866) $(275,316) $(269,773) $(127,333) $(125,580)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization........................ 578,739 626,531 577,240 296,193 256,784
(Gain) loss on sale of assets........................ (103,583) - 7,143 - -
Provision for losses on accounts receivable.......... 22,500 18,000 15,505 9,000 9,000
(Increase) in other assets........................... (125) (65) - - -
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable......... (17,720) (10,184) (17,950) (7,931) (5,487)
(Increase) decrease in other current assets........ (8,110) 16,418 (5,597) 7,804 13,115
Increase (decrease) in accounts payable............ 3,170 39,575 (19,168) (378) (4,261)
Increase in accrued expenses....................... 127,134 91,610 44,130 53,191 13,553
Increase (decrease) in deferred income............. 65 5,165 (7,479) (3,225) (3,016)
----------- ----------- ----------- ---------- ----------
Cash flows provided by operating activities.............. 493,204 511,734 324,051 227,321 154,108
----------- ----------- ----------- ---------- ----------
Cash flows used in investing activities:
Capital expenditures................................... (329,640) (220,778) (143,545) (88,554) (43,175)
Proceeds from sale of assets........................... 180,000 - 3,500 - -
----------- ----------- ----------- ---------- ----------
Net cash used in investing activities.................... (149,640) (220,778) (140,045) (88,554) (43,175)
----------- ----------- ----------- ---------- ----------
Cash flows used in financing activities:
Payment on bank overdraft.............................. (21,815) - - - -
Payments on line of credit............................. (300,000) (307,000) (150,000) (100,000) (50,000)
----------- ----------- ----------- ---------- ----------
Net cash used by financing activities.................... (321,815) (307,000) (150,000) (100,000) (50,000)
----------- ----------- ----------- ---------- ----------
Net increase (decrease) in cash and cash equivalents..... 21,749 (16,044) 34,006 38,767 60,933
Cash and cash equivalents at beginning of period......... - 21,749 5,705 5,705 39,711
----------- ----------- ----------- ---------- ----------
Cash and cash equivalents at end of period............... $ 21,749 $ 5,705 $ 39,711 $ 44,472 $100,644
=========== =========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
MADISON COMMUNICATIONS, INC. AND BEASLEY COMMUNICATIONS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) The Companies
(a) History and Organization
Madison Communications, Inc. ("Madison"), an Alabama corporation, was formed
and began operations on July 26, 1989. Beasley Communications, Inc.
("Beasley"), an Alabama corporation, was formed on June 16, 1994. The
shareholders of Madison and Beasley are the same and the business operations
are generally conducted as if Madison and Beasley were a single entity.
Accordingly, the financial statements of Madison and Beasley are presented on a
combined basis. Madison and Beasley are hereafter referred to as "the Company."
The Company is engaged in building, managing and owning wired and wireless
cable systems. Wired cable systems retransmit television signals to subscribers
over coaxial cable networks from a head-end facility where the signals are
received and processed. Wireless cable systems retransmit television
programming received at the head-end via encrypted microwave signals from
multi-channel broadcast towers to subscribers within an approximate 40 mile
radius of each tower. The Company has licenses for contractual control over 27
wireless cable channels in Madison and Limestone Counties of North Alabama
licensed by the Federal Communications Commission ("FCC").
(b) FCC Licenses
The Company is dependent on leases with unaffiliated third parties for
substantially all of its wireless cable channel rights. ITFS licenses generally
are granted for a term of 10 years and are subject to renewal by the FCC. MDS
licenses generally will expire on May 1, 2001 unless renewed. FCC licenses also
specify construction deadlines which, if not met by the Company or extended by
the FCC, could result in the loss of the license. There can be no assurance
that the FCC will grant any particular extension request or license renewal
request. The use of wireless cable channels by the license holders is subject
to regulation by the FCC and the Company is dependent upon the continuing
compliance by channel license holders with applicable regulations. The
termination or non-renewal of a channel lease or of a channel license, or the
failure to grant an application for an extension of the time to construct an
authorized station, would result in the Company being unable to deliver
programming on the channels authorized pursuant thereto. Although the Company
does not believe that the termination of or failure to renew a single channel
lease would materially adversely affect the Company, several of such
terminations or failures to renew in one or more Markets that the Company
actively serves or intends to serve could have a material adverse effect on the
Company. In addition, the termination, forfeiture, revocation or failure to
renew or extend an authorization or license held by the Company's lessors could
have a material adverse effect on the Company.
(2) Summary of Significant Accounting Policies
(a) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
(b) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is recorded on
the straight-line basis for financial reporting purposes. Costs incurred for
repair and maintenance of property, plant and equipment are charged to expense
when incurred. Costs incurred for renewals and improvements are capitalized.
The costs of subscriber equipment, including installation labor and other
direct installation costs, is capitalized. Subscriber premises equipment and
installation costs are depreciated using a composite method over five years
which factors in the Company's estimates of useful lives of recoverable
equipment and average subscriber lives of nonrecoverable installation costs.
Depreciation is recorded over the estimated useful lives as follows:
Cable systems-wireless......................... 3-10 years
Cable systems-wired............................ 5-10 years
Machinery and equipment........................ 5-10 years
Office furniture and equipment................. 7 years
Buildings and improvements..................... 31 years
(c) License Costs
License costs include the costs of acquiring the rights to use certain FCC
frequencies to broadcast programming to the Company's customers. These costs,
net of amortization of $20,001, $26,668 and $33,334 at December 31, 1993, 1994
and 1995 and $36,668 at June 30, 1996, are being amortized over a 15 year
period beginning with inception of service in a market. The Company from time
to time reevaluates the carrying value of the licenses based on estimated
undiscounted cash flows as well as the amortization period to determine whether
current events or circumstances warrant adjustments to the carrying amounts or
a revised estimate of the useful life. In 1993, broadcast licenses to certain
Markets outside of the Company's area of interests were sold to a third party,
resulting in a gain of approximately $100,000.
(d) Revenue Recognition
Revenues from monthly service charges are recognized as the service is
provided to the customer. Customers are billed in the month services are
rendered.
Operating Expenses
Operating expenses consist principally of programming fees, license fees,
tower rental, maintenance, engineering and other costs incident to providing
service to customers.
(e) Income Taxes
Effective March 15, 1990, the Company elected to be taxed as an S Corporation
under provisions of the Internal Revenue Code. As a result, the Company does
not pay federal corporate income taxes or Alabama corporate income taxes on its
taxable income. Instead, the stockholders are liable for individual federal
income taxes and Alabama income taxes on the Company's taxable income. No
distributions of earnings to stockholders have been made or are planned to be
made for payment of income taxes as the Company had a loss for income tax
purposes in 1995.
(f) Statement of Cash Flows
The Company considers all highly liquid investments with remaining maturities
of 90 days or less to be cash equivalents. The Company paid interest of
$55,465, $31,090 and $17,440, for the years ended December 31, 1993, 1994 and
1995, respectively and $5,953 for the six months ended June 30, 1996. No
interest was paid in the three months ended March 31, 1995. No income taxes
were paid in any of the periods presented.
(g) Disclosures about the Fair Value of Financial Instruments
The fair values of the Company's financial instruments (which consist of
cash, accounts receivable, accounts payable and borrowings under the line of
credit) approximate their carrying value.
(h) Recently Issued Accounting Standards
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 ("SFAS 121"), Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of.
The Statement does not apply to deferred acquisition costs, or deferred tax
assets. The Company has adopted this statement effective January 1, 1995, and
its adoption did not have a material effect on the Company's financial
statements.
(i) Unaudited Interim Financial Statements
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and Rule 10-01 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six months ended June 30, 1996 are not necessarily
indicative of the results that will be expected for the year ending December
31, 1996.
(3) Line of Credit Agreement
On April 8, 1992 the Company obtained a $1,000,000 revolving credit facility
(the "Revolver") for working capital and other general corporate purposes.
Borrowings under the Revolver bear interest at the prime rate plus 1.0% (9.5%
at December 31, 1995). Interest is payable quarterly and the Revolver is
renewable on an annual basis. Substantially all of the assets of the Company
are pledged as collateral under the Revolver and the stock of the Company is
pledged as collateral under the guarantee of the Revolver. Total borrowings
outstanding under the Revolver were $125,000 at December 31, 1995.
(4) Commitments and Contingencies
The Company leases office space, antenna space and certain equipment under
noncancelable operating leases with remaining terms ranging from one to five
years. The following is a schedule by years of future minimum rentals due under
the leases at December 31, 1995:
1996..................................... $26,407
1997..................................... 10,560
1998..................................... 6,600
1999..................................... 2,640
2000..................................... 1,540
Rent expense for the years ended December 31, 1993, 1994 and 1995 was
approximately $13,200, $24,800 and $37,200, respectively.
In addition to the noncancelable leases above, the Company has entered into
agreements with certain area schools and colleges to use the ITFS licenses
awarded them. These contracts give the Company exclusive rights to utilize 16
channels awarded as educational frequencies to broadcast commercial
programming. The Company is obligated to reserve a certain number of hours per
week for broadcasting of educational programming for these institutions and to
provide the equipment necessary in the institutions to receive the Company's
transmission. The Company fulfills its educational programming obligation
through assignment of four channels for full-time educational programming. The
contracts provide monthly payments of $0.05 to $0.10 per subscriber per
channel. License expense for the years ended December 31, 1993, 1994 and 1995
was $44,300, $46,900 and $54,300, respectively.
The Company is involved in certain legal proceedings generally incidental to
its business. While the results of any litigation contain an element of
uncertainty, management believes that the outcome of any known or threatened
legal proceeding will not have a material effect on the Company's financial
position or results of operations.
(5): Concentrations of Credit Risk
Financial instruments which potentially expose the Company to concentrations
of credit risk consist primarily of cash and accounts receivable. The Company
has not experienced any losses on its deposits. Subscriber accounts receivable
collectibility is impacted by economic trends in each of the Company's Markets.
Such receivables are typically collected within thirty days, and the Company
has provided an allowance which it believes is adequate to absorb losses from
uncollectible accounts.
(6): Sale of the Company
On February 6, 1996, the Company signed a definitive agreement to sell
substantially all of the assets of Madison and Beasley to TruVision Wireless,
Inc., for $6.0 million in a combination of cash and notes receivable. The sale,
which is contingent upon FCC approval, is expected to be consummated in the
second quarter of 1996.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of BarTel, Inc.:
We have audited the accompanying balance sheet of BarTel, Inc. (an Alabama
corporation) as of December 31, 1995, and the related statements of income and
retained earnings and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BarTel, Inc. as of December
31, 1995, and the results of its operations and its cash flows for the year
then ended in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Jackson, Mississippi,
March 26, 1996.
BARTEL, INC.
BALANCE SHEET
December 31,
1995
------------
ASSETS
Current assets:
Accounts receivable........................................... $27,816
Other current assets.......................................... 500
------------
Total current assets........................................ 28,316
------------
Property and equipment, net-(note 2).......................... 655
Other assets-(note 2)......................................... 38,299
------------
Total assets................................................ $67,270
============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.............................................. $1,722
Accrued expenses.............................................. 3,145
------------
Total current liabilities................................... 4,867
------------
Other liabilities-(note 2)...................................... 37,828
Deferred tax liability.......................................... 4,583
------------
Total liabilities............................................. 47,278
------------
Stockholder's equity
Common Stock, $1.00 par value; 1,500 shares authorized,
1,000 shares issued and outstanding......................... 1,000
Retained earnings............................................. 18,992
------------
Total stockholder's equity.................................... 19,992
------------
Total liabilities and stockholder's equity.................... $67,270
============
The accompanying notes are an integral part of this financial statement.
BARTEL, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
For the Year Ended
December 31, 1995
------------------
Revenues:
Consulting fees........................ $150,000
------------------
Total revenues....................... 150,000
------------------
Expenses:
Operating expenses..................... 67,720
General and administrative expenses.... 59,485
Depreciation........................... 42
------------------
Total operating expenses............. 127,247
------------------
Income from operations................... 22,753
Provision for income taxes-(note 2)...... 5,039
------------------
Net income............................... 17,714
Retained earnings, beginning of year..... 1,278
------------------
Retained earnings, end of year........... $18,992
==================
The accompanying notes are an integral part of this financial statement.
BARTEL, INC.
STATEMENT OF CASH FLOWS
For the Year Ended
December 31, 1995
------------------
Cash flows from operating activities:
Net income................................................ $17,714
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation............................................ 42
Provision for deferred income tax....................... 4,583
Changes in operating assets and liabilities:
Increase in accounts receivable....................... (25,100)
Increase in other assets.............................. (500)
Increase in accounts payable and accrued expenses..... 629
Increase in other liabilities......................... 37,828
-----------------
Cash provided by operating activities....................... 35,196
-----------------
Cash flows from investing activities:
Capital expenditures...................................... (697)
Deposit for FCC auction................................... (38,169)
-----------------
Cash used in investing activities........................... (38,866)
-----------------
Net decrease in cash and cash equivalents................... (3,670)
-----------------
Cash and cash equivalents, beginning of year................ 3,670
-----------------
Cash and cash equivalents, end of year...................... $ -
=================
The accompanying notes are an integral part of this financial statement.
BARTEL, INC.
NOTES TO FINANCIAL STATEMENTS
(1) The Company-History and Organization
BarTel, Inc. ("BarTel" or the "Company"), an Alabama corporation, was
incorporated on April 14, 1993, to, among other things, develop, construct,
operate and maintain wireless cable systems. A wireless cable system
retransmits programming received at a head-end receiver via encryptic microwave
signals from multichannel broadcast towers to subscribers within an approximate
40 mile radius of each tower. In February 1996, the Company's sole stockholder
signed a definitive agreement to sell the stock of BarTel to TruVision
Wireless, Inc. See note 4.
(a) Demopolis Market Area
The Company has entered into lease agreements with various educational
institutions (the "Educational Institutions") whereby it has the exclusive
rights to the excess airtime capacity of 20 Instructional Television Fixed
Service ("ITFS") wireless cable channels in the Demopolis, Alabama, market and
through agreements with various individuals, the rights to 8 Multipoint
Distribution Service ("MDS") channels in the same area. Through the lease
agreements with the Educational Institutions, BarTel agreed to assist in
obtaining government grants to fund equipment and construction costs, and to
operate and maintain, at its own cost, a wireless cable system which would
broadcast commercial and educational programming to the Educational
Institutions free of charge.
In October 1993, the Educational Institutions pooled certain ITFS licenses
awarded by the FCC into a single entity, Black Warrior Telecommunications
Consortium (the "Consortium") and agreed to provide the funding for
constructing and equipping the wireless cable system with BarTel operating and
maintaining the system. The Consortium permitted BarTel the right to use the
equipment to operate a commercial wireless system, but the equipment remains
the property of the educational institutions. The Consortium has also allowed
BarTel to combine the ITFS and MDS channels to enhance the wireless cable
system in order to attract potential subscribers. See note 3.
The Company has successfully tested its broadcasting system to limited test
sites in the Demopolis area but has not solicited or installed any customers.
(b) Eutaw/Tuscaloosa Market Area
The Company also has agreements with various educational and health-care
service institutions (the "Institutions") in the Eutaw/Tuscaloosa, Alabama,
broadcast market area. Under these agreements, BarTel has exclusive rights to
the excess airtime capacity of 20 ITFS wireless cable channels of which the
individual Institutions hold licenses. The Company is required to assist in
obtaining government grants to fund the equipment and construction of an ITFS
system, as well as operate and maintain the system, at its own cost. The
equipment will then become the property of the individual Institutions with
BarTel maintaining the right to its use for broadcasting programming to the
general public. See note 3.
(c) Gadsden/Anniston Market Area
The Company has entered into an agreement with Gadsden Wireless Cable
Corporation, Inc. ("Gadsden") whereby it will act as a consultant and
contractor, from development through operation, for purposes of establishing a
wireless cable system in the Gadsden/Anniston, Alabama, broadcast market area.
Under this agreement, Gadsden will fully fund all expenses related to this
endeavor including consulting fees to be paid to BarTel. Upon successful
completion of this wireless cable system in accordance with the agreement,
BarTel will be granted an amount of stock in Gadsden equivalent to that of its
two owners/shareholders. See notes 3 and 4.
The Company acts as an agent for Gadsden for purposes of bidding at an FCC
auction on the rights to acquire several MDS channel licenses. Gadsden has
advanced the Company the deposit necessary to bid on these licenses.
(d) Risks and Other Factors
The Company has not marketed its product to potential customers in the
Demopolis area and the construction of the wireless cable system transmission
facilities has not commenced in the Eutaw/Tuscaloosa market area. The Company
expects to incur significant costs in advertising to the Demopolis market area
and in increased manpower to handle a customer base. Additionally, the cost of
developing a system in the Eutaw/Tuscaloosa market area will require outside
financing sources. The growth of the Company's business also requires
substantial investment on a continuing basis to finance subscriber premises
equipment. There can be no assurance that the Company will generate revenues or
obtain other sources of financing sufficient to cover these costs and achieve
positive cash flow. See note 4.
The Company is dependent on leases with third parties for all of its wireless
cable channel rights. Most of these licenses are granted for a term of 10 years
and are subject to renewal by the lessor. There can be no assurance that the
lessors will grant a license renewal request. The use of wireless cable
channels by the license holders is subject to regulation by the FCC and the
Company is dependent upon the continuing compliance of channel license holders
with applicable regulations. The termination or non-renewal of a channel lease
or of a channel license would result in the Company being unable to deliver
programming on the channels authorized pursuant thereto. In addition, the
termination, forfeiture, revocation or failure to renew or extend an
authorization or license held by the Company's lessors could have a material
adverse effect on the Company.
(2) Summary of Significant Accounting Policies
(a) Revenue Recognition
Revenue recognized to date is for consulting work performed by the Company's
employees for the benefit of the holders of the channel licenses described in
Note 3 and related to the design and construction of the broadcast equipment to
be leased by the Company. This revenue is recognized as the service is provided
and the holders are billed in the month the service is performed.
(b) Statement of Cash Flows
The Company considers all demand and interest-bearing accounts to be cash
equivalents. In 1995, income taxes of $240 were paid. No interest was paid in
1995.
(c) Property and Equipment
Property and equipment are stated at cost. Depreciation is recorded on the
straight-line basis for financial reporting purposes. Costs incurred for repair
and maintenance of property and equipment are charged to expense when incurred.
All equipment is depreciated over an estimated useful life of 7 years.
(d) Other Assets and Liabilities
Other assets and other liabilities consist of a deposit to the FCC for the
wireless cable auction and a liability for the same amount as this deposit was
advanced to the Company by Gadsden.
(e) Income Taxes
Income taxes are provided using an asset and liability approach. The current
provision for income taxes represents actual or estimated amounts payable on
tax returns to be filed for each year. Deferred tax assets and liabilities are
recorded for the estimated future tax effects of temporary differences between
the tax basis of assets and liabilities and amounts reported in the balance
sheet. The Company pays taxes on the cash basis. Accordingly, deferred tax
assets and liabilities have been recorded for the difference between the cash
basis and accrual basis for the Company's yearly activity. As of December 31,
1995, the Company had a deferred income tax liability of $4,583.
(f) Disclosure about the Fair Value of Financial Instruments
The fair value of the Company's financial instruments (which consists of
accounts receivable and payable) approximate their carrying amounts.
(3) License Contracts
(a) Demopolis Market Area:
Black Warrior Telecommunications Consortium
In September 1994, the Company was awarded a contract with the Consortium to
act as a "facilitator" in the construction, operation and maintenance of a
wireless cable transmission facility. Under the agreement, the Company will be
paid a monthly fee for services as well as reimbursements for expenses related
to construction of the facility. The Educational Institutions have leased the
Company exclusive rights to the excess airtime under the 20 ITFS licenses
awarded them. The Company is allowed to use the Consortium system, equipment
and leased tower to operate a commercial wireless cable operation. In return
for the use of the excess airtime (that portion of channel's airtime available
for commercial broadcasting according to FCC regulations) under each of these
channel licenses, the Company agrees to pay the Consortium 20% of the Company's
annual gross subscription revenues received from residential and commercial
customers. The Consortium also granted BarTel the right to link other MDS
channels to the system in order to enhance the offering of programs and to
attract potential subscribers. The Company will pay all costs associated with
the operation and maintenance of the transmission facility as well as all
reception equipment required for the general public or any Consortium members
to view the programs to be transmitted. For the ITFS channels, the Company
agrees to reserve for each channel licensed a minimum of 20 hours of airtime
each week for broadcasting educational programming. The terms of the ITFS
channel leases are 10 years, running concurrent with the licenses, commencing
June 29, 1994. All leases are renewable at the Company's option and with
approval from the FCC.
Powell, Hyatt & Caroline Wireless Cable, Inc.
On May 22, 1994, the Company entered into an agreement with Louis F. Powell,
Arvol M. Hyatt, and Caroline Wireless Cable, Inc. ("Caroline"). Powell and
Hyatt are the holders of separate MDS channel licenses granted by the FCC and
authorizing the licensees to construct a transmission facility in Demopolis,
Alabama. Caroline had entered into a service agreement with both Powell and
Hyatt for use of these licenses in exchange for constructing the facility and
providing royalties upon commencement of commercial operations. Caroline also
entered into an agreement with the Wilcox County Board of Education ("Wilcox"),
a holder of an ITFS license, for the use of excess channel capacity. Under that
contract, Caroline was to construct, maintain and operate a transmission
facility and pay royalties to Wilcox once subscribers to a commercial wireless
cable system were installed.
Caroline assigned BarTel all of its rights to the contracts with Powell,
Hyatt and Wilcox. The Company agreed to complete the Powell license to
construct the facility and use reasonable efforts to assume and carry out the
obligations to Wilcox County. In the event that the Powell and Hyatt licenses
are implemented and that the Wilcox application to construct and operate a
transmission facility is successful, the Company agrees to assume the same
obligations in respect to the various agreements listed above. The term of the
Wilcox agreement is for two years, running concurrent with the license date,
with four automatically renewable terms of two years unless either party gives
notice of cancellation for cause.
In addition, Powell and Hyatt agreed to transfer their licenses to the
Company for $.10 per channel per month per commercial subscriber with payment
to begin after BarTel has reached 4,000 subscribers. Payment will continue for
40 months or until the cumulative payments reach $100,000. If, at the end of
this term, the aggregate payments do not exceed $100,000, the monthly payments
are to continue until the aggregate is $100,000. If the Company has less than
4,000 subscribers, it may withhold payment. However, if after three years
BarTel does not have 4,000 subscribers it must begin monthly payments of $.10
per customer until the aggregate of payments exceeds $100,000.
At no time will the Company be obligated to pay after reaching payments of
$100,000.
Eutaw/Tuscaloosa Market Area:
On October 12, 1992, Stuart Barron, sole stockholder of BarTel, contracted
with five institutions in separate agreements. The Institutions had applied for
licenses from the FCC to build and operate ITFS channels in the Eutaw, Alabama
area. The Company reached agreements with each institution to have exclusive
rights to the excess channel capacity on these ITFS channels. The initial term
of the agreements is 10 years from the date of the FCC grant of licenses to the
Institutions.
Under these agreements, the Company is to prepare applications for a federal
grant on behalf of the Institutions which will be used to "procure, arrange
for, and pay all costs associated with engineering, purchasing, constructing
and installing ITFS equipment which shall become the property of the
institution." BarTel must pay all costs to provide suitable space and to
operate and maintain the ITFS equipment so that it meets FCC standards. The
Company may, at its own expense, install reception equipment necessary for the
general public to view the programs transmitted.
The Institutions have leased excess capacity time to BarTel and have reserved
20 hours per channel per week for educational programming. The contract also
allows the institution to reserve an additional 20 hours each week. Airtime is
to be available free of charge to the Institutions.
(b) Gadsden/Anniston Market Area:
Gadsden Wireless Cable Corporation, Inc.
On June 17, 1995, the Company entered into a service agreement with Gadsden.
Under this agreement, the Company will assist in assessing the needs of Gadsden
to establish a 20-channel wireless cable system in the Gadsden/Anniston,
Alabama market area and act as a consultant for completing the project,
including applying for FCC licenses.
The Company will acquire and purchase on behalf of Gadsden all materials and
equipment needed to construct the system and arrange for necessary labor to
perform the construction work. It is also required to determine the work to be
done and supervise all activities to meet FCC requirements for placing the
system in operation.
Gadsden agrees to fully fund the project, including the prompt payment of all
labor and materials upon requisition by the Company and approval by Gadsden.
Gadsden will pay the Company $8,000 per month and out of pocket expenses, up to
$1,000 per month, from the execution of this agreement until the project
broadcasts a test signal, or 12 months, whichever occurs first. If the project
is not operational after 12 months, the project may be continued if it is
determined that it is still viable. However, monthly fees paid to the Company
will decline by $1,000 for each month after the twelfth month.
If the Company is successful in placing a 20-channel wireless cable system
into operation, the two shareholders of Gadsden will transfer to BarTel an
amount of stock in Gadsden equal to that which they themselves hold. See Note
4.
(4) Subsequent Event
On February 20, 1996, the Company's sole stockholder sold his stock in the
Company to TruVision Wireless, Inc. ("TruVision") for $1.7 million cash and a
promissory note for $652,000 subject to the terms of the purchase agreement.
TruVision expects to renegotiate the obligations under the leases discussed in
Note 3 to (1) reduce the payments to the Consortium and (2) remove the
provisions for the Company obtaining government grants on behalf of the
Consortium. TruVision also anticipates to renegotiate the lease agreements with
the four Eutaw ITFS groups and to transfer ownership of transmission equipment
from the Consortium to TruVision.
Also in February 1996, TruVision entered into a purchase and sale agreement
with Gadsden pursuant to which TruVision will acquire assets that include the
rights to the 20-channel wireless cable system that Gadsden had planned to
establish with the Company's assistance.
Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily
complete, but such statements are complete in all material respects for
the purposes herein made. With respect to each such contract, agreement
or other document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the
matter involved, and each such statement shall be deemed qualified in
its entirety by such reference.
No dealer, salesman or other person Prospectus
has been authorized to give any
information or make any
representation not contained in this
Prospectus and, if given or made,
such information or representation
must not be relied upon as having
been authorized by the Company.
This Prospectus does not constitute
an offer to buy any of the
securities offered hereby in any
jurisdiction to any person to whom
it is unlawful to make such offer in
such jurisdiction.
Wireless One, Inc.
Table of Contents
944,059 Shares
Prospectus Summary.................i
Risk Factors.......................9 Common Stock
Formation of the Company..........17 ($0.01 par value per share)
Formation of TruVision............18
The TruVision Transaction.........18
Acquisitions......................19
Use of Proceeds...................20
Dividends and Price Range of
Common Stock....................20
Dilution..........................21
Capitalization....................22
Unaudited Pro Forma Condensed
Combined Financial Information..23
Selected Historical Financial
Data............................29
Management's Discussion and
Analysis of Financial Condition
and Results of Operations.......32
Business..........................42
Wireless Cable Industry...........60 September __, 1996
Management........................68
Certain Transactions..............76
Principal Stockholders............77
Description of Capital Stock......80
Shares Eligible for Future Sale...82
Plan of Distribution..............83
Legal Matters.....................83
Experts...........................83
Available Information.............84
Index to Financial Statements....F-1
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses in
connection with the sale and distribution of the securities being
registered. All of the amounts shown are estimated except the
Securities and Exchange Commission registration fee.
SEC registration fee....................$ 2,328
Blue sky fees and expenses.............. 2,672
Legal fees and expenses................. 22,000
Accounting fees and expenses............ 33,000
_____________
Total..............................$ 60,000
=============
The Registrant will bear all of the foregoing fees and
expenses.
Item 14.Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law (the
"DGCL") provides that a corporation may indemnify directors and
officers as well as other employees and individuals against
expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement in connection with specified actions,
suits, or proceedings, whether civil, criminal, administrative,
or investigative (other than action by or in the right of the
corporation-a "derivative action"), if they acted in good faith
and in a manner they reasonably believed to be in or not opposed
to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe
their conduct was unlawful. A similar standard is applicable in
the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) incurred in
connection with the defense or settlement of such action, and the
statute requires court approval before there can be any
indemnification where the person seeking indemnification has been
found liable to the corporation. The statute provides that it is
not exclusive of other indemnification that may be granted by a
corporation's charter, by-laws, disinterested director vote,
stockholder vote, agreement or otherwise. Article IX of the
Registrant's By-laws requires indemnification to the fullest
extent permitted by Delaware law. In addition, the Registrant
has entered into indemnity agreements with its directors, which
obligate the Registrant to indemnify such directors to the
fullest extent permitted by the DGCL. The Registrant also
intends to obtain, prior to the effective date of this
Registration Statement, officers' and directors' liability
insurance which insures against liabilities that officers and
directors of the Registrant may incur in such capacities.
Section 102(b)(7) of the DGCL permits a corporation to
provide in its certificate of incorporation that 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 transaction
from which the director derives an improper personal benefit,
(ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) for
improper payment of dividends or redemptions of shares or (iv)
for any breach of a director's duty of loyalty to the company or
its stockholders. Article VI of the Registrant's Certificate of
Incorporation includes such a provision.
Item 15.Recent Sales of Unregistered Securities.
(a) In the Heartland Transaction, the Registrant issued
shares of Common Stock to the following persons in exchange for
shares of common stock of Old Wireless One:
Investors Shares
__________ ________
The Lamar Corporation........................ 341,517
Hans Sternberg............................... 281,802
Hendrix Family Trust......................... 245,692
KBBS, Inc.................................... 163,795
Wireless Investment Co....................... 163,795
Gulf Coast Services, Inc..................... 163,795
Otelco Investments, LLC...................... 163,795
EATEL, Inc................................... 149,053
William C. Norris, Jr........................ 102,372
Robert A. Hart............................... 102,372
Fort Bend Telephone Co....................... 81,897
Columbia Cellular, Inc....................... 81,897
Hart Wireless LTD Partnership................ 51,595
G.T. Investments, Inc........................ 45,044
Sean Reilly.................................. 15,636
Chase Manhattan Capital Corporation.......... 2,413,656
Premier Venture Capital Corporation.......... 754,268
Advantage Capital Partners Limited
Partnership................................ 452,561
Advantage Capital Partners II Limited
Partnership................................ 150,853
First Commerce Capital, Inc.................. 150,853
Wireless Investment Company.................. 150,853
Concord Telephone............................ 75,426
Ronald L. Daniels............................ 75,426
OPCO Senior Executive Investment
Partnership, L.P........................... 45,255
R.C. Corr & Doris Corr, Joint Survivors...... 30,171
Deborah Sternberg............................ 12,672
Donna Sternberg.............................. 12,672
Erich Sternberg.............................. 12,672
Julie Sternberg.............................. 12,672
Mark Sternberg............................... 12,672
Insa Abraham................................. 12,672
Allyn Madere................................. 3,017
Arthur G. Scanlan II......................... 3,017
Paul Boudreaux............................... 3,017
_____________
Total 6,538,462
=============
The Registrant also issued 3,461,538 shares of Common Stock
and the Heartland Notes to certain subsidiaries of Heartland
Wireless Communications, Inc. in connection with the Heartland
Transaction.
The Registrant also issued warrants to GKM to purchase
300,000 shares of Common Stock in connection with the Heartland
Transaction.
(b) In the TruVision Transaction, the Registrant issued
shares of Common Stock to the following persons in exchange for
shares of common stock of TruVision.
Investors Shares
__________ ________
Mississippi Wireless TV, L.P.................. 1,702,406
Chase Venture Capital Associates, L.P......... 1,517,979
Vision Communications, Inc.................... 180,000
VanCom, Inc................................... 42,560
____________
Total 3,442,945
============
(c) The Company issued 48,752 shares of Common Stock to
Volunteer Wireless, Inc. within the past 12 months.
Except as set forth above, the Registrant has not sold any
securities.
All transactions described above were effected in reliance
upon the exemption from the registration requirements of the
Securities Act contained in Section 4(2) of the Securities Act
and Regulation D promulgated thereunder on the basis that such
transactions did not involve any public offering.
Item 16.Exhibits and Financial Statement Schedules
a) Exhibits
Exhibit No. Description
2.1 TruVision Merger Agreement among the Registrant,
TruVision and Wireless One MergerSub, Inc., dated
April 25, 1996<F2>
3.1(i) Amended and Restated Certificate of Incorporation of
the Registrant<F3>
3.1(ii) Bylaws of the Registrant<F3>
4.1 Indenture between the Registrant and United States
Trust Company of New York, as Trustee, dated October
24, 1995<F4>
4.2 Warrant Agreement between the Registrant and United
States Trust Company of New York, as Warrant Agent,
dated October 24, 1995<F4>
4.3 Escrow and Disbursement Agreement between the
Registrant and Bankers Trust Corporation, Escrow
Agent, dated October 24, 1995<F4>
4.4 Supplemental Indenture between the Registrant and
United States Trust Company of New York, as Trustee,
dated July 26, 1996<F1>
4.5 Indenture between the Registrant and United States
Trust Company of New York as Trustee, dated August 12,
1996<F1>
4.6 Warrant Agreement between the Registrant and United
States Trust Company of New York, as Warrant Agent,
dated August 12, 1996<F1>
4.7 Unit Agreement between the Registrant and United
States Trust Company of New York, as Unit Agent, dated
August 12, 1996<F1>
5.1 Opinion of Jones, Walker, Waechter, Poitevent, Carreree
& Denegre L.L.P. (including the consent of such firm)
as to the validity of the common stock being
offered<F1>
10.1 Contribution Agreement and Plan of Merger among, inter
alia, the Registrant, Old Wireless One and its
stockholders and Heartland dated October 18, 1995<F4>
10.2 Escrow Agreement among the parties to Exhibit 10.1
dated October 24, 1995<F4>
10.3 1995 Long-Term Performance Incentive Plan of the
Registrant<F4>
10.4 1996 Director's Stock Option Plan of the Registrant<F1>
10.5 Warrant Agreement between the Registrant and GKM
(including form of warrant certificate) dated October
18, 1995<F4>
10.6 Amended and Restated Registration Rights Agreement
among the Registrant, Heartland and certain
stockholders dated July 29, 1996<F1>
10.7 Amended and Restated Stockholders Agreement among the
Registrant, and certain stockholders Dated dated
July 29, 1996<F1>
10.8 Standard forms of MDS License Agreement of the
Registrant<F3>
10.9 Standard forms of ITFS License Agreement of the
Registrant<F3>
10.10 Form of Employment Agreement between the Registrant
and certain executive officers<F2>
10.11 Acquisition and Market Escrow Agreement among the
parties to Exhibit 2.1 dated July 29, 1996<F2>
11.1 Statement re: Computation of Per Share Earnings<F1>
21.1 Subsidiaries of the Registrant<F1>
23.1 Consent of Jones, Walker, Waechter, Poitevent, Carrere
& Denegre L.L.P. (included in Exhibit 5.1)<F1>
23.2 Consent of PKPMG Peat Markwick LLP (Dallas,
Texas)<F1>
23.3 Consent of KPMG Peat Marwick LLP (New Orleans, LA)<F1>
23.4 Consent of Arthur Andersen & Co. LLP (Jackson,
Mississippi)<F1>
24.1 Powers of Attorney<F5>
_________________
<F1> Filed herewith
<F2> Incorporated herein by reference from the
Registrant's Registration Statement Form S-1
(Registration Number 333-05109 ) as declared
effective by the Commission on August 7, 1996
<F3> Incorporated herein by reference from the
Registrant's Registration Statement on Form S-1
(Registration Number 33-94942) as declared effective
by the Commission on October 18, 1995.
<F4> Incorporated herein by reference from the
Registrant's Quarterly Report on Form 10Q for the
fiscal quarter ended September 30, 1995.
<F5> Included on Signature Page
(b) Financial Statement Schedules
Independent Auditor's Report on Financial Statement
Schedule and Consent
Schedule II-Valuation and Qualifying Accountings
All other schedules are omitted because they are
inapplicable or the requested information is shown in the
consolidated financial statements or related notes.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions
described in Item 14 above, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in such Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than payment by the Registrant of
expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in such Securities Act and will be governed by the
final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the registration statement or any material
change to such information in the registration statement;
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of
Baton Rouge, State of Louisiana on this 19th day of September, 1996.
WIRELESS ONE, INC.
By: /s/ Henry M. Burkhalter
________________________
Henry M. Buckhalter
President and Vice Chairman
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of Michael C. Ellis and
Sean E. Reilly, or any of them, each acting alone, his ture and lawful
attorney-in-fact and agent, with full powers of substitution and
resubstitution, for such person and in his name, place and stead, in any
and all capacities in connection with the Registrant's Registration
Statement (including post-effective amendments) and to file the same
with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done, as fully
to all intents and purposes as he might or could do in person, hereby
ratifying and conforming all that said attorney-in-fact and agent or his
substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on the 19th day of September,
1996, by the following persons in the capacities indicated.
Signature Title
_________ ______
/s/ Hans J. Sternberg Chairman of the Board
________________________
Hans J. Sternberg
/s/ Henry M. Burkhalter President and Vice Chairman
_______________________ of the Board
Henry M. Burkhalter
/s/ Sean E. Reilly Chief Executive Officer and Director
________________________ (Principal Executive Officer)
Sean E. Reilly
/s/ Michael C. Ellis Vice President and Controller
________________________ (Principal Financial and
Michael C. Ellis Accounting Officer)
/s/ William K. Luby Director
_________________________
William K. Luby
/s/ Arnold L. Chavkin Director
__________________________
Arnold L. Chavkin
/s/ Daniel L. Shimer Director
__________________________
Daniel L. Shimer
/s/ J.R. Holland, Jr. Director
__________________________
J.R. Holland, Jr.
/s/ William J. Van Devender Director
___________________________
William J. Van Devender
/s/ David E. Webb Director
___________________________
David E. Webb
<PAGE>
SCHEDULE II
WIRELESS ONE, INC.
Valuation and Qualifying Accounts
The period from February 4, 1993 (inception)
through December 31, 1993 and the
years ended December 31, 1994 and 1995
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Balance at Changed to Balance
Beginning Costs and at End
Description of Period Expenses Deductions of Period
____________ ___________ ___________ ___________ ___________
<S> <C> <C> <C> <C>
1995
Deducted in balance sheet from
subscription receivables:
Allowance for doubtfull accounts $ 4,000 $ 196,281 $ 126,640 $ 73,641
___________ ____________ ___________ _____________
Deducted in balance sheet from
leased license investment:
Amortization of leased license
investment 230,902 317,381 --- 548,283
___________ ____________ ___________ _____________
Deducted in balance sheet from
other assets:
Amortization of debt issuance
costs --- 163,926 --- 163,926
___________ ____________ ___________ _____________
1994
Deducted in balance sheet from
subscription receivables:
Allowance for doubtful accounts $ --- $ 54,605 $ 50,608 $ 4,000
___________ ____________ ___________ _____________
Deducted in balance sheet from
leased license investment:
Amortization of leased license
investment 4,116 226,786 --- 230,902
___________ ____________ ___________ _____________
Deducted in balance sheet from
other assets:
Amortization of debt issuance
costs --- --- --- ---
___________ ____________ ___________ _____________
1993
Deducted in balance sheet from
subcription receivables:
Allowance for doubtful accounts $ --- $ --- $ --- $ ---
___________ ____________ ___________ _____________
Deducted in balance sheet from
leased license investment:
Amortization of leased license
investment --- 4,116 --- 4,116
___________ ____________ ___________ _____________
Deducted in balance sheet from
other assets:
Amortization of debt issuance
costs --- --- --- ---
___________ ____________ ___________ _____________
</TABLE>
INDEX TO EXHIBITS
Sequentially
Exhibit No. Description Numbered
Page
2.1 TruVision Merger Agreement among the Registrant,
TruVision and Wireless One MergerSub, Inc., dated
April 25, 1996<F2>
3.1(i) Amended and Restated Certificate of Incorporation of
the Registrant<F3>
3.1(ii) Bylaws of the Registrant<F3>
4.1 Indenture between the Registrant and United States
Trust Company of New York, as Trustee, dated October
24, 1995<F4>
4.2 Warrant Agreement between the Registrant and United
States Trust Company of New York, as Warrant Agent,
dated October 24, 1995<F4>
4.3 Escrow and Disbursement Agreement between the
Registrant and Bankers Trust Corporation, Escrow
Agent, dated October 24, 1995<F4>
4.4 Supplemental Indenture between the Registrant and
United States Trust Company of New York, as Trustee,
dated July 26, 1996<F1>
4.5 Indenture between the Registrant and United States
Trust Company of New York as Trustee, dated August 12,
1996<F1>
4.6 Warrant Agreement between the Registrant and United
States Trust Company of New York, as Warrant Agent,
dated August 12, 1996<F1>
4.7 Unit Agreement between the Registrant and United
States Trust Company of New York, as Unit Agent, dated
August 12, 1996<F1>
5.1 Opinion of Jones, Walker, Waechter, Poitevent, Carrere
& Denegre L.L.P. (including the consent of such firm)
as to the validity of the common stock being
offered<F1>
10.1 Contribution Agreement and Plan of Merger among, inter
alia, the Registrant, Old Wireless One and its
stockholders and Heartland dated October 18, 1995<F4>
10.2 Escrow Agreement among the parties to Exhibit 10.1
dated October 24, 1995<F4>
10.3 1995 Long-Term Performance Incentive Plan of the
Registrant<F4>
10.4 1996 Director's Stock Option Plan of the Registrant<F1>
10.5 Warrant Agreement between the Registrant and GKM
(including form of warrant certificate) dated October
18, 1995<F4>
10.6 Amended and Restated Registration Rights Agreement
among the Registrant, Heartland and certain
stockholders dated July 29, 1996<F1>
10.7 Amended and Restated Stockholders Agreement among the
Registrant, and certain stockholders Dated dated
July 29, 1996<F1>
10.8 Standard forms of MDS License Agreement of the
Registrant<F3>
10.9 Standard forms of ITFS License Agreement of the
Registrant<F3>
10.10 Form of Employment Agreement between the Registrant
and certain executive officers<F2>
10.11 Acquisition and Market Escrow Agreement among the
parties to Exhibit 2.1 dated July 29, 1996<F2>
11.1 Statement re: Computation of Per Share Earnings<F1>
21.1 Subsidiaries of the Registrant<F1>
23.1 Consent of Jones, Walker, Waechter, Poitevent, Carrere
& Denegre L.L.P. (included in Exhibit 5.1)<F1>
23.2 Consent of PKPMG Peat Markwick LLP (Dallas,
Texas)<F1>
23.3 Consent of KPMG Peat Marwick LLP (New Orleans, LA)<F1>
23.4 Consent of Arthur Andersen & Co. LLP (Jackson,
Mississippi)<F1>
24.1 Powers of Attorney<F5>
_________________
<F1> Filed herewith
<F2> Incorporated herein by reference from the
Registrant's Registration Statement Form S-1
(Registration Number 333-05109 ) as declared
effective by the Commission on August 7, 1996
<F3> Incorporated herein by reference from the
Registrant's Registration Statement on Form S-1
(Registration Number 33-94942) as declared effective
by the Commission on October 18, 1995.
<F4> Incorporated herein by reference from the
Registrant's Quarterly Report on Form 10Q for the
fiscal quarter ended September 30, 1995.
<F5> Included on Signature Page
FIRST SUPPLEMENTAL INDENTURE, dated as of
July 26, 1996, between WIRELESS ONE, INC., a
Delaware Corporation (the "Corporation"), and
UNITED STATES TRUST COMPANY OF NEW YORK (the
"Trustee"), as trustee under an Indenture,
dated as of October 24, 1995, between the
Corporation and the Trustee (the
"Indenture").
Sections 10.01 and 10.02 of the Indenture respectively
provide that the Corporation and the Trustee may enter into an
indenture supplemental to the Indenture for (a) stated purposes
and (b) upon the written consent of the Holders of not less than
a majority in aggregate principal amount of the Notes then
outstanding. Pursuant to Sections 10.01 and 10.02 of the
Indenture, the Board of Directors of the Corporation has duly
authorized the execution and delivery by the Corporation of this
First Supplemental Indenture.
Capitalized terms used and not defined herein shall
have the meanings specified in or pursuant to the Indenture.
1. Section 1.01 of the Indenture is hereby amended by
deleting the definition of "Annualized EBITDA" and substituting
therefor the following definition of "Annualized EBITDA to
Consolidated Interest Expense":
"`Annualized EBITDA to Consolidated Interest Expense'
as of any date of determination means the ratio of (x) the
aggregate amount of EBITDA for the most recent fiscal quarter for
which financial information has been filed with the Commission
multiplied by four to (y) Consolidated Interest Expense for the
preceding four quarter period; provided, however, that (i) if the
Company or any Restricted Subsidiary of the Company has incurred
any Indebtedness (including Acquired Indebtedness) that remains
outstanding on the date of such determination, the ratio of
Annualized EBITDA to Consolidated Interest Expense for such
period will be calculated after giving effect on a pro forma
basis to (a) such Indebtedness, as if such Indebtedness had been
incurred on the first day of the relevant period (fiscal quarter
in the case of annualized EBITDA and four quarter period in the
case of Consolidated Interest Expense) and (b) the discharge of
any other Indebtedness repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of the relevant period,
(ii) if since the beginning of such fiscal quarter the Company or
any Restricted Subsidiary of the Company has made any Asset Sale,
EBITDA for such fiscal quarter will be (a) reduced by an amount
equal to EBITDA (if positive) directly attributable to the assets
which are the subject of such Asset Sale for such fiscal quarter
or (b) increased by an amount equal to EBITDA (if negative)
directly attributable thereto for such fiscal quarter and (iii)
if since the beginning of such period the Company or any
Restricted Subsidiary of the Company (by merger or otherwise) has
made an Investment in any Person which becomes a Restricted
Subsidiary of the Company as a result of such Investment or an
Investment in an existing Restricted Subsidiary with the result
that such Investment will result in the consolidation of a
greater percentage of such Restricted Subsidiary's Consolidated
Net Income (Loss) (other than a transfer of operating assets from
the Company or one Restricted Subsidiary to another Restricted
Subsidiary) or has made an acquisition of assets (other than from
the Company or another Restricted Subsidiary of the Company),
including any acquisition of assets occurring in connection with
a transaction causing a calculation of Annualized EBITDA to
Consolidated Interest Expense to be made hereunder, which
constitutes all or substantially all of an operating unit of a
business, Annualized EBITDA to Consolidated Interest Expense will
be calculated after giving pro forma effect thereto (including
the incurrence of any Indebtedness (including Acquired
Indebtedness)) as if such Investment or acquisition occurred on
the first day of the relevant period. For purposes of this
definition, whenever pro forma effect is to be given to an
acquisition of assets, an Investment, a divestiture or an
incurrence of Indebtedness, the pro forma calculations will be
determined in good faith by a responsible financial or accounting
officer of the Company; provided, however, that such officer
shall apply in his calculations the historical EBITDA and
Consolidated Interest Expense associated with such assets for the
most recent relevant period for which financial information is
available. If any Indebtedness (including Acquired Indebtedness)
bears a floating rate of interest and is being given pro forma
effect, the interest on such Indebtedness will be calculated as
if the rate in effect on the date of determination had been the
applicable rate for the entire period."
2. The definition of "Consolidated Income Tax
Expense" as defined in Section 1.01 of the Indenture is hereby
deleted in its entirety and replaced by the following:
"`Consolidated Income Tax Expense' for any Person for
any period means, without duplication, the aggregate amount of
net taxes based on income or profits for such period of the
operations of such Person and its Consolidated Restricted
Subsidiaries with respect to such period in accordance with
GAAP."
3. The definition of "EBITDA" set forth in Section
1.01 of the Indenture is hereby deleted in its entirety and
replaced by the following:
"`EBITDA' for any period means the Consolidated Net
Income (Loss) for such period plus the following to the extent
deducted in calculating such Consolidated Net Income (Loss): (i)
Consolidated Income Tax Expense, (ii) Consolidated Interest
Expense, (iii) depreciation and amortization expense determined
on a consolidated basis for such Person and its Consolidated
Restricted Subsidiaries in accordance with GAAP for such period
and (iv) all other non-cash charges (other than non-cash charges
which require an accrual of or reserve for cash charges in future
periods), and less any non-cash items which have the effect of
increasing (decreasing in the case of a loss) Consolidated Net
Income (Loss) for such period."
4. The definition of "Net Cash Proceeds" set forth in
Section 1.01 of the Indenture is hereby deleted in its entirety
and replaced by the following:
"`Net Cash Proceeds' means (a) with respect to any
Asset Sale by any Person, the proceeds thereof in the form of
cash or Temporary Cash Investments including payments in respect
of deferred payment obligations when received in the form of, or
stock or other assets when disposed of for, cash or Temporary
Cash Investments (except to the extent that such obligations are
financed or sold with recourse to the Company or any Restricted
Subsidiary) net of (i) brokerage commissions and other reasonable
fees and expenses (including fees and expenses of counsel and
investment bankers) related to such Asset Sale, (ii) provisions
for all taxes payable as a result of such Asset Sale, (iii)
payments made to retire Indebtedness where payment of such
Indebtedness is secured by the assets or properties the subject
of such Asset Sale, (iv) amounts required to be paid to any
Person (other than the Company or any Restricted Subsidiary)
owning a beneficial interest in the assets subject to the Asset
Sale and (v) appropriate amounts to be provided by the Company or
any Restricted Subsidiary, as the case may be, as a reserve, in
accordance with GAAP, against any liabilities associated with
such Asset Sale and retained by the Company or any Restricted
Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with
such Asset Sale, all as reflected in an Officers' Certificate
delivered to the Trustee and (b) with respect to any issuance or
sale of Indebtedness or Capital Stock, as applicable, as referred
to under the definition of Permitted Investment and the
provisions of Sections 3.07, 4.07 and 4.08, the proceeds of such
issuance or sale in the form of cash or Temporary Cash
Investments, net of attorney's fees, accountant's fees and
brokerage, consultation, underwriting and other fees and expenses
actually incurred in connection with such issuance or sale and
net of taxes paid or payable as a result thereof."
5. The definition of "Operating Cash Flow" set forth
in Section 1.01 of the Indenture is hereby deleted in its
entirety and replaced by the following:
"`Operating Cash Flow' means, for any period, the
Consolidated Net Income (Loss) of the Company and its
Consolidated Restricted Subsidiaries for such period, plus,
without duplication, (a) extraordinary net losses and net losses
on sales of assets outside the ordinary course of business during
such period, to the extent such losses were deducted in computing
Consolidated Net Income (Loss), plus (b) Consolidated Income Tax
Expense, and any provision for taxes utilized in computing the
net losses under clause (a) hereof, plus (c) Consolidated
Interest Expense of the Company and its Restricted Subsidiaries
for such period, plus (d) depreciation, amortization and all
other non-cash charges, to the extent such depreciation,
amortization and other non-cash charges were deducted in
computing such Consolidated Net Income (Loss) (including
amortization of goodwill and other intangibles)."
6. The definition of "Permitted Holders" set forth in
Section 1.01 of the Indenture is hereby deleted in its entirety
and replaced by the following:
"`Permitted Holders' means, as of the date of
determination, Chase Capital Partners, The Chase Manhattan
Corporation, Heartland Wireless Communications, Inc., Henry J.
Burkhalter, William J. Van Devender and their respective
Affiliates (other than the Company and its Subsidiaries)."
7. The definition of "Permitted Investment" set forth
in Section 1.01 of the Indenture is hereby deleted in its
entirety and replaced by the following:
"'Permitted Investment'" means (i) Investments in any
existing Restricted Subsidiary; (ii) Indebtedness of the Company
or a Restricted Subsidiary described under clauses (v), (vi) and
(vii) of the definition of "Permitted Indebtedness"; (iii)
Temporary Cash Investments; (iv) Investments acquired by the
Company or any Restricted Subsidiary in connection with an Asset
Sale permitted under the provisions of Section 4.12 to the extent
such Investments are non-cash proceeds as permitted under such
covenant; (v) Investments in existence on the date of the
effectiveness of the Supplemental Indenture; (vi) any acquisition
of equipment in the ordinary course of business; (vii) any
acquisition of property and assets (other than channel rights)
for a purchase price of not more than $50,000; (viii) any
Investment in the Wireless Cable Business acquired in
consideration for the issuance of Common Stock or the proceeds of
the issuance of Common Stock to the extent such amounts have not
been previously applied to a Restricted Payment, provided that
the amount available for Investment out of such proceeds shall be
reduced (but not below zero) by the quotient of (A) the Net Cash
Proceeds of Indebtedness incurred by the Company or any of its
Restricted Subsidiaries under clauses (xi) and (xii) of Section
4.08 divided by (B) $1.50; (ix) any acquisition or lease of
additional channel rights in any wireless cable market listed in
Annex A to the Supplemental Indenture or in which the Company and
its Restricted Subsidiaries (A) as of the date of the
effectiveness of the Supplemental Indenture, have channel rights,
whether by way of license, lease with a channel license holder,
lease with a channel license applicant, lease with a qualified,
non-profit educational organization that plans to apply for a
channel license or option to acquire any of the foregoing, or (B)
as of the date of such acquisition or lease (without giving
effect to such acquisition), have rights with respect to at least
eight wireless cable channels, whether by way of license, lease
with a channel license holder, lease with a channel license
applicant, lease with a qualified, non-profit educational
organization that plans to apply for a channel license or option
to acquire any of the foregoing; (x) Investments consisting of
any acquisition or lease of additional channel rights in one or
more Wireless One Service States or any Investment by the Company
or any Restricted Subsidiary of the Company in a Person engaged
in the Wireless Cable Business if as a result of such Investment
(A) such Person becomes a Restricted Subsidiary of the Company or
(B) such Person, in one transaction or a series of related
transactions, is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to,
or is liquidated into, the Company or a Restricted Subsidiary;
provided that (1) there are a maximum of 250,000 households
within a 35-mile radius of the licensed transmission site
associated with such channel rights or such Person, as the case
may be, of which at least 15% are unpassed by traditional hard-
wire cable (as supported by an Officer's Certificate); (2) if
such Person conducts operations outside the Wireless One Service
States, the Company shall deliver to the Trustee an Officer's
Certificate that allocates a portion of the dollar amount of such
Investment to the operations outside the Wireless One Service
States and such amount shall not qualify as a Permitted
Investment and (3) the aggregate amount of such cash Investments
in respect of all such channel rights and all such Persons shall
not exceed $20,000,000; and (xi) Investments by the Company or
any Restricted Subsidiary in a joint venture which is formed to
provide wireless cable television service in North Carolina in
part via ITFS channels leased from community colleges in North
Carolina, provided that such Investments do not in the aggregate
exceed $15,000,000."
8. The following definition of "Supplemental
Indenture" is hereby inserted in Section 1.01 of the Indenture in
its proper alphabetical order:
"`Supplemental Indenture' shall mean the First
Supplemental Indenture, dated as of July __, 1996, between the
Company and the Trustee."
9. The following definition of "Wireless One Service
States" is hereby inserted in Section 1.01 of the Indenture in
its proper alphabetical order:
"`Wireless One Service States' means the states of
Texas, Louisiana, Mississippi, Tennessee, Alabama, Georgia,
Arkansas, North Carolina, Florida, South Carolina and Kentucky."
10. Section 4.07 of the Indenture is hereby deleted in
its entirety and replaced with the following:
"Section 4.07. Limitation on Restricted Payments.
(a) The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly:
(i) declare or pay any dividend on, or make any
distribution to holders of, any shares of the Company's
Capital Stock (other than dividends or distributions payable
solely in its shares of Qualified Capital Stock or in
options, warrants or other rights to acquire shares of such
Qualified Capital Stock);
(ii) purchase, redeem or otherwise acquire or retire
for value, directly or indirectly, the Company's Capital
Stock or any Capital Stock of any Affiliate of the Company
(other than Capital Stock of any Wholly Owned Restricted
Subsidiary) or options, warrants or other rights to acquire
such Capital Stock;
(iii) make any principal payment on, or repurchase,
redeem, defease, retire or otherwise acquire for value,
prior to any scheduled principal payment, sinking fund
payment or maturity, any Subordinated Indebtedness;
(iv) declare or pay any dividend or distribution on
any Capital Stock of any Restricted Subsidiary to any Person
(other than to the Company or any of its Restricted
Subsidiaries;
(v) incur, create or assume any guarantee of
Indebtedness of any Affiliate of the Company (other than
guarantees of Indebtedness of the Company given by any
Restricted Subsidiary in accordance with the terms of this
Indenture); or
(vi) until the date on which the ratio of Annualized
EBITDA to Consolidated Interest Expense equals or exceeds
1.5, make any Investment in any Person (other than any
Permitted Investments) in a cumulative amount for the
Company and all of its Restricted Subsidiaries in excess of
(A)(1) 100% of the Net Cash Proceeds received by the Company
from the issuance and sale of Capital Stock of the Company
(other than Capital Stock sold to a Subsidiary or to any
employee stock ownership plan or similar trust and other
than Redeemable Capital Stock) subsequent to the date of the
effectiveness of the Supplemental Indenture and
(2) $15,000,000 less (B) the cumulative amount of Net Cash
Proceeds received by the Company from the issuance or sale
of Capital Stock of the Company that has been applied to
make Restricted Payments provided in clauses (i) through (v)
above subsequent to the date of the effectiveness of the
Supplemental Indenture; provided that any Guarantee that is
an Investment in an Unrestricted Subsidiary shall cease to
be deemed an Investment (and shall be deemed to have not
been made) to the extent that the Guarantee is released
without payment on the obligations so guaranteed by the
Company or any Restricted Subsidiary of the Company;
(any of the foregoing actions described in clauses (i) through
(vi) above, other than any such action that is a Permitted
Payment, collectively, "Restricted Payments") unless after giving
effect to the proposed Restricted Payment (the amount of any such
Restricted Payment, if other than cash, as determined by the
Board of Directors of the Company, whose determination shall be
conclusive and evidenced by a board resolution), (1) no Default
or Event of Default shall have occurred and be continuing and
such Restricted Payment shall not be an event which is, or after
notice or lapse of time or both, would be, an "event of default"
under the terms of any Indebtedness of the Company or its
Restricted Subsidiaries; (2) the Company could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under
the provisions of Section 4.08; and (3) the aggregate amount of
all such Restricted Payments declared or made after the date of
the effectiveness of the Supplemental Indenture, does not exceed
the sum of:
(A) an amount equal to the Company's Cumulative Operating
Cash Flow less 2.0 times the Company's Cumulative
Consolidated Interest Expense; and
(B) the aggregate Net Cash Proceeds received after the date
of the Supplemental Indenture by the Company from
capital contributions (other than from a Subsidiary) or
from the issuance or sale (other than to a Subsidiary)
of Qualified Capital Stock of the Company or any
options, warrants or rights to purchase such Qualified
Capital Stock of the Company (except, in each case, to
the extent such proceeds are used to purchase, redeem
or otherwise retire Capital Stock or Subordinated
Indebtedness as set forth below in clause (ii), (iii)
or (vii) of paragraph (b) below and except the Net Cash
Proceeds from the issuance of Common Stock that are
applied to acquire Permitted Investments pursuant to
clause (viii) of the definition of Permitted
Investments).
(b) Notwithstanding the foregoing, and in the case of
clauses (ii) through (vi) below, so long as there is no Default
or Event of Default continuing, the foregoing provisions shall
not prohibit the following actions (each of clauses (i) through
(vii) below being referred to as a "Permitted Payment"):
(i) the payment of any dividend within 60 days after
the date of declaration thereof, if at such date of
declaration such payment was permitted by the provisions of
paragraph (a) of this Section and such payment shall have
been deemed to have been paid on such date of declaration
and shall not have been deemed a "Permitted Payment" for
purposes of the calculation required by paragraph (a) of
this Section;
(ii) the repurchase, redemption or other acquisition
or retirement of any shares of any class of Capital Stock of
the Company in exchange for (including any such exchange
pursuant to the exercise of a conversion right or privilege
in connection with which cash is paid in lieu of the
issuance of fractional shares or scrip), or out of the Net
Cash Proceeds of a substantially concurrent issue and sale
for cash (other than to a Subsidiary) of, other shares of
Qualified Capital Stock of the Company; provided that the
Net Cash Proceeds from the issuance of such shares of
Qualified Capital Stock are excluded from clause (3)(B) of
paragraph (a) of this Section;
(iii) the repurchase, redemption, defeasance,
retirement or acquisition for value or payment of principal
of any Subordinated Indebtedness in exchange for, or in an
amount not in excess of the net proceeds of, a substantially
concurrent issuance and sale for cash (other than to any
Subsidiary of the Company) of any Qualified Capital Stock of
the Company, provided that the Net Cash Proceeds from the
issuance of such shares of Qualified Capital Stock are
excluded from clause (3)(B) of paragraph (a) of this
Section;
(iv) the repurchase, redemption, defeasance,
retirement, refinancing, acquisition for value or payment of
principal of any Subordinated Indebtedness (other than
Redeemable Capital Stock) (a "refinancing") through the
issuance of new Subordinated Indebtedness of the Company,
provided that any such new Subordinated Indebtedness (1)
shall be in a principal amount that does not exceed the
principal amount so refinanced (or, if such Subordinated
Indebtedness provides for an amount less than the principal
amount thereof to be due and payable upon a declaration of
acceleration thereof, then such lesser amount as of the date
of determination), plus the lesser of (I) the stated amount
of any premium or other payment required to be paid in
connection with such a refinancing pursuant to the terms of
the Indebtedness being refinanced or (II) the amount of
premium or other payment actually paid at such time to
refinance the Indebtedness, plus, in either case, the amount
of expenses of the Company incurred in connection with such
refinancing; (2) has an Average Life to Stated Maturity
greater than the remaining Average Life to Stated Maturity
of the Notes; (3) has a Stated Maturity for its final
scheduled principal payment later than the Stated Maturity
for the final scheduled principal payment of the Notes; and
(4) is expressly subordinated in right of payment to the
Notes at least to the same extent as the Indebtedness to be
refinanced;
(v) the repurchase of Capital Stock of the Company
(including options, warrants or other rights to acquire such
Capital Stock) from employees or former employees of the
Company or any Restricted Subsidiary thereof for
consideration which, when added to all loans made pursuant
to clause (vi) below during the same fiscal year and then
outstanding, does not exceed $1,000,000 in the aggregate in
any fiscal year and $4,000,000 in the aggregate since the
date of this Indenture;
(vi) the making of loans and advances to employees of
the Company or any Restricted Subsidiary thereof in an
aggregate amount at any time outstanding (including as
outstanding any such loan or advance written off or
forgiven) which, when added to the aggregate consideration
paid pursuant to clause (v) above during the same fiscal
year, does not exceed $1,000,000 in any fiscal year and
$4,000,000 in the aggregate since the date of this
Indenture; and
(vii) the repurchase, redemption or other acquisition
or retirement of Capital Stock of any Subsidiary of the
Company for Capital Stock (other than Redeemable Capital
Stock).
The amounts referred to in clauses (i), (v) and (vi)
shall be included as Restricted Payment in any computation made
pursuant to clause (a)(3) above. Restricted Payments shall be
deemed not to include Permitted Payments and Permitted
Investments."
11. Section 4.08 of the Indenture is hereby deleted in
its entirety and replaced with the following:
"Section 4.08. Limitation on Indebtedness.
The Company will not, and will not permit any
Restricted Subsidiary to, create, issue, incur, assume, guarantee
or otherwise in any manner become directly or indirectly liable
for the payment of or otherwise incur (collectively, "incur") any
Indebtedness (including any Acquired Indebtedness), except that
the Company may incur Indebtedness (including any Acquired
Indebtedness) and any Restricted Subsidiary may incur Acquired
Indebtedness, if, in each case, the Debt to Operating Cash Flow
Ratio of the Company and its Restricted Subsidiaries at the time
of incurrence of such Indebtedness, after giving pro forma effect
thereto, is 5.0: 1.0 or less.
The foregoing limitation will not apply to the
incurrence of any of the following (collectively, "Permitted
Indebtedness"), but any such Permitted Indebtedness will be
included in any calculation of Debt:
(i) Indebtedness of the Company or any of its
Restricted Subsidiaries under a Bank Credit Facility in an
aggregate principal amount at any one time outstanding not
to exceed $25,000,000;
(ii) Indebtedness of the Company pursuant to the
Notes;
(iii) Indebtedness of any Restricted Subsidiary
consisting of a guarantee of Indebtedness under a Bank
Credit Facility;
(iv) Indebtedness of the Company or any Restricted
Subsidiary outstanding on the date of this Indenture and
listed on a schedule hereto (exclusive of any debt of the
kind referred to in clause (x));
(v) Indebtedness of the Company owing to a Restricted
Subsidiary; provided that any Indebtedness of the Company
owing to a Restricted Subsidiary is made pursuant to an
intercompany note and is subordinated in right of payment
from and after such time as the Notes shall become due and
payable (whether at Stated Maturity, acceleration or
otherwise) to the payment of the Company's obligations under
the Notes; provided, further, that any disposition, pledge
or transfer of any such Indebtedness to a Person (other than
a disposition, pledge or transfer to a Wholly Owned
Restricted Subsidiary) shall be deemed to be an incurrence
of such Indebtedness by the obligor not permitted by this
clause (v);
(vi) Indebtedness of a Restricted Subsidiary owing to
the Company or another Restricted Subsidiary; provided that,
with respect to Indebtedness owing to a Restricted
Subsidiary, any such Indebtedness is made pursuant to an
intercompany note; provided, further, that (a) any
disposition, pledge or transfer of any such Indebtedness to
a Person (other than a disposition, pledge or transfer to
the Company or a Restricted Subsidiary) shall be deemed to
be an incurrence of such Indebtedness by the obligor not
permitted by this clause (vi) and (b) any transaction
pursuant to which any Restricted Subsidiary, which has
Indebtedness owing to the Company or any other Restricted
Subsidiary, ceases to be a Restricted Subsidiary shall be
deemed to be the incurrence of Indebtedness by such
Restricted Subsidiary that is not permitted by this clause
(vi);
(vii) guarantees of any Restricted Subsidiary made in
accordance with the provisions of Section 4.19;
(viii) obligations of the Company or any Restricted
Subsidiary entered into in the ordinary course of business
pursuant to Interest Rate Agreements designed to protect the
Company or any Restricted Subsidiary against fluctuations in
interest rates in respect of Indebtedness of the Company or
any Restricted Subsidiary as long as such obligations at the
time incurred do not exceed the aggregate principal amount
of such Indebtedness then outstanding or in good faith
anticipated to be outstanding within 90 days of such
occurrence;
(ix) Indebtedness having an interest rate not in
excess of the interest rate on the Indebtedness under clause
(xiv) below lent by a Strategic Equity Investor (or any
subsidiary thereof and including any refinancing of such
outstanding amount) resulting in up to $50,000,000 in
aggregate Net Cash Proceeds (or if no such Indebtedness has
been incurred, an interest rate not to exceed 13%); provided
that (i) such Indebtedness (and any refinancing thereof) is
subordinated in right of payment to the prior payment in
full in cash of all obligations (including principal,
interest and premium, if any) of the Company under the Notes
and the Indenture (including as a consequence of any
repurchase, redemption or other repayment of the Notes,
including, without limitation, by way of optional
redemption, Asset Sale Offers, and Change of Control Offers
to the extent such rights to repayment are exercised by the
Noteholders) such that (A) the Company shall make no payment
or distribution in respect of such Indebtedness and may not
acquire such Indebtedness until the prior payment in full in
cash of all obligations in respect of the Notes if any
Default on the Notes shall occur and be continuing, and
(B) the holders of such Indebtedness may not take any action
to enforce or accelerate such Indebtedness until the holders
of the Notes have taken such action in respect of the Notes,
(ii) such Indebtedness (and any refinancing thereof) is not
guaranteed by any of the Company's Subsidiaries and is not
secured by any Lien on any property or asset of the Company
or any Restricted Subsidiary, (iii) such Indebtedness (and
any refinancing thereof) has no scheduled maturity of
principal earlier than a date at least one year after the
final Stated Maturity of the Notes, and (iv) accreted
interest on such Indebtedness shall only be payable on the
Maturity thereof and cash interest on such Indebtedness
shall only be payable to the extent that immediately prior
to and after such payment of interest the Company is
permitted to incur $1.00 of Indebtedness under the ratio
described in the first paragraph of this Section 4.08 and
(v) the holders of such Indebtedness shall assign any rights
to vote, including by way of proxy, in a bankruptcy,
insolvency or similar proceeding to the Trustee and the
trustee for Indebtedness permitted by clause (xiv) of this
Section; and, provided, further, the aggregate Net Cash
Proceeds of such Indebtedness together with the Net Cash
Proceeds of Indebtedness incurred under clause (xi) below
shall not exceed $100,000,000 at any one time;
(x) Indebtedness of the Company or any Restricted
Subsidiary owing to a federal governmental authority
relating to the purchase of wireless cable channels in an
auction in an amount not to exceed in the aggregate
$40,000,000 (including any such Indebtedness refinanced
under clause (xiii) below);
(xi) in the event the Company receives $40,000,000 or
more of aggregate Net Cash Proceeds from the sale of
Qualified Capital Stock (other than Qualified Capital Stock
sold to a Subsidiary or to any employee stock ownership plan
or similar trust and other than Redeemable Capital Stock)
issued subsequent to the date of the effectiveness of the
Supplemental Indenture, Indebtedness of the Company in an
aggregate principal amount not to exceed $100,000,000
(including any refinancing thereof); provided that (i) the
incurrence of such Indebtedness would not result in there
being outstanding more than $1.50 of Indebtedness under this
clause (xi), clause (ix) and clause (xii) for each $1.00 of
aggregate Net Cash Proceeds of Qualified Capital Stock
issued subsequent to the date of the effectiveness of the
Supplemental Indenture, (ii) such Indebtedness (and any
refinancing thereof) is not guaranteed by any of the
Company's Subsidiaries and is not secured by any lien on any
property or asset of the Company or any Restricted
Subsidiary and (iii) the Indebtedness permitted by this
clause (xi) shall be reduced by the sum of (A) the aggregate
Net Cash Proceeds of Indebtedness issued under clause (ix)
and clause (xii) of Section 4.08 plus (B) the product of
$1.50 and the aggregate amount of Investments made by the
Company pursuant to clause (viii) of the definition of
Permitted Investments (other than Investments acquired in
consideration for the issuance of Common Stock);
(xii) in the event the Company incurs Indebtedness
lent by a Strategic Equity Investor under clause (ix) that
results in $50,000,000 of Net Cash Proceeds and the Company
receives $40,000,000 or more of aggregate Net Cash Proceeds
from the sale of Qualified Capital Stock issued subsequent
to the date of the effectiveness of the Supplemental
Indenture, the Company or any Restricted Subsidiary shall be
permitted to incur up to $25,000,000 of Indebtedness
(including any refinancing thereof); provided that the Net
Cash Proceeds of such Indebtedness, together with the Net
Cash Proceeds of Indebtedness incurred under clause (xi) of
this Section, shall not exceed $50,000,000;
(xiii) any renewals, extensions, substitutions,
refundings, refinancings or replacements (collectively, a
"refinancing") of any Indebtedness described in clauses
(ii), (iv) and (x) above and clause (xiv) below, including
any successive refinancings so long as the aggregate
principal amount of Indebtedness represented thereby is not
increased by such refinancing (or, if said Indebtedness
provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of
acceleration of the maturity thereof, not greater than such
lesser amount) plus the lesser of (I) the stated amount of
any premium or other payment required to be paid in
connection with such a refinancing pursuant to the terms of
the Indebtedness being refinanced or (II) the amount of
premium or other payment actually paid at such time to
refinance the Indebtedness, plus, in either case, the amount
of expenses of the Company incurred in connection with such
refinancing and, in the case of Pari Passu or Subordinated
Indebtedness, such refinancing does not reduce the Average
Life to Stated Maturity or the Stated Maturity of such
Indebtedness;
(xiv) (A) Indebtedness of the Company, together with
any accretion thereon, the gross proceeds of which on the
date of issuance thereof do not exceed $125,000,000 or (B)
with respect to Indebtedness for which a cash interest
reserve is established, (i) Indebtedness of the Company, the
gross proceeds, net of such cash interest reserve, of which
on the date of issuance thereof do not exceed $125,000,000
and (ii) the related cash interest reserve; and
(xv) Indebtedness of the Company or any Restricted
Subsidiary in addition to that described in clauses (i)
through (xiv) above, so long as the aggregate principal
amount of all such Indebtedness shall not exceed $10,000,000
at any one time outstanding."
12. Section 4.09 of the Indenture is hereby deleted in
its entirety and replaced with the following:
"Section 4.09. Limitation on Liens.
The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create, incur,
affirm or suffer to exist any Lien of any kind upon any of its
property or assets (including any intercompany notes), now owned
or acquired after the date of this Indenture, or any income or
profits therefrom, except if the Notes are directly secured
equally and ratably with (or prior to in the case of Liens with
respect to Subordinated Indebtedness) the obligation or liability
secured by such Lien, excluding, however, from the operation of
the foregoing any of the following (collectively, "Permitted
Liens"):
(a) any Lien on (1) the Escrow Account and all funds
and securities therein securing only the Notes equally and
ratably or (2) other assets of the Company or any Subsidiary
thereof securing only the Notes equally and ratably;
(b) any Lien existing as of the date of the
effectiveness of the Supplemental Indenture and listed on a
schedule hereto;
(c) any Lien arising by reason of (1) any judgment,
decree or order of any court, so long as such Lien is
adequately bonded and any appropriate legal proceedings
which may have been duly initiated for the review of such
judgment, decree or order shall not have been finally
terminated or the period within which such proceedings may
be initiated shall not have expired; (2) taxes not yet
delinquent or which are being contested in good faith; (3)
security for payment of workers' compensation or other
insurance; (4) good faith deposits in connection with
tenders, leases and contracts (other than contracts for the
payment of money) in the ordinary course of business; (5)
zoning restrictions, easements, licenses, reservations,
provisions, covenants, conditions, waivers, restrictions on
the use of property or minor irregularities of title (and
with respect to leasehold interests, mortgages, obligations,
liens and other encumbrances incurred, created, assumed or
permitted to exist and arising by, through or under a
landlord or owner of the leased property, with or without
consent of the lessee), none of which materially impairs the
use of any parcel of property material to the operation of
the business of the Company or any Restricted Subsidiary or
the value of such property for the purpose of such business;
(6) deposits to secure public or statutory obligations, or
in lieu of surety or appeal bonds; (7) certain surveys,
exceptions, title defects, encumbrances, easements,
reservations of, or rights of others for, rights of way,
sewers, electric lines, telegraph or telephone lines and
other similar purposes or zoning or other restrictions as to
the use of real property not interfering with the ordinary
conduct of the business of the Company or any of its
Restricted Subsidiaries; or (8) operation of law in favor of
mechanics, materialmen, laborers, employees or suppliers,
incurred in the ordinary course of business for sums which
are not yet delinquent or are being contested in good faith
by negotiations or by appropriate proceedings which suspend
the collection thereof;
(d) any Lien securing Indebtedness under a Bank Credit
Facility incurred by the Company or any Restricted
Subsidiary in compliance with the provisions of Section 4.08
or Liens securing Indebtedness incurred in compliance with
clause (xii) of the definition of Permitted Indebtedness in
Section 4.08;
(e) Liens securing purchase money Indebtedness,
including pursuant to clause (x) under the second paragraph
of the provisions of Section 4.08, incurred in compliance
with this Indenture, provided that such Liens do not extend
to any assets other than the assets so acquired and the
principal amount of such Indebtedness shall at no time
exceed the original purchase price of the property or assets
purchased;
(f) any Lien securing Acquired Indebtedness created
prior to (and not created in connection with, or in
contemplation of) the incurrence of such Indebtedness by the
Company or any Restricted Subsidiary, in each case which
Indebtedness is permitted under the provisions of
Section 4.08; provided that any such Lien extends only to
the assets that were subject to such Lien securing Acquired
Indebtedness prior to the related transaction by the Company
or its Restricted Subsidiaries; and
(g) any extension, renewal, refinancing or
replacement, in whole or in part, of any Lien described in
the foregoing clauses (a) through (f) so long as the amount
of security is not increased thereby."
13. Section 4.10 of the Indenture is hereby amended by
inserting the phrase "of the Company" immediately following the
phrase "Wholly Owned Restricted Subsidiary."
14. Section 4.13 of the Indenture is hereby amended by
inserting the proviso "provided that any such encumbrance or
restriction shall specifically not prohibit payments of
principal, premium, if any, and interest on the Notes" at the
conclusion of clause (b) of Section 4.13.
15. Section 4.15 of the Indenture is hereby deleted in
its entirety and replaced with the following:
"Section 4.15. Activities of the Company.
The Company and its Restricted Subsidiaries may not,
directly or indirectly, engage in any business other than the
Wireless Cable Business; provided that in the event a Change of
Control occurs in which a Strategic Equity Investor becomes the
holder of a majority of the Voting Stock of the Company, this
Section shall no longer be of force and effect."
16. This First Supplemental Indenture shall become
effective on the later of (i) immediately prior to the completion
of the merger of a subsidiary of the Corporation (Wireless One
MergerSub, Inc.) with and into TruVision Wireless, Inc.
("TruVision"), with TruVision becoming a subsidiary of the
Corporation (the "TruvVision Transaction") and (ii) the due
execution of this First Supplemental Indenture. All references
in the Indenture and this First Supplemental Indenture to the
time or date of effectiveness of the First Supplemental Indenture
shall be deemed to refer to the time immediately after the
consummation of the TruVision Transaction.
17. As supplemented by this First Supplemental
Indenture, the Indenture is hereby ratified and confirmed in all
respects.
18. This First Supplemental Indenture may be executed
in any number of counterparts, each of which when so executed
shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
19. This First Supplemental Indenture shall be deemed
to be a contract made under the laws of the State of New York,
and for all purposes shall be construed in accordance with the
laws of such State.
IN WITNESS THEREOF, the parties hereto have caused this
First Supplemental Indenture to be duly executed (and effective
in the manner set forth in Section 16 of this First Supplemental
Indenture), and their respective corporate seals to be hereunto
affixed and attested, all as of the day and year first above
written.
WIRELESS ONE, INC.
By: /s/ Sean Reilly
[SEAL] _______________________________
Attest:
_____________________________
Title:
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By:/s/ M. Ciesmelewski
________________________________
[SEAL] Assistant Vice President
Attest:
/s/ Robert F. Leman
____________________________
Title: Assistant Secretary
EXECUTION COPY
WIRELESS ONE, INC.
13 1/2% SENIOR DISCOUNT NOTES DUE 2006
___________________________________
_______________
INDENTURE
Dated as of August 12, 1996
_______________
_______________
United States Trust Company of New York
as Trustee
_______________
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
310(a)(1)....................................................7.10
(a)(2)....................................................7.10
(a)(3)....................................................N.A.
(a)(4)....................................................N.A.
(a)(5)....................................................7.10
(b).......................................................7.10
(c).......................................................N.A.
311(a).......................................................7.11
(b).......................................................7.11
(c).......................................................N.A.
312(a).......................................................N.A.
(b)(1)...................................................11.03
(c)......................................................11.03
313(a).......................................................7.06
(b)(1)...................................................11.03
(b)(2)....................................................7.06
(c)................................................7.06; 11.02
(d).......................................................7.06
314(a).......................................................N.A.
(b).......................................................N.A.
(c)(1)....................................................N.A.
(c)(2)....................................................N.A.
(c)(3)....................................................N.A.
(d).......................................................N.A.
(e).......................................................N.A.
(f).......................................................N.A.
315(a).......................................................N.A.
(b).......................................................N.A.
(c).......................................................N.A.
(d).......................................................N.A.
(e).......................................................N.A.
316(a)(last sentence)........................................N.A.
(a)(1)(A).................................................N.A.
(a)(1)(B).................................................N.A.
(a)(2)....................................................N.A.
(b).......................................................N.A.
(c).......................................................N.A.
317(a)(1)....................................................N.A.
(a)(2)....................................................N.A.
(b).......................................................N.A.
318(a).......................................................N.A.
(b).......................................................N.A.
(c)......................................................11.01
N.A. means not applicable.
*This Cross-Reference Table is not part of this Indenture.
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions............................... 1
Section 1.02. Other Definitions......................... 19
Section 1.03. Incorporation by Reference of Trust
Indenture Act............................. 20
Section 1.04. Rules of Construction..................... 20
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating........................... 21
Section 2.02. Execution and Authentication; Aggregate
Principal Amount.......................... 21
Section 2.03. Registrar and Paying Agent................ 22
Section 2.04. Paying Agent to Hold Assets in Trust...... 23
Section 2.05. Noteholder Lists.......................... 23
Section 2.06. Transfer and Exchange..................... 23
Section 2.07. Replacement Notes......................... 24
Section 2.08. Outstanding Notes......................... 24
Section 2.09. Treasury Notes............................ 25
Section 2.10. Temporary Notes........................... 25
Section 2.11. Cancellation.............................. 25
Section 2.12. Defaulted Interest........................ 25
Section 2.13. CUSIP Number.............................. 26
Section 2.14. Deposit of Monies......................... 26
Section 2.15. Legend.................................... 27
Section 2.16. Book-Entry Provisions for Global Note..... 27
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee........................ 28
Section 3.02. Selection of Notes to Be Redeemed......... 29
Section 3.03. Notice of Redemption...................... 29
Section 3.04. Effect of Notice of Redemption............ 30
Section 3.05. Deposit of Redemption Price............... 30
Section 3.06. Notes Redeemed in Part.................... 31
Section 3.07. Optional Redemption. ..................... 31
Section 3.08. Mandatory Redemption...................... 32
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.......................... 32
Section 4.02. Maintenance of Office or Agency........... 33
Section 4.03. Provision of Financial Statements......... 33
Section 4.04. Compliance Certificate.................... 34
Section 4.05. Taxes..................................... 35
Section 4.06. Stay, Extension and Usury Laws............ 35
Section 4.07. Limitation on Restricted Payments......... 35
Section 4.08. Limitation on Indebtedness................ 38
Section 4.09. Limitation on Liens....................... 41
Section 4.10. Limitation on Subsidiary Capital Stock.... 43
Section 4.11. Limitation on Preferred Stock of
Subsidiaries.............................. 43
Section 4.12. Limitation on Sale of Assets.............. 44
Section 4.13. Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries....... 45
Section 4.14. Limitation on Transactions with
Affiliates................................ 46
Section 4.15. Activities of the Company................. 47
Section 4.16. Purchase of Notes Upon a Change of
Control................................... 47
Section 4.17. Limitations on Unrestricted Subsidiaries.. 48
Section 4.18. Limitation on Issuances of Guarantees of
Indebtedness.............................. 48
Section 4.19. Limitation on Sale and Leaseback
Transactions.............................. 49
ARTICLE 5
SUCCESSORS
Section 5.01. Consolidation, Merger, Sale of Assets..... 49
Section 5.02. Successor Corporation Substituted......... 50
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default......................... 51
Section 6.02. Acceleration.............................. 53
Section 6.03. Other Remedies............................ 54
Section 6.04. Waiver of Past Defaults................... 54
Section 6.05. Control by Majority....................... 55
Section 6.06. Limitation on Suits....................... 55
Section 6.07. Rights of Holders of Notes to
Receive Payment........................... 56
Section 6.08. Collection Suit by Trustee................ 56
Section 6.09. Trustee May File Proofs of Claim.......... 56
Section 6.10. Priorities................................ 57
Section 6.11. Undertaking for Costs..................... 57
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee......................... 57
Section 7.02. Rights of Trustee......................... 59
Section 7.03. Individual Rights of Trustee.............. 59
Section 7.04. Trustee's Disclaimer...................... 60
Section 7.05. Notice of Defaults........................ 60
Section 7.06. Reports by Trustee to Holders of
the Notes................................. 60
Section 7.07. Compensation and Indemnity................ 61
Section 7.08. Replacement of Trustee.................... 62
Section 7.09. Successor Trustee by Merger, etc. ........ 63
Section 7.10. Eligibility; Disqualification............. 63
Section 7.11. Preferential Collection of Claims
Against Company........................... 63
ARTICLE 8
DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Defeasance or Covenant
Defeasance................................ 63
Section 8.02. Defeasance and Discharge.................. 64
Section 8.03. Covenant Defeasance....................... 64
Section 8.04. Conditions to Defeasance or Covenant
Defeasance................................ 65
Section 8.05. Deposited Money and U.S. Government
Securities to Be Held in Trust; Other
Miscellaneous Provisions.................. 67
Section 8.06. Repayment to Company...................... 68
Section 8.07. Reinstatement............................. 68
ARTICLE 9
SATISFACTION AND DISCHARGE
Section 9.01. Satisfaction and Discharge of Indenture... 69
Section 9.02. Application of Monies for Satisfaction
and Discharge............................. 70
ARTICLE 10
AMENDMENT, SUPPLEMENT AND WAIVER
Section 10.01. Without Consent of Holders of Notes...... 70
Section 10.02. With Consent of Holders of Notes......... 71
Section 10.03. Compliance with Trust Indenture Act...... 73
Section 10.04. Revocation and Effect of Consents........ 73
Section 10.05. Notation on or Exchange of Notes......... 73
Section 10.06. Trustee to Sign Amendments, etc. ........ 74
ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls............. 74
Section 11.02. Notices.................................. 74
Section 11.03. Communication by Holders of Notes with
Other Holders of Notes................... 75
Section 11.04. Certificate and Opinion as to
Conditions Precedent..................... 75
Section 11.05. Statements Required in Certificate or
Opinion.................................. 76
Section 11.06. Rules by Trustee and Agents.............. 76
Section 11.07. No Personal Liability of Partners,
Directors, Officers, Employees and
Stockholders............................. 76
Section 11.08. Governing Law............................ 76
Section 11.09. No Adverse Interpretation of Other
Agreements............................... 77
Section 11.10. Successors............................... 77
Section 11.11. Severability............................. 77
Section 11.12. Counterpart Originals.................... 77
Section 11.13. Table of Contents, Headings, etc. ....... 77
ANNEXES, EXHIBITS AND SCHEDULES
Exhibit A Form of Note
Exhibit B Form of Intercompany Note
INDENTURE, dated as of August 12, 1996, between
Wireless One, Inc., a Delaware Corporation (the "Company"), and
United States Trust Company of New York, as trustee (the
"Trustee").
The Company has duly authorized the creation of an
issue of 13 1/2% Senior Discount Notes due 2006 (the "Notes") and,
to provide therefor, the Company has duly authorized the
execution and delivery of this Indenture. All things necessary
to make the Notes, when duly issued and executed by the Company,
and authenticated and delivered hereunder, the valid obligations
of the Company, and to make this Indenture a valid and binding
agreement of the Company, have been done.
The Company and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of
the Holders of the Notes:
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"Accreted Value" means as of a date of determination
prior to August 1, 2001, with respect to any Note, the sum of
(a) the initial offering price of such Note and (b) the portion
of the excess of the principal amount of such Note over such
initial offering price which shall have been accreted thereon
through such date, such amount to be so accreted on a daily
basis at the rate of 13 1/2% per annum of the initial offering
price of such Note, compounded semi-annually on each February 1
and August 1 from the Issue Date through the date of
determination, computed on the basis of a 360-day year of twelve
30-day months. The Accreted Value of any Note on or after
August 1, 2001 shall be 100% of the principal amount thereof.
"Acquired Indebtedness" means Indebtedness of a Person
(i) existing at the time such Person becomes a Subsidiary or
(ii) assumed in connection with the acquisition of assets from
such Person, in each case, other than Indebtedness incurred in
connection with, or in contemplation of, such Person becoming a
Subsidiary or such acquisition, as the case may be. Acquired
Indebtedness shall be deemed to be incurred on the date of the
related acquisition of assets from any Person or the date the
acquired Person becomes a Subsidiary, as the case may be.
"Affiliate" means, with respect to any specified
Person, (i) any other Person directly or indirectly controlling
or controlled by or under direct or indirect common control with
such specified Person; (ii) any other Person that owns, directly
or indirectly, 5% or more of such specified Person's Capital
Stock or any officer or director of any such specified Person or
other Person or, with respect to any natural Person, any person
having a relationship with such Person by blood, marriage or
adoption not more remote than first cousin or (iii) any other
Person 5% or more of the Voting Stock of which is beneficially
owned or held directly or indirectly by such specified Person.
For the purposes of this definition, "control" when used with
respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly,
whether through ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Agent" means any Registrar or Paying Agent.
"Annualized EBITDA to Consolidated Interest Expense"
as of any date of determination means the ratio of (x) the
aggregate amount of EBITDA for the most recent fiscal quarter
for which financial information has been filed with the
Commission multiplied by four to (y) Consolidated Interest
Expense for the preceding four quarter period; provided,
however, that (i) if the Company or any Restricted Subsidiary of
the Company has incurred any Indebtedness (including Acquired
Indebtedness) that remains outstanding on the date of such
determination, the ratio of Annualized EBITDA to Consolidated
Interest Expense for such period will be calculated after giving
effect on a pro forma basis to (a) such Indebtedness, as if such
Indebtedness had been incurred on the first day of the relevant
period (fiscal quarter in the case of annualized EBITDA and four
quarter period in the case of Consolidated Interest Expense) and
(b) the discharge of any other Indebtedness repaid, repurchased,
defeased or otherwise discharged with the proceeds of such new
Indebtedness as if such discharge had occurred on the first day
of the relevant period, (ii) if since the beginning of such
fiscal quarter the Company or any Restricted Subsidiary of the
Company has made any Asset Sale, EBITDA for such fiscal quarter
will be (a) reduced by an amount equal to EBITDA (if positive)
directly attributable to the assets which are the subject of
such Asset Sale for such fiscal quarter or (b) increased by an
amount equal to EBITDA (if negative) directly attributable
thereto for such fiscal quarter and (iii) if since the beginning
of such period the Company or any Restricted Subsidiary of the
Company (by merger or otherwise) has made an Investment in any
Person which becomes a Restricted Subsidiary of the Company as a
result of such Investment or an Investment in an existing
Restricted Subsidiary with the result that such Investment will
result in the consolidation of a greater percentage of such
Restricted Subsidiary's Consolidated Net Income (Loss) (other
than a transfer of operating assets from the Company or one
Restricted Subsidiary to another Restricted Subsidiary) or has
made an acquisition of assets (other than from the Company or
another Restricted Subsidiary of the Company), including any
acquisition of assets occurring in connection with a transaction
causing a calculation of Annualized EBITDA to Consolidated
Interest Expense to be made hereunder, which constitutes all or
substantially all of an operating unit of a business, Annualized
EBITDA to Consolidated Interest Expense will be calculated after
giving pro forma effect thereto (including the incurrence of any
Indebtedness (including Acquired Indebtedness)) as if such
Investment or acquisition occurred on the first day of the
relevant period. For purposes of this definition, whenever pro
forma effect is to be given to an acquisition of assets, an
Investment, a divestiture or an incurrence of Indebtedness, the
pro forma calculations will be determined in good faith by a
responsible financial or accounting officer of the Company;
provided, however, that such officer shall apply in his
calculations the historical EBITDA and Consolidated Interest
Expense associated with such assets for the most recent relevant
period for which financial information is available. If any
Indebtedness (including Acquired Indebtedness) bears a floating
rate of interest and is being given pro forma effect, the
interest on such Indebtedness will be calculated as if the rate
in effect on the date of determination had been the applicable
rate for the entire period.
"Asset Sale" means any sale, issuance, conveyance,
transfer, lease or other disposition (including, without
limitation, by way of merger, consolidation or Sale and
Leaseback Transaction) (collectively, a "transfer"), directly or
indirectly, in one or a series of related transactions, of: (i)
any Capital Stock of any Restricted Subsidiary; (ii) all or
substantially all of the properties and assets of any division
or line of business of the Company or its Restricted
Subsidiaries; or (iii) any other properties or assets of the
Company or any Restricted Subsidiary other than in the ordinary
course of business. For the purposes of this definition, the
term "Asset Sale" shall not include any transfer of properties
and assets that (A) is governed by the provisions of Section
5.01, (B) is by the Company to any Restricted Subsidiary, or by
any Restricted Subsidiary to the Company or any Wholly Owned
Restricted Subsidiary, (C) is in the form of a contribution to
an Unrestricted Subsidiary which complies with the provisions of
Section 4.17, (D) is of obsolete equipment in the ordinary
course of business, (E) aggregates not more than $250,000 in
gross proceeds or (F) aggregates, when together with all other
transfers in any 12-month period, not more than $2,000,000 in
gross proceeds and, when together with all other transfers since
the date of this Indenture, not more than $5,000,000 in gross
proceeds.
"Average Life to Stated Maturity" means, as of the
date of determination with respect to any Indebtedness, the
quotient obtained by dividing (i) the sum of the products of (a)
the number of years from the date of determination to the date
or dates of each successive scheduled principal payment of such
Indebtedness multiplied by (b) the amount of each such principal
payment by (ii) the sum of all such principal payments.
"Bank Credit Facility" means one or more credit
facilities (whether a term or a revolving facility) of the type
customarily entered into with commercial banks, between the
Company or any of its Restricted Subsidiaries, on the one hand,
and any commercial banks, financial institutions or other
lenders, on the other hand (and any renewals, refundings,
extensions or replacements of any such credit facilities,
provided that such renewals, refundings, extensions or
replacements comply with this definition of "Bank Credit
Facility"), which Bank Credit Facilities are by their terms
designated as a "Bank Credit Facility" for purposes of this
Indenture.
"Bankruptcy Law" means Title 11, United States
Bankruptcy Code of 1978, as amended, or any similar United
States federal or state law relating to bankruptcy, insolvency,
receivership, winding up, liquidation, reorganization or relief
of debtors or any amendment to, succession to or change in any
such law.
"Beneficial Owner" means a beneficial owner as defined
in Rules 13d-3 and 13d-5 under the Exchange Act (or any
successor rules), including the provision of such Rules that a
Person shall be deemed to have beneficial ownership of all
securities that such Person has a right to acquire within 60
days; provided that a Person will not be deemed a beneficial
owner of, or to own beneficially, any securities if such
beneficial ownership (i) arises solely as a result of a
revocable proxy delivered in response to a proxy or consent
solicitation made pursuant to, and in accordance with, the
Exchange Act and (ii) is not also then reportable on Schedule
13D or Schedule 13G (or any successor schedule) under the
Exchange Act.
"Business Day" means any day that is not a Saturday,
Sunday or a day on which banking institutions in the City of New
York or at a place of payment are authorized by law, regulation
or executive order to remain closed. If a payment date is not a
Business Day at a place of payment, payment may be made at that
place on the next succeeding Business Day, and no interest shall
accrue for the intervening period.
"Capital Lease Obligation" means any obligation of the
Company and its Restricted Subsidiaries on a Consolidated basis
under any capital lease of real or personal property which, in
accordance with GAAP, has been recorded as a capitalized lease
obligation.
"Capital Stock" of any Person means any and all
shares, interests, participations or other equivalents (however
designated) of such Person's capital stock or other equity
interests whether now outstanding or issued after the date of
this Indenture.
"Certificated Notes" means Notes in the form of
certificated securities in definitive form that are not Global
Notes.
"Change of Control" means the occurrence of any of the
following events:
(i) any Person or "group" (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act),
other than the Permitted Holders, is or becomes the
Beneficial Owner, directly or indirectly, of more than
40% of the total outstanding Voting Stock of the
Company;
(ii) during any period of two consecutive years,
individuals who at the beginning of such period
constituted the Board of Directors of the Company
(together with any new directors whose election to
such board or whose nomination for election by the
stockholders of the Company was approved by a vote of
66 2/3% of the directors then still in office who were
either directors at the beginning of such period or
whose election or nomination for election was
previously so approved), cease for any reason to
constitute a majority of such Board of Directors then
in office;
(iii) the Company consolidates with, or merges
with or into, any Person or sells, assigns, conveys,
transfers, or leases or otherwise disposes of all or
substantially all of its assets to any Person, or any
Person consolidates with, or merges with or into, the
Company, in any such event pursuant to a transaction
in which the outstanding Voting Stock of the Company
is changed into or exchanged for cash, securities or
other property, other than any such transaction where
the outstanding Voting Stock of the Company is not
changed or exchanged at all (except to the extent
necessary to reflect a change in the jurisdiction of
incorporation of the Company) or where (A) the
outstanding Voting Stock of the Company is changed
into or exchanged for (x) Voting Stock of the
surviving corporation which is not Redeemable Capital
Stock or (y) cash, securities and other property
(other than Capital Stock of the surviving
corporation) in an amount which could be paid by the
Company as a Restricted Payment under Section 4.07
(and such amount shall be treated as a Restricted
Payment subject to the provisions of Section 4.07) and
(B) no Person or "group" other than Permitted Holders
owns immediately after such transaction, directly or
indirectly, more than 40% of the total outstanding
Voting Stock of the surviving corporation; or
(iv) the Company is liquidated or dissolved or
adopts a plan of liquidation or dissolution other than
in a transaction which complies with the provisions
described under Section 5.01.
"Closing Price" on any Trading Day with respect to the
per share price of any shares of Capital Stock means the last
reported sale price regular way or, in case no such reported
sale takes place on such day, the average of the reported
closing bid and asked prices regular way, in either case on the
New York Stock Exchange or, if such shares of Capital Stock are
not listed or admitted to trading on such exchange, on the
principal national securities exchange on which such shares are
listed or admitted to trading or, if not listed or admitted to
trading on any national securities exchange, on the Nasdaq
National Market or, if such shares are not listed or admitted to
trading on any national securities exchange or quoted on such
automated quotation system but the issuer is a Foreign Issuer
(as defined in Rule 3b-4(b) under the Exchange Act) and the
principal securities exchange on which such shares are listed or
admitted to trading is a Designated Offshore Securities Market
(as defined in Rule 902(a) under the Securities Act), the
average of the reported closing bid and asked prices regular way
on such principal exchange, or, if such shares are not listed or
admitted to trading on any national securities exchange or
quoted on such automated quotation system and the issuer and
principal securities exchange do not meet such requirements, the
average of the closing bid and asked prices in the
over-the-counter market as furnished by any New York Stock
Exchange member firm that is selected from time to time by the
Company for that purpose and is reasonably acceptable to the
Trustee.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Commission" means the Securities and Exchange
Commission, as from time to time constituted, created under the
Exchange Act, or if at any time after the execution of this
Indenture such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act then the
body performing such duties at such time.
"Common Stock" means the common stock, $0.01 par value
per share, of the Company.
"Company" means Wireless One, Inc., a corporation
incorporated under the laws of the State of Delaware, until a
successor Person shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Consolidated Income Tax Expense" for any Person for
any period means, without duplication, the aggregate amount of
net taxes based on income or profits for such period of the
operations of such Person and its Consolidated Restricted
Subsidiaries with respect to such period in accordance with
GAAP.
"Consolidated Indebtedness" means, with respect to any
Person, as of any date of determination, the aggregate amount of
Indebtedness of such Person and its subsidiaries (other than, in
the case of the Company, Unrestricted Subsidiaries) as of such
date determined on a consolidated basis in accordance with GAAP
and which would appear on the balance sheet of any such Person.
"Consolidated Interest Expense" means, without
duplication, for any period, the sum of (a) the interest expense
of the Company and its Consolidated Restricted Subsidiaries for
such period, on a Consolidated basis, including, without
limitation, (i) amortization of debt discount, (ii) the net
costs associated with Interest Rate Agreements (including
amortization of discounts), (iii) the interest portion of any
deferred payment obligation and (iv) accrued interest, plus (b)
the interest component of the Capital Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by such Person
and its Restricted Subsidiaries during such period, in each case
as determined in accordance with GAAP.
"Consolidated Net Income (Loss)" means, for any
period, the Consolidated net income (or loss) of the Company and
its Consolidated Restricted Subsidiaries for such period on a
Consolidated basis as determined in accordance with GAAP,
adjusted, to the extent included in calculating such net income
(or loss), by excluding, without duplication, (i) all
extraordinary gains but not losses (less all fees and expenses
relating thereto), (ii) the portion of net income (or loss) of
the Company and its Consolidated Restricted Subsidiaries on a
Consolidated basis allocable to minority interests in
unconsolidated Persons and Unrestricted Subsidiaries except to
the extent of the amount of dividends or distributions actually
paid to the Company and its Consolidated Restricted
Subsidiaries, (iii) net income (or loss) of any Person combined
with the Company and its Consolidated Restricted Subsidiaries on
a "pooling of interests" basis attributable to any period prior
to the date of combination, (iv) any gain or loss, net of taxes,
realized upon the termination of any employee pension benefit
plan, (v) net gains (but not losses) (less all fees and expenses
relating thereto) in respect of dispositions of assets other
than in the ordinary course of business and (vi) the net income
of any Restricted Subsidiary to the extent that the declaration
of dividends or similar distributions by that Restricted
Subsidiary of that income is not at the time permitted, directly
or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary
or its stockholders.
"Consolidated Net Worth," as of a date, means the
Consolidated stockholders' equity (excluding Redeemable Capital
Stock) of the Company and its Consolidated Restricted
Subsidiaries, as of such date, as determined in accordance with
GAAP.
"Consolidation" means, with respect to any Person, the
consolidation of the accounts of such Person and each of its
subsidiaries (other than, in the case of the Company,
Unrestricted Subsidiaries) if and to the extent the accounts of
such Person and each of its subsidiaries (other than, in the
case of the Company, Unrestricted Subsidiaries) would normally
be consolidated with those of such Person, all in accordance
with GAAP. The term "Consolidated" shall have a similar
meaning.
"Corporate Trust Office of the Trustee" shall be at
the address of the Trustee specified in Section 11.02 or such
other address as to which the Trustee may give notice to the
Company.
"Cumulative Consolidated Interest Expense" means, as
of any date of determination, Consolidated Interest Expense from
June 30, 1996 to the end of the Company's most recently ended
full fiscal quarter for which financial statements are available
prior to such date, taken as a single accounting period.
"Cumulative Operating Cash Flow" means, as of any date
of determination, Operating Cash Flow from June 30, 1996 to the
end of the Company's most recently ended full fiscal quarter for
which financial statements are available prior to such date,
taken as a single accounting period.
"Custodian" means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.
"Debt" or "Indebtedness" means, with respect to any
Person, without duplication, (i) all indebtedness of such Person
for borrowed money or for the deferred purchase price of
property or services, excluding any trade payables and other
accrued current liabilities arising in the ordinary course of
business, but including, without limitation, all obligations,
contingent or otherwise, of such Person in connection with any
letters of credit issued under letter of credit facilities,
acceptance facilities or other similar facilities and in
connection with any agreement to purchase, redeem, exchange,
convert or otherwise acquire for value any Capital Stock of such
Person, or any warrants, rights or options to acquire such
Capital Stock, now or hereafter outstanding, (ii) all
obligations of such Person evidenced by bonds, notes, debentures
or other similar instruments, (iii) all indebtedness created or
arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even
if the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or
sale of such property), but excluding trade payables arising in
the ordinary course of business, (iv) all obligations under
Interest Rate Agreements of such Person, (v) all Capital Lease
Obligations of such Person, (vi) all Indebtedness referred to in
clauses (i) through (v) above of other Persons and all dividends
of other Persons, the payment of which is secured by (or for
which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien, upon or
with respect to property (including, without limitation,
accounts and contract rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of
such Indebtedness, (vii) all Guaranteed Debt of such Person,
(viii) all Redeemable Capital Stock issued by such Person valued
at the greater of its voluntary or involuntary maximum fixed
repurchase price plus accrued and unpaid dividends, and (ix) any
amendment, supplement, modification, deferral, renewal,
extension, refunding or refinancing of any liability of the
types referred to in clauses (i) through (viii) above. For
purposes hereof, the "maximum fixed repurchase price" of any
Redeemable Capital Stock which does not have a fixed repurchase
price shall be calculated in accordance with the terms of such
Redeemable Capital Stock as if such Redeemable Capital Stock
were purchased on any date on which Indebtedness shall be
required to be determined pursuant to this Indenture, and if
such price is based upon, or measured by, the Fair Market Value
of such Redeemable Capital Stock, such Fair Market Value to be
determined in good faith by the board of directors of the issuer
of such Redeemable Capital Stock.
"Debt to Operating Cash Flow Ratio" means, as of any
date of determination, the ratio of (a) the aggregate principal
amount of all outstanding Consolidated Indebtedness of the
Company and its Restricted Subsidiaries as of such date plus,
without duplication, the aggregate liquidation preference or
redemption amount of all Redeemable Capital Stock of the Company
(excluding any such Redeemable Capital Stock held by the Company
or a Wholly Owned Restricted Subsidiary of the Company), to (b)
Operating Cash Flow of the Company and its Restricted
Subsidiaries on a Consolidated basis for the most recently ended
fiscal quarter for which financial statements are available
prior to such date multiplied by four, determined on a pro forma
basis (and after giving pro forma effect to (i) the incurrence
of such Indebtedness and (if applicable) the application of the
net proceeds therefrom, including to refinance other
Indebtedness, as if such Indebtedness was incurred, and the
application of such proceeds occurred, at the beginning of such
period; (ii) the incurrence, repayment or retirement of any
other Indebtedness by the Company and its Restricted
Subsidiaries since the first day of such period as if such
Indebtedness was incurred, repaid or retired at the beginning of
such period (except that, in making such computation, the amount
of Indebtedness under any revolving credit facility shall be
computed based upon the average balance of such Indebtedness at
the end of each month during such period); (iii) in the case of
Acquired Indebtedness, the related acquisition as if such
acquisition had occurred at the beginning of such period; and
(iv) any acquisition or disposition by the Company and its
Restricted Subsidiaries of any company or any business or any
assets out of the ordinary course of business, or any related
repayment of Indebtedness, in each case since the first day of
such period, assuming such acquisition or disposition had been
consummated on the first day of such four-quarter period).
"Default" means any event which is, or after notice or
passage of any time or both would be, an Event of Default.
"Depository" means The Depository Trust Company, or
its nominee or successors and assigns.
"Disinterested Director" means, with respect to any
transaction or series of related transactions, a member of the
Board of Directors of the Company who does not have any material
direct or indirect financial interest in or with respect to such
transaction or series of related transactions.
"EBITDA" for any period means the Consolidated Net
Income (Loss) for such period plus the following to the extent
deducted in calculating such Consolidated Net Income (Loss): (i)
Consolidated Income Tax Expense, (ii) Consolidated Interest
Expense, (iii) depreciation and amortization expense determined
on a consolidated basis for such Person and its Consolidated
Restricted Subsidiaries in accordance with GAAP for such period
and (iv) all other non-cash charges (other than non-cash charges
which require an accrual of or reserve for cash charges in
future periods), and less any non-cash items which have the
effect of increasing (decreasing in the case of a loss)
Consolidated Net Income (Loss) for such period.
"Eligible Institution" means a commercial banking
institution that has combined capital and surplus of not less
than $500 million or its equivalent in foreign currency, whose
debt is rated "A" (or higher) according to S&P or Moody's at the
time as of which any investment or rollover therein is made.
"Equity Interests" means Capital Stock and all
warrants, options or other rights to acquire Capital Stock or
that are measured by the value of Capital Stock (but excluding
any debt security that is convertible into or exchangeable for
Capital Stock).
"Event of Default" means any of the events set forth
in Section 6.01.
"Exchange Act" means the Securities Exchange Act of
1934, as amended, or any successor statute.
"Existing Notes" means the 13% Senior Notes due 2003
of the Company issued on October 24, 1995.
"Fair Market Value" means, with respect to any asset
or property, the sale value that would be obtained in an
arm's-length transaction between an informed and willing seller
under no compulsion to sell and an informed and willing buyer
under no compulsion to buy.
"Generally Accepted Accounting Principles" or "GAAP"
means generally accepted accounting principles in the United
States, consistently applied, which are in effect on the date of
this Indenture.
"Global Note" or "Global Notes" has the meaning
provided in Section 2.01.
"Guarantee" means the guarantee by any Guarantor of
the Company's Indenture Obligations.
"Guaranteed Debt" of any Person means, without
duplication, all Indebtedness of any other Person referred to in
the definition of Debt or Indebtedness above guaranteed directly
or indirectly in any manner by such Person, or in effect
guaranteed directly or indirectly by such Person through an
agreement (i) to pay or purchase such Indebtedness or to advance
or supply funds for the payment or purchase of such
Indebtedness, (ii) to purchase, sell or lease (as lessee or
lessor) property, or to purchase or sell services, primarily for
the purpose of enabling the debtor to make payment of such
Indebtedness or to assure the holder of such Indebtedness
against loss, (iii) to supply funds to, or in any other manner
invest in, the debtor (including any agreement to pay for
property or services without requiring that such property be
received or such services be rendered), (iv) to maintain working
capital or equity capital of the debtor, or otherwise to
maintain the net worth, solvency or other financial condition of
the debtor or (v) otherwise to assure a creditor against loss;
provided that the term "guarantee" shall not include
endorsements for collection or deposit, in either case in the
ordinary course of business.
"Guarantor" means any Restricted Subsidiary that is
required after the date of this Indenture to execute a guarantee
of the Notes pursuant to the provisions of Section 4.18 until a
successor replaces such Restricted Subsidiary pursuant to the
applicable provisions of this Indenture and, thereafter, shall
mean such successor.
"Holder" means a Person in whose name a Note is
registered.
"Indenture" means this Indenture, as amended or
supplemented from time to time.
"Indenture Obligations" means the obligations of the
Company and any other obligor under this Indenture or under the
Notes, including any Guarantor, to pay principal of, premium, if
any, and interest when due and payable, and all other amounts
due or to become due under or in connection with this Indenture,
the Notes and the performance of all other obligations to the
Trustee and the Holders under this Indenture and the Notes,
according to the respective terms thereof.
"Interest Payment Date" has the meaning set forth in
the Notes.
"Interim Facility" means the interim financing
facility of up to $12.0 million provided by Chase Venture
Capital Associates to the Company in February 1996.
"Interest Rate Agreements" means one or more of the
following agreements which shall be entered into with one or
more financial institutions: interest rate protection agreements
(including, without limitation, interest rate swaps, caps,
floors, collars and similar agreements) and/or other types of
interest rate hedging agreements from time to time.
"Investment" means, with respect to any Person,
directly or indirectly, (a) any advance, loan (including
guarantees) or other extension of credit or capital contribution
to (by means of any transfer of cash or other property to others
or any payment for property or services for the account or use
of others), or any purchase, acquisition or ownership by such
Person of any Capital Stock, bonds, notes, debentures or other
securities issued or owned by any other Person and all other
items that would be classified as investments on a balance sheet
prepared in accordance with GAAP and (b) any acquisition of
property and assets by such Person.
"Issue Date" means the date on which Notes are first
authenticated and issued.
"Lien" means any mortgage or deed of trust, charge,
pledge, lien (statutory or otherwise), privilege, security
interest, assignment, deposit, arrangement, easement,
hypothecation, claim, preference, priority or other encumbrance
upon or with respect to any property of any kind (including any
conditional sale, capital lease or other title retention
agreement, any leases in the nature thereof and any agreement to
give any security interest), real or personal, movable or
immovable, now owned or hereafter acquired.
"Material Restricted Subsidiary" means any Restricted
Subsidiary which would be a "significant subsidiary" of the
Company as defined in Rule 1-02 of Regulation S-X under the
Securities Act.
"Maturity" means, when used with respect to the Notes,
the date on which the principal of the Notes becomes due and
payable as therein provided or as provided in this Indenture,
whether at Stated Maturity, the Offer Date or the redemption
date and whether by declaration of acceleration, Offer in
respect of Excess Proceeds, Change of Control Offer in respect
of a Change of Control, call for redemption or otherwise.
"Moody's" means Moody's Investors Service, Inc. and
its successors.
"Net Cash Proceeds" means (a) with respect to any
Asset Sale by any Person, the proceeds thereof in the form of
cash or Temporary Cash Investments including payments in respect
of deferred payment obligations when received in the form of, or
stock or other assets when disposed of for, cash or Temporary
Cash Investments (except to the extent that such obligations are
financed or sold with recourse to the Company or any Restricted
Subsidiary), net of (i) brokerage commissions and other
reasonable fees and expenses (including fees and expenses of
counsel and investment bankers) related to such Asset Sale, (ii)
provisions for all taxes payable as a result of such Asset Sale,
(iii) payments made to retire Indebtedness where payment of such
Indebtedness is secured by the assets or properties the subject
of such Asset Sale, (iv) amounts required to be paid to any
Person (other than the Company or any Restricted Subsidiary)
owning a beneficial interest in the assets subject to the Asset
Sale and (v) appropriate amounts to be provided by the Company
or any Restricted Subsidiary, as the case may be, as a reserve,
in accordance with GAAP, against any liabilities associated with
such Asset Sale and retained by the Company or any Restricted
Subsidiary, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as reflected in an
Officers' Certificate delivered to the Trustee and (b) with
respect to any issuance or sale of Indebtedness or Capital
Stock, as applicable, as referred to under the definition of
Permitted Investment and the provisions of Sections 3.07, 4.07
and 4.08, the proceeds of such issuance or sale in the form of
cash or Temporary Cash Investments, net of attorney's fees,
accountant's fees and brokerage, consultation, underwriting and
other fees and expenses actually incurred in connection with
such issuance or sale and net of taxes paid or payable as a
result thereof.
"Notes" has the meaning provided in the preamble of
the Indenture.
"Officer" means, with respect to any Person other than
the Trustee, Authenticating Agent, Paying Agent or Registrar,
the Chairman of the Board, the Chief Executive Officer, the
President, the Chief Operating Officer, the Chief Financial
Officer, the Chief Accounting Officer, the Treasurer, any
Assistant Treasurer, the Controller, the Secretary or any Vice
President of such Person, and with respect to the Trustee,
Authenticating Agent, Paying Agent or Registrar, a Responsible
Officer of such Person.
"Officers' Certificate" means a certificate signed by
two Officers of the Company, one of whom must be the Chief
Executive officer, Chief Financial Officer or Chief Accounting
Officer of the Company.
"Operating Cash Flow" means, for any period, the
Consolidated Net Income (Loss) of the Company and its
Consolidated Restricted Subsidiaries for such period, plus,
without duplication, (a) extraordinary net losses and net losses
on sales of assets outside the ordinary course of business
during such period, to the extent such losses were deducted in
computing Consolidated Net Income (Loss), plus (b) Consolidated
Income Tax Expense, and any provision for taxes utilized in
computing the net losses under clause (a) hereof, plus (c)
Consolidated Interest Expense of the Company and its Restricted
Subsidiaries for such period, plus (d) depreciation,
amortization and all other non-cash charges, to the extent such
depreciation, amortization and other non-cash charges were
deducted in computing such Consolidated Net Income (Loss)
(including amortization of goodwill and other intangibles).
"Opinion of Counsel" means an opinion in writing
signed by legal counsel which may be an employee of or of
counsel to the Company, or who may be other counsel reasonably
satisfactory to the Trustee.
"Pari Passu Indebtedness" means any Indebtedness of
the Company that is pari passu in right of payment to the Notes.
"Permitted Holders" means, as of the date of
determination, Chase Capital Partners, The Chase Manhattan
Corporation, Heartland Wireless Communications, Inc., Henry J.
Burkhalter, William J. Van Devender and their respective
Affiliates (other than the Company and its Subsidiaries).
"Permitted Investment" means (i) Investments in any
existing Restricted Subsidiary; (ii) Indebtedness of the Company
or a Restricted Subsidiary described under clauses (v), (vi) and
(vii) of the definition of "Permitted Indebtedness"; (iii)
Temporary Cash Investments; (iv) Investments acquired by the
Company or any Restricted Subsidiary in connection with an Asset
Sale permitted under the provisions of Section 4.12 to the
extent such Investments are non-cash proceeds as permitted under
such covenant; (v) Investments in existence on the date of this
Indenture; (vi) any acquisition of equipment in the ordinary
course of business; (vii) any acquisition of property and assets
(other than channel rights) for a purchase price of not more
than $50,000; (viii) any Investment in the Wireless Cable
Business acquired in consideration for the issuance of Common
Stock, or provided that no Default or Event of Default shall
have occurred and be continuing and such Permitted Investment
shall not be an event which is, or after notice or lapse of time
or both, would be an "event of default" under the terms of any
Indebtedness of the Company or its Restricted Subsidiaries, the
proceeds of the issuance of Common Stock to the extent such
amounts have not been previously applied to a Restricted
Payment; provided further that the amount available for
Investment out of such proceeds shall be reduced (but not below
zero) by the quotient of (A) the Net Cash Proceeds of
Indebtedness incurred by the Company or any of its Restricted
Subsidiaries under clauses (xi) and (xii) of Section 4.08
divided by (B) $1.50; (ix) any acquisition or lease of
additional channel rights in any wireless cable market listed in
Annex A to this Indenture or in which the Company and its
Restricted Subsidiaries (A) as of the date of this Indenture,
have channel rights, whether by way of license, lease with a
channel license holder, lease with a channel license applicant,
lease with a qualified, non-profit educational organization that
plans to apply for a channel license or option to acquire any of
the foregoing, or (B) as of the date of such acquisition or
lease (without giving effect to such acquisition), have rights
with respect to at least eight wireless cable channels, whether
by way of license, lease with a channel license holder, lease
with a channel license applicant, lease with a qualified, non-
profit educational organization that plans to apply for a
channel license or option to acquire any of the foregoing;
(x) Investments consisting of any acquisition or lease of
additional channel rights in one or more Wireless One Service
States or any Investment by the Company or any Restricted
Subsidiary of the Company in a Person engaged in the Wireless
Cable Business if as a result of such Investment (A) such Person
becomes a Restricted Subsidiary of the Company or (B) such
Person, in one transaction or a series of related transactions,
is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary;
provided that (1) there are a maximum of 250,000 households
within a 35-mile radius of the licensed transmission site
associated with such channel rights or such Person, as the case
may be, of which at least 15% are unpassed by traditional hard-
wire cable (as supported by an Officer's Certificate); (2) if
such Person conducts operations outside the Wireless One Service
States, the Company shall deliver to the Trustee an Officer's
Certificate that allocates a portion of the dollar amount of
such Investment to the operations outside the Wireless One
Service States and such amount shall not qualify as a Permitted
Investment and (3) the aggregate amount of such cash Investments
in respect of all such channel rights and all such Persons shall
not exceed $20,000,000; and (xi) Investments by the Company or
any Restricted Subsidiary in a joint venture which is formed to
provide wireless cable television service in North Carolina in
part via ITFS channels leased from community colleges in North
Carolina, provided that such Investments do not in the aggregate
exceed $15,000,000.
"Permitted Payments" means payments permitted by
Section 4.07(b).
"Person" means any individual, corporation, limited
liability company, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Phase II Payment" means the Company's agreement to
pay Vision Communications, Inc. $1.8 million and issue 180,000
shares of Common Stock in satisfaction of a prior obligation of
TruVision Wireless, Inc.
"Preferred Stock" means, with respect to any Person,
any Capital Stock of any class or classes (however designated)
which is preferred as to the payment of dividends or
distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such
Person, over the Capital Stock of any other class in such
Person.
"Qualified Capital Stock" of any Person means any and
all Capital Stock of such Person other than Redeemable Capital
Stock.
"Qualified Subordinated Indebtedness" means
Subordinated Indebtedness issued to a Strategic Investor the
terms of which include (i) the terms set forth in clause (ix) of
the definition of Permitted Indebtedness in Section 4.08, (ii)
asset sale provisions and change of control provisions no more
restrictive in any respect than those contained in this
Indenture, (iii) optional redemption or repurchase provisions
that are not effective until the day succeeding the final
Maturity date of the Notes, (iv) provisions that no part of such
Subordinated Indebtedness shall have any claim to the assets of
the Company on a parity with or prior to the claim of the Notes,
(v) provisions that unless and until the Notes have been paid in
full, without the express prior written consent of the holders
of a majority in aggregate principal amount of the Notes, no
holder of such Subordinated Indebtedness will take, demand or
receive from the Company, and the Company will not make, give or
permit, directly or indirectly, by set-off, redemption, purchase
or in any other manner, any payment of or security for the whole
or any part of the Subordinated Indebtedness, including, without
limitation, any letter of credit or similar credit support
facility to support payment of such Subordinated Indebtedness
and (vi) covenants from the holder of such Subordinated
Indebtedness that such holder will not, without the written
consent of the holders of a majority in aggregate principal
amount of the Notes, (A) sell, assign or otherwise transfer its
rights in respect of such Subordinated Indebtedness to any
Person who does not agree to be bound by clauses (B) and (C),
(B) permit any of the documentation relating to the
subordination of such Subordinated Indebtedness to be amended
and (C) commence, or join with any creditors other than the
Trustee or the Noteholders, in commencing any bankruptcy,
insolvency or similar proceeding with respect to the Company or
any of its Restricted Subsidiaries.
"Record Date" when used with respect to any Interest
Payment Date, means either the January 15 or July 15 which
immediately precedes such Interest Payment Date, whether or not
a Business Day.
"Redeemable Capital Stock" means any Capital Stock
that, either by its terms or by the terms of any security into
which it is convertible or exchangeable or otherwise, is or upon
the happening of an event or passage of time would be, required
to be redeemed prior to any Stated Maturity of the principal of
the Notes or is redeemable at the option of the holder thereof
at any time prior to any Stated Maturity of the Notes, or is
convertible into or exchangeable for debt securities at any time
prior to any Stated Maturity of the Notes at the option of the
holder thereof.
"Responsible Officer," when used with respect to the
Trustee, means any officer within the Corporate Trust Division
of the Trustee (or any successor group of the Trustee) or any
other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular
subject.
"Restricted Payment" means payments prohibited by
Section 4.07(a).
"Restricted Subsidiary" means any Subsidiary other
than an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Ratings Group and its
successors.
"Sale and Leaseback Transaction" means any transaction
or series of related transactions pursuant to which the Company
or a Restricted Subsidiary sells or transfers any property or
asset in connection with the leasing, or the resale against
installment payments, of such property or asset to the seller or
transferor.
"Securities Act" means the Securities Act of 1933, as
amended, or any successor statute.
"Stated Maturity" when used with respect to any
Indebtedness or any installment of interest thereon, means the
dates specified in such Indebtedness as the fixed date on which
the principal of such Indebtedness or such installment of
interest, as the case may be, is due and payable.
"Strategic Investor" means any Person (i) engaged in
the Telecommunications Business that as of the date of
determination has a Total Equity Market Capitalization of at
least $500,000,000 or (ii) any corporation, partnership, joint
venture, limited liability company or similar entity of which a
shareholder, general partner, joint venturer or member with more
than 50% of the capital accounts, distribution rights, total
equity and voting interests or general or limited partnership
interests, as applicable, are owned or controlled, directly or
indirectly, by a Person that satisfies clause (i) of this
definition; provided that clause (ii) of this definition may be
satisfied by any group of shareholders, general partners, joint
venturers or members so long as (a) each Person included in such
group satisfies clause (i), (b) at least one member in such
group owns or controls, directly or indirectly, 35% or more of
the capital accounts, distribution rights, total equity and
voting rights or general or limited partnership interests of
such Strategic Investor, (c) no more than five Persons may be
included in such group and (d) the shareholders, general
partners, joint venturers or members to be included in such
group shall act as a group and in concert.
"Subordinated Indebtedness" means Indebtedness of the
Company or any Guarantor subordinated in right of payment to the
Notes or the Guarantee of such Guarantor, as the case may be.
"Subsidiary" means any Person, a majority of the
equity ownership or the Voting Stock of which is at the time
owned, directly or indirectly, by the Company or by one or more
other Subsidiaries, or by the Company and one or more other
Subsidiaries.
"Telecommunications Business" means, when used in
reference to any Person, that such Person, directly or
indirectly, is engaged primarily in the business of (i)
transmitting video, voice or data, (ii) creating, developing or
packaging entertainment or communication programming, (iii)
offering of private telephony services or (iv) evaluating,
participating or pursuing any other activity or opportunity that
is related to those identified in (i), (ii) or (iii) above.
"Temporary Cash Investments" means (i) any evidence of
Indebtedness, maturing not more than one year after the date of
acquisition, issued by the United States of America, or an
instrumentality or agency thereof and guaranteed fully as to
principal, premium, if any, and interest by the United States of
America, (ii) any certificate of deposit, maturing not more than
one year after the date of acquisition, issued by, or time
deposit of, a commercial banking institution that is a member of
the Federal Reserve System and that has combined capital and
surplus and undivided profits of not less than $500,000,000,
whose debt has a rating, at the time as of which any investment
therein is made, of "P-1" (or higher) according to Moody's or
"A-1" (or higher) according to S&P, (iii) commercial paper,
maturing not more than one year after the date of acquisition,
issued by a corporation (other than an Affiliate or Subsidiary
of the Company) organized and existing under the laws of the
United States of America with a rating, at the time as of which
any investment therein is made, of "P-1" according to Moody's or
"A-1" according to S&P and (iv) any money market deposit
accounts issued or offered by a domestic commercial bank having
capital and surplus in excess of $500,000,000; provided that the
short term debt of such commercial bank has a rating at the time
of Investment, of "P-1" (or higher) according to Moody's or
"A-1" (or higher) according to S&P.
"Total Equity Market Capitalization" of any Person
means, as of any date of determination, the product of (i) the
aggregate number of outstanding shares of common stock of such
Person on such date (which shall not include any options or
warrants on, or securities convertible or exchangeable into,
shares of common stock of such Person) and (ii) the average
Closing Price of such common stock over the 20 consecutive
Trading Days immediately preceding such date. If no such
Closing Price exists with respect to shares of any such class,
the value of such shares shall be determined by the Company's
Board of Directors in good faith and evidenced by a resolution
of the Board of Directors of the Company filed with the Trustee.
"Trading Day" with respect to a securities exchange or
automated quotation system means a day on which such exchange or
system is open for a full day of trading.
"Trust Indenture Act" means the Trust Indenture Act of
1939, as amended, or any successor statute.
"Trustee" means the party named as such above until a
successor replaces it in accordance with the applicable
provisions of this Indenture and thereafter means the successor
serving hereunder.
"Unrestricted Subsidiary" means (i) any Subsidiary of
the Company that at the time of determination shall be an
Unrestricted Subsidiary (as designated by the Board of Directors
of the Company, as provided below) and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors of the Company
may designate any Subsidiary of the Company (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary if all of the following conditions apply: (a) such
Subsidiary is not liable, directly or indirectly, with respect
to any Indebtedness other than Unrestricted Subsidiary
Indebtedness and (b) any Investment in such Subsidiary made as a
result of designating such Subsidiary an Unrestricted Subsidiary
shall not violate the provisions of Section 4.17. Any such
designation by the Board of Directors of the Company shall be
evidenced to the Trustee by filing with the Trustee a board
resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complies with the
foregoing conditions. The Board of Directors of the Company may
designate any Unrestricted Subsidiary as a Restricted
Subsidiary; provided that immediately after giving effect to
such designation, the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the
restrictions under Section 4.08.
"Unrestricted Subsidiary Indebtedness" of any
Unrestricted Subsidiary means Indebtedness of such Unrestricted
Subsidiary (i) as to which neither the Company nor any
Restricted Subsidiary is directly or indirectly liable (by
virtue of the Company or any such Restricted Subsidiary being
the primary obligor on, guarantor of, or otherwise liable in any
respect for, such Indebtedness), except Guaranteed Debt of the
Company or any Restricted Subsidiary to any Affiliate, in which
case (unless the incurrence of such Guaranteed Debt resulted in
a Restricted Payment at the time of incurrence) the Company
shall be deemed to have made a Restricted Payment equal to the
principal amount of any such Indebtedness to the extent
guaranteed at the time such Affiliate is designated an
Unrestricted Subsidiary and (ii) which, upon the occurrence of a
default with respect thereto, does not result in, or permit any
holder of any Indebtedness of the Company or any Restricted
Subsidiary (other than a Bank Credit Facility incurred pursuant
to clause (i) of the second paragraph of Section 4.08) to
declare a default on such Indebtedness of the Company or any
Restricted Subsidiary or cause the payment thereof to be
accelerated or payable prior to its Stated Maturity.
"U.S. Government Securities" means securities that are
(x) direct obligations of the United States of America for the
payment of which its full faith and credit is pledged or (y)
obligations of a Person controlled or supervised by and acting
as an agency or instrumentality of the United States of America,
the payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America,
which, in either case, are not callable or redeemable at the
option of the issuer thereof, and shall also include a
depository receipt issued by a bank (as defined in Section 3(a)
(2) of the Securities Act) as custodian with respect to any such
U.S. Government Obligation or a specific payment of principal or
interest on any such U.S. Government Obligation held by such
custodian for the account of the holder of such depository
receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any
amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of principal of or
interest on the U.S. Government Obligation evidenced by such
depository receipt.
"Voting Stock" means Capital Stock of the class or
classes pursuant to which the holders thereof have the general
voting power under ordinary circumstances to elect at least a
majority of the board of directors, managers or trustees of a
corporation (irrespective of whether or not at the time Capital
Stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency).
"Wholly Owned Restricted Subsidiary" means a
Restricted Subsidiary all the Capital Stock of which is owned by
the Company or another Wholly Owned Restricted Subsidiary.
"Wholly Owned Subsidiary" means any Subsidiary of the
Company, all of the outstanding Capital Stock (other than
directors' qualifying shares), or in the case of a non-corporate
Subsidiary, other equity interests having ordinary voting power
for the election of directors or other governing body of such
Subsidiary, of which is owned by the Company or another Wholly
Owned Subsidiary of the Company or a combination thereof.
"Wireless Cable Business" means, when used in
reference to any Person, that such Person, directly or
indirectly, is engaged primarily in the business of (i)
transmitting video, voice or data primarily through wireless
transmission facilities, (ii) utilizing wireless cable channels
for any commercial purpose permitted by the Federal
Communications Commission, (iii) creating, developing and
packaging programming that may be used to satisfy educational
programming requirements for ITFS channels and advertising,
that, in either case, is transmitted over one or more of the
Company's wireless cable channels or (iv) evaluating,
participating or pursuing any other activity or opportunity that
is related to those identified in (i), (ii) or (iii) above.
"Wireless Cable Related Assets" means all assets,
rights (contractual or otherwise) and properties, whether
tangible or intangible, used in connection with a Wireless Cable
Business, and the Voting Stock of any entity which is to become
a Wholly Owned Restricted Subsidiary and is engaged exclusively
in the Wireless Cable Business.
"Wireless One Service States" means the states of
Texas, Louisiana, Mississippi, Tennessee, Alabama, Georgia,
Arkansas, North Carolina, Florida, South Carolina and Kentucky.
Section 1.02. Other Definitions.
Defined in
Term Section
"Agent Members" 2.16
"Authenticating Agent" 2.02
"Change of Control Offer" 4.16
"Change of Control Purchase Date" 4.16
"Change of Control Purchase Price" 4.16
"Covenant Defeasance" 8.03
"Default Interest Payment Date" 2.12
"Defeasance" 8.02
"Defeasance Redemption Date 8.04
"Event of Default" 6.01
"Excess Proceeds" 4.12(b)
"incur" 4.08
"Net Proceeds Offer" or "Offer" 4.12(c)
"Note Amount" 4.12(c)
"Offer Date" 4.12(c)
"Offered Price" 4.12(c)
"Pari Passu Debt Amount" 4.12(c)
"Pari Passu Offer" 4.12(c)
"Paying Agent" 2.03
"Permitted Indebtedness" 4.08
"Registrar" 2.03
"Restricted Payments" 4.07
"Surviving Entity" 5.01
Section 1.03. Incorporation by Reference of Trust
Indenture Act.
This Indenture shall be governed by the provisions of
the Trust Indenture Act. Whenever this Indenture refers to a
provision of the Trust Indenture Act, the provision is
incorporated by reference in and made a part of this Indenture.
The following Trust Indenture Act terms used in this
Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means
the Trustee;
"obligor" on the Notes means the Company and any
successor obligor upon the Notes.
All other terms used in this Indenture that are
defined by the Trust Indenture Act, defined by Trust Indenture
Act reference to another statute or defined by rules promulgated
by the Securities and Exchange Commission under the Trust
Indenture Act have the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in
the plural include the singular; and
(5) provisions apply to successive events and
transactions.
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating.
The Notes and the Trustee's certificate of
authentication relating thereto shall be substantially in the
form of Exhibit A hereto. The Notes may have notations, legends
or endorsements required by law, stock exchange rule or
depository rule or usage. The Company shall approve the form of
the Notes and any notation, legend or endorsement on them and
shall furnish the same to the Trustee, which shall be in form
and substance satisfactory to the Trustee. Each Note shall be
dated the date of its issuance and shall show the date of its
authentication.
The terms and provisions contained in the Notes,
annexed hereto as Exhibit A, shall constitute, and are hereby
expressly made, a part of this Indenture and, to the extent
applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Notes offered and sold shall be issued initially in
the form of one or more permanent Global Notes substantially in
the form set forth in Exhibit A ("Global Notes"), deposited
with, or on behalf of, The Depository Trust Company (the
"Depositary") and registered in the name of Cede & Co. or such
other nominee, as nominee of the Depositary, or will remain in
the custody of the Registrar pursuant to the Fast Balance
Certificate Agreement between the Depositary and the Registrar,
and shall bear the legend set forth on Exhibit B. The aggregate
principal amount of any Global Note may from time to time be
increased or decreased by adjustments made on the records of the
Depositary and the Registrar, as the custodian for the
Depositary.
Section 2.02. Execution and Authentication; Aggregate
Principal Amount.
Two Officers, or an Officer and an Assistant Secre-
tary, shall sign, or one Officer shall sign and one Officer or
an Assistant Secretary (each of whom shall, in each case, have
been duly authorized by all requisite corporate actions) shall
attest to, the Notes for the Company by manual or facsimile
signature.
If an Officer or Assistant Secretary whose signature
is on a Note was an Officer or Assistant Secretary at the time
of such execution but no longer holds that office or position at
the time the Trustee authenticates the Note, the Note shall
nevertheless be valid.
A Note shall not be valid until an authorized signa-
tory of the Trustee manually signs the certificate of authenti-
cation on the Note. The signature shall be conclusive evidence
that the Note has been authenticated under this Indenture.
Upon receipt of a written order of the Company in the
form of an Officers' Certificate, the Trustee shall authenticate
Notes for original issue in the aggregate principal amount at
maturity of $239,252,000. The Notes may have such changes in
the form thereof as are specified in the written order referred
to in the preceding sentence. The Officers' Certificate shall
specify (i) the amount of Notes to be authenticated, (ii) the
series and type of Notes, and (iii) the date on which the Notes
are to be authenticated. The aggregate principal amount at
maturity of Notes outstanding at any time may not exceed
$239,252,000, except as provided in Section 2.07. In order to
reflect any name change of the Company, the Trustee, upon
receipt of a written order of the Company, shall authenticate
Notes in substitution of Notes originally issued.
The Trustee may appoint an authenticating agent (the
"Authenticating Agent") reasonably acceptable to the Company to
authenticate Notes. Unless otherwise provided in the appoint-
ment, an Authenticating Agent may authenticate Notes whenever
the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such
Authenticating Agent. An Authenticating Agent has the same
rights as an Agent to deal with the Company or with any Affili-
ate of the Company.
The Notes shall be issuable in fully registered form
only, without coupons, in denominations of $1,000 and any inte-
gral multiple thereof.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency (which
shall be located in the Borough of Manhattan in the City of New
York, State of New York) where (a) Notes may be presented or
surrendered for registration of transfer ("Registrar"), (b)
Notes may be presented or surrendered for payment ("Paying
Agent") and (c) notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The
Registrar shall keep a register of the Notes and of their
transfer and exchange. The Company, upon prior written notice
to the Trustee, may have one or more co-registrars and one or
more additional paying agents reasonably acceptable to the
Trustee. The term "Registrar" includes any co-Registrar and the
term "Paying Agent" includes any additional Paying Agent. The
Company may act as its own Paying Agent, except that for the
purposes of payments on the Notes pursuant to Sections 3.07,
4.12 and 4.16 neither the Company nor any Affiliate of the
Company may act as Paying Agent.
The Company shall enter into an appropriate agency
agreement with any Agent not a party to this Indenture, which
agreement shall incorporate the provisions of the Trust
Indenture Act and implement the provisions of this Indenture
that relate to such Agent. The Company shall notify the
Trustee, in advance, of the name and address of any such Agent.
If the Company fails to maintain a Registrar or Paying Agent, or
fails to give the foregoing notice, the Trustee shall act as
such.
The Company initially appoints United States Trust
Company of New York as Registrar, Paying Agent and agent for
service of demands and notices in connection with the Notes,
until such time as United States Trust Company of New York has
resigned or a successor has been appointed. Any of the
Registrar, the Paying Agent, Authenticating Agent or any other
agent may resign upon 30 days' written notice to the Company.
Section 2.04. Paying Agent to Hold Assets in Trust.
The Company shall require each Paying Agent other than
the Trustee to agree in writing that such Paying Agent shall
hold in trust for the benefit of the Holders or the Trustee all
assets held by such Paying Agent for the payment of principal
of, premium, if any, or interest on, the Notes (whether such
assets have been distributed to it by the Company or any other
obligor on the Notes), and the Company and the Paying Agent
shall notify the Trustee of any Default by the Company (or any
other obligor on the Notes) in making any such payment. The
Company at any time may require a Paying Agent to distribute all
assets held by it to the Trustee and account for any assets
disbursed and the Trustee may at any time during the continuance
of any payment default, upon written request to a Paying Agent,
require such Paying Agent to distribute all assets held by it to
the Trustee and to account for any assets distributed. Upon
distribution to the Trustee of all assets that shall have been
delivered by the Company to the Paying Agent, the Paying Agent
shall have no further liability for such assets.
Section 2.05. Noteholder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of
the names and addresses of the Holders. The Company shall
furnish or cause the Registrar to furnish to the Trustee
promptly after each Record Date and at such other times as the
Trustee may reasonably request in writing a list as of such date
and in such form as the Trustee may reasonably require of the
names and addresses of the Holders, which list may be
conclusively relied upon by the Trustee.
Section 2.06. Transfer and Exchange.
Subject to the provisions of Section 2.16, when Notes
are presented to the Registrar with a request to register the
transfer of such Notes or to exchange such Notes for an equal
principal amount of Notes of other authorized denominations, the
Registrar shall register the transfer or make the exchange as
requested if its requirements for such transaction are met;
provided, however, that the Notes presented or surrendered for
registration of transfer or exchange shall be duly endorsed or
accompanied by a written instrument of transfer in form satis-
factory to the Company and the Registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing. To
permit registrations of transfer and exchanges, the Company
shall execute and the Trustee shall authenticate Notes at the
Registrar's request. No service charge shall be made for any
registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith
(other than any such transfer taxes or similar governmental
charge payable upon exchanges or transfers pursuant to Sections
2.10, 3.06, 3.07(b), 4.12, 4.16 or 10.05, in which event the
Company shall be responsible for the payment of such taxes).
The Registrar shall not be required to register the
transfer of or exchange of any Note (i) during a period
beginning at the opening of business 15 days before the mailing
of a notice of redemption of Notes and ending at the close of
business on the day of such mailing and (ii) selected for
redemption in whole or in part pursuant to Article 3, except the
unredeemed portion of any Note being redeemed in part.
Any Holder of the Global Note shall, by acceptance of
such Global Note, agree that transfers of beneficial interests
in such Global Notes may be effected only through a book entry
system maintained by the Holder of such Global Note (or its
agent), and that ownership of a beneficial interest in the
Global Note shall be required to be reflected in a book entry
system.
Section 2.07. Replacement Notes.
If a mutilated Note is surrendered to the Trustee or
an Agent or if the Holder of a Note claims that the Note has
been lost, destroyed or wrongfully taken, the Company shall
issue and the Trustee shall authenticate a replacement Note if
the Trustee's requirements are met. If required by the Trustee
or the Company, such Holder at its sole expense must provide an
indemnity bond or other indemnity of reasonable tenor,
sufficient in the reasonable judgment of the Company, such Agent
and the Trustee, to protect the Company, the Trustee or any
Agent from any loss which any of them may suffer if a Note is
replaced. Every replacement Note shall constitute an additional
obligation of the Company.
Section 2.08. Outstanding Notes.
Notes outstanding at any time are all the Notes that
have been authenticated by the Trustee except those cancelled by
it, those delivered to it for cancellation and those described
in this Section as not outstanding. Subject to the provisions
of Section 2.09, a Note does not cease to be outstanding because
the Company or any of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other
than a mutilated Note surrendered for replacement), it ceases to
be outstanding unless the Trustee receives proof satisfactory to
it that the replaced Note is held by a bona fide purchaser. A
mutilated Note ceases to be outstanding upon surrender of such
Note and replacement thereof pursuant to Section 2.07.
If the principal amount of any Note is considered paid
under Section 4.01 hereof, it ceases to be outstanding and
interest on it ceases to accrue.
If on a redemption date or at Maturity the Paying
Agent holds U.S. legal tender or U.S. Government Securities
sufficient to pay all of the principal and interest due on the
Notes payable on that date and is not prohibited from paying
such money to the Holders thereof pursuant to the terms of this
Indenture, then on and after that date such Notes cease to be
outstanding and interest on them ceases to accrue.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required
principal amount of Notes have concurred in any direction,
waiver, consent or notice, Notes owned by the Company or an
Affiliate shall be considered as though they are not outstand-
ing, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction,
waiver or consent, only Notes as to which a Responsible Officer
of the Trustee has received written notice of such ownership
shall be so considered. The Company shall notify the Trustee,
in writing, when it or any of its Affiliates repurchases or
otherwise acquires Notes, of the aggregate principal amount of
such Notes so repurchased or otherwise acquired.
Section 2.10. Temporary Notes.
Until definitive Notes are ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary
Notes upon receipt of a written order of the Company in the form
of an Officers' Certificate. The Officers' Certificate shall
specify the amount of temporary Notes to be authenticated and
the date on which the temporary Notes are to be authenticated.
Temporary Notes shall be substantially in the form of definitive
Notes but may have variations that the Company considers
appropriate for temporary Notes and so indicates in the
Officers' Certificate. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate upon receipt of
a written order of the Company pursuant to Section 2.02
definitive Notes in exchange for temporary Notes.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the
Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Notes surrendered to them for
transfer, exchange or payment. The Trustee, or at the direction
of the Trustee, the Registrar or the Paying Agent, and no one
else, shall cancel and, at the written direction of the Company,
shall dispose of (subject to the record retention requirements
of the Exchange Act) all Notes surrendered for transfer,
exchange, payment or cancellation. Subject to Section 2.07, the
Company may not issue new Notes to replace Notes that it has
paid or delivered to the Trustee for cancellation. If the
Company shall acquire any of the Notes, such acquisition shall
not operate as a redemption or satisfaction of the Indebtedness
represented by such Notes unless and until the same are surren-
dered to the Trustee for cancellation pursuant to this Section
2.11.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on
the Notes, it shall pay the interest set forth in 4.01, plus (to
the extent lawful) any interest payable on the defaulted
interest to the Persons who are Holders on a subsequent special
record date, which special record date shall be the fifteenth
day next preceding the date fixed by the Company for the payment
of defaulted interest or the next succeeding Business Day if
such date is not a Business Day. The Company shall notify the
Trustee and Paying Agent in writing of the amount of defaulted
interest proposed to be paid on each Note and the date of the
proposed payment (a "Default Interest Payment Date"), and at the
same time the Company shall deposit with the Trustee or Paying
Agent an amount of money equal to the aggregate amount proposed
to be paid in respect of such defaulted interest or shall make
arrangements satisfactory to the Trustee or Paying Agent for
such deposit prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of the
Persons entitled to such defaulted interest as in this Section
provided; provided that in no event shall the Company deposit
monies proposed to be paid in respect of defaulted interest
later than 10:00 a.m. New York time on the proposed Default
Interest Payment Date. At least 15 days before the subsequent
special record date, the Company shall mail (or cause to be
mailed) to each Holder, as of a recent date selected by the
Company, with a copy to the Trustee and Paying Agent, a notice
that states the subsequent special record date, the payment date
and the amount of defaulted interest, and interest payable on
such defaulted interest, if any, to be paid. Notwithstanding
the foregoing, any interest which is paid prior to the
expiration of the 30-day period set forth in Section 6.01(i)
shall be paid to Holders as of the regular Record Date for the
Interest Payment Date for which interest has not been paid.
Notwithstanding the foregoing, the Company may make payment of
any defaulted interest in any other lawful manner not
inconsistent with the requirements of any securities exchange on
which the Notes may be listed, and upon such notice as may be
required by such exchange.
Section 2.13. CUSIP Number.
The Company in issuing the Notes may use a "CUSIP"
number, and, if so, the Trustee shall use the CUSIP number in
notices of redemption or exchange as a convenience to Holders;
provided, however, that any such notice may state that no
representation is hereby deemed to be made by the Trustee as to
the correctness or accuracy of the CUSIP number printed in the
notice or on the Notes, and that reliance may be placed only on
the other identification numbers printed on the Notes. The
Company shall promptly notify the Trustee of any change in the
CUSIP number.
Section 2.14. Deposit of Monies.
Prior to 10:00 a.m. New York City time on each Inter-
est Payment Date, redemption date, Change of Control Purchase
Date and Net Proceeds Offer payment date and at Maturity, the
Company shall have deposited with the Paying Agent in immedi-
ately available funds money sufficient to make cash payments, if
any, due on such Interest Payment Date, redemption date, Change
of Control Purchase Date and Net Proceeds Offer payment date or
at Maturity, as the case may be, in a timely manner which
permits the Paying Agent to remit payment to the Holders on such
Interest Payment Date, redemption date, Change of Control
Purchase Date and Net Proceeds Offer payment date or at
Maturity, as the case may be.
Section 2.15. Legend.
Each Global Note shall bear the following legend on
the face thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR
IN PART FOR NOTES IN DEFINITIVE FORM, THIS
NOTE MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY, OR BY ANY SUCH NOMINEE OF THE
DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE
OF SUCH SUCCESSOR DEPOSITORY OR ANY SUCH
NOMINEE TO A SUCCESSOR DEPOSITORY OR A
NOMINEE OF SUCH SUCCESSOR DEPOSITORY.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN
PART, TO NOMINEES OF CEDE & CO. OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE.
Section 2.16. Book-Entry Provisions for Global Note.
(a) The Global Note initially shall (i) be registered
in the name of the Depository or the nominee of such Depository,
(ii) be delivered to the Trustee as custodian for such
Depository and (iii) bear the legend as set forth in Section
2.15.
Members of, or participants in, the Depository ("Agent
Members") shall have no rights under this Indenture with respect
to any Global Note held on their behalf by the Depository, or
the Trustee as its custodian, or under the Global Note, and the
Depository may be treated by the Company, the Trustee and any
Agent of the Company or the Trustee as the absolute owner of the
Global Note for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee
or any Agent of the Company or the Trustee from giving effect to
any written certification, proxy or other authorization
furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices
governing the exercise of the rights of a holder of any Note.
(b) Transfers of the Global Note shall be limited to
transfers in whole, but not in part, to the Depository, its
successors or their respective nominees. Interests of
beneficial owners in the Global Notes may be transferred or
exchanged for Certificated Notes in accordance with the rules
and procedures of the Depository. In addition, Certificated
Notes shall be transferred to all beneficial owners in exchange
for their beneficial interests in Global Notes if (i) the
Company notifies the Registrar that the Depository is unwilling
or unable to continue as Depositary for any Global Note and a
successor depositary is not appointed by the Company within 90
days of such notice or (ii) the Company, at its option, notifies
the Registrar in writing that it elects to cause the issuance of
Notes in definitive form under the Indenture or (iii) an Event
of Default has occurred and is continuing and the Registrar has
received a request from the Depository to issue Certificated
Notes.
In connection with any transfer or exchange of a
portion of the beneficial interest in any Global Note to
beneficial owners pursuant to this paragraph (b), the Registrar
shall (if one or more Certificated Notes are to be issued)
reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the
principal amount of the beneficial interest in the Global Note
to be transferred, and the Company shall execute, and the
Trustee shall authenticate and deliver, one or more Certificated
Notes of like tenor and amount.
(c) The Holder of the Global Note may grant proxies
and otherwise authorize any person, including Agent Members and
persons that may hold interests through Agent Members, to take
any action which a Holder is entitled to take under this Inden-
ture or the Notes.
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the
optional redemption provisions of Section 3.07, it shall furnish
to the Trustee, Registrar and Paying Agent, at least 45 days
(unless a shorter period is acceptable to the Trustee) but not
more than 60 days before a redemption date, an Officers'
Certificate setting forth (i) the redemption date, (ii) the
principal amount at maturity of Notes to be redeemed and (iii)
the redemption price. The procedures for redemption shall be
governed by this Article 3.
Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed, the
Registrar or Trustee shall select the Notes to be redeemed among
the Holders of the Notes in compliance with the requirements of
the principal national securities exchange, if any, on which the
Notes are listed, or if the Notes are not so listed, on a pro
rata basis, by lot or in accordance with any other method the
Trustee considers fair and appropriate, provided that no Notes
of $1,000 or less shall be redeemed in part. In the event of
partial redemption by lot, the particular Notes to be redeemed
shall be selected, unless otherwise provided herein, not less
than 30 nor more than 60 days prior to the redemption date by
the Registrar or Trustee from the outstanding Notes not
previously called for redemption.
The Registrar shall promptly notify the Company in
writing of the Notes selected for redemption and, in the case of
any Note selected for partial redemption, the principal amount
at maturity thereof to be redeemed. Notes and portions of them
selected shall be in amounts of $1,000 or whole multiples of
$1,000. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for
redemption also apply to portions of Notes called for
redemption.
Section 3.03. Notice of Redemption.
Subject to the provisions of Section 4.12, at least 30
days but not more than 60 days before a redemption date, the
Company shall mail or cause to be mailed, by first class mail, a
notice of redemption to each Holder whose Notes are to be
redeemed at its registered address.
The notice shall identify the Notes to be redeemed and
shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the
portion of the principal amount at maturity of such Note to
be redeemed and that, on and after the redemption date,
interest shall cease to accrete or accrue, as the case may
be, on the portion called for redemption, and upon
surrender of such Note, a new Note or Notes in principal
amount at maturity equal to the principal amount at
maturity of the unredeemed portion shall be issued;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be
surrendered to the Paying Agent to collect the redemption
price;
(f) that, unless the Company defaults in making such
redemption payment, interest on Notes called for redemption
ceases to accrete or accrue on and after the redemption
date, and the only remaining right of the Holders of such
Notes is to receive payment of the redemption price upon
surrender to the Paying Agent of the Notes redeemed;
(g) the paragraph of the Notes and/or Section of this
Indenture pursuant to which the Notes called for redemption
are being redeemed; and
(h) the CUSIP number, and that no representation is
made as to the correctness or accuracy of the CUSIP number,
if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the
notice of redemption in the Company's name and at the Company's
expense; provided, however, that the Company shall have
delivered to the Trustee, at least 45 days (unless a shorter
period is acceptable to the Trustee) prior to the redemption
date, an Officers' Certificate requesting that the Trustee give
such notice and setting forth the information to be stated in
such notice as provided in the preceding paragraph.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with
Section 3.03, Notes called for redemption become due and
payable on the redemption date at the redemption price, plus
accrued and unpaid interest, if any. Upon surrender to the
Trustee or Paying Agent, such Notes called for redemption shall
be paid at the redemption price (which shall include accrued and
unpaid interest thereon, if any, to the redemption date), but
installments of interest, the Maturity of which is on or prior
to the redemption date, shall be payable to Holders of record at
the close of business on the relevant Record Dates.
Section 3.05. Deposit of Redemption Price.
On or prior to any redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money
sufficient to pay the redemption price of and accreted or
accrued interest on all Notes to be redeemed on that date. The
Trustee or the Paying Agent shall promptly return to the Company
upon its written request (accompanied by an Officers'
Certificate) any money deposited with the Trustee or the Paying
Agent by the Company in excess of the amounts necessary to pay
the redemption price of, and accreted or accrued interest on,
all Notes to be redeemed.
If the Company complies with the preceding paragraph,
then, unless the Company defaults in the payment of such
redemption price plus accreted or accrued and unpaid interest,
if any, interest shall cease to accrete or accrue, as the case
may be, on the Notes or the portions of Notes called for
redemption on and after the redemption date. If a Note is
redeemed on or after an interest Record Date but on or prior to
the related interest payment date, then any accreted or accrued
and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such Record
Date. If any Note called for redemption shall not be so paid
upon surrender for redemption because of the failure of the
Company to comply with the preceding paragraph, interest shall
accrete or be paid on the unpaid principal, from the redemption
date until such principal and accreted or accrued interest is
paid, and to the extent lawful on any interest not paid on such
unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the
Company shall issue and the Trustee shall authenticate for the
Holder of the Notes at the expense of the Company a new Note
equal in principal amount to the unredeemed portion of the Note
surrendered.
Section 3.07. Optional Redemption.
(a) Optional Redemption.The Notes will not be
redeemable at the Company's option prior to August 1, 2001.
Thereafter, the Notes will be subject to redemption at the
option of the Company, in whole or in part, upon not less than
30 nor more than 60 days' prior notice in amounts of $1,000 or
an integral multiple thereof, at the redemption prices
(expressed as percentages of principal amount) set forth below
plus accreted or accrued and unpaid interest thereon to the
applicable redemption date, if redeemed during the twelve-month
period beginning on August 1 of the years indicated below:
Year Percentage
2001 106.75%
2002 104.50%
2003 102.25%
2004 100.00%
and thereafter at 100% of the
principal amount, in each case,
together with accrued and
unpaid interest, if any, to the
redemption date (subject to the
rights of holders of record on
relevant record dates to
receive interest due on an
interest payment date).
(b) Optional Redemption Upon Sale of to Strategic
Investor. Notwithstanding the foregoing, in the event of the
sale by the Company to a Strategic Investor prior to August 1,
1999 of $25 million or more of the Company's Capital Stock
(other than Redeemable Capital Stock) or Qualified Subordinated
Indebtedness in a single transaction or series of related
transactions, the Company may, at its option, use the net cash
proceeds of such sale of the Company's Capital Stock or
Qualified Subordinated Indebtedness to redeem up to 30% of the
aggregate principal amount originally issued of the Notes at a
redemption price equal to 113.50% of the Accreted Value of the
Notes to be redeemed on the redemption date; provided that,
after giving effect to such transaction, at least 70% of the
aggregate principal amount originally issued of the Notes
remains outstanding immediately after such redemption. In order
to effect the foregoing redemption with the proceeds of any such
sale of the Company's Capital Stock (other than Redeemable
Capital Stock) or Qualified Subordinated Indebtedness, the
Company shall make such redemption not more than 180 days after
the consummation of any such sale of the Company's Capital Stock
or Qualified Subordinated Indebtedness and upon not less than 60
nor more than 150 days' notice given within 30 days after (and
not before) the consummation of any such sale of the Company's
Capital Stock or Qualified Subordinated Indebtedness. Notes and
portions of them selected for redemption shall be in amounts of
$1,000 or whole multiples of $1,000.
Section 3.08. Mandatory Redemption.
Except as set forth under Sections 4.12 and 4.16 of
this Indenture, the Company shall not be required to make
mandatory redemption payments with respect to the Notes. There
are no sinking fund payments with respect to the Notes.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the
principal of, premium, if any, and interest on the Notes on the
dates and in the manner provided in the Notes. Principal,
premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company, holds
as of 10:00 a.m. Eastern time on the due date money deposited by
the Company in immediately available funds and designated for
and sufficient to pay all principal, premium, if any, and
interest then due.
The Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy
Law) on overdue principal and on overdue installments of
interest (without regard to any applicable grace period) at the
rate borne by the Notes plus 2% per annum, to the extent lawful.
Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
Notwithstanding anything to the contrary contained in
this Indenture, the Company may, to the extent it is required to
do so by law, deduct or withhold income or other similar taxes
imposed by the United States of America from principal or
interest payments hereunder.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain an office or agency (which
may be an office of the Trustee or Registrar or an affiliate of
the Trustee or Registrar) where Notes may be surrendered for
registration of transfer, exchange or conversion and where
notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The Company shall give
prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office
or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may
be made or served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one
or more other offices or agencies where the Notes may be
presented or surrendered for any or all such purposes and may
from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or
agency for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or
agency.
The Company hereby designates the Corporate Trust
Office of the Trustee as one such office or agency of the
Company in accordance with Section 2.03.
Section 4.03. Provision of Financial Statements.
At the Company's expense, whether or not the Company
is subject to Section 13(a) or 15(d) of the Exchange Act, the
Company will, to the extent permitted under the Exchange Act,
file with the Commission the annual reports, quarterly reports
and other documents which the Company would have been required
to file with the Commission pursuant to such Section 13(a) or
15(d) if the Company were so subject, such documents to be filed
with the Commission on or prior to the date (the "Required
Filing Date") by which the Company would have been required so
to file such documents if the Company were so subject. The
Company will also in any event (x) within 15 days of each
Required Filing Date (i) transmit by mail to all Holders, as
their names and addresses appear in the security register,
without cost to such Holders and (ii) file with the Trustee
copies of the annual reports, quarterly reports and other
documents which the Company would have been required to file
with the Commission pursuant to Section 13(a) or 15(d) of the
Exchange Act if the Company were subject to such Sections and
(y) if filing such documents by the Company with the Commission
is not permitted under the Exchange Act, promptly upon written
request, supply copies of such documents to any prospective
holder at the Company's cost.
Section 4.04. Compliance Certificate.
(a) The Company shall deliver to the Trustee, within
120 days after the end of each fiscal year, an Officers'
Certificate stating that a review of the activities of the
Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with
a view to determining whether the Company has kept, observed,
performed and fulfilled, and has caused each of its Subsidiaries
to keep, observe, perform and fulfill, its obligations under
this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her
knowledge the Company has kept, observed, performed and
fulfilled, and has caused each of its Subsidiaries to keep,
observe, perform and fulfill, each and every covenant contained
in this Indenture and no such Person is in default in the
performance or observance of any of the terms, provisions and
conditions of this Indenture to be performed or observed by it,
including, without limitation, a default in the performance or
breach of Sections 4.07 through 4.19 (or, if a Default or Event
of Default shall have occurred, describing all such Defaults or
Events of Default of which he or she may have knowledge and what
action each is taking or proposes to take with respect thereto)
and that to the best of his or her knowledge no event has
occurred and remains in existence by reason of which payments on
account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the
event and what action each is taking or proposes to take with
respect thereto. The Company's fiscal year ends on December 31
of each year.
(b) The annual financial statements delivered
pursuant to Section 4.03 shall include a "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and, so long as not contrary to the then current
recommendations of the American Institute of Certified Public
Accountants, the year-end financial statements delivered
pursuant to Section 4.03 above shall be accompanied by a written
statement of the Company's independent public accountants (who
shall be a firm of established national reputation) that in
making the examination necessary for certification of such
financial statements, nothing has come to their attention which
would lead them to believe that the Company has violated any
provisions of Article 3, Article 4 or Article 5 of this
Indenture, to the extent such Articles apply to accounting
matters, or if any such violation has occurred, specifying the
nature and period of existence thereof, it being understood that
such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such
violation.
(c) The Company shall, so long as any of the Notes
are outstanding, deliver to the Trustee, forthwith upon any
Officer becoming aware of any Default or Event of Default, or
any default under any Indebtedness referred to in Section
6.01(iv), an Officers' Certificate specifying such Default,
Event of Default or default and what action the Company is
taking or proposes to take with respect thereto.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency, all material taxes,
assessments, and governmental levies except as contested in good
faith and by appropriate proceedings or where the failure to
effect such payment is not adverse in any material respect to
the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead
or in any manner whatsoever claim or take the benefit or
advantage of, any stay, extension or usury law wherever enacted,
now or at any time hereafter in force, that may affect the
covenants or the performance of this Indenture; and the Company
(to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law, and covenants
that it shall not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Trustee,
but shall suffer and permit the execution of every such power as
though no such law has been enacted.
Section 4.07. Limitation on Restricted Payments.
(a) The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly:
(i) declare or pay any dividend on, or make any
distribution to holders of, any shares of the Company's
Capital Stock (other than dividends or distributions
payable solely in its shares of Qualified Capital Stock or
in options, warrants or other rights to acquire shares of
such Qualified Capital Stock);
(ii) purchase, redeem or otherwise acquire or retire
for value, directly or indirectly, the Company's Capital
Stock or any Capital Stock of any Affiliate of the Company
(other than Capital Stock of any Wholly Owned Restricted
Subsidiary) or options, warrants or other rights to acquire
such Capital Stock;
(iii) make any principal payment on, or repurchase,
redeem, defease, retire or otherwise acquire for value,
prior to any scheduled principal payment, sinking fund
payment or maturity, any Subordinated Indebtedness;
(iv) declare or pay any dividend or distribution on
any Capital Stock of any Restricted Subsidiary to any
Person (other than to the Company or any of its Restricted
Subsidiaries so long as, in the event the Restricted
Subsidiary paying such dividend or distribution is not a
Wholly Owned Restricted Subsidiary, the Company or a
Restricted Subsidiary of the Company receives at least its
pro rata share of such dividend or distribution in
accordance with its Equity Interests in such Capital
Stock);
(v) incur, create or assume any guarantee of
Indebtedness of any Affiliate of the Company (other than
guarantees of Indebtedness of the Company given by any
Restricted Subsidiary in accordance with the terms of this
Indenture); or
(vi) until the date on which the ratio of Annualized
EBITDA to Consolidated Interest Expense equals or exceeds
1.5 to 1.0, make any Investment in any Person (other than
any Permitted Investments) in a cumulative amount for the
Company and all of its Restricted Subsidiaries in excess of
(A)(1) 100% of the Net Cash Proceeds received by the
Company from the issuance and sale of Capital Stock of the
Company (other than Capital Stock sold to a Subsidiary or
to any employee stock ownership plan or similar trust and
other than Redeemable Capital Stock) subsequent to the date
of this Indenture and (2) $15,000,000 less (B) the
cumulative amount of Net Cash Proceeds received by the
Company from the issuance or sale of Capital Stock of the
Company that has been applied to make Restricted Payments
provided in clauses (i) through (v) above subsequent to the
date of this Indenture; provided that any Guarantee that is
an Investment in an Unrestricted Subsidiary shall cease to
be deemed an Investment (and shall be deemed to have not
been made) to the extent that the Guarantee is released
without payment on the obligations so guaranteed by the
Company or any Restricted Subsidiary of the Company;
(any of the foregoing actions described in clauses (i) through
(vi) other than any such action that is a Permitted Payment (as
defined below), collectively, "Restricted Payments") unless
after giving effect to the proposed Restricted Payment (the
amount of any such Restricted Payment, if other than cash, as
determined by the Board of Directors of the Company, whose
determination shall be conclusive and evidenced by a board
resolution), (1) no Default or Event of Default shall have
occurred and be continuing and such Restricted Payment shall not
be an event which is, or after notice or lapse of time or both,
would be, an "event of default" under the terms of any
Indebtedness of the Company or its Restricted Subsidiaries; (2)
the Company could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under the provisions of Section
4.08; and (3) the aggregate amount of all such Restricted
Payments declared or made after the date of this Indenture, does
not exceed the sum of:
(A) an amount equal to the Company's Cumulative Operating
Cash Flow less 2.0 times the Company's Cumulative
Consolidated Interest Expense; and
(B) the aggregate Net Cash Proceeds received after the
date of this Indenture by the Company from capital
contributions (other than from a Subsidiary) or from
the issuance or sale (other than to a Subsidiary) of
Qualified Capital Stock of the Company or any options,
warrants or rights to purchase such Qualified Capital
Stock of the Company (except, in each case, to the
extent such proceeds are used to purchase, redeem or
otherwise retire Capital Stock or Subordinated
Indebtedness as set forth below in clause (ii), (iii)
or (vii) of paragraph (b) below and except the Net
Cash Proceeds from the issuance of Common Stock that
are applied to acquire Permitted Investments pursuant
to clause (viii) of the definition of Permitted
Investments).
(b) Notwithstanding the foregoing, and in the case of
clauses (ii) through (vi) below, so long as there is no Default
or Event of Default continuing, the foregoing provisions shall
not prohibit the following actions (each of clauses (i) through
(vii) being referred to as a "Permitted Payment"):
(i) the payment of any dividend within 60 days
after the date of declaration thereof, if at such date of
declaration such payment was permitted by the provisions of
paragraph (a) of this Section and such payment shall have
been deemed to have been paid on such date of declaration
and shall not have been deemed a "Permitted Payment" for
purposes of the calculation required by paragraph (a) of
this Section 4.07;
(ii) the repurchase, redemption or other acquisition
or retirement of any shares of any class of Capital Stock
of the Company in exchange for (including any such exchange
pursuant to the exercise of a conversion right or privilege
in connection with which cash is paid in lieu of the
issuance of fractional shares or scrip), or out of the Net
Cash Proceeds of a substantially concurrent issue and sale
for cash (other than to a Subsidiary) of, other shares of
Qualified Capital Stock of the Company; provided that the
Net Cash Proceeds from the issuance of such shares of
Qualified Capital Stock are excluded from clause (3)(B) of
paragraph (a) of this Section 4.07;
(iii) the repurchase, redemption, defeasance,
retirement or acquisition for value or payment of principal
of any Subordinated Indebtedness in exchange for, or in an
amount not in excess of the net proceeds of, a
substantially concurrent issuance and sale for cash (other
than to any Subsidiary of the Company) of any Qualified
Capital Stock of the Company, provided that the Net Cash
Proceeds from the issuance of such shares of Qualified
Capital Stock are excluded from clause (3)(B) of paragraph
(a) of this Section 4.07;
(iv) the repurchase, redemption, defeasance,
retirement, refinancing, acquisition for value or payment
of principal of any Subordinated Indebtedness (other than
Redeemable Capital Stock) (a "refinancing") through the
issuance of new Subordinated Indebtedness of the Company,
provided that any such new Subordinated Indebtedness (1)
shall be in a principal amount that does not exceed the
principal amount so refinanced (or, if such Subordinated
Indebtedness provides for an amount less than the principal
amount thereof to be due and payable upon a declaration of
acceleration thereof, then such lesser amount as of the
date of determination), plus the lesser of (I) the stated
amount of any premium or other payment required to be paid
in connection with such a refinancing pursuant to the terms
of the Indebtedness being refinanced or (II) the amount of
premium or other payment actually paid at such time to
refinance the Indebtedness, plus, in either case, the
amount of expenses of the Company incurred in connection
with such refinancing; (2) has an Average Life to Stated
Maturity greater than the remaining Average Life to Stated
Maturity of the Notes; (3) has a Stated Maturity for its
final scheduled principal payment later than the Stated
Maturity for the final scheduled principal payment of the
Notes; and (4) is expressly subordinated in right of
payment to the Notes at least to the same extent as the
Indebtedness to be refinanced;
(v) the repurchase of Capital Stock of the Company
(including options, warrants or other rights to acquire
such Capital Stock) from employees or former employees of
the Company or any Restricted Subsidiary thereof for
consideration which, when added to all loans made pursuant
to clause (vi) below during the same fiscal year and then
outstanding, does not exceed $1,000,000 in the aggregate in
any fiscal year and $4,000,000 in the aggregate since the
date of this Indenture;
(vi) the making of loans and advances to employees
of the Company or any Restricted Subsidiary thereof in an
aggregate amount at any time outstanding (including as
outstanding any such loan or advance written off or
forgiven) which, when added to the aggregate consideration
paid pursuant to clause (v) above during the same fiscal
year, does not exceed $1,000,000 in any fiscal year and
$4,000,000 in the aggregate since the date of this
Indenture; and
(vii) the repurchase, redemption or other acquisition
or retirement of Capital Stock of any Subsidiary of the
Company for Capital Stock (other than Redeemable Capital
Stock).
The amounts referred to in clauses (i), (v) and (vi)
shall be included as Restricted Payments in any computation made
pursuant to clause (a)(3) above. Restricted Payments shall be
deemed not to include Permitted Payments and Permitted
Investments.
Section 4.08. Limitation on Indebtedness.
The Company will not, and will not permit any
Restricted Subsidiary to, create, issue, incur, assume,
guarantee or otherwise in any manner become directly or
indirectly liable for the payment of or otherwise incur
(collectively, "incur") any Indebtedness (including any Acquired
Indebtedness), except that the Company may incur Indebtedness
(including any Acquired Indebtedness) and any Restricted
Subsidiary may incur Acquired Indebtedness, if, in each case,
the Debt to Operating Cash Flow Ratio of the Company and its
Restricted Subsidiaries at the time of incurrence of such
Indebtedness, after giving pro forma effect thereto, is 5.0: 1.0
or less.
The foregoing limitation will not apply to the
incurrence of any of the following (collectively, "Permitted
Indebtedness"), but any such Permitted Indebtedness will be
included in any calculation of Debt:
(i) Indebtedness of the Company or any of its
Restricted Subsidiaries under a Bank Credit Facility in an
aggregate principal amount at any one time outstanding not
to exceed $25,000,000;
(ii) Indebtedness of the Company pursuant to the
Notes;
(iii) Indebtedness of any Restricted Subsidiary
consisting of a guarantee of Indebtedness under a Bank
Credit Facility;
(iv) Indebtedness of the Company or any Restricted
Subsidiary outstanding on the date of this Indenture and
listed on a schedule hereto (exclusive of any debt of the
kind referred to in clause (x));
(v) Indebtedness of the Company owing to a
Restricted Subsidiary; provided that any Indebtedness of
the Company owing to a Restricted Subsidiary is made
pursuant to an intercompany note in the form of Exhibit B
and is subordinated in right of payment from and after such
time as the Notes shall become due and payable (whether at
Stated Maturity, acceleration or otherwise) to the payment
of the Company's obligations under the Notes; provided,
further, that any disposition, pledge or transfer of any
such Indebtedness to a Person (other than a disposition,
pledge or transfer to a Wholly Owned Restricted Subsidiary)
shall be deemed to be an incurrence of such Indebtedness by
the obligor not permitted by this clause (v);
(vi) Indebtedness of a Restricted Subsidiary owing
to the Company or another Restricted Subsidiary; provided
that, with respect to Indebtedness owing to a Restricted
Subsidiary, any such Indebtedness is made pursuant to an
intercompany note in the form of Exhibit B; provided,
further, that (a) any disposition, pledge or transfer of
any such Indebtedness to a Person (other than a
disposition, pledge or transfer to the Company or a
Restricted Subsidiary) shall be deemed to be an incurrence
of such Indebtedness by the obligor not permitted by this
clause (vi) and (b) any transaction pursuant to which any
Restricted Subsidiary, which has Indebtedness owing to the
Company or any other Restricted Subsidiary, ceases to be a
Restricted Subsidiary shall be deemed to be the incurrence
of Indebtedness by such Restricted Subsidiary that is not
permitted by this clause (vi);
(vii) guarantees of any Restricted Subsidiary made in
accordance with the provisions of Section 4.18;
(viii) obligations of the Company or any Restricted
Subsidiary entered into in the ordinary course of business
pursuant to Interest Rate Agreements designed to protect
the Company or any Restricted Subsidiary against
fluctuations in interest rates in respect of Indebtedness
of the Company or any Restricted Subsidiary as long as such
obligations at the time incurred do not exceed the
aggregate principal amount of such Indebtedness then
outstanding or in good faith anticipated to be outstanding
within 90 days of such occurrence;
(ix) Indebtedness having a yield to maturity not in
excess of the yield to maturity on the Notes lent by a
Strategic Investor (or any subsidiary thereof and including
any refinancing of such outstanding amount) resulting in up
to $50,000,000 in aggregate Net Cash Proceeds; provided
that (i) such Indebtedness (and any refinancing thereof) is
subordinated in right of payment to the prior payment in
full in cash of all obligations (including principal,
interest and premium, if any) of the Company under the
Notes and the Indenture (including as a consequence of any
repurchase, redemption or other repayment of the Notes,
including, without limitation, by way of optional
redemption, Offers, and Change of Control Offers to the
extent such rights to repayment are exercised by the
Noteholders) such that (A) the Company shall make no
payment or distribution in respect of such Indebtedness and
may not acquire such Indebtedness until the prior payment
in full in cash of all obligations in respect of the Notes
if any Default on the Notes shall occur and be continuing
and (B) the holders of such Indebtedness may not take any
action to enforce or accelerate such Indebtedness until the
holders of the Notes have taken such action in respect of
the Notes, (ii) such Indebtedness (and any refinancing
thereof) is not guaranteed by any of the Company's
Subsidiaries and is not secured by any Lien on any property
or asset of the Company or any Restricted Subsidiary, (iii)
such Indebtedness (and any refinancing thereof) has no
scheduled maturity of principal earlier than a date at
least one year after the final Stated Maturity of the
Notes, (iv) accreted interest on such Indebtedness shall
only be payable on the Maturity thereof and cash interest
on such Indebtedness shall only be payable to the extent
that immediately prior to and after such payment of
interest the Company is permitted to incur $1.00 of
Indebtedness under the ratio described in the first
paragraph of this Section 4.08 and (v) the holders of such
Indebtedness shall assign any rights to vote, including by
way of proxy, in a bankruptcy, insolvency or similar
proceeding to the Trustee and the trustee for the Existing
Notes and, provided, further, the aggregate Net Cash
Proceeds of such Indebtedness together with the Net Cash
Proceeds of Indebtedness incurred under clause (xi) below
shall not exceed $100,000,000 at any one time;
(x) Indebtedness of the Company or any Restricted
Subsidiary owing to a federal governmental authority
relating to the purchase of wireless cable channels in an
auction in an amount not to exceed in the aggregate
$40,000,000 (including any such Indebtedness refinanced
under clause (xiii) below);
(xi) in the event the Company receives $40,000,000
or more of aggregate Net Cash Proceeds from the sale of
Qualified Capital Stock (other than Qualified Capital Stock
sold to a Subsidiary or to any employee stock ownership
plan or similar trust and other than Redeemable Capital
Stock) issued subsequent to the date of the Indenture,
Indebtedness of the Company in an aggregate principal
amount not to exceed $100,000,000 (including any
refinancing thereof); provided that (i) the incurrence of
such Indebtedness would not result in there being
outstanding more than $1.50 of Indebtedness under this
clause (xi), clause (ix) and clause (xii) for each $1.00 of
aggregate Net Cash Proceeds of Qualified Capital Stock
issued subsequent to the date of the Indenture, (ii) such
Indebtedness (and any refinancing thereof) is not
guaranteed by any of the Company's Subsidiaries and is not
secured by any Lien on any property or asset of the Company
or any Restricted Subsidiary and (iii) the Indebtedness
permitted by this clause (xi) shall be reduced by the sum
of (A) the aggregate Net Cash Proceeds of Indebtedness
issued under clause (ix) and clause (xii) of this Section
plus (B) the product of $1.50 and the aggregate amount of
Investments made by the Company pursuant to clause (viii)
of the definition of Permitted Investments (other than
Investments acquired in consideration for the issuance of
Common Stock);
(xii) in the event the Company incurs Indebtedness
lent by a Strategic Investor under clause (ix) that results
in $50,000,000 of Net Cash Proceeds and the Company
receives $40,000,000 or more of aggregate Net Cash Proceeds
from the sale of Qualified Capital Stock issued subsequent
to the date of the Indenture, the Company or any Restricted
Subsidiary shall be permitted to incur up to $25,000,000 of
Indebtedness (including any refinancing thereof); provided
that the Net Cash Proceeds of such Indebtedness together
with the Net Cash Proceeds of Indebtedness incurred under
clause (xi) of this Section, shall not exceed $50,000,000;
(xiii) any renewals, extensions, substitutions,
refundings, refinancings or replacements (collectively, a
"refinancing") of any Indebtedness described in clauses
(ii), (iv) and (x) above, including any successive
refinancings so long as the aggregate principal amount of
Indebtedness represented thereby is not increased by such
refinancing (or, if said Indebtedness provides for an
amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the maturity
thereof, not greater than such lesser amount) plus the
lesser of (I) the stated amount of any premium or other
payment required to be paid in connection with such a
refinancing pursuant to the terms of the Indebtedness being
refinanced or (II) the amount of premium or other payment
actually paid at such time to refinance the Indebtedness,
plus, in either case, the amount of expenses of the Company
incurred in connection with such refinancing and, in the
case of Pari Passu or Subordinated Indebtedness, such
refinancing does not reduce the Average Life to Stated
Maturity or the Stated Maturity of such Indebtedness; and
(xiv) Indebtedness of the Company or any Restricted
Subsidiary, in addition to that described in clauses (i)
through (xiii) above, so long as the aggregate principal
amount of all such Indebtedness shall not exceed
$10,000,000 at any one time outstanding.
Section 4.09. Limitation on Liens.
The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create, incur,
affirm or suffer to exist any Lien of any kind upon any of its
property or assets (including any intercompany notes), now owned
or acquired after the date of this Indenture, or any income or
profits therefrom, except if the Notes are directly secured
equally and ratably with (or prior to in the case of Liens with
respect to Subordinated Indebtedness) the obligation or
liability secured by such Lien, excluding, however, from the
operation of the foregoing any of the following (collectively,
"Permitted Liens"):
(a) any Lien on assets of the Company or any
Subsidiary thereof securing only the Notes equally and
ratably;
(b) any Lien arising under this Indenture in favor of
the Trustee or any prior Trustee;
(c) any Lien existing as of the date of this
Indenture and listed on a schedule hereto;
(d) any Lien arising by reason of (1) any judgment,
decree or order of any court, so long as such Lien is
adequately bonded and any appropriate legal proceedings
which may have been duly initiated for the review of such
judgment, decree or order shall not have been finally
terminated or the period within which such proceedings may
be initiated shall not have expired; (2) taxes not yet
delinquent or which are being contested in good faith; (3)
security for payment of workers' compensation or other
insurance; (4) good faith deposits in connection with
tenders, leases and contracts (other than contracts for the
payment of money) in the ordinary course of business; (5)
zoning restrictions, easements, licenses, reservations,
provisions, covenants, conditions, waivers, restrictions on
the use of property or minor irregularities of title (and
with respect to leasehold interests, mortgages,
obligations, liens and other encumbrances incurred,
created, assumed or permitted to exist and arising by,
through or under a landlord or owner of the leased
property, with or without consent of the lessee), none of
which materially impairs the use of any parcel of property
material to the operation of the business of the Company or
any Restricted Subsidiary or the value of such property for
the purpose of such business; (6) deposits to secure public
or statutory obligations, or in lieu of surety or appeal
bonds; (7) certain surveys, exceptions, title defects,
encumbrances, easements, reservations of, or rights of
others for, rights of way, sewers, electric lines,
telegraph or telephone lines and other similar purposes or
zoning or other restrictions as to the use of real property
not interfering with the ordinary conduct of the business
of the Company or any of its Restricted Subsidiaries; or
(8) operation of law in favor of mechanics, materialmen,
laborers, employees or suppliers, incurred in the ordinary
course of business for sums which are not yet delinquent or
are being contested in good faith by negotiations or by
appropriate proceedings which suspend the collection
thereof;
(e) any Lien securing Indebtedness under a Bank
Credit Facility incurred by the Company or any Restricted
Subsidiary in compliance with the provisions of Section
4.08 or Liens securing Indebtedness incurred in compliance
with clause (xii) of the definition of Permitted
Indebtedness in Section 4.08;
(f) Liens securing purchase money Indebtedness,
including pursuant to clause (x) under the second paragraph
of the provisions of Section 4.08, incurred in compliance
with this Indenture, provided that such Liens do not extend
to any assets other than the assets so acquired and the
principal amount of such Indebtedness shall at no time
exceed the original purchase price of the property or
assets purchased;
(g) any Lien securing Acquired Indebtedness created
prior to (and not created in connection with, or in
contemplation of) the incurrence of such Indebtedness by
the Company or any Restricted Subsidiary, in each case
which Indebtedness is permitted under the provisions of
Section 4.08; provided that any such Lien extends only to
the assets that were subject to such Lien securing Acquired
Indebtedness prior to the related transaction by the
Company or its Restricted Subsidiaries; and
(h) any extension, renewal, refinancing or
replacement, in whole or in part, of any Lien described in
the foregoing clauses (a) through (g) so long as the amount
of security is not increased thereby.
Section 4.10. Limitation on Subsidiary Capital Stock.
The Company will not permit (a) any Restricted
Subsidiary of the Company to issue, sell or transfer any Capital
Stock, except for (i) Capital Stock issued or sold to, held by
or transferred to the Company or a Wholly Owned Restricted
Subsidiary of the Company, and (ii) Capital Stock issued by a
Person prior to the time (A) such Person becomes a Restricted
Subsidiary, (B) such Person merges with or into a Restricted
Subsidiary or (C) a Restricted Subsidiary merges with or into
such Person; provided that such Capital Stock was not issued or
incurred by such Person in anticipation of the type of
transaction contemplated by subclause (A), (B) or (C) or (b) any
Person (other than the Company or a Wholly Owned Restricted
Subsidiary) to acquire Capital Stock of any Subsidiary from the
Company or any Wholly Owned Restricted Subsidiary except upon
the acquisition of all the outstanding Capital Stock of such
Restricted Subsidiary in accordance with the terms of this
Indenture.
Section 4.11. Limitation on Preferred Stock of
Subsidiaries.
The Company will not permit any of its Restricted
Subsidiaries to issue, directly or indirectly, any Preferred
Stock, except (i) Preferred Stock of Restricted Subsidiaries
outstanding on the Issue Date, (ii) Preferred Stock issued to
and held by the Company or a Wholly-Owned Restricted Subsidiary,
except that any subsequent issuance or transfer of any Capital
Stock which results in any Wholly Owned Restricted Subsidiary
ceasing to be a Wholly Owned Restricted Subsidiary or any
transfer of such Preferred Stock to a Person not a Wholly Owned
Restricted Subsidiary will be deemed an issuance of Preferred
Stock; (iii) Preferred Stock issued by a Person prior to the
time (a) such Person became a Restricted Subsidiary, (b) such
Person merges with or into a Restricted Subsidiary or (c)
another Person merges with or into such Person (in a transaction
in which such Person becomes a Restricted Subsidiary), in each
case if such Preferred Stock was not issued in anticipation of
such transaction; and (iv) Preferred Stock issued in exchange
for, or the proceeds of which are used to refund Indebtedness or
refinance Preferred Stock referred to in clause (i) or issued
pursuant to clause (ii) or (iii) (other than Preferred Stock
which by its terms or by the terms of any security into which it
is convertible or for which it is exchangeable is redeemable at
the option of the holder thereof or is otherwise redeemable,
pursuant to sinking fund obligations or otherwise, prior to the
date of redemption or maturity of the Preferred Stock or
Indebtedness being so refunded or refinanced); provided that (a)
the liquidation value of such Preferred Stock so issued shall
not exceed the principal amount or the liquidation value of the
Indebtedness or Preferred Stock, as the case may be, so refunded
or refinanced and (b) the Preferred Stock so issued (1) shall
have a Stated Maturity not earlier than the Stated Maturity of
the Indebtedness or Preferred Stock being refunded or refinanced
and (2) shall have a Average Life to Stated Maturity equal to or
greater than the remaining Average Life to Stated Maturity of
the Indebtedness or Preferred Stock being refunded or
refinanced.
Section 4.12. Limitation on Sale of Assets.
(a) The Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly,
consummate an Asset Sale unless (i) at least 80% of the proceeds
from such Asset Sale are received in cash or Temporary Cash
Investments; and (ii) the Company or such Restricted Subsidiary
receives consideration at the time of such Asset Sale at least
equal to the Fair Market Value of the shares or assets subject
to such Asset Sale (as determined by the Board of Directors of
the Company and evidenced in a board resolution; provided,
however, that if the Fair Market Value of such assets exceeds
$20,000,000, the Fair Market Value shall be determined by an
investment banking firm of national standing selected by the
Company). For purposes of this paragraph (a), an amount equal
to the Fair Market Value (as determined by the Board of
Directors of the Company and evidenced in a board resolution) of
(1) Wireless Cable Related Assets received by the Company or any
such Restricted Subsidiary from the transferee that will be used
by the Company or any such Restricted Subsidiary in the
operation of a Wireless Cable Business in North America and (2)
the Voting Stock of a Strategic Investor engaged in the
Telecommunications Business in North America received by the
Company or any such Restricted Subsidiary shall be deemed to be
cash, provided that the aggregate Fair Market Value (as
determined at the date of receipt of such Wireless Cable Related
Assets or Voting Stock, as the case may be) of all such Wireless
Cable Related Assets and Voting Stock received since the date of
this Indenture shall not exceed $12,500,000.
(b) If all or a portion of the Net Cash Proceeds of
any Asset Sale are not required to be applied to repay
permanently any Indebtedness then outstanding under a Bank
Credit Facility as required by the terms thereof, or the Company
determines not to apply such Net Cash Proceeds to the permanent
prepayment of such Indebtedness under a Bank Credit Facility, or
if no such Indebtedness under a Bank Credit Facility is then
outstanding, then the Company or a Restricted Subsidiary may,
within 270 days of the Asset Sale, invest the Net Cash Proceeds
from such Asset Sale in properties and other assets that (as
determined by the Board of Directors of the Company) replace the
properties and assets that were the subject of the Asset Sale or
in properties and assets that will be used in the Wireless Cable
Business. The amount of such Net Cash Proceeds neither used to
permanently repay or prepay Indebtedness under a Bank Credit
Facility nor used or invested as set forth in this paragraph
constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds
exceeds $5,000,000 the Company will apply the Excess Proceeds to
the repayment of the Notes and any other Pari Passu Indebtedness
outstanding with similar provisions requiring the Company to
make an offer to purchase such Indebtedness with the proceeds
from any Asset Sale as follows: (A) the Company will make an
offer to purchase (a "Net Proceeds Offer" or an "Offer") within
ten days of such time from all holders of the Notes in
accordance with the procedures set forth in this Indenture in
the maximum principal amount (expressed as a multiple of $1,000)
of Notes that may be purchased out of an amount (the "Note
Amount") equal to the product of such Excess Proceeds multiplied
by a fraction, the numerator of which is the outstanding
principal amount of the Notes (or, if prior to August 1, 2001,
the Accreted Value of the Notes), and the denominator of which
is the sum of the outstanding principal amount of the Notes (or,
if prior to August 1, 2001, the Accreted Value of the Notes) and
such Pari Passu Indebtedness (subject to proration in the event
such amount is less than the aggregate Offered Price of all
Notes tendered) and (B) to the extent required by such Pari
Passu Indebtedness to permanently reduce the principal amount of
such Pari Passu Indebtedness, the Company will make an offer to
purchase or otherwise repurchase or redeem Pari Passu
Indebtedness (a "Pari Passu Offer") in an amount (the "Pari
Passu Debt Amount") equal to the excess of the Excess Proceeds
over the Note Amount; provided that in no event will the Company
be required to make a Pari Passu Offer in a Pari Passu Debt
Amount exceeding the principal amount of such Pari Passu
Indebtedness plus the amount of any premium required to be paid
to repurchase such Pari Passu Indebtedness. The offer price for
the Notes will be an amount payable in cash equal to 100% of the
principal amount of the Notes plus accrued and unpaid interest,
if any, (or, if prior to August 1, 2001, the Accreted Value of
the Notes) to the date (the "Offer Date") such Offer is
consummated (the "Offered Price") in accordance with the
procedures set forth in this Indenture. To the extent that the
aggregate Offered Price of the Notes tendered pursuant to the
Offer is less than the Note Amount relating thereto or the
aggregate amount of Pari Passu Indebtedness that is purchased in
a Pari Passu Offer is less than the Pari Passu Debt Amount, the
Company may use any remaining Excess Proceeds for general
corporate purposes. Upon the completion of the purchase of all
the Notes tendered pursuant to an Offer and the completion of a
Pari Passu Offer, the amount of Excess Proceeds, if any, shall
be reset at zero.
(d) If the Company becomes obligated to make an Offer
pursuant to clause (c) above, the Notes and the Pari Passu
Indebtedness shall be purchased by the Company, at the option of
the holder thereof, in whole or in part in integral multiples of
$1,000, on a date that is not earlier than 45 days and not later
than 60 days from the date the notice of the Offer is given to
holders, or such later date as may be necessary for the Company
to comply with the requirements under the Exchange Act.
(e) The Company will comply with the applicable
tender offer rules, including Rule 14e-1 under the Exchange Act,
and any other applicable securities laws or regulations in
connection with an Offer.
Section 4.13. Limitation on Dividends and Other
Payment Restrictions Affecting Subsidiaries.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any
consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (i) pay dividends or make any other
distribution on its Capital Stock, (ii) pay any Indebtedness
owed to the Company or any other Restricted Subsidiary, (iii)
make any Investment in the Company or any other Restricted
Subsidiary or (iv) transfer any of its properties or assets to
the Company or any other Restricted Subsidiary, except for: (a)
any encumbrance or restriction pursuant to any agreement in
effect on the date of this Indenture and listed on a schedule
hereto; (b) any customary encumbrance or restriction pursuant to
the terms of any instrument governing any Indebtedness incurred
by a Restricted Subsidiary pursuant to a Bank Credit Facility in
conformance with the provisions of Section 4.08; provided that
any such encumbrance or restriction shall specifically not
prohibit payments of principal, premium, if any, and interest on
the Notes; (c) any encumbrance or restriction, with respect to a
Restricted Subsidiary that is not a Restricted Subsidiary of the
Company on the date of this Indenture, in existence at the time
such Person becomes a Restricted Subsidiary of the Company and
not incurred in connection with, or in contemplation of, such
Person becoming a Restricted Subsidiary; (d) any encumbrance or
restriction existing under any agreement that extends, renews,
refinances or replaces the agreements containing the
encumbrances or restrictions in the foregoing clauses (a), (b)
and (c), or in this clause (d), provided that the terms and
conditions of any such encumbrances or restrictions are no more
restrictive in any material respect than those under or pursuant
to the agreement evidencing the Indebtedness so extended,
renewed, refinanced or replaced; (e) any instrument governing
Acquired Indebtedness as in effect at the time of acquisition
(except to the extent such Indebtedness was incurred in
connection with, or in contemplation of, such acquisition),
which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so
acquired; (f) with respect to clause (iv) above, by reason of
customary non-assignment provisions in leases entered into in
the ordinary course of business; or (g) with respect to clause
(iv) above, purchase money obligations for property acquired in
the ordinary course of business, which obligations do not cover
any asset other than the asset acquired.
Section 4.14. Limitation on Transactions with
Affiliates.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into
any transaction or series of related transactions (including,
without limitation, the sale, purchase, exchange or lease of
assets, property or services) with any Affiliate of the Company
(other than the Company or a Wholly Owned Restricted Subsidiary)
unless (a) such transaction or series of related transactions is
in writing and on terms that are no less favorable to the
Company or such Restricted Subsidiary, as the case may be, than
those that would be available in a comparable transaction in
arm's-length dealings with an unrelated third party, (b) with
respect to any transaction or series of related transactions
involving aggregate value in excess of $1,000,000, the Company
delivers an Officers' Certificate to the Trustee certifying that
such transaction or series of related transactions complies with
clause (a) above and such transaction or series of transactions
has been approved by a majority of the board of directors of the
Company, (c) with respect to any transaction or series of
related transactions involving aggregate payments in excess of
$2,000,000, such transaction or series of related transactions
has been approved by the Disinterested Directors of the Company
(or in the event there is only one Disinterested Director, by
such Disinterested Director) and (d) with respect to any
transaction or series of related transactions involving
aggregate payments in excess of $10,000,000, such transaction or
series of related transactions has been approved by the
Disinterested Directors of the Company (or in the event there is
only one Disinterested Director, by such Disinterested Director)
and the Company delivers to the Trustee a written opinion of an
investment banking firm of national standing or other recognized
independent expert with experience appraising the terms and
conditions of the type of transaction or series of related
transactions for which an opinion is required stating that the
transaction or series of related transactions is fair to the
Company or such Restricted Subsidiary from a financial point of
view; provided, however, (I) that the provision with respect to
clause (d) above shall not apply to the coordination of
programming and equipment purchases with Heartland Wireless
Communications, Inc. and (II) that this provision shall not
apply to (A) any transaction with an officer or director of the
Company entered into in the ordinary course of business
(including compensation or employee benefit arrangements with
any officer or director of the Company and any transactions
permitted by subclauses (v) and (vi) of clause (b) under the
provisions of Section 4.07), or (B) the cash portion of the
Phase II Payment, (C) repayment of the Interim Facility or (D)
any agreements, transactions or series of related transactions
in existence on the date of this Indenture and any renewal or
extension thereof under substantially the same terms as the
original terms.
Section 4.15. Activities of the Company.
The Company and its Restricted Subsidiaries may not,
directly or indirectly, engage in any business other than the
Wireless Cable Business; provided that in the event a Change of
Control occurs in which a Strategic Investor becomes the holder
of a majority of the Voting Stock of the Company, this Section
shall no longer be of force and effect.
Section 4.16. Purchase of Notes Upon a Change of
Control.
(a) If a Change of Control shall occur at any time,
then each holder of Notes shall have the right to require that
the Company purchase (subject to compliance with the
requirements of Rules 13e-4 and 14e-1 under the Exchange Act and
any other applicable statute, rule or regulation) such holder's
Notes in whole or in part in integral multiples of $1,000, at a
purchase price (the "Change of Control Purchase Price") in cash
in an amount equal to 101% of the principal amount of such
Notes, plus accrued and unpaid interest, if any (or, in the case
of repurchases of Notes prior to August 1, 2001 at a purchase
price equal to 101% of the Accreted Value thereof), to the
repurchase date (the "Change of Control Purchase Date") pursuant
to the offer described below (the "Change of Control Offer") and
in accordance with the other procedures set forth in this
Indenture.
(b) Within 30 days following any Change of Control,
the Company shall notify the Trustee thereof and give written
notice of such Change of Control to each holder of Notes, by
first-class mail, postage prepaid, at his address appearing in
the security register, stating, among other things: the purchase
price and the purchase date which shall be a business day no
earlier than 30 days nor later than 60 days from the date such
notice is mailed, or such later date as is necessary to comply
with requirements under the Exchange Act; that any Note not
tendered will continue to accrue or accrete interest; that,
unless the Company defaults in the payment of the purchase
price, any Notes accepted for payment pursuant to the Change of
Control Offer shall cease to accrue or accrete interest after
the Change of Control Purchase Date; and certain other
procedures that a holder of Notes must follow to accept a Change
of Control Offer or to withdraw such acceptance.
(c) The Company will comply with the applicable
tender offer rules, including Rule 14e-1 under the Exchange Act,
and any other applicable securities laws or regulations in
connection with a Change of Control Offer.
(d) The Company will not, and will not permit any
Restricted Subsidiary to, create or permit to exist or become
effective any restriction (other than restrictions under
Indebtedness as in effect on the date of this Indenture and any
extensions, refinancings, renewals or replacements of any of the
foregoing) that would materially impair the ability of the
Company to make a Change of Control Offer to purchase the Notes
or, if such Change of Control Offer is made, to pay for the
Notes tendered for purchase; provided that the restrictions in
any such extensions, refinancings, renewals or replacements are
no less favorable in any material respect to the holders of the
Notes than those under the Indebtedness being extended,
refinanced, renewed or replaced.
Section 4.17. Limitations on Unrestricted
Subsidiaries.
The Company will not make, and will not permit its
Restricted Subsidiaries to make, any Investment in Unrestricted
Subsidiaries if, at the time thereof, the aggregate amount of
such Investments would exceed the amount of Restricted Payments
then permitted to be made pursuant to the provisions of Section
4.07. Any Investments in Unrestricted Subsidiaries permitted to
be made pursuant to this covenant (i) will be treated as a
Restricted Payment in calculating the amount of Restricted
Payments made by the Company and (ii) may be made in cash or
property.
Section 4.18. Limitation on Issuances of Guarantees
of Indebtedness.
(a) The Company will not permit any Restricted
Subsidiary, directly or indirectly, to guarantee, assume or in
any other manner become liable with respect to any Indebtedness
of the Company (other than Indebtedness under a Bank Credit
Facility pursuant to clauses (i) and (iii) of the second
paragraph under the provisions of Section 4.08) unless (i) such
Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture to this Indenture providing for a
guarantee of the Notes on the same terms as the guarantee of
such Indebtedness except that (A) such guarantee need not be
secured unless required pursuant to the provisions of Section
4.09, and (B) if such Indebtedness is by its terms expressly
subordinated to the Notes, any such assumption, guarantee or
other liability of such Restricted Subsidiary with respect to
such Indebtedness shall be subordinated to such Restricted
Subsidiary's assumption, guarantee or other liability with
respect to the Notes to the same extent as such Indebtedness is
subordinated to the Notes and (ii) such Restricted Subsidiary
waives and will not in any manner whatsoever claim or take the
benefit or advantage of, any rights of reimbursement, indemnity
or subrogation or any other rights against the Company or any
other Restricted Subsidiary as a result of any payment by such
Restricted Subsidiary under its guarantee.
(b) Notwithstanding the foregoing, any Guarantee by a
Restricted Subsidiary of the Notes shall provide by its terms
that it shall be automatically and unconditionally released and
discharged upon any sale, exchange or transfer, to any Person
not an Affiliate of the Company, of all of the Company's Capital
Stock in such Restricted Subsidiary, which is in compliance with
the terms of this Indenture.
Section 4.19. Limitation on Sale and Leaseback
Transactions.
The Company will not, and will not permit any
Restricted Subsidiary to, enter into any Sale and Leaseback
Transaction with respect to any property or assets (whether now
owned or hereafter acquired) unless (i) the sale or transfer of
such property or assets to be leased is treated as an Asset Sale
and the Company complies with the provisions of Section 4.12 and
(ii) the Company or such Subsidiary would be entitled under the
provisions of Section 4.08 to incur any Capital Lease
Obligations in respect of such Sale and Leaseback Transaction.
ARTICLE 5
SUCCESSORS
Section 5.01. Consolidation, Merger, Sale of Assets.
The Company will not, in a single transaction or
through a series of related transactions, consolidate with or
merge with or into any other Person or sell, assign, convey,
transfer, lease or otherwise dispose of all or substantially all
of its properties and assets to any Person or group of
affiliated Persons, or permit any of its Restricted Subsidiaries
to enter into any such transaction or series of related
transactions if such transaction or series of related
transactions, in the aggregate, would result in a sale,
assignment, conveyance, transfer, lease or disposition of all or
substantially all of the properties and assets of the Company
and its Restricted Subsidiaries on a Consolidated basis to any
other Person or group of affiliated Persons, unless at the time
and after giving effect thereto (i) either (a) the Company will
be the continuing corporation or (b) the Person (if other than
the Company) formed by such consolidation or into which the
Company is merged or the Person which acquires by sale,
assignment, conveyance, transfer, lease or disposition all or
substantially all of the properties and assets of the Company
and its Restricted Subsidiaries on a Consolidated basis (the
"Surviving Entity") will be a corporation duly organized and
validly existing under the laws of the United States of America,
any state thereof or the District of Columbia and such Person
expressly assumes, by a supplemental indenture, in a form
satisfactory to the Trustee, all the obligations of the Company
under the Notes and this Indenture, as the case may be, and the
Notes and this Indenture will remain in full force and effect as
so supplemented; (ii) immediately before and immediately after
giving effect to such transaction on a pro forma basis, no
Default or Event of Default will have occurred and be
continuing; (iii) immediately after giving effect to such
transaction on a pro forma basis (and treating any Indebtedness
not previously an obligation of the Company or any of its
Restricted Subsidiaries which becomes the obligation of the
Company or any of its Restricted Subsidiaries as a result of
such transaction as having been incurred at the time of such
transaction), the Consolidated Net Worth of the Company (or the
Surviving Entity if the Company is not the continuing obligor
under this Indenture) is equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such
transaction; (iv) immediately before and immediately after
giving effect to such transaction on a pro forma basis (on the
assumption that the transaction occurred on the first day of the
most recently ended full fiscal quarter for which financial
statements are available immediately prior to the consummation
of such transaction with the appropriate adjustments with
respect to the transaction being included in such pro forma
calculation), the Company (or the Surviving Entity if the
Company is not the continuing obligor under this Indenture)
could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the provisions of Section 4.08;
(v) at the time of the transaction each Guarantor, if any,
unless it is the other party to the transactions described
above, will have by supplemental indenture confirmed that its
Guarantees shall apply to such Person's obligations under this
Indenture and the Notes; (vi) at the time of the transaction if
any of the property or assets of the Company or any of its
Restricted Subsidiaries would thereupon become subject to any
Lien, the provisions of Section 4.09 are complied with; and
(vii) at the time of the transaction the Company or the
Surviving Entity will have delivered, or caused to be delivered,
to the Trustee, in form and substance reasonably satisfactory to
the Trustee, an Officers' Certificate and an Opinion of Counsel,
each to the effect that such consolidation, merger, transfer,
sale, assignment, conveyance, transfer, lease or other
transaction and the supplemental indenture in respect thereof
comply with this Indenture and that all conditions precedent
therein provided for relating to such transaction have been
complied with. For purposes of the foregoing, the transfer (by
lease, assignment, sale or otherwise, in a single transaction or
series of transactions) of all or substantially all of the
properties and assets of one or more Subsidiaries of the
Company, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company,
shall be deemed to be the transfer of all or substantially all
of the properties and assets of the Company.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation, combination or merger or any
transfer of all or substantially all of the assets of the
Company in accordance with Section 5.01, the surviving entity
shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture and the
Notes with the same effect as if such surviving entity had been
named as such; provided that solely for purposes of computing
amounts described in clause (a) of Section 4.07, any such
surviving entity to the Company shall only be deemed to have
succeeded to and be substituted for the Company with respect to
periods subsequent to the effective time of such merger,
consolidation, combination or transfer of assets.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An Event of Default will occur under this Indenture
if:
(i) there shall be a default in the payment of any
interest on any Note when it becomes due and payable, and
such default shall continue for a period of 30 days;
(ii) there shall be a default in the payment of the
principal of (or premium, if any, on) any Note at its
Maturity (upon acceleration, optional or mandatory
redemption, required repurchase or otherwise);
(iii) (a) there shall be a default in the
performance, or breach, of any covenant or agreement of the
Company under this Indenture or the Notes (other than a
default in the performance, or breach, of a covenant or
agreement which is specifically dealt with in clause (i) or
(ii) or in clause (b), (c) or (d) of this clause (iii)) and
such default or breach shall continue for a period of 30
days after written notice has been given, by certified
mail, (x) to the Company by the Trustee or (y) to the
Company and the Trustee by the holders of at least 25% in
Accreted Value or aggregate principal amount, as the case
may be, of the outstanding Notes; (b) there shall be a
default in the performance or breach of the provisions
described in Section 5.01; (c) the Company shall have
failed to make or consummate an Offer in accordance with
the provisions of Section 4.12; or (d) the Company shall
have failed to make or consummate a Change of Control Offer
in accordance with the provisions of Section 4.16;
(iv) (A) any default in the payment of the
principal, premium, if any, or interest on any Indebtedness
shall have occurred under any agreements, indentures or
instruments under which the Company or any Restricted
Subsidiary then has outstanding Indebtedness in excess of
$5,000,000 when the same shall become due and payable and
continuation of such default after any applicable grace
period and, if such Indebtedness has not already matured at
its final maturity in accordance with its terms, the holder
of such Indebtedness shall have the right to accelerate
such Indebtedness or (B) an event of default as defined in
any of the agreements, indentures or instruments described
in clause (A) of this paragraph (iv) shall have occurred
and the Indebtedness thereunder, if not already matured at
its final maturity in accordance with its terms, shall have
been accelerated; provided that a default in the payment of
principal, premium, if any, or interest in respect of
Indebtedness issued by the Company or any Restricted
Subsidiary of the Company to any seller of Wireless Cable
Related Assets pursuant to an acquisition of Wireless Cable
Related Assets by the Company or any Restricted Subsidiary
of the Company in an aggregate amount not to exceed
$10,000,000 shall not be considered an Event of Default so
long as (a) such nonpayment shall be the result of
nonperformance by the seller under the terms of the
definitive documentation applicable to such acquisition,
(b) the Company is applying its best efforts to the pursuit
of legal remedies under such definitive documentation at
law or in equity, (c) other outstanding Indebtedness of the
Company or its Restricted Subsidiaries in an aggregate
principal amount in excess of $5,000,000 shall not have
become due and payable as a consequence of such nonpayment,
(d) in the event such nonpayment continues for a period of
time equal to or in excess of 30 days, the Company shall
have an Eligible Institution make available to the Trustee
a letter of credit that may be immediately drawn upon in an
amount sufficient to satisfy all amounts due and payable
with respect to such seller indebtedness and (e) the
Company shall have delivered to the Trustee an Officer's
Certificate regarding all such matters;
(v) any Guarantee shall for any reason cease to be,
or shall for any reason be asserted in writing by any
Guarantor or the Company not to be, in full force and
effect and enforceable in accordance with its terms except
to the extent contemplated by this Indenture and any such
Guarantee;
(vi) one or more judgments, orders or decrees for
the payment of money in excess of $5,000,000, either
individually or in the aggregate, shall be rendered against
the Company, or any Restricted Subsidiary or any of their
respective properties and shall not be discharged and
either (a) any creditor shall have commenced an enforcement
proceeding upon such judgment, order or decree or (b) there
shall have been a period of 60 consecutive days during
which a stay of enforcement of such judgment or order, by
reason of an appeal or otherwise, shall not be in effect;
(vii) any holder or holders of at least $5,000,000 in
aggregate principal amount of Indebtedness of the Company
or any Restricted Subsidiary after a default under such
Indebtedness shall notify the Trustee of the intended sale
or disposition of any assets of the Company or any
Restricted Subsidiary that have been pledged to or for the
benefit of such holder or holders to secure such
Indebtedness or shall commence proceedings, or take any
action (including by way of set-off), to retain in
satisfaction of such Indebtedness or to collect on, seize,
dispose of or apply in satisfaction of Indebtedness, assets
of the Company or any Restricted Subsidiary (including
funds on deposit or held pursuant to lock-box and other
similar arrangements);
(viii) there shall have been the entry by a court of
competent jurisdiction of (a) a decree or order for relief
in respect of the Company or any Material Restricted
Subsidiary in an involuntary case or proceeding under any
applicable Bankruptcy Law or (b) a decree or order
adjudging the Company or any Material Restricted Subsidiary
bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment or composition of or in respect of
the Company or any Material Restricted Subsidiary under any
applicable federal or state law, or appointing a Custodian
or other similar official of the Company or any Material
Restricted Subsidiary or of any substantial part of their
respective properties, or ordering the winding up or
liquidation of their respective affairs, and any such
decree or order for relief shall continue to be in effect,
or any such other decree or order shall be unstayed and in
effect, for a period of 60 consecutive days; or
(ix) (a) the Company or any Material Restricted
Subsidiary commences a voluntary case or proceeding under
any applicable Bankruptcy Law or any other case or
proceeding to be adjudicated bankrupt or insolvent, (b) the
Company or any Material Restricted Subsidiary consents to
the entry of a decree or order for relief in respect of the
Company or such Material Restricted Subsidiary in an
involuntary case or proceeding under any applicable
Bankruptcy Law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, (c) the Company,
any Guarantor or any Material Restricted Subsidiary files a
petition or answer or consent seeking reorganization or
relief under any applicable federal or state law, (d) the
Company or any Material Restricted Subsidiary (I) consents
to the filing of such petition or the appointment of, or
taking possession by, a Custodian or similar official of
the Company or such Material Restricted Subsidiary or of
any substantial part of their respective properties, (II)
makes an assignment for the benefit of creditors or (III)
admits in writing its inability to pay its debts generally
as they become due or (e) the Company or any Material
Restricted Subsidiary takes any corporate action in
furtherance of any such actions in this paragraph (ix).
Section 6.02. Acceleration.
If any Event of Default (other than as specified in
clauses (viii) and (ix) of Section 6.01) shall occur and be
continuing under this Indenture, the Holders of not less than
25% in aggregate principal amount or the Accreted Value, as the
case may be, of the Notes then outstanding may, and the Trustee
at the request of such Holders shall, declare all unpaid
principal of (or, if prior to August 1, 2001, Accreted Value
of), premium, if any, and accrued interest on all Notes to be
due and payable immediately, by a notice in writing to the
Company (the "Acceleration Notice") (and to the Trustee if given
by the Holders of the Notes) and upon any such declaration, such
principal (or Accreted Value), premium, if any, and interest
shall become due and payable. If an Event of Default specified
in clause (viii) or (ix) of Section 6.01 occurs and is
continuing, then all the Notes shall ipso facto become and be
due and payable immediately in an amount equal to principal of
(or, if prior to August 1, 2001, Accreted Value of), premium, if
any, and accrued interest on all Notes to the date the Notes
become due and payable, without any declaration or other act on
the part of the Trustee or any holder. No premium is payable
upon acceleration of the Notes except that in the case of an
Event of Default that is the result of an action or inaction by
the Company or any of its Subsidiaries intended to avoid
premiums related to redemptions of the Notes contained in this
Indenture or the Notes, the amount declared due and payable will
include the premium that would have been applicable on a
voluntary prepayment of the Notes or, if voluntary prepayment is
not then permitted, the premium set forth in this Indenture and
such amount shall be due and payable immediately.
At any time after a declaration of acceleration with
respect to the Notes as described in the preceding paragraph,
but before a judgment or decree for payment of the money due has
been obtained by the Trustee, the Holders of a majority in
aggregate principal amount of the Notes outstanding by written
notice to the Company and the Trustee, may rescind and annul
such declaration and its consequences if (a) the Company has
paid or deposited with the Trustee a sum sufficient to pay (i)
all sums paid or advanced by the Trustee under the Indenture and
the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, (ii) all
overdue interest on all Notes then outstanding, (iii) the
principal of and premium, if any, on any Notes then outstanding
which have become due otherwise than by such declaration of
acceleration and interest thereon at a rate borne by the Notes
and (iv) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Notes;
and (b) all Events of Default, other than the non-payment of
principal of the Notes which have become due solely by such
declaration of acceleration, have been cured or waived as
provided in this Indenture as evidenced by an Officer's
Certificate and on Opinion of Counsel to such effect.
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the
Trustee may pursue any available remedy to collect the payment
of principal (or Accreted Value), premium, if any, and interest
on the Notes or to enforce the performance of any provision of
the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does
not possess any of the Notes or does not produce any of them in
the proceeding. A delay or omission by the Trustee or any
Holder of a Note in exercising any right or remedy accruing upon
an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default.
All remedies are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Subject to Sections 2.09, 6.07 and 10.02, the Holders
of not less than a majority in aggregate principal amount or
Accreted Value, as the case may be, of the Notes outstanding, by
written notice to the Trustee, may on behalf of the Holders of
all outstanding Notes waive any past Default or Event of Default
and its consequences under this Indenture, except a continuing
Default or Event of Default in the payment of interest or
premium on, or the principal of, the Notes, or in respect of a
covenant or a provision which under this Indenture cannot be
amended or modified without the consent of all Holders affected
by such modification.
The Company shall deliver to the Trustee an Officers'
Certificate stating that the requisite percentage of Holders
have consented to such waiver and attaching copies of such
consents. When a Default or Event of Default is waived, it is
cured and ceases.
Upon any such waiver, such Default shall cease to
exist, and any Event of Default arising therefrom shall be
deemed to have been cured for every purpose of this Indenture;
but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
Section 6.05. Control by Majority.
Subject to Section 2.09, holders of a majority in
principal amount or Accreted Value, as the case may be, of the
then outstanding Notes may, by written notice to the Trustee,
direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee. Subject to Section
7.01, however, the Trustee may refuse to follow any direction
that conflicts with the law or this Indenture, that the Trustee
determines may be unduly prejudicial to the rights of other
Holders of Notes or that may involve the Trustee in personal
liability; provided that the Trustee may take any other action
deemed proper by the Trustee which is not inconsistent with such
direction.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to
this Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written
notice of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount,
or Accreted Value, as the case may be, of the then
outstanding Notes make a written request to the Trustee to
pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer
and, if requested, provide to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or
expense;
(d) the Trustee does not comply with the request
within 15 days after receipt of the request and the offer
and, if requested, the provision of indemnity; and
(e) during such 15-day period the Holders of a
majority in principal amount, or Accreted Value, as the
case may be, of the then outstanding Notes do not give the
Trustee a direction which, in the opinion of the Trustee,
is inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or
priority over another Holder of a Note.
Section 6.07. Rights of Holders of Notes to
Receive Payment.
Notwithstanding any other provision of this Indenture,
the right of any Holder of a Note to receive payment of
principal, premium, if any, and interest on the Note, on or
after the respective due dates expressed in the Note, or to
bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without
the consent of the Holder of the Note.
Section 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal or
interest specified in clause (i) or (ii) of Section 6.01 occurs
and is continuing, the Trustee may recover judgment in its own
name and as trustee of an express trust against the Company or
any other obligor on the Notes for the whole amount of principal
and accrued interest remaining unpaid, together with interest on
overdue principal and, to the extent that payment of such
interest is lawful, interest on overdue installments of
interest, in each case at the rate per annum borne by the Notes
and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim
and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim
for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel) and the Holders
of the Notes allowed in any judicial proceedings relative to the
Company (or any other obligor upon the Notes), the Company's
creditors or the Company's property and shall be entitled and
empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims, and any
Custodian in any such judicial proceeding is hereby authorized
by each Holder of a Note to make such payments to the Trustee,
and in the event that the Trustee shall consent to the making of
such payments directly to the Holders of the Notes, to pay to
the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07. To the extent that the payment of
any such compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, and any other amounts due
the Trustee under Section 7.07 out of the estate in any such
proceeding, shall be denied for any reason (including, without
limitation, any categorization as an administrative expense of
the estate), payment of the same shall be secured by a Lien on,
and shall be paid out of, any and all distributions, dividends,
money, securities and other properties which the Holders of the
Notes may be entitled to receive in such proceeding whether in
liquidation or under any plan of reorganization or arrangement
or otherwise. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or
adopt on behalf of any Holder of a Note any plan of
reorganization, arrangement, adjustment or composition affecting
the Notes or the rights of any Holder of a Note thereof, or to
authorize the Trustee to vote in respect of the claim of any
Holder of a Note in any such proceeding.
Section 6.10. Priorities.
Subject to Article Nine, if the Trustee collects any
money or property pursuant to this Article, it shall pay out the
money or property in the following order:
First: to the Trustee, the Agents, and their agents
and attorneys for amounts due under Section 7.07, including
payment of all compensation, expense and liabilities incurred,
and all advances made, by the Trustee and the costs and expenses
of collection;
Second: to Holders of Notes, for amounts due and
unpaid on such Notes for principal, premium, if any, and
interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for
principal, premium, if any, and interest, respectively; and
Third: to the Company or to such party as a court of
competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for
any payment to Holders of Notes.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy
under this Indenture or in any suit against the Trustee for any
action taken or omitted by it as a Trustee, a court in its
discretion may require the filing by any party litigant in the
suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section does
not apply to a suit by the Trustee, a suit by a Holder of a Note
pursuant to Section 6.07 or a suit by Holders of more than 10%
in principal amount or Accreted Value, as the case may be, of
the then outstanding Notes.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree
of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his
own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers
vested in it by this Indenture at the request or direction of
any of the Holders, unless such Holders shall have offered to
the Trustee security or indemnity satisfactory to it against the
costs, expenses and liabilities which might be incurred thereby.
(b) Except during the continuance of an Event of
Default:
(i) the duties of the Trustee and the Agents shall be
determined solely by the express provisions of this
Indenture and the Trustee and the Agents need perform only
those duties that are specifically set forth in this
Indenture and no others, and no implied covenants or
obligations shall be read into this Indenture against the
Trustee and the Agents; and
(ii) in the absence of bad faith on their part, the
Trustee and the Agents may conclusively rely, as to the
truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished
to the Trustee and the Agents and conforming to the
requirements of this Indenture. However, the Trustee shall
examine the certificates and opinions to determine whether
or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities
for its own negligent action, its own negligent failure to act
or its own willful misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section;
(ii) neither the Trustee nor any Agent shall be liable
for any error of judgment made in good faith by a
Responsible Officer, unless it is proved that the Trustee
or such Agent was negligent in ascertaining the pertinent
facts; and
(iii) the Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to
Section 6.05.
(d) Whether or not therein expressly so provided,
every provision of this Indenture that in any way relates to the
Trustee or any Agent is subject to paragraphs (a), (b) and (c)
of this Section.
(e) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties
hereunder or to take or omit to take any action under this
Indenture or to take any action at the request or direction of
Holders if the Trustee shall have reasonable grounds for
believing that repayment of such funds is not assured to it or
it does not receive an indemnity satisfactory to it in its sole
discretion against such risk, liability, loss, fee or expense
which might be incurred by it in compliance with such request or
direction.
(f) Neither the Trustee nor any Agent shall be liable
for interest on any money received by it except as the Trustee
or such Agent, as the case may be, may agree in writing with the
Company. Money held in trust by the Trustee or such Agent, as
the case may be, need not be segregated from other funds except
to the extent required by law.
(g) Any provision hereof relating to the conduct or
affecting the liability of or affording protection to the
Trustee shall be subject to the provisions of this Section 7.01
and the TIA.
Section 7.02. Rights of Trustee.
(a) The Trustee and each Agent may conclusively rely
upon any document believed by them to be genuine and to have
been signed or presented by the proper Person. Neither the
Trustee nor any Agent need investigate any fact or matter stated
in the document.
(b) Before the Trustee or any Agent acts or refrains
from acting, it may require an Officers' Certificate or an
Opinion of Counsel or both. Neither the Trustee nor any Agent
shall be liable for any action it takes or omits to take in good
faith in reliance on such Officers' Certificate or Opinion of
Counsel. The Trustee or any Agent may consult with counsel and
the advice of such counsel or any Opinion of Counsel shall be
full and complete authorization and protection from liability in
respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon.
(c) The Trustee and any Agent may act through their
attorneys and agents and shall not be responsible for the
misconduct or negligence of any agent appointed with due care.
(d) The Trustee and any Agent shall not be liable for
any action they take or omit to take in good faith which they
believe to be authorized or within their rights or powers
conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this
Indenture, any demand, request, direction or notice from the
Company shall be sufficient if signed by one Officer of the
Company.
(f) The Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this
Indenture at the request or direction of any of the Holders
unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and
liabilities that might be incurred by it in compliance with such
request or direction.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity
may become the owner or pledgee of Notes and may otherwise deal
with the Company or any Affiliate of the Company with the same
rights it would have if it were not Trustee. However, in the
event that the Trustee acquires any conflicting interest it must
eliminate such conflict upon the earlier of the occurrence of an
Event of Default or within 90 days, apply to the Commission for
permission to continue as trustee or resign. Any Agent may do
the same with like rights and duties. The Trustee is also
subject to Sections 7.10 and 7.11.
Section 7.04. Trustee's Disclaimer.
The Trustee and the Agents shall not be responsible
for and make no representation as to the validity, effectiveness
or adequacy of this Indenture or the Notes, shall not be
accountable for the Company's use of the proceeds from the Notes
or any money paid to the Company or upon the Company's direction
under any provision of this Indenture, shall not be responsible
for the use or application of any money received by any Paying
Agent other than the Trustee and shall not be responsible for
any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or
pursuant to this Indenture other than its certificate of
authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is
continuing and if it is known to a Responsible Officer of the
Trustee, the Trustee shall mail to Holders of Notes a notice of
the Default or Event of Default within 90 days after it occurs.
Except in the case of a Default or Event of Default in payment
of principal of, premium, if any, or interest on any Note,
including the failure to make payment on (i) the Change of
Control Purchase Date pursuant to a Change of Control Offer or
(ii) the Offer Date pursuant to a Net Proceeds Offer, the
Trustee may withhold the notice if and so long as a committee of
its Responsible Officers in good faith determines that
withholding the notice is in the interests of the Holders of the
Notes.
Section 7.06. Reports by Trustee to Holders of
the Notes.
Within 60 days after each March 15 beginning with the
March 15 following the date of this Indenture, the Trustee shall
mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with Trust Indenture Act Section
313(a) (but if no event described in Trust Indenture Act Section
313(a) has occurred within the twelve months preceding the
reporting date, no report need be transmitted). The Trustee
also shall comply with Trust Indenture Act Section 313(b), (c)
and (d). The Trustee shall also transmit by mail all reports as
required by Trust Indenture Act Section 313(c).
A copy of each report at the time of its mailing to
the Holders of Notes shall be mailed to the Company and filed
with the Commission and each stock exchange on which the Notes
are listed. The Company shall promptly notify the Trustee when
the Notes are listed on any stock exchange or of any delisting
thereof.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee and the Agents
from time to time reasonable compensation as agreed in writing
from time to time for their acceptance of this Indenture and
services hereunder. The Trustee's and the Agents' compensation
shall not be limited by any law on compensation of a trustee of
an express trust. The Company shall reimburse the Trustee and
the Agents promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by them in
addition to the compensation for their services, except any such
disbursements, advances and expenses as may be attributable to
the Trustee's or any Agent's negligence or bad faith. Such
expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's and the Agents' and
counsel and any taxes or other expenses incurred by a trust
created pursuant to Article 8.
The Company shall indemnify the Trustee and the Agents
against any and all losses, liabilities or expenses incurred by
them arising out of or in connection with the acceptance or
administration of their duties under this Indenture, except any
such loss, liability or expense as may be attributable to the
negligence or bad faith of the Trustee or such Agent. The
Trustee or such Agent shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee
or such Agent to so notify the Company shall not relieve the
Company of its obligations hereunder. The Company shall defend
the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the
reasonable fees and expenses of such counsel. The Company need
not pay for any settlement made without its consent, which
consent shall not be unreasonably withheld. The Company need
not reimburse any expense or indemnify against any loss or
liability incurred by the Trustee or such Agent as a result of
the violation of this Indenture by the Trustee or such Agent if
such violation arose from the Trustee's or such Agent's
negligence or bad faith.
The obligations of the Company under this Section 7.07
and any claim arising hereunder shall survive the satisfaction
and discharge of this Indenture, the resignation or removal of
any Trustee or Agent, the discharge of the Company's obligations
pursuant to Article Eight and any rejection or termination under
any Bankruptcy Law.
To secure the Company' payment obligations in this
Section 7.07, the Trustee shall have a Lien prior to the Notes
on all money or property held or collected by the Trustee,
except that held in trust to pay principal, premium, if any, and
interest on particular Notes. Such Lien shall survive the
satisfaction and discharge or termination of this Indenture
(including any termination under any Bankruptcy Law) or the
resignation or removal of any Agent or the Trustee, as the case
may be.
When the Trustee or any Agent incurs expenses or
renders services after an Event of Default specified in Section
6.01(viii) or (ix) occurs, the expenses and the compensation for
the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration
under any Bankruptcy Law.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and
appointment of a successor Trustee shall become effective only
upon the successor Trustee's acceptance of appointment as
provided in this Section.
The Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the
Company. The Holders of Notes of a majority in Accreted Value
or principal amount, as the case may be, of the then outstanding
Notes may remove the Trustee by so notifying the Trustee and the
Company in writing and may appoint a successor trustee with the
Company's consent. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an
insolvent or an order for relief is entered with respect to
the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the
Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy
exists in the office of Trustee for any reason, the Company
shall notify each Holder of such event and shall promptly
appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in
Accreted Value or principal amount, as the case may be, of the
then outstanding Notes may, with the Company's consent, appoint
a successor Trustee to replace the successor Trustee appointed
by the Company.
If a successor Trustee does not take office within 60
days after the retiring Trustee resigns or is removed, the
retiring Trustee, the Company, or the Holders of Notes of at
least 10% in Accreted Value or principal amount, as the case may
be, of the then outstanding Notes may petition any court of
competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10 after
written request by any Holder of a Note who has been a Holder of
a Note for at least six months, such Holder of a Note may
petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance
of its appointment to the retiring Trustee and to the Company.
Thereupon, the resignation or removal of the retiring Trustee
shall become effective, and the successor Trustee shall have all
the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall
promptly transfer all property held by it as Trustee to the
successor Trustee, provided all sums owing to the Trustee
hereunder have been paid and subject to the Lien provided for in
Section 7.07. Notwithstanding replacement of the Trustee
pursuant to this Section 7.08, the Company's obligations under
Section 7.07 shall continue for the benefit of the retiring
Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into,
or transfers all or substantially all of its corporate trust
business to, another corporation, the successor corporation
without any further act shall be the successor Trustee if such
successor corporation is otherwise eligible hereunder. All
related appointments hereunder shall simultaneously be deemed
transferred as well.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder which
shall be a corporation organized and doing business under the
laws of the United States of America or of any state thereof
authorized under such laws to exercise corporate trustee power,
shall be subject to supervision or examination by Federal or
state authority and shall have a combined capital and surplus of
at least $25 million as set forth in its most recent published
annual report of condition.
This Indenture shall always have a Trustee who
satisfies the requirements of Trust Indenture Act Section
310(a)(1), (2) and (5). The Trustee is subject to Trust Indenture
Act Section 310(b).
Section 7.11. Preferential Collection of Claims
Against Company.
The Trustee is subject to Trust Indenture Act Section
311(a), excluding any creditor relationship listed in Trust
Indenture Act Section 311(b). A Trustee who has resigned or
been removed shall be subject to Trust Indenture Act Section
311(a) to the extent indicated therein.
ARTICLE 8
DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Defeasance or Covenant
Defeasance.
The Company may, at the option of its Board of
Directors evidenced by a resolution set forth in an Officers'
Certificate, at any time, with respect to the Notes, elect to
have either Section 8.02 or 8.03 be applied to all outstanding
Notes upon compliance with the conditions set forth below in
this Article 8.
Section 8.02. Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 of the
option applicable to this Section 8.02, the Company, any
Guarantor, or any other obligor, shall be deemed to have been
discharged from their obligations with respect to all
outstanding Notes on the date the conditions set forth below in
Section 8.04 are satisfied (hereinafter, "Defeasance"). For
this purpose, such Defeasance means that the Company, any
Guarantor, or any other obligor, shall be deemed to have paid
and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be
"outstanding" only for the purposes of Section 8.05 and the
other Sections of this Indenture referred to in (a) and (b)
below, and to have satisfied all its other obligations under
such Notes and this Indenture (and the Trustee, on demand of and
at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder:
(a) the rights of Holders of outstanding Notes to
receive solely from the trust fund described in Section 8.04,
and as more fully set forth in such Section, payments in respect
of the principal of, premium, if any, and interest on such Notes
when such payments are due or on the redemption date, Change of
Control Purchase Date, or Offer Date, as the case may be;
(b) the Company's obligations with respect to such
Notes under Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.10 and
4.02;
(c) the rights, powers, trusts, duties and immunities
of the Trustee hereunder and the Company's obligations in
connection therewith; and
(d) this Article 8.
Subject to compliance with this Article 8, the Company
may exercise its option under this Section 8.02 notwithstanding
the prior exercise of its option under Section 8.03 with respect
to the Notes.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 of the
option applicable to this Section 8.03, the Company, any
Guarantor or any other obligor, shall be released from their
obligations under the covenants contained in Sections 4.03,
4.04, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15,
4.16, 4.17, 4.18 and 4.19 with respect to the outstanding Notes
on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes
shall thereafter be deemed not "outstanding" for the purposes of
any direction, waiver, consent or declaration or act of Holders
(and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all
other purposes hereunder (it being understood that such Notes
shall not be deemed outstanding for accounting purposes). For
this purpose, such Covenant Defeasance means that, with respect
to the outstanding Notes, the Company, any Guarantor or any
other obligor may omit to comply with and shall have no
liability in respect of any term, condition or limitation set
forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default
under Sections 6.01(iii)(a) (with respect to Section 4.03, 4.04,
4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16,
4.17, 4.18 and 4.19), but, except as specified above, the
remainder of this Indenture and such Notes shall be unaffected
thereby. In addition, upon the Company's, any Guarantor's or
any other obligor's exercise under Section 8.01 of the option
applicable to this Section 8.03, Sections 6.01(iv), (v), and
(vii) shall not constitute Events of Default.
Section 8.04. Conditions to Defeasance or Covenant
Defeasance.
The following shall be the conditions to the
application of either Section 8.02 or Section 8.03 to the
outstanding Notes:
(a) The Company shall irrevocably have deposited or
caused to be deposited with the Trustee (or another trustee
satisfying the requirements of Section 7.10 who shall agree
to comply with the provisions of this Article 8 applicable
to it, on terms acceptable to the Trustee) as trust funds
in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of such Notes, (a) cash in
U.S. Dollars in an amount, or (b) non-callable U.S.
Government Securities which through the scheduled payment
of principal and interest in respect thereof in accordance
with their terms will provide, not later than one day
before the due date of any payment, cash in U.S. Dollars in
an amount, or (c) a combination thereof, in such amounts,
as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants or a
nationally recognized investment banking firm, in either
case expressed in a written certification thereof delivered
to the Trustee, to pay and discharge and which shall be
applied by the Trustee (or other qualifying trustee) to pay
and discharge the principal of, premium, if any, and
interest on the outstanding Notes on the Stated Maturity or
on the applicable optional redemption date, as the case may
be (such date being referred to as the "Defeasance
Redemption Date"), of such principal or installment of
principal, premium, if any, or interest, without
reinvestment of the deposited U.S. Government Securities
and other deposited monies; provided that the Trustee shall
have been irrevocably instructed to apply such money or the
proceeds of such non-callable U.S. Government Securities to
said payments with respect to the Notes, if at or prior to
electing either defeasance or covenant defeasance, the
Company has delivered to the Trustee an irrevocable notice
to redeem all of the outstanding Notes on the Defeasance
Redemption Date;
(b) In the case of an election under Section 8.02,
the Company shall have delivered to the Trustee an Opinion
of Counsel in the United States reasonably satisfactory to
the Trustee confirming that (i) the Company has received
from, or there has been published by, the Internal Revenue
Service a ruling or (ii) since the date hereof, there has
been a change in the applicable Federal income tax law, in
either case to the effect that, and based thereon such
opinion shall confirm that, the Holders of the outstanding
Notes will not recognize income, gain or loss for Federal
income tax purposes as a result of such Defeasance and will
be subject to Federal income tax on the same amounts, in
the same manner and at the same times as would have been
the case if such Defeasance had not occurred;
(c) In the case of an election under Section 8.03,
the Company shall have delivered to the Trustee an Opinion
of Counsel in the United States reasonably satisfactory to
the Trustee confirming that the Holders of the outstanding
Notes will not recognize income, gain or loss for Federal
income tax purposes as a result of such Covenant Defeasance
and will be subject to Federal income tax in the same
amounts, in the same manner and at the same times as would
have been the case if such Covenant Defeasance had not
occurred;
(d) No Default or Event of Default with respect to
the Notes shall have occurred and be continuing on the date
of such deposit or, insofar as Sections 6.01(viii) and (ix)
are concerned, at any time in the period ending on the 91st
day after the date of such deposit (it being understood
that this condition shall not be deemed satisfied until the
expiration of such period);
(e) Such Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default
under, this Indenture or any other material agreement or
instrument to which the Company, any Guarantor, or any
Subsidiary, is a party or by which it is bound;
(f) In the case of an election under either Section
8.02 or 8.03, the Company shall have delivered to the
Trustee an Officers' Certificate stating that the deposit
made by the Company pursuant to its election under Section
8.02 or 8.03 was not made by the Company with the intent of
preferring the Holders of Notes or any Guarantee over other
creditors of the Company or any Guarantor or with the
intent of defeating, hindering, delaying or defrauding
creditors of the Company any Guarantor or others;
(g) The Company shall have delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel, each
stating that all conditions precedent provided for relating
to either the Defeasance under Section 8.02 or the Covenant
Defeasance under Section 8.03 (as the case may be) have
been complied with as contemplated by this Section 8.04;
(h) The Company shall have delivered to the Trustee
an Opinion of Counsel to the effect that (i) the trust
resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the
Investment Company Act of 1940, (ii) the Holders of the
Notes have a valid first priority perfected security
interest in the trust funds, and (iii) after passage of 91
days following the deposit (except, with respect to any
trust funds for the account of any Holder who may be deemed
to be an "insider" for purposes of the Bankruptcy Law,
after one year following the deposit), the trust funds will
not be subject to the effect of Section 547 of the
Bankruptcy Law or Section 15 of the New York Debtor and
Creditor Law in a case commenced by or against the Company
under either such statute, and either (A) the trust funds
will no longer remain the property of the Company (and
therefore, will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally) or (B)
if a court were to rule under any such law in any case or
proceeding that the trust funds remained in the possession
of the Trustee prior to such court ruling to the extent not
paid to Holders, the Trustee will hold, for the benefit of
the Holders, a valid first priority perfected security
interest in such trust funds that is not avoidable in
bankruptcy or otherwise except for the effect of Section
552(b) of the Bankruptcy Law on interest on the trust funds
accruing after the commencement of a case under such
statute and the Holders will be entitled to receive
adequate protection of their interests in such trust funds
if such trust funds are used in such case or proceeding;
(i) Such Defeasance or Covenant Defeasance shall not
cause the Trustee for the Notes to have a conflicting
interest, and for purposes of the Trust Indenture Act, with
respect to any securities of the Company or any Guarantor;
and
(j) No event or condition shall exist that would
prevent the Company from making payments of the principal
of, premium, if any, and interest on the Notes on the date
of such deposit or at any time ending on the 91st day after
the date of such deposit.
Section 8.05. Deposited Money and U.S. Government
Securities to Be Held in Trust; Other Miscellaneous Provisions.
Subject to Section 8.06, all money and U.S. Government
Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, on terms acceptable to the
Trustee), collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 in respect of the
outstanding Notes shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Notes and
this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as Paying Agent) as
the Trustee may determine, to the Holders of such Notes of all
sums due and to become due thereon in respect of principal,
premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by
law.
The Company shall pay and indemnify the Trustee
against any tax, fee or other charge imposed on or assessed
against the cash or U.S. Government Securities deposited
pursuant to Section 8.04 or the principal and interest received
in respect thereof other than any such tax, fee or other charge
which by law is for the account of the Holders of the
outstanding Notes.
Anything in this Article 8 to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company
from time to time upon the request of the Company any money or
U.S. Government Securities held by it as provided in Section
8.04 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written
certification thereof delivered to the Trustee (which may be the
opinion delivered under Section 8.04(a)), are in excess of the
amount thereof which would then be required to be deposited to
effect an equivalent Defeasance or Covenant Defeasance.
Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying
Agent, or then held by the Company, in trust for the payment of
the principal of, premium, if any, or interest on any Note and
remaining unclaimed for two years after such principal, and
premium, if any, or interest has become due and payable shall be
paid to the Company on its written request or (if then held by
the Company) shall be discharged from such trust; and the Holder
of such Note shall thereafter, as an unsecured general creditor,
look only to the Company for payment thereof, and all liability
of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof,
shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be
published once, in The New York Times and The Wall Street
Journal (national edition), notice that such money remains
unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such notification or
publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any
U.S. Dollars or U.S. Government Securities in accordance with
Section 8.02 or 8.03, as the case may be, by reason of any order
or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, then the
Company's obligations under this Indenture and the Notes shall
be revived and reinstated as though no deposit had occurred
pursuant to Section 8.02 or 8.03 until such time as the Trustee
or Paying Agent is permitted to apply all such money in
accordance with Section 8.02 or 8.03, as the case may be;
provided, however, that, if the Company makes any payment of
principal of, premium, if any, or interest on any Note following
the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Notes to receive
such payment from the money held by the Trustee or Paying Agent.
ARTICLE 9
SATISFACTION AND DISCHARGE
Section 9.01. Satisfaction and Discharge of
Indenture.
This Indenture shall cease to be of further effect
(except as to any surviving rights of registration of transfer
or exchange of Notes herein expressly provided for), and the
Trustee, on demand of and at the expense of the Company, shall
execute instruments in form and substance satisfactory to the
Trustee and the Company acknowledging satisfaction and discharge
of this Indenture, when
(1) either
(A) all Notes theretofore authenticated and
issued (other than (i) Notes which have been
destroyed, lost or stolen and which have been replaced
or paid as provided in Section 2.07 and (ii) Notes for
whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company
and thereafter repaid to the Trustee or discharged
from such trust, as provided in Section 2.04) have
been delivered to the Trustee for cancellation; or
(B) all such Notes not theretofore delivered to
the Trustee for cancellation
(i) have become due and payable;
(ii) will become due and payable at their
Stated Maturity within one year; or
(iii) are to be called for redemption
within one year under arrangements satisfactory
to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the
expense of the Company,
and the Company, in the case of (B)(i), (ii) or (iii)
above, has deposited or caused to be deposited with
the Trustee as trust funds in trust an amount
sufficient to pay and discharge the entire
indebtedness on such Notes not theretofore delivered
to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes, together
with irrevocable instructions from the Company
directing the Trustee to apply such funds to the
payment thereof at maturity or redemption, as the case
may be;
(2) the Company has paid or caused to be paid all
other sums payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating
that (i) all conditions precedent herein provided for relating
to the satisfaction and discharge of this Indenture have been
complied with and (ii) such satisfaction and discharge will not
result in a breach or violation of, or constitute a default
under, the Indenture or any other material agreement or
instrument to which the Company, or any Subsidiary is a party or
by which the Company or any Subsidiary is bound.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company to the Trustee under
Section 7.07, the obligations of the Trustee to any
Authenticating Agent under Section 2.02 and, if money shall have
been deposited with the Trustee pursuant to Section 8.04(a) or
subclause (B) of Clause (1) of this Section 9.01, the
obligations of the Trustee under Section 8.06 and Section 9.02
shall survive.
Section 9.02. Application of Monies for Satisfaction
and Discharge.
Subject to the provisions of Section 8.06, all money
deposited with the Trustee pursuant to Section 9.01 shall be
held in trust and applied by it, in accordance with the
provisions of the Notes and this Indenture, to the payment,
either directly or through any Paying Agent (including the
Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and
interest for whose payment such money has been deposited with
the Trustee.
ARTICLE 10
AMENDMENT, SUPPLEMENT AND WAIVER
Section 10.01. Without Consent of Holders of Notes.
From time to time, the Company, each Guarantor, if
any, and the Trustee, without the consent of the Holders of the
Notes, may amend this Indenture for the following purposes, so
long as such change does not adversely affect the rights of any
of the Holders. The Trustee will be entitled to rely on such
evidence as it deems appropriate, including, without limitation,
solely on an Opinion of Counsel that such change does not
adversely affect the rights of any Holder, in executing any
supplemental indenture.
Notwithstanding Section 10.02 of this Indenture, the
Company, each Guarantor, if any, and the Trustee may amend or
supplement this Indenture or the Notes without the consent of
any Holder of a Note:
(a) to evidence the succession of another Person to
the Company or a Guarantor, and the assumption by any such
successor of the covenants of the Company or such Guarantor
in this Indenture and in the Notes and in any Guarantee in
accordance with the provisions of Section 5.01;
(b) to add to the covenants of the Company, any
Guarantor or any other obligor upon the Notes for the
benefit of the holders of the Notes or to surrender any
right or power conferred upon the Company or any Guarantor
or any other obligor upon the Notes, as applicable, in this
Indenture, in the Notes or in any Guarantee;
(c) to cure any ambiguity, or to correct or supplement
any provision in this Indenture, the Notes or any Guarantee
which may be defective or inconsistent with any proper
provision in this Indenture, the Notes or any Guarantee or
make any other provisions with respect to matters or
questions arising under this Indenture, the Notes or any
Guarantee; provided that, in each case, such provisions
shall not adversely affect the interest of the holders of
the Notes;
(d) to comply with the requirements of the Commission
in order to effect or maintain the qualification of this
Indenture under the Trust Indenture Act;
(e) to add a Guarantor under this Indenture;
(f) to evidence and provide the acceptance of the
appointment of a successor Trustee under this Indenture; or
(g) to mortgage, pledge, hypothecate or grant a
security interest in favor of the Trustee for the benefit
of the holders of the Notes and the Trustee as additional
security for the payment and performance of the Company's
and any Guarantor's obligations under this Indenture, in
any property, or assets, including any of which are
required to be mortgaged, pledged or hypothecated or in
which a security interest is required to be granted to the
Trustee pursuant to this Indenture or otherwise.
Upon the written request of the Company, and each
Guarantor, if any, accompanied by a resolution of the Board of
Directors of the Company authorizing the execution of any such
amended or supplemental Indenture, and upon receipt by the
Trustee of the documents described in Section 10.06, the Trustee
shall join with the Company, and each Guarantor, if any, in the
execution of any amended or supplemental Indenture authorized or
permitted by the terms of this Indenture and to make any further
appropriate agreements and stipulations which may be therein
contained, but the Trustee shall not be obligated to enter into
such amended or supplemental Indenture which affects its own
rights, duties or immunities under this Indenture or otherwise.
Section 10.02. With Consent of Holders of Notes.
The Company, each Guarantor, if any, and the Trustee
may amend or supplement this Indenture, the Notes or any amended
or supplemental Indenture with the written consent of the
Holders of Notes of not less than a majority in aggregate
principal amount of the Notes then outstanding, and, subject to
Sections 6.04 and 6.07, any existing Default and its
consequences or compliance with any provision of this Indenture
or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes.
Upon the request of the Company, and each Guarantor,
if any, accompanied by a resolution of the Board of Directors of
the Company authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of
evidence satisfactory to the Trustee of the consent of the
Holders of Notes as aforesaid, and upon receipt by the Trustee
of the documents described in Section 10.06, the Trustee shall
join with the Company, and each Guarantor, if any, in the
execution of such amended or supplemental Indenture unless such
amended or supplemental Indenture affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise,
in which case the Trustee may in its discretion, but shall not
be obligated to, enter into such amended or supplemental
Indenture.
It shall not be necessary for the consent of the
Holders of Notes under this Section 10.02 to approve the
particular form of any proposed amendment or waiver, but it
shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this
Section becomes effective, the Company shall mail to the Holders
of Notes affected thereby a notice briefly describing the
amendment, supplement or waiver. Any failure of the Company to
mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 6.04 and
6.07, the Holders of a majority in aggregate principal amount of
the Notes then outstanding may waive compliance in a particular
instance by the Company, and each Guarantor, if any, with any
provision of this Indenture or the Notes. However, without the
consent of each Holder affected thereby, an amendment or waiver
may not (with respect to any Notes held by a non-consenting
Holder of Notes):
(i) change the Stated Maturity of the principal of,
premium, if any, or any installment of interest on, any such
Note or reduce the principal amount thereof or the rate of
interest thereon or any premium payable upon the redemption
thereof, or change the coin or currency in which the principal
of any such Note or any premium or the interest thereon is
payable, or impair the right to institute suit for the
enforcement of any such payment after the Stated Maturity
thereof (or, in the case of redemption, on or after the
redemption date); (ii) amend, change or modify the obligation of
the Company to make and consummate an Offer with respect to any
Asset Sale or Asset Sales in accordance with Section 4.12 or the
obligation of the Company to make and consummate a Change of
Control Offer in the event of a Change of Control in accordance
with Section 4.16, including, in each case, amending, changing
or modifying any definitions relating thereto; (iii) reduce the
percentage in principal amount of such outstanding Notes, the
consent of whose holders is required for any such supplemental
indenture, or the consent of whose holders is required for any
waiver or compliance with certain provisions of the Indenture;
(iv) modify any of the provisions relating to supplemental
indentures requiring the consent of holders or relating to the
waiver of past defaults or relating to the waiver of certain
covenants, except to increase the percentage of such outstanding
Notes required for such actions or to provide that certain other
provisions of the Indenture cannot be modified or waived without
the consent of the holder of each such Note affected thereby;
(v) except as otherwise permitted under Section 5.01, consent to
the assignment or transfer by the Company or any Guarantor of
any of its rights and obligations under the Indenture; or (vi)
amend or modify any of the provisions of the Indenture relating
to the ranking of the Notes or any Guarantee thereof in any
manner adverse to the holders of the Notes or any such
Guarantee.
Section 10.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the
Notes shall be set forth in an amended or supplemental Indenture
that complies with the Trust Indenture Act as then in effect.
Section 10.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes
effective, a consent to it by a Holder of a Note is a continuing
consent by the Holder of a Note and every subsequent Holder of a
Note or portion of a Note that evidences the same debt as the
consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or
subsequent Holder of a Note may revoke the consent as to its
Note if the Trustee receives written notice of revocation before
the date the waiver, supplement or amendment becomes effective.
An amendment, supplement or waiver becomes effective in
accordance with its terms and thereafter binds every Holder of a
Note.
The Company may fix a record date for determining
which Holders of the Notes must consent to such amendment,
supplement or waiver. If the Company fixes a record date, the
record date shall be fixed at (i) the later of 30 days prior to
the first solicitation of such consent or the date of the most
recent list of Holders of Notes furnished to the Trustee prior
to such solicitation pursuant to Section 2.05 or (ii) such other
date as the Company shall designate.
Section 10.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Note thereafter
authenticated. The Company in exchange for all Notes may issue
and the Trustee shall authenticate new Notes that reflect the
amendment, supplement or waiver.
Failure to make the appropriate notation or issue a
new Note shall not affect the validity and effect of such
amendment, supplement or waiver.
Section 10.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental
Indenture authorized pursuant to this Article 10 if the
amendment or supplement does not adversely affect the rights,
duties, liabilities or immunities of the Trustee. If it does,
the Trustee may but need not sign it. In signing such amendment
the Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive, and (subject to Section 7.01)
shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture and
constitutes the legal, valid and binding obligations of the
Company enforceable in accordance with its terms. Such Opinion
of Counsel shall not be an expense of the Trustee.
ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies
or conflicts with the duties imposed by Trust Indenture Act
Section 318(c), the imposed duties shall control.
Section 11.02. Notices.
Any notice or communication by the Company or the
Trustee to the other is duly given if in writing and delivered
in person or mailed by first class mail (registered or
certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the
other's address:
If to the Company:
Wireless One, Inc.
1301 Industriplex Boulevard
Suite 4
Baton Rouge, Louisiana 70809-4115
Telecopier No.: (504) 293-5400
Attention: Chief Financial Officer
If to the Trustee:
United States Trust Company of New York
114 West 47th Street
New York, New York, 10036-1532
Telecopier No.: (212) 852-1626
Attention: Corporate Trust Division
The Company or the Trustee, by notice to the other may
designate additional or different addresses for subsequent
notices or communications.
All notices and communications (other than those sent
to Holders of Notes) shall be deemed to have been duly given:
at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after
timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery.
Any notice or communication to a Holder of a Note
shall be mailed by first class mail, certified or registered,
return receipt requested, or by overnight air courier
guaranteeing next day delivery to its address shown on the
register kept by the Registrar. Any notice or communication
shall also be so mailed to any Person described in Trust
Indenture Act Section 313(c), to the extent required by the
Trust Indenture Act. Failure to mail a notice or communication
to a Holder of a Note or any defect in it shall not affect
its sufficiency with respect to other Holders of Notes.
If a notice or communication is mailed in the manner
provided above within the time prescribed, it is duly given,
whether or not the addressee receives it.
If the Company mails a notice or communication to
Holders of Notes, it shall mail a copy to the Trustee and each
Agent at the same time.
Section 11.03. Communication by Holders of Notes with
Other Holders of Notes.
Holders of the Notes may communicate pursuant to Trust
Indenture Act Section 312(b)(1) with other Holders of Notes
with respect to their rights under this Indenture or the Notes.
The Company, the Trustee, the Registrar and anyone else shall
have the protection of Trust Indenture Act Section 312(c).
Section 11.04. Certificate and Opinion as to
Conditions Precedent.
Upon any request or application by the Company to the
Trustee or any Agent to take any action under this Indenture,
the Company shall furnish to the Trustee or such Agent:
(a) an Officers' Certificate in form and substance
reasonably satisfactory to the Trustee or such Agent (which
shall include the statements set forth in Section 11.05)
stating that, in the opinion of the signers, all conditions
precedent and covenants, if any, provided for in this
Indenture relating to the proposed action have been
satisfied; and
(b) an Opinion of Counsel in form and substance
reasonably satisfactory to the Trustee or such Agent (which
shall include the statements set forth in Section 11.05)
stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
Section 11.05. Statements Required in Certificate or
Opinion.
Each certificate or opinion with respect to compliance
with a condition or covenant provided for in this Indenture
shall include:
(a) a statement that the Person making such
certificate or opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of
the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are
based;
(c) a statement that, in the opinion of such Person,
he has made such examination or investigation as is
necessary to enable him to express an informed opinion as
to whether or not such covenant or condition has been
satisfied; and
(d) a statement as to whether or not, in the opinion
of such Person, such condition or covenant has been
satisfied; provided, however, that with respect to matters
of fact an Opinion of Counsel may, absent actual knowledge
to the contrary, rely on an Officers' Certificate or
certificates of public officials.
Section 11.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or
at a meeting of Holders of Notes. The Registrar or Paying Agent
may make reasonable rules and set reasonable requirements for
its functions.
Section 11.07. No Personal Liability of Partners,
Directors, Officers, Employees and Stockholders.
No director, officer, employee, incorporator or
stockholder of the Company, as such, shall have any liability
for any obligations of the Company under the Notes, this
Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Holder of the
Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration
for issuance of the Notes.
Section 11.08. Governing Law.
The internal law of the State of New York shall govern
and be used to construe this Indenture and the Notes without
regard to principles of conflict of laws. Each of the parties
hereto agrees to submit to the jurisdiction of the courts of the
State of New York in any action or proceeding arising out of or
relating to this Indenture.
Section 11.09. No Adverse Interpretation of Other
Agreements.
This Indenture may not be used to interpret another
indenture, loan or debt agreement of the Company or its
Subsidiaries. Any such indenture, loan or debt agreement may
not be used to interpret this Indenture.
Section 11.10. Successors.
All agreements of the Company in this Indenture and
the Notes shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successor.
Section 11.11. Severability.
In case any provision in this Indenture or in the
Notes shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall
not in any way be affected or impaired thereby.
Section 11.12. Counterpart Originals.
The parties may sign any number of copies of this
Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
Section 11.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and
Headings of the Articles and Sections of this Indenture have
been inserted for convenience of reference only, are not to be
considered a part of this Indenture and shall in no way modify
or restrict any of the terms or provisions hereof.
[Signatures on following page]
SIGNATURES
Dated as of August 12, 1996 WIRELESS ONE, INC.
(SEAL) By: /s/ Alton C. Rye
----------------------------
Name: Alton C. Rye
Attest: Title: Executive Vice President
By: /s/ Michael C. Ellis
----------------------------
/s/ William C. Norris Name: Micahel C. Ellis
-------------------------- Title: Vice President & Controller
Name: William C. Norris
Title: Secretary
Dated as of August 12, 1996 UNITED STATES TRUST COMPANY
OF NEW YORK
By: /s/ Christine C. Collins
(SEAL) ---------------------------
Name: Christine C. Collins
Attest: Title: Assistant Vice President
/s/ Patricia Stermer
--------------------------
Name: Patricia Stermer
Title: Assistant Vice President
EXHIBIT A
---------
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN
PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY
NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY
ANY SUCH NOMINEE OF THE DEPOSITORY, OR BY THE
DEPOSITORY OR NOMINEE OF SUCH SUCCESSOR
DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR
DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITORY. UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR
TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART,
TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE.
REGISTERED CUSIP No.: 97652H AC 3
WIRELESS ONE, INC.
13 1/2% SENIOR DISCOUNT NOTE DUE 2006
No. _________
WIRELESS ONE, INC., a Delaware corporation (the
"Company", which term includes any successor entity), for value
received promises to pay to or registered
assigns, the principal sum of $_______ Dollars, on August 1,
2006.
Interest Payment Dates: February 1 and August 1
Record Dates (whether or not a Business Day): January
15 and July 15
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same
effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to
be signed manually or by facsimile by its duly authorized
officers and a facsimile of its corporate seal to be affixed
hereto or imprinted herein.
WIRELESS ONE, INC.
By:_______________________________
Name:
Title:
By:_______________________________
Name:
Title: Secretary
Dated:
A-1
Trustee's Certificate of Authentication
This is one of the Notes referred to in the within-mentioned
Indenture.
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By:________________________________
Authorized Signatory
A-2
(REVERSE OF SECURITY)
13 1/2% Senior Note due 2006
1. Interest. The Notes shall not bear interest prior
to August 1, 2001; however, the Accreted Value of the Notes will
increase from August 12, 1996 through July 31, 2001 at a rate of
13 1/2% per annum, compounded semi-annually. From and after August
1, 2001, interest on the Notes will accrue at a rate of 13 1/2% per
annum and will be paid semi-annually in arrears on each February
1 and August 1, commencing February 1, 2002 (each an "Interest
Payment Date"). Interest on the Notes will accrue from the most
recent date to which interest has be paid or, if no interest has
been paid, from August 1, 2001. Interest will be computed on the
basis of a 360 day-year of twelve 30-day months. The Company
shall pay interest on overdue principal and on overdue
installments of interest (without regard to any applicable grace
periods) at the rate borne by the Notes plus 2% per annum, to the
extent lawful.
2. Method of Payment. The Company shall pay interest
on the Notes (except defaulted interest) to the Persons who are
the registered Holders at the close of business on the Record
Date immediately preceding the Interest Payment Date even if the
Notes are cancelled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Notes
to a Paying Agent to collect principal payments. The Company
shall pay principal and interest in money of the United States
that at the time of payment is legal tender for payment of public
and private debts ("U.S. Legal Tender"). However, the Company
may pay principal and interest by its check payable in such U.S.
Legal Tender; provided that payments of principal of, and
interest on, Notes registered in the name of The Depository Trust
Company (the "Depositary") or its nominee will be made in
immediately available funds to the Depositary or its nominee.
The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, United
States Trust Company of New York will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar
without notice to the Holders.
4. Indenture. The Company issued the Notes under an
Indenture, dated as of August 12, 1996 (the "Indenture"), between
the Company and United States Trust Company of New York, as
Trustee (the "Trustee"). This Note is one of a duly authorized
issue of Notes of the Company designated as its 13 1/2% Senior
Discount Notes due 2006 (the "Notes"). The Notes are limited in
aggregate principal amount to $239,252,000. Capitalized terms
herein are used as defined in the Indenture unless otherwise
defined herein. The terms of the Notes include those stated in
the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S. Code Section 77aaa-
77bbbb)(the "Trust Indenture Act"), as in effect on the date of
the Indenture. Notwithstanding anything to the contrary herein,
the Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and the Trust Indenture Act for a
statement of them. The Notes are not secured by any of the
assets of the Company.
5. Optional Redemption. (a) Optional Redemption.
The Notes will not be redeemable at the Company's option prior to
August 1, 2001. Thereafter, the Notes will be subject to
redemption at the option of the Company, in whole or in part,
upon not less than 30 nor more than 60 days' prior notice in
amounts of $1,000 or an integral multiple thereof, at the
redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest thereon to the
applicable redemption date, if redeemed during the twelve-month
period beginning on August 1, of the years indicated below:
Year Percentage
---- ----------
2001......................... 106.75%
2002......................... 104.50%
2003......................... 102.25%
2004......................... 100.00%
and thereafter at 100% of the
principal amount, in each case,
together with accrued and
unpaid interest, if any, to the
redemption date (subject to the
rights of holders of record on
relevant record dates to
receive interest due on an
interest payment date).
(b) Optional Redemption Upon Sale of Equity or
Qualified Subordinated Indebtedness to Strategic Investor.
Notwithstanding the foregoing, in the event of the sale by the
Company to a Strategic Investor prior to August 1, 1999 of $25
million or more of the Company's Capital Stock (other than
Redeemable Capital Stock) or Qualified Subordinated Indebtedness
in a single transaction or series of related transactions, the
Company may, at its option, use the Net Cash Proceeds of such
sale of the Company's Capital Stock or Qualified Subordinated
Indebtedness to redeem up to 30% of the aggregate principal
amount originally issued of the Notes at a redemption price equal
to 113.50% of the Accreted Value of the Notes to be redeemed on
the date of redemption of the Notes; provided that, after giving
effect to such transaction, at least 70% of the aggregate
principal amount originally issued of the Notes remains
outstanding immediately after such redemption. In order to
effect the foregoing redemption with the proceeds of any such
sale of the Company's Capital Stock (other than Redeemable
Capital Stock) or Qualified Subordinated Indebtedness, the
Company shall make such redemption not more than 180 days after
the consummation of any such sale of the Company's Capital Stock
or Qualified Subordinated Indebtedness and upon not less than 60
nor more than 150 days' notice given within 30 days after (and
not before) the consummation of any such sale of the Company's
Capital Stock or Qualified Subordinated Indebtedness. Notes and
portions of them selected for redemption shall be in amounts of
$1,000 or whole multiples of $1,000.
If less than all of the Notes are to be redeemed, the
Trustee shall select the Notes or portions thereof to be redeemed
pro rata, by lot or by any other method the Trustee shall deem
fair and reasonable.
The Notes are not entitled to the benefit of any
sinking fund.
6. Notice of Redemption. Notice of redemption will be
mailed at least 30 days but not more than 60 days before the
redemption date to each Holder of Notes to be redeemed at such
Holder's registered address. Notes in denominations larger than
$1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the
redemption of the Notes called for redemption shall have been
deposited with the Paying Agent for redemption on such redemption
date, then, unless the Company defaults in the payment of such
redemption price plus accrued interest, if any, the Notes called
for redemption will cease to bear interest from and after such
redemption date and the only right of the Holders of such Notes
will be to receive payment of the redemption price plus accrued
interest, if any.
7. Offers to Purchase. Sections 4.12 and 4.16 of the
Indenture provide that, after certain Asset Sales (as defined in
the Indenture) and upon the occurrence of a Change of Control (as
defined in the Indenture) subject to further limitations
contained therein, the Company will make an offer to purchase
certain amounts of the Notes in accordance with the procedures
set forth in the Indenture.
8. Denominations; Transfer; Exchange. The Notes are
in registered form, without coupons, in denominations of $1,000
and integral multiples of $1,000. A Holder shall register the
transfer of or exchange Notes in accordance with the Indenture.
The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to
pay certain transfer taxes or similar governmental charges
payable in connection therewith as permitted by the Indenture.
The Registrar need not register the transfer of or exchange of
any Notes or portions thereof selected for redemption.
9. Persons Deemed Owners. The registered Holder of a
Note shall be treated as the owner of it for all purposes.
10. Unclaimed Money. If money for the payment of
principal, premium or interest remains unclaimed for two years
after such principal or interest has become due and payable, the
Trustee and the Paying Agent will pay such money back to the
Company. After that, all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
11. Discharge Prior to Redemption or Maturity. If the
Company at any time deposits with the Trustee U.S. Legal Tender
or U.S. Government Securities sufficient to pay the principal of
and interest on the Notes to redemption or maturity and complies
with the other provisions of the Indenture relating thereto, the
Company will be discharged from certain provisions of the
Indenture and the Notes (including certain covenants, but
excluding its obligation to pay the principal of and interest on
the Notes).
12. Amendment; Supplement; Waiver. Subject to certain
exceptions set forth in the Indenture, the Indenture or the Notes
may be amended or supplemented with the written consent of the
Holders of not less than a majority in aggregate principal amount
of the Notes then outstanding, and except as set forth in the
Indenture, any past Default or Event of Default or noncompliance
with any provision may be waived with the written consent of the
Holders of not less than a majority in aggregate principal amount
of the Notes then outstanding. Without notice to or consent of
any Holder, the parties thereto may amend or supplement the
Indenture or the Notes to, among other things, cure any
ambiguity, defect or inconsistency, to add to the covenants of
the Company, or comply with Article 5 of the Indenture or make
any other change that does not adversely affect the rights of any
Holder of a Note.
13. Restrictive Covenants. The Indenture imposes
certain limitations on the ability of the Company and its
Subsidiaries to, among other things, incur additional
Indebtedness, make payments in respect of its Capital Stock or
certain Indebtedness, make certain Investments, incur liens,
enter into transactions with Affiliates, create dividend or other
payment restrictions affecting Restricted Subsidiaries, issue
Preferred Stock of its Restricted Subsidiaries, merge or
consolidate with any other Person, sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its
assets or adopt a plan of liquidation. Such limitations are
subject to a number of important qualifications and exceptions.
Pursuant to Section 4.04 of the Indenture, the Company must
annually report to the Trustee on compliance with such
limitations.
14. Successors. Upon any consolidation, combination
or merger or any transfer of all or substantially all of the
assets of the Company in accordance with Article 5 of the
Indenture, the surviving entity shall succeed to, and be
substituted for, and may exercise every right and power of, the
Company under this Indenture and the Notes with the same effect
as if such surviving entity had been named as such; provided that
for the purpose of computing amounts available for Restricted
Payments, any such surviving entity to the Company shall only be
deemed to have succeeded to and be substituted for the Company
with respect to periods subsequent to the effective time of such
merger, consolidation, combination or transfer of assets.
15. Defaults and Remedies. If an Event of Default
occurs and is continuing (other than as specified in clauses
(viii) and (ix) of Section 6.01 of the Indenture), the Holders of
not less than 25% in aggregate principal amount or the Accreted
Value, as the case may be, of Notes then outstanding may, and the
Trustee at the request of such Holders shall, declare all unpaid
principal of (or, if prior to August 1, 2001, Accreted Value of),
premium, if any, and accrued interest on all Notes to be due and
payable immediately, by a notice in writing to the Company (and
to the Trustee if given by the Holders of the Notes) and upon any
such declaration, such principal (or Accreted Value), premium, if
any, and interest shall become due and payable. If an Event of
Default specified in clause (viii) or (ix) of Section 6.01 occurs
and is continuing, then all the Notes shall ipso facto become and
be due and payable immediately in an amount equal to the
principal of (or, if prior to August 1, 2001, Accreted Value of),
premium, if any, and accrued interest on all Notes to the date
the Notes become due and payable, without any declaration or
other act on the part of the Trustee or any holder. Holders of
Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee is not obligated to
enforce the Indenture or the Notes unless it has received
indemnity reasonably satisfactory to it. The Indenture permits,
subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then
outstanding to direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of Notes notice of
any continuing Default or Event of Default (except a Default in
payment of principal of, premium, if any, or interest when due)
if it determines that withholding notice is in their interest.
16. Trustee Dealings with Company. The Trustee under
the Indenture, in its individual or any other capacity, may
become the owner or pledgee of Notes and may otherwise deal with
the Company, its Subsidiaries or their respective Affiliates as
if it were not the Trustee.
17. No Recourse Against Others. No stockholder,
director, officer, employee or incorporator, as such, of the
Company shall have any liability for any obligation of the
Company under the Notes or the Indenture or for any claim based
on, in respect of or by reason of, such obligations or their
creation. Each Holder of a Note by accepting a Note waives and
releases all such liability. The waiver and release are part of
the consideration for the issuance of the Notes.
18. Authentication. This Note shall not be valid
until the Trustee or Authentication Agent manually signs the
certificate of authentication on this Note.
19. Governing Law. This Note and the Indenture shall
be governed by and construed in accordance with the laws of the
State of New York, as applied to contracts made and performed
within the State of New York, without regard to principles of
conflict of laws.
20. Abbreviations and Defined Terms. Customary
abbreviations may be used in the name of a Holder of a Note or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian),
and U/G/M/A (= Uniform Gifts to Minors Act).
21. CUSIP Numbers. Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification
Procedures, the Company has caused CUSIP numbers to be printed on
the Notes as a convenience to the Holders of the Notes. No
representation is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the other
identification numbers printed hereon.
22. Indenture. Each Holder, by accepting a Note,
agrees to be bound by all of the terms and provisions of the
Indenture, as the same may be amended from time to time.
The Company will furnish to any Holder of a Note upon
written request and without charge a copy of the Indenture, which
has the text of this Note in larger type. Requests may be made
to: Wireless One, Inc., 11301 Industriplex Boulevard, Suite 4,
Baton Rouge, Louisiana 70809-4115, Attn: Chief Financial
Officer.
A-3
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the
form below and have your signature guaranteed:
I or we assign and transfer this Note to:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ______________________________________,
agent to transfer this Note on the books of the Company. The
agent may substitute another to act for him.
Dated: _____________ Signed: ________________________________
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee: _____________________________
Notice: Signature(s) must be guaranteed by an institution which
is a participant in the Securities Transfer Agent
Medallion Program ("STAMP") or similar program.
A-4
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.12 or 4.16 of the Indenture, check
the appropriate box:
Section 4.12 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note
purchased by the Company pursuant to Section 4.12 or 4.16 of the
Indenture, state the amount you elect to have purchased (must be
an integral multiple of $1,000):
$_______________________
Dated: _____________ ________________________________________
NOTICE: The signature on this assignment
must correspond with the name as it
appears upon the face of the within Note
in every particular without alteration
or enlargement or any change whatsoever
and be guaranteed by the endorser's bank
or broker.
Signature Guarantee: ____________________________________
Notice: Signature(s) must be guaranteed by an institution which
is a participant in the Securities Transfer Agent
Medallion Program ("STAMP") or similar program.
A-5
EXHIBIT B
FORM OF INTERCOMPANY NOTE
$______________
__________, 199__
On demand, and if no demand be made then on __________,
__________, a __________ corporation, hereby promises to pay
__________, a __________ corporation, the principal sum of
$__________, together with interest on the unpaid principal
balance from the date of this Intercompany Note, or from the most
recent date to which interest has been paid or duly provided for,
at the rate of _____% per annum until the principal hereof is
paid or made available for payment. Interest will be computed on
the basis of a 360-day year comprised of twelve 30-day months.
This Intercompany Note is one of the Intercompany Notes
referred to in the Indenture, dated as of even date herewith,
between __________ and __________, as trustee (the "Indenture").
Unless otherwise noted, capitalized terms used in this
Intercompany Note and not defined herein shall have the meanings
ascribed to them in the Indenture. In the event that there
exists any conflict between the terms of this Intercompany Note
and the Indenture, the Indenture shall control.
Whenever possible each provision of this Intercompany
Note shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this
Intercompany Note shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this
Intercompany Note.
This Intercompany Note shall be governed by, and be
construed in accordance with, the laws of the State of
__________.
_________________________
By:______________________
Name:________________________
Title:_________________________
ANNEX A
Brenham, TX
Bryan/College Station, TX
Milano, TX
Wharton, TX
Bunkie, LA
Lafayette, LA
Lake Charles, LA
Monroe, LA
Jackson, MS
Delta, MS
Gulf Coast, MS
Natchez, MS
Oxford, MS
Bucks, AL
Demopolis, AL
Dothan, AL
Huntsville, AL
Fort Walton Beach, AL
Gainesville, FL
Panama City, FL
Pensacola, FL
Jeffersonville, GA
Lawrenceburg, TN
Tullahoma, TN
Florence, AL
Albany, GA
Ocala, FL
Alexandria, LA
Houma, LA
Meridian, MS
Starkville, MS
Tupelo, MS
Chattanooga, TN
Bedias/Huntsville, TN
Freeport, TX
Hattiesburg, MS
Flippin, TN
Jackson, TN
Memphis, TN
Bankston, AL
Gadsden, AL
Montgomery, AL
Selma, AL
Charing, GA
Groveland, GA
Hoggards Mill, GA
Matthews, GA
Tarboro, GA
Valdosta, GA
Marianna, FL
Auburn, AL
Birmingham, AL
Mobile, AL
Six Mile, AL
Tuscaloosa, AL
Woodville, AL
Hot Springs, AR
Pine Bluff, AR
Tallahassee, FL
Columbus, GA
Vidalia, GA
Bowling Green, KY
Abita Springs, LA
Amite, LA
Baton Rouge, LA
Leesville, LA
Natchitoches, LA
Ruston, LA
Tallulah, LA
Moorehead City, NC
SCHEDULE 4.09(c)
1) Liens arising in connection with the EdNet Agreement, dated
as of 8/25/93, between Mississippi EdNet Institute, Inc. and
TruVision Wireless Communications, Inc.
2) The Escrow and Disbursement Agreement, dated as of 10/24/95,
between Wireless One, Inc. and Bankers Trust Corporation, as
Escrow Agent.
UNIT AGREEMENT
Among
WIRELESS ONE, INC.
and
UNITED STATES TRUST COMPANY OF NEW YORK,
as Unit Agent and Warrant Agent
and
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
Dated as of August 12, 1996
UNIT AGREEMENT dated as of August 12, 1996 among
Wireless One, Inc. (the "Company"), a Delaware Corporation, and
United States Trust Company of New York, as Unit Agent (the "Unit
Agent"), United States Trust Company of New York, as Trustee (the
"Trustee"), and United States Trust Company of New York, as
Warrant Agent (the "Warrant Agent").
WHEREAS, the Company proposes to issue $239,252,000
aggregate principal amount of its 13 1/2% Senior Discount Notes
due 2006 (the "Notes") pursuant to an Indenture dated as of
August 12, 1996 (the "Indenture") between the Company and the
Trustee, and the Company proposes to issue 239,252 warrants (the
"Warrants") to purchase initially an aggregate 544,059 shares of
its Common Stock, par value $0.01 per share (the "Common Stock")
pursuant to a Warrant Agreement dated as of August 12, 1996 (the
"Warrant Agreement") between the Company and the Warrant Agent.
The Notes and the Warrants will initially be represented by units
(the "Units"), with each Unit consisting of $1,000 principal
amount of Notes and one warrant to purchase shares of Common
Stock of the Company.
WHEREAS, the Company, the Trustee and the Warrant Agent
desire to appoint United States Trust Company of New York to act
as their agent for the purpose of issuing certificates ("Unit
Certificates") representing the Units and for the registration of
transfers and exchanges thereof. United States Trust Company of
New York in such capacity is referred to herein as the "Unit
Agent."
WHEREAS, the Units will automatically be cancelled and
the Unit Certificate will be converted into the right to receive
the Notes and the Warrants formerly represented thereby upon the
earlier to occur of: (i) November 10, 1996 (90 days after the
Issue Date), and (ii) such date as may, in their discretion, be
determined collectively, by Chase Securities Inc., BT Securities
Corporation, Gerard Klauer Mattison & Co., LLC and Prudential
Securities Incorporated, which is specified to the Company, the
Trustee, the Warrant Agent and the Unit Agent in writing. The
date on which an event listed in the preceding sentence occurs is
referred to as the "Separability Date."
NOW THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereto agree as
follows, it being understood that Capitalized Terms used but not
defined herein have the meanings set forth in the Indenture:
SECTION 1. Appointment of Unit Agent. (a) The
Company hereby appoints the Unit Agent to act as agent for the
Company in accordance with the instructions set forth hereinafter
in this Agreement, and the Unit Agent hereby accepts such
appointment.
(b) The Trustee and the Company hereby appoint the
Unit Agent as Authenticating Agent and Registrar (as such terms
are defined in the Indenture) for the Notes for so long as the
Notes are represented by the Units. In its capacity as
Authenticating Agent and Registrar, the Unit Agent shall have the
rights and obligations provided for such capacities in the
Indenture.
(c) The Warrant Agent and the Company hereby appoint
the Unit Agent as an agent of the Warrant Agent for the purposes
of countersigning the Warrants so long as the Warrants are
represented by the Units, and for maintaining a register of the
registered owners of and the registration of transfers and
exchanges of the Warrants for so long as the Warrants are
represented by the Units.
SECTION 2. Unit Certificates. The Units initially
will be issued either in global form (the "Global Units"),
substantially in the form of Exhibit A, or in registered form as
definitive Unit certificates ("Definitive Units"). Any
certificates evidencing the Global Units or the Definitive Units
to be delivered pursuant to this Agreement shall be substantially
in the form set forth in Exhibit A attached hereto, and if Global
Units, shall bear the legend set forth in Exhibit B attached
hereto. Such Global Units shall represent such of the
outstanding Units as shall be specified therein and each shall
provide that it shall represent the aggregate Units from time to
time endorsed thereon and that the aggregate amount of
outstanding Units represented thereby may from time to time be
reduced or increased, as appropriate. Any endorsement of a
Global Unit to reflect the amount of any increase or decrease in
the amount of outstanding Units represented thereby shall be made
by the Unit Agent and the Depositary (as defined below) in
accordance with instructions given by the holder thereof. The
Depository Trust Company shall act as the Depositary (the
"Depositary") with respect to the Global Units until a successor
shall be appointed by the Company and the Unit Agent. Upon
written request, a Unit holder may receive from the Depositary
and the Unit Agent Definitive Units as set forth in Section 5
below.
SECTION 3. Execution of Unit Certificates. Unit
Certificates shall be signed on behalf of the Company by the
Company's Chairman of the Board or a President or a Vice Presi-
dent and by a Secretary or an Assistant Secretary under the
Company's corporate seal. Each such signature upon the Unit
Certificates may be in the form of a facsimile signature of the
present or any future Chairman of the Board, President, Vice
President, Treasurer, Secretary or Assistant Secretary and may be
imprinted or otherwise reproduced on the Unit Certificates and
for that purpose the Company may adopt and use the facsimile
signature of any person who shall have been Chairman of the
Board, President, Vice President, Treasurer, Secretary or
Assistant Secretary, notwithstanding the fact that at the time
the Unit Certificates shall be authenticated and delivered or
disposed of he or she shall have ceased to hold such office. The
seal of the Company may be in the form of a facsimile thereof and
may be impressed, affixed, imprinted or otherwise reproduced on
the Unit Certificates.
In case any officer of the Company who shall have
signed any of the Unit Certificates shall cease to be such
officer before the Unit Certificates so signed shall have been
authenticated by the Unit Agent, or disposed of by the Company,
such Unit Certificates nevertheless may be authenticated and
delivered or disposed of as though such person had not ceased to
be such officer of the Company.
Unit Certificates shall be dated the date of
authentication by the Unit Agent.
SECTION 4. Registration and Authentication. The Unit
Agent, on behalf of the Company, shall number and register the
Unit Certificates in a register as they are issued by the
Company.
Unit Certificates shall be authenticated by the Unit
Agent and shall not be valid for any purpose unless so
authenticated. The Unit Agent shall, upon receipt of a written
order set forth in an Officers' Certificate specifying the amount
of Units to be authenticated, whether the Units are to be Global
Units or Definitive Units, the date of such Units, and such other
information as the Unit Agent may request, initially authenticate
and deliver not more than 239,252 Units and shall thereafter
authenticate and deliver Units as otherwise provided in this
Agreement.
The Company and the Unit Agent may deem and treat the
registered holder(s) of the Unit Certificates as the absolute
owner(s) thereof (notwithstanding any notation of ownership or
other writing thereon made by anyone) for all purposes, and
neither the Company nor the Unit Agent shall be affected by any
notice to the contrary.
SECTION 5. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Definitive Units. Prior
to the Separability Date, when Definitive Units are presented to
the Unit Agent with a request:
(i) to register the transfer of the Definitive Units; or
(ii) to exchange such Definitive Units for an equal
number of Definitive Units of other authorized
denominations,
the Unit Agent shall register the transfer or make the exchange
as requested; provided, however, that the Definitive Units
presented or surrendered for registration of transfer or exchange
shall be duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Unit Agent, duly executed by
the holder thereof or by his attorney, duly authorized in
writing.
(b) Restrictions on Transfer of a Definitive Unit for
a Beneficial Interest in a Global Unit. A Definitive Unit may
not be exchanged for a beneficial interest in a Global Unit
except upon satisfaction of the requirements set forth below.
Upon receipt by the Unit Agent of a Definitive Unit, duly
endorsed or accompanied by appropriate instruments of transfer,
in form satisfactory to the Unit Agent, together with written
instructions directing the Unit Agent to make, or to direct the
Depositary to make, an endorsement on the Global Unit to reflect
an increase in the aggregate amount of the Units represented by
the Global Unit, the Unit Agent shall cancel such Definitive Unit
and cause, or direct the Depositary to cause, in accordance with
the standing instructions and procedures existing between the
Depositary and the Unit Agent, the number of Units represented by
the Global Unit to be increased accordingly. If no Global Unit
is then outstanding, the Company shall issue and the Unit Agent
shall authenticate a new Global Unit in the appropriate amount.
(c) Transfer and Exchange of Global Units. The
transfer and exchange of Global Units or beneficial interests
therein shall be effected through the Depositary, in accordance
with this Unit Agreement (including the restrictions on transfer
set forth herein) and the procedures of the Depositary therefor.
(d) Transfer of a Beneficial Interest in a Global Unit
for a Definitive Unit.
(i) Prior to the Separability Date, any person having a
beneficial interest in a Global Unit may upon request
exchange such beneficial interest for a Definitive
Unit. Upon receipt by the Unit Agent of written
instructions or such other form of instructions as is
customary for the Depositary or its nominee on behalf
of any person having a beneficial interest in a
Global Unit and upon receipt by the Unit Agent of a
written order or such other form of instructions as
is customary for the Depositary or the person
designated by the Depositary as having such a
beneficial interest containing registration
instructions, the Unit Agent will cause, in
accordance with the standing instructions and
procedures existing between the Depositary and the
Unit Agent, the aggregate amount of the Global Unit
to be reduced and, following such reduction, the
Company will execute and, upon receipt of an
authentication order in the form of an Officers'
Certificate, the Unit Agent will authenticate and
deliver to the transferee a Definitive Unit.
(ii) Definitive Units issued in exchange for a beneficial
interest in a Global Unit pursuant to this Section
5(d) shall be registered in such names and in such
authorized denominations as the Depositary, pursuant
to instructions from its direct or indirect
participants or otherwise, shall instruct the Unit
Agent in writing. The Unit Agent shall deliver such
Definitive Units to the persons in whose names such
Units are so registered.
(e) Restrictions on Transfer and Exchange of Global
Units. Notwithstanding any other provisions of this Agreement
(other than the provisions set forth in subsection (f) of this
Section 5), a Global Unit may not be transferred as a whole
except by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of
the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Authentication of Definitive Units in Absence of
Depositary. If at any time:
(i) the Depositary for the Units notifies the Company
that the Depositary is unwilling or unable to
continue as Depositary for the Global Unit and a
successor Depositary for the Global Unit is not
appointed by the Company within 90 days after
delivery of such notice; or
(ii) the Company, in its sole discretion, notifies the
Unit Agent in writing that it elects to cause the
issuance of Definitive Units in place of the Global
Unit under this Unit Agreement,
then the Company will execute, and the Unit Agent, upon receipt
of an Officers' Certificate requesting the authentication and
delivery of Definitive Units, will authenticate and deliver
Definitive Units, in an aggregate number equal to the aggregate
number of Units represented by the Global Unit, in exchange for
such Global Unit.
(g) Legend. Unless otherwise indicated in an
Officers' Certificate delivered to the Unit Agent and Registrar,
each Unit Certificate evidencing the Global Units and the
Definitive Units (and all Units issued in exchange therefor or
substitution thereof) shall bear a legend substantially to the
following effect:
THESE SECURITIES HAVE BEEN OFFERED AS PART OF A UNIT. EACH
OF THE UNITS CONSISTS OF $1,000 PRINCIPAL AMOUNT OF 13 1/2%
SENIOR DISCOUNT NOTES DUE 2006 (THE "NOTES") OF WIRELESS
ONE, INC. AND ONE WARRANT OF WIRELESS ONE, INC., EACH
WARRANT INITIALLY EXERCISABLE TO PURCHASE 2.274 SHARES OF
COMMON STOCK OF WIRELESS ONE, INC. THE NOTES AND WARRANTS
WILL NOT BE TRANSFERABLE BY A HOLDER THEREOF SEPARATELY FROM
EACH OTHER UNTIL THE "SEPARABILITY DATE," WHICH SHALL BE THE
EARLIER OF (I) NOVEMBER 10, 1996 AND (II) SUCH EARLIER DATE
AS MAY BE DETERMINED BY CHASE SECURITIES INC., BT SECURITIES
CORPORATION, GERARD KLAUER MATTISON & CO., LLC AND
PRUDENTIAL SECURITIES INCORPORATED.
(h) Cancellation and/or Adjustment of a Global Unit.
At such time as all beneficial interests in a Global Unit have
either been exchanged for Definitive Units, redeemed, repurchased
or cancelled, such Global Unit shall be returned to or retained
and cancelled by the Unit Agent. At any time prior to such
cancellation, if any beneficial interest in a Global Unit is
exchanged for Definitive Units, redeemed, repurchased or
cancelled, the number of Units represented by such Global Unit
shall be reduced and an endorsement shall be made on such Global
Unit, by the Unit Agent to reflect such reduction.
(i) Obligations with Respect to Transfers and
Exchanges of Definitive Units.
(i) Prior to the Separability Date, to permit registra-
tions of transfers and exchanges, the Company shall
deliver to the Unit Agent, upon execution of this
Agreement, and from time to time thereafter,
sufficient inventory of executed Definitive Units
and Global Units.
(ii) All Definitive Units and Global Units issued upon
any registration, transfer or exchange of Definitive
Units or Global Units shall be the valid obligations
of the Company, entitled to the same benefits under
this Unit Agreement as the Definitive Units or
Global Units surrendered upon the registration of
transfer or exchange.
(iii) Prior to due presentment for registration of
transfer of any Unit, the Unit Agent and the Company
may deem and treat the person in whose name any Unit
is registered as the absolute owner of such Unit,
and neither the Unit Agent nor the Company shall be
affected by notice to the contrary.
(j) The Unit Agent shall be under no duty to monitor
compliance with any federal, state or other securities laws.
SECTION 6. Separation of the Notes and the Warrants.
On the Separability Date, the Units will automatically be
cancelled and the Unit Certificate will automatically be
converted into the right to receive the Notes and the Warrants
formerly represented by such Unit Certificate. Thereafter, the
Notes and the Warrants formerly represented by the Units shall be
separately transferable. Upon presentation after the
Separability Date of any Unit Certificate for exchange for
Warrants and Notes or for registration of transfer or otherwise,
(i) the Unit Agent shall notify the Trustee, the Registrar and
the Warrant Agent of the number of Units so presented, the
registered owner thereof, such owner's registered address, the
nature of any legends or restrictive endorsements set forth on
such Unit Certificate and any other information provided by the
holder thereof in connection therewith, (ii) the Trustee, if the
requirements of the Indenture for such transaction are met, shall
promptly register, authenticate and deliver a new Note equal in
principal amount to the Notes formerly represented by such Unit
Certificate in accordance with the direction of such holder and
(iii) the Warrant Agent, if its requirements for such
transactions are met, shall promptly countersign, register and
deliver a new Warrant certificate for the number of Warrants
formerly represented by such Unit Certificate in accordance with
the directions of such holder. The Warrant Agent and the Trustee
will notify the Unit Agent of any additional requirements in
connection with a particular transfer or exchange.
Following the Separability Date, no Unit Certificates
shall be issued upon transfer or exchange of Unit Certificates or
otherwise.
SECTION 7. Rights of Unit Holders. The registered
owner of a Unit Certificate shall have all the rights and
privileges of a registered owner of the principal amount of Notes
represented thereby and the number of Warrants represented
thereby and shall be treated as the registered owner thereof for
all purposes.
SECTION 8. The Unit Agent. The Unit Agent undertakes
the duties and obligations imposed by this Agreement upon the
following terms and conditions, by which the Company and the
holders of Units, by their acceptance thereof, shall be bound:
(a) The statements contained herein and in the Unit
Certificates shall be taken as statements of the Company,
and the Unit Agent assumes no responsibility for the
correctness of any of the same. The Unit Agent assumes no
responsibility with respect to the distribution of the Unit
Certificates except as herein otherwise specifically
provided.
(b) The Unit Agent shall not be responsible for and
shall incur no liability or responsibility to the Company or
any holder of a Unit Certificate for any failure of the
Company to comply with any of the covenants in this
Agreement, the Unit Certificates, the Indenture or Warrant
Agreement.
(c) The Unit Agent may consult at any time with
counsel satisfactory to it (who may be counsel for the
Company) and the Unit Agent shall incur no liability or
responsibility to the Company or to any holder of any Unit
Certificate in respect of any action taken, suffered or
omitted by it hereunder in good faith and in accordance with
the opinion or the advice of such counsel.
(d) The Unit Agent shall incur no liability or
responsibility to the Company or to any holder of any Unit
Certificate for any action taken in reliance on any Unit
Certificate, certificate of shares, notice, resolution,
waiver, consent, order, certificate, or other paper,
document or instrument believed by the Unit Agent to be
genuine and to have been signed, sent or presented by the
proper party or parties.
(e) The Company agrees to pay to the Unit Agent
reasonable compensation, as agreed in writing from time to
time, for all services rendered by the Unit Agent in
connection with this Agreement, to reimburse the Unit Agent
for all expenses, taxes and governmental charges and other
charges of any kind and nature reasonably incurred by the
Unit Agent in connection with this Agreement (including,
without limitation, reasonable fees and expenses of counsel)
and to indemnify the Unit Agent and its agents, employees,
directors, officers and affiliates and save it and them
harmless against any and all losses, liabilities and
expenses of any nature whatsoever, including, without
limitation, judgments, costs and counsel fees and actual
expenses, for any action taken or omitted by the Unit Agent
or arising in connection with this Agreement and the
exercise by the Unit Agent of its rights hereunder and the
performance by the Unit Agent of any of its obligations
hereunder except as a result of the Unit Agent's gross
negligence or bad faith or willful misconduct.
(f) The Unit Agent, and any stockholder, director,
officer, affiliate or employee ("Related Parties") of it,
may buy, sell or deal in any of the Units, Notes, Warrants,
Common Stock or other securities of the Company or become
pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to
the Company or otherwise act as fully and freely as though
it were not Unit Agent under this Agreement. Nothing herein
shall preclude the Unit Agent or such Related Parties from
acting in any other capacity for the Company or for any
other legal entity.
(g) The Unit Agent shall act hereunder solely as agent
for the Company, the Trustee and the Warrant Agent, and its
duties shall be determined solely by the provisions hereof.
The Unit Agent shall not be liable for anything which it may
do or refrain from doing in connection with this Agreement
except for its own gross negligence or bad faith or willful
misconduct.
(h) No provision of this Agreement shall require the
Unit 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 any of its rights
or powers if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.
(i) Before the Unit Agent acts or refrains from acting
with respect to any matter contemplated by this Unit
Agreement, it may require from the Company:
(1) an Officers' Certificate of the Company stating
that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Unit Agreement
relating to the proposed action have been complied
with; and
(2) an Opinion of Counsel for the Company stating
that, in the opinion of such counsel, all such
conditions precedent have been complied with.
Each Officers' Certificate or Opinion of Counsel with
respect to compliance with a condition or covenant provided
for in this Unit Agreement shall include:
(a) a statement that the person making such
certificate or opinion has read such covenant or
condition;
(b) a brief statement as to the nature and scope of
the examination or investigation upon which the
statements or opinions contained in such certificate or
opinion are based;
(c) a statement that, in the opinion of such
person, he or she has made such examination or
investigation as is necessary to enable him or her to
express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether or not, in the
opinion of such person, such condition or covenant has
been complied with.
The Unit Agent shall not be liable for any action it
takes or omits to take in good faith in reliance on any such
certificate or opinion.
(j) In the absence of bad faith on its part, the Unit
Agent may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Unit
Agent and conforming to the requirements of this Unit
Agreement. However, the Unit Agent shall examine the
certificates and opinions to determine whether or not they
conform to the requirements of this Unit Agreement.
(k) The Unit Agent may rely and shall be fully
protected in relying upon any document believed by it to be
genuine and to have been signed or presented by the proper
person. The Unit Agent need not investigate any fact or
matter stated in the document.
(l) The Unit Agent may act through agents and shall
not be responsible for the misconduct or negligence of any
agent appointed with due care.
SECTION 9. Replacement of the Unit Agent. The Unit
Agent may resign by providing the Company not less than 30 days'
prior written notice thereof. The Holders of a majority in
principal amount of the outstanding Units may remove the Unit
Agent by so notifying the Company and the Unit Agent and may
appoint a successor Unit Agent. The Company may remove the Unit
Agent if:
(1) the Unit Agent is adjudged bankrupt or insolvent;
(2) a receiver or other public officer takes charge of
the Unit Agent or its property; or
(3) the Unit Agent becomes incapable of acting.
If the Unit Agent resigns or is removed or if a vacancy
exists in the office of the Unit Agent for any reason, the
Company shall notify each holder of such event and shall promptly
appoint a successor Unit Agent. Notwithstanding any resignation
or removal of the Unit Agent or the cancellation of the Unit
Certificates, the Company's obligations under Section 8(e) shall
survive for the benefit of the retiring Unit Agent.
SECTION 10. Successor Unit Agent by Merger, Etc. If
the Unit Agent consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust
business to, another corporation, the resulting, surviving or
transferee corporation without any further act shall, if such
resulting, surviving or transferee corporation is otherwise
eligible hereunder, be the successor Unit Agent.
SECTION 11. Notices to the Company, the Unit Agent,
the Trustee and the Transfer Agent. Any notice or demand
authorized by this Agreement to be given or made shall be
sufficiently given or made (i) five business days after deposited
in the mail, first class or registered, postage paid, (ii) one
business day after being timely delivered to a next-day air
courier or (iii) when receipt is acknowledged by the addressee,
if telecopied, addressed as follows:
If to the Company:
Wireless One, Inc.
11301 Industriplex Boulevard
Suite 4
Baton Rouge, Louisiana 70809-4115
Telecopier: (504) 293-5400
Attention: Chief Financial Officer
If to the Unit Agent or the Warrant Agent:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Telecopier No.: 212-852-1626
Attention: Corporate Trust Division
If to the Trustee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Telecopier No.: (212)-852-1626
Attention: Corporate Trust Division
The parties hereto by notice to the other parties may
designate additional or different addresses for subsequent
communications or notice.
Any notice to be mailed to a holder of Units shall be
mailed to him at his address as it appears on the register of
Units maintained by the Unit Agent. Copies of any such
communication shall also be mailed to the Unit Agent, Trustee and
Warrant Agent. The Unit Agent shall furnish the Company, the
Trustee or the Warrant Agent promptly when requested with a list
of registered holders of Units for the purpose of mailing any
notice or communication to the holders of the Notes or Warrants
and at such other times as may be reasonably requested.
SECTION 12. Supplements and Amendments. The Company
and the Unit Agent may from time to time supplement or amend this
Agreement without the approval of any holders of Unit
Certificates in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective
or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising
hereunder which the Company, the Trustee, the Warrant Agent and
the Unit Agent may deem necessary or desirable and which shall
not in any way adversely affect the interests of the holders of
Unit Certificates. Any amendment or supplement to this Agreement
that has a material adverse effect on the interests of Unit
holders shall require the written consent of registered holders
of the then outstanding Units representing not less than a
majority in principal amount of the then outstanding Units.
SECTION 13. Successors. All the covenants and
provisions of this Agreement by or for the benefit of the
Company, the Trustee, the Warrant Agent or the Unit Agent shall
bind and inure to the benefit of their respective successors and
assigns hereunder.
SECTION 14. Governing Law. THIS AGREEMENT AND EACH
UNIT CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID
STATE, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF.
SECTION 15. Benefits of This Agreement. Nothing in
this Agreement shall be construed to give to any person or
corporation other than the Company, the Trustee, the Warrant
Agent, the Unit Agent and the registered holders of the Unit
Certificates any legal or equitable right, remedy or claim under
this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Trustee, the Warrant Agent,
the Unit Agent and the registered holders of the Unit
Certificates.
SECTION 16. Entire Agreement. This Agreement,
together with the Warrant Agreement and the Indenture is intended
by the parties as a final expression of their agreement, and is
intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. Such agreements
supersede all prior agreements and understandings between the
parties with respect to such subject matter.
SECTION 17. 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.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above
written.
WIRELESS ONE, INC.
By: /s/ Alton C. Rye
________________________
Name: Alton C. Rye
Title: Executive Vice President
UNITED STATES TRUST COMPANY OF
NEW YORK, as Unit Agent
By: /s/ Christine C. Collins
________________________
Name: Christine C. Collins
Title: Assistant Vice President
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By: /s/ Christine C. Collins
________________________
Name: Christine C. Collins
Title: Assistant Vice President
UNITED STATES TRUST COMPANY OF
NEW YORK, as Warrant Agent
By: /s/ Christine C. Collins
_________________________
Name: Christine C. Collins
Title: Assistant Vice President
EXHIBIT A
[FORM OF UNIT CERTIFICATE]
THESE SECURITIES HAVE BEEN OFFERED AS PART OF A UNIT.
EACH OF THE UNITS CONSISTS OF $1,000 PRINCIPAL AMOUNT
OF 13 1/2% SENIOR DISCOUNT NOTES DUE 2006 (THE "NOTES")
OF WIRELESS ONE, INC. AND ONE WARRANT OF WIRELESS ONE,
INC., EACH WARRANT INITIALLY EXERCISABLE TO PURCHASE
2.274 SHARES OF COMMON STOCK OF WIRELESS ONE, INC. THE
NOTES AND WARRANTS WILL NOT BE TRANSFERABLE BY A HOLDER
THEREOF SEPARATELY FROM EACH OTHER UNTIL THE
"SEPARABILITY DATE," WHICH SHALL BE THE EARLIER OF (I)
NOVEMBER 10, 1996 AND (II) SUCH EARLIER DATE AS MAY BE
DETERMINED BY CHASE SECURITIES INC., BT SECURITIES
CORPORATION, GERARD KLAUER MATTISON & CO., LLC AND
PRUDENTIAL SECURITIES INCORPORATED.
239,252 Units
WIRELESS ONE, INC.
Units each Consisting of $1,000 Principal Amount
13 1/2% Senior Discount Notes due 2006 and
One Warrant to Purchase 2.274 Shares of
Common Stock of Wireless One, Inc.
No. 1 CUSIP No. 97652H AD 1
Wireless One, Inc., a Delaware corporation (the
"Company"), which term includes any successor corporation),
hereby certifies that [ ] is the owner of 239,252
Units as described above, transferable only on the books of the
Company by the holder thereof in person or by his or her duly
authorized attorney, upon surrender of this Unit Certificate
properly endorsed.
Each Unit consists of $1,000 principal amount of 13 1/2%
Senior Discount Notes due 2006 of the Company (the "Notes") and
One Warrant to purchase 2.274 shares of common stock, par value
$0.01 per share, of the Company (the "Common Stock") at an
exercise price of $16.6375 per share. This Unit is issued
pursuant to the Unit Agreement (the "Unit Agreement") dated as of
August 12, 1996 among the Company, United States Trust Company of
New York, as Unit Agent (the "Unit Agent"), United States Trust
Company of New York, as Warrant Agent, and United States Trust
Company of New York, as Trustee, and is subject to the terms and
provisions contained therein, all of which terms and provisions
the holder of this Unit Certificate consents to by acceptance
hereof. The terms of the Notes are governed by an Indenture (the
"Indenture") dated as of August 12, 1996 between the Company and
United States Trust Company of New York, as Trustee, and are
subject to the terms and provisions contained therein, to which
all of such terms and provisions the holder of this Unit
Certificate consents by acceptance hereof.
Reference is made to the further provisions of this
Unit Certificate contained on the reverse hereof, which will for
all purposes have the same effect as if set forth at this place.
Reference is also made to the Warrant Agreement dated as of
August 12, 1996 (the "Warrant Agreement") between the Company and
United States Trust Company of New York, as Warrant Agent which
govern the rights of holders of Warrants of the Company, to which
all of such terms and provisions the holder of this Unit
Certificate consents by acceptance hereof. Copies of the Unit
Agreement, Indenture and Warrant Agreement are on file at the
office of United States Trust Company of New York, Attention:
Corporate Trust Division, and are available to any holder on
written request to the Company and without cost.
The Notes of the Company and Warrants of the Company
represented by this Unit Certificate shall be non-detachable and
not separately transferable until the earlier to occur: of
(i) November 10, 1996, and (ii) such earlier date as may be
determined by Chase Securities Inc., BT Securities Corporation,
Gerard Klauer Mattison & Co., LLC and Prudential Securities
Incorporated and specified to the Company, the Trustee, the
Warrant Agent and the Unit Agent in writing.
Capitalized terms used but not otherwise defined in
this Unit Certificate shall have the meanings given thereto in
the Indenture.
Dated: August 12, 1996
WIRELESS ONE, INC.
By:__________________________
Name:
Title:
By:__________________________
Name:
Title: Secretary
Certificate of Authentication:
This is one of the Units
referred to in the within
mentioned Unit Agreement.
UNITED STATES TRUST COMPANY OF NEW YORK,
as Unit Agent
By:___________________________
Authorized Signatory
A-1
[FORM OF REVERSE OF UNIT CERTIFICATE]
WIRELESS ONE, INC.
Units Each Consisting of $1,000 Principal Amount
13 1/2% Senior Discount Notes due 2006 and
One Warrant to Purchase 2.274 Shares of
Common Stock of Wireless One, Inc.
I. PROVISIONS RELATING TO THE 13 1/2%
SENIOR DISCOUNT NOTES DUE 2006
1. Interest. The Notes shall not bear interest prior
to August 1, 2001; however, the Accreted Value of the Notes will
increase from August 12, 1996 through July 31, 2001 at a rate of
13 1/2% per annum, compounded semi-annually. From and after August
1, 2001, interest on the Notes will accrue at a rate of 13 1/2% per
annum and will be paid semi-annually in arrears on each February
1 and August 1 of each year, commencing February 1, 2002 (each an
"Interest Payment Date"). Interest on the Notes will accrue from
the most recent date on which interest has been paid or, if no
interest has been paid, from August 1, 2001. Interest will be
computed on the basis of a 360 day-year of twelve 30-day months.
The Company shall pay interest on overdue principal and on
overdue installments of interest (without regard to any
applicable grace periods) at the rate borne by the Notes plus 2%
per annum, to the extent lawful.
2. Method of Payment. The Company shall pay interest
on the Notes (except defaulted interest) to the Persons who are
the registered Holders at the close of business on the Record
Date immediately preceding the Interest Payment Date even if the
Notes are cancelled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Notes
to a Paying Agent to collect principal payments. The Company
shall pay principal and interest in money of the United States
that at the time of payment is legal tender for payment of public
and private debts ("U.S. Legal Tender"). However, the Company
may pay principal and interest by its check payable in such U.S.
Legal Tender; provided that payments of principal of, and
interest on, Notes registered in the name of The Depository Trust
Company (the "Depositary") or its nominee will be made in
immediately available funds to the Depositary or its nominee.
The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, United
States Trust Company of New York will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar
without notice to the Holders.
4. Indenture. The Company issued the Notes under an
Indenture, dated as of August 12, 1996 (the "Indenture"), between
the Company and United States Trust Company of New York, as
Trustee (the "Trustee"). This Note is one of a duly authorized
issue of Notes of the Company designated as its 13 1/2% Senior
Discount Notes due 2006 (the "Notes"). The Notes are limited in
aggregate principal amount to $239,252,000. Capitalized terms
herein are used as defined in the Indenture unless otherwise
defined herein. The terms of the Notes include those stated in
the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S. Code Section 77aaa-
77bbbb)(the "Trust Indenture Act"), as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein, the
Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and the Trust Indenture Act for a
statement of them. The Notes are not secured by any of the
assets of the Company.
5. Optional Redemption. (a) Optional Redemption. The
Notes will not be redeemable at the Company's option prior to
August 1, 2001. Thereafter, the Notes will be subject to
redemption at the option of the Company, in whole or in part,
upon not less than 30 nor more than 60 days' prior notice in
amounts of $1,000 or an integral multiple thereof, at the
redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest thereon to the
applicable redemption date, if redeemed during the twelve-month
period beginning on August 1 of the years indicated below:
Year Percentage
2001 106.750%
2002 104.500%
2003 102.250%
2004 100.00%
and thereafter at 100% of the
principal amount, in each case,
together with accrued and unpaid
interest, if any, to the
redemption date (subject to the
rights of holders of record on
relevant record dates to receive
interest due on an interest
payment date).
(b) Optional Redemption Upon Sale of Equity or
Qualified Subordinated Indebtedness to Strategic Investor.
Notwithstanding the foregoing, in the event of the sale by the
Company to a Strategic Investor prior to August 1, 1999 of $25
million or more of the Company's Capital Stock (other than
Redeemable Capital Stock) or Qualified Subordinated Indebtedness
in a single transaction or series of related transactions, the
Company may, at its option, use the Net Cash Proceeds of such
sale of the Company's Capital Stock or Qualified Subordinated
Indebtedness to redeem up to 30% of the aggregate principal
amount originally issued of the Notes at a redemption price equal
to 113.50% of the Accreted Value of the Notes to be redeemed on
the date of redemption of the Notes; provided that, after giving
effect to such transaction, at least 70% of the aggregate
principal amount originally issued of the Notes remains
outstanding immediately after such redemption. In order to
effect the foregoing redemption with the proceeds of any such
sale of the Company's Capital Stock (other than Redeemable
Capital Stock) or Qualified Subordinated Indebtedness, the
Company shall make such redemption not more than 180 days after
the consummation of any such sale of the Company's Capital Stock
or Qualified Subordinated Indebtedness and upon not less than 60
nor more than 150 days' notice given within 30 days after (and
not before) the consummation of any such sale of the Company's
Capital Stock or Qualified Subordinated Indebtedness. Notes and
portions of them selected for redemption shall be in amounts of
$1,000 or whole multiples of $1,000.
If less than all of the Notes are to be redeemed, the
Trustee shall select the Notes or portions thereof to be redeemed
pro rata, by lot or by any other method the Trustee shall deem
fair and reasonable.
The Notes are not entitled to the benefit of any
sinking fund.
6. Notice of Redemption. Notice of redemption will be
mailed at least 30 days but not more than 60 days before the
redemption date to each Holder of Notes to be redeemed at such
Holder's registered address. Notes in denominations larger than
$1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the
redemption of the Notes called for redemption shall have been
deposited with the Paying Agent for redemption on such redemption
date, then, unless the Company defaults in the payment of such
redemption price plus accrued interest, if any, the Notes called
for redemption will cease to bear interest from and after such
redemption date and the only right of the Holders of such Notes
will be to receive payment of the redemption price plus accrued
interest, if any.
7. Offers to Purchase. Sections 4.12 and 4.16 of the
Indenture provide that, after certain Asset Sales (as defined in
the Indenture) and upon the occurrence of a Change of Control (as
defined in the Indenture) subject to further limitations
contained therein, the Company will make an offer to purchase
certain amounts of the Notes in accordance with the procedures
set forth in the Indenture.
8. Denominations; Transfer; Exchange. The Notes are
in registered form, without coupons, in denominations of $1,000
and integral multiples of $1,000. A Holder shall register the
transfer of or exchange Notes in accordance with the Indenture.
The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to
pay certain transfer taxes or similar governmental charges
payable in connection therewith as permitted by the Indenture.
The Registrar need not register the transfer of or exchange of
any Notes or portions thereof selected for redemption.
9. Persons Deemed Owners. The registered Holder of a
Note shall be treated as the owner of it for all purposes.
10. Unclaimed Money. If money for the payment of
principal, premium or interest remains unclaimed for two years
after such principal or interest has become due and payable, the
Trustee and the Paying Agent will pay such money back to the
Company. After that, all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
11. Discharge Prior to Redemption or Maturity. If the
Company at any time deposits with the Trustee U.S. Legal Tender
or U.S. Government Securities sufficient to pay the principal of
and interest on the Notes to redemption or maturity and complies
with the other provisions of the Indenture relating thereto, the
Company will be discharged from certain provisions of the
Indenture and the Notes (including certain covenants, but
excluding its obligation to pay the principal of and interest on
the Notes).
12. Amendment; Supplement; Waiver. Subject to certain
exceptions set forth in the Indenture, the Indenture or the Notes
may be amended or supplemented with the written consent of the
Holders of not less than a majority in aggregate principal amount
of the Notes then outstanding, and except as set forth in the
Indenture, any past Default or Event of Default or noncompliance
with any provision may be waived with the written consent of the
Holders of not less than a majority in aggregate principal amount
of the Notes then outstanding. Without notice to or consent of
any Holder, the parties thereto may amend or supplement the
Indenture or the Notes to, among other things, cure any
ambiguity, defect or inconsistency, to add to the covenants of
the Company, or comply with Article 5 of the Indenture or make
any other change that does not adversely affect the rights of any
Holder of a Note.
13. Restrictive Covenants. The Indenture imposes
certain limitations on the ability of the Company and its
Subsidiaries to, among other things, incur additional
Indebtedness, make payments in respect of its Capital Stock or
certain Indebtedness, make certain Investments, incur liens,
enter into transactions with Affiliates, create dividend or other
payment restrictions affecting Restricted Subsidiaries, issue
Preferred Stock of its Restricted Subsidiaries, merge or
consolidate with any other Person, sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its
assets or adopt a plan of liquidation. Such limitations are
subject to a number of important qualifications and exceptions.
Pursuant to Section 4.04 of the Indenture, the Company must
annually report to the Trustee on compliance with such
limitations.
14. Successors. Upon any consolidation, combination
or merger or any transfer of all or substantially all of the
assets of the Company in accordance with Article 5 of the
Indenture, the surviving entity shall succeed to, and be
substituted for, and may exercise every right and power of, the
Company under this Indenture and the Notes with the same effect
as if such surviving entity had been named as such; provided that
for the purpose of computing amounts available for Restricted
Payments, any such surviving entity to the Company shall only be
deemed to have succeeded to and be substituted for the Company
with respect to periods subsequent to the effective time of such
merger, consolidation, combination or transfer of assets.
15. Defaults and Remedies. If an Event of Default
occurs and is continuing (other than as specified in clauses
(viii) and (ix) of Section 6.01 of the Indenture) the Holders of
not less than 25% in aggregate principal amount or the Accreted
Value, as the case may be, of Notes then outstanding may, and the
Trustee at the request of such Holders shall, declare all unpaid
principal of (or, if prior to August 1, 2001, Accreted Value of),
premium, if any, and accrued interest on all Notes to be due and
payable immediately, by a notice in writing to the Company (and
to the Trustee if given by the Holders of the Notes) and upon any
such declaration, such principal (or Accreted Value), premium, if
any, and interest shall become due and payable. If an Event of
Default specified in clause (viii) or (ix) of Section 6.01 occurs
and is continuing, then all the Notes shall ipso facto become and
be due and payable immediately in an amount equal to the
principal of (or, if prior to August 1, 2001, Accreted Value of),
premium, if any, and accrued interest on all Notes to the date
the Notes become due and payable, without any declaration or
other act on the part of the Trustee or any holder. Holders of
Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee is not obligated to
enforce the Indenture or the Notes unless it has received
indemnity reasonably satisfactory to it. The Indenture permits,
subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then
outstanding to direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of Notes notice of
any continuing Default or Event of Default (except a Default in
payment of principal of, premium, if any, or interest when due)
if it determines that withholding notice is in their interest.
16. Trustee Dealings with Company. The Trustee under
the Indenture, in its individual or any other capacity, may
become the owner or pledgee of Notes and may otherwise deal with
the Company, its Subsidiaries or their respective Affiliates as
if it were not the Trustee.
17. No Recourse Against Others. No stockholder,
director, officer, employee or incorporator, as such, of the
Company shall have any liability for any obligation of the
Company under the Notes or the Indenture or for any claim based
on, in respect of or by reason of, such obligations or their
creation. Each Holder of a Note by accepting a Note waives and
releases all such liability. The waiver and release are part of
the consideration for the issuance of the Notes.
18. Authentication. This Note shall not be valid
until the Trustee or Authentication Agent manually signs the
certificate of authentication on this Note.
19. Governing Law. This Note and the Indenture shall
be governed by and construed in accordance with the laws of the
State of New York, as applied to contracts made and performed
within the State of New York, without regard to principles of
conflict of laws.
20. Abbreviations and Defined Terms. Customary
abbreviations may be used in the name of a Holder of a Note or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian),
and U/G/M/A (= Uniform Gifts to Minors Act).
21. CUSIP Numbers. Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification
Procedures, the Company has caused CUSIP numbers to be printed on
the Notes as a convenience to the Holders of the Notes. No
representation is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the other
identification numbers printed hereon.
22. Indenture. Each Holder, by accepting a Note,
agrees to be bound by all of the terms and provisions of the
Indenture, as the same may be amended from time to time.
The Company will furnish to any Holder of a Note upon
written request and without charge a copy of the Indenture, which
has the text of this Note in larger type. Requests may be made
to: Wireless One, Inc., 11301 Industriplex Boulevard, Suite 4,
Baton Rouge, Louisiana 70809-4115, Attn: Chief Financial
Officer.
A-2
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have the Note portion of this
Unit purchased by the Company pursuant to Section 4.12 or 4.16 of
the Indenture, check the appropriate box:
Section 4.12[ ]
Section 4.16[ ]
If you want to elect to have only part of such Note
portion purchased by the Company pursuant to Section 4.12 or 4.16
of the Indenture, state the amount you elect to have purchased
(must be an integral multiple of $1,000):
$_______________________
Dated: _____________________________________________________
NOTICE: The signature on this assignment
must correspond with the name as it
appears upon the face of the within Note
in every particular without alteration
or enlargement or any change whatsoever
and be guaranteed by the endorser's bank
or broker.
Signature Guarantee: ____________________________________
Notice: Signature(s) must be guaranteed by an institution which
is a participant in the Securities Transfer Agent
Medallion Program ("STAMP") or similar program.
A-3
II. PROVISIONS RELATING TO THE WARRANTS
WIRELESS ONE, INC.
The Warrants are part of a duly authorized issue of
Warrants expiring August 12, 2001 entitling the Holder on
exercise to receive shares of Common Stock, $0.01 par value per
share, of the Company (the "Common Stock"), and are issued or to
be issued pursuant to a Warrant Agreement dated as of August 12,
1996 (the "Warrant Agreement"), duly executed and delivered by
the Company to United States Trust Company of New York, as
warrant agent (the "Warrant Agent"), which Warrant Agreement is
hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the
rights, limitation of rights, obligations, duties and immunities
thereunder of the Warrant Agent, the Company and the holders (the
words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants. A copy of the Warrant
Agreement may be obtained by the holder hereof upon written
request to the Company.
Warrants may be exercised at any time on or after
August 12, 1997 and on or before 5:00 p.m., New York City time on
August 12, 2001. Each Warrant entitles the registered holder
upon exercise on or before 5:00 p.m. New York City Time on August
12, 2001, to receive from the Company 2.274 fully paid and
nonassessable shares of Common Stock (each such share a "Warrant
Share") at the initial exercise price (the "Exercise Price") of
$16.6375 per share payable in lawful money of the United States
of America upon surrender of the Warrant Certificate and payment
of the Exercise Price per share at the office or agency of the
Warrant Agent, but only subject to the conditions set forth
herein and in the Warrant Agreement referred to on the reverse
hereof. The holder of Warrants evidenced by the Warrant
Certificate may exercise them by surrendering the Warrant
Certificate, with the form of election to purchase set forth
hereon properly completed and executed, together with payment of
the Exercise Price in cash at the office of the Warrant Agent.
In the event that upon any exercise of Warrants evidenced hereby
the number of Warrants exercised shall be less than the total
number of Warrants evidenced hereby, there shall be issued to the
holder hereof or his assignee a new Warrant Certificate
evidencing the number of Warrants not exercised. No adjustment
shall be made for any dividends on any Common Stock issuable upon
exercise of the Warrant Certificate.
The Warrant Agreement provides that upon the occurrence
of certain events the Exercise Price set forth on the face hereof
and/or the number of shares of Common Stock issuable upon the
exercise of each Warrant shall, subject to certain conditions, be
adjusted. No fractions of a share of Common Stock will be issued
upon the exercise of any Warrant, but the Company will pay the
cash value thereof determined as provided in the Warrant
Agreement.
The Warrant Agreement provides certain registration
obligations with respect to the Common Stock issuable upon
exercise of the Warrants.
Warrant Certificates, when surrendered at the office of
the Warrant Agent by the registered holder thereof in person or
by legal representative or attorney duly authorized in writing,
may be exchanged, in the manner and subject to the limitations
provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant
Certificates of like tenor evidencing in the aggregate a like
number of Warrants.
Upon due presentation for registration of transfer of
the Warrant Certificate at the office of the Warrant Agent a new
Warrant Certificate or Warrant Certificates of like tenor and
evidencing in the aggregate a like number of Warrants shall be
issued to the transferee(s) in exchange for the Warrant
Certificate, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
The Company and the Warrant Agent may deem and treat
the registered holder(s) thereof as the absolute owner(s) of the
Warrant Certificate (notwithstanding any notation of ownership or
other writing hereon made by anyone), for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof, and
for all other purposes, and neither the Company nor the Warrant
Agent shall be affected by any notice to the contrary. Neither
the Warrants nor the Warrant Certificate entitles any holder
hereof to any rights of a stockholder of the Company.
A-4
ASSIGNMENT FORM
If you the Holder want to assign this Unit, fill in the
form below and have your signature guaranteed:
I or we assign and transfer this Unit to:
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ______________________________________,
agent to transfer this Unit on the books of the Company. The
agent may substitute another to act for him.
Dated: _____________ Signed: ________________________________
(Sign exactly as your name appears
on the other side of this Unit)
A-5
SCHEDULE OF INCREASES OR DECREASES OF UNITS
The following increases or decreases in this Global Unit have
been made:
Number of
Amount of Amount of Units of this
decrease in increase in Global Units Signature of
Number of Units Number of Units following such authorized
Date of of this Global of this Global decrease or signatory of
Exchange Unit Unit increase Unit Agent
__________________________________________________________________________
EXHIBIT B
FORM OF LEGEND FOR GLOBAL UNITS
Any Global Unit authenticated and delivered hereunder
shall bear a legend in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING
OF THE UNIT AGREEMENT HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A
DEPOSITARY OR A SUCCESSOR DEPOSITARY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE EXCEPT IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE UNIT AGREEMENT,
AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF
THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF
THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE
DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE
REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE UNIT AGREEMENT.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
EXHIBIT C
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF UNITS
Re: Units (the "Units") each consisting of $1,000 principal
amount of 131/2% Senior Discount Notes due 2006 of Wireless
One, Inc. and one warrant to Purchase 2.274 shares of Common
Stock of Wireless One, Inc.
This Certificate relates to _____ Units held in* ____
book-entry or* _______ certificated form by ______ (the
"Transferor").
The Transferor:*
has requested the Unit Agent by written order to
deliver in exchange for its beneficial interest in the Global
Unit held by the depositary a Unit or Units in definitive,
registered form of authorized denominations and an aggregate
number equal to its beneficial interest in such Global Unit (or
the portion thereof indicated above); or
has requested the Unit Agent by written order to
exchange or register the transfer of a Unit or Units.
[INSERT NAME OF TRANSFEROR]
By: _________________________
Date:_____________________
UNIT AGREEMENT
Among
WIRELESS ONE, INC.
and
UNITED STATES TRUST COMPANY OF NEW YORK,
as Unit Agent and Warrant Agent
and
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
Dated as of August 12, 1996
UNIT AGREEMENT dated as of August 12, 1996 among
Wireless One, Inc. (the "Company"), a Delaware Corporation, and
United States Trust Company of New York, as Unit Agent (the "Unit
Agent"), United States Trust Company of New York, as Trustee (the
"Trustee"), and United States Trust Company of New York, as
Warrant Agent (the "Warrant Agent").
WHEREAS, the Company proposes to issue $239,252,000
aggregate principal amount of its 131/2% Senior Discount Notes due
2006 (the "Notes") pursuant to an Indenture dated as of August
12, 1996 (the "Indenture") between the Company and the Trustee,
and the Company proposes to issue 239,252 warrants (the
"Warrants") to purchase initially an aggregate 544,059 shares of
its Common Stock, par value $0.01 per share (the "Common Stock")
pursuant to a Warrant Agreement dated as of August 12, 1996 (the
"Warrant Agreement") between the Company and the Warrant Agent.
The Notes and the Warrants will initially be represented by units
(the "Units"), with each Unit consisting of $1,000 principal
amount of Notes and one warrant to purchase shares of Common
Stock of the Company.
WHEREAS, the Company, the Trustee and the Warrant Agent
desire to appoint United States Trust Company of New York to act
as their agent for the purpose of issuing certificates ("Unit
Certificates") representing the Units and for the registration of
transfers and exchanges thereof. United States Trust Company of
New York in such capacity is referred to herein as the "Unit
Agent."
WHEREAS, the Units will automatically be cancelled and
the Unit Certificate will be converted into the right to receive
the Notes and the Warrants formerly represented thereby upon the
earlier to occur of: (i) November 10, 1996 (90 days after the
Issue Date), and (ii) such date as may, in their discretion, be
determined collectively, by Chase Securities Inc., BT Securities
Corporation, Gerard Klauer Mattison & Co., LLC and Prudential
Securities Incorporated, which is specified to the Company, the
Trustee, the Warrant Agent and the Unit Agent in writing. The
date on which an event listed in the preceding sentence occurs is
referred to as the "Separability Date."
NOW THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereto agree as
follows, it being understood that Capitalized Terms used but not
defined herein have the meanings set forth in the Indenture:
SECTION 1. Appointment of Unit Agent. (a) The
Company hereby appoints the Unit Agent to act as agent for the
Company in accordance with the instructions set forth hereinafter
in this Agreement, and the Unit Agent hereby accepts such
appointment.
(b) The Trustee and the Company hereby appoint the
Unit Agent as Authenticating Agent and Registrar (as such terms
are defined in the Indenture) for the Notes for so long as the
Notes are represented by the Units. In its capacity as
Authenticating Agent and Registrar, the Unit Agent shall have the
rights and obligations provided for such capacities in the
Indenture.
(c) The Warrant Agent and the Company hereby appoint
the Unit Agent as an agent of the Warrant Agent for the purposes
of countersigning the Warrants so long as the Warrants are
represented by the Units, and for maintaining a register of the
registered owners of and the registration of transfers and
exchanges of the Warrants for so long as the Warrants are
represented by the Units.
SECTION 2. Unit Certificates. The Units initially
will be issued either in global form (the "Global Units"),
substantially in the form of Exhibit A, or in registered form as
definitive Unit certificates ("Definitive Units"). Any
certificates evidencing the Global Units or the Definitive Units
to be delivered pursuant to this Agreement shall be substantially
in the form set forth in Exhibit A attached hereto, and if Global
Units, shall bear the legend set forth in Exhibit B attached
hereto. Such Global Units shall represent such of the
outstanding Units as shall be specified therein and each shall
provide that it shall represent the aggregate Units from time to
time endorsed thereon and that the aggregate amount of
outstanding Units represented thereby may from time to time be
reduced or increased, as appropriate. Any endorsement of a
Global Unit to reflect the amount of any increase or decrease in
the amount of outstanding Units represented thereby shall be made
by the Unit Agent and the Depositary (as defined below) in
accordance with instructions given by the holder thereof. The
Depository Trust Company shall act as the Depositary (the
"Depositary") with respect to the Global Units until a successor
shall be appointed by the Company and the Unit Agent. Upon
written request, a Unit holder may receive from the Depositary
and the Unit Agent Definitive Units as set forth in Section 5
below.
SECTION 3. Execution of Unit Certificates. Unit
Certificates shall be signed on behalf of the Company by the
Company's Chairman of the Board or a President or a Vice Presi-
dent and by a Secretary or an Assistant Secretary under the
Company's corporate seal. Each such signature upon the Unit
Certificates may be in the form of a facsimile signature of the
present or any future Chairman of the Board, President, Vice
President, Treasurer, Secretary or Assistant Secretary and may be
imprinted or otherwise reproduced on the Unit Certificates and
for that purpose the Company may adopt and use the facsimile
signature of any person who shall have been Chairman of the
Board, President, Vice President, Treasurer, Secretary or
Assistant Secretary, notwithstanding the fact that at the time
the Unit Certificates shall be authenticated and delivered or
disposed of he or she shall have ceased to hold such office. The
seal of the Company may be in the form of a facsimile thereof and
may be impressed, affixed, imprinted or otherwise reproduced on
the Unit Certificates.
In case any officer of the Company who shall have
signed any of the Unit Certificates shall cease to be such
officer before the Unit Certificates so signed shall have been
authenticated by the Unit Agent, or disposed of by the Company,
such Unit Certificates nevertheless may be authenticated and
delivered or disposed of as though such person had not ceased to
be such officer of the Company.
Unit Certificates shall be dated the date of
authentication by the Unit Agent.
SECTION 4. Registration and Authentication. The Unit
Agent, on behalf of the Company, shall number and register the
Unit Certificates in a register as they are issued by the
Company.
Unit Certificates shall be authenticated by the Unit
Agent and shall not be valid for any purpose unless so
authenticated. The Unit Agent shall, upon receipt of a written
order set forth in an Officers' Certificate specifying the amount
of Units to be authenticated, whether the Units are to be Global
Units or Definitive Units, the date of such Units, and such other
information as the Unit Agent may request, initially authenticate
and deliver not more than 239,252 Units and shall thereafter
authenticate and deliver Units as otherwise provided in this
Agreement.
The Company and the Unit Agent may deem and treat the
registered holder(s) of the Unit Certificates as the absolute
owner(s) thereof (notwithstanding any notation of ownership or
other writing thereon made by anyone) for all purposes, and
neither the Company nor the Unit Agent shall be affected by any
notice to the contrary.
SECTION 5. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Definitive Units. Prior
to the Separability Date, when Definitive Units are presented to
the Unit Agent with a request:
(i) to register the transfer of the Definitive Units; or
(ii) to exchange such Definitive Units for an equal
number of Definitive Units of other authorized
denominations,
the Unit Agent shall register the transfer or make the exchange
as requested; provided, however, that the Definitive Units
presented or surrendered for registration of transfer or exchange
shall be duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Unit Agent, duly executed by
the holder thereof or by his attorney, duly authorized in
writing.
(b) Restrictions on Transfer of a Definitive Unit for
a Beneficial Interest in a Global Unit. A Definitive Unit may
not be exchanged for a beneficial interest in a Global Unit
except upon satisfaction of the requirements set forth below.
Upon receipt by the Unit Agent of a Definitive Unit, duly
endorsed or accompanied by appropriate instruments of transfer,
in form satisfactory to the Unit Agent, together with written
instructions directing the Unit Agent to make, or to direct the
Depositary to make, an endorsement on the Global Unit to reflect
an increase in the aggregate amount of the Units represented by
the Global Unit, the Unit Agent shall cancel such Definitive Unit
and cause, or direct the Depositary to cause, in accordance with
the standing instructions and procedures existing between the
Depositary and the Unit Agent, the number of Units represented by
the Global Unit to be increased accordingly. If no Global Unit
is then outstanding, the Company shall issue and the Unit Agent
shall authenticate a new Global Unit in the appropriate amount.
(c) Transfer and Exchange of Global Units. The
transfer and exchange of Global Units or beneficial interests
therein shall be effected through the Depositary, in accordance
with this Unit Agreement (including the restrictions on transfer
set forth herein) and the procedures of the Depositary therefor.
(d) Transfer of a Beneficial Interest in a Global Unit
for a Definitive Unit.
(i) Prior to the Separability Date, any person having a
beneficial interest in a Global Unit may upon request
exchange such beneficial interest for a Definitive
Unit. Upon receipt by the Unit Agent of written
instructions or such other form of instructions as is
customary for the Depositary or its nominee on behalf
of any person having a beneficial interest in a
Global Unit and upon receipt by the Unit Agent of a
written order or such other form of instructions as
is customary for the Depositary or the person
designated by the Depositary as having such a
beneficial interest containing registration
instructions, the Unit Agent will cause, in
accordance with the standing instructions and
procedures existing between the Depositary and the
Unit Agent, the aggregate amount of the Global Unit
to be reduced and, following such reduction, the
Company will execute and, upon receipt of an
authentication order in the form of an Officers'
Certificate, the Unit Agent will authenticate and
deliver to the transferee a Definitive Unit.
(ii) Definitive Units issued in exchange for a beneficial
interest in a Global Unit pursuant to this Section
5(d) shall be registered in such names and in such
authorized denominations as the Depositary, pursuant
to instructions from its direct or indirect
participants or otherwise, shall instruct the Unit
Agent in writing. The Unit Agent shall deliver such
Definitive Units to the persons in whose names such
Units are so registered.
(e) Restrictions on Transfer and Exchange of Global
Units. Notwithstanding any other provisions of this Agreement
(other than the provisions set forth in subsection (f) of this
Section 5), a Global Unit may not be transferred as a whole
except by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of
the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Authentication of Definitive Units in Absence of
Depositary. If at any time:
(i) the Depositary for the Units notifies the Company
that the Depositary is unwilling or unable to
continue as Depositary for the Global Unit and a
successor Depositary for the Global Unit is not
appointed by the Company within 90 days after
delivery of such notice; or
(ii) the Company, in its sole discretion, notifies the
Unit Agent in writing that it elects to cause the
issuance of Definitive Units in place of the Global
Unit under this Unit Agreement,
then the Company will execute, and the Unit Agent, upon receipt
of an Officers' Certificate requesting the authentication and
delivery of Definitive Units, will authenticate and deliver
Definitive Units, in an aggregate number equal to the aggregate
number of Units represented by the Global Unit, in exchange for
such Global Unit.
(g) Legend. Unless otherwise indicated in an
Officers' Certificate delivered to the Unit Agent and Registrar,
each Unit Certificate evidencing the Global Units and the
Definitive Units (and all Units issued in exchange therefor or
substitution thereof) shall bear a legend substantially to the
following effect:
THESE SECURITIES HAVE BEEN OFFERED AS PART OF A UNIT. EACH
OF THE UNITS CONSISTS OF $1,000 PRINCIPAL AMOUNT OF 131/2%
SENIOR DISCOUNT NOTES DUE 2006 (THE "NOTES") OF WIRELESS
ONE, INC. AND ONE WARRANT OF WIRELESS ONE, INC., EACH
WARRANT INITIALLY EXERCISABLE TO PURCHASE 2.274 SHARES OF
COMMON STOCK OF WIRELESS ONE, INC. THE NOTES AND WARRANTS
WILL NOT BE TRANSFERABLE BY A HOLDER THEREOF SEPARATELY FROM
EACH OTHER UNTIL THE "SEPARABILITY DATE," WHICH SHALL BE THE
EARLIER OF (I) NOVEMBER 10, 1996 AND (II) SUCH EARLIER DATE
AS MAY BE DETERMINED BY CHASE SECURITIES INC., BT SECURITIES
CORPORATION, GERARD KLAUER MATTISON & CO., LLC AND
PRUDENTIAL SECURITIES INCORPORATED.
(h) Cancellation and/or Adjustment of a Global Unit.
At such time as all beneficial interests in a Global Unit have
either been exchanged for Definitive Units, redeemed, repurchased
or cancelled, such Global Unit shall be returned to or retained
and cancelled by the Unit Agent. At any time prior to such
cancellation, if any beneficial interest in a Global Unit is
exchanged for Definitive Units, redeemed, repurchased or
cancelled, the number of Units represented by such Global Unit
shall be reduced and an endorsement shall be made on such Global
Unit, by the Unit Agent to reflect such reduction.
(i) Obligations with Respect to Transfers and
Exchanges of Definitive Units.
(i) Prior to the Separability Date, to permit registra-
tions of transfers and exchanges, the Company shall
deliver to the Unit Agent, upon execution of this
Agreement, and from time to time thereafter,
sufficient inventory of executed Definitive Units
and Global Units.
(ii) All Definitive Units and Global Units issued upon
any registration, transfer or exchange of Definitive
Units or Global Units shall be the valid obligations
of the Company, entitled to the same benefits under
this Unit Agreement as the Definitive Units or
Global Units surrendered upon the registration of
transfer or exchange.
(iii) Prior to due presentment for registration of
transfer of any Unit, the Unit Agent and the Company
may deem and treat the person in whose name any Unit
is registered as the absolute owner of such Unit,
and neither the Unit Agent nor the Company shall be
affected by notice to the contrary.
(j) The Unit Agent shall be under no duty to monitor
compliance with any federal, state or other securities laws.
SECTION 6. Separation of the Notes and the Warrants.
On the Separability Date, the Units will automatically be
cancelled and the Unit Certificate will automatically be
converted into the right to receive the Notes and the Warrants
formerly represented by such Unit Certificate. Thereafter, the
Notes and the Warrants formerly represented by the Units shall be
separately transferable. Upon presentation after the
Separability Date of any Unit Certificate for exchange for
Warrants and Notes or for registration of transfer or otherwise,
(i) the Unit Agent shall notify the Trustee, the Registrar and
the Warrant Agent of the number of Units so presented, the
registered owner thereof, such owner's registered address, the
nature of any legends or restrictive endorsements set forth on
such Unit Certificate and any other information provided by the
holder thereof in connection therewith, (ii) the Trustee, if the
requirements of the Indenture for such transaction are met, shall
promptly register, authenticate and deliver a new Note equal in
principal amount to the Notes formerly represented by such Unit
Certificate in accordance with the direction of such holder and
(iii) the Warrant Agent, if its requirements for such
transactions are met, shall promptly countersign, register and
deliver a new Warrant certificate for the number of Warrants
formerly represented by such Unit Certificate in accordance with
the directions of such holder. The Warrant Agent and the Trustee
will notify the Unit Agent of any additional requirements in
connection with a particular transfer or exchange.
Following the Separability Date, no Unit Certificates
shall be issued upon transfer or exchange of Unit Certificates or
otherwise.
SECTION 7. Rights of Unit Holders. The registered
owner of a Unit Certificate shall have all the rights and
privileges of a registered owner of the principal amount of Notes
represented thereby and the number of Warrants represented
thereby and shall be treated as the registered owner thereof for
all purposes.
SECTION 8. The Unit Agent. The Unit Agent undertakes
the duties and obligations imposed by this Agreement upon the
following terms and conditions, by which the Company and the
holders of Units, by their acceptance thereof, shall be bound:
(a) The statements contained herein and in the Unit
Certificates shall be taken as statements of the Company,
and the Unit Agent assumes no responsibility for the
correctness of any of the same. The Unit Agent assumes no
responsibility with respect to the distribution of the Unit
Certificates except as herein otherwise specifically
provided.
(b) The Unit Agent shall not be responsible for and
shall incur no liability or responsibility to the Company or
any holder of a Unit Certificate for any failure of the
Company to comply with any of the covenants in this
Agreement, the Unit Certificates, the Indenture or Warrant
Agreement.
(c) The Unit Agent may consult at any time with
counsel satisfactory to it (who may be counsel for the
Company) and the Unit Agent shall incur no liability or
responsibility to the Company or to any holder of any Unit
Certificate in respect of any action taken, suffered or
omitted by it hereunder in good faith and in accordance with
the opinion or the advice of such counsel.
(d) The Unit Agent shall incur no liability or
responsibility to the Company or to any holder of any Unit
Certificate for any action taken in reliance on any Unit
Certificate, certificate of shares, notice, resolution,
waiver, consent, order, certificate, or other paper,
document or instrument believed by the Unit Agent to be
genuine and to have been signed, sent or presented by the
proper party or parties.
(e) The Company agrees to pay to the Unit Agent
reasonable compensation, as agreed in writing from time to
time, for all services rendered by the Unit Agent in
connection with this Agreement, to reimburse the Unit Agent
for all expenses, taxes and governmental charges and other
charges of any kind and nature reasonably incurred by the
Unit Agent in connection with this Agreement (including,
without limitation, reasonable fees and expenses of counsel)
and to indemnify the Unit Agent and its agents, employees,
directors, officers and affiliates and save it and them
harmless against any and all losses, liabilities and
expenses of any nature whatsoever, including, without
limitation, judgments, costs and counsel fees and actual
expenses, for any action taken or omitted by the Unit Agent
or arising in connection with this Agreement and the
exercise by the Unit Agent of its rights hereunder and the
performance by the Unit Agent of any of its obligations
hereunder except as a result of the Unit Agent's gross
negligence or bad faith or willful misconduct.
(f) The Unit Agent, and any stockholder, director,
officer, affiliate or employee ("Related Parties") of it,
may buy, sell or deal in any of the Units, Notes, Warrants,
Common Stock or other securities of the Company or become
pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to
the Company or otherwise act as fully and freely as though
it were not Unit Agent under this Agreement. Nothing herein
shall preclude the Unit Agent or such Related Parties from
acting in any other capacity for the Company or for any
other legal entity.
(g) The Unit Agent shall act hereunder solely as agent
for the Company, the Trustee and the Warrant Agent, and its
duties shall be determined solely by the provisions hereof.
The Unit Agent shall not be liable for anything which it may
do or refrain from doing in connection with this Agreement
except for its own gross negligence or bad faith or willful
misconduct.
(h) No provision of this Agreement shall require the
Unit 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 any of its rights
or powers if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.
(i) Before the Unit Agent acts or refrains from acting
with respect to any matter contemplated by this Unit
Agreement, it may require from the Company:
(1) an Officers' Certificate of the Company stating
that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Unit Agreement
relating to the proposed action have been complied
with; and
(2) an Opinion of Counsel for the Company stating
that, in the opinion of such counsel, all such
conditions precedent have been complied with.
Each Officers' Certificate or Opinion of Counsel with
respect to compliance with a condition or covenant provided
for in this Unit Agreement shall include:
(a) a statement that the person making such
certificate or opinion has read such covenant or
condition;
(b) a brief statement as to the nature and scope of
the examination or investigation upon which the
statements or opinions contained in such certificate or
opinion are based;
(c) a statement that, in the opinion of such
person, he or she has made such examination or
investigation as is necessary to enable him or her to
express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether or not, in the
opinion of such person, such condition or covenant has
been complied with.
The Unit Agent shall not be liable for any action it
takes or omits to take in good faith in reliance on any such
certificate or opinion.
(j) In the absence of bad faith on its part, the Unit
Agent may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Unit
Agent and conforming to the requirements of this Unit
Agreement. However, the Unit Agent shall examine the
certificates and opinions to determine whether or not they
conform to the requirements of this Unit Agreement.
(k) The Unit Agent may rely and shall be fully
protected in relying upon any document believed by it to be
genuine and to have been signed or presented by the proper
person. The Unit Agent need not investigate any fact or
matter stated in the document.
(l) The Unit Agent may act through agents and shall
not be responsible for the misconduct or negligence of any
agent appointed with due care.
SECTION 9. Replacement of the Unit Agent. The Unit
Agent may resign by providing the Company not less than 30 days'
prior written notice thereof. The Holders of a majority in
principal amount of the outstanding Units may remove the Unit
Agent by so notifying the Company and the Unit Agent and may
appoint a successor Unit Agent. The Company may remove the Unit
Agent if:
(1) the Unit Agent is adjudged bankrupt or insolvent;
(2) a receiver or other public officer takes charge of
the Unit Agent or its property; or
(3) the Unit Agent becomes incapable of acting.
If the Unit Agent resigns or is removed or if a vacancy
exists in the office of the Unit Agent for any reason, the
Company shall notify each holder of such event and shall promptly
appoint a successor Unit Agent. Notwithstanding any resignation
or removal of the Unit Agent or the cancellation of the Unit
Certificates, the Company's obligations under Section 8(e) shall
survive for the benefit of the retiring Unit Agent.
SECTION 10. Successor Unit Agent by Merger, Etc. If
the Unit Agent consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust
business to, another corporation, the resulting, surviving or
transferee corporation without any further act shall, if such
resulting, surviving or transferee corporation is otherwise
eligible hereunder, be the successor Unit Agent.
SECTION 11. Notices to the Company, the Unit Agent,
the Trustee and the Transfer Agent. Any notice or demand
authorized by this Agreement to be given or made shall be
sufficiently given or made (i) five business days after deposited
in the mail, first class or registered, postage paid, (ii) one
business day after being timely delivered to a next-day air
courier or (iii) when receipt is acknowledged by the addressee,
if telecopied, addressed as follows:
If to the Company:
Wireless One, Inc.
11301 Industriplex Boulevard
Suite 4
Baton Rouge, Louisiana 70809-4115
Telecopier: (504) 293-5400
Attention: Chief Financial Officer
If to the Unit Agent or the Warrant Agent:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Telecopier No.: 212-852-1626
Attention: Corporate Trust Division
If to the Trustee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Telecopier No.: (212)-852-1626
Attention: Corporate Trust Division
The parties hereto by notice to the other parties may
designate additional or different addresses for subsequent
communications or notice.
Any notice to be mailed to a holder of Units shall be
mailed to him at his address as it appears on the register of
Units maintained by the Unit Agent. Copies of any such
communication shall also be mailed to the Unit Agent, Trustee and
Warrant Agent. The Unit Agent shall furnish the Company, the
Trustee or the Warrant Agent promptly when requested with a list
of registered holders of Units for the purpose of mailing any
notice or communication to the holders of the Notes or Warrants
and at such other times as may be reasonably requested.
SECTION 12. Supplements and Amendments. The Company
and the Unit Agent may from time to time supplement or amend this
Agreement without the approval of any holders of Unit
Certificates in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective
or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising
hereunder which the Company, the Trustee, the Warrant Agent and
the Unit Agent may deem necessary or desirable and which shall
not in any way adversely affect the interests of the holders of
Unit Certificates. Any amendment or supplement to this Agreement
that has a material adverse effect on the interests of Unit
holders shall require the written consent of registered holders
of the then outstanding Units representing not less than a
majority in principal amount of the then outstanding Units.
SECTION 13. Successors. All the covenants and
provisions of this Agreement by or for the benefit of the
Company, the Trustee, the Warrant Agent or the Unit Agent shall
bind and inure to the benefit of their respective successors and
assigns hereunder.
SECTION 14. Governing Law. THIS AGREEMENT AND EACH
UNIT CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID
STATE, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF.
SECTION 15. Benefits of This Agreement. Nothing in
this Agreement shall be construed to give to any person or
corporation other than the Company, the Trustee, the Warrant
Agent, the Unit Agent and the registered holders of the Unit
Certificates any legal or equitable right, remedy or claim under
this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Trustee, the Warrant Agent,
the Unit Agent and the registered holders of the Unit
Certificates.
SECTION 16. Entire Agreement. This Agreement,
together with the Warrant Agreement and the Indenture is intended
by the parties as a final expression of their agreement, and is
intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. Such agreements
supersede all prior agreements and understandings between the
parties with respect to such subject matter.
SECTION 17. 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.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above
written.
WIRELESS ONE, INC.
By: /s/ Alton C. Rye
________________________
Name: Alton C. Rye
Title: Executive Vice President
UNITED STATES TRUST COMPANY OF
NEW YORK, as Unit Agent
By: /s/ Christine C. Collins
________________________
Name: Christine C. Collins
Title: Assistant Vice President
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By: /s/ Christine C. Collins
________________________
Name: Christine C. Collins
Title: Assistant Vice President
UNITED STATES TRUST COMPANY OF
NEW YORK, as Warrant Agent
By: /s/ Christine C. Collins
_________________________
Name: Christine C. Collins
Title: Assistant Vice President
EXHIBIT A
[FORM OF UNIT CERTIFICATE]
THESE SECURITIES HAVE BEEN OFFERED AS PART OF A UNIT.
EACH OF THE UNITS CONSISTS OF $1,000 PRINCIPAL AMOUNT
OF 13 1/2% SENIOR DISCOUNT NOTES DUE 2006 (THE "NOTES")
OF WIRELESS ONE, INC. AND ONE WARRANT OF WIRELESS ONE,
INC., EACH WARRANT INITIALLY EXERCISABLE TO PURCHASE
2.274 SHARES OF COMMON STOCK OF WIRELESS ONE, INC. THE
NOTES AND WARRANTS WILL NOT BE TRANSFERABLE BY A HOLDER
THEREOF SEPARATELY FROM EACH OTHER UNTIL THE
"SEPARABILITY DATE," WHICH SHALL BE THE EARLIER OF (I)
NOVEMBER 10, 1996 AND (II) SUCH EARLIER DATE AS MAY BE
DETERMINED BY CHASE SECURITIES INC., BT SECURITIES
CORPORATION, GERARD KLAUER MATTISON & CO., LLC AND
PRUDENTIAL SECURITIES INCORPORATED.
239,252 Units
WIRELESS ONE, INC.
Units each Consisting of $1,000 Principal Amount
13 1/2% Senior Discount Notes due 2006 and
One Warrant to Purchase 2.274 Shares of
Common Stock of Wireless One, Inc.
No. 1 CUSIP No. 97652H AD 1
Wireless One, Inc., a Delaware corporation (the
"Company"), which term includes any successor corporation),
hereby certifies that [ ] is the owner of 239,252
Units as described above, transferable only on the books of the
Company by the holder thereof in person or by his or her duly
authorized attorney, upon surrender of this Unit Certificate
properly endorsed.
Each Unit consists of $1,000 principal amount of 13 1/2%
Senior Discount Notes due 2006 of the Company (the "Notes") and
One Warrant to purchase 2.274 shares of common stock, par value
$0.01 per share, of the Company (the "Common Stock") at an
exercise price of $16.6375 per share. This Unit is issued
pursuant to the Unit Agreement (the "Unit Agreement") dated as of
August 12, 1996 among the Company, United States Trust Company of
New York, as Unit Agent (the "Unit Agent"), United States Trust
Company of New York, as Warrant Agent, and United States Trust
Company of New York, as Trustee, and is subject to the terms and
provisions contained therein, all of which terms and provisions
the holder of this Unit Certificate consents to by acceptance
hereof. The terms of the Notes are governed by an Indenture (the
"Indenture") dated as of August 12, 1996 between the Company and
United States Trust Company of New York, as Trustee, and are
subject to the terms and provisions contained therein, to which
all of such terms and provisions the holder of this Unit
Certificate consents by acceptance hereof.
Reference is made to the further provisions of this
Unit Certificate contained on the reverse hereof, which will for
all purposes have the same effect as if set forth at this place.
Reference is also made to the Warrant Agreement dated as of
August 12, 1996 (the "Warrant Agreement") between the Company and
United States Trust Company of New York, as Warrant Agent which
govern the rights of holders of Warrants of the Company, to which
all of such terms and provisions the holder of this Unit
Certificate consents by acceptance hereof. Copies of the Unit
Agreement, Indenture and Warrant Agreement are on file at the
office of United States Trust Company of New York, Attention:
Corporate Trust Division, and are available to any holder on
written request to the Company and without cost.
The Notes of the Company and Warrants of the Company
represented by this Unit Certificate shall be non-detachable and
not separately transferable until the earlier to occur: of
(i) November 10, 1996, and (ii) such earlier date as may be
determined by Chase Securities Inc., BT Securities Corporation,
Gerard Klauer Mattison & Co., LLC and Prudential Securities
Incorporated and specified to the Company, the Trustee, the
Warrant Agent and the Unit Agent in writing.
Capitalized terms used but not otherwise defined in
this Unit Certificate shall have the meanings given thereto in
the Indenture.
Dated: August 12, 1996
WIRELESS ONE, INC.
By:__________________________
Name:
Title:
By:__________________________
Name:
Title: Secretary
Certificate of Authentication:
This is one of the Units
referred to in the within
mentioned Unit Agreement.
UNITED STATES TRUST COMPANY OF NEW YORK,
as Unit Agent
By:___________________________
Authorized Signatory
A-1
[FORM OF REVERSE OF UNIT CERTIFICATE]
WIRELESS ONE, INC.
Units Each Consisting of $1,000 Principal Amount
13 1/2% Senior Discount Notes due 2006 and
One Warrant to Purchase 2.274 Shares of
Common Stock of Wireless One, Inc.
I. PROVISIONS RELATING TO THE 13 1/2%
SENIOR DISCOUNT NOTES DUE 2006
1. Interest. The Notes shall not bear interest prior
to August 1, 2001; however, the Accreted Value of the Notes will
increase from August 12, 1996 through July 31, 2001 at a rate of
13 1/2% per annum, compounded semi-annually. From and after August
1, 2001, interest on the Notes will accrue at a rate of 13 1/2% per
annum and will be paid semi-annually in arrears on each February
1 and August 1 of each year, commencing February 1, 2002 (each an
"Interest Payment Date"). Interest on the Notes will accrue from
the most recent date on which interest has been paid or, if no
interest has been paid, from August 1, 2001. Interest will be
computed on the basis of a 360 day-year of twelve 30-day months.
The Company shall pay interest on overdue principal and on
overdue installments of interest (without regard to any
applicable grace periods) at the rate borne by the Notes plus 2%
per annum, to the extent lawful.
2. Method of Payment. The Company shall pay interest
on the Notes (except defaulted interest) to the Persons who are
the registered Holders at the close of business on the Record
Date immediately preceding the Interest Payment Date even if the
Notes are cancelled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Notes
to a Paying Agent to collect principal payments. The Company
shall pay principal and interest in money of the United States
that at the time of payment is legal tender for payment of public
and private debts ("U.S. Legal Tender"). However, the Company
may pay principal and interest by its check payable in such U.S.
Legal Tender; provided that payments of principal of, and
interest on, Notes registered in the name of The Depository Trust
Company (the "Depositary") or its nominee will be made in
immediately available funds to the Depositary or its nominee.
The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, United
States Trust Company of New York will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar
without notice to the Holders.
4. Indenture. The Company issued the Notes under an
Indenture, dated as of August 12, 1996 (the "Indenture"), between
the Company and United States Trust Company of New York, as
Trustee (the "Trustee"). This Note is one of a duly authorized
issue of Notes of the Company designated as its 13 1/2% Senior
Discount Notes due 2006 (the "Notes"). The Notes are limited in
aggregate principal amount to $239,252,000. Capitalized terms
herein are used as defined in the Indenture unless otherwise
defined herein. The terms of the Notes include those stated in
the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S. Code Section 77aaa
-77bbbb)(the "Trust Indenture Act"), as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein, the
Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and the Trust Indenture Act for a
statement of them. The Notes are not secured by any of the
assets of the Company.
5. Optional Redemption. (a) Optional Redemption. The
Notes will not be redeemable at the Company's option prior to
August 1, 2001. Thereafter, the Notes will be subject to
redemption at the option of the Company, in whole or in part,
upon not less than 30 nor more than 60 days' prior notice in
amounts of $1,000 or an integral multiple thereof, at the
redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest thereon to the
applicable redemption date, if redeemed during the twelve-month
period beginning on August 1 of the years indicated below:
Year Percentage
2001 106.750%
2002 104.500%
2003 102.250%
2004 100.00%
and thereafter at 100% of the
principal amount, in each case,
together with accrued and unpaid
interest, if any, to the
redemption date (subject to the
rights of holders of record on
relevant record dates to receive
interest due on an interest
payment date).
(b) Optional Redemption Upon Sale of Equity or
Qualified Subordinated Indebtedness to Strategic Investor.
Notwithstanding the foregoing, in the event of the sale by the
Company to a Strategic Investor prior to August 1, 1999 of $25
million or more of the Company's Capital Stock (other than
Redeemable Capital Stock) or Qualified Subordinated Indebtedness
in a single transaction or series of related transactions, the
Company may, at its option, use the Net Cash Proceeds of such
sale of the Company's Capital Stock or Qualified Subordinated
Indebtedness to redeem up to 30% of the aggregate principal
amount originally issued of the Notes at a redemption price equal
to 113.50% of the Accreted Value of the Notes to be redeemed on
the date of redemption of the Notes; provided that, after giving
effect to such transaction, at least 70% of the aggregate
principal amount originally issued of the Notes remains
outstanding immediately after such redemption. In order to
effect the foregoing redemption with the proceeds of any such
sale of the Company's Capital Stock (other than Redeemable
Capital Stock) or Qualified Subordinated Indebtedness, the
Company shall make such redemption not more than 180 days after
the consummation of any such sale of the Company's Capital Stock
or Qualified Subordinated Indebtedness and upon not less than 60
nor more than 150 days' notice given within 30 days after (and
not before) the consummation of any such sale of the Company's
Capital Stock or Qualified Subordinated Indebtedness. Notes and
portions of them selected for redemption shall be in amounts of
$1,000 or whole multiples of $1,000.
If less than all of the Notes are to be redeemed, the
Trustee shall select the Notes or portions thereof to be redeemed
pro rata, by lot or by any other method the Trustee shall deem
fair and reasonable.
The Notes are not entitled to the benefit of any
sinking fund.
6. Notice of Redemption. Notice of redemption will be
mailed at least 30 days but not more than 60 days before the
redemption date to each Holder of Notes to be redeemed at such
Holder's registered address. Notes in denominations larger than
$1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the
redemption of the Notes called for redemption shall have been
deposited with the Paying Agent for redemption on such redemption
date, then, unless the Company defaults in the payment of such
redemption price plus accrued interest, if any, the Notes called
for redemption will cease to bear interest from and after such
redemption date and the only right of the Holders of such Notes
will be to receive payment of the redemption price plus accrued
interest, if any.
7. Offers to Purchase. Sections 4.12 and 4.16 of the
Indenture provide that, after certain Asset Sales (as defined in
the Indenture) and upon the occurrence of a Change of Control (as
defined in the Indenture) subject to further limitations
contained therein, the Company will make an offer to purchase
certain amounts of the Notes in accordance with the procedures
set forth in the Indenture.
8. Denominations; Transfer; Exchange. The Notes are
in registered form, without coupons, in denominations of $1,000
and integral multiples of $1,000. A Holder shall register the
transfer of or exchange Notes in accordance with the Indenture.
The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to
pay certain transfer taxes or similar governmental charges
payable in connection therewith as permitted by the Indenture.
The Registrar need not register the transfer of or exchange of
any Notes or portions thereof selected for redemption.
9. Persons Deemed Owners. The registered Holder of a
Note shall be treated as the owner of it for all purposes.
10. Unclaimed Money. If money for the payment of
principal, premium or interest remains unclaimed for two years
after such principal or interest has become due and payable, the
Trustee and the Paying Agent will pay such money back to the
Company. After that, all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
11. Discharge Prior to Redemption or Maturity. If the
Company at any time deposits with the Trustee U.S. Legal Tender
or U.S. Government Securities sufficient to pay the principal of
and interest on the Notes to redemption or maturity and complies
with the other provisions of the Indenture relating thereto, the
Company will be discharged from certain provisions of the
Indenture and the Notes (including certain covenants, but
excluding its obligation to pay the principal of and interest on
the Notes).
12. Amendment; Supplement; Waiver. Subject to certain
exceptions set forth in the Indenture, the Indenture or the Notes
may be amended or supplemented with the written consent of the
Holders of not less than a majority in aggregate principal amount
of the Notes then outstanding, and except as set forth in the
Indenture, any past Default or Event of Default or noncompliance
with any provision may be waived with the written consent of the
Holders of not less than a majority in aggregate principal amount
of the Notes then outstanding. Without notice to or consent of
any Holder, the parties thereto may amend or supplement the
Indenture or the Notes to, among other things, cure any
ambiguity, defect or inconsistency, to add to the covenants of
the Company, or comply with Article 5 of the Indenture or make
any other change that does not adversely affect the rights of any
Holder of a Note.
13. Restrictive Covenants. The Indenture imposes
certain limitations on the ability of the Company and its
Subsidiaries to, among other things, incur additional
Indebtedness, make payments in respect of its Capital Stock or
certain Indebtedness, make certain Investments, incur liens,
enter into transactions with Affiliates, create dividend or other
payment restrictions affecting Restricted Subsidiaries, issue
Preferred Stock of its Restricted Subsidiaries, merge or
consolidate with any other Person, sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its
assets or adopt a plan of liquidation. Such limitations are
subject to a number of important qualifications and exceptions.
Pursuant to Section 4.04 of the Indenture, the Company must
annually report to the Trustee on compliance with such
limitations.
14. Successors. Upon any consolidation, combination
or merger or any transfer of all or substantially all of the
assets of the Company in accordance with Article 5 of the
Indenture, the surviving entity shall succeed to, and be
substituted for, and may exercise every right and power of, the
Company under this Indenture and the Notes with the same effect
as if such surviving entity had been named as such; provided that
for the purpose of computing amounts available for Restricted
Payments, any such surviving entity to the Company shall only be
deemed to have succeeded to and be substituted for the Company
with respect to periods subsequent to the effective time of such
merger, consolidation, combination or transfer of assets.
15. Defaults and Remedies. If an Event of Default
occurs and is continuing (other than as specified in clauses
(viii) and (ix) of Section 6.01 of the Indenture) the Holders of
not less than 25% in aggregate principal amount or the Accreted
Value, as the case may be, of Notes then outstanding may, and the
Trustee at the request of such Holders shall, declare all unpaid
principal of (or, if prior to August 1, 2001, Accreted Value of),
premium, if any, and accrued interest on all Notes to be due and
payable immediately, by a notice in writing to the Company (and
to the Trustee if given by the Holders of the Notes) and upon any
such declaration, such principal (or Accreted Value), premium, if
any, and interest shall become due and payable. If an Event of
Default specified in clause (viii) or (ix) of Section 6.01 occurs
and is continuing, then all the Notes shall ipso facto become and
be due and payable immediately in an amount equal to the
principal of (or, if prior to August 1, 2001, Accreted Value of),
premium, if any, and accrued interest on all Notes to the date
the Notes become due and payable, without any declaration or
other act on the part of the Trustee or any holder. Holders of
Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee is not obligated to
enforce the Indenture or the Notes unless it has received
indemnity reasonably satisfactory to it. The Indenture permits,
subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then
outstanding to direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of Notes notice of
any continuing Default or Event of Default (except a Default in
payment of principal of, premium, if any, or interest when due)
if it determines that withholding notice is in their interest.
16. Trustee Dealings with Company. The Trustee under
the Indenture, in its individual or any other capacity, may
become the owner or pledgee of Notes and may otherwise deal with
the Company, its Subsidiaries or their respective Affiliates as
if it were not the Trustee.
17. No Recourse Against Others. No stockholder,
director, officer, employee or incorporator, as such, of the
Company shall have any liability for any obligation of the
Company under the Notes or the Indenture or for any claim based
on, in respect of or by reason of, such obligations or their
creation. Each Holder of a Note by accepting a Note waives and
releases all such liability. The waiver and release are part of
the consideration for the issuance of the Notes.
18. Authentication. This Note shall not be valid
until the Trustee or Authentication Agent manually signs the
certificate of authentication on this Note.
19. Governing Law. This Note and the Indenture shall
be governed by and construed in accordance with the laws of the
State of New York, as applied to contracts made and performed
within the State of New York, without regard to principles of
conflict of laws.
20. Abbreviations and Defined Terms. Customary
abbreviations may be used in the name of a Holder of a Note or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian),
and U/G/M/A (= Uniform Gifts to Minors Act).
21. CUSIP Numbers. Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification
Procedures, the Company has caused CUSIP numbers to be printed on
the Notes as a convenience to the Holders of the Notes. No
representation is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the other
identification numbers printed hereon.
22. Indenture. Each Holder, by accepting a Note,
agrees to be bound by all of the terms and provisions of the
Indenture, as the same may be amended from time to time.
The Company will furnish to any Holder of a Note upon
written request and without charge a copy of the Indenture, which
has the text of this Note in larger type. Requests may be made
to: Wireless One, Inc., 11301 Industriplex Boulevard, Suite 4,
Baton Rouge, Louisiana 70809-4115, Attn: Chief Financial
Officer.
A-2
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have the Note portion of this
Unit purchased by the Company pursuant to Section 4.12 or 4.16 of
the Indenture, check the appropriate box:
Section 4.12[ ]
Section 4.16[ ]
If you want to elect to have only part of such Note
portion purchased by the Company pursuant to Section 4.12 or 4.16
of the Indenture, state the amount you elect to have purchased
(must be an integral multiple of $1,000):
$_______________________
Dated: _____________________________________________________
NOTICE: The signature on this assignment
must correspond with the name as it
appears upon the face of the within Note
in every particular without alteration
or enlargement or any change whatsoever
and be guaranteed by the endorser's bank
or broker.
Signature Guarantee: ____________________________________
Notice: Signature(s) must be guaranteed by an institution which
is a participant in the Securities Transfer Agent
Medallion Program ("STAMP") or similar program.
A-3
II. PROVISIONS RELATING TO THE WARRANTS
WIRELESS ONE, INC.
The Warrants are part of a duly authorized issue of
Warrants expiring August 12, 2001 entitling the Holder on
exercise to receive shares of Common Stock, $0.01 par value per
share, of the Company (the "Common Stock"), and are issued or to
be issued pursuant to a Warrant Agreement dated as of August 12,
1996 (the "Warrant Agreement"), duly executed and delivered by
the Company to United States Trust Company of New York, as
warrant agent (the "Warrant Agent"), which Warrant Agreement is
hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the
rights, limitation of rights, obligations, duties and immunities
thereunder of the Warrant Agent, the Company and the holders (the
words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants. A copy of the Warrant
Agreement may be obtained by the holder hereof upon written
request to the Company.
Warrants may be exercised at any time on or after
August 12, 1997 and on or before 5:00 p.m., New York City time on
August 12, 2001. Each Warrant entitles the registered holder
upon exercise on or before 5:00 p.m. New York City Time on August
12, 2001, to receive from the Company 2.274 fully paid and
nonassessable shares of Common Stock (each such share a "Warrant
Share") at the initial exercise price (the "Exercise Price") of
$16.6375 per share payable in lawful money of the United States
of America upon surrender of the Warrant Certificate and payment
of the Exercise Price per share at the office or agency of the
Warrant Agent, but only subject to the conditions set forth
herein and in the Warrant Agreement referred to on the reverse
hereof. The holder of Warrants evidenced by the Warrant
Certificate may exercise them by surrendering the Warrant
Certificate, with the form of election to purchase set forth
hereon properly completed and executed, together with payment of
the Exercise Price in cash at the office of the Warrant Agent.
In the event that upon any exercise of Warrants evidenced hereby
the number of Warrants exercised shall be less than the total
number of Warrants evidenced hereby, there shall be issued to the
holder hereof or his assignee a new Warrant Certificate
evidencing the number of Warrants not exercised. No adjustment
shall be made for any dividends on any Common Stock issuable upon
exercise of the Warrant Certificate.
The Warrant Agreement provides that upon the occurrence
of certain events the Exercise Price set forth on the face hereof
and/or the number of shares of Common Stock issuable upon the
exercise of each Warrant shall, subject to certain conditions, be
adjusted. No fractions of a share of Common Stock will be issued
upon the exercise of any Warrant, but the Company will pay the
cash value thereof determined as provided in the Warrant
Agreement.
The Warrant Agreement provides certain registration
obligations with respect to the Common Stock issuable upon
exercise of the Warrants.
Warrant Certificates, when surrendered at the office of
the Warrant Agent by the registered holder thereof in person or
by legal representative or attorney duly authorized in writing,
may be exchanged, in the manner and subject to the limitations
provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant
Certificates of like tenor evidencing in the aggregate a like
number of Warrants.
Upon due presentation for registration of transfer of
the Warrant Certificate at the office of the Warrant Agent a new
Warrant Certificate or Warrant Certificates of like tenor and
evidencing in the aggregate a like number of Warrants shall be
issued to the transferee(s) in exchange for the Warrant
Certificate, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
The Company and the Warrant Agent may deem and treat
the registered holder(s) thereof as the absolute owner(s) of the
Warrant Certificate (notwithstanding any notation of ownership or
other writing hereon made by anyone), for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof, and
for all other purposes, and neither the Company nor the Warrant
Agent shall be affected by any notice to the contrary. Neither
the Warrants nor the Warrant Certificate entitles any holder
hereof to any rights of a stockholder of the Company.
A-4
ASSIGNMENT FORM
If you the Holder want to assign this Unit, fill in the
form below and have your signature guaranteed:
I or we assign and transfer this Unit to:
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ______________________________________,
agent to transfer this Unit on the books of the Company. The
agent may substitute another to act for him.
Dated: _____________ Signed: ________________________________
(Sign exactly as your name appears
on the other side of this Unit)
A-5
SCHEDULE OF INCREASES OR DECREASES OF UNITS
The following increases or decreases in this Global Unit have
been made:
Number of
Amount of Amount of Units of this
decrease in increase in Global Units Signature of
Number of Units Number of Units following such authorized
Date of of this Global of this Global decrease or signatory of
Exchange Unit Unit increase Unit Agent
__________________________________________________________________________
EXHIBIT B
FORM OF LEGEND FOR GLOBAL UNITS
Any Global Unit authenticated and delivered hereunder
shall bear a legend in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING
OF THE UNIT AGREEMENT HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A
DEPOSITARY OR A SUCCESSOR DEPOSITARY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE EXCEPT IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE UNIT AGREEMENT,
AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF
THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF
THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE
DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE
REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE UNIT AGREEMENT.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
EXHIBIT C
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF UNITS
Re: Units (the "Units") each consisting of $1,000 principal
amount of 13 1/2% Senior Discount Notes due 2006 of Wireless
One, Inc. and one warrant to Purchase 2.274 shares of Common
Stock of Wireless One, Inc.
This Certificate relates to _____ Units held in* ____
book-entry or* _______ certificated form by ______ (the
"Transferor").
The Transferor:*
has requested the Unit Agent by written order to
deliver in exchange for its beneficial interest in the Global
Unit held by the depositary a Unit or Units in definitive,
registered form of authorized denominations and an aggregate
number equal to its beneficial interest in such Global Unit (or
the portion thereof indicated above); or
has requested the Unit Agent by written order to
exchange or register the transfer of a Unit or Units.
[INSERT NAME OF TRANSFEROR]
By: _________________________
Date:_____________________
EXHIBIT 5
[LETTERHEAD OF JONES, WALKER, WAECHTER,
POITEVENT, CARRERE & DENEGRE, L.L.P.]
September 19, 1996
Wireless One, Inc.
11301 Industriplex Boulevard
Suite 4
Baton Rouge, Louisiana 70809-4115
Dear Sirs:
We have acted as your counsel in connection with the
preparation of the registration statement on Form S-1 (the
"Registration Statement") filed by you with the Securities and
Exchange Commission on the date hereof, with respect to the offer
and sale of up to $450,000 shares of Common Stock, $.01 par value
per share (the "Shares") upon exercise of certain warrants
previously issued by Wireless One, Inc. (the "Company"). In so
acting, we have examined original, or photostatic or certified
copies, of such records of the Company, certificates of officers
of the Company and of public officials, and such other documents
as we have deemed relevant. In such examination, we have assumed
the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified
or photostatic copies and the authenticity of the originals of
such documents.
Based upon the foregoing, we are of the opinion that the
Shares have been duly authorized and validly issued, fully paid
and non-assessable shares of the Company's Common Stock.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and the reference to us
under the caption "Legal Matters" as counsel for the Company. In
giving this consent, we do not admit that we are within the
category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the general rules and
regulations of the Commission.
Very truly yours,
/s/ Jones, Walker, Waechter,
Poitevent, Carrere & Denegre, L.L.P.
JONES, WALKER, WAECHTER,
POITEVENT, CARRERE & DENEGRE, L.L.P.
EXHIBIT 10.4
WIRELESS ONE, INC.
1996 Stock Option Plan for Non-Employee Directors
1. PURPOSE
-------
The purpose of the WIRELESS ONE, INC. 1996 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS (the "Plan") is to attract and retain
the services of experienced and knowledgeable independent
directors of Wireless One, Inc. (the "Corporation"), for the
benefit of the Corporation and its stockholders and to provide
additional incentive for such directors to continue to work for
the best interests of the Corporation and its stockholders
through continuing ownership of its Common Stock, $.01 par value
(the "Common Stock").
2. SHARES SUBJECT TO THE PLAN
--------------------------
The total number of shares (the "Shares") of Common Stock
for which options may be granted under the Plan shall not exceed
100,000 in the aggregate, subject to adjustment in accordance
with Section 12 hereof. Within the foregoing limitations, Shares
for which options have been granted pursuant to the Plan but
which options have lapsed or otherwise terminated shall become
available for the grant of additional options. There will
initially be reserved for issuance or transfer from the
Corporation's treasury upon the exercise of options granted under
the Plan 100,000 Shares, subject to adjustment in accordance with
Section 12 hereof.
3. ADMINISTRATION OF PLAN
----------------------
The Plan shall be administered by the Board of Directors of
the Corporation (the "Board"). The Board shall have the power to
construe the Plan, to determine all questions arising thereunder
and to adopt and amend such rules and regulations for the
administration of the Plan as it may deem desirable.
4. ELIGIBILITY; GRANT OF OPTION
----------------------------
Each director of the Corporation who is not, and has not
been during the immediately preceding 12-month period, an officer
or employee of the Corporation or any subsidiary of the
Corporation (a "Participant") shall automatically be a
participant in the Plan. Options will be granted in the
following manner:
(a) Each Participant who is in office on the Effective Date
(as hereinafter defined) shall, on the Effective Date,
automatically be granted an option to acquire 4,000
Shares under the Plan.
(b) Each Participant who is in office on November 15, 1996,
but who was not in office on the Effective Date, shall,
on January 1, 1997, automatically be granted an option
to acquire 2,000 Shares under the Plan.
(c) Each Participant who is in office on November 15 of any
year (commencing with November 15, 1997) shall, on the
immediately succeeding January 1, automatically be
granted an option to acquire 2,000 Shares under the
Plan.
5. OPTION AGREEMENT
----------------
Each option granted under the Plan shall be evidenced by an
option agreement (the "Agreement") duly executed on behalf of the
Corporation and by the Participant to whom such option is
granted, which Agreement may but need not be identical and which
shall (i) comply with and be subject to the terms and conditions
of the Plan and (ii) provide that the participant agrees to
continue to serve as a director of the Corporation during the
term for which he or she was elected. Any Agreement may contain
such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Board. No option shall be
deemed granted within the meaning of the Plan and no purported
grant of any option shall be effective until such Agreement shall
have been duly executed on behalf of the Corporation and the
Participant to whom the option is to be granted.
6. OPTION EXERCISE PRICE
---------------------
The option exercise price for an option granted under the
Plan shall be the fair market value of the Shares covered by the
option on the date on which such option is granted or, if such
date is not a business day on which Shares are traded, the next
immediately preceding business day (the "Pricing Date"). For
purposes hereof, the fair market value of the Shares covered by
an option shall be the average of the high and low sales prices
of the Shares on the Pricing Date as reported on the National
Association of Securities Dealers, Inc. Automated Quotation
System - National Market System or on the principal national
securities exchange on which the Shares are then listed for
trading.
7. TIME AND MANNER OF EXERCISE OF OPTION
-------------------------------------
(a) Options granted under the Plan shall become exercisable
in installments of 25 percent upon each anniversary of
the date of grant.
(b) To the extent that the right to exercise an option has
accrued and is in effect, the option may be exercised
from time to time, by giving written notice, signed by
the person or persons exercising the option, to the
Corporation, stating the number of Shares with respect
to which the option is being exercised, accompanied by
payment in full for such Shares in cash, check,
delivery of Shares or other method determined by the
Board.
(c) Upon exercise of the option, delivery of a certificate
for fully paid and non-assessable Shares shall be made
at the principal office of the Corporation to the
person or persons exercising the option as soon as
practicable (but in no event more than 30 days) after
the date of receipt of the notice of exercise by the
Corporation, or at such time, place and manner as may
be agreed upon by the Corporation and the person or
persons exercising the option.
8. TERM OF OPTIONS
---------------
Each option shall expire seven years from the date of the
granting thereof, but shall be subject to earlier termination as
follows:
(a) In the event of the death of a Participant, the option
granted to such Participant may be exercised, to the
extent exercisable on the date of death pursuant to
Section 7(a), by the estate of such Participant, or by
any person or persons who acquired the right to
exercise such option by will or by the laws of descent
and distribution. Such option may be exercised at any
time within 180 days after the date of each such
Participant or prior to the date on which the option
expires by its terms, whichever is earlier.
(b) In the event that a Participant ceases to be a director
of the Corporation, other than by reason of his or her
death, the option granted to such Participant may be
exercised, to the extent exercisable on the date the
Participant ceases to be a director, for a period of
30 days after such date, or prior to the date on which
the option expires by its terms, whichever is earlier.
9. MERGER, CONSOLIDATION, SALE OF ASSETS, ETC.,
RESULTING IN CHANGING OF CONTROL
--------------------------------
(a) In the event of a Change in Control (as hereinafter
defined), notwithstanding the provisions of Sections
7(a) and 8, an option granted to a Participant shall
become fully exercisable if, within one year of such
Change in Control, such Participant shall cease for any
reason to be a member of the Board. For purposes
hereof, a Change in Control of the Corporation shall be
deemed to have occurred if (i) there shall be
consummated (x) any consolidation or merger of the
Corporation in which the Corporation is not the
continuing or surviving corporation or pursuant to
which shares of common stock of the Corporation would
be converted into cash, securities or other property,
other than a merger of the Corporation in which the
holders of common stock of the Corporation immediately
prior to the merger have the same proportionate
ownership of common stock of the surviving corporation
immediately after the merger, or (y) any sale, lease,
exchange or other transfer (in one transaction or a
series of related transactions) of all, or
substantially all, of the assets of the Corporation; or
(ii) the stockholders of the Corporation approve any
plan or proposal for the liquidation or dissolution of
the Corporation; or (iii) any person (as such term in
used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")),
shall become the beneficial owner (within the meaning
of Rule 13d-3 under the Exchange Act) of 30% or more of
the Corporation's outstanding common stock; or (iv)
during any period of two consecutive years, individuals
who at the beginning of such period constitute the
entire Board shall cease for any reason to constitute a
majority thereof unless the election, or the nomination
for election by the Corporation's stockholders, of each
now director was approved by a vote of at least two-
thirds of the directors then still in office who were
directors at the beginning of the period.
(b) Any exercise of an option permitted pursuant to Section
9(a) shall be made within 180 days of the relevant
Participant's termination as a director of the
Corporation.
10. OPTIONS NOT TRANSFERABLE
------------------------
The right of any Participant to exercise an option granted
to him or her under the Plan shall not be assignable or
transferable by such Participant otherwise than by will or the
laws of descent and distribution, and any such option shall be
exercisable during the lifetime of such Participant only by him
or her.
11. NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE
---------------------------------------
Neither the recipient of an option under the Plan nor his or
her successors in interest shall have any rights as a stockholder
of the Corporation with respect to any Shares subject to an
option granted to such person until such person becomes a holder
of record of such Shares.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
------------------------------------------
In the event that the outstanding shares of the Common Stock
are changed into or exchanged for a different number or kind of
shares or other securities of the Corporation or of another
corporation by reason of any reorganization, merger,
consolidation, recapitalization, reclassification, stock splitup,
combination of shares or dividend payable in capital stock,
appropriate adjustment shall to made in the number and kind of
shares subject to and reserved for issuance or transfer under the
Plan and as to which outstanding options (or portions thereof
then unexercised) shall be exercisable, to the end that the
proportionate interest of Participants and prospective
Participants, with respect to options theretofore granted and to
be granted, shall be maintained as before the occurrence of such
event. Such adjustment in outstanding options shall be made
without change in the total price applicable to the unexercised
portion of such options, but with a corresponding adjustment in
the option price per share.
13. RESTRICTIONS ON ISSUE OF SHARES
-------------------------------
Anything contained in this Plan to the contrary
notwithstanding, the Corporation may delay the issuance of Shares
covered by the exercise of any option and the delivery of a
certificate for such Shares until one of the following conditions
shall be satisfied:
(i) the Shares with respect to which an option has been
exercised are at the time of the issuance or transfer
of such Shares effectively registered under applicable
federal securities laws now in force or hereafter
amended: or
(ii) counsel for the Corporation shall have given an
opinion, which opinion shall not be unreasonably
conditioned or withheld, that such Shares are exempt
from the registration under applicable federal
securities laws now in force or hereafter amended.
It is intended that all exercises of options shall be effective.
Accordingly, the Corporation shall use its best efforts to bring
about compliance with the above conditions within a reasonable
time, except that the Corporation shall be under no obligation to
cause a registration statement or a post-effective amendment to
any registration statement to be prepared at its expense solely
for the purpose of covering the issuance or transfer from the
Corporation's treasury of Shares in respect of which any option
may be exercised.
14. PURCHASE FOR INVESTMENT
-----------------------
Unless the Shares to be issued upon exercise of an option
granted under the Plan have been effectively registered under the
Securities Act of 1933, as amended (the "Securities Act"), as now
in force or hereafter amended, the Corporation shall be under no
obligation to issue or transfer any Shares covered by any option
unless the person or persons who exercise such option, in whole
or in part, shall give a written representation and undertaking
to the Corporation, which is satisfactory in form and scope to
counsel to the Corporation and upon which, in the opinion of such
counsel, the Corporation may reasonably rely, that he or she in
acquiring the Shares issued or transferred to him or her pursuant
to such exercise of the option for his or her own account as an
investment and not with a view to, or for sale in connection
with, the distribution for any such Shares, and that he or she
will make no transfer of the same except in compliance with any
rules and regulations in force at the time of such transfer under
the Securities Act, or any other applicable law, and that if
Shares are issued or transferred without such registration a
legend to such effect may be endorsed upon the certificates
representing the Shares.
15. EFFECTIVE DATE
--------------
The effective date (the "Effective Date") of this Plan shall
be the date on which the Plan is approved by the stockholders of
the Corporation.
16. EXPENSES OF THE PLAN
--------------------
All costs and expenses of the adoption and administration of
the Plan shall be borne by the Corporation and none of such
expenses shall be charged to any Participant.
17. TERMINATION AND AMENDMENT OF PLAN
---------------------------------
Unless sooner terminated as herein provided, the Plan shall
terminate ten years from the Effective Date. The Board may at
any time terminate the Plan or make such modification or
amendment thereof as it deems advisable; provided, however, that
the plan may not be amended more than once every six months,
other than to comport with changes in the Internal Revenue Code
of 1986, as amended, the Employee Retirement Income Security Act
of 1974, as amended, or the rules thereunder; and provided
further, however, that, except as provided in Section 12, the
Board may not, without the approval of the stockholders of the
Corporation, increase the maximum aggregate number of shares for
which options may be granted under the Plan or the number of
Shares for which an option may be granted to any Participant.
Termination or any modification or amendment of the Plan shall
not, without the consent of a Participant, affect his or her
rights under an option previously granted to him or her.
AMENDED AND RESTATED REGISTRATION AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION AGREEMENT (this
"Agreement") is made as of July 29, 1996, by and among Chase
Venture Capital Associates, L.P. ("CVCA"), Chase Manhattan
Capital Corporation ("CMCC"), Baseball Partners ("Baseball"),
those Persons named on Schedule I hereto (the "TruVision
Stockholders"), Heartland Wireless Communications, Inc., a
Delaware corporation ("Heartland"), on behalf of itself and each
of its subsidiaries which holds Common Stock (the "Heartland
Subsidiaries"), Premier Venture Capital Corporation, as the
representative of the holders of Wireless One Registrable
Securities (as that term is defined below), and Wireless One,
Inc., a Delaware corporation (the "Company"). Unless otherwise
indicated herein, capitalized terms used herein are defined in
Section 8 hereof.
WHEREAS, the Company, the former stockholders of
Wireless One, Heartland and certain subsidiaries of Heartland are
parties to a certain Registration Agreement dated October 24,
1995 (the "Old Registration Agreement");
WHEREAS, the Company, the former stockholders of
Wireless One, certain subsidiaries of Heartland, Wireless One
Operating Company, a Delaware corporation ("Old Wireless One"),
Wireless One Merger Company, a Delaware corporation and a direct
wholly-owned Subsidiary of the Company ("Heartland MergerSub"),
and the other stockholders of Old Wireless One are parties to a
Contribution Agreement and Agreement and Plan of Merger, dated as
of October 18, 1995 (the "Heartland Merger Agreement"), pursuant
to which Heartland Entities contributed certain of their assets
and pursuant to which Old Wireless One merged with and into
Heartland MergerSub with Old Wireless One surviving. In
addition, pursuant to Article IX of the Heartland Merger
Agreement, the Company has the right under certain circumstances
to acquire certain assets of Heartland and/or its Subsidiaries
(the "Call Market Assets") in exchange for either cash or shares
of the Company's Common Stock. The execution, delivery and
continued effectiveness of the Old Registration Agreement were
conditions precedent to Old Wireless One's obligation under the
Heartland Merger Agreement to consummate the Heartland Merger and
the obligation of the Company under the Heartland Merger
Agreement to cause Heartland MergerSub to consummate the
Heartland Merger. The Old Registration Agreement was executed
and delivered contemporaneously with the First Closing (as that
term is defined in the Heartland Merger Agreement);
WHEREAS, the Company, Wireless One MergerSub, Inc.
("TruVision MergerSub") and TruVision Wireless, Inc.
("TruVision") are parties to an Agreement and Plan of Merger,
dated April 25, 1996 (as in effect from time to time, the
"TruVision Merger Agreement"), pursuant to which TruVision
MergerSub will merge with and into TruVision with TruVision
surviving. The execution and delivery of this Agreement are
conditions precedent to the Company's obligation under the
TruVision Merger Agreement to cause TruVision Merger Sub to
consummate the TruVision Merger and to TruVision's obligation to
consummate the TruVision Merger. This Agreement is being
executed and delivered contemporaneously with the TruVision
Closing.
WHEREAS, the parties hereto desire to amend and restate
the Old Registration Agreement in order to provide for the
registration of the Registrable Securities;
NOW, THEREFORE, the parties to this Agreement hereby
agree as follows:
1. Demand Registrations.
(a) Requests for Registration. At any time after
October 24, 1997, subject to paragraphs 1(b) and 1(c), the
Majority Chase Holders, the Majority TruVision Holders, the
Majority Wireless One Holders or the Majority Heartland Holders
may request registration under the Securities Act of all or any
portion of their Registrable Securities on Form S-1 or any
similar long-form registration ("Long-Form Registrations"), and
the Majority Chase Holders, the Majority TruVision Holders, the
Majority Wireless One Holders or the Majority Heartland Holders
may request registration under the Securities Act of all or any
portion of their Registrable Securities on Form S-2 or S-3
(including under Rule 415 promulgated under the Securities Act or
any similar provision then in force) or any similar short-form
registration ("Short-Form Registrations"), if available (with the
Majority Chase Holders, the Majority Chase Holders, the Majority
TruVision Holders, the Majority Wireless One Holders or the
Majority Heartland Holders, as the case may be, constituting,
with respect to such registration, the "Requesting Holders").
All registrations requested pursuant to this paragraph 1(a) are
referred to herein as "Demand Registrations"; all Demand
Registrations initially so requested by the Majority Chase
Holders are referred to herein as "Chase Demand Registrations;"
all Demand Registrations initially so requested by the Majority
TruVision Holders are referred to herein as "TruVision Demand
Registrations;" all Demand Registrations initially so requested
by the Majority Wireless One Holders are referred to herein as
"Wireless One Demand Registrations;" and all Demand Registrations
initially so requested by the Majority Heartland Holders are
referred to herein as "Heartland Demand Registrations." Within
10 days after receipt of any such request (any such request a
"Demand Notice"), the Company shall give written notice of such
requested registration to all other holders of Registrable
Securities and, subject to the other terms hereof, shall include
in such registration all Registrable Securities with respect to
which the Company has received written requests for inclusion
therein within 15 days after the receipt of the Company's notice.
(b) Long-Form Registrations. The Majority Chase
Holders shall be entitled to request three Long-Form
Registrations in which the Company shall pay all Registration
Expenses ("Company-paid Long-Form Chase Registrations"); the
Majority TruVision Holders shall be entitled to request three
Long-Form Registrations in which the Company shall pay all
Registration Expenses ("Company-paid Long-Form TruVision
Registrations"); the Majority Wireless One Holders shall be
entitled to request three Long-Form Registrations in which the
Company shall pay all Registration Expenses ("Company-paid
Long-Form Wireless One Registrations"); and the Majority
Heartland Holders shall be entitled to request three Long-Form
Registration in which the Company shall pay all Registration
Expenses ("Company-paid Long-Form Heartland Registration"). All
Long-Form Registrations shall be underwritten registrations.
(c) Short-Form Registrations. In addition to the
Long-Form Registrations provided pursuant to Section 1(b), the
Majority Chase Holders shall be entitled to request three Short-
Form Registrations in which the Company shall pay all
Registration Expenses ("Company-paid Short-Form Chase
Registrations"); the Majority TruVision Holders shall be entitled
to request three Short-Form Registrations in which the Company
shall pay all Registration Expenses ("Company-paid Short-Form
TruVision Registrations"); the Majority Wireless One Holders
shall be entitled to request three Short-Form Registrations in
which the Company shall pay all Registration Expenses
("Company-paid Short-Form Wireless One Registrations") and the
Majority Heartland Holders shall be entitled to request three
Short-Form Registration in which the Company shall pay all
Registration Expenses ("Company-paid Short-Form Heartland
Registration"). Demand Registrations shall be Short-Form
Registrations whenever the Company is permitted to use any
applicable short form. Each request for a Short-Form
Registration shall state the intended method of distribution of
Registrable Securities requested to be registered. After the
Company has become subject to the reporting requirements of the
Securities Exchange Act, the Company shall use its best efforts
to make Short-Form Registrations on Form S-3 available for the
sale of Registrable Securities.
(d) Withdrawal of Demand Registration. The Majority
Chase Holders, the Majority TruVision Holders, the Majority
Wireless One Holders or the Majority Heartland Holders, whichever
are the Requesting Holders, may withdraw any request for a Demand
Registration at any time prior to the effectiveness of the
related registration statement and any such withdrawn request
shall not count as one of such Requesting Holders' permitted
Demand Registrations; provided that any Registration Expenses in
connection with any such withdrawn Demand Registration shall be
borne by the withdrawing Requesting Holders pro rata based on
number of Registrable Securities requested to be included in such
registration by each such holder.
(e) Company Right to Preempt Demand Registration. The
Company shall have the right to preempt any request for a Demand
Registration by providing written notice (pursuant to Section
2(a)) to all holders of Registrable Securities (within twenty
(20) business days of receipt of the Demand Notice in connection
with such Demand Registration) of the Company's intention to
effect a registration under the Securities Act within 180 days of
the receipt of such Demand Notice. Upon delivery of such notice,
the registration initially requested by the Requesting Holders
shall no longer be deemed to be a Demand Registration and shall
not count as one of such Requesting Holders' permitted Demand
Registrations.
(f) Priority on Demand Registrations. If a Demand
Registration is an underwritten offering and the managing
underwriters advise the Company in writing that in their opinion
the number of securities requested to be included in such
offering exceeds the number of securities (the "Offering
Quantity") which can be sold in an orderly manner in such
offering within a price range acceptable to the Requesting
Holders, then the Company shall include in the registration
securities in the following priority:
(i) first, before including any securities which
are not Registrable Securities, the Company shall include
all of the Registrable Securities requested to be included
by holders thereof, and if the number of Registrable
Securities requested to be included exceeds the Offering
Quantity, then the Company shall include the pro rata share
of the Offering Quantity of each holder of Registrable
Securities which requests inclusion therein, based on the
amount of Registrable Securities held by each such holder;
and
(ii) to the extent (and only to the extent) that
the Offering Quantity exceeds the aggregate amount of
Registrable Securities which are requested to be included in
such registration, the Company may include in such
registration any other securities requested to be included
in the offering.
(g) Restrictions on Long-Form Registrations. The
Company shall not be obligated to effect any Long-Form
Registration within 180 days after the effective date of a
previous Long-Form Registration or a previous registration in
which the holders of Registrable Securities were given piggyback
rights pursuant to Section 2. The Company may postpone for up to
180 days the filing or the effectiveness of a registration
statement for a Demand Registration if the Board determines in
its reasonable good faith judgment that such Demand Registration
would reasonably be expected to have a material adverse effect on
any proposal or plan by the Company or any of its Subsidiaries to
engage in any acquisition of assets (other than in the ordinary
course of business) or any merger, consolidation, tender offer,
offering of securities, reorganization or similar transaction;
provided that in such event, the Requesting Holders shall be
entitled to withdraw such request and, if such request is
withdrawn, such Demand Registration shall not count as one of the
permitted Demand Registrations hereunder and the Company shall
pay all Registration Expenses in connection with such
registration. The Company may delay a Demand Registration
hereunder only once in an twelve-month period.
(h) Selection of Underwriters. The Requesting Holders
shall have the right to select the investment banker(s) and
manager(s) to administer the offering in connection with each
Demand Registration, subject to the Company's approval, which
approval shall not be unreasonably withheld.
(i) Other Registration Rights. Except as provided in
this Agreement, the Company shall not grant to any Persons the
right to request that the Company initiate a registration under
the Securities Act of any equity securities of the Company, or
any securities convertible or exchangeable into or exercisable
for such securities, without the prior written consent of each of
the Majority Chase Holders, the Majority TruVision Holders, the
Majority Wireless One Holders and the Majority Heartland Holders
unless the holders of Registrable Securities are permitted to
participate therein, pro rata based upon the number of
Registrable Securities and other shares of Common Stock held and
such rights are otherwise not inconsistent with the rights of the
holders of Chase Registrable Securities, holders of TruVision
Registrable Securities, holders of Wireless One Registrable
Securities or the holders of Heartland Registrable Securities.
(j) Termination. The rights of the parties hereto to
Demand Registrations (whether Long-Form Registrations or Short-
Form Registrations) and to Piggyback Registrations (collectively,
the "Rights") shall terminate on the date all Rights have been
fully exercised and satisfied in accordance with this Agreement.
(k) VCI Registration Right. At any time after October
24, 1996, the Majority VCI Holders shall be entitled to request
one registration under the Securities Act of all or any portion
of the VCI Registrable Securities on Form S-3 (including under
Rule 415 promulgated under the Securities Act or any similar
provision then in force) or any similar short-form registration
("Company paid Short-Form VCI Registration") and the Majority VCI
Holders shall be the Requesting Holders with respect to such
registration. The Company shall pay all Registration Expenses of
the Company paid Short-Form VCI Registration. Within 10 days
after receipt of any such request, the Company shall give written
notice of such requested registration to all other holders of VCI
Registrable Securities and, subject to the other terms hereof,
shall include in such registration all VCI Registrable Securities
with respect to which the Company has received written requests
for inclusion therein within 15 days after the receipt of the
Company's notice.
2. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes
to register any of its securities under the Securities Act (other
than pursuant to a Demand Registration or a Company paid Short-
Form VCI Registration) and the registration form to be used may
be used for the registration of Registrable Securities (a
"Piggyback Registration"), the Company shall give prompt written
notice (in any event within 10 business days after its receipt of
notice of any exercise of demand registration rights other than
under this Agreement) to all holders of Registrable Securities of
its intention to effect such a registration and, subject to the
provisions hereof, shall include in such registration all
Registrable Securities with respect to which the Company has
received written requests for inclusion therein within 20 days
after the receipt of the Company's notice.
(b) Piggyback Expenses. The Registration Expenses of
the holders of Registrable Securities shall be paid by the
Company in all Piggyback Registrations.
(c) Priority on Primary Registrations. If a Piggyback
Registration is an underwritten primary registration on behalf of
the Company, and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested
to be included in such registration exceeds the number (the
"Maximum Company Number") which can be sold in an orderly manner
in such offering within a price range acceptable to the Company,
the Company shall include in such registration (but only to the
extent the aggregate amount of securities so included does not
exceed such Maximum Company Number) (i) first, the securities the
Company proposes to sell and (ii) second, the other securities
requested to be included in such registration (including
Registrable Securities), pro rata among the holders of such
securities on the basis of the number of securities owned by each
such holder.
(d) Priority on Secondary Registrations. If a
Piggyback Registration is an underwritten secondary registration
on behalf of holders of the Company's equity securities other
than the holders of Registrable Securities which are entitled to
request registrations of the Company's securities, and the
managing underwriters advise the Company in writing that in their
opinion the number of such securities requested to be included
in such registration exceeds the number (the "Maximum Secondary
Number") which can be sold in an orderly manner in such offering
within a price range acceptable to the holders initially
requesting such registration, the Company shall include in such
registration all securities requested to be included therein pro
rata among the holders of such securities on the basis of the
number of such securities owned by each such holder.
(e) Selection of Underwriters. If any Piggyback
Registration is an underwritten offering and the number of
Registrable Securities included therein exceeds 30% of the total
number of shares being offered, the selection of investment
banker(s) and manager(s) for the offering must be approved by the
holders of a majority of the Registrable Securities requested to
be included in such Piggyback Registration, which approval shall
not be unreasonably withheld.
(f) Other Registrations. If the Company has
previously filed a registration statement with respect to the
Chase Registrable Securities, the TruVision Registrable
Securities, the Wireless One Registrable Securities or the
Heartland Registrable Securities either pursuant to Section 1 or
pursuant to this Section 2, and if such previous registration has
not been withdrawn or abandoned, then the Company shall not file
or cause to be effected any other registration of any of its
equity securities or securities convertible or exchangeable into
or exercisable for its equity securities under the Securities Act
(except on Form S-8 or any successor form), whether on its own
behalf or at the request of any holder or holders of such
securities, until a period of at least six months has elapsed
from the effective date of such previous registration (except (i)
in the case of such a filing pursuant Section 1, with the prior
written consent of the Requesting Holders, or (ii) in the case of
such a filing pursuant to this Section 2, with the prior written
consent of the holders of a majority of the Registrable
Securities included in such Piggyback Registration).
3. Holdback Agreements.
(a) Each holder of Registrable Securities shall not
effect any public sale or distribution (including sales pursuant
to Rule 144) of equity securities of the Company, or any
securities convertible into or exchangeable or exercisable for
such securities, during the seven days prior to and the 180-day
period beginning on the effective date of any registered
underwritten offering of the Company's equity securities or
securities convertible or exchangeable into or exercisable for
its equity securities under the Securities Act (except as part of
such underwritten offering), unless the underwriters managing the
underwritten offering otherwise agree.
(b) The Company (i) shall not effect any public sale
or distribution of its equity securities, or any securities
convertible into or exchangeable or exercisable for such
securities, during the seven days prior to and during the 180-day
period beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration (except
as part of such underwritten registration or pursuant to
registrations on Form S-8 or any successor form), unless the
underwriters managing such underwritten offering otherwise agree,
and (ii) shall cause each holder of its Common Stock, or any
securities convertible into or exchangeable or exercisable for
Common Stock, purchased from the Company at any time after the
date of this Agreement and representing 5% or more of the Common
Stock on a fully-diluted basis (other than in a registered public
offering) to agree not to effect any public sale or distribution
(including sales pursuant to Rule 144) of any such securities
during such period (except as part of such underwritten offering,
if otherwise permitted), unless the underwriters managing such
underwritten offering otherwise agree.
4. Registration Procedures. Whenever holders of
Registrable Securities have requested that any Registrable
Securities be registered pursuant to this Agreement, the Company
shall use its best efforts to effect the registration and the
sale of such Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto the
Company shall as expeditiously as possible:
(a) prepare and file with the Securities and Exchange
Commission a registration statement with respect to such
Registrable Securities and use its best efforts to cause such
registration statement to become effective (provided that before
filing a registration statement or prospectus or any amendments
or supplements thereto, the Company shall furnish to the counsel
selected by the Requesting Holders and any other counsel, if any,
designated by the holders of not less than 25% of the Registrable
Securities covered by such registration statement copies of all
such documents proposed to be filed, which documents shall be
subject to the review and comment of such counsel);
(b) notify each holder of Registrable Securities of
the effectiveness of each registration statement filed hereunder
and prepare and file with the Securities and Exchange Commission
such amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a
period of not less than 180 days and comply with the provisions
of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such
period in accordance with the intended methods of disposition by
the sellers thereof set forth in such registration statement;
(c) furnish to each seller of Registrable Securities
such number of copies of such registration statement, each
amendment and supplement thereto, the prospectus included in such
registration statement (including each preliminary prospectus)
and such other documents as such seller may reasonably request in
order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky
laws of such jurisdictions as any seller reasonably requests and
do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities
owned by such seller (provided that the Company shall not be
required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify
but for this subparagraph, (ii) subject itself to taxation in any
such jurisdiction or (iii) consent to general service of process
in any such jurisdiction);
(e) notify each seller of such Registrable Securities,
at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or
omits any fact necessary to make the statements therein not
misleading, and, at the request of any such seller, the Company
shall prepare a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not contain an
untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed
on each securities exchange on which similar securities issued by
the Company are then listed and, if not so listed, to be listed
on the NASD automated quotation system and, if listed on the NASD
automated quotation system, use its best efforts to secure
designation of all such Registrable Securities covered by such
registration statement as a NASDAQ "national market system
security" within the meaning of Rule 11Aa2-1 of the Securities
and Exchange Commission or, failing that, to secure NASDAQ
authorization for such Registrable Securities and, without
limiting the generality of the foregoing, to arrange for at least
two market makers to register as such with respect to such
Registrable Securities with the NASD;
(g) provide a transfer agent and registrar for all
such Registrable Securities not later than the effective date of
such registration statement;
(h) enter into such customary agreements (including
underwriting agreements in customary form) and take all such
other actions as the Requesting Holders or holders of not less
than 25% of the Registrable Securities being sold or the
underwriters (if any) reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities
(including effecting a stock split or a combination of shares);
(i) make available for inspection by any seller of
Registrable Securities, any underwriter participating in any
disposition pursuant to such registration statement and any
attorney, accountant or other agent retained by any such seller
or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the
Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by any
such seller, underwriter, attorney, accountant or agent in
connection with such registration statement;
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the Securities and Exchange
Commission, and make available to its security holders, as soon
as reasonably practicable, an earnings statement covering the
period of at least twelve months beginning with the first day of
the Company's first full calendar quarter after the effective
date of the registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder;
(k) obtain a cold comfort letter from the Company's
independent public accountants in customary form and covering
such matters of the type customarily covered by cold comfort
letters as the Requesting Holders or holders of a majority of the
Registrable Securities being sold reasonably request (provided
that such Registrable Securities constitute at least 10% of the
securities covered by such registration statement);
(l) in the event of the issuance of any stop order
suspending the effectiveness of a registration statement, or of
any order suspending or preventing the use of any related
prospectus or suspending the qualification of any common stock
included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to
obtain the withdrawal of such order; and
(m) use its best efforts to cause such Registrable
Securities covered by such registration statement to be
registered with or approved by such other governmental agencies
or authorities as may be necessary to enable the sellers thereof
to consummate the disposition of such Registrable Securities.
If any such registration or comparable statement refers
to any holder by name or otherwise as the holder of any
securities of the Company and if in its sole and exclusive
judgment, such holder is or might be deemed to be an underwriter
or a controlling person of the Company, such holder shall have
the right to require (i) the insertion therein of language, in
form and substance satisfactory to such holder and presented to
the Company in writing, to the effect that the holding by such
holder of such securities is not to be construed as a
recommendation by such holder of the investment quality of the
Company's securities covered thereby and that such holding does
not imply that such holder shall assist in meeting any future
financial requirements of the Company, or (ii) in the event that
such reference to such holder by name or otherwise is not
required by the Securities Act or any similar Federal statute
then in force, the deletion of the reference to such holder;
provided that with respect to this clause (ii) such holder shall
furnish to the Company an opinion of counsel to such effect,
which opinion and counsel shall be reasonably satisfactory to the
Company.
5. Registration Expenses.
(a) All expenses incident to the Company's performance
of or compliance with this Agreement, including without
limitation all registration and filing fees, fees and expenses of
compliance with securities or blue sky laws, printing expenses,
messenger and delivery expenses, fees and disbursements of
custodians, and fees and disbursements of counsel for the Company
and all independent certified public accountants, underwriters
(excluding discounts and commissions) and other Persons retained
by the Company (all such expenses being herein called
"Registration Expenses"), shall be borne as provided in this
Agreement, except that the Company shall, in any event, pay its
internal expenses (including, without limitation, all salaries
and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit or quarterly
review, the expense of any liability insurance and the expenses
and fees for listing the securities to be registered on each
securities exchange on which similar securities issued by the
Company are then listed or on the NASD automated quotation
system. Underwriting discounts and commissions shall be borne by
the Person or Persons selling securities, in proportion to the
value of securities sold.
(b) In connection with each Demand Registration, the
Company shall reimburse the holders of Registrable Securities
included in such registration for the reasonable fees and
disbursements of one counsel chosen by the Requesting Holders.
In connection with each Piggyback Registration, the Company shall
reimburse the holders of Registrable Securities included in such
registration for the reasonable fees and disbursements of one
counsel chosen by the holders of a majority of the Registrable
Securities included in such registration. In connection with
each Demand Registration and each Piggyback Registration, the
Company shall reimburse the holders of Registrable Securities
included in such registration for the reasonable fees and
disbursements of each additional counsel retained by any holder
of Registrable Securities for the purpose of rendering any legal
opinion required by the Company or the managing underwriter(s) to
be rendered on behalf of such holder in connection with any
underwritten Demand Registration or Piggyback Registration.
(c) To the extent Registration Expenses are not
required to be paid by the Company, each holder of securities
included in any registration hereunder shall pay those
Registration Expenses allocable to the registration of such
holder's securities so included, and any Registration Expenses
not so allocable shall be borne by all sellers of securities
included in such registration in proportion to the aggregate
selling price of the securities to be so registered.
6. Indemnification.
(a) The Company agrees to indemnify, to the extent
permitted by law, each holder of Registrable Securities, its
officers and directors and each Person who controls such holder
(within the meaning of the Securities Act) against all losses,
claims, damages, liabilities and expenses caused by any untrue or
alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading,
except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such holder
expressly for use therein or by such holder's failure to deliver
a copy of the registration statement or prospectus or any
amendments or supplements thereto after the Company has furnished
such holder with a sufficient number of copies of the same. In
connection with an underwritten offering, the Company shall
indemnify such underwriters, their officers and directors and
each Person who controls such underwriters (within the meaning of
the Securities Act) to the same extent as provided above with
respect to the indemnification of the holders of Registrable
Securities.
(b) In connection with the preparation of any
registration statement with respect to any registration in which
a holder of Registrable Securities is participating, each such
holder shall furnish to the Company in writing such information
and affidavits as the Company reasonably requests for use in
connection with any such registration statement or prospectus
and, to the extent permitted by law, shall indemnify the Company,
its directors and officers and each Person who controls the
Company (within the meaning of the Securities Act) against any
losses, claims, damages, liabilities and expenses resulting from
any untrue or alleged untrue statement of material fact contained
in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or
omission is contained in any information or affidavit so
furnished in writing by such holder; provided that the obligation
to indemnify shall be individual, not joint and several, for each
holder and shall be limited to the net amount of proceeds
received by such holder from the sale of Registrable Securities
pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder
shall (i) give prompt written notice to the indemnifying party of
any claim with respect to which it seeks indemnification
(provided that the failure to give prompt notice shall not impair
any Person's right to indemnification hereunder to the extent
such failure has not prejudiced the indemnifying party) and (ii)
unless in such indemnified party's reasonable judgment a conflict
of interest between such indemnified and indemnifying parties may
exist with respect to such claim, permit such indemnifying party
to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is
assumed, the indemnifying party shall not be subject to any
liability for any settlement made by the indemnified party
without its consent (but such consent shall not be unreasonably
withheld). An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim shall not be
obligated to pay the fees and expenses of more than one counsel
for all parties indemnified by such indemnifying party with
respect to such claim, unless in the reasonable judgment of any
indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with
respect to such claim.
(d) The indemnification provided for under this
Agreement shall remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or
any officer, director or controlling Person of such indemnified
party and shall survive the transfer of securities. The Company
also agrees to make such provisions, as are reasonably requested
by any indemnified party, for contribution to such party in the
event the Company's indemnification is unavailable for any
reason.
7. Participation in Underwritten Registrations. No
Person may participate in any registration hereunder which is
underwritten unless such Person (i) agrees to sell such Person's
securities on the basis provided in any underwriting arrangements
approved by the Person or Persons entitled hereunder to approve
such arrangements and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such
underwriting arrangements; provided that no holder of Registrable
Securities included in any underwritten registration shall be
required to make any representations or warranties to the Company
or the underwriters (other than representations and warranties
regarding such holder and such holder's intended method of
distribution) or to undertake any indemnification obligations to
the Company or the underwriters with respect thereto, except as
otherwise provided in Section 6 hereof.
8. Definitions. Unless otherwise defined herein or
below, capitalized terms used herein shall have the meanings
given such terms in the TruVision Merger Agreement.
"Board" means the Company's board of directors.
"Chase Registrable Securities" means (i) all Common
Stock which is (a) part of the portion of Wireless One Share
Consideration issued to CMCC or Baseball as a part of the
Wireless One Share Consideration pursuant to the Heartland Merger
Agreement (as adjusted pursuant to the Heartland Merger Agreement
and the Heartland Escrow Agreement) and (b) issued to CVCA
pursuant to the TruVision Merger Agreement (as adjusted pursuant
to the TruVision Merger Agreement and the TruVision Escrow
Agreement) and (ii) any Common Stock issued or issuable with
respect to the Common Stock referred to in clause (i) by way of
stock dividend or stock split or in connection with a combination
of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Chase Registrable
Securities, such securities shall cease to be Chase Registrable
Securities when they have been (a) effectively registered under
the Securities Act and disposed of in accordance with the
registration statement covering them or (b) distributed to the
public through a broker, dealer or market maker pursuant to
Rule 144 under the Securities Act (or any similar provision then
in force).
"Common Stock" means the Company's common stock, par
value $.01 per share.
"Designated Wireless One Shares" means (i) all Common
Stock which is part of the portion of the Wireless One Share
Consideration issued to the Designated Wireless One Stockholders
pursuant to the Heartland Merger Agreement (as adjusted pursuant
to the Heartland Merger Agreement and the Heartland Escrow
Agreement) and (ii) any equity securities issued or issuable
directly or indirectly with respect to the Common Stock referred
to in clause (i) by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization. As to any
particular shares constituting Designated Wireless One Shares,
such shares shall cease to be Designated Wireless One Shares when
they have been (a) effectively registered under the Securities
Act and disposed of in accordance with the registration statement
covering them or (b) distributed to the public through a broker,
dealer or market maker pursuant to Rule 144 under the Securities
Act (or any similar provision then in force).
"Designated Wireless One Stockholders" means the
Persons named on Schedule II hereto.
"Heartland Escrow Agreement" means the "Escrow
Agreement," as that term is defined in the Heartland Merger
Agreement.
"Heartland Registrable Securities" means (i) all
Common Stock which is part of the Heartland Share Consideration
issued to Heartland and certain subsidiaries of Heartland
pursuant to the Heartland Merger Agreement (as adjusted pursuant
to the Heartland Merger Agreement and the Heartland Escrow
Agreement) or which is or was issued to Heartland or a Subsidiary
of Heartland in consideration of any Call Market Assets (as that
term is defined in the Heartland Merger Agreement) acquired by
the Company or any of its Affiliates pursuant to the Heartland
Merger Agreement and (ii) any Common Stock issued or issuable
with respect to the Common Stock referred to in clause (i) by way
of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or
other reorganization. As to any particular Heartland Registrable
Securities, such securities shall cease to be Heartland
Registrable Securities when they have been (a) effectively
registered under the Securities Act and disposed of in accordance
with the registration statement covering them or (b) distributed
to the public through a broker, dealer or market maker pursuant
to Rule 144 under the Securities Act (or any similar provision
then in force).
"Heartland Share Consideration" has the meaning given
such term in the Heartland Merger Agreement.
"Majority Chase Holders" at any time means holders of a
majority of the Chase Registrable Securities.
"Majority Heartland Holders" at any time means holders
of a majority of the Heartland Registrable Securities.
"Majority TruVision Holders" at any time means holders
of a majority of the TruVision Registrable Securities.
"Majority Wireless One Holders" at any time means
holders of a majority of the Designated Wireless One Shares.
"Majority VCI Holders" at any time means holders of a
majority of the VCI Registrable Shares.
"Person" means an individual, a partnership, a limited
liability company, a corporation, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization
and a governmental entity or any department, agency or political
subdivision thereof.
"Registrable Securities" means VCI Registrable
Securities Chase Registrable Securities, TruVision Registrable
Securities, Wireless One Registrable Securities and Heartland
Registrable Securities.
"Securities Act" means the Securities Act of 1933.
"Subsidiary" means, with respect to any Person, any
corporation, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power
of shares of stock entitled (irrespective of whether, at the
time, stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening
of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof, or
(ii) if a partnership, association or other business entity, a
majority of the partnership or other similar ownership interest
thereof is at the time owned or controlled, directly or
indirectly, by any Person or one or more Subsidiaries of that
Person or a combination thereof. For purposes hereof, a Person
or Persons shall be deemed to have a majority ownership interest
in a partnership, association or other business entity if such
Person or Persons shall be allocated a majority of partnership,
association or other business entity gains or losses or shall be
or control the managing director or general partner of such
partnership, association or other business entity.
"TruVision Closing" means the "Closing," as that term
is defined in the TruVision Merger Agreement.
"TruVision Escrow Agreement" means, collectively, the
escrow agreements dated as of the date of this Agreement and
executed and delivered in connection with the consummation of the
TruVision Merger.
"TruVision Merger" means the "Merger," as that term is
defined in the TruVision Merger Agreement.
"TruVision Registrable Securities" means (i) all Common
Stock which is issued to TruVision Stockholders pursuant to the
TruVision Merger Agreement, including the VCI Registrable
Securities and Common Stock of the Company issuable pursuant to
Article I of the TruVision Merger Agreement or upon exercise of
the options provided for in Section 5.3 of the TruVision Merger
Agreement (as adjusted pursuant to the TruVision Merger Agreement
and the TruVision Escrow Agreement) (ii) any Common Stock issued
or issuable with respect to the Common Stock referred to in
clause (i) by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization. As to any
particular TruVision Registrable Securities, such securities
shall cease to be TruVision Registrable Securities when they have
been (a) effectively registered under the Securities Act and
disposed of in accordance with the registration statement
covering them or (b) distributed to the public through a broker,
dealer or market maker pursuant to Rule 144 under the Securities
Act (or any similar provision then in force).
"VCI" means Vision Communications, Inc.
"VCI Registrable Securities" means (i) all Common Stock
which is issued to VCI pursuant to Section 5.13 of the TruVision
Merger Agreement (as adjusted pursuant to the TruVision Merger
Agreement and the TruVision Escrow Agreement) and (ii) any Common
Stock issued or issuable with respect to the Common Stock
referred to in clause (i) by way of stock dividend or stock split
or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization. As to any
particular VCI Registrable Securities, such securities shall
cease to be VCI Registrable Securities when they have been
(a) effectively registered under the Securities Act and disposed
of in accordance with the registration statement covering them or
(b) distributed to the public through a broker, dealer or market
maker pursuant to Rule 144 under the Securities Act (or any
similar provision then in force).
"Wireless One Registrable Securities" means (i) all
Common Stock which is part of the portion of the Wireless One
Share Consideration issued other than to CMCC and Baseball
pursuant to the Heartland Merger Agreement (as adjusted pursuant
to the Heartland Merger Agreement and the Heartland Escrow
Agreement) and (ii) any Common Stock issued or issuable with
respect to the Common Stock referred to in clause (i) by way of
stock dividend or stock split or in connection with a combination
of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Wireless One Registrable
Securities, such securities shall cease to be Wireless One
Registrable Securities when they have been (a) effectively
registered under the Securities Act and disposed of in accordance
with the registration statement covering them or (b) distributed
to the public through a broker, dealer or market maker pursuant
to Rule 144 under the Securities Act (or any similar provision
then in force).
"Wireless One Share Consideration" has the meaning
given such term in the Heartland Merger Agreement.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company shall not
hereafter enter into any agreement with respect to its securities
which is inconsistent with or violates the rights granted in this
Agreement to the holders of Registrable Securities.
(b) Remedies. Any Person having rights under any
provision of this Agreement shall be entitled to enforce such
rights specifically to recover damages caused by reason of any
breach of any provision of this Agreement and to exercise all
other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for
any breach of the provisions of this Agreement and that any party
may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or other
security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions
of this Agreement.
(c) Amendments and Waivers. No amendment or waiver to
the provisions of this Agreement shall be effective against the
Company without the prior written consent of the Company. No
amendment or waiver to the provisions of this Agreement shall be
effective against the holders of Chase Registrable Securities
without the prior written consent of the Majority Chase Holders.
No amendment or waiver to the provisions of this Agreement shall
be effective against the holders of TruVision Registrable
Securities without the prior written consent of the Majority
TruVision Holders. No amendment or waiver to the provisions of
this Agreement shall be effective against the holders of
Heartland Registrable Securities without the prior written
consent of the Majority Heartland Holders. No amendment or
waiver to the provisions of this Agreement shall be effective
against the holders of Wireless One Registrable Securities
without the prior written consent of the Majority Wireless One
Holders.
(d) Successors and Assigns. All covenants and
agreements in this Agreement by or on behalf of any of the
parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether
so expressed or not. In addition, whether or not any express
assignment has been made, the provisions of this Agreement which
are for the benefit of purchasers or holders of Registrable
Securities are also for the benefit of, and enforceable by, any
subsequent holder of Registrable Securities.
(e) Severability. Whenever possible, each provision
of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of
this Agreement is held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating
the remainder of this Agreement.
(f) Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need
not contain the signatures of more than one party, but all such
counterparts taken together shall constitute one and the same
Agreement.
(g) Descriptive Headings. The descriptive headings of
this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
(h) Governing Law. This Agreement shall be construed
in accordance with the laws of the State of New York, without
giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of New York or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.
(i) Notices. All notices, demands and other
communications to be given and delivered under or by reason of
provisions under this Agreement shall be in writing and shall be
deemed to have been given when personally delivered, sent by
telecopy (with a hard copy to follow) or express overnight
courier service, or mailed by first class mail, return receipt
requested, (i) with respect to each of the TruVision
Stockholders, to the addresses or telecopy numbers set forth on
Schedule IV hereto, (ii) with respect to each of the Designated
Wireless One Stockholders, to the addresses or telecopy numbers
set forth on Schedule II hereto, (iii) with respect to each of
CMCC, CVCA and Baseball, to the addresses or telecopy numbers set
forth on Schedule III hereto, and (iv) with respect to all other
parties, to the addresses or telecopy numbers set forth on
Exhibit 11.2 to the Heartland Merger Agreement.
(j) No Strict Construction. The parties hereto have
participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this
Agreement.
(k) Effect of Amendment and Restatement. This
Agreement amends and restates the terms of the Old Registration
Agreement with respect to the obligations of the parties thereto.
The obligations under the Old Registration Agreement, as restated
hereunder, remain in full force and effect under this Agreement.
Each party hereto by their execution of a counterpart hereof
consents to the amendment of the Old Registration Agreement,
which shall be effective as against each party to the Old
Registration Agreement and each holder of Registrable Securities,
whether or not such party or holder is a signatory hereto.
(l) Execution by Heartland. Heartland is executing
this Agreement on behalf of both itself and each of the Heartland
Subsidiaries, each of whom shall be bound by this Agreement by
virtue of such execution by Heartland, and Heartland agrees to
cause each Heartland Subsidiary to perform and honor each of its
obligations hereunder.
* * * * *
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
CHASE MANHATTAN CAPITAL CORPORATION
By: /s/ Micahel Hannon
______________________________
Name: Michael Hannon
Title:
BASEBALL PARTNERS
By: /s/ Michael Hannon
______________________________
Name: Michael Hannon
Title:
PREMIER VENTURE CAPITAL CORPORATION
By: /s/ Thomas J. Adamek
______________________________
Name: Thomas J. Adamek
Title: President
HEARTLAND WIRELESS COMMUNICATIONS,
INC.
By: /s/ David D. Hasby
______________________________
Name: David D. Hasby
Title: Vice President
WIRELESS ONE, INC.
By: /s/ Sean Reilly
______________________________
Name: Sean Reilly
Title: Chief Executive Officer
WIRELESS ONE STOCKHOLDERS
By: PREMIER VENTURE CAPITAL CORPORATION,
attorney-in-fact
By: /s/ Thomas J. Adamek
______________________________
Name: Thomas J. Adamek
Title: President
MISSISSIPPI WIRELESS TV, L.P.
By: WIRELESS TV, INC.
Its: General Partner
By: /s/ Henry M. Burkhalter
______________________________
Name: Henry M. Burkhalter
Title:
VISION COMMUNICATIONS, INC.
By: /s/ Henry M. Burkhalter
______________________________
Name: Henry M. Burkhalter
Title: President
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By: Chase Capital Partners
Its: General Partner
By: /s/ Michael Hannon
_______________________________
Name: Micahel Hannon
Title:
VANCOM, INC.
By: /s/ William Van Devender
_______________________________
Name: William Van Devender
Title: President
/s/ Laurence O. Woolhiser, Jr.
___________________________________
Laurence O. Woolhiser, Jr.
/s/ Walter Eilers
___________________________________
Walter Eilers
/s/ Henry M. Burkhalter
___________________________________
Henry M. Burkhalter
/s/ Bill R. Byer, Jr.
___________________________________
Bill R. Byer, Jr.
/s/ Kelly Balius
___________________________________
Kelly Balius
/s/ Douglas Goodwin
___________________________________
Douglas Goodwin
/s/ Sam Robertson
___________________________________
Sam Robertson
/s/ Jerrod Pitts
___________________________________
Jerrod Pitts
SCHEDULE I
TRUVISION STOCKHOLDERS
Mississippi Wireless TV, L.P.
VanCom, Inc.
Vision Communications, Inc.
Henry M. Burkhalter
Bill R. Byer, Jr.
Laurence O. Woolhiser, Jr.
Walter Eilers
Kelly Balius
Douglas Goodwin
Sam Robertson
Jerrod Pitts
SCHEDULE II
NAME ADDRESS
Premier Venture Capital 451 Florida Street
Corporation P.O. Box 1511
Baton Rouge, LA 70821-1511
Attention: Thomas J. Adamek
Advantage Capital Partners, LL&E Tower
Limited Partnership 909 Poydras Street, Suite 2230
New Orleans, LA 70112
Attention: Steven Stull
Advantage Capital Partners II, LL&E Tower
Limited Partnership 909 Poydras Street, Suite 2230
New Orleans, LA 70112
Attention: Steven Stull
First Commerce Capital, Inc. 821 Gravier Street, #1027
New Orleans, LA 70112
Attention: Michael P. Kirby
SCHEDULE III
NAME ADDRESS
Chase Manhattan Capital 380 Madison Avenue, 12th Fl.
Corporation New York, NY 10017
Attention: Arnold Chavkin
Baseball Partners c/o Chase Capital
380 Madison Avenue, 12th Fl.
New York, NY 10017
Attention: Arnold Chavkin
Chase Venture Capital 380 Madison Avenue, 12th Floor
Associates L.P. New York, New York 10017
Attention: Arnold Chavkin
in each case with a copy (which copy
will not constitute notice to such
stockholder) to:
Samuel A. Fishman
Latham & Watkins
885 Third Avenue
Suite 100
New York, New York 10022
Telecopy: (212) 751-4864
SCHEDULE IV
For Mississippi Wireless TV, L.P., or Vision Communications, Inc.
c/o TruVision Wireless, Inc.
1080 River Oaks Drive
Suite A150
Jackson, Mississippi 39208
Attention: Henry M. Burkhalter
Telecopy: (601) 936-1517
with a copy (which copy will not
constitute notice to such stockholder) to:
Samuel A. Fishman
Latham & Watkins
885 Third Avenue
Suite 100
New York, New York 10022
Telecopy: (212) 751-4864
For VanCom, Inc.:
P.O. Box 5327
Jackson, Mississippi 39296
Attention: William Van Devender
Telecopy: (601) 354-0904
with a copy (which copy will not
constitute notice to such
Stockholder) to:
Brunini Grantham Grower & Hewes
1400 Trustmark Building
248 E. Capitol Street
Jackson, Mississippi 39201
Telecopy: (601) 960-6902
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
THIS AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this
"Agreement") is made as of July 29, 1996, by and among Chase
Venture Capital Associates, L.P. ("CVCA"), the Persons named on
Schedule I hereto (the "TruVision Stockholders"), Hans Sternberg
("Sternberg"), Sean Reilly ("Reilly") and those persons named on
Schedule II hereto (together with Sternberg and Reilly, the
"Wireless One Stockholders"), Chase Manhattan Capital Corporation
("CMCC"), Baseball Partners ("Baseball"), Heartland Wireless
Communications, Inc., a Delaware corporation ("Heartland"), on
behalf of itself and each of its subsidiaries which holds Common
Stock (the "Heartland Subsidiaries"), and Wireless One, Inc., a
Delaware corporation (the "Company"). Unless otherwise indicated
herein, capitalized terms used herein are defined in Section 6
hereof.
WHEREAS, the Wireless One Stockholders, CMCC,
certain subsidiaries of Heartland and Heartland are parties to a
certain Stockholders Agreement dated October 24, 1995 (the "Old
Stockholders Agreement") as amended by the Amendment to the
Stockholders Agreement dated April 25, 1996;
WHEREAS, the Company, the Wireless One Stockholders,
Heartland and the Heartland Subsidiaries (collectively with
Heartland, the "Heartland Entities"), Wireless One Operating
Company, a Delaware corporation ("Old Wireless One"), Wireless
One Merger Company, a Delaware corporation and a direct
wholly-owned Subsidiary of the Company ("Heartland MergerSub"),
and the other stockholders of Old Wireless One are parties to a
Contribution Agreement and Agreement and Plan of Merger, dated as
of October 18, 1995 (the "Heartland Merger Agreement"), pursuant
to which certain subsidiaries of Heartland contributed certain of
their assets to the Company and pursuant to which Old Wireless
One merged with and into Heartland MergerSub with Old Wireless
One surviving. In addition, pursuant to Article IX of the
Heartland Merger Agreement, after the Second Closing (as that
term is defined in the Heartland Merger Agreement) the Company
has had the right under certain circumstances to acquire certain
assets of Heartland and/or its Subsidiaries (the "Call Market
Assets") in exchange for either cash or shares of the Company's
Common Stock;
WHEREAS, the execution, delivery and continued
effectiveness of the Old Stockholders Agreement were conditions
precedent to Old Wireless One's obligation under the Heartland
Merger Agreement to consummate the Heartland Merger and the
obligation of the Company under the Heartland Merger Agreement to
cause Heartland MergerSub to consummate the Heartland Merger.
The Old Stockholders Agreement was executed and delivered
contemporaneously with the First Closing (as that term is defined
in the Heartland Merger Agreement).
WHEREAS, the Company, Wireless One MergerSub, Inc.
("TruVision MergerSub") and TruVision Wireless, Inc.
("TruVision") are parties to an Agreement and Plan of Merger,
dated April 25, 1996 (the "TruVision Merger Agreement"), pursuant
to which TruVision MergerSub will merge with and into TruVision
with TruVision surviving. The execution and delivery this
Agreement are conditions precedent to the Company's obligation
under the TruVision Merger Agreement to cause TruVision MergerSub
to consummate the TruVision Merger and to TruVision's obligation
to consummate the TruVision Merger. This Agreement is being
executed and delivered contemporaneously with the TruVision
Closing.
WHEREAS, the Company and the Stockholders desire to
amend and restate the Old Stockholders Agreement, as amended, for
the purposes, among others, of (i) establishing the composition
of the Company's Board of Directors (the "Board") and (ii)
establishing limitations on the rights of certain Stockholders to
make future acquisitions of the Company's Common Stock.
NOW, THEREFORE, the parties to this Agreement hereby
agree as follows:
1. Voting Agreement Related to Board Composition.
(a) From and after the date of this Agreement and
until the provisions of this Section 1 cease to be effective,
each Stockholder shall vote all of his Stockholder Shares and
shall take all other necessary or desirable actions within his
control (whether in his capacity as a stockholder, director,
member of a board committee or officer of the Company or
otherwise, and including, without limitation, attendance at
meetings in person or by proxy for purposes of obtaining a quorum
and execution of written consents in lieu of meetings), and the
Company shall take all necessary and desirable actions within its
control (including, without limitation, calling special board and
stockholder meetings), so that:
(i) the authorized number of directors on
the Board shall be established at nine (9);
(ii) the Majority TruVision Holders shall
have the right in any election of directors to the Board
to designate one (1) director so long as the number of
TruVision Shares is greater than one-half (1/2) of the
Initial TruVision Share Quantity (any such director so
selected being referred to herein as a "TruVision
Director") (the initial TruVision Director shall be Henry
M. Burkhalter);
(iii) the Majority Wireless One Holders
shall have the right in any election of directors to the
Board to designate two (2) directors so long as the
number of Wireless One Shares is greater than one-half
(1/2) of the Initial Wireless One Share Quantity (any such
director so selected being referred to herein as a
"Wireless One Director") (the initial Wireless One
Directors shall be Sternberg and Reilly);
(iv) the Majority Heartland Holders shall
have the right in any election of directors to the Board
to designate two (2) directors so long as the number of
Heartland Shares is greater than one-half (1/2) of the
Initial Heartland Share Quantity (any such director so
selected being referred to herein as a "Heartland
Director") (the initial Heartland Directors shall be
David E. Webb and J.R. Holland, Jr.);
(v) the Majority Chase Holders shall have
the right in any election of directors to the Board to
designate two (2) directors so long as the number of
Chase Shares is greater than one-half (1/2) of the Initial
Chase Share Quantity (any such director so selected being
referred to herein as a "Chase Director") (the initial
Chase Directors shall be Arnold Chavkin and William J.
Van Devender);
(vi) the Majority Wireless One Holders
shall have the right in any election of directors to the
Board to designate one (1) Independent Director so long
as the number of Wireless One Shares is greater than one-
half (1/2) of the Initial Wireless One Share Quantity (any
such director so selected being referred to herein as a
"Wireless One Independent Director") (the initial
Wireless One Independent Director shall be William K.
Luby);
(vii) the Majority Heartland Holders shall
have the right in any election of directors to the Board
to designate one (1) Independent Director so long as the
number of Heartland Shares is greater than one-half (1/2)
of the Initial Heartland Share Quantity (any such
director so selected being referred to herein as a
"Heartland Independent Director") (the initial Heartland
Independent Director shall be Daniel L. Shimer);
(viii) the board of directors of each of the
Company's Subsidiaries (each a "Sub Board") shall be
comprised of the President of the Company, the Chief
Executive Officer of the Company, and one director from
among the TruVision Director, the Heartland Directors and
the Chase Directors, which latter director (the "Non-
Management Sub Director") will be chosen by the holders
of a majority of the Stockholder Shares and shall
initially be Arnold Chavkin;
(ix) the removal from the Board (with or
without cause) of any TruVision Director shall be at the
written request of the Majority TruVision Holders, but
only upon such written request and under no other
circumstances, so long as the number of TruVision Shares
is greater than one-half (1/2) of the Initial TruVision
Share Quantity;
(x) the removal from the Board (with or
without cause) of any Wireless One Director or Wireless
One Independent Director shall be at the written request
of the Majority Wireless One Holders, but only upon such
written request and under no other circumstances so long
as the number of Wireless One Shares is greater than
one-half (1/2) of the Initial Wireless One Share Quantity;
(xi) the removal from the Board (with or
without cause) of any Heartland Director or Heartland
Independent Director shall be at the written request of
the Majority Heartland Holders, but only upon such
written request and under no other circumstances, so long
as the number of Heartland Shares is greater than one-
half (1/2) of the Initial Heartland Share Quantity;
(xii) the removal from the Board (with or
without cause) of any Chase Director shall be at the
written request of the Majority Chase Holders, but only
upon such written request and under no other
circumstances, so long as the number of Chase Shares is
greater than one-half (1/2) of the Initial Chase Share
Quantity;
(xiii) in the event that any TruVision
Director ceases to serve as a member of the Board during
such member's term of office, the resulting vacancy on
the Board shall be filled by the Majority TruVision
Holders, so long as the number of TruVision Shares is
greater than one-half (1/2) of the Initial TruVision Share
Quantity;
(xiv) in the event that any Wireless One
Director or Wireless One Independent Director ceases to
serve as a member of the Board during such member's term
of office, the resulting vacancy on the Board shall be
filled by the Majority Wireless One Holders, so long as
the number of Wireless One Shares is greater than
one-half (1/2) of the Initial Wireless One Share Quantity;
(xv) in the event that any Heartland
Director or Heartland Independent Director ceases to
serve as a member of the Board during the member's term
of office, the resulting vacancy on the Board shall be
filled by the Majority Heartland Holders, so long as the
number of Heartland Shares is greater than one-half (1/2)
of the Initial Heartland Share Quantity;
(xvi) in the event that any Chase Director
ceases to serve as a member of the Board during such
member's term of office, the resulting vacancy on the
Board shall be filled by the Majority Chase Holders, so
long as the number of Chase Shares is greater than one-
half (1/2) of the Initial Chase Share Quantity;
(xvii) the removal from any Sub kBoard (with
or without cause) of any Non-Management Sub Director
shall be at the written request of the holders of a
majority of the Stockholder Shares, but only upon such
written request (provided that any Non-Management Sub
Director shall be removed as such if he or she ceases to
be either a Chase Director, a Heartland Director or a
TruVision Director, as the case may be), and in the event
that any Non-Management Sub Director ceases to serve as a
member of any Sub Board during such Director's term of
office, the resulting vacancy on such Sub Board shall be
filled by the holders of a majority of the Stockholder
Shares; and
(xviii) Henry M. Burkhalter shall be the
Vice-Chairman of the Board for so long as he is President
of the Company.
(b) The Company shall pay the reasonable
out-of-pocket expenses incurred by each director in connection
with attending the meetings of the Board, any Sub Board and any
committee thereof.
2. Legend. Each certificate evidencing Stockholder
Shares and each certificate issued in exchange for or upon the
transfer of any Stockholder Shares (if such shares remain Stock-
holder Shares as defined herein after such transfer) shall be
stamped or otherwise imprinted with a legend in substantially the
following form:
"The securities represented by this certificate are
subject to an Amended and Restated Stockholders
Agreement dated as of July 29, 1996, among the
issuer of such securities (the "Company") and
certain of the Company's stockholders. A copy of
such Stockholders Agreement will be furnished
without charge by the Company to the holder hereof
upon written request."
The legend set forth above shall be removed from the certificates
evidencing any shares which cease to be Stockholder Shares.
3. Additional Stockholders. Prior to Transferring any
Stockholder Shares (other than in a Public Sale) to any Person,
the transferring Stockholder shall cause the prospective
Transferee (other than Transferees which are already parties to
this Agreement) to execute and deliver to the Company and the
other Stockholders a counterpart of this Agreement and thereby
agree to be bound by this Agreement as an additional
"Stockholder". Any Transfer or attempted Transfer of any
Stockholder Shares in violation of any provision of this
Agreement shall be void, and the Company shall not record such
Transfer on its books or treat any purported Transferee of such
Stockholder Shares as the owner of such shares for any purpose.
In addition, contemporaneously with any issuance of Common Stock
pursuant to Article IX of the Heartland Merger Agreement to any
Subsidiary of Heartland which is not already a party to this
Agreement, Heartland will cause such Subsidiary to execute and
deliver to the Company and the other Stockholders a counterpart
of this Agreement and thereby agree to be bound by this Agreement
as an additional "Stockholder".
4. Acquire Shares; Solicit Proxies; Form Group. Until
October 24, 1998, each Stockholder shall not (and shall cause any
Person controlled by it or him not to), directly or indirectly,
without the prior approval of the Board:
(a) acquire, or offer to acquire, directly or
indirectly, by purchase or otherwise, any equity securities of
the Company (or direct or indirect rights or options to acquire
any equity securities of the Company), except for (i) Common
Stock acquired by such Person pursuant to the Heartland Merger
Agreement (as adjusted pursuant to the Heartland Merger Agreement
and the Heartland Escrow Agreement), or TruVision Merger
Agreement (as adjusted pursuant to the TruVision Merger Agreement
and the TruVision Escrow Agreement) and any equity securities
issued or issuable directly or indirectly with respect to such
Common Stock by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization, (ii) any
securities issued (or issuable) by the Company to such
Stockholder pursuant to any option plan of the Company approved
by the Board, (iii) in the case of Advantage Capital Partners,
Limited Partnership and Advantage Capital Partners II, Limited
Partnership, the acquisition (in the aggregate among them) of not
more than 250,000 shares of Common Stock (as such number may be
proportionately adjusted to reflect stock dividends, splits or
combinations of the Common Stock after the date hereof) on or
after the date of the Old Stockholders Agreement in addition to
the Wireless One Shares received or to be received by them, and
(iv) in the case of the Heartland Entities, the acquisition (in
the aggregate among them) of not more than 250,000 shares of
Common Stock (as such number may be proportionately adjusted to
reflect stock dividends, splits or combinations of the Common
Stock after the date hereof) on or after the date of the Old
Stockholders Agreement in addition to the Heartland Shares
received or to be received by them;
(b) solicit proxies or consents or become a
"participant" in a "solicitation" (as such terms are defined in
Regulation 14A under the Securities Exchange Act of 1934, as
amended) of proxies or consents with respect to securities of the
Company in opposition to solicitations made by or on behalf of
the Board with regard to any matter; or
(c) except for this Agreement, join a partnership,
limited partnership, syndicate or other group (as that term is
used in Rule 13d-5 under the Securities Exchange Act of 1934, as
amended) or otherwise act in concert with any other person for
the purpose of acquiring, holding, voting or disposing of
securities of the Company.
No director shall be deemed to be disqualified from voting with
respect to any matter subject to Board approval in this Section 4
on the basis that such director has an interest in such matter.
5. Definitions.
"Affiliate" means a Person that directly, or
indirectly through one or more intermediaries, controls or is
controlled by or is under common control with the Person in
question and in the case of a partnership or limited liability
company, any partner or member of such partnership or limited
liability company. For purposes of this Agreement, Baseball will
be deemed to be an "Affiliate" of CMCC and CVCA and CMCC's and
CVCA's "Affiliates", and CMCC, CVCA, CMCC's Affiliates and CVCA's
Affiliates will be deemed to be "Affiliates" of Baseball.
"Baseball" means Baseball Partners, a New York
general partnership.
"Chase Shares" means (i) all Common Stock which is
part of the portion of the Wireless One Share Consideration
issued to CMCC or Baseball pursuant to the Heartland Merger
Agreement (as adjusted pursuant to the Heartland Merger Agreement
and the Heartland Escrow Agreement) and all Common Stock which is
part of the portion of Consideration issued to CVCA pursuant to
the TruVision Merger Agreement (as adjusted pursuant to the
TruVision Merger Agreement and the TruVision Escrow Agreement)
and (ii) any equity securities issued or issuable directly or
indirectly with respect to the Common Stock referred to in clause
(i) by way of stock dividend or stock split or in connection with
a combination of shares, recapitalization, merger, consolidation
or other reorganization. As to any particular shares
constituting Chase Shares, such shares shall cease to be Chase
Shares when they have been (a) effectively registered under the
Securities Act and disposed of in accordance with the regis-
tration statement covering them or (b) distributed to the public
through a broker, dealer or market maker pursuant to Rule 144
under the Securities Act (or any similar provision then in
force).
"Common Stock" means the Company's common stock, par
value $.01 per share.
"Entity" means any general partnership, limited
partnership, corporation, association, cooperative, joint stock
company, trust, limited liability company, business trust, joint
venture, unincorporated organization and governmental entity (or
any department, agency or political subdivision thereof).
"Heartland Escrow Agreement" means the "Escrow
Agreement," as that term is defined in the Heartland Merger
Agreement.
"Heartland Merger" means the "Merger," as that term
is defined in the Heartland Merger Agreement.
"Heartland Share Consideration" has the meaning
given such term in the Heartland Merger Agreement.
"Heartland Shares" means (i) all Common Stock which
is part of the Heartland Share Consideration issued to the
Heartland Entities pursuant to the Heartland Merger Agreement (as
adjusted pursuant to the Heartland Merger Agreement and the
Heartland Escrow Agreement) or which is issued to Heartland or
any Subsidiary of Heartland in consideration of any Call Market
Assets acquired by the Company or any of its Affiliates pursuant
to the Heartland Merger Agreement and (ii) any equity securities
issued or issuable directly or indirectly with respect to the
Common Stock referred to in clause (i) by way of stock dividend
or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
As to any particular shares constituting Heartland Shares, such
shares shall cease to be Heartland Shares when they have been (a)
effectively registered under the Securities Act and disposed of
in accordance with the registration statement covering them or
(b) distributed to the public through a broker, dealer or market
maker pursuant to Rule 144 under the Securities Act.
"Independent Director" means a natural person who is
not an employee, officer, director (other than of the Company),
Affiliate, or stockholder holding more than 5% of the outstanding
common stock (on a fully diluted basis), of the Company,
Heartland or any of the Wireless One Stockholders, or a member of
the Family Group, as applicable, of any such Person.
"Initial Chase Share Quantity" means the aggregate
number of shares of Common Stock issued to CMCC and Baseball
pursuant to the Heartland Merger Agreement (as adjusted pursuant
to the Heartland Merger Agreement and the Heartland Escrow
Agreement, and as adjusted for any subsequent stock splits, stock
dividends, combinations of shares and similar recapitalizations)
and to CVCA pursuant to the TruVision Merger Agreement (as
adjusted pursuant to the TruVision Merger Agreement and the
TruVision Escrow Agreement, and as adjusted for any subsequent
stock splits, stock dividends, combinations of shares and similar
recapitalizations).
"Initial Heartland Share Quantity" means the
aggregate number of shares of Common Stock issued to Heartland
and certain subsidiaries of Heartland pursuant to the Heartland
Merger Agreement (as adjusted pursuant to the Heartland Merger
Agreement and the Heartland Escrow Agreement, and as adjusted for
any subsequent stock splits, stock dividends, combinations of
shares and similar recapitalizations).
"Initial TruVision Share Quantity" means the
aggregate number of shares of Common Stock issued to the
TruVision Stockholders pursuant to the TruVision Merger
Agreement, including Common Stock issuable pursuant to Article I
and Section 5.13 of the TruVision Merger Agreement(as adjusted
pursuant to the TruVision Merger Agreement and the TruVision
Escrow Agreement, and as adjusted for any subsequent stock
splits, stock dividends, combinations of shares and similar
recapitalizations).
"Initial Wireless One Share Quantity" means the
aggregate number of shares of Common Stock issued to the Wireless
One Stockholders pursuant to the Heartland Merger Agreement (as
adjusted pursuant to the Heartland Merger Agreement and the
Heartland Escrow Agreement, and as adjusted for any subsequent
stock splits, stock dividends, combinations of shares and similar
recapitalizations).
"Majority Chase Holders" at any time means holders
of a majority of the Chase Shares.
"Majority Heartland Holders" at any time means
holders of a majority of the Heartland Shares.
"Majority TruVision Holders" at any time means
holders of a majority of the TruVision Shares.
"Majority Wireless One Holders" at any time means
holders of a majority of the Wireless One Shares.
"Person" means any individual or any Entity.
"Public Sale" means any sale of Stockholder Shares
to the public pursuant to an offering registered under the
Securities Act or to the public through a broker, dealer or
market maker pursuant to the provisions of Rule 144 adopted under
the Securities Act (or any similar provision then in force).
"Securities Act" means the Securities Act of 1933,
as amended from time to time.
"Stockholder" means any holder of Stockholder
Shares.
"Stockholder Shares" means the TruVision Shares, the
Chase Shares, the Wireless One Shares and the Heartland Shares.
As to any particular shares constituting Stockholder Shares, such
shares will cease to be Stockholder Shares when they have been
(A) effectively registered under the Securities Act and disposed
of in accordance with the registration statement covering them or
(B) sold to the public through a broker, dealer or market maker
pursuant to Rule 144 (or any similar provision then in force)
under the Securities Act.
"Subsidiary" means, with respect to any Person, any
corporation, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power
of shares of stock entitled (irrespective of whether, at the
time, stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening
of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof, or
(ii) if a partnership, association or other business entity, a
majority of the partnership or other similar ownership interest
thereof is at the time owned or controlled, directly or
indirectly, by any Person or one or more Subsidiaries of that
Person or a combination thereof. For purposes hereof, a Person
or Persons shall be deemed to have a majority ownership interest
in a partnership, association or other business entity if such
Person or Persons shall be allocated a majority of partnership,
association or other business entity gains or losses or shall be
or control the managing director or general partner of such
partnership, association or other business entity.
"Transfer" means any sale, transfer, assignment,
pledge, hypothecation or other direct or indirect disposition of
an interest in a security. The terms "Transferee,"
"Transferred," and other forms of the word "Transfer" shall have
correlative meanings.
"TruVision Closing" means the "Closing," as that
term is defined in the TruVision Merger Agreement.
"TruVision Escrow Agreement" means, collectively,
the escrow agreements dated as of the date of this Agreement and
executed and delivered in connection with the consummation of the
TruVision Merger.
"TruVision Shares" means (i) all Common Stock issued
to the TruVision Stockholders pursuant to the TruVision Merger
Agreement, including Common Stock issuable pursuant to Article I
and Section 5.13 of the TruVision Merger Agreement(as adjusted
pursuant to the TruVision Merger Agreement and the TruVision
Escrow Agreement), and (ii) any equity securities issued or
issuable directly or indirectly with respect to the Common Stock
referred to in clause (i) by way of stock dividend or stock split
or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization. As to any
particular shares constituting TruVision Shares, such shares
shall cease to be TruVision Shares when they have been (a)
effectively registered under the Securities Act and disposed of
in accordance with the registration statement covering them or
(b) distributed to the public through a broker, dealer or market
maker pursuant to Rule 144 under the Securities Act (or any
similar provision then in force).
"Wireless One Share Consideration" has the meaning
given such term in the Heartland Merger Agreement.
"Wireless One Shares" means (i) all Common Stock
which is part of the portion of the Wireless One Share
Consideration issued to the Wireless One Stockholders pursuant to
the Heartland Merger Agreement (as adjusted pursuant to the
Heartland Merger Agreement and the Heartland Escrow Agreement)
and (ii) any equity securities issued or issuable directly or
indirectly with respect to the Common Stock referred to in clause
(i) by way of stock dividend or stock split or in connection with
a combination of shares, recapitalization, merger, consolidation
or other reorganization. As to any particular shares
constituting Wireless One Shares, such shares shall cease to be
Wireless One Shares when they have been (a) effectively
registered under the Securities Act and disposed of in accordance
with the registration statement covering them or (b) distributed
to the public through a broker, dealer or market maker pursuant
to Rule 144 under the Securities Act (or any similar provision
then in force).
6. Amendment and Waiver. Except as otherwise provided
herein, the provisions of this Agreement may be amended or waived
only upon the prior written consent of the Company, the Majority
TruVision Holders, the Majority Wireless One Holders, the
Majority Heartland Holders and the Majority Chase Holders. The
failure of any party to enforce any of the provisions of this
Agreement shall in no way be construed as a waiver of such
provisions and shall not affect the right of such party there-
after to enforce each and every provision of this Agreement in
accordance with its terms.
7. Governing Law. The corporate law of the State of
Delaware shall govern all issues and questions concerning the
relative rights of the Company and its stockholders. This
Agreement shall be construed in accordance with the laws of the
State of New York, without giving effect to any choice of law or
conflict of law rules or provisions (whether of the State of New
York or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of New York.
8. Notices. All notices, demands and other
communications to be given and delivered under or by reason of
provisions under this Agreement shall be in writing and shall be
deemed to have been given to any party when personally delivered,
sent by telecopy (with a hard copy to follow) or express
overnight courier service, or mailed by first class mail, return
receipt requested, to the applicable addresses or telecopy
numbers set forth for such party on Exhibit 11.2 to the Heartland
Merger Agreement or Section 12.3 of the TruVision Merger
Agreement or Schedule III hereto or to such other addresses or
telecopy numbers as such party shall have designated by notice to
the other party.
9. Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of
this Agreement is held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating
the remainder of this Agreement.
10. Entire Agreement. Except as otherwise expressly set
forth herein and in the Heartland Merger Agreement and the
TruVision Merger Agreement, this document embodies the complete
agreement and understanding among the parties hereto with respect
to the subject matter hereof and supersedes and preempts any
prior understandings, agreements or representations by or among
the parties, written or oral, which may have related to the
subject matter hereof in any way.
11. Successors and Assigns. Except as otherwise
provided herein, this Agreement shall bind and inure to the
benefit of and be enforceable by the Company and its successors
and assigns and the Stockholders and any subsequent holders of
Stockholder Shares and the respective successors and assigns of
each of them, so long as they hold Stockholder Shares.
12. Remedies. The Company and the holders of
Stockholder Shares shall be entitled to enforce their rights
under this Agreement specifically to recover damages by reason of
any breach of any provision of this Agreement and to exercise all
other rights existing in their favor. The parties hereto agree
and acknowledge that money damages may not be an adequate remedy
for any breach of the provisions of this Agreement and that the
Company and the holders of Stockholder Shares may in their sole
discretion apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive relief
(without posting a bond or other security) in order to enforce or
prevent any violation of the provisions of this Agreement.
13. No Strict Construction. The parties hereto have
participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this
Agreement.
14. Descriptive Headings; Interpretation. The
descriptive headings of this Agreement are inserted for
convenience only and do not constitute a Section of this
Agreement. The use of the word "including" in this Agreement
shall be by way of example rather than by limitation. The use of
the words "he", "his", "it", or "its" shall be deemed to include
any Person, regardless of gender or status as an Entity.
15. Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be an original and all
of which taken together shall constitute one and the same
agreement.
16. Effect of Amendment and Restatement. This Agreement
amends and restates the terms of the Old Stockholders Agreement
(as amended) with respect to the obligations of the parties
thereto. The obligations under the Old Stockholders Agreement
(as amended), as amended and restated hereunder, remain in full
force and effect under this Agreement. Each party hereto by
their execution of a counterpart hereof consents to this
amendment and restatement of the Old Stockholders Agreement (as
amended).
17. Execution by Heartland. Heartland is executing this
Agreement on behalf of both itself and each of the Heartland
Subsidiaries, each of whom shall be bound by this Agreement by
virtue of such execution by Heartland, and Heartland agrees to
cause each Heartland Subsidiary to perform and honor each of its
obligations hereunder.
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on the day and year first above written.
CHASE MANHATTAN CAPITAL CORPORATION
By: /s/ Michael Hannon
______________________________
Name: Michael Hannon
Title:
BASEBALL PARTNERS
By: /s/ Michael Hannon
______________________________
Name: Michael Hannon
Title:
PREMIER VENTURE CAPITAL CORPORATION
By: /s/ Thomas J. Adamek
______________________________
Name: Thomas J. Adamek
Title: President
HEARTLAND WIRELESS COMMUNICATIONS,
INC.
By: /s/ David D. Hasby
______________________________
Name: David D. Hasby
Title: Vice President
WIRELESS ONE, INC.
By: /s/ Sean Reilly
______________________________
Name: Sean Reilly
Title: Chief Executive Officer
MISSISSIPPI WIRELESS TV, L.P.
By: WIRELESS TV, INC.
Its: General Partner
By: /s/ Henry M. Burkhalter
______________________________
Name: Henry M. Burkhalter
Title:
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By: Chase Capital Partners, L.P.
Its: General Partner
By: /s/ Michael Hannon
______________________________
Name: Michael Hannon
Title:
VANCOM, INC.
By: /s/ William Van Deveneder
______________________________
Name: William Van Devender
Title: President
VISION COMMUNICIATIONS, INC.
By: /s/ Henry M. Burkhalter
______________________________
Name: Henry M. Burkhalter
Title: President
/s/ Hans Sternberg
___________________________________
Hans Sternberg
/s/ Sean E. Reilly
___________________________________
Sean E. Reilly
SCHEDULE I
TRUVISION STOCKHOLDERS
Mississippi Wireless TV, L.P.
VanCom, Inc.
Vision Communications, Inc.
SCHEDULE II
Advantage Capital Partners, Limited Partnership
Advantage Capital Partners II, Limited Partnership
Premier Venture Capital Corporation
Hans Sternberg
Sean Reilly
SCHEDULE III
For Mississippi Wireless TV, L.P., or Vision Communications, Inc.
c/o TruVision Wireless, Inc.
1080 River Oaks Drive
Suite A150
Jackson, Mississippi 39208
Attention: Henry M. Burkhalter
Telecopy: (601) 936-1517
with a copy (which copy will not constitute
notice to such stockholder) to:
Samuel A. Fishman
Latham & Watkins
885 Third Avenue
Suite 100
New York, New York 10022
Telecopy: (212) 751-4864
For Chase Venture Capital Associates, L.P.:
380 Madison Avenue
12th Floor
New York, New York 10014
Attention: Arnold Chavkin
Telecopy: (212) 622-3101
with a copy (which copy will not constitute
notice to such stockholder) to:
Samuel A. Fishman
Latham & Watkins
885 Third Avenue
Suite 100
New York, New York 10022
Telecopy: (212) 751-4864
For VanCom, Inc.:
P.O. Box 5327
Jackson, Mississippi 39296
Attention: William Van Devender
Telecopy: (601) 354-0904
with a copy (which copy will not constitute
notice to such Stockholder) to:
Walter Weems
___________________________________
___________________________________
___________________________________
Telecopy: (601) 960-6902
EXHIBIT 11
Wireless One, Inc.
Earnings per Share Computation Information
<TABLE>
<CAPTION>
Period from
February 4,
1993 Year Year Pro Forma Six Months Pro Forma
(inception) to Ended Ended Combined Ended June 30, Combined
to December 31 December 31, December 31, As Adjusted ______________ As Adjusted
1993 1994 1995 1995 1995 1996 6/30/96
_______ ______ ______ _____ ____ ____ _________
<S> <C> <C> <C> <C> <C> <C> <C>
Net loss (162,610) (2,261,813) (7,692,474) (10,093,835) (1,749,544) (12,776,890)(14,032,546)
Preferred stock dividends and
discount accretion -- -- (786,389) -- (365,311) -- --
_____________ ______________ ____________ ____________ ____________ ___________ ____________
Net loss applicable to
common stock (162,610) (2,261,813) (8,478,863) (10,093,835) (2,114,855) (12,776,890)(14,032,546)
============= ============== ============ ============ ============ ============ ============
Weighted avg shares
outstanding 538,127 1,863,512 4,187,736 7,630,681 2,013,950 13,498,752 16,941,697
Primary and fully-diluted
loss per common share (0.30) (1.21) (2.02) (1.32) (1.05) (0.95) (0.83)
============= ============== ============ ============ ============ =========== ============
The above earnings per share (EPS) calculations are submitted in accordance
with APB Opinion No. 15.
An EPS calculation in accordance with Regulation S-K item 601(b)(11) is not
shown above because it produces an antidilutive result.
The following information is disclosed for purposes of calculating the antidilutive
EPS.
Weighted avg shares
outstanding 538,127 1,863,512 4,187,736 7,630,681 2,013,950 13,498,752 16,941,697
Shares issuable upon exercise
of options and warrants -- 248,917 586,133 743,547 380,331 623,112 743,547
_____________ ______________ ____________ ____________ ____________ ___________ ____________
Weighted average shares
outstanding 538,127 2,112,429 4,773,869 8,374,228 2,394,281 14,121,864 17,685,244
Net loss per common share (0.30) (1.07) (1.78) (1.21) (0.88) (0.90) (0.79)
============= ============== ============ ============ =========== =========== ============
</TABLE>
EXHIBIT 21.1
SUBSIDIARIES STATE OF ORGANIZATION
TruVision Wireless, Inc. Delaware
TruVision Wireless - Chattanooga, Inc. Delaware
TruVision Wireless - Flippin, Inc. Delaware
TruVision Wireless - Gadsden, Inc. Delaware
TruVision Wireless - Memphis, Inc. Delaware
TruVision Wireless - Jacksonville, Inc. Delaware
TruVision Wireless - Lawrenceburg, Inc. Delaware
Wireless One, Inc. Delaware
Wireless One Operating Company, L.L.C. Texas
Wireless One Operating Company, Inc. Delaware
Wireless One of Baton Rouge, Inc. Delaware
Wireless One of Bunkie, Inc. Delaware
Wireless One of Houma, Inc. Delaware
Wireless One of Husser, Inc. Delaware
Wireless One of Lafayette, Inc. Delaware
Wireless One of Lake Charles, Inc. Delaware
Wireless One of Monroe, Inc. Delaware
Wireless One of Baldwin County, Inc. Delaware
Wireless One of Bucks, Inc. Delaware
Wireless One of Muscle Shoals, Inc. Delaware
Wireless One of Brenham, Inc. Delaware
Wireless One of Bryan, Tx., Inc. Delaware
Wireless One of Milano, Inc. Delaware
Wireless One of Wharton, Inc. Delaware
Gulf Coast Wireless, Inc. Texas
Wireless One of Fort Walton, Inc. Delaware
Wireless One of Gainesville, Inc. Delaware
Wireless One of Ocala, Inc. Delaware
Wireless One of Panama City, Inc. Delaware
Pan Wireless Communication, Inc. Delaware
Wireless One of Pensacola, Inc. Delaware
Wireless One of Chattanooga, Inc. Delaware
Wireless One of Tullahoma, Inc. Delaware
Wireless One of Jeffersonville, Inc. Delaware
Wireless One PCS, Inc. Delaware
Wireless One of Alexandria, Inc. Delaware
Wireless One of Dothan, Inc. Delaware
Wireless One of Albany, Inc. Delaware
Wireless One of Freeport, Inc. Delaware
Wireless One of Huntsville, Inc. Delaware
Bartel, Inc. Alabama
Shoals Wireless, Inc. Tennessee
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Wireless One, Inc.
We consent to the use of our report included herein and to
the references to our firm under the headings "Selected
Historical Financial Data" and "Experts" in the prospectus.
Our report dated June 20, 1995 contains an explanatory
paragraph that refers to a business combination in 1994 accounted
for as a purchase involving assets comprising a portion of
Heartland Division. As a result of the acquisition, financial
information of Heartland Division for periods after August 18,
1994 is presented on a different cost basis than that for periods
before August 18, 1994, and, therefore , such information is not
comparable.
KPMG Peat Mariwick LLP
Dallas, Texas
September 19, 1996
EXHIBIT 23.3
INDEPENDENT AUDITORS' REPORT ON
FINANCIAL STATEMENT SCHEDULE AND CONSENT
The Board of Directors
Wireless One, Inc.
The audits referred to in our report dated March 22, 1996,
except as to Note 15 which is as of August 12, 1996,
included the related financial statement schedule for the period
from February 3, 1993 (inception) through December 31, 1993 and
the years ended December 31, 1994 and 1995, included in the
registration statement. This financial statement schedule is the
responsibility of the Company's management. Our responsibility
is to express an opinion, on this financial statement schedule
based on our audits. In our opinion such financial statement
schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
We consent to the use of our reports included herein and to
the references to our firm under the headings "Experts", "Summary
Consolidated Financial and Opertating Data" and "Selected
Historical Financial Data" in the prospectus.
KPMG Peat Marwick LLP
New Orleans, Lousisiana
September 19, 1996
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports on the financial statements of TruVision Wireless, Inc., on the
combined financial statements of Madison Communications, Inc. and Beasley
Communications, Inc. and on the financial statements of BarTel, Inc. as of
the dates and for the periods indicated therein, and to all other references
to our firm included in or made a part of this Registration Statement.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Jackson, Mississippi,
September 19, 1996.
