<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 2, 1996
REGISTRATION NO. 333-5109
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 2 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
WIRELESS ONE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
DELAWARE 72-1300837 4841
(STATE OR OTHER (I.R.S. EMPLOYER IDENTIFICATION NO.)
JURISDICTION OF (PRIMARY STANDARD
INCORPORATION OR INDUSTRIAL CLASSIFICATION
ORGANIZATION) CODE NUMBER)
11301 INDUSTRIPLEX BOULEVARD
SUITE 4
BATON ROUGE, LOUISIANA 70809-4115
TELEPHONE: 504-293-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
MR. HANS J. STERNBERG
CHAIRMAN OF THE BOARD
WIRELESS ONE, INC.
11301 INDUSTRIPLEX BOULEVARD
SUITE 4
BATON ROUGE, LOUISIANA 70809-4115
TELEPHONE: 504-293-5000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
COPIES TO:
LANCE C. BALK, ESQ. JEREMIAH L. THOMAS III, ESQ.
KIRKLAND & ELLIS SIMPSON THACHER & BARTLETT
153 EAST 53RD STREET 425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10017
TELEPHONE: 212-446-4800 TELEPHONE: 212-455-2000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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, 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
MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED PRICE(1) FEE
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<S> <C> <C>
Units(2) $125,000,000 $43,103.45(3)
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Senior Discount Notes due 2006 -- -- (4)
- ---------------------------------------------------------------------------
Warrants to Purchase Common Stock -- -- (4)
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Common Stock, par value $0.01 per share $ 14,452,100 $ 4,983.48(5)
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457.
(2) Each Unit will consist of $1,000 principal amount of Senior Discount Notes
due 2006 and Warrants to purchase shares of Common Stock. The Senior
Discount Notes and Warrants will be offered only in Units.
(3) Previously paid.
(4) Such securities will be issued at no additional cost. As a result no
registration fee is required with respect thereto.
(5) Calculated in accordance with Rule 457(g). This amount has been previously
paid.
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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS SUBJECT TO COMPLETION, DATED AUGUST 2, 1996
WIRELESS ONE/SM/
WIRELESS ONE, INC.
UNITS CONSISTING OF
$
% SENIOR DISCOUNT NOTES DUE 2006
AND WARRANTS TO PURCHASE SHARES OF COMMON STOCK
Wireless One, Inc. (the "Company") is offering (the "Offering" or "Unit
Offering") units (collectively, the "Units"), each consisting of $1,000
principal amount of % Senior Discount Notes due 2006 (collectively, the
"Notes") and one warrant (the "Warrants") to purchase shares of common
stock, $0.01 par value per share (the "Common Stock") of the Company. The Notes
and the Warrants will not be separately transferable until the Separation Date,
which will be no later than 90 days from the date of issuance. The Notes will
be issued at a discount to their aggregate principal amount to generate gross
proceeds to the Company of approximately $125 million. The Notes will accrete
in value until August 1, 2001 at a rate of % per annum, compounded semi-
annually, to an aggregate principal amount of $ million. Cash interest will
not accrue on the Notes prior to August 1, 2001. Thereafter, interest on the
Notes will accrue at a rate of % per annum and will be payable in cash semi-
annually on and of each year, commencing , 2002. The Notes
will be redeemable at the option of the Company, in whole or in part, at any
time on or after , 2001 at the redemption prices set forth herein,
together with accrued and unpaid interest, if any, to the date of redemption.
In addition, in the event of a sale by the Company prior to , 1999 of at
least $25 million of its Capital Stock or Qualified Subordinated Indebtedness
(each as defined) to a Strategic Investor (as defined), up to a maximum of 30%
of the aggregate principal amount originally issued of the Notes may be
redeemed at the election of the Company; provided that at least 70% of the
aggregate principal amount of the Notes originally issued remains outstanding
after the occurrence of such redemption. See "Description of Notes--Optional
Redemption."
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 Accreted Value (as defined) thereof, or, in the case of any such
purchase on or after August 1, 2001, at 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the purchase date. See
"Description of Notes--Certain Covenants--Purchase of Notes upon a Change of
Control."
The Notes will be senior obligations of the Company ranking pari passu in right
of payment to all existing and future Indebtedness (as defined) of the Company,
other than Indebtedness that is expressly subordinated to the Notes. However,
subject to certain limitations set forth in the Indenture, the Company and its
Subsidiaries (as defined) may incur other senior Indebtedness, including
Indebtedness that is secured by the assets of the Company and its Subsidiaries.
IN ADDITION, ALTHOUGH THE NOTES ARE TITLED "SENIOR," THE COMPANY IS A HOLDING
COMPANY THAT CONDUCTS SUBSTANTIALLY ALL OF ITS BUSINESS THROUGH SUBSIDIARIES,
AND THE NOTES WILL BE EFFECTIVELY SUBORDINATED TO ALL LIABILITIES OF THE
COMPANY'S SUBSIDIARIES, INCLUDING TRADE PAYABLES. As of March 31, 1996, after
giving effect to the Pro Forma Events (as defined) and the Offering, the
Company would have had $296.6 million of Indebtedness. The outstanding
Indebtedness and trade payables of the Company's Subsidiaries as of March 31,
1996 (on a pro forma basis giving effect to the Pro Forma Events) would have
been approximately $17.4 million. See "Description of Notes."
Each Warrant will entitle the holder to purchase shares of Common Stock at
$ per share, subject to adjustment under certain circumstances. Warrant
holders may exercise the Warrants at any time after the first anniversary of
the consummation of the Unit Offering and on or prior to the fifth anniversary
of the consummation of the Unit Offering. Upon the consummation of the Unit
Offering, the Warrants will entitle the holders thereof initially to purchase,
in the aggregate, 361,540 shares of Common Stock of the Company or
approximately 2% of the outstanding Common Stock on a fully-diluted basis as of
the date hereof. The exercise price of the Warrants will be 110% of the last
reported sales price on the date a price is established for the Units. On
August 1, 1996, the last reported sales price of the Common Stock on the Nasdaq
National Market (which is quoted under the symbol "WIRL") was $15.50 per share.
On July 26, 1996, the Company received the consent of the holders of its 13%
Senior Notes due 2003 (the "Existing Notes") to amend the indenture relating
thereto to permit the consummation of the TruVision Transaction (as defined
herein) and certain other amendments.
-------------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE UNITS, THE NOTES
AND THE WARRANTS.
-------------------------------------
THE UNITS, THE NOTES AND THE WARRANTS HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC (/1/) DISCOUNTS (/2/) COMPANY (/1/)(/3/)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER UNIT $ $ $
TOTAL $ $ $
</TABLE>
- --------------------------------------------------------------------------------
(1) Plus accretion, if any, from , 1996.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $2,000,000.
-------------------------------------
The Units are being offered by Chase Securities Inc. ("CSI"), BT Securities
Corporation ("BTSC"), Gerard Klauer Mattison & Co., LLC ("GKM") and Prudential
Securities Incorporated ("Prudential" and, together with CSI, BTSC, and GKM,
the "Underwriters"), subject to prior sale, when, as and if issued by the
Company and delivered to and accepted by the Underwriters, and subject to
certain other conditions. It is expected that delivery of the Units will be
made in book-entry form through the facilities of The Depository Trust Company
on or about , 1996.
This Prospectus may be used by the Underwriters in connection with offers and
sales related to secondary market transactions in the Units, the Notes and the
Warrants. CSI may act as principal or agent in such transactions. Such sales
will be made at prices related to prevailing market prices at the time of sale.
No dealer, salesman or other person has been authorized to give any information
or to 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 or the Underwriters. This Prospectus does not
constitute an offer to sell any of the Units, the Notes and the Warrants
offered hereby in any jurisdiction to any person to whom it is unlawful to make
such offer in such jurisdiction.
CHASE SECURITIES INC.
BT SECURITIES CORPORATION
GERARD KLAUER MATTISON & CO., LLC
PRUDENTIAL SECURITIES INCORPORATED
, 1996
<PAGE>
WIRELESS ONE/SM/
[MAP]
The Company's 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.
- -------------------------------------------------------------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE UNITS, THE
NOTES OR THE WARRANTS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
<PAGE>
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 located 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
cluster 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, 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.
The Company's markets include (i) 24 markets in which the Company has systems
in operation (the "Operating Systems"), (ii) 9 markets in which the Company's
systems are currently 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 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"). In addition, the Company owns a 50%
interest in a limited liability company which holds channel rights to
1
<PAGE>
serve 10 markets in North Carolina. See "Risk Factors--Need for Additional
Financing for Growth; Certain Covenants", "--Uncertainty of Ability to Obtain
FCC Authorizations" and "Use of Proceeds." 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 (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
and 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.
<TABLE>
<CAPTION>
AVERAGE MONTHLY
CURRENT ESTIMATED APPROXIMATE REVENUE PER
CHANNELS TOTAL ESTIMATED LOS SUBSCRIBERS AT SUBSCRIBER FOR
OPERATING SYSTEMS DATE OF LAUNCH (1) HOUSEHOLDS(2) HOUSEHOLDS (3) JUNE 30, 1996 JUNE 1996
----------------- -------------- -------- ------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Brenham, TX............. February 1996 20 39,500 32,100 857 $33.69
Bryan/College Station,
TX..................... May 1995 32 102,700 65,600 2,899 33.66
Milano, TX(4)........... October 1995 20 40,900 36,800 1,659 32.34
Wharton, TX............. June 1994 21 102,300 92,000 2,114 34.28
Bunkie, LA.............. December 1995 20 94,700 81,600 1,498 33.17
Lafayette, LA(5)........ January 1994 11 180,300 153,200 697 23.15
Lake Charles, LA........ April 1994 17 111,600 92,500 555 30.66
Monroe, LA(4)........... October 1995 23 114,100 89,600 1,806 30.64
Jackson, MS............. June 1994 29 211,500 176,900 10,745 30.06
Delta, MS(6)............ July 1995 31 100,800 92,800 4,096 28.97
Gulf Coast, MS(7)....... January 1996 24 132,300 121,700 1,672 21.59
Natchez,MS.............. June 1996 20 76,500 60,000 2 --
Oxford, MS.............. June 1996 20 60,100 53,500 23 --
Bucks, AL............... April 1996 20 150,800 113,700 454 33.32
Demopolis, AL........... April 1996 28 17,500 15,600 266 20.25
Dothan, AL.............. June 1996 23 100,500 81,200 1 --
Huntsville, AL(8)....... February 1991 27 196,800 181,900 4,014 31.25
Fort Walton Beach, FL... May 1996 15 64,200 54,600 70 --
Gainesville, FL(9)...... January 1996 24 138,700 115,200 986 26.56
Panama City, FL......... September 1995 23 108,300 83,300 1,751 30.08
Pensacola, FL........... July 1995 28 217,400 157,900 2,041 35.88
Jeffersonville, GA...... March 1996 20 189,300 147,000 247 32.35
Lawrenceburg, TN(8)..... June 1995 20 76,400 44,100 397 30.08
Tullahoma, TN........... November 1995 20 109,600 73,600 1,403 31.36
--------- --------- ------
TOTAL................... 2,736,800 2,216,400 40,253
========= ========= ======
</TABLE>
- --------
(1) Includes wireless cable channels and, where applicable, local off-air
VHF/UHF channels that are not retransmitted by the Company via wireless
cable frequencies.
(2) 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,
2
<PAGE>
(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.
(3) 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.
(4) 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. The systems were not actively marketed until being acquired by the
Company as part of the Heartland Transaction.
(5) 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 number of channels is achieved, which the Company expects to occur
within 12 months from the date hereof.
(6) Eight channels currently utilized in the Delta System are operated under
special temporary FCC authorization.
(7) Four channels currently utilized in the Gulf Coast System were granted by
the FCC without acting on an objection filed by a third party.
(8) The Company has entered into an acquisition agreement with respect to this
Market. There can be no assurance that the Company will consummate such
transaction. See "Risk Factors--Inability to Consummate the Pending
Acquisitions" and "Acquisitions."
(9) 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 its low-priced service is
the most economical subscription television alternative for many of these
consumers. Further, 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.
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
3
<PAGE>
favorably with that of direct broadcast satellite ("DBS") operators, which must
incur (i) the fixed cost of a satellite and (ii) the variable cost of
subscriber receive site equipment, that 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 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 shareholders 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 10.7% of the Company's common stock, $.01 par
value (the "Common Stock") on a fully diluted basis. Chase Venture Capital
Associates, L.P. ("CVCA"), an affiliate of CMCC by virtue of the merger of
Chase with and into Chemical Banking Corporation, which was renamed The Chase
Manhattan Corporation, owns 8.5% of the Company's Common Stock on a fully
diluted basis. In addition, Chase Capital Partners ("CCP"), which is the
general partner of CVCA, has voting discretion with respect to the 2.1% of the
Common Stock of the Company on a fully diluted basis owned by Baseball
Partners. In total, affiliates of Chase own 21.3% of the outstanding Common
Stock on a fully diluted basis.
Also as a result of the TruVision Transaction, by virtue of its previous
investment in TruVision, MWTV owns approximately 10.5% of the Company's Common
Stock on a fully diluted basis. Wireless TV, Inc. ("WTV"), a corporation
controlled by Henry Burkhalter, a Director of the Company who became the
Company's President and Vice Chairman upon the consummation of the TruVision
Transaction on July 29, 1996, is the general partner of MWTV. In addition,
Heartland presently owns approximately 18.1% of the Company's Common Stock on a
fully diluted basis as a result of the transaction in October 1995 in 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"). By virtue of the Company's initial public offering of Common
Stock in October 1995, the public owns approximately 18.6% of the Company's
Common Stock on a fully diluted basis.
RECENT DEVELOPMENTS
TruVision Transaction. On April 25, 1996, the Company entered into the
TruVision Transaction. Under the terms of the 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, upon which
time TruVision became a wholly-owned subsidiary of the Company. The TruVision
Transaction and certain acquisitions described below have added and will add 21
Markets representing approximately 1.9
4
<PAGE>
million LOS households to the Company's portfolio of wireless cable markets.
See "Acquisitions" and "The TruVision Transaction." Of these Markets, eight are
currently in operation with 21,215 subscribers as of June 30, 1996.
BTA Auction. The Company and TruVision participated in an auction (the "BTA
Auction") conducted by the Federal Communications Commission ("FCC") for the
right to apply for available Multipoint Distribution Services ("MDS")
commercial channels in certain designated Basic Trading Areas ("BTAs"). Winning
bidders for any of the BTA authorizations received the exclusive right to apply
for additional MDS channels in such 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 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 "Description of Certain Indebtedness--
Indebtedness to U.S. Government" 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."
On July 26, 1996, the Company received the consent of the holders of its 13%
Senior Notes due 2003 to amend the indenture relating thereto to permit the
consummation of the TruVision Transaction and certain other amendments.
THE FINANCING PLAN
The net proceeds from this Offering (after deduction of discounts,
commissions and estimated expenses of the Offering payable by the Company) are
expected to be approximately $118.6 million. The Company currently intends to
apply the proceeds of the Offering to repay $18.0 million of indebtedness of
TruVision and finance the launch and initial development of the Markets with
the $100.6 million of remaining net proceeds. 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 certain Markets prior to
investing capital in the launch of systems in each of the Markets described in
this Prospectus. The Company reserves the right to reallocate the net proceeds
to different business purposes, as permitted by the Indentures (as defined) as
opportunities arise and business conditions change. See "Use of Proceeds",
"Description of Notes--Certain Covenants--Activities of the Company" and "--
Limitation on Restricted Payments."
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.
5
<PAGE>
THE UNIT OFFERING
THE UNITS:
Securities Offered......... Units consisting of $ aggregate
principal amount of % Senior Discount Notes
due 2006 and one Warrant to purchase
shares of Common Stock, representing, in the
aggregate, 361,540 shares of Common Stock of
the Company or approximately 2% of the
outstanding Common Stock on a fully diluted
basis as of the date hereof. Each Unit
consists of a $1,000 principal amount Note
and Warrants to purchase shares
of Common Stock. The exercise price of the
Warrants will be 110% of the last reported
sales price on the date a price is
established for the Units. On August 1, 1996,
the last reported sales price of the Common
Stock on the Nasdaq National Market (which is
quoted under the symbol "WIRL") was $15.50
per share.
Separability............... The Notes and Warrants will not trade
separately until the earlier of (i) 90 days
from the date of issuance and (ii) such date
as the Underwriters may, in their discretion,
deem appropriate (such date, the "Separation
Date").
Use of Proceeds............ The net proceeds to the Company from the Unit
Offering will be approximately $ million.
The Company intends to use the net proceeds
to repay $18.0 million of Indebtedness of
TruVision, and, to the extent not used for
the foregoing purpose, to finance the launch
and initial development and expansion of the
Company's Markets.
THE NOTES:
Maturity Date................... , 2006.
Principal Amount at Maturity.... $
Interest Rate and Payment The Notes will accrete in value until August
Dates........................... 1, 2001 at a rate of % per annum, compounded
semi-annually. Cash interest will not accrue
on the Notes prior to August 1, 2001.
Thereafter, interest on the Notes will accrue
at a rate of % per annum and will be payable
in cash semi-annually on and of
each year, commencing , 2002.
Optional Redemption............. The Notes will be redeemable at the option of
the Company, in whole or in part, at any time
on or after , 2001 at the redemption
prices set forth herein, together with
accrued and unpaid interest, if any, to the
date of redemption.
In addition, at any time or from time to time
prior to , 1999, up to 30% of the
aggregate principal amount originally issued
of the Notes will be redeemable at the option
of the Company with the Net Cash Proceeds (as
defined) from a sale to a Strategic Investor
of the Company's Capital Stock (other than
Redeemable
6
<PAGE>
Capital Stock (as defined)) or Qualified
Subordinated Indebtedness in a single
transaction or a series of related
transactions for an aggregate purchase price
equal to or exceeding $25 million at a
redemption price equal to % of the Accreted
Value of the Notes to the date of redemption
of the Notes; provided, that after giving
effect to any such redemption, at least 70%
of the aggregate principal amount of the
Notes originally issued remains outstanding
thereafter.
Change of Control...............
Upon the occurrence of a Change of Control,
each holder of Notes will have the option to
require the Company to repurchase all or a
portion of such holder's Notes at 101% of the
Accreted Value thereof, or, in the case of
any such purchase on or after August 1, 2001,
at 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the
purchase date. However, certain highly
leveraged transactions may not be deemed to
be a Change of Control, including, without
limitation, transactions with affiliates that
comply with the other covenants included in
the Indenture. See "Description of Notes."
Additionally, there can be no assurance that
the Company will have the financial resources
necessary to repurchase the Notes upon a
Change of Control. See "Risk Factors--Change
of Control" and "Description of Notes--
Certain Covenants--Purchase of Notes Upon a
Change of Control."
Ranking.........................
The Notes will be senior obligations of the
Company ranking pari passu in right of
payment to all existing and future
Indebtedness of the Company, other than
Indebtedness that is expressly subordinated
to the Notes. However subject to certain
limitations, which may not limit the
Company's ability to engage in certain highly
leveraged transactions, set forth in the
Indenture, between the Company and United
States Trust Company of New York dated August
, 1996 (the "Indenture"), the Company and
its Subsidiaries may incur other senior
Indebtedness, including Indebtedness that is
secured by the assets of the Company and its
Subsidiaries. In addition, the Company is a
holding company that conducts substantially
all of its business operations through its
Subsidiaries, and, therefore, the Notes will
be effectively subordinated to all existing
and future Indebtedness and other liabilities
and commitments of such Subsidiaries,
including trade payables. As of March 31,
1996, after giving effect to the Pro Forma
Events and the Offering, the Company would
have had $296.6 million of Indebtedness. The
outstanding Indebtedness and trade payables
of the Company's Subsidiaries as of March 31,
1996 (on a pro forma basis giving effect to
the Pro Forma Events), would have been
approximately $17.4 million. See "Description
of Notes."
7
<PAGE>
Certain Covenants............... The Indenture will contain certain covenants,
including limitations on the incurrence of
Indebtedness, the making of restricted
payments, transactions with affiliates, sale
and leaseback transactions, the existence and
creation of liens, the disposition of
proceeds of asset sales, the making of
guarantees and pledges by Restricted
Subsidiaries, transfers and issuances of
stock of Subsidiaries, issuance of preferred
stock by Restricted Subsidiaries, the
imposition of certain payment restrictions on
Restricted Subsidiaries, investments in
Unrestricted Subsidiaries, the conduct of the
Company's business and certain mergers,
consolidations and sales of assets. See
"Description of Notes--Certain Covenants."
Original Issue Discount......... The Notes will be issued with original issue
discount for Federal income tax purposes.
Thus, although cash interest will not accrue
on the Notes prior to August 1, 2001 and
there will be no periodic payments of
interest on the Notes prior to , 2002,
original issue discount (that is, the
difference between the stated redemption
price at maturity and the issue price of the
Notes) will accrue from the issue date of a
Note to August 1, 2001 and will be includable
as interest income for each day during each
taxable year in which the Note is held by a
holder in such holder's gross income for
Federal income tax purposes in advance of
receipt of the cash payments to which the
income is attributable. See "United States
Federal Income Tax Matters."
THE WARRANTS:
Warrants Issued............
Warrants, which, when exercised, will
entitle the holders thereof to acquire
361,540 shares of Common Stock (the "Warrant
Shares"), representing approximately 2% of
the outstanding Common Stock on a fully-
diluted basis as of the date hereof.
Registration Rights........
The Company has agreed that for a period of
four years commencing on the first
anniversary of the date of issuance of the
Warrants it will maintain the effectiveness
of a registration statement with respect to
the issuance of the Common Stock from time to
time upon exercise of the Warrants.
Exercise...................
Each Warrant will entitle the holder thereof
to purchase shares of Common Stock at an
exercise price of $ per share. The
exercise price of the Warrants will be 110%
of the last reported sales price on the date
a price is established for the Units.The
Warrants will be exercisable at any time on
or after the first anniversary of the date of
this Unit Offering. The number of shares
8
<PAGE>
of Common Stock for which, and the price per
share at which, a Warrant is exercisable are
subject to adjustment upon the occurrence of
certain events, as provided in the warrant
agreement relating to the Warrants (the
"Warrant Agreement"). The Common Stock issued
upon the exercise of the Warrants will be
registered under the Securities Act of 1933,
as amended (the "Securities Act"). A Warrant
does not entitle the holder to receive any
dividends paid on the Common Stock. See
"Description of Warrants."
Expiration of Warrants.....
The Warrants will expire on the fifth
anniversary of the date of the closing of
this offering (the "Expiration Date"). The
Company will give notice of expiration not
less than 90 nor more than 120 days prior to
the Expiration Date to the registered holders
of the then outstanding Warrants. If the
Company does not give such notice, the
Warrants will still terminate and become void
on the Expiration Date.
For additional information concerning the Units, the Notes and the Warrants
and the definitions of certain capitalized terms used above, see "Description
of Units," "Description of Notes" and "Description of Warrants."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered in evaluating an investment in the Units, the Notes and the Warrants
including, but not limited to, risks related to the substantial indebtedness of
the Company and the insufficiency of its earnings to cover its fixed charges;
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 holding company structure of the
Company and its dependence on its subsidiaries for the repayment of the Notes;
the ranking of the Notes; 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.
9
<PAGE>
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 for the three months ended
March 31, 1995 and 1996 and balance sheet data as of March 31, 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 gives
effect to (each as defined) (i) the completed offerings by the Company in
October 1995 of (A) 150,000 Units consisting of $150 million aggregate
principal amount of its 13% Senior Notes due 2003 and 450,000 warrants to
purchase an equal number of shares of Common Stock (the "Old Warrants") and (B)
3,450,000 shares of Common Stock (collectively, the "Old Offerings"), (ii) the
Heartland Transaction, (iii) the TruVision Transaction, (iv) the Madison
Purchase, (v) the BarTel Purchase, (vi) the Shoals Purchase and (vii) 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 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, and
(xii) the channel rights to be purchased by the Company via the BTA Auction and
the incurrence of associated indebtedness, as if all such transactions occurred
as of March 31, 1996 (collectively, the "Pro Forma Events"). In addition, each
of the summary unaudited pro forma combined statement of operations data and
the summary unaudited pro forma balance sheet data are adjusted to give effect
to the Offering as if the Offering had occured on March 31, 1996. 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>
PERIOD FROM
FEBRUARY 4, YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
1993 ------------------------------------------ ----------------------------------------
(INCEPTION) PRO FORMA PRO FORMA
TO DECEMBER COMBINED AS COMBINED AS
31, 1993 1994 1995 ADJUSTED 1995(1) 1995 1996 ADJUSTED 1996(1)
----------- ----------- ----------- ---------------- --------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................ $ -- $ 380,077 $ 1,343,969 $ 6,387,670 $ 238,825 $ 940,777 $ 2,510,702
Total operating
expenses............... 162,199 2,489,430 7,056,724 16,944,381 830,629 4,157,500 7,429,836
Operating loss.......... (162,199) (2,109,353) (5,712,755) (10,556,711) (591,804) (3,216,723) (4,919,134)
Interest expense and
other, net............. (411) (152,460) (1,979,719) (4,326,804) (111,488) (2,863,109) (3,437,713)
Net loss................ (162,610) (2,261,813) (7,692,474) (9,865,128) (703,292) (6,079,832) (5,479,666)
Net loss applicable to
common stock........... (162,610) (2,261,813) (8,478,863) (9,865,128) (703,292) (6,079,832) (5,479,666)
OTHER DATA:
EBITDA (2).............. $(134,710) $(1,695,529) $(3,929,689) $ (5,404,662) $(392,285) $(2,252,718) $(2,821,263)
Depreciation and
amortization........... 27,489 413,824 1,783,066 5,152,049 199,519 964,005 2,097,871
Capital expenditures.... 442,977 8,116,896 16,567,472 73,256,958 674,847 11,181,673 12,852,351
Deficiency of earnings
to fixed charges (3)... 162,610 2,261,813 8,478,863 14,883,515 703,292 6,079,832 8,356,847
OPERATING DATA AT END OF PERIOD:
Number of Operating
Systems ............... -- 3 10 14 3 13 18
Estimated LOS households
in Operating Systems... -- 337,700 926,100 1,421,800 337,700 1,220,400 1,837,800
Subscribers in Operating
Systems................ -- 2,504 7,525 23,725 2,610 12,289 30,908
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------------------
PRO FORMA
PRO FORMA COMBINED
HISTORICAL COMBINED AS ADJUSTED
------------ ------------ ------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital, excluding
restricted cash............. $ 87,773,899 $ 39,435,746 $158,060,746
Restricted cash(4)........... 53,681,589 53,681,589 53,681,589
Total assets................. 213,294,099 308,350,436 423,265,542
Current portion of long-term
debt........................ 384,366 10,469,260 384,366
Long-term debt............... 150,993,259 174,706,139 296,255,322
Total stockholders' equity... 49,569,855 100,586,609 104,037,426
</TABLE>
- --------
(1) The summary pro forma combined as adjusted statement of operations data
gives effect to the issuance of the Notes and the related interest expense
only to the extent proceeds therefrom are to be used to repay $10.1 million
of TruVision indebtedness outstanding as of March 31, 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 Existing Notes and
amortization of the related debt issuance costs, (ii) the issuance of the
Notes at an assumed rate of 13.25% and amortization of the related debt
issuance costs and amortization of the debt discount resulting from the
issue price allocated to the Warrants 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 $42.1 million and $10.9
million, respectively, for the year ended December 31, 1995 and for the
three months ended March 31, 1996.
(2) "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.
(3) 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).
(4) Represents a portion of net proceeds realized from the issuance of the
Existing Notes sufficient to pay interest expense on the Existing Notes
through October 15, 1998, which was deposited by the Company into an escrow
account for the benefit of the holders of the Existing Notes.
11
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the following factors, in
addition to other information contained in this Prospectus, regarding an
investment in the Units, the Notes and the Warrants offered hereby.
SUBSTANTIAL INDEBTEDNESS OF THE COMPANY; INSUFFICIENT EARNINGS TO COVER FIXED
CHARGES
After giving effect to the Pro Forma Events and the Unit Offering, the
Company will have approximately $296.6 million of consolidated indebtedness.
The indenture relating to the Existing Notes (the "Old Indenture") and the
Indenture (together, the Old Indenture and the Indenture are referred to as
the "Indentures") limit, but do not prohibit, the incurrence of additional
Indebtedness, secured and unsecured, by the Company and its Subsidiaries.
Subject to the restrictions set forth in the Indentures, the Company expects
that it and its Subsidiaries will incur substantial additional indebtedness in
the future. The Notes will be senior obligations of the Company ranking pari
passu in right of payment to all existing and future indebtedness of the
Company, other than Indebtedness that is expressly subordinated to the Notes.
However, subject to certain limitations set forth in the Indenture, the
Company and its Subsidiaries may incur other senior Indebtedness, including
Indebtedness that is secured by the assets of the Company and its
Subsidiaries. The ability of the Company to make payments of principal and
interest will be largely dependent upon its future performance. On a combined
basis, since 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, inability to raise additional financing or disruption in
operations, will not result in additional time elapsing prior to the Company
generating positive net income. Losses may increase as operations in
additional Markets are commenced or acquired. See "Selected Historical
Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Many factors, some of which will be
beyond the Company's control (such as prevailing economic conditions), may
affect its performance. Once the proceeds of the escrow arrangement relating
to the Existing Notes have been fully applied in October 1998, a substantial
portion of the Company's cash flow will be devoted to debt service on the
Existing Notes and on and after , 2002, will also be devoted to debt
service on the Notes. If the Company is unable to meet interest and principal
payments in the future, it may, depending upon the circumstances which then
exist, seek additional equity or debt financing, attempt to refinance its
existing indebtedness or sell all or part of its business or assets to raise
funds to repay its indebtedness. There can be no assurance that sufficient
equity or debt financing will be available at all or on terms acceptable to
the Company, that the Company will be able to refinance its existing
indebtedness or the Notes or that sufficient funds could be raised through the
sale of all or a part of the Company's business or assets. If no such
refinancing or additional financing or funds were available, the Company could
be forced to default on the Notes and, as an ultimate remedy, seek protection
under the federal bankruptcy laws. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
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 where it intends
to operate wireless cable systems. Prospective investors, therefore, have
limited historical financial information about the Company upon which to base
an evaluation of the Company's performance and an investment in the Units, the
Notes and the Warrants offered hereby. Since 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
12
<PAGE>
adjusting for the Pro Forma Events, the Company's accumulated deficit as of
March 31, 1996 was $16.2 million. The Company currently has only three
Operating Systems which 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 capital expenditures and related expenses 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 and 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
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," "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
HOLDING COMPANY STRUCTURE; DEPENDENCE OF COMPANY ON SUBSIDIARIES FOR REPAYMENT
OF NOTES
The operations of the Company are conducted principally through its direct
and indirect subsidiaries and, as a result, the Company's cash flow and,
consequently, its ability to service debt, including the Notes, is dependent
upon the cash flow of its subsidiaries and the payment of funds by those
subsidiaries to the Company in the form of loans, dividends or otherwise. The
subsidiaries are separate and distinct legal entities and have no obligation,
contingent or otherwise, to pay any amounts due pursuant to the Notes or to
make any funds available therefor, whether in the form of loans, dividends or
otherwise. In addition, certain of the Company's subsidiaries may become
parties to credit agreements that contain limitations on the ability of such
subsidiaries to pay dividends or to make loans or advances to the Company. The
Indentures limit in certain respects the ability of the Company to create or
permit additional restrictions on dividends and other payments by its
Subsidiaries. See "Description of Notes--Certain Covenants--Limitation on
Dividends and Other Payment Restrictions Affecting Subsidiaries."
Because the Company is a holding company that conducts its business through
its direct and indirect subsidiaries, all existing and future liabilities of
the Company's subsidiaries, including trade payables, will be effectively
senior to the Notes. As of March 31, 1996, on a pro forma basis, the Company's
consolidated subsidiaries had aggregate liabilities, including trade payables,
of approximately $17.4 million.
13
<PAGE>
RANKING OF NOTES
The Notes are not secured by any of the assets of the Company and are senior
unsecured obligations of the Company. Under the terms of the Indenture, the
Company and its Subsidiaries will be permitted to incur additional
indebtedness, including indebtedness secured by the assets of the Company and
its Subsidiaries. See "Description of Notes--Certain Covenants--Limitation on
Indebtedness" and "--Limitation on Liens." In the event of any distribution or
payment of the assets of the Company in any foreclosure, dissolution, winding-
up, liquidation or reorganization, holders of secured indebtedness will have a
secured prior claim to the assets of the Company which constitute their
collateral. In the event of bankruptcy, liquidation or reorganization of the
Company, holders of the Notes will participate ratably with all holders of
indebtedness of the Company which is unsecured, including the Existing Notes,
and all other general creditors of the Company, based upon the respective
amounts owed to each holder or creditor in the remaining assets of the
Company, and there may not be sufficient assets to pay amounts due on the
Notes.
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 the properties from TruVision
successfully 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 and Lawrenceburg, Tennessee Markets, (ii) the
Auburn and Huntsville, Alabama Markets, (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 Huntsville,
Alabama Market and (iii) the BTAs subject to the Wireless Ventures Transaction
(as defined) are contingent upon the Company being able to obtain certain
consents from the FCC and the acquisition of the Huntsville, Alabama Market is
contingent upon the Company obtaining a waiver of and exemption from FCC
regulations that prohibit operation by a single operator of both wireless and
hard-wire cable television systems in a single market. 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. The Offering
is not conditioned upon consummation of the pending Acquisitions and there can
be no assurance that, in the case of Valdosta and Vidalia, Georgia 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."
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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 Rouge 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 filed initial applications for a BTA authorization for channel rights
in each BTA Market by May 10, 1996. Such applications are not subject to
competing applications. 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. See "--Interference Issues."
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.
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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
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 any other regulations applicable to the Company
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 those 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
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methods of distributing and receiving video programming. Further, 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 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 n o
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
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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 for 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 operational 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
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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.
CHANGE OF CONTROL
In the event of a Change of Control, each holder of Notes will have the
option to require that the Company repurchase (subject to compliance with the
requirements of Rules 13e-4 and 14e-1 under
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the Securities Exchange Act of 1934, as amended (the "Exchange Act")) all or a
portion of such holder's Notes at 101% of the Accreted Value thereof, or, in
the case of any such purchase on or after August 1, 2001, at 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the
purchase date. However, certain highly leveraged transactions may not be deemed
to be a Change of Control, including, without limitation, transactions with
affiliates that comply with the other covenants included in the Indenture. See
"Description of Notes." Additionally, there can be no assurance that the
Company will have the financial resources necessary to repurchase the Notes
upon a Change of Control. See "Description of Notes--Certain Covenants--
Purchase of Notes Upon a Change of Control."
ABSENCE OF PUBLIC MARKET FOR THE UNITS, THE NOTES AND THE WARRANTS
There is no existing trading market for the Units, the Notes or the Warrants.
The Company does not intend to apply for listing of the Units, the Notes or the
Warrants on a securities exchange or to seek approval for quotation through an
automated quotation system. The Underwriters have advised the Company that they
currently intend to make a market in the Units, the Notes or the Warrants, but
they are not obligated to do so and they may discontinue such market making at
any time without notice. Accordingly, no assurance can be given that an active
trading market for the Units, the Notes or the Warrants will develop, or as to
the liquidity thereof. If a trading market develops for the Units, the Notes or
the Warrants, the future trading prices thereof will depend on many factors
including, among other things, the Company's result of operations, prevailing
interest rates, the market for securities with similar terms and the market for
securities of other companies in similar businesses.
ORIGINAL ISSUE DISCOUNT
The Notes will be issued at a substantial discount from their principal
amount at maturity. Consequently, the purchasers of the Notes generally will be
required to include amounts in gross income for Federal income tax purposes in
advance of receipt of the cash payments to which the income is attributable.
See "United States Federal Income Tax Matters" for a more detailed discussion
of the Federal income tax consequences to the holders of the Notes resulting
from the purchase, ownership and disposition of the Notes. If a bankruptcy case
is commenced by or against the Company under Federal bankruptcy law after the
issuance of the Notes, the claim of a holder of the Notes with respect to the
principal amount thereof may be limited to an amount equal to the sum of (i)
the initial public offering price of the Notes and (ii) that portion of the
original issue discount which is not deemed to constitute "unmatured interest"
for the purposes of Federal bankruptcy law. Any original issue discount that
was not accreted as of such bankruptcy filing would constitute "unmatured
interest."
CONTROL BY PRINCIPAL STOCKHOLDERS
Affiliates of The Chase Manhattan Corporation, Heartland and MWTV
collectively beneficially own 49.9% of the outstanding Common Stock. 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, 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, 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
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(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 for which the Warrants are exercisable
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 and the Warrants.
EXPIRATION OF WARRANTS
The Warrants are not exercisable prior to the first anniversary of the issue
date and terminate and become void on the Expiration Date. The Company will
give notice not less than 90 nor more than 120 days prior to the Expiration
Date to the registered holders of then outstanding Warrants to the effect that
the Warrants will terminate and become void as of the close of business on the
Expiration Date. If the Company fails to give such notice, the Warrants will
nonetheless terminate and become void as of the close of business on the
Expiration Date. See "Description of Warrants."
SHARES ELIGIBLE FOR FUTURE SALE
The Company has a total of 17,052,085 shares of Common Stock outstanding
(assuming the exercise of the Old Warrants, GKM Warrants, the Warrants and
certain management and employee options). Of these shares, 3,498,752 shares are
freely transferable by persons other than affiliates of the Company without
restriction or registration under the Securities Act. The remaining shares 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 Warrants will be exercisable at any time on or
after the first anniversary of the date of issuance thereof through the fifth
anniversary of the date of issuance. During such period, the Company has agreed
to maintain the effectiveness of a registration statement, and, as a result,
the Common Stock issuable upon exercise of such 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. The
Company has agreed not to issue any securities or file a registration statement
under the Securities Act, subject to certain exceptions, for a period of 180
days following the date of the prospectus relating to the Unit
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Offering without the prior written consent of the Underwriters. See "Shares
Eligible for Future Sale" and "Underwriting."
DILUTION
On a pro forma combined basis, at March 31, 1996, the net tangible book
value of the Common Stock was $(1.95) per share. After giving effect to the
Unit Offering and assuming that all Warrants offered hereby were exercised at
an assumed exercise price per share of $17.05, the adjusted pro forma net
tangible book value per share would have been $(1.38) as of that date.
Accordingly, holders of Common Stock issuable upon the exercise of the
Warrants offered hereby would experience immediate dilution in net tangible
book value of $18.43 per share. See "Dilution."
FRAUDULENT TRANSFER CONSIDERATIONS
Under applicable provisions of the United States Bankruptcy Code or
comparable provisions of state fraudulent transfer or conveyance law, if the
Company, at the time it issued the Notes, (a) incurred such indebtedness with
the intent to hinder, delay or defraud creditors, or (b)(i) received less than
reasonably equivalent value or fair consideration and (ii)(A) was insolvent at
the time of such incurrence, (B) was rendered insolvent by reason of such
incurrence (and the application of the proceeds thereof), (C) was engaged or
was about to engage in a business or transaction for which the assets
remaining with the Company constituted unreasonably small capital to carry on
its business, or (D) intended to incur, or believed that it would incur, debts
beyond its ability to pay such debts as they mature, then, in each such case,
a court of competent jurisdiction could avoid, in whole or in part, the Notes
or, in the alternative, subordinate the Notes to existing and future
indebtedness of the Company. The measure of insolvency for purposes of the
foregoing would likely vary depending upon the law applied in such case.
Generally, however, the Company would be considered insolvent if the sum of
its debts, including contingent liabilities, was greater than all of its
assets at a fair valuation, or if the present fair saleable value of its
assets was less than the amount that would be required to pay the probable
liabilities on its existing debts, including contingent liabilities, as such
debts become absolute and matured. The Company believes that, for purposes of
the United States Bankruptcy Code and state fraudulent transfer or conveyance
laws, the Notes are being issued without the intent to hinder, delay or
defraud creditors and for proper purposes and in good faith, and that the
Company will receive reasonably equivalent value or fair consideration
therefor, and that after the issuance of the Notes and the application of the
net proceeds therefrom, the Company will be solvent, will have sufficient
capital for carrying on its business and will be able to pay its debts as they
mature. However, there can be no assurance that a court passing on such issues
would agree with the determination of the Company.
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), certain 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
22
<PAGE>
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 10,000,000 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. 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
This 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.
23
<PAGE>
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 Existing Notes
and 450,000 warrants to purchase an equal number of shares of Common Stock.
24
<PAGE>
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 and other assets, 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 $8.0 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
$12.0 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 six Markets located in Jackson, Mississippi, Delta, Natchez,
Oxford and the Gulf Coast regions of Mississippi and Demopolis, Alabama,
(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 Lawrenceburg, Tennessee; Huntsville, Alabama; 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 the 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 3,553,333 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 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. In addition, upon the
consummation of the TruVision Transaction, the Company assumed the non-
qualified stock options issued by TruVision. As assumed by the Company, such
options covered the following number of shares of Common Stock at the weighted
average exercise prices indicated: Mr. Burkhalter--78,105 shares of Common
Stock, $6.82 per share; Mr. Byer--62,411 shares of Common Stock, $6.82 per
share; all other persons--36,467 shares of Common Stock, $6.82 per share. 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."
25
<PAGE>
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 Madison Communications, Inc. and
Beasley Communications, Inc. to acquire a wireless cable system and a hard-
wire cable system currently operating in the Huntsville, Alabama Market (the
"Madison Purchase") for approximately $3.0 million in cash plus a $3.0 million
five-year promissory note, (ii) 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"), (iii) 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 (iv) 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 a
$652,000 five-year 8% per annum promissory note (the "BarTel Purchase"), which
acquisition closed on February 20, 1996 and (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").
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.
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."
26
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Offering will be approximately
$118.6 million after deducting discounts and commissions and estimated
expenses of the Offering payable by the Company. The Company currently intends
to use the net proceeds of the Offering as follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
Repayment of Interim Facility(1)................................ $ 12.0
Repayment of amounts outstanding under the Revolving Credit Fa-
cility(2)...................................................... 6.0
Finance launch, initial development and expansion of Markets.... 100.6
------
Total......................................................... $118.6
======
</TABLE>
- --------
(1) In February 1996, CVCA provided the Interim Facility in order to fund
certain operating and acquisition costs. Such borrowing is payable by the
Company on demand after June 30, 1996 for the principal sum thereof, plus
accrued and unpaid interest thereon at the rate of 10% per annum. See
"Formation of TruVision," "Certain Transactions" and "Underwriting." The
Company used the borrowings under the Interim Facility to (i) pay a
$350,000 deposit in connection with the acquisition of the Huntsville
System, (ii) pay the $1.7 million cash portion of the purchase price for
the Demopolis and Tuscaloosa Systems, (iii) pay a deposit made in
connection with the BTA Auction and (iv) finance the launch and additional
development of Markets.
(2) On June 11, 1996, the Company entered into the revolving credit facility
with Deposit Guaranty National Bank ("DGNB") in the amount of $6.0 million
(the "Revolving Credit Facility"). The Revolving Credit Facility bears
interest at the DGNB prime floating rate and matured on the consummation
of the TruVision Transaction. The Revolving Credit Facility was cancelled
upon repayment.
The Company expects that under its current plans it will have capital
expenditures of $45.1 million for the last three quarters of 1996 for
subscriber additions, system construction, development, launch, installation
labor and expansion activities. The Company expects to incur $99.5 million and
$96.7 million of capital expenditures in 1997 and 1998, respectively, in
connection with subscriber additions, system construction, development, launch
and expansion activities, including the launch of 20 to 24 additional systems
in 1997 and the remaining 9 to 13 systems in 1998.
The Company will need to obtain additional financing to begin operations in
all the Markets and continue to add subscribers to its new and existing
Markets. The Company may elect to invest its capital in building subscriber
levels in certain Markets prior to investing capital in the launch of systems
in each of the Markets described in the Prospectus. The Company reserves the
right to reallocate the net proceeds to different business purposes, as
permitted by the Indenture, as opportunities arise and business conditions
change. There can be no assurance that the Company will obtain the required
additional financing to complete its current business plan or that its future
capital requirements will not increase as the result of future acquisitions,
if any.
27
<PAGE>
DIVIDENDS AND PRICE RANGE OF COMMON STOCK
The Common Stock began trading on the Nasdaq 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
National Market.
<TABLE>
<CAPTION>
MARKET PRICE
---------------
FISCAL PERIOD HIGH LOW
- ------------- ------- -------
<S> <C> <C>
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 August 1, 1996).......................... $18 $14 1/2
</TABLE>
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. The Indenture will significantly restrict the Company's ability
to pay dividends on the Common Stock. See "Description of Notes." 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 March 31,
1996 would have been $(34.6 million), or $(1.95) 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 (i) the sale by the Company of the Units offered hereby
and the initial application of the net proceeds therefrom and (ii) the
exercise of all Warrants offered hereby at an assumed exercise price of $17.05
per share (notwithstanding that the Warrants may not be exercised for one year
from the date of issuance), the pro forma net tangible book value of the
Company at March 31, 1996 would have been $(24.9 million) or $(1.38) per
share, representing an immediate increase in net tangible book value of $0.57
per share to existing stockholders and an immediate, substantial dilution of
$18.43 per share to investors exercising Warrants purchased in this offering.
Dilution in net tangible book value represents the difference between the
price per share to be paid by purchasers of Units upon exercise of the
Warrants and the pro forma combined net tangible book value as of March 31,
1996.
28
<PAGE>
CAPITALIZATION
The following table sets forth (i) the cash and the historical
capitalization of the Company at March 31, 1996, (ii) the pro forma combined
cash and capitalization of the Company at March 31, 1996 and (iii) the pro
forma combined cash and capitalization of the Company at March 31, 1996 as
adjusted to give effect to the Unit 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>
MARCH 31, 1996
----------------------------------------
PRO FORMA
PRO FORMA COMBINED
HISTORICAL COMBINED AS ADJUSTED
------------ ------------ ------------
<S> <C> <C> <C>
Cash and cash equivalents, excluding
restricted cash.................... $ 98,964,157 $ 63,627,348 $172,167,454
Restricted cash(1).................. 53,681,589 53,681,589 53,681,589
------------ ------------ ------------
Total cash and cash equivalents... $152,645,746 $117,308,937 $225,849,043
============ ============ ============
Short-term debt..................... $ 384,366 $ 10,469,260 $ 384,366
------------ ------------ ------------
Long-term debt:
Notes offered hereby (2)............ -- -- 121,549,183
Existing Notes(3)................... 148,207,847 148,207,847 148,207,847
Other(4)............................ 2,785,412 26,498,292 26,498,292
------------ ------------ ------------
Total long-term debt.............. 150,993,259 174,706,139 296,255,322
------------ ------------ ------------
Common stock, $.01 par value;
50,000,000 shares authorized;
13,498,752 issued and outstanding on
a
historical basis................... 134,988 -- --
17,052,085 issued and outstanding
pro forma as adjusted(5)........... -- 170,521 170,521
Additional paid-in capital.......... 65,631,596 116,612,817 116,612,817
Warrants(2)......................... -- -- 3,450,817
Accumulated deficit................. (16,196,729) (16,196,729) (16,196,729)
------------ ------------ ------------
Total stockholders' equity........ 49,569,855 100,586,609 104,037,426
------------ ------------ ------------
Total capitalization............. $200,947,480 $285,762,008 $400,677,114
============ ============ ============
</TABLE>
- --------
(1) Represents a portion of the net proceeds realized from the sale of the
Existing Notes that was placed in escrow to pay interest on the Existing
Notes through October 1998.
(2) Gives effect to Warrants, which have been valued at $3.5 million.
(3) Net of unamortized discount.
(4) On a pro forma basis, includes $23,712,880 of BTA Auction indebtedness to
the U.S. Government.
(5) 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 810,178 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 warrants (the "GKM Warrants") delivered to GKM
upon consummation of the Heartland Transaction, (iii) 450,000 shares of
Common Stock issuable upon exercise of the Old Warrants, and (iv) 195,226
shares of Common Stock relating to options assumed by the Company in the
TruVision Transaction. See "Management--Stock Option Plans."
29
<PAGE>
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
March 31, 1996 and Unaudited Pro Forma Condensed Combined Statements of
Operations for the year ended December 31, 1995 and the three months ended
March 31, 1996 (collectively, the "Pro Forma Statements"). The Unaudited Pro
Forma Condensed Combined Statements of Operations give effect to (i) the Old
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 give
effect to the issuance of the Notes to the extent proceeds therefrom are to be
used to repay $10.1 million of 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. 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 Existing Notes and
amortization of the related debt issuance costs, (ii) the issuance of the
Notes at an assumed rate of 13.25% and amortization of the related debt
issuance costs and amortization of the debt discount resulting from the issue
price allocated to the Warrants, and (iii) the incurrence of BTA Auction
indebtedness as if such indebtedness had been incurred, and the Existing Notes
and Notes had been issued, on January 1, 1995, interest expense on a pro forma
basis would have been $42.1 million and $10.9 million, respectively, for the
year ended December 31, 1995 and for the three months ended March 31, 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.
30
<PAGE>
WIRELESS ONE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1996
<TABLE>
<CAPTION>
ADJUSTMENTS FOR
ACQUISITIONS,
TRUVISION LICENSE AND
WIRELESS ONE TRUVISION MADISON SHOALS PRO FORMA CHANNEL RIGHTS PRO FORMA
HISTORICAL HISTORICAL HISTORICAL HISTORICAL ADJUSTMENTS PURCHASES COMBINED
------------ ----------- ---------- ---------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash
equivalents $ 98,964,157 $ 536,411 $ 63,946 $ -- $(6,495,000)(1) $(29,378,220)(3) $ 63,627,348
(63,946)(4)
Marketable
investment
securities-
restricted 17,735,150 -- -- -- -- -- 17,735,150
Other current
assets 1,540,727 380,577 6,818 630 -- 32,000 (5) 1,960,752
------------ ----------- ---------- -------- ----------- ------------ ------------
Total current
assets 118,240,034 916,988 70,764 630 (6,495,000) (29,410,166) 83,323,250
Property and
equipment, net 22,912,095 11,862,038 1,147,827 390,000 580,000 (5) 36,891,960
Intangibles 28,491,658 2,447,387 65,000 21,107 35,853,096 (1) 68,268,443 (5) 142,052,025
6,905,334 (2)
Marketable
investment
securities -
restricted 35,946,439 -- -- -- -- -- 35,946,439
Other assets 7,703,873 4,525,240 1,835 -- (744,186)(1) (1,350,000)(6) 10,136,762
------------ ----------- ---------- -------- ----------- ------------ ------------
Total assets $213,294,099 $19,751,653 $1,285,426 $411,737 $35,519,244 $ 38,088,277 $308,350,436
============ =========== ========== ======== =========== ============ ============
Current
liabilities:
Short-term debt $ 384,366 $10,084,894 $ 100,000 $ -- $ -- $ (100,000)(4) $ 10,469,260
Other current
liabilities 12,346,619 3,336,475 345,245 53,028 -- (398,273)(4) 15,683,094
------------ ----------- ---------- -------- ----------- ------------ ------------
Total current
liabilities 12,730,985 13,421,369 445,245 53,028 -- (498,273) 26,152,354
Deferred income
taxes -- -- -- -- 6,905,334 (2) -- 6,905,334
Long-term debt 150,993,259 -- -- 432,089 (432,089)(4) 174,706,139
23,712,880 (6)
Stockholders'
equity:
Preferred stock -- 11,000 -- -- (11,000)(1) -- --
Common stock 134,988 24,000 1,000 300 24,053 (1) 11,480 (7) 170,521
(24,000)(1) (1,300)(7)
Additional
paid-in capital 65,631,596 10,698,679 2,475,192 17,604 33,650,049 (1) 16,061,080 (7) 116,612,817
(10,698,679)(1) (2,492,796)(7)
1,270,092 (1)
Warrants -- -- -- -- -- -- --
Accumulated
deficit (16,196,729) (4,403,395) (1,636,011) (91,284) 4,403,395 (1) 1,727,295 (7) (16,196,729)
------------ ----------- ---------- -------- ----------- ------------ ------------
Total
stockholders'
equity 49,569,855 6,330,284 840,181 (73,380) 28,613,910 15,305,759 100,586,609
------------ ----------- ---------- -------- ----------- ------------ ------------
Total
liabilities and
stockholders'
equity $213,294,099 $19,751,653 $1,285,426 $411,737 $35,519,244 $ 38,088,277 $308,350,436
============ =========== ========== ======== =========== ============ ============
<CAPTION>
PRO FORMA
OFFERING COMBINED
ADJUSTMENTS AS ADJUSTED
---------------- -------------
<S> <C> <C>
Current assets:
Cash and cash
equivalents $118,625,000 $172,167,454
(10,084,894)(8)
Marketable
investment
securities-
restricted -- 17,735,150
Other current
assets -- 1,960,752
---------------- -------------
Total current
assets 108,540,106 191,863,356
Property and
equipment, net -- 36,891,960
Intangibles -- 142,052,025
Marketable
investment
securities -
restricted -- 35,946,439
Other assets 6,375,000 (8) 16,511,762
---------------- -------------
Total assets $114,915,106 $423,265,542
================ =============
Current
liabilities:
Short-term debt $(10,084,894)(8) $ 384,366
Other current
liabilities -- 15,683,094
---------------- -------------
Total current
liabilities (10,084,894)(8) 16,067,460
Deferred income
taxes 6,905,334
Long-term debt 121,549,183 (8) 296,255,322
Stockholders'
equity:
Preferred stock -- --
Common stock -- 170,521
Additional
paid-in capital -- 116,612,817
Warrants 3,450,817 3,450,817
Accumulated
deficit -- (16,196,729)
---------------- -------------
Total
stockholders'
equity 3,450,817 104,037,426
---------------- -------------
Total
liabilities and
stockholders'
equity $114,915,106 $423,265,542
================ =============
</TABLE>
31
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(1) Represents the elimination of TruVision's historical equity and the
issuance of 2,405,293 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 Old 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
$1,270,092 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). 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 $1,350,000 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 issuance of the Units, net of estimated debt issuance costs
of $6.4 million, and the application of $10.1 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 Warrants have been valued at
$3.5 million.
32
<PAGE>
WIRELESS ONE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
HEARTLAND
TRANSACTION
WIRELESS HEARTLAND AND THE OLD
ONE DIVISION TRUVISION MADISON BARTEL SHOALS OFFERINGS TRUVISION
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL ADJUSTMENTS ADJUSTMENTS
----------- ---------- ----------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues........... $ 1,343,969 $ 632,173 $ 3,081,614 $1,582,147 $150,000 $ 83,867 $ -- $ (486,100)(5)
Operating expenses:
Systems
operations....... 841,819 397,574 2,103,053 888,707 67,720 53,015 194,541 (1) (134,787)(5)
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 -- (35,131)(6)
421,354 (7)
545,267 (8)
----------- --------- ----------- ---------- -------- --------- --------- ----------
Total operating
expenses....... 7,056,724 939,983 5,455,554 1,870,751 127,247 164,236 194,541 796,702
----------- --------- ----------- ---------- -------- --------- --------- ----------
Operating income
(loss)............ (5,712,755) (307,810) (2,373,940) (288,604) 22,753 (80,369) (194,541) (1,282,803)
----------- --------- ----------- ---------- -------- --------- --------- ----------
Interest income.... 2,024,116 -- 15,063 -- -- -- -- --
Interest expense... (4,070,184) -- (143,505) (17,440) -- (35,137) (668,427)(2) --
Other.............. 66,349 -- -- 36,271 -- -- -- --
----------- --------- ----------- ---------- -------- --------- --------- ----------
Income (loss)
before income
taxes............ (7,692,474) (307,810) (2,502,382) (269,773) 22,753 (115,506) (862,968) (1,282,803)
Income tax
(expense)
benefit.......... -- 113,890 -- -- (5,039) -- (113,890)(3) 4,481,520(11)
----------- --------- ----------- ---------- -------- --------- --------- ----------
Net income
(loss)........... (7,692,474) (193,920) (2,502,382) (269,773) 17,714 (115,506) (976,858) 3,198,717
Preferred stock
dividends and
discount
accretion......... (786,389) -- (687,000) -- -- -- 786,389(4) 687,000 (9)
----------- --------- ----------- ---------- -------- --------- --------- ----------
Net income (loss)
applicable to
common stock..... $(8,478,863) $(193,920) $(3,189,382) $ (269,773) $ 17,714 $(115,506) $(190,469) $3,885,717
=========== ========= =========== ========== ======== ========= ========= ==========
Net loss per
common share..... $ (2.02)
===========
Weighted average
common shares
outstanding...... 4,187,736 2,405,293
=========== ==========
<CAPTION>
ADJUSTMENTS
FOR ACQUISITIONS,
LICENSE AND ADJUSTMENTS PRO FORMA
CHANNEL RIGHTS PRO FORMA FOR COMBINED
PURCHASES COMBINED OFFERING AS ADJUSTED
------------------ --------------- ---------------- ------------
<S> <C> <C> <C> <C>
Revenues........... $ -- $ 6,387,670 $ -- $ 6,387,670
Operating expenses:
Systems
operations....... -- 4,411,642 -- 4,411,642
Selling, general
and
administrative... -- 7,380,690 -- 7,380,690
Depreciation and
amortization..... 338,642 (7) 5,152,049 -- 5,152,049
------------------ --------------- ---------------- ------------
Total operating
expenses....... 338,642 16,944,381 -- 16,944,381
------------------ --------------- ---------------- ------------
Operating income
(loss)............ (338,642) (10,556,711) -- (10,556,711)
------------------ --------------- ---------------- ------------
Interest income.... -- 2,039,179 -- 2,039,179
Interest expense... -- (4,934,693) (1,533,910)(10) (6,468,603)
Other.............. -- 102,620 -- 102,620
------------------ --------------- ---------------- ------------
Income (loss)
before income
taxes............ (338,642) (13,349,605) (1,533,910) (14,883,515)
Income tax
(expense)
benefit.......... 5,039(3) 4,481,520(11) 536,867(11) 5,018,387
------------------ --------------- ---------------- ------------
Net income
(loss)........... (333,603) (8,868,085) (997,043) (9,865,128)
Preferred stock
dividends and
discount
accretion......... -- -- -- --
------------------ --------------- ---------------- ------------
Net income (loss)
applicable to
common stock..... $(333,603) $(8,868,085) $ (997,043) $(9,865,128)
================== =============== ================ ============
Net loss per
common share..... $ (1.15) $ (1.27)
=============== ============
Weighted average
common shares
outstanding...... 1,148,040 7,741,069 7,741,069
================== =============== ============
</TABLE>
33
<PAGE>
WIRELESS ONE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR ACQUISITIONS,
WIRELESS LICENSE AND
ONE TRUVISION MADISON BARTEL SHOALS TRUVISION CHANNEL RIGHTS PROFORMA
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL ADJUSTMENTS PURCHASES COMBINED
----------- ----------- ---------- ---------- ---------- ----------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues........... $ 940,777 $ 1,286,026 $392,629 $ 8,500 $ 20,967 $ (138,197)(5) $ -- $ 2,510,702
Operating expenses:
Systems
operations....... 555,942 885,711 152,554 5,090 13,254 (36,668)(5) -- 1,575,883
Selling, general
and
administrative... 2,637,553 911,024 191,675 3,351 12,479 -- -- 3,756,082
Depreciation and
amortization..... 964,005 584,544 129,134 17 15,327 (17,566)(6) 84,662 (7) 2,097,871
201,431 (7)
136,317 (8)
----------- ----------- -------- ------- -------- ---------- --------- -----------
Total operating
expenses....... 4,157,500 2,381,279 473,363 8,458 41,060 283,514 84,662 7,429,836
----------- ----------- -------- ------- -------- ---------- --------- -----------
Operating income
(loss)............ (3,216,723) (1,095,253) (80,734) 42 (20,093) (421,711) (84,662) (4,919,134)
----------- ----------- -------- ------- -------- ---------- --------- -----------
Interest income.... 2,126,360 -- -- -- -- -- -- 2,126,360
Interest expense... (5,009,893) (163,998) (2,910) -- (8,784) -- -- (5,185,585)
Other.............. 20,424 -- 19,703 -- -- -- -- 40,127
----------- ----------- -------- ------- -------- ---------- --------- -----------
Income (loss)
before income
taxes............ (6,079,832) (1,259,251) (63,941) 42 (28,877) (421,711) (84,662) (7,938,232)
Income tax
benefit.......... -- -- -- -- -- 2,730,670(11) -- 2,730,670
----------- ----------- -------- ------- -------- ---------- --------- -----------
Net income
(loss)........... (6,079,832) (1,259,251) (63,941) 42 (28,877) 2,308,959 (84,662) (5,207,562)
Preferred stock
dividends and
discount
accretion......... -- (220,000) -- -- -- 220,000(9) -- --
----------- ----------- -------- ------- -------- ---------- --------- -----------
Net income (loss)
applicable to
common stock..... $(6,079,832) $(1,479,251) $(63,941) $ 42 $(28,877) $2,528,959 $(84,662) $(5,207,562)
=========== =========== ======== ======= ======== ========== ========= ===========
Net loss per
common share..... $ (0.45) $ (0.31)
=========== ===========
Weighted average
common shares
outstanding...... 13,498,752 2,405,293 1,148,040 17,052,085
=========== ========== ========= ===========
<CAPTION>
ADJUSTMENTS PROFORMA
FOR COMBINED
OFFERING AS ADJUSTED
--------------- ------------
<S> <C> <C>
Revenues........... $ -- $ 2,510,702
Operating expenses:
Systems
operations....... -- 1,575,883
Selling, general
and
administrative... -- 3,756,082
Depreciation and
amortization..... -- 2,097,871
--------------- ------------
Total operating
expenses....... -- 7,429,836
--------------- ------------
Operating income
(loss)............ -- (4,919,134)
--------------- ------------
Interest income.... -- 2,126,360
Interest expense... (418,615)(10) (5,604,200)
Other.............. -- 40,127
--------------- ------------
Income (loss)
before income
taxes............ (418,615) (8,356,847)
Income tax
benefit.......... 146,511(11) 2,877,181
--------------- ------------
Net income
(loss)........... (272,104) (5,479,666)
Preferred stock
dividends and
discount
accretion......... -- --
--------------- ------------
Net income (loss)
applicable to
common stock..... $(272,104) $(5,479,666)
=============== ============
Net loss per
common share..... $ (0.32)
============
Weighted average
common shares
outstanding...... 17,052,085
============
</TABLE>
34
<PAGE>
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 Existing 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 Old
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 Old
Offerings.
(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 Notes at an assumed rate of
13.25% and amortization of debt issuance costs and amortization of debt
discount resulting from the issue price allocated to the Warrants
associated solely with the portion of the proceeds from the Offering used
to repay $10.1 million of TruVision indebtedness. A 0.125% difference in
the stated rate on the Notes would impact interest expense for the year
ended December 31, 1995 and the three months ended March 31, 1996 by
$13,400 and $4,000, respectively. Giving full effect to (i) the issuance
of the Existing Notes and amortization of the related debt issuance cost,
(ii) the issuance of the Notes at an assumed rate of 13.25% 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 $42.1 million and
$10.9 million, respectively, for the year ended December 31, 1995 and the
three months ended March 31, 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.
35
<PAGE>
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, and which are included elsewhere in this Prospectus. The selected
historical consolidated financial data presented below as of March 31, 1996
and for the three months ended March 31, 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>
YEAR ENDED THREE MONTHS
PERIOD FROM DECEMBER 31, ENDED MARCH 31,
FEBRUARY 4, 1993 (INCEPTION) ------------------------ ----------------------------
TO DECEMBER 31, 1993 1994 1995 1995 1996
----------------------------- ----------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $ -- $ 380,077 $ 1,343,969 $ 238,825 $ 940,777
Operating expenses:
Systems operations..... 24,429 274,886 841,819 169,981 555,942
Selling, general and
administrative........ 110,281 1,800,720 4,431,839 461,129 2,637,553
Depreciation and amor-
tization.............. 27,489 413,824 1,783,066 199,519 964,005
--------- ----------- ----------- ------------ ------------
Total operating ex-
penses................. 162,199 2,489,430 7,056,724 830,629 4,157,500
--------- ----------- ----------- ------------ ------------
Operating loss.......... (162,199) (2,109,353) (5,712,755) (591,804) (3,216,723)
Interest expense, net... (411) (152,460) (1,979,719) (111,488) (2,863,109)
--------- ----------- ----------- ------------ ------------
Net loss (162,610) (2,261,813) (7,692,474) (703,292) (6,079,832)
Preferred stock divi-
dends and
discount accretion..... -- -- (786,389) -- --
--------- ----------- ----------- ------------ ------------
Net loss applicable to
common stock........... $(162,610) $(2,261,813) $(8,478,863) $ (703,292) $ (6,079,832)
========= =========== =========== ============ ============
Deficiency of earnings
to fixed charges....... $ 162,610 $ 2,261,813 $ 8,478,863 $ 703,292 $ 6,079,832
========= =========== =========== ============ ============
Net loss per share...... $ (0.30) $ (1.21) $ (2.02) $ (0.35) $ (0.45)
========= =========== =========== ============ ============
Shares used in computing
net loss per share..... 538,127 1,863,512 4,187,736 2,013,950 13,498,752
========= =========== =========== ============ ============
<CAPTION>
DECEMBER 31,
-------------------------
1994 1995 MARCH 31, 1996
----------- ------------ --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit), excluding restricted cash.............. $(1,537,244) $104,446,672 $ 87,773,899
Restricted cash................................................... -- 53,393,344 53,681,589
Total assets...................................................... 8,914,224 213,799,874 213,294,099
Current portion of long-term debt................................. 1,457,295 376,780 384,366
Long-term debt.................................................... 2,839,602 150,871,267 150,993,259
Total stockholders' equity........................................ 4,343,713 55,649,687 49,569,855
</TABLE>
36
<PAGE>
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, 1994 AUGUST 19, AUGUST 19, NINE MONTHS
YEAR ENDED TO AUGUST 1994 TO 1994 TO ENDED
DECEMBER 31, 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 77,995 22,659 193,962
---------- --------- --------- -------- ---------
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>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1993 1994 1995
------------ ------------ -------------
<S> <C> <C> <C>
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
</TABLE>
37
<PAGE>
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 March 31, 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, 1994 AUGUST 25, 1994 THREE MONTHS
TO TO YEAR ENDED ENDED
AUGUST 24, 1994 DECEMBER 31, 1994 DECEMBER 31, 1995 MARCH 31, 1996
--------------- ----------------- ----------------- --------------
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Total revenues.......... $ 73,370 $ 430,534 $ 3,081,614 $ 1,286,026
System operating ex-
penses................ 278,000 425,603 2,103,053 885,712
Selling, general and
administrative........ 668,009 534,431 2,086,200 911,024
Depreciation and amor-
tization.............. 82,196 167,990 1,266,301 584,544
----------- ---------- ------------ ------------
Total operating
expenses............... 1,028,205 1,128,024 5,455,554 2,381,280
----------- ---------- ------------ ------------
Operating loss.......... (954,835) (697,490) (2,373,940) (1,095,254)
Interest income
(expense), net......... 6,632 55,728 (128,442) (163,997)
----------- ---------- ------------ ------------
Net loss................ $ (948,203) $ (641,762) $ (2,502,382) $ (1,259,251)
=========== ========== ============ ============
<CAPTION>
AUGUST 24, 1994 DECEMBER 31, 1994 DECEMBER 31, 1995 MARCH 31, 1996
--------------- ----------------- ----------------- --------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital
(deficit).............. $(2,696,905) $1,948,892 $ (4,770,468) $(12,504,381)
Total assets............ 4,252,144 7,983,059 12,877,217 19,751,653
Current portion of long-
term debt.............. 3,308,000 -- 4,531,464 10,084,894
Long-term debt.......... -- -- -- --
Convertible preferred
stock.................. -- 8,000 11,000 11,000
Total stockholders'
equity................. 495,040 7,091,917 7,589,535 6,330,284
</TABLE>
38
<PAGE>
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 and Lake
Charles, Louisiana; Jackson, Delta, Gulf Coast, Natchez and Oxford,
Mississippi; Bucks, Demopolis, Dothan and Huntsville, Alabama; Ft. Walton
Beach, Gainesville, Panama City and Pensacola, Florida; Jeffersonville,
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 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 stages 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 additional time elapsing
prior to the Company 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,
39
<PAGE>
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.
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THE 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 March 31, 1995 and March 31, 1996.
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
LAUNCH OR SUBSCRIBERS AT SUBSCRIBERS AT
MARKET ACQUISITION DATE MARCH 31, 1995 MARCH 31, 1996
- ------ ---------------- -------------- --------------
<S> <C> <C> <C>
Brenham, TX .................... February 1996 -- 268
Bryan/College Station, TX ...... May 1995 -- 2,080
Milano, TX ..................... October 1995 -- 1,501
Wharton, TX .................... June 1994 1,601 1,881
Bunkie, LA ..................... December 1995 -- 667
Lafayette, LA .................. January 1994 436 625
Lake Charles, LA ............... April 1994 573 490
Monroe, LA ..................... October 1995 -- 1,206
Gainesville, FL ................ January 1996 -- 261
Panama City, FL ................ September 1995 -- 1,362
Pensacola, FL .................. July 1995 -- 1,287
Jeffersonville, GA (1).......... March 1996 -- --
Tullahoma, TN .................. November 1995 -- 661
----- ------
TOTAL......................... 2,610 12,289
===== ======
</TABLE>
- --------
(1) System launched at the end of March 1996.
REVENUE INFORMATION
<TABLE>
<CAPTION>
FOR THE THREE MONTHS APPROXIMATE
ENDED MARCH 31, AVERAGE REVENUE
--------------------- PER SUBSCRIBER FOR
1995 1996 MARCH 1996
---------- ---------- ------------------
<S> <C> <C> <C>
SUBSCRIPTION REVENUES:
Brenham, TX............................ $ -- $ 8,526 $33.83
Bryan/College Station, TX ............. -- 171,891 34.88
Milano, TX ............................ -- 140,578 32.24
Wharton, TX ........................... 167,062 178,988 35.69
Bunkie, LA ............................ -- 34,686 33.10
Lafayette, LA ......................... 23,475 41,207 23.22
Lake Charles, LA ...................... 48,288 42,408 29.86
Monroe, LA ............................ -- 89,861 30.17
Gainesville, FL ....................... -- 6,009 27.72
Panama City, FL ....................... -- 82,456 31.40
Pensacola, FL ......................... -- 110,282 38.87
Jeffersonville, GA (1)................. -- -- --
Tullahoma, TN ......................... -- 33,885 33.41
---------- ----------
TOTAL................................ $ 238,825 $ 940,777
========== ==========
</TABLE>
- --------
(1) System launched at the end of March 1996.
40
<PAGE>
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 three months ended March 31, 1996 were $940,777 as compared
to $238,825 for the comparable period of 1995, an increase of $701,952 or
294%. This increase is principally attributable to the increase in the average
number of subscribers for the three months ended March 31, 1996 compared to
the same period in 1995. The increase in the average number of subscribers is
due to the launch of eight new systems during the remaining nine months of
1995 and during the first quarter of 1996. In addition, the contributions of
two Operating Systems from Heartland in October 1995, are part of this
increase in the average number of subscribers for the first three 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 three months ended
March 31, 1996 was $555,942 as compared to $169,981 for the same period of
1995, reflecting an increase of $385,961 or 227%. This increase is
attributable primarily to the increase in the number of subscribers for such
period in 1996 compared to such period in 1995 as a result of the new Markets
launched as described above.
Selling, General and Administrative Expense. Selling, general and
administrative ("SG&A") expense for the three months ended March 31, 1996 was
$2,637,553 compared to $461,129 for the same period of 1995, an increase of
$2,176,424 or 471%. The Company has experienced increasing selling, general
and administrative 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 increases in personnel costs,
advertising and marketing expenses and other overhead expenses required to
support the expansion of the Company's operations. The Company believes such
selling, general and administrative costs 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 when
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 such selling,
general and administrative expenses will stabilize within this time period.
Depreciation and Amortization Expense. Depreciation and amortization expense
includes depreciation of systems and equipment and amortization of channel
rights and organizational costs. Depreciation and amortization expense for the
three months ended March 31, 1996 was $964,005 versus $199,519 for the same
period of 1995, an increase of $764,486 or 383%. 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 purchase of equipment for newly launched markets.
Interest Expense. Interest expense increased to $5,009,893 from $114,090 as
compared to the same period ended in 1995. This large increase in interest
expense is due to the issuance in October 1995 of the Existing Notes.
Interest Income. Interest income includes amounts earned on the Company's
cash equivalents and the escrowed funds required to cover the first three
years' interest payments as required by the terms of the Old Indenture
relating to the Existing Notes. Interest income of $2,126,360 consists of
interest earned on the proceeds from the Old Offerings.
41
<PAGE>
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 Old 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 February 29, 1996.
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE APPROXIMATE
LAUNCH OR SUBSCRIBERS AT SUBSCRIBERS AT SUBSCRIBERS AT
MARKET ACQUISITION DATE DECEMBER 31, 1994 DECEMBER 31, 1995 FEBRUARY 29, 1996
- ------ ---------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Brenham, TX............. February 1996 -- -- 126
Bryan/College Station,
TX..................... May 1995 -- 1,445 1,809
Milano, TX(1)........... October 1995 -- 1,297 1,428
Wharton, TX............. June 1994 1,401 1,579 1,768
Bunkie, LA.............. December 1995 -- 62 463
Lafayette, LA(2)........ January 1994 500 593 610
Lake Charles, LA(3)..... April 1994 603 487 476
Monroe, LA(4)........... October 1995 -- 829 1,045
Gainesville, FL......... January 1996 -- -- 100
Panama City, FL......... September 1995 -- 442 1,039
Pensacola, FL........... July 1995 -- 658 1,086
Jeffersonville, GA...... March 1996 -- -- --
Tullahoma, TN........... November 1995 -- 133 422
----- ----- ------
TOTAL................. 2,504 7,525 10,372
===== ===== ======
</TABLE>
- --------
(1) The Milano System was acquired by the Company from Heartland in October
1995.
(2) 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 twelve months from the date hereof.
(3) The Company expects to commence marketing the Lake Charles System in
August 1996.
(4) The Monroe System was acquired by the Company from Heartland in October
1995.
42
<PAGE>
REVENUE INFORMATION
<TABLE>
<CAPTION>
APPROXIMATE
YEAR ENDED DECEMBER 31, AVERAGE REVENUE
------------------------ PER SUBSCRIBER FOR
1993 1994 1995 DECEMBER 1995
---- -------- ---------- ------------------
<S> <C> <C> <C> <C>
SUBSCRIPTION REVENUES:
Brenham, TX....................... $-- $ -- $ -- $ -- (1)
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 -- (2)
Lafayette, LA..................... -- 46,057 125,727 22.60
Lake Charles, LA.................. -- 48,739 182,760 30.10
Monroe, LA........................ -- -- 66,124 27.40
Gainesville, FL................... -- -- -- -- (1)
Panama City, FL................... -- -- 11,644 31.90
Pensacola, FL..................... -- -- 59,814 37.50
Jeffersonville, GA................ -- -- -- -- (1)
Tullahoma, TN..................... -- -- 1,703 -- (2)
---- -------- ----------
TOTAL........................... $-- $254,303 $1,343,969
==== ======== ==========
</TABLE>
- --------
(1) Operating System not launched at December 31, 1995.
(2) 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 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 in 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 is 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 selling, general, and administrative 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 selling, general
43
<PAGE>
and administrative costs 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 when 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 selling, general and administrative
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 is due primarily to
increases 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 the partial year 1993 of $27,489.
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 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 escrowed funds.
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 for this
revolving credit facility. In October 1995, the Company issued the Existing
Notes with an aggregate principal amount of $150,000,000. At December 31,
1995, interest expense of $3,683,333 had been accrued for the Senior 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 described above 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.
44
<PAGE>
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 "Common Stock Offering"). The Company received approximately $32.3
million in net proceeds from the Common Stock Offering. Concurrent with the
Common Stock Offering, the Company issued 150,000 units (the "Old Units")
consisting of $150 million aggregate principal amount of Existing Notes and
450,000 warrants to purchase an equal number of shares of Common Stock at an
exercise price of $11.55 per share to the initial purchasers. The Company
placed approximately $53.2 million of the approximately $143.8 million of net
proceeds realized from the sale of the Old Units into an escrow account to
cover the first three years' interest payments as required by terms of the Old
Indenture. Additionally, in April 1995, the Company completed a private
placement of 14,781.75 shares of redeemable convertible preferred stock,
receiving net proceeds of approximately $13.8 million. Such preferred stock
was converted into Common Stock at the time of the Heartland Transaction.
The Old Indenture pursuant to which the Existing Notes were issued contains
representations and warranties, affirmative and negative covenants and events
of default customary for financing of this type. As of March 31, 1996, the
Company was in compliance in all material respects with all covenants in the
Old Indenture.
At March 31, 1996, the Company had commitments to purchase approximately
$6.2 million in equipment for existing and future Markets, primarily for set-
top converters and head end equipment.
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 EBITDA 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 Old Offerings and this Offering will
be sufficient to meet its expected capital needs at least over the next twelve
months.
The Company does not anticipate immediate reductions in SG&A, including
reductions in its number of employees, as a consequence of the TruVision
Transaction.
Subject to the limitations relating to the Existing Notes and the 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, if such financing is available
to the Company on satisfactory terms.
As a result of the Old Offering and the Offering, and the possible
incurrence of additional indebtedness, the Company will be required to satisfy
certain debt service requirements. Following the
45
<PAGE>
disbursement in October 1998 of all of the funds in the escrow account
established in connection with the Old Indenture, a substantial portion of the
Company's cash flow will be devoted to debt service on the Existing Notes and
on and after , 2002, on the Notes offered in this Offering, and 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 Existing Notes, the 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 three months ended March 31, 1995, cash used in operating activities
was $0.14 million consisting primarily of a net loss of $0.7 million, offset
by an increase in accounts payable and accrued expenses of $0.27 million, non-
cash expenses of $0.07 million and depreciation and amortization of $0.2
million. For the three months ended March 31, 1995, cash used in investing
activities was $0.7 million, consisting primarily of capital expenditures and
payments for licenses and organizational costs of approximately $0.68 million
and $0.02 million, respectively. These capital expenditures were principally
related to the construction of new markets and certain license and
organization costs. For the three months ended March 31, 1995 cash provided by
financing activities was $1.1 million, consisting primarily of $1.0 million in
proceeds from the subscription of Common Stock and $0.04 million in proceeds
from the issuance of long-term debt.
For the three months ended March 31, 1996, cash used in operating activities
was $0.02 million consisting primarily of a net loss of $6 million and an
increase in receivables and prepaid expenses of $0.2 million, offset by an
increase in accounts payable and accrued expenses of $5.4 million,
depreciation and amortization of $0.96 million, non-cash income of $0.29
million and non-cash expenses of $0.15 million. For the three months ended
March 31, 1996, cash used in investing activities was $11.4 million,
consisting primarily of capital expenditures and payments for licenses and
organizational costs of approximately $9.4 million and $1.9 million,
respectively. 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 three
months ended March 31, 1996, cash used in financing activities was $0.001
million, consisting of $0.001 million from the repayments of long-term debt.
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 an
increase in prepaid expenses of $0.01 million, offset by an increase in
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 organizational 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
46
<PAGE>
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 organizational 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. For 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 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 Existing 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
three months ended March 31, 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 three months ended March 31, 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.
Three Months Ended March 31, 1996
Revenues. For the three months ended March 31, 1996, revenues were
$2,510,702. Subscription revenues from subscribers accounted for $2,331,951,
or approximately 93% of total revenues.
Systems Operations Expense. The Company incurred $1,575,883 of systems
operations expense.
SG&A Expense. The Company recorded SG&A expense in the amount of $3,576,082
for the three months ended March 31, 1996.
47
<PAGE>
Depreciation and Amortization Expense. Depreciation and amortization expense
totaled $2,097,871 for the period.
Interest Income. For the three month period, the Company earned $1,451,035
on its cash equivalents and $675,325 from the escrowed funds.
Interest Expense. Interest expense incurred during the period amounted to
$5,604,200. This amount gives pro forma effect to the issuance of the Existing
Notes and the Notes offered hereby 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 Existing Notes and amortization of the related debt issuance costs, (ii)
the issuance of the Notes at an assumed rate of 13.25% and amortization of the
related debt issuance costs and amortization of the debt discount resulting
from the issue price allocated to the Warrants, and (iii) the incurrence of
BTA Auction indebtedness as if such indebtedness had been incurred, and the
Existing Notes and Notes had been issued, on January 1, 1995, interest expense
on a pro forma basis would have been $10.9 million for the three months ended
March 31, 1996.
Net Loss. As a result of the excess of expenses over revenues detailed
above, the Company incurred a net loss of $5,479,666 for the three months
ended March 31, 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
$6,468,603. This amount gives pro forma effect to the issuance of the Existing
Notes and the Notes offered hereby 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 Existing Notes and amortization of the related debt issuance costs, (ii)
the issuance of the Notes at an assumed rate of 13.25% and amortization of the
related debt issuance costs and amortization of the debt discount resulting
from the issue price allocated to the Warrants, and (iii) the incurrence of
BTA Auction indebtedness as if such indebtedness had been incurred, and the
Existing Notes and Notes had been issued, on January 1, 1995, interest expense
on a pro forma basis would have been $42.1 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 $9,865,128 for the twelve months
ended December 31, 1995.
48
<PAGE>
BUSINESS
The Company acquires, develops, owns and operates wireless cable television
systems, primarily in small to mid-size markets located 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 (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 cluster 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, 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.
The Company's markets include (i) 24 Operating Systems, (ii) 9 Systems Under
Construction, (iii) 17 Near-Term Launch Markets, and (iv) 20 Long-Term Launch
Markets. In addition, the Company owns a 50% interest in a limited liability
company which holds channel rights to serve 10 markets in North Carolina. See
"Risk Factors--Need for Additional Financing for Growth; Certain Covenants",
"--Uncertainty of Ability to Obtain FCC Authorizations", "Wireless Cable
Industry--Government Regulation" and "Use of Proceeds." 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 and 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.
49
<PAGE>
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.
50
<PAGE>
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED APPROXIMATE
TOTAL LOS LAUNCH CURRENT EXPECTED SUBSCRIBERS AT
HOUSEHOLDS(1) HOUSEHOLDS(2) DATE CHANNELS(3) CHANNELS(3)(4) JUNE 30, 1996
------------- ------------- -------------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING SYSTEMS(5):
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(6)........... 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(7)........ 180,300 153,200 January 1994 11 26 697
Lake Charles, LA........ 111,600 92,500 April 1994 17 31 555
Monroe, LA(6)........... 114,100 89,600 October 1995 17 30 1,806
Jackson, MS............. 211,500 176,900 June 1994 29 32 10,745
Delta, MS(8)............ 100,800 92,800 July 1995 31 32 4,096
Gulf Coast, MS(9)....... 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(10)...... 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(11)..... 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(10).... 76,400 44,100 June 1995 20 32 397
Tullahoma, TN .......... 109,600 73,600 November 1995 20 20 1,403
--------- --------- ------
Total Operating
Systems.............. 2,736,800 2,216,400 40,253
--------- --------- ======
</TABLE>
<TABLE>
<CAPTION>
ESTIMATED TOTAL ESTIMATED LOS EXPECTED
HOUSEHOLDS(1) HOUSEHOLDS(2) CHANNELS(3)(4)
--------------- ------------- --------------
<S> <C> <C> <C>
SYSTEMS UNDER CONSTRUCTION(12):
Florence, AL ..................... 62,000 55,800 24
Albany, GA........................ 92,900 67,600 21
Ocala, FL(13)..................... 275,500 186,200 24
Alexandria, LA.................... 31,700 26,900 28
Houma, LA......................... 81,700 69,500 26
Meridian, MS...................... 73,300 44,800 31
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................... 1,108,200 807,200
--------- -------
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
ESTIMATED TOTAL ESTIMATED LOS EXPECTED
HOUSEHOLDS(1) HOUSEHOLDS(2) CHANNELS(3)(4)
--------------- ------------- --------------
<S> <C> <C> <C>
NEAR-TERM LAUNCH MARKETS(14):
Bedias/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
Bankston, AL....................... 64,800 41,300 20
Gadsden, AL(13).................... 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(15).................. 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(16)................... 103,200 81,300 29
Marianna, FL....................... 56,700 44,900 24
--------- ---------
Total Near-Term Launch Markets... 2,136,200 1,683,000
--------- ---------
LONG-TERM LAUNCH MARKETS(17):
Auburn, AL(18)..................... 62,200 47,700 27
Birmingham, AL .................... 308,400 276,900 28
Mobile, AL (13)(19)................ 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(20)................. 86,300 57,900 16
Tallahassee, FL ................... 129,800 115,000 29
Columbus, GA....................... 160,100 116,500 32
Vidalia, GA(21).................... 50,800 34,500 24
Bowling Green, KY(22).............. 126,900 68,300 20
Abita Springs, LA.................. 217,300 116,800 20
Amite, LA.......................... 50,100 34,400 20
Baton Rouge, LA(13)(19)............ 261,700 235,500 20
Leesville, LA...................... 43,500 26,700 28
Natchitoches, LA(13)............... 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>
- -------
(1) 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.
(2) 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
52
<PAGE>
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.
(3) Includes wireless cable channels and, where applicable, local off-air
VHF/UHF channels that are not retransmitted by the Company via wireless
cable frequencies.
(4) 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."
(5) 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 and Lawrenceburg System are part of the TruVision Transaction and
pending acquisitions. See "The TruVision Transaction" and "Acquisitions".
(6) 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. The
Systems were not actively marketed until being acquired by the Company as
part of the Heartland Transaction.
(7) 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 12 months from the date hereof.
(8) Eight channels currently utilized in the Delta System are operated under
special temporary FCC authorization.
(9) Four channels currently utilized in the Gulf Coast System were granted by
the FCC without acting on an objection filed by a third party.
(10) The Company has entered into an acquisition agreement with respect to
this system. There can be no assurance that the Company will consummate
such transaction. See "Risk Factors--Inability to Consummate the Pending
Acquisitions" and "Acquisitions."
(11) Ten channels currently utilized in the Gainesville, Florida System are
operated under special temporary FCC authorization.
(12) 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, Meridian and Starkville, Mississippi Markets are part of the
TruVision Transaction. See "The TruVision Transaction."
(13) 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.
(14) 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."
(15) 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.
(16) 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."
(17) 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."
(18) 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."
(19) An existing wireless cable operator is serving approximately 300
subscribers in this market with an 11 channel MDS system.
(20) The Company believes that another entity has leased rights to 20 other
channels that are the subject of pending ITFS applications.
(21) 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."
(22) The Company currently leases eight channels in the Bowling Green Market,
and has filed applications for 12 commercial channels pursuant to the BTA
Auction which 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."
53
<PAGE>
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
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.
54
<PAGE>
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 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. 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 TCA 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.
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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 two channels. Co-location applications
were recently granted for four 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.
Heartland completed construction of the Monroe System 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. 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 the 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
HBO and Showtime for $8.95 each per month and The Disney Channel for $4.95 per
month. 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.
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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 HBO and Showtime for $8.95 each per month
and The Disney Channel for $4.95 per month. 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
transmits 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
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 coverage 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 2 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 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,
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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 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 the
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 HBO and Showtime for $8.95 each per month and The Disney Channel for
$4.95 per month. 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, Holmes,
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.
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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 to 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 anticipates that it will acquire an operating
wireless cable system (the "Huntsville Wireless System") , in the third
quarter of 1996 (by which time the Company expects to receive the necessary
FCC consents and waivers), together with an operating hard-wire system (the
"Huntsville Wired System"), and operate it thereafter. 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 intends to lease 24 and acquire three of the wireless cable
channels available 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 Okaloosa 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
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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 the 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.
Jeffersonville System. The Company launched service in the Jeffersonville,
Georgia System in March 1996. The Jeffersonville System serves portions of
Laurens, Pulaski, 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
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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 469 feet above ground level. The Lawrenceburg System's signal
pattern covers a radius 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,
Bedford, 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.
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; Meridian, 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 by September 30, 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.
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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.
Albany System. The Company currently leases 21 of the wireless cable
channels available for the Albany, Georgia market. Seventeen of the 21
channels are granted and co-located. The Company expects to launch this system
by July 31, 1996. The Company will transmit 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 will serve 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 of Georgia.
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 at 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.
Alexandria System. The Company currently leases 27 of the wireless cable
channels available for the Alexandria, Louisiana market. Of these, 15 channels
are subject to pending modification applications and four channels are granted
and co-located. New station applications are pending for the remaining 8
channels. The Company expects to launch this System by August 31, 1996. The
Company will transmit 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.
Meridian System. 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 Company expects to launch this system by September
1996. The Company is licensed to transmit at 50 watts of power from the 805
foot level. A modification is pending FCC approval to move the 20 ITFS
channels. Consent letters from surrounding licensees have been received and
submitted to the FCC. A tower lease is currently under negotiation at a tower
site in the Meridian area. Upon completion of these negotiations and FCC
approval, the Meridian System's signal pattern will cover a radius of
approximately 40 miles, encompassing 73,300 households, of which the Company
believes approximately 44,800 households can be served by LOS transmissions.
The principal hard-wire cable competitor in the Meridian, Mississippi area is
TV Selection Systems, Inc., an affiliate of Comcast Corp.
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
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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 130,900 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.
Houma System. The Company currently leases 26 of the wireless cable channels
available for the Houma, Louisiana market. Eighteen of these channels are
granted and co-located. New station applications are pending for the remaining
eight channels. The Company expects to launch this system by August 31, 1996.
The Company will transmit 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 covers 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.
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 applications are pending for the remaining 12
channels. The Company expects to launch this system by September 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 can be served by LOS transmissions. The Company will serve parts of
DeKalb, Jackson, Catoosa, Dade 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 educational
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.
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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
selection process. The FCC's ITFS application selection process is based on a
set of 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 its option, trade or exchange
existing channel rights in order to acquire, directly or indirectly, channel
rights in Markets that have a 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:
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<TABLE>
<CAPTION>
ESTIMATED
TOTAL ESTIMATED LOS
MARKET HOUSEHOLDS HOUSEHOLDS
- ------ ---------- -------------
<S> <C> <C>
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
========= =========
</TABLE>
WONC 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 to 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
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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
(special interest)
CBS (local network affiliate) The Nashville Network (music)
Country Music Television NBC (local network affiliate)
CNN (news) Nickelodeon (children's)
C-SPAN (public affairs) PBS (education, general interest)
Discovery (science) SportSouth (southeast U.S. sports)
The Disney Channel (/1/) TBS Superstation (sports, movies)
ESPN (sports) TNT (sports, movies)
The Family Channel (family entertainment) USA (general interest)
Fox (local network affiliate) The Weather Channel (weather)
PREMIUM PAY-PER-VIEW
Home Box Office Viewer's Choice
Showtime
The Disney Channel (/1/)
(/1/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 the day of
the survey if 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 of the receiving antenna in accordance with national
electrical codes. The installation process is completed, 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
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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, the 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 hard-wire cable operators
with respect to comparable programming.
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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 economies 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
generate substantial goodwill in the community and enhance the Company's
identity as a local provider of subscription television service.
EMPLOYEES
As of March 31, 1996, the Company had a total of 507 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 annum 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,
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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 for subscribers who were previously disconnected 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 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 relatively 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 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
estimates that wireless cable would be serving approximately 950,000 customers
at the end of 1995.
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Like a traditional hard-wire cable system, a wireless cable system receives
programming at a headend. Unlike traditional hard-wire cable systems, however,
programming then is 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, and 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 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 or 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 through 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 or not new
state laws will be enacted which 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
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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
airtime ("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 leasing 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 requirement 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 within 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. See "Description of Certain Indebtedness."
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
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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, cancelled 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.
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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
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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 between 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
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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
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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 throughout 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
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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 optic network. In April
1995, Pacific Telesis ("PacTel"), an 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 own 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 into 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.
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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:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Hans J. Sternberg(1).... 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 and Secretary
Michael C. Ellis........ 30 Vice President--Controller
Arnold L.
Chavkin(1)(3).......... 44 Director
William K.
Luby(1)(2)(3).......... 35 Director
J. R. Holland,
Jr.(1)(2)(3)........... 52 Director
Daniel L. Shimer(2)..... 51 Director
William J. Van
Devender............... 47 Director
David E. Webb(1)........ 49 Director
</TABLE>
- --------
(1) Member of Operating Committee.
(2) Member of the Compensation Committee.
(3) 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 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.
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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 and Secretary 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. Prior to his 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
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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 has served as Executive Vice President and Chief Financial Officer of
COREStaff, Inc. since April 1994. Formed in late 1993, COREStaff has rapidly
grown, principally through acquisitions, to a $400 million top ten provider of
staffing services in the United States. From March 1991 to March 1994, Mr.
Shimer served as the Executive Vice-President, Chief Financial Officer, and
President of National Accounts for Brice Foods, Inc. From February 1983 to
March 1991, he was associated with Bard & Company, Inc. in various senior
financial capacities among its publicly traded affiliates, including Foxmeyer
Corporation, Coast America Corporation, and Computerland Corporation. Mr.
Shimer, a certified public accountant, began his career at KPMG Peat Marwick
LLP and has over 25 years of financial management experience.
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 numbers 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
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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 are 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
81
<PAGE>
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 Chief Executive Officer. No other
executive officers of the Company received compensation in excess of $100,000
in either of those years. The amounts shown include compensation for services
in all capacities that were provided to the Company or Old Wireless One and
their respective subsidiaries.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------------
AWARDS
---------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
NAME AND ------------------------- STOCK UNDERLYING ALL OTHER
PRNCIPAL POSITIONI YEAR SALARY($) BONUS($) AWARDS($) OPTIONS(#) COMPENSATION
- ------------------ ---- --------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sean E. Reilly.......... 1995 $87,692 -- -- 201,395(1) --
Chief Executive Officer 1994 $35,000(2) -- -- 113,144(3) --
</TABLE>
- --------
(1) Such options were originally issued in April 1995 and were to purchase
shares of common stock of Old Wireless One. Such options were assumed by
the Company under its 1995 Long-Term Performance Incentive Plan (the
"Incentive Plan") in October 1995 in connection with the Heartland
Transaction.
(2) Mr. Reilly began receiving compensation from Old Wireless One on June 1,
1994.
(3) Such options were originally issued in September 1994 and were to purchase
shares of common stock of Old Wireless One. Such options were assumed by
the Company under its Incentive Plan in October 1995 in connection with
the Heartland Transaction.
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<PAGE>
STOCK OPTION GRANTS
The following table provides information relating to the stock options
awarded to the Chief Executive Officer during the Company's last fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(1)
- --------------------------------------------------------------------------- ----------------------
NUMBER OF
SECURITIES
UNDERLYING PERCENT OF TOTAL
OPTIONS OPTIONS GRANTED EXERCISE EXPIRATION
NAME GRANTED(#)(2) IN FISCAL YEAR PRICE($) DATE(3) 5%($) 10%($)
---- ------------- ---------------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Sean E. Reilly.......... 201,395(4) 36.3% (5) 4/14/01 $57,196 $ 199,784
</TABLE>
- --------
(1) Amounts reflect certain assumed rates of appreciation set forth in the
Commission's executive compensation disclosure rules. Actual gains, if
any, on stock options 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.
(2) All options vest in five equal installments, with accelerated vesting in
the event of a change in control of the Company.
(3) All options listed in the table also expire one year following the
termination of employment with the Company of such holder for any reason.
(4) 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.
(5) 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(2)
---- ------------------------------- ----------------------------
<S> <C> <C>
Sean E.
Reilly(1)........ 62,908/251,631 $729,893/$2,088,212
</TABLE>
- --------
(1) 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 $4.16 per share, which is increased 35% per year for
each of the remaining four installments.
(2) The closing sale price of the Common Stock on December 29, 1995 was $16.50
as reported by the Nasdaq 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.
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<PAGE>
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 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 during 1995 were Messrs.
Holland and Luby, and now include Mr. Shimer as of February 1996. 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"
within the meaning of 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 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, 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 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 and to establish
performance objectives. 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.
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<PAGE>
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
176,983 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 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 for any reason
other than death, permanent disability, or termination without "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
85
<PAGE>
the Company's stockholders; provided, that the Board of Directors shall 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 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).
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<PAGE>
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 to 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-length 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.
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<PAGE>
PRINCIPAL STOCKHOLDERS
Except as otherwise noted, the following table sets forth certain
information as of May 30, 1996 (pro forma to account for the TruVision
Transaction) 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.
<TABLE>
<CAPTION>
COMMON STOCK(1)
-------------------
DIRECTORS, OFFICERS NUMBER OF PERCENT
AND 5% STOCKHOLDERS SHARES OF CLASS
------------------- ---------- --------
<S> <C> <C>
Heartland Wireless Communications, Inc.(2)(3)............. 3,361,538 19.9%
903 North Bowser, Suite 140
Richardson, Texas 75081
Chase Manhattan Capital Corporation(2)(4)................. 3,954,249 23.4%
380 Madison Avenue, 12th Floor
New York, New York 10017
Chase Venture Capital Associates L.P. (2)(5).............. 3,954,249 23.4%
380 Madison Avenue, 12th Floor
New York, New York 10017
Baseball Partners(2)...................................... 393,226 2.3%
380 Madison Avenue, 12th Floor
New York, New York 10017
Premier Venture Capital Corporation(2)(6)................. 754,268 4.5%
451 Florida Street
Baton Rouge, Louisiana 70821
Advantage Capital Corporation(2)(7)....................... 630,489 3.7%
LL&E Tower
909 Poydras Street, Suite 2230
New Orleans, Louisiana 70112
Mississippi Wireless TV, L.P.(2)(8)....................... 1,760,000 10.4%
VanCom, Inc.(2)(9)........................................ 44,000 *
Henry M. Burkhalter(2).................................... 2,018,015 11.9%
Hans J. Sternberg(2)(10).................................. 374,193 2.2%
Sean E. Reilly(2)(11)..................................... 101,755 *
Arnold L. Chavkin(5)...................................... 3,954,249 23.4%
J. R. Holland, Jr.(12).................................... 3,361,538 19.9%
William K. Luby(13)....................................... 393,226 2.3%
Daniel L. Shimer.......................................... 4,800 *
William J. Van Devender................................... 44,000 *
David E. Webb(14)......................................... 3,361,538 19.9%
All Directors and executive officers as a group (13
persons)................................................. 10,496,874 59.1%
</TABLE>
88
<PAGE>
- --------
* Less than one percent.
(1) Does not include 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.
(2) 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 parties to such agreement.
(3) 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.
(4) 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.
(5) Reflects 3,954,249 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.
(6) 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 Premier Bancorp, Inc., which is a
publicly-traded corporation. The address for PVCC is 451 Florida Street,
Baton Rouge, Louisiana 70821.
(7) 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.
(8) MWTV owns 1,760,000 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."
(9) 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.
(10) Includes 12,520 shares owned by Mr. Sternberg's wife and 85,537 shares
issuable upon the exercise of presently exercisable options.
(11) Includes 85,537 shares issuable upon the exercise of presently
exercisable options.
(12) 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.
(13) 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.
(14) 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.
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<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
INDEBTEDNESS TO U.S. GOVERNMENT
The Company anticipates that it will incur certain indebtedness to the U.S.
government in connection with its payment obligations for the rights to MDS
licenses which it has acquired through the BTA Auction. The FCC has approved
an installment financing plan for qualified "designated entities" to complete
their payment obligations for such rights. The Company believes that it
qualifies as a "designated entity" and thus is eligible for such installment
financing.
The terms of the installment payment plan authorized by the FCC provide that
a qualifying bidder can pay the full amount of its winning bid in installments
(less a down payment equal to 20% of the total purchase price). The total
purchase price, in the case of a company which qualifies as a "designated
entity," is calculated by multiplying the total amount of wining bids in the
BTA Auction by 0.85. The plan provides for quarterly interest and principal
payments and a term of ten years for repayment, running from the date the BTA
authorization is issued. Only interest payments are required for the first two
years, with principal being amortized over the remaining years of the ten-year
period. The applicable interest rate is fixed at the time of issuance of the
BTA authorization at the then prevailing rate on the ten-year U.S. Treasury
obligation plus 2.5%.
EXISTING NOTES
The Company currently has outstanding $150 million aggregate principal
amount of Existing Notes. The Company recently executed the Supplemental
Indenture to modify certain of the restrictive covenants to conform to the
restrictive covenants governing the Notes and to make certain other technical
changes of a non-substantive nature. See "Description of Notes--Certain
Covenants."
DESCRIPTION OF UNITS
Each Unit consists of $1,000 principal amount at maturity of the Notes and
one Warrant to purchase shares of Common Stock. The Notes and the Warrants
will not trade separately until the earlier of (i) 90 days from the date of
issuance and (ii) such date as the Underwriters may, in their discretion, deem
appropriate (the "Separation Date").
DESCRIPTION OF NOTES
GENERAL
The Notes will be issued under the Indenture to be dated as of August ,
1996 between the Company and United States Trust Company of New York, as
trustee (the "Trustee"), a copy of the form of which is filed as an exhibit to
the Registration Statement of which this Prospectus forms a part and will be
made available to prospective purchasers of the Notes upon request. The
Indenture is subject to and governed by the Trust Indenture Act.
The following summary of the material provisions of the Indenture does not
purport to be complete, and where reference is made to particular provisions
of the Indenture, such provisions, including the definitions of certain terms,
are qualified in their entirety by reference to all of the provisions of the
Indenture and those terms made a part of the Indenture by the Trust Indenture
Act. For definitions of certain capitalized terms used in the following
summary, see "--Certain Definitions." References to the Company in the
"Description of Notes" are to Wireless One, Inc., excluding any Subsidiaries
thereof.
PRINCIPAL, INTEREST AND MATURITY
The Notes will be issued at a discount to their aggregate principal amount
to generate gross proceeds to the Company of approximately $ million and
will be senior obligations of the Company. The Notes will accrete in value
until August 1, 2001 at a rate of % per annum, compounded semi-annually, to
an aggregate principal amount of $ million. Cash interest will not accrue on
the Notes prior to August 1, 2001. Thereafter, interest will accrue at a rate
of % per annum and will be payable semi-annually in cash on each and
, commencing , 2002, to holders of record on the immediately
preceding and . Interest will accrue
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from the most recent date to 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 comprised of twelve 30-day months. The Notes will mature on
, 2006. All references to the principal amount of the Notes herein are
references to the principal amount at final maturity.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes will be exchangeable and transferable, at the office or agency
of the Company in the City of New York maintained for such purposes (which
initially will be the corporate trust office of the Trustee at 114 West 47th
Street, New York, New York 10036, Attention: Corporate Trust Administration);
provided, however, that payment of interest may be made at the option of the
Company by check mailed to the Person entitled thereto as shown on the
security register. Notwithstanding the foregoing, payments of principal of,
and interest on, Notes represented by one or more permanent global Notes
registered in the name of or held by The Depository Trust Company or its
nominee will be made in immediately available funds to such entity as the
registered owner and holder of such permanent global Note or Notes. The Notes
will be issued only in fully registered form without coupons, in denominations
of $1,000 and any integral multiple thereof. No service charge will be made
for any registration of transfer, exchange or redemption of Notes, except in
certain circumstances for any tax or other governmental charge that may be
imposed in connection therewith.
RANKING
The Notes will be senior obligations of the Company ranking pari passu in
right of payment to all existing and future Indebtedness of the Company, other
than Indebtedness that is expressly subordinated to the Notes. However,
subject to certain limitations set forth in the Indenture, the Company and its
Subsidiaries may incur other senior Indebtedness, including Indebtedness that
is secured by the assets of the Company and its Subsidiaries. Such limitations
may not limit the Company's ability to engage in certain highly leveraged
transactions. In addition, the Company is a holding company that conducts
substantially all of its business operations through its Subsidiaries and,
therefore, the Notes will be effectively subordinated to all existing and
future Indebtedness and other liabilities and commitments of such
Subsidiaries, including trade payables. As of March 31, 1996, after giving
effect to the TruVision Transaction and the Offering, the Company would have
had $296.6 million of Indebtedness. The outstanding Indebtedness and trade
payables of the Company's Subsidiaries as of March 31, 1996 (on a pro forma
basis giving effect to the TruVision Transaction and the other Pro Forma
Events) would have been approximately $17.4 million.
OPTIONAL REDEMPTION
The Notes will be subject to redemption at any time on or after ,
2001, at the option of the Company, in whole or in part, on not less than 30
nor more than 60 days' prior notice in amounts of $1,000 or an integral
multiple thereof at the following redemption prices (expressed as percentages
of the principal amount), if redeemed during the 12-month period beginning on
of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2001............................................................ %
2002............................................................
2003............................................................
2004............................................................ 100%
</TABLE>
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).
In addition, at any time or from time to time prior to , 1999, up to
30% of the aggregate principal amount originally issued of the Notes will be
redeemable at the option of the Company with the Net Cash Proceeds from a sale
to a Strategic Investor of the Company's Capital Stock (other than Redeemable
Capital Stock) or Qualified Subordinated Indebtedness in a single transaction
or series
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of related transactions for an aggregate purchase price equal to or exceeding
$ million, at a redemption price equal to % of the Accreted Value of the
Notes; provided that after giving effect to any such redemption, at least 70%
of the aggregate principal amount originally issued of the Notes remains
outstanding thereafter. 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 30 nor
more than 60 days' notice given within 30 days after (and not before) the
consummation of any such sale, in amounts of $1,000 or an integral multiple
thereof.
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.
MANDATORY REDEMPTION
Except as set forth below under "--Certain Covenants--Limitation on Sale of
Assets" and "--Purchase of Notes upon a Change of Control," the Company will
not be required to make mandatory redemption or sinking fund payments with
respect to the Notes.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
the Notes are listed, or, if the Notes are not so listed, on a pro rata basis,
by lot or by such method as the Trustee shall deem fair and appropriate,
provided that no Notes with a principal amount of $1,000 or less shall be
redeemed in part. Notice of redemption shall be mailed by first class mail at
least 30 but not more than 60 days before the redemption date to each holder
of Notes to be redeemed at its registered address. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note
shall state the portion of the principal amount to be redeemed. A new Note in
principal amount equal to the unredeemed portion will be issued in the name of
the holder thereof upon cancellation of the original Note. On and after the
redemption date, interest will cease to accrue on the Notes or portions of the
Notes called for redemption.
CERTAIN COVENANTS
The Indenture will contain, among others, the covenants described below.
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 the Indenture and listed on a schedule thereto (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 attached to
the Indenture and is subordinated in right of payment
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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 attached to the Indenture; 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 the "--Limitation on Issuances of Guarantees of Indebtedness"
covenant;
(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, 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, (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 covenant 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 under this clause (ix) together with the Net
Cash Proceeds of Indebtedness incurred under clause (xi) below shall not
exceed $100,000,000 at any time outstanding;
(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);
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(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 their 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 covenant
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 covenant, 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;
(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.
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;
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(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
the 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 the 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 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 "--Limitation on Indebtedness" covenant; and (3) the
aggregate amount of all such Restricted Payments declared or made after the
date of the 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
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 covenant and such
payment shall have been deemed to have been paid on such date of
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declaration and shall not have been deemed a "Permitted Payment" for
purposes of the calculation required by paragraph (a) of this covenant;
(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 covenant;
(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 covenant;
(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 the 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 the
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.
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
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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 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 "--Limitation on
Restricted Payments" covenant), (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 the Indenture and
any renewal or extension thereof under substantially the same terms as the
original terms.
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 "--Limitation on Sale of Assets" covenant and (ii) the Company or
such Subsidiary would be entitled under the "--Limitation on Indebtedness"
covenant to incur any Capital Lease Obligations in respect of such Sale and
Leaseback Transaction.
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
the 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 existing as of the date of the Indenture and listed on a
schedule thereto;
(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
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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 "--
Limitation on Indebtedness" covenant or Liens securing Indebtedness
incurred in compliance with clause (xii) of the definition of Permitted
Indebtedness of the "--Limitation on Indebtedness" covenant;
(e) Liens securing purchase money Indebtedness, including pursuant to
clause (x) under the second paragraph of the "--Limitation on Indebtedness"
covenant, incurred in compliance with the 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 the "--Limitation
on Indebtedness" covenant; 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.
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,
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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 the 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) The Indenture will provide that, 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 (an "Offer") from all holders of the Notes in
accordance with the procedures set forth in the 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 , 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 , 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 , 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 the 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.
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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 "--Limitation on
Indebtedness" covenant) unless (i) such Restricted Subsidiary simultaneously
executes and delivers a supplemental indenture to the 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 the "--Limitations on Liens" covenant,
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
the Indenture.
Purchase of Notes Upon a Change of Control. 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 , 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 the
Indenture.
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 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.
"Change of Control" means the occurrence of any of the following events: (i)
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act), other than Permitted Holders, is or becomes the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except
that a Person shall be deemed to have beneficial ownership of all shares that
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), 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),
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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 the "--Limitation on Restricted Payments" covenant
(and such amount shall be treated as a Restricted Payment subject to the
provisions of the "--Limitation on Restricted Payments" covenant) 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 the "--
Consolidation, Merger, Sale of Assets" covenant.
"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).
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
Purchase Price for all of the Notes that might be delivered by holders of the
Notes seeking to accept the Change of Control Offer. The failure of the
Company to make or consummate the Change of Control Offer or pay the Change of
Control Purchase Price when due will give the Trustee and the holders of the
Notes the rights described under "--Events of Default."
The term "all or substantially all" as used in the definition of "Change of
Control" has not been interpreted under New York law (which is the governing
law of the Indenture) to represent a specific quantitative test. As a
consequence, in the event the holders of the Notes elected to exercise their
rights under the Indenture and the Company elected to contest such election,
there could be no assurance as to how a court interpreting New York law would
interpret the phrase.
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.
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 the 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.
As of the date of this Prospectus, the Company is not subject to any agreement
containing a material restriction on its ability to make a Change of Control
Offer.
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
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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 the Indenture.
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 an 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.
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 the Indenture and listed on a schedule thereto; (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 "--Limitation on Indebtedness" covenant;
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 the
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
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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.
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 "--Limitation on Restricted Payments" covenant. 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.
Provision of Financial Statements. The Indenture provides that, 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
Sections 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.
Activities of the Company. The Indenture will provide that 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 covenant shall no longer be
of force or effect.
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 the Indenture, as the case may be, and the Notes and the Indenture
will remain in full force and effect as so supplemented; (ii) immediately
before, and immediately after giving effect
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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 the 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 the Indenture) could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the "--Limitation on Indebtedness" covenant; (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
the 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 the "--Limitation on
Liens" covenant 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 the 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.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the immediately preceding paragraph in
which the Company is not the continuing corporation, the successor Person
formed or remaining shall succeed to, and be substituted for, and may exercise
every right and power of, the Company, and the Company would be discharged
from all obligations and covenants under the Indenture and the Notes.
EVENTS OF DEFAULT
An Event of Default will occur under the 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 the 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 the "--Consolidation, Merger, Sale of Assets" covenant; (c)
the Company shall have failed to make or consummate an Offer in accordance
with the provisions of the "--Limitation on Sale of Assets" covenant; or
(d) the
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Company shall have failed to make or consummate a Change of Control Offer
in accordance with the provisions of the "--Purchase of Notes Upon a Change
of Control" covenant;
(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 and (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.
(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 the 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,
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receiver, liquidator, assignee, trustee, sequestrator (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, receiver, liquidator, assignee, trustee, sequestrator 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).
If an Event of Default (other than as specified in clauses (viii) and (ix)
of the prior paragraph) shall occur and be continuing with respect to the
Indenture, the Trustee or 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 , 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 the
prior paragraph occurs and is continuing, then all the Notes shall ipso facto
become and be due and payable immediately in an amount equal to the Accreted
Value of the Notes, together with accrued and unpaid interest, if any, to the
date the Notes become due and payable, without any declaration or other act on
the part of the Trustee or any holder.
After a declaration of acceleration, 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 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 the Indenture.
The holders of not less than a majority in aggregate principal amount of the
Notes outstanding may on behalf of the holders of all outstanding Notes waive
any past default under the Indenture and its consequences, except a continuing
default in the payment of the principal of, premium, if any, or interest on
any Note or in respect of a covenant or provision which under the Indenture
cannot be modified or amended without the consent of the holder of each Note
affected by such modification or amendment.
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The Company is also required to notify the Trustee within five business days
of the Company's knowledge of the occurrence of any Default. The Company is
required to deliver to the Trustee, on or before a date not more than 60 days
after the end of each fiscal quarter and not more than 120 days after the end
of each fiscal year, a written statement as to compliance with the Indenture,
including whether or not any Default has occurred. The Trustee is under no
obligation to exercise any of the rights or powers vested in it by the
Indenture at the request or direction of any of the holders of the Notes
unless such holders offer to the Trustee security or indemnity satisfactory to
the Trustee against the costs, expenses and liabilities which might be
incurred thereby.
The Trust Indenture Act contains limitations on the rights of the Trustee,
should it become a creditor of the Company or any Guarantor, if any, to obtain
payment of claims in certain cases or to realize on certain property received
by it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; provided that if it acquires any
conflicting interest it must eliminate such conflict upon the occurrence of an
Event of Default or else resign.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, elect to have the
obligations of the Company, any Guarantor and any other obligor upon the Notes
discharged with respect to the outstanding Notes ("defeasance"). Such
defeasance means that the Company, any such Guarantor and any other obligor
under the Indenture shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Notes, except for (i) the rights
of holders of such outstanding Notes to receive payments in respect of the
principal of, premium, if any, and interest on such Notes when such payments
are due, (ii) the Company's obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or
stolen Notes, and the maintenance of an office or agency for payment and money
for security payments held in trust, (iii) the rights, powers, trusts, duties
and immunities of the Trustee and (iv) the defeasance provisions of the
Indenture. In addition, the Company may, at its option and at any time, elect
to have the obligations of the Company and any Guarantor released with respect
to certain covenants that are described in the Indenture ("covenant
defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or an Event of Default with respect to the Notes. In
the event covenant defeasance occurs, certain events (not including non-
payment, bankruptcy and insolvency events) described under "Events of Default"
will no longer constitute an Event of Default with respect to the Notes.
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the Notes cash in United States dollars, U.S. Government
Securities (as defined in the Indenture) or 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, 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 (such date being referred to as the "Defeasance
Redemption Date"), 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; (ii) in
the case of defeasance, the Company shall have delivered to the Trustee an
opinion of independent counsel in the United States stating that (A) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of the Indenture, there has
been a change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion of independent counsel in the
United States 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; (iii) in the case of covenant defeasance,
the Company shall have delivered to the Trustee an opinion of
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independent counsel in the United States to the effect that the holders of the
outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such covenant defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as clauses (viii) or (ix)
under the first paragraph under "Events of Default" are concerned, at any time
during the period ending on the 91st day after the date of deposit; (v) such
defeasance or covenant defeasance shall not cause the Trustee for the Notes to
have a conflicting interest as defined in the Indenture and for purposes of
the Trust Indenture Act with respect to any securities of the Company or any
Guarantor; (vi) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a Default under, the Indenture or any
other material agreement or instrument to which the Company, any Guarantor or
any Subsidiary is a party or by which it is bound; (vii) such defeasance or
covenant defeasance shall not result in the trust arising from such deposit
constituting an investment company within the meaning of the Investment
Company Act of 1940, as amended, unless such trust shall be registered under
such Act or exempt from registration thereunder; (viii) the Company will have
delivered to the Trustee an opinion of independent counsel in the United
States to the effect that after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (ix) the Company shall have delivered to the Trustee an officers'
certificate stating that the deposit was not made by the Company with the
intent of preferring the holders of the Notes or any Guarantee over the 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; (x) 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; and (xi) the Company will have delivered to the
Trustee an officers' certificate and an opinion of independent counsel, each
stating that all conditions precedent provided for relating to either the
defeasance or the covenant defeasance, as the case may be, have been complied
with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of the
Notes as expressly provided for in the Indenture) as to all outstanding Notes
under the Indenture when (a) either (i) all such Notes theretofore
authenticated and delivered (except lost, stolen or destroyed Notes which have
been replaced or paid or Notes whose payment has been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust as provided for in the Indenture) have
been delivered to the Trustee for cancellation or (ii) all Notes not
theretofore delivered to the Trustee for cancellation (x) have become due and
payable, (y) will become due and payable at their Stated Maturity within one
year or (z) are to be called for redemption within one year under arrangements
satisfactory to the applicable Trustee for the giving of notice of redemption
by the Trustee in the name, and at the expense, of the Company; and the
Company has irrevocably deposited or caused to be deposited with the Trustee
as trust funds in trust an amount in United States dollars sufficient to pay
and discharge the entire indebtedness on the Notes not theretofore delivered
to the Trustee for cancellation, including principal of, premium, if any, and
accrued interest at such Maturity, Stated Maturity or redemption date; (b) the
Company has paid or caused to be paid all other sums payable under the
Indenture by the Company; and (c) the Company has delivered to the Trustee an
officers' certificate and an opinion of independent counsel, each stating that
(i) all conditions precedent under the Indenture relating to the satisfaction
and discharge of such 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
or any Subsidiary is bound.
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MODIFICATIONS AND AMENDMENTS
Modifications and amendments of the Indenture may be made by the Company,
each Guarantor, if any, and the Trustee with the consent of the holders of at
least a majority of aggregate principal amount of the Notes then outstanding;
provided, however, that no such modification or amendment may, without the
consent of the holder of each outstanding Note affected thereby: (i) change
the Stated Maturity of the principal of, 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 the "--Limitation
on Sale of Assets" covenant 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 the "--Purchase of Notes Upon a Change of Control" covenant,
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
the "--Consolidation, Merger, Sale of Assets" covenant, 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.
Notwithstanding the foregoing, without the consent of any holders of the
Notes, the Company, any Guarantor and the Trustee may modify or amend the
Indenture (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 the Indenture and in the Notes and in any
Guarantee in accordance with the "--Consolidation, Merger, Sale of Assets"
covenant; (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 the Indenture, in the
Notes or in any Guarantee; (c) to cure any ambiguity, or to correct or
supplement any provision in the Indenture, the Notes or any Guarantee which
may be defective or inconsistent with any other provision in the Indenture,
the Notes or any Guarantee or make any other provisions with respect to
matters or questions arising under the 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 the
Indenture under the Trust Indenture Act; (e) to add a Guarantor under the
Indenture; (f) to evidence and provide the acceptance of the appointment of
successor Trustee under the 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 as additional security for the payment and performance of
the Company's and any Guarantor's obligations under the 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 the Indenture or otherwise.
The holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture.
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GOVERNING LAW
The Indenture and the Notes will be governed by, and construed in accordance
with, the laws of the State of New York, without giving effect to the
conflicts of law principles thereof.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used herein and in the Indenture.
Reference is made to the Indenture for a full disclosure of all such terms, as
well as any other capitalized terms used herein for which no definition is
provided.
"Accreted Value" means as of a date of determination prior to , 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 % per annum of the initial offering price of such Note, compounded semi-
annually on each and 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 , 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.
"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
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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 "--
Consolidation, Merger, Sale of Assets" covenant, (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 "--Limitations on Unrestricted
Subsidiaries" covenant, (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 the 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.
"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.
"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
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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 the
Indenture.
"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 the Indenture.
"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.
"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 the 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, $.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 the 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.
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"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.
"Cumulative Consolidated Interest Expense" means, as of any date of
determination, Consolidated Interest Expense from to the end of the
Company's most recently ended full fiscal quarter date for which financial
statements are available prior to such, taken as a single accounting period.
"Cumulative Operating Cash Flow" means, as of any date of determination,
Operating Cash Flow from 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.
"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
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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 the 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.
"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
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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.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any
successor statute.
"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 the Indenture.
"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 Indebtedness 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 the Indenture to execute a guarantee of the Notes pursuant to the "--
Limitation on Issuance of Guarantees of Indebtedness" covenant until a
successor replaces such Restricted Subsidiary pursuant to the applicable
provisions of the Indenture and, thereafter, shall mean such successor.
"Indenture Obligations" means the obligations of the Company and any other
obligor under the 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 the Indenture,
the Notes and the performance of all other obligations to the Trustee and the
holders under the Indenture and the Notes, according to the respective terms
thereof.
"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
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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.
"Marketable Securities" means (i) U.S. Government Securities maturing not
more than three years after the date of acquisition; (ii) any certificate of
deposit maturing not more than 270 days after the date of acquisition issued
by, or time deposit of, an Eligible Institution; (iii) commercial paper
maturing not more than 270 days after the date of acquisition issued by a
corporation (other than an Affiliate of the Company) with a rating, at the
time as of which any investment therein is made, of "A-1" (or higher)
according to S&P or "P-1" (or higher) according to Moody's; (iv) any banker's
acceptances or money market deposit accounts issued or offered by an Eligible
Institution; and (v) any fund investing exclusively in investments of the
types described in clauses (i) through (iv) above.
"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 the 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 in the "--Limitation on
Restricted Payments" covenant, the "--Limitation on Indebtedness" covenant and
under "--Optional Redemption," 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
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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.
"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 any opinion in writing signed by legal counsel,
who 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 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 "--Limitation on Sale of Assets" covenant to the extent
such Investments are non-cash proceeds as permitted under such covenant; (v)
Investments in existence on the date of the 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 the "--Limitation on Indebtedness" covenant divided by (B) $1.50; (ix) any
acquisition or lease of additional channel rights in markets listed in an
annex to the Indenture or in which the Company and its Restricted Subsidiaries
(A) as of the date of the Indenture, have channel rights, whether by way of
license, lease with a channel license holder, lease with a channel license
applicant, lease with a qualified, non-profit educational organization that
plans to apply for a channel license or option to acquire any of the foregoing
or (B) as of the date of such acquisition or lease (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
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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.
"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.
"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 (x) of the definition of Permitted Indebtedness in the covenant "--
Limitation on Indebtedness", (ii) asset sale provisions and change of control
provisions no more restrictive in any respect than those contained in the
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 Trustee, 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 Trustee, (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.
"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.
"Restricted Subsidiary" means any Subsidiary other than an Unrestricted
Subsidiary.
"S&P" means Standard & Poor's Ratings Services 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.
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"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 ventures 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,
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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.
"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 the "--Limitation on Unrestricted Subsidiaries"
covenant. 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 the "--
Limitation on Indebtedness" covenant.
"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 the "--Limitation on Indebtedness" covenant) 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 of or interest on any
such U.S. government obligation held by such custodian for the account of the
holder of such depository receipt; provided that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the U.S. government
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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.
"Wireless Cable Business" means, when used in reference to any Person, that
such Person, directly or indirectly, is engaged primarily in the business of
(i) transmitting video, voice or data primarily through wireless transmission
facilities, (ii) utilizing wireless cable channels for any commercial purpose
permitted by the FCC, (iii) creating, developing and packaging programming
that may be used to satisfy educational programming requirements for ITFS
channels and advertising, that, in either case, is transmitted over one or
more of the Company's wireless cable channels or (iv) evaluating,
participating or pursuing any other activity or opportunity that is related to
those identified in (i), (ii) or (iii) above.
"Wireless Cable Related Assets" means all assets, rights (contractual or
otherwise) and properties, whether tangible or intangible, used in connection
with a Wireless Cable Business, 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.
BOOK-ENTRY, DELIVERY AND FORM
Upon issuance the Notes will be represented by a permanent global Note or
Notes. Each permanent global Note will be deposited with, or on behalf of, The
Depositary Trust Company (the "Depositary") and registered in the name of a
nominee of the Depositary. Except under the limited circumstances described
below, permanent global Notes will not be exchangeable for definitive
certificated Notes.
Ownership of beneficial interests in a permanent global Note will be limited
to institutions that have accounts with the Depositary or its nominee
("participants") or persons that may hold interests through participants. In
addition, ownership of beneficial interests by participants in such permanent
global Note will be evidenced only by, and the transfer of that ownership
interest will be effected only through, records maintained by the Depositary
or its nominee for such permanent global Note. Ownership of beneficial
interests in such permanent global Note by persons that hold through
participants will be evidenced only by, and the transfer of that ownership
interest within such participant will be effected only through, records
maintained by such participant. The Depositary has no knowledge of the actual
beneficial owners of the Notes. Beneficial owners will not receive written
confirmation from the Depositary of their purchase, but beneficial owners are
expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the
participants through which the beneficial owners entered the transaction. The
laws of some jurisdictions require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in such permanent global Note.
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The Company has been advised by the Depositary that upon the issuance of a
permanent global Note and the deposit of such permanent global Note with the
Depositary, the Depositary will immediately credit, on its book-entry
registration and transfer system, the respective principal amounts represented
by such permanent global Note to the accounts of such participants.
Payment of principal of, and interest on, Notes represented by a permanent
global Note registered in the name of or held by the Depositary or its nominee
will be made to the Depositary or its nominee, as the case may be, as the
registered owner and holder of the permanent global Note representing such
Notes. The Company has been advised by the Depositary that upon receipt of any
payment of principal of, or interest on, a permanent global Note, the
Depositary will immediately credit, on its book-entry registration and
transfer system, accounts of participants with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such permanent global Note as shown in the records of the Depositary.
Payments by participants to owners of beneficial interests in a permanent
global Note held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name,"
and will be the sole responsibility of such participants, subject to any
statutory or regulatory requirements as may be in effect from time to time.
None of the Company, the Trustee or any other agent of the Company or the
Trustee will have any responsibility or liability for any aspect of the
records of the Depositary, any nominee or any participant relating to, or
payments made on account of, beneficial interests in a permanent global Note
or for maintaining, supervising or reviewing any of the records of the
Depositary, any nominee or any participant relating to such beneficial
interests.
A permanent global Note is exchangeable for definitive Notes registered in
the name of, and a transfer of a permanent global Note may be registered to,
any person other than the Depositary or its nominee, only if:
(a) the Depositary notifies the Company that it is unwilling or unable to
continue as Depositary for such permanent global Note or if any time the
Depositary ceases to be a clearing agency registered under the Exchange
Act;
(b) the Company in its sole discretion determines that such permanent
global Note shall be exchangeable for definitive Notes in registered form;
or
(c) there shall have occurred and be continuing an Event of Default under
the Notes.
Any permanent global Note that is exchangeable pursuant to the preceding
sentence will be exchangeable in whole for definitive Notes in registered
form, of like tenor and of an equal aggregate principal amount as the
permanent global Note, in denominations of $1,000 and integral multiples
thereof. Such definitive Notes will be registered in the name or names of such
persons as the Depositary shall instruct the Trustee. It is expected that such
instructions may be based upon directions received by the Depositary from its
participants with respect to ownership of beneficial interests in such
permanent global Note. With respect to definitive Notes, any principal and
interest will be payable, the transfer of the definitive Notes will be
registerable and the definitive Notes will be exchangeable at the office of
the Trustee in New York, New York, provided that payment of interest may be
made at the option of the Company by check mailed to the address of the person
entitled thereto and as shown on the register for the Notes.
Except as provided above, owners of beneficial interests in such permanent
global Note will not be entitled to receive physical delivery of Notes in
definitive form and will not be considered the holders thereof for any purpose
under the Indenture, and no permanent global Note shall be exchangeable except
for another permanent global Note of like denomination and tenor to be
registered in the name of the Depositary or its nominee. Accordingly, each
person owning a beneficial interest in such
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permanent global Note must rely on the procedures of the Depositary and, if
such person is not a participant, on the procedures of the participant through
which such person owns its interest, to exercise any rights of a holder of the
Notes (a "Holder") under the permanent global Note.
The Company understands that, under existing industry practices, in the
event that the Company requests any action of Holders, or an owner of a
beneficial interest in such permanent global Note desires to give or take any
action that a Holder is entitled to give or take under the Notes, the
Depositary would authorize the participants holding the relevant beneficial
interests to give or take such action, and such participants would authorize
beneficial owners owning through such participants to give or take such action
or would otherwise act upon the instructions of beneficial owners owning
through them.
The Depositary has advised the Company that the Depositary is a limited
purpose trust company organized under the laws of the State of New York, a
"banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered under the Exchange Act. The Depositary was created to hold
securities of its participants and to facilitate the clearance and settlement
of securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. The
Depositary is owned by a number of its participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc. Access to the Depositary's book-entry system is
also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
either directly or indirectly. The rules applicable to the Depositary and its
participants are on file with the Commission.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made in immediately available funds. So
long as the Notes are represented by a permanent global Note or Notes, all
payments of principal, premium, if any, and interest will be made by the
Company in immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing-house or next-day funds. So long as the Notes
are represented by a permanent global Note or Notes registered in the name of
the Depositary or its nominee, the Notes will trade in the Depositary's Same-
Day Funds Settlement System, and secondary market trading activity in the
Notes will therefore be required by the Depositary to settle in immediately
available funds. No assurance can be given as to the effect, if any, of
settlement in immediately available funds on the trading activity in the
Notes.
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DESCRIPTION OF WARRANTS
The Warrants will be issued pursuant to a warrant agreement (the "Warrant
Agreement") between the Company and United States Trust Company of New York,
as warrant agent (the "Warrant Agent"). The following summary of certain
provisions of the Warrant Agreement and the Warrants does not purport to be
complete and is qualified in its entirety by reference to the Warrant
Agreement and the Warrants, including the definitions therein of certain
terms. As used in this Section, the term "Company" refers only to Wireless
One, Inc. and not to its subsidiaries.
GENERAL
Each Warrant, when exercised, will entitle the holder thereof to receive
shares of Common Stock of the Company at an exercise price of $ per
share (the "Exercise Price"). The Exercise Price and the number of Warrant
Shares issuable on exercise of a Warrant are both subject to adjustment in
certain cases. See "--Adjustments" below. The Warrants are exercisable at any
time on or after one year from the date of issuance. Unless exercised, the
Warrants will automatically expire on , 2001 (the "Expiration Date"),
which is not subject to extension by the Company. The Company will give notice
of expiration not less than 90 nor more than 120 days prior to the Expiration
Date to the registered holders of the then outstanding Warrants. If the
Company does not give such notice, the Warrants will still terminate and
become void on the Expiration Date. The Warrants will entitle the holders
thereof to purchase in the aggregate 361,540 shares of Common Stock of the
Company, or approximately 2% of the outstanding Common Stock of the Company on
a fully-diluted basis as of the date hereof (assuming the exercise or
conversion of all outstanding securities exercisable for or convertible into
Common Stock other than the exercise of employee and non-employee director
options). The Company has agreed that for a period of four years commencing on
the first anniversary of the date of issuance of the Warrants it will maintain
the effectiveness of a registration statement with respect to the issuance of
the Company's Common Stock from time to time upon exercise of the Warrants.
The Warrants may be exercised by surrendering to the Company the Warrant
certificates evidencing such Warrants, if any, with the accompanying form of
election to purchase, properly completed and executed, together with payment
of the Exercise Price. The Exercise Price of the Warrants will be 110% of the
last reported sales price on the date a price is established for the Units. On
August 1, 1996, the last reported sales price of the Common Stock on the
Nasdaq National Market was $15.50 per share. Payment of the Exercise Price may
be made in the form of cash or a certified or official bank check payable to
the order of the Company. Upon surrender of the Warrant certificate and
payment of the Exercise Price, the Warrant Agent will deliver or cause to be
delivered, to or upon the written order of such holder, stock certificates
representing the number of whole Warrant Shares or other securities or
property to which such holder is entitled under the Warrants and Warrant
Agreement, including, without limitation, any cash payable to adjust for
fractional interests in Warrant Shares issuable upon such exercise. If less
than all of the Warrants evidenced by a Warrant certificate are to be
exercised, a new Warrant certificate will be issued for the remaining number
of Warrants.
No fractional Warrant Share will be issued upon exercise of the Warrants. If
any fraction of a Warrant Share would, except for the foregoing provision, be
issuable upon the exercise of any Warrants (or specified portion thereof), the
Company will pay an amount in cash equal to the current market price per
Warrant Share, as determined on the day immediately preceding the date the
Warrant is presented for exercise, multiplied by such fraction, computed to
the nearest whole cent.
Certificates for Warrants will be issued in global form or registered form
as definitive warrant certificates and no service charge will be made for
registration of transfer or exchange upon surrender of any Warrant certificate
at the office of the Warrant Agent maintained for that purpose. The Company
may require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration or transfer or
exchange of Warrant certificates.
The holders of the Warrants have no right to vote on matters submitted to
the stockholders of the Company and have no right to receive cash dividends.
The holders of the Warrants are not entitled to
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share in the assets of the Company in the event of the liquidation,
dissolution or winding up of the Company's affairs.
ADJUSTMENTS
The number of Warrant Shares purchasable upon the exercise of the Warrants
and the Exercise Price will both be subject to adjustment in certain events
including: (i) the payment by the Company of dividends (or other
distributions) on the Common Stock of the Company payable in shares of such
Common Stock or other shares of the Company's capital stock, (ii)
subdivisions, combinations and reclassifications of the Common Stock, (iii)
the issuance to all holders of the Common Stock of rights, options or warrants
entitling them to subscribe for shares of the Common Stock, or of securities
convertible into or exchangeable for shares of the Common Stock or additional
shares of Common Stock, for a consideration per share which is less than the
current market price per share (as defined in the Warrant Agreement) of the
Common Stock and (iv) the distribution to all holders of the Common Stock of
any of the Company's assets, debt securities or any rights or warrants to
purchase securities (excluding those rights and warrants referred to in clause
(iii) above and excluding cash dividends or other cash distributions from
current or retained earnings). In addition, the Exercise Price may be reduced
in the event of purchase of shares of the Common Stock pursuant to a tender or
exchange offer made by the Company or any subsidiary thereof at a price
greater than the sale price of the Common Stock at the time such tender or
exchange offer expires.
No adjustment in the Exercise Price will be required unless such adjustment
would require an increase or decrease of at least one percent (1%) in the
Exercise Price; provided, however, that any adjustment which is not made will
be carried forward and taken into account in any subsequent adjustment.
In case of certain reclassifications, redesignations, reorganizations or
changes in the number of outstanding shares of Common Stock or consolidations
or mergers of the Company or the sale of all or substantially all of the
assets of the Company, each Warrant shall thereafter be exercisable for the
right to receive the kind and amount of shares of stock or other securities or
property to which such holder would have been entitled as a result of such
consolidation, merger or sale had the Warrants been exercised immediately
prior thereto.
RESERVATION OF SHARES
The Company has authorized and reserved for issuance such number of shares
of Common Stock as shall be issuable upon the exercise of all outstanding
Warrants. Such shares of Common Stock, when paid for and issued, will be duly
and validly issued, fully paid and non-assessable, free of preemptive rights
and free from all taxes, liens, charges and security interests with respect to
the issue thereof.
AMENDMENT
From time to time, the Company and the Warrant Agent, without the consent of
the holders of the Warrants, may amend or supplement the Warrant Agreement for
certain purposes, including, without limitation, curing defects or
inconsistencies or making any change that does not adversely affect the rights
of any holder. Any amendment or supplement to the Warrant Agreement that has
an adverse effect on the interests of the holders of the Warrants shall
require the written consent of the holders of a majority of the then
outstanding Warrants. The consent of each holder of the Warrants affected
shall be required for any amendment pursuant to which the Exercise Price would
be increased or the number of Warrant Shares purchasable upon exercise of
Warrants would be decreased (other than pursuant to adjustments provided in
the Warrant Agreement).
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REPORTS
Whether or not required by the rules and regulations of the Commission, so
long as any of the Warrants remain outstanding, but only to the extent it is
required to send such documents to the holders of its outstanding Common
Stock, the Company shall cause copies of the reports and other documents
described under "Description of Notes--Certain Covenants--Provision of
Financial Statements" to be filed with the Warrant Agent and mailed to the
holder at their addresses appearing in the register of Warrants maintained by
the Warrant Agent.
BOOK-ENTRY PROCEDURES
The Depositary will act also as securities depository for the Warrants. On
the Separation Date, one global certificate representing the entire issue of
Warrants will be issued and registered in the name of Cede & Co. and such
global certificate will be deposited with the Depositary or its custodian.
Purchases of, and transfers of beneficial ownership interests in, Warrants
will be effected through the Depositary system in the same manner as for the
Notes, except that prior to the Separation Date, any transfer of beneficial
ownership interests in a Note will also constitute transfer of the beneficial
ownership interests in the related Warrants. See "Description of Notes--Book-
Entry, Delivery and Form." Beneficial owners will not receive certificates
representing their ownership interests in Warrants except in the event that
use of the book-entry system for the Warrants is discontinued. The Depositary
has no knowledge of the actual beneficial owners of the Warrants; the
Depositary's records reflect only the identity of the participants to whose
accounts such Warrants are credited, which may or may not be the beneficial
owners. Participants in the Depositary's system will remain responsible for
keeping account of their holdings on behalf of their customers.
Because the Depositary can act only on behalf of direct participants, who in
turn act on behalf of indirect participants, the ability of a holder of
Warrants to pledge Warrants to persons or entities that do not participate in
the Depositary's system, or otherwise to act with respect to such Warrants may
be limited due to the lack of a physical certificate for such Warrants.
Conveyance of notices and other communications by the Depositary to
participants, by direct participants to indirect participants, and by direct
participants and indirect participants to beneficial owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with respect to
any Warrants. Under its usual procedures, the Depositary mails an Omnibus
Proxy to the Company as soon as possible after the record date. The Omnibus
Proxy assigns Cede & Co.'s consenting or voting rights to those participants
to whose accounts the Warrants are credited on the record date (identified in
a listing attached to the Omnibus Proxy).
In order to exercise a Warrant, the beneficial owner of the Warrant shall
give notice to elect to exercise such Warrant, through its direct or indirect
participant, to the Warrant Agent, and shall effect delivery of the Warrant
certificate evidencing such Warrant by causing the direct participant to
transfer its interest in such Warrant on the Depositary's records, to the
Warrant Agent. The requirement for physical delivery of Warrant certificates
in connection with an exercise request will be deemed satisfied when the
ownership rights in the Warrants are transferred by direct participants on the
Depositary's records.
The Depositary may discontinue providing its services as securities
depository with respect to the Warrants at any time by giving reasonable
notice to the Company. The Company may decide to discontinue use of the system
of book-entry transfers through the Depositary (or a successor securities
depository). Under such circumstances, in the event that a successor
securities depository is not obtained, or if the Depository (or its successor)
ceases to be a clearing agency registered under the Exchange Act, Warrant
certificates will be printed and delivered.
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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, $.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 outstanding shares of Common Stock
are validly issued, fully-paid and nonassessable. 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 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 33 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 corporate 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
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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 in connection with the TruVision Transaction or upon the exercise of
the GKM Warrants, the Warrants or options which have been granted or which may
be granted in the future to the Company's employees or directors. See
"Underwriting."
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
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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 Unit Offering, the Company has agreed that for a
period of four years from the first anniversary of the date of the Unit
Offering, it will maintain the effectiveness of a registration statement with
respect to the issuance of the Common Stock from time to time upon exercise of
the Warrants. See "Description of Warrants."
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
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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 17,052,085 shares of Common Stock outstanding
(assuming the exercise of the Old Warrants, GKM Warrants, the Warrants, and
certain management and employee options). Of these shares, 3,498,752 shares are
freely transferable by persons other than affiliates of the Company without
restriction or registration under the Securities Act. All of the remaining
13,553,333 shares 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 the
remaining 13,553,333 shares of Common Stock will be eligible for sale under
Rule 144 until October 1997. However, all of the 13,553,333 shares will be
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. The Company has agreed not to issue any securities or file a registration
statement under the Securities Act, subject to certain exceptions, for a period
of 180 days following the date of the prospectus relating to this Offering
without the prior written consent of the Underwriters.
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.
UNITED STATES FEDERAL INCOME TAX MATTERS
Kirkland & Ellis, special tax counsel to the Company, is of the opinion that
the following summary describes the principal United States Federal income tax
consequences of the purchase, ownership and disposition of Notes and Warrants
as of the date hereof. Except where noted, it deals only with Notes and
Warrants held as capital assets by holders that are United States Persons (as
defined below) and does not deal with special situations, such as those of
dealers in securities or currencies, financial institutions, life insurance
companies, persons holding Notes and Warrants as a part of a hedging or
conversion transaction or a straddle or holders whose functional currency is
not the U.S. dollar. Furthermore, the discussion below is based upon the
provisions of the Internal Revenue Code of 1986, as amended to the date hereof
(the "Code") and regulations, administrative pronouncements, rulings and
judicial decisions thereunder as of the date hereof, and such authorities may
be repealed, revoked or modified so as to result in U.S. Federal income tax
consequences different from those discussed below. In particular, the
discussion below is based upon Treasury regulations issued under
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section 1273 and related sections of the Code relating to "original issue
discount" ("OID") (the "OID Regulations").
The opinion described above is based in reliance on various representations
of the Company including the following:
1. Based on all facts and circumstances as of the issue date, it is
significantly more likely that payments will be made according to the
Notes' stated payment schedule than that the Notes will be redeemed before
their scheduled maturity.
2. The interest that accrues and is payable semi-annually on the Notes
beginning on February 1, 2002 will be computed at a rate that is
approximately equal to, but does not exceed, the overall yield on the Notes
(determined by assuming that the Notes remain outstanding until their final
maturity date).
3. The redemption price of the Notes on each optional redemption date will
be equal to or greater than the sum of (i) the adjusted issue price (as
defined in Section 1272(a)(4) of the Code) of the Notes at the start of the
accrual period in which such optional redemption date occurs plus (ii) the
original issue discount (as defined in Section 1273 of the Code) that has
accrued on the Notes from the beginning of such accrual period through such
optional redemption date.
4. During the term of the Notes, the Company will not pay or incur interest
in any taxable year in excess of $5,000,000 that is attributable to an
obligation evidenced by a bond, debenture, note, certificate or other
evidence of indebtedness ("Debt") issued to provide direct or indirect
consideration for the acquisition (an "Acquisition") of (A) stock in
another corporation (an "acquired corporation") or (B) assets of another
corporation (an "acquired corporation") pursuant to a plan under which at
least two-thirds (in value) of all the assets (excluding money) used in
trades and business carried on by such corporation are acquired. For this
purpose, Debt issued to provide consideration for an Acquisition includes
(without limitation):
(i) Debt issued directly in exchange for the acquired corporation's
stock or assets;
(ii) Debt issued to raise the money necessary to purchase the acquired
corporation's stock or assets, including, without limitation, where the
Company, when it issued the Debt, anticipated the Acquisition and the
Debt would not have been issued if the Company had not so anticipated
such Acquisition; and
(iii) Debt issued to replace the Company working capital spent to
acquire the acquired corporation where the Company, when it used
working capital to purchase the acquired corporation, foresaw or
reasonably should have foreseen that it would be required to issue the
Debt, which it would not otherwise have been required to issue if the
Acquisition had not occurred, in order to meet its future economic
needs.
PERSONS CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF NOTES AND
WARRANTS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL
INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY
CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.
As used herein, a "United States Person" means an individual that is a
citizen or resident of the United States, a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof, or an estate or trust the income of which is
subject to United States federal income taxation regardless of its source.
THE UNITS
Each Unit is comprised of $1,000 principal amount at maturity of Note and
Warrants to purchase an equal number of shares of Common Stock.
Consequently, the issue price of a Unit must
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be allocated between the Notes and the Warrants. Under the OID Regulations, the
"issue price" of the Notes is the first price at which a substantial amount of
the Units is sold for money, excluding sales to underwriters, placement agents
or wholesalers, less the amount allocable to the Warrants (based on the
relationship of the fair market value of each of the Notes and the Warrants to
the fair market value of the Notes and the Warrants taken together as a Unit).
The Company will allocate $ to each $1,000 principal amount at maturity of
Notes and $ to each Warrant. The Company's allocations reflect its judgment
as to the relative values of those instruments at the time of issuance, but is
not binding on the Internal Revenue Service (the "IRS").
The Company's allocation of the issue price of the Units will be binding on
holders of the instruments, unless a holder discloses the use of a different
allocation on its U.S. Federal income tax return for the year including the
acquisition date of such Unit. If a holder acquires a Unit at a price different
from that on which the Company's allocation is based, such holder may be
treated as having acquired its Notes for an amount greater or less than the
amount allocated to such Notes by the Company as set forth above, thereby
resulting in "acquisition premium" or "market discount," as defined below.
Holders considering the use of an issue price allocation different from that
used by the Company should consult their tax advisors as to the consequences
thereof.
THE NOTES
Payments of Interest--Original Issue Discount
The Notes will be issued with original issue discount ("OID") equal to the
difference between their issue price and their stated redemption price at
maturity. The "stated redemption price at maturity" of the Notes will equal the
sum of all payments required under the Notes other than payments of qualified
stated interest. To have "qualified stated interest," a debt instrument must,
among other requirements, have interest that is unconditionally payable at
least annually during the entire term of the debt instrument. Because the Notes
will not pay interest until February 1, 2002, none of the interest on the Notes
will be qualified stated interest. As a result, all payments made under the
Notes will be treated as part of the stated redemption price at maturity.
Accordingly, the interest on the Notes will be taxable to holders in advance of
receipt regardless of a holder's method of accounting, in accordance with the
OID rules described below. The aggregate OID on a Note will equal the
difference between the sum of all payments required under the Note and the
issue price of the Note.
A holder of Notes will be required to include OID in income for U.S. Federal
income tax purposes as it accrues. OID will accrue daily in accordance with a
constant yield method based on a compounding of interest. Under this method,
holders of the Notes will be required to include in income increasingly greater
amounts of OID in successive accrual periods. The accrual period for Notes may
be of any length and may vary in length over the term of the Notes, provided
that each accrual period is no longer than one year and each scheduled payment
of principal or interest occurs on the first day or the final day of an accrual
period. OID allocable to any accrual period will equal the product of the
adjusted issue price of the Notes as of the beginning of such period and the
Notes' yield to maturity (determined on the basis of compounding at the close
of each accrual period and properly adjusted for the length of the accrual
period). OID allocable to a final accrual period is the difference between the
amount payable at maturity and the adjusted issue price at the beginning of the
final accrual period. The "adjusted issue price" of the Notes as of the
beginning of any accrual period will equal the issue price of the Notes
increased by OID previously includable in income and decreased by any payments
under the Notes (other than qualified stated interest). The "yield to maturity"
is the discount rate that, when used in computing the present value of all
principal and interest payments to be made under a Note, produces an amount
equal to its issue price. The initial accrual period of a Note is the short
period beginning on the issue date and ending on the day before the first day
of the first full accrual period. The amount of OID attributable to such
initial accrual period may be computed under any reasonable method.
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The Company is required to furnish certain information to the IRS, and will
furnish annually to record holders of Notes, information with respect to
interest and OID accruing during the calendar year. The OID information will be
based upon the adjusted issue price of the debt instrument as if the holder
were the original holder of the debt instrument. Subsequent holders who
purchase Notes for an amount other than the adjusted issue price and/or on a
date other than the last day of an accrual period will be required to determine
for themselves the amount of OID, if any, they are required to include in gross
income for U.S. Federal income tax purposes.
Applicable High Yield Discount Rules
If the yield to maturity on the Notes equals or exceeds the sum of (x) the
"applicable federal rate" (as determined under Section 1274(d) of the Code) in
effect for the month in which the Notes are issued (the "AFR") and (y) 5%, the
Notes will be considered "applicable high yield discount obligations" under
Section 163(i) of the Code. Consequently, the Company will not be allowed to
take a deduction for interest (including OID) accrued on the Notes for U.S.
Federal income tax purposes until such time as the Company actually pays such
interest (including OID) in cash or in other property (other than stock or debt
of the Company or a person deemed to be related to the Company under Section
453(f)(1) of the Code).
Moreover, if the yield to maturity on the Notes exceeds the sum of (x) the
AFR and (y) 6% (such excess shall be referred to hereinafter as the
"Disqualified Yield"), the deduction for interest (including OID) accrued on
the Notes will be permanently disallowed (regardless of whether the Company
actually pays such interest or OID in cash or in other property) for U.S.
Federal income tax purposes to the extent such interest or OID is attributable
to the Disqualified Yield on the Notes ("Dividend-Equivalent Interest"). For
purposes of the dividends-received deduction, such Dividend-Equivalent Interest
will be treated as a dividend to the extent it is deemed to have been paid out
of the Company's current or accumulated earnings and profits. Accordingly, a
corporate holder of a Note may be entitled to take a dividends-received
deduction with respect to any Dividend-Equivalent Interest received by such
corporate holder on such Note.
Market Discount; Acquisition Premium
If a holder purchases Notes for an amount that is less than the revised issue
price (which generally approximates adjusted issue price) of such Notes, the
amount of the difference will be treated as "market discount" for U.S. Federal
income tax purposes, unless such difference is less than a specified de minimis
amount. Under the market discount rules, a holder will be required to treat any
principal payment on, or any amount received on the sale, exchange, retirement
or other disposition of, Notes as ordinary income to the extent of any market
discount which has not previously been included in income and is treated as
having accrued on such Notes by the time of such payment or disposition. If a
holder makes a gift of a Note, accrued market discount, if any, will be
recognized as if such holder had sold such Note for a price equal to its fair
market value. In addition, the holder may be required to defer, until the
maturity of the Notes or their earlier disposition in a taxable transaction,
the deduction of a portion of the interest expense on any indebtedness incurred
or continued to purchase or carry such Notes.
Any market discount will be considered to accrue on a straight-line basis
during the period from the date of acquisition to the maturity date of the
Notes, unless the holder elects to accrue market discount under a constant
interest method. A holder of Notes may elect to include market discount in
income currently as it accrues (under either a straight-line or constant
interest method), in which case the rules described above regarding the
deferral of interest deductions will not apply. This election to include market
discount in income currently, once made, applies to all market discount
obligations acquired on or after the first day of the first taxable year to
which the election applies and may not be revoked without the consent of the
IRS.
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A holder that purchases Notes for an amount that is greater than the adjusted
issue price of such Notes but equal to or less than the sum of all amounts
payable on such Notes after the purchase date will be considered to have
purchased such Notes at an "acquisition premium." Under the acquisition premium
rules, the amount of OID which such holder must include in its gross income
with respect to such Notes for any taxable year will be reduced by the portion
of such acquisition premium properly allocable to such year.
Sale, Exchange, Retirement or other Disposition of Notes
Upon the sale, exchange, retirement or other disposition of Notes, a holder
will generally recognize gain or loss equal to the difference between the
amount realized upon such sale, exchange, retirement or other disposition and
such holder's adjusted tax basis in the Note.
A holder's adjusted tax basis in a Note will equal such holder's initial tax
basis in the Note, increased by the amounts of any OID or market discount
previously included in income by the holder with respect to such Note and
reduced by the amounts of any payments on the Note received by such holder.
Except with respect to market discount and payments for accrued interest not
previously included in income, such gain or loss will be capital gain or loss
and will be long-term capital gain or loss if the Notes have been held for more
than one year as of the date of such sale, exchange, retirement or other
disposition. Under current law, the excess of net long-term capital gains over
net short-term capital losses is taxed at a lower rate than ordinary income for
certain non-corporate taxpayers. The distinction between capital gain or loss
and ordinary income or loss is also relevant for purposes of, among other
things, limitation on the deductibility of capital losses.
THE WARRANTS
Upon the exercise of a Warrant, a holder will not recognize gain or loss
(except to the extent of cash, if any, received in lieu of the issuance of
fractional shares of Common Stock) and will have a tax basis in the Common
Stock equal to such holder's tax basis in the Warrant (which, in the case of an
initial holder, will equal the portion of the issue price of the Unit allocable
to the Warrant, as described above) plus the exercise price of the Warrant. The
holding period of such Common Stock will commence on the day after the date of
exercise of the Warrant. If any cash is received in lieu of the issuance of
fractional shares of Common Stock, the holder will recognize gain or loss, the
amount and character of which generally will be determined as if the holder had
received such fractional shares and then immediately sold them for cash.
Similarly, upon the sale of Common Stock received upon exercise of a Warrant, a
holder will recognize capital gain or loss equal to the difference between the
amount realized upon the sale and the holder's tax basis in the Common Stock.
Such capital gain or loss will be long-term if, at the time of sale or
exchange, the Common Stock was held for more than one year. HOLDERS SHOULD
CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX
CONSEQUENCES OF THE OWNERSHIP OF THE COMMON STOCK.
If a Warrant expires unexercised, a holder will have a capital loss equal to
its tax basis in the Warrant. Such capital loss will be long-term capital loss
if, at the time of expiration, the Warrant was held for more than one year.
Upon the sale or exchange of a Warrant, a holder will recognize capital gain or
loss equal to the difference between the amount realized upon the sale or
exchange and the holder's tax basis in the Warrant. Such capital gain or loss
will be long-term if, at the time of sale or exchange, the Warrant was held for
more than one year. It is unclear whether the repurchase of a Warrant by the
Company would be treated as a sale or exchange. If it were not so treated, any
gain or loss to a holder on such repurchase could be ordinary income or loss.
Adjustments to the exercise price or conversion ratio of the Warrant, or the
failure to make adjustments, may result in the receipt of taxable constructive
dividends by the holder.
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BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to accruals of
interest and OID on the Notes and to the proceeds of a disposition of a Note,
other than a disposition by certain exempt recipients (including, among others,
corporations). Certain noncorporate holders may be subject to backup
withholding at a rate of 31% on payments of principal and interest (including
OID) and premium on, and the proceeds of disposition of, a Note. Backup
withholding will apply only if the holder: (i) fails to furnish its Taxpayer
Identification Number ("TIN") which, for an individual, would be his or her
Social Security number; (ii) furnishes an incorrect TIN; (iii) is notified by
the IRS that he or she has failed to properly report payments of interest and
dividends; or (iv) under certain circumstances, fails to certify, under penalty
of perjury, that he or she has furnished a correct TIN and has not been
notified by the IRS that he or she is subject to backup withholding for failure
to report interest and dividend payments. Holders of the Notes should consult
their tax advisors regarding their qualification for exemption from backup
withholding and the procedure for obtaining such an exemption, if applicable.
The amount of any backup withholding from a payment for a holder of a Note
will be allowed as a credit against the holder's U.S. Federal income tax
liability and may entitle the holder to a refund, provided that the required
information is furnished to the IRS.
OTHER TAX CONSEQUENCES
In addition to the U.S. Federal income tax considerations described above,
prospective purchasers of the Notes and Warrants should consider potential
state and local income, franchise, personal property and other taxation in any
state or locality and the tax effect of ownership, sale, exchange, retirement
or disposition of Notes and Warrants in any state or locality. Prospective
purchasers of Notes and Warrants are advised to consult their own tax advisors
with respect to any state and local income, franchise, personal property and
other tax consequences arising out of their ownership of Notes and Warrants.
THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION AND IS NOT TAX ADVICE.
ACCORDINGLY, EACH PROSPECTIVE PURCHASER OF NOTES AND WARRANTS SHOULD CONSULT
HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO HIM OR HER
OF THE NOTES AND WARRANTS, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE,
LOCAL OR FOREIGN INCOME TAX LAWS AND ANY RECENT OR PROSPECTIVE CHANGES IN
APPLICABLE TAX LAWS.
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UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") among the Company and the Underwriters, the
Company has agreed to sell to the Underwriters, and the Underwriters have
severally agreed to purchase from the Company, the following respective amounts
of the Units:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS UNITS
------------ ---------
<S> <C>
Chase Securities Inc.................................................
BT Securities Corporation............................................
Gerard Klauer Mattison & Co., LLC....................................
Prudential Securities Incorporated...................................
----
Total..............................................................
====
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Units offered
hereby if any of the Units are purchased. The Company has been advised by the
Underwriters that the Underwriters propose to offer the Units to the public
initially at the public offering price set forth on the cover page of this
Prospectus, and to certain dealers initially at such price less a discount not
in excess of per Unit. The Underwriters may allow, and such dealers may
reallow, a concession to certain other dealers not in excess of per Unit.
After the initial public offering, the Underwriters may change the public
offering price, the discount and the concession.
The Units comprise new issues of securities with no established trading
market. The Company had been advised by the Underwriters that the Underwriters
intend to make a market in the Units, as permitted by applicable laws and
regulations. No assurance can be given, however, that the Underwriters will
make a market in the Units, or as to the liquidity of, or the trading market
for, the Units.
There is no public market for the Units, the Notes or the Warrants and the
Company does not intend to apply for listing of the Units, the Notes or the
Warrants on any national securities exchange or for quotation through the
Nasdaq National Market. The Company has been advised by the Underwriters that,
following the completion of the offering of the Units, the Underwriters
presently intend to make a market in the Units, the Notes and the Warrants.
However, they are under no obligation to do so and may discontinue any market
making activities at any time without notice. No assurance can be given as to
the liquidity of the trading market for the Units, the Notes or the Warrants or
that an active public market will develop or, if developed, will continue. If
an active public market does not develop or is not maintained, the market price
and liquidity of the Units, the Notes and the Warrants may be adversely
affected.
The Company has agreed to indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act, and to contribute
to payments which the Underwriters might be required to make in respect
thereof.
CMCC and CVCA, each affiliates of CSI and each other, own on a fully diluted
basis approximately 10.7% and 8.5%, respectively, of the Company's outstanding
Common Stock upon completion of the TruVision Transaction. In addition,
Baseball Partners, which is also affiliated with each of CMCC, CVCA and CSI,
owns, on a fully diluted basis, approximately 2.1% of the Company's Common
Stock outstanding upon completion of the Offerings, which will be voted by CVCA
pursuant to a proxy. See "Principal Stockholders." In addition, CVCA provided
the Interim Facility to TruVision
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and will be repaid by the Company from the proceeds of the Offering. See "Use
of Proceeds." Mr. Arnold L. Chavkin is a Director of the Company and a General
Partner of CCP. Pursuant to the New Stockholders Agreement, CMCC, CVCA and
Baseball Partners have the right to designate up to two of the nine directors
of the Company. See "Management."
In connection with the Heartland Transaction, the Company sold to GKM for
nominal consideration warrants to purchase from the Company 300,000 shares of
Common Stock ("GKM Warrants"). The GKM Warrants are initially exercisable at a
price per share of $12.60 (120% of the initial public offering price in the
initial public offering of the Common Stock) for a period of four years
commencing on October 18, 1996. The GKM Warrants grant to the holders thereof
certain anti-dilution rights and rights with respect to the registration of the
securities issuable upon exercise of the GKM Warrants. "Description of Capital
Stock--Registration Rights." GKM has also provided certain financial advisory
services to Heartland and the Company in connection with the Heartland
Transaction for which GKM received a fee.
BTSC, GKM and Prudential have, from time to time, provided investment banking
services to the Company, such as in connection with the Old Offerings (in the
case of each of BTSC, GKM, and Prudential) and the Heartland Transaction (in
the case of GKM) and have received customary fees in connection therewith. GKM
also has a right of first refusal to be a managing underwriter in future equity
and debt transactions of the Company. In connection with the TruVision
Transaction, GKM delivered a fairness opinion and received customary
compensation in connection therewith. BTSC acted as solicitation agent in
connection with the receipt of consent from the holders of Existing Notes to
amend the Old Indenture and received customary compensation in connection
therewith.
Under Conduct Rule 2720 ("Rule 2720") of the National Association of
Securities Dealers, Inc. (the "NASD"), when an 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 offering of the Notes and Chase's ownership interest in
the Company, the offering of the Notes will be conducted in accordance with the
applicable provisions of Rule 2720. Accordingly, Prudential has agreed to act
as a qualified independent underwriter for the Offering. In the Offering, the
Underwriters will not confirm sales to any account over which they exercise
discretionary authority without the prior specific written approval of the
customer.
This Prospectus has been prepared for use by the Underwriters and may be used
by CSI in connection with offers and sales related to secondary market
transactions in the Units, the Notes and the Warrants. CSI may act as principal
or agent in such transactions. Such sales will be made at prices related to
prevailing market prices at the time of sale. No dealer, salesman or other
person has been authorized to give any information or to 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 or CSI. 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.
LEGAL MATTERS
The legality of the Units, the Notes and the Warrants offered hereby will be
passed upon for the Company by Kirkland & Ellis (a partnership which includes
professional corporations), New York, New York. Certain FCC regulatory matters
relating to this offering will be passed upon for the Company by Gardner,
Carton & Douglas, Washington, D.C., as special telecommunications counsel.
Certain legal matters relating to the Offering will be passed upon for the
Underwriters by Simpson Thacher & Bartlett (a partnership which includes
professional corporations), New York, New York and by Rini, Coran &
Lancellotta, P.C., Washington, D.C., as special telecommunications counsel.
137
<PAGE>
EXPERTS
The consolidated financial statements 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 Units, the Notes and the Warrants 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
Units, the Notes and the Warrants 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.
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.
The Company will be required by the Indenture to furnish holders of the Notes
and the Warrants with annual reports containing audited consolidated financial
statements certified by independent public accountants and quarterly reports
containing unaudited consolidated financial data for the first three quarters
of each fiscal year following the end of each such quarter.
138
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
WIRELESS ONE, INC.
Independent Auditors' Report............................................ F-3
Consolidated Balance Sheets as of December 31, 1994 and 1995 and March
31, 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 three months ended March 31, 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 three months ended March 31, 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 three months ended March 31, 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 March 31,
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 three months ended March 31, 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 three months ended March 31, 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 three months ended March 31,
1995 and 1996.......................................................... F-32
Notes to Financial Statements........................................... F-33
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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
March 31, 1996......................................................... F-44
Combined Statements of Operations and Accumulated Deficit for the years
ended
December 31, 1993, 1994 and 1995 and unaudited for the three months
ended March 31, 1995 and 1996.......................................... F-45
Combined Statements of Cash Flows for the years ended December 31, 1993,
1994
and 1995 and unaudited for the three months ended March 31, 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
</TABLE>
F-2
<PAGE>
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
F-3
<PAGE>
WIRELESS ONE, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 31,
1994 1995 1996
---------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............ $ 24,481 $110,380,329 $ 98,964,157
Marketable investment securities--
restricted
(note 3)............................ -- 17,637,839 17,735,150
Subscriber receivables, less
allowance for doubtful accounts of
$4,000, $73,641 and $39,834 at
December 31, 1994 and 1995 and March
31, 1996, respectively.............. 110,219 143,633 159,819
Accrued interest and other
receivables......................... 3,450 405,241 793,176
Prepaid expenses..................... 55,515 796,389 587,732
---------- ------------ ------------
Total current assets............... 193,665 129,363,431 118,240,034
Property and equipment, net (note 4)... 3,078,523 14,266,755 22,912,095
Leased license investment, net of
accumulated amortization of $230,902,
$548,283 and $767,291 at December 31,
1994 and 1995 and March 31, 1996,
respectively.......................... 5,540,036 26,724,238 28,491,658
Marketable investment securities--
restricted (note 3)................... -- 35,755,505 35,946,439
Other assets (note 5).................. 102,000 7,689,945 7,703,873
---------- ------------ ------------
$8,914,224 $213,799,874 $213,294,099
========== ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................... $ 228,835 $ 2,356,707 $ 2,627,827
Accrued expenses..................... 44,779 862,100 1,160,459
Accrued interest..................... -- 3,683,333 8,558,333
Current maturities of long-term debt
(note 6)............................ 1,457,295 376,780 384,366
---------- ------------ ------------
Total current liabilities.......... 1,730,909 7,278,920 12,730,985
Long-term debt (note 6)................ 2,839,602 150,871,267 150,993,259
---------- ------------ ------------
4,570,511 158,150,187 163,724,244
---------- ------------ ------------
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 March 31, 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) (16,196,729)
---------- ------------ ------------
Total stockholders' equity......... 4,343,713 55,649,687 49,569,855
Commitments and contingencies (note
11)...................................
---------- ------------ ------------
$8,914,224 $213,799,874 $213,294,099
========== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
WIRELESS ONE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FEBRUARY 4,
1993
(INCEPTION YEARS ENDED THREE MONTHS ENDED
THROUGH DECEMBER 31, MARCH 31,
DECEMBER 31, ------------------------ -----------------------
1993 1994 1995 1995 1996
------------ ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................ $ -- $ 380,077 $ 1,343,969 $ 238,825 $ 940,777
--------- ----------- ----------- --------- -----------
Operating expenses:
Systems operations.... 24,429 274,886 841,819 169,981 555,942
Selling, general and
administrative....... 110,281 1,800,720 4,431,839 461,129 2,637,553
Depreciation and
amortization......... 27,489 413,824 1,783,066 199,519 964,005
--------- ----------- ----------- --------- -----------
162,199 2,489,430 7,056,724 830,629 4,157,500
--------- ----------- ----------- --------- -----------
Operating loss.......... (162,199) (2,109,353) (5,712,755) (591,804) (3,216,723)
--------- ----------- ----------- --------- -----------
Other income (expense):
Interest expense...... (411) (171,702) (4,070,184) (114,090) (5,009,893)
Interest income....... -- -- 2,024,116 3,122 2,126,360
Other................. -- 19,242 66,349 (520) 20,424
--------- ----------- ----------- --------- -----------
Total other income
(expense).......... (411) (152,460) (1,979,719) (111,488) (2,863,109)
--------- ----------- ----------- --------- -----------
Net loss............ (162,610) (2,261,813) (7,692,474) (703,292) (6,079,832)
Preferred stock
dividends and discount
accretion (note 8)..... -- -- (786,389) -- --
--------- ----------- ----------- --------- -----------
Net loss applicable to
common stock........... $(162,610) $(2,261,813) $(8,478,863) $(703,292) $(6,079,832)
========= =========== =========== ========= ===========
Net loss per common
share.................. $ (.30) $ (1.21) $ (2.02) $ (.35) $ (.45)
========= =========== =========== ========= ===========
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.
F-5
<PAGE>
WIRELESS ONE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
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).... -- -- -- (6,079,832) (6,079,832)
-------- ----------- ---------- ------------ -----------
Balance at March 31,
1996 (unaudited)....... $134,988 $65,631,596 $ -- $(16,196,729) $49,569,855
======== =========== ========== ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
WIRELESS ONE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS
FEBRUARY 4, 1993 YEARS ENDED DECEMBER 31, ENDED MARCH 31,
(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) $(703,292) $(6,079,832)
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 1,783,066 199,519 964,005
Amortization of debt
discount........... -- 104,767 328,301 73,671 130,897
Non-cash interest
income............. -- -- (213,230) -- (288,245)
Changes in assets
and liabilities:
Receivables....... -- (167,277) (571,957) 884 (427,815)
Prepaid expenses.. (9,000) (46,515) (468,707) 11,631 208,657
Accounts payable
and accrued
expenses......... 36,236 237,378 6,004,541 279,448 5,444,480
--------- ----------- ------------ --------- -----------
Net cash used in
operating
activities..... (107,885) (1,665,028) (634,179) (138,139) (24,159)
--------- ----------- ------------ --------- -----------
Cash flows from
investing activities:
Purchase of
investments and other
assets............... -- (102,000) (1,533,446) (25,943) (209,021)
Capital expenditures.. (288,123) (2,960,842) (9,805,057) (654,945) (9,195,283)
Acquisition of
intangible assets.... (154,854) (5,156,054) (6,762,415) (19,902) (1,986,390)
Purchase of marketable
investment
securities........... -- -- (53,180,114) -- --
--------- ----------- ------------ --------- -----------
Net cash used in
investing
activities..... (442,977) (8,218,896) (71,281,032) (700,790) (11,390,694)
--------- ----------- ------------ --------- -----------
Cash flows from
financing activities:
Proceeds from issuance
of long-term debt and
warrants............. 20,722 4,275,819 150,014,902 37,472 --
Principal payments on
long-term debt....... (1,104) (103,306) (11,502,054) -- (1,319)
Debt issuance costs... -- -- (5,593,839) -- --
Issuance of common
stock................ 619,980 5,647,156 35,008,396 1,077,622 --
Issuance of redeemable
preferred stock...... -- -- 14,343,654 -- --
--------- ----------- ------------ --------- -----------
Net cash
provided by
financing
activities..... 639,598 9,819,669 182,271,059 1,115,094 (1,319)
--------- ----------- ------------ --------- -----------
Net increase
(decrease) in
cash........... 88,736 (64,255) 110,355,848 276,165 (11,416,172)
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 $ 300,646 $98,964,157
========= =========== ============ ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
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
F-8
<PAGE>
WIRELESS ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
F-9
<PAGE>
WIRELESS ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(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 March 31, 1996 and the results of its
operations and cash flows for the three month periods ended March 31, 1995 and
1996, and changes in stockholders' equity for the three months ended March 31,
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:
<TABLE>
<S> <C>
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
============
</TABLE>
F-10
<PAGE>
WIRELESS ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
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)
=========== ===========
</TABLE>
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:
<TABLE>
<CAPTION>
AMORTIZED UNREALIZED UNREALIZED FAIR
COST LOSS GAIN VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
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
=========== ======= ======== ===========
</TABLE>
Scheduled maturities for the marketable securities held at December 31,
1995, are as follows:
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
----------- -----------
<S> <C> <C>
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
=========== ===========
</TABLE>
F-11
<PAGE>
WIRELESS ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(4) PROPERTY AND EQUIPMENT
Major categories of property and equipment at December 31, 1994 and 1995 are
as follows :
<TABLE>
<CAPTION>
ESTIMATED
LIFE 1994 1995
--------- ----------- ------------
<S> <C> <C> <C>
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:
<CAPTION>
1994 1995
----------- ------------
<S> <C> <C>
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:
<CAPTION>
1994 1995
----------- ------------
<S> <C> <C>
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
=========== ============
</TABLE>
F-12
<PAGE>
WIRELESS ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Long term debt matures as follows:
<TABLE>
<S> <C>
1996............................. $ 376,780
1997............................. 2,572,136
1998............................. --
1999............................. 150,000
2000............................. --
Thereafter....................... 148,149,131
</TABLE>
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."
F-13
<PAGE>
WIRELESS ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are presented below:
<TABLE>
<CAPTION>
1994 1995
--------- ----------
<S> <C> <C>
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 bases of underlying assets........ -- 612,000
--------- ----------
Deferred tax liabilities............................ 583,654 1,064,495
--------- ----------
Net deferred tax asset.............................. $ -- --
========= ==========
</TABLE>
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
F-14
<PAGE>
WIRELESS ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
F-15
<PAGE>
WIRELESS ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Information regarding the Company's stock option plans is summarized as
follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
--------------------
EXERCISE
INCENTIVE DIRECTORS' PRICE
PLAN PLAN RANGE
--------- ---------- -----------
<S> <C> <C> <C>
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
======= =======
</TABLE>
(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.
F-16
<PAGE>
WIRELESS ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Future minimum lease payments due under channel rights leases and other
noncancelable operating leases at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
CHANNEL OTHER
YEAR ENDING RIGHTS OPERATING
DECEMBER 31, LEASES LEASES
------------ ---------- ----------
<S> <C> <C>
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
========== ==========
</TABLE>
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.
F-17
<PAGE>
WIRELESS ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(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.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1995
-------------------------
CARRYING ESTIMATED
AMOUNT FAIR VALUE
------------ ------------
<S> <C> <C>
Marketable investment securities................ $ 53,393,344 $ 53,704,532
Long-term debt.................................. 151,248,047 160,598,916
</TABLE>
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.
F-18
<PAGE>
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
F-19
<PAGE>
HEARTLAND DIVISION
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER
DECEMBER 31, DECEMBER 31, 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
========== ========== ===========
<CAPTION>
LIABILITIES AND DIVISION EQUITY
-------------------------------
<S> <C> <C> <C>
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.
F-20
<PAGE>
HEARTLAND DIVISION
STATEMENTS OF OPERATIONS AND DIVISION EQUITY
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 1, AUGUST 19,
DECEMBER 31, 1994 TO 1994 TO AUGUST 19,
---------------------- AUGUST 18, DECEMBER 31, 1994 TO
1992 1993 1994 1994 SEPTEMBER 30, 1994
---------- ---------- ---------- ------------ ------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues.................................... $ 349,244 $ 850,167 $ 616,223 $ 291,012 $ 80,095
---------- ---------- ---------- ---------- ----------
Operating expenses:
Systems operations......................... 290,898 397,503 340,539 197,429 54,601
Selling, general and administrative........ 352,226 557,466 320,701 184,859 50,065
Depreciation and amortization.............. 105,860 211,464 166,358 77,995 22,659
---------- ---------- ---------- ---------- ----------
Total operating expenses................. 748,984 1,166,433 827,598 460,283 127,325
---------- ---------- ---------- ---------- ----------
Loss before income taxes................. (399,740) (316,266) (211,375) (169,271) (47,230)
Income tax benefit (note 4)................. -- -- -- 62,630 17,475
---------- ---------- ---------- ---------- ----------
Net loss................................. (399,740) (316,266) (211,375) (106,641) (29,755)
Division equity at beginning of period...... -- 1,673,924 2,302,227 2,202,789 2,202,789
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
---------- ---------- ---------- ---------- ----------
Division equity at end of period............ $1,673,924 $2,302,227 $2,202,789 $8,857,709 $8,900,768
========== ========== ========== ========== ==========
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1995
-------------
(UNAUDITED)
<S> <C>
Revenues.................................... $ 632,173
-------------
Operating expenses:
Systems operations......................... 397,574
Selling, general and administrative........ 348,447
Depreciation and amortization.............. 193,962
-------------
Total operating expenses................. 939,983
-------------
Loss before income taxes................. (307,810)
Income tax benefit (note 4)................. 113,890
-------------
Net loss................................. (193,920)
Division equity at beginning of period...... 8,857,709
Elimination of RuralVision equity
(note 1(a))................................ --
Net investment in and advances from
parents.................................... 5,380,366
-------------
Division equity at end of period............ $14,044,155
=============
</TABLE>
See accompanying notes to financial statements.
F-21
<PAGE>
HEARTLAND DIVISION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 1, AUGUST 19, AUGUST 19, NINE MONTHS
DECEMBER 31, 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.
F-22
<PAGE>
HEARTLAND DIVISION
NOTES TO FINANCIAL STATEMENTS
(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)
(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
interest expense and, therefore, may
F-23
<PAGE>
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)
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.
F-24
<PAGE>
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:
<TABLE>
<CAPTION>
1993 1994
---------- ----------
<S> <C> <C>
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
========== ==========
</TABLE>
(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.
F-25
<PAGE>
HEARTLAND DIVISION
NOTES TO FINANCIAL STATEMENTS, CONCLUDED
(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)
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:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1995........................... $402,000
1996........................... 485,000
1997........................... 485,000
1998........................... 478,000
1999........................... 472,000
</TABLE>
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.
F-26
<PAGE>
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).
F-27
<PAGE>
TRUVISION WIRELESS, INC.
BALANCE SHEETS
(DATA WITH RESPECT TO MARCH 31, 1996 ARE UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- MARCH 31,
1994 1995 1996
---------- ----------- -----------
ASSETS (UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.......... $2,712,851 $ 88,882 $ 500,111
Short-term investments............. 75,000 36,300 36,300
Accounts receivable (less allowance
for doubtful accounts of $34,000,
$150,426 and $187,060,
respectively)..................... 41,178 283,656 237,644
Other current assets............... 11,005 108,376 142,933
---------- ----------- -----------
Total current assets............. 2,840,034 517,214 916,988
---------- ----------- -----------
Property, plant and equipment:
Transmission equipment............. 1,197,425 3,029,214 3,419,840
Subscriber premises equipment and
installation costs................ 1,841,868 6,866,806 8,476,038
Office furniture and equipment..... 263,743 437,169 610,224
Vehicles........................... 223,996 215,344 216,144
Buildings and improvements......... 204,340 326,090 348,654
---------- ----------- -----------
3,731,372 10,874,623 13,070,900
Less: accumulated depreciation..... (217,676) (1,375,402) (1,905,355)
---------- ----------- -----------
3,513,696 9,499,221 11,165,545
Uninstalled subscriber premises
equipment......................... 1,006,854 546,316 696,493
---------- ----------- -----------
4,520,550 10,045,537 11,862,038
---------- ----------- -----------
License costs, net--Notes 2 and 3.... 157,480 179,592 2,447,387
Organizational costs, net............ 374,654 285,318 253,370
Deferred costs, net and other
assets--Note 7...................... 90,341 1,849,556 4,271,870
---------- ----------- -----------
Total assets..................... $7,983,059 $12,877,217 $19,751,653
========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable............. $ 813,471 $ 713,218 $3,302,800
Accrued expenses................... 77,671 43,000 33,675
Short-term debt.................... -- 4,531,464 10,084,894
---------- ----------- -----------
Total current liabilities........ 891,142 5,287,682 13,421,369
---------- ----------- -----------
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) (4,403,395)
---------- ----------- -----------
Total stockholders' equity....... 7,091,917 7,589,535 6,330,284
---------- ----------- -----------
Total liabilities and
stockholders' equity............ $7,983,059 $12,877,217 $19,751,653
========== =========== ===========
</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.
F-28
<PAGE>
TRUVISION WIRELESS, INC.
STATEMENTS OF OPERATIONS (NOTE 1)
(DATA WITH RESPECT TO MARCH 31, 1995 AND 1996 ARE UNAUDITED)
<TABLE>
<CAPTION>
MISSISSIPPI WIRELESS TV L.P. TRUVISION WIRELESS, INC.
--------------------------------------- -----------------------------------------------------------
PERIOD FROM
INCEPTION
(NOVEMBER 2, 1993) JANUARY 1, 1994 TO AUGUST 25, 1994 TO YEAR ENDED THREE MONTHS ENDED
TO DECEMBER 31, 1993 AUGUST 24, 1994 DECEMBER 31, 1994 DECEMBER 31, 1995 MARCH 31,
-------------------- ------------------ ------------------ ----------------- ----------------------
1995 1996
--------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Service revenues... $ -- $ 16,233 $ 264,491 $ 2,595,514 $ 379,561 $ 1,107,275
Installation
revenues.......... -- 57,137 166,043 486,100 122,308 178,751
--------- ---------- ---------- ----------- --------- -----------
Total revenues.. -- 73,370 430,534 3,081,614 501,869 1,286,026
--------- ---------- ---------- ----------- --------- -----------
Expenses:
System operating
expenses.......... 116,733 278,000 425,603 2,103,053 380,551 885,712
Selling, general
and
administrative
expenses.......... 111,186 668,009 534,431 2,086,200 233,275 911,024
Depreciation and
amortization...... -- 82,196 167,990 1,266,301 193,796 584,544
--------- ---------- ---------- ----------- --------- -----------
Total operating
expenses........ 227,919 1,028,205 1,128,024 5,455,554 807,622 2,381,280
--------- ---------- ---------- ----------- --------- -----------
Loss from
operations......... (227,919) (954,835) (697,490) (2,373,940) (305,753) (1,095,254)
Interest income..... -- 6,632 55,728 15,063 -- --
Interest expense.... -- -- -- (143,505) -- (163,997)
--------- ---------- ---------- ----------- --------- -----------
Net loss............ (227,919) (948,203) (641,762) (2,502,382) (305,753) (1,259,251)
Preferred dividend
requirement........ -- -- (227,000) (687,000) (160,000) (220,000)
--------- ---------- ---------- ----------- --------- -----------
Net loss
attributable to
common
stockholders....... $(227,919) $ (948,203) $ (868,762) $(3,189,382) $(465,753) $(1,479,251)
========= ========== ========== =========== ========= ===========
Loss per common
share*............. N/A N/A $ (0.36) $ (1.33) $ (0.19) $ (0.62)
========= ========== ========== =========== ========= ===========
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.
F-29
<PAGE>
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
<TABLE>
<CAPTION>
TOTAL
GENERAL LIMITED PARTNERS'
PARTNER PARTNER CAPITAL
--------- ---------- ----------
<S> <C> <C> <C>
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
========= ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE>
TRUVISION WIRELESS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (NOTE 1)
(DATA WITH RESPECT TO MARCH 31, 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> <C> <C> <C> <C> <C> <C> <C> <C>
Exchange of the net
assets of 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................ -- -- -- -- -- -- -- (1,259,251)
-------- ------ -------- ------ ---------- ------- ----------- -----------
BALANCE, MARCH 31,
1996................... 800,000 $8,000 300,000 $3,000 2,400,000 $24,000 $10,698,679 $(4,403,395)
======== ====== ======== ====== ========== ======= =========== ===========
</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.
F-31
<PAGE>
TRUVISION WIRELESS, INC.
STATEMENTS OF CASH FLOWS (NOTE 1)
(DATA WITH RESPECT TO MARCH 31, 1995 AND 1996 ARE UNAUDITED)
<TABLE>
<CAPTION>
MISSISSIPPI WIRELESS TV L.P. TRUVISION WIRELESS, INC.
---------------------------------- -----------------------------------------------------------
PERIOD FROM
INCEPTION
(NOVEMBER 2, 1993) JANUARY 1, 1994 AUGUST 25, 1994 THREE MONTHS ENDED
THROUGH TO TO YEAR ENDED MARCH 31,
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) $ (305,753) $(1,259,252)
Adjustments to
reconcile net loss
to net cash provided
by operating
activities:
Depreciation and
amortization........ -- 82,196 167,990 1,266,301 193,796 584,544
Provision for losses
on accounts
receivable.......... -- -- 34,000 126,370 8,563 36,634
Changes in operating
assets and
liabilities:
Decrease (increase)
in accounts
receivable......... -- (105,395) (23,783) (368,848) (20,375) 9,378
Decrease (increase)
in other current
assets............. -- (76,969) 63,014 (97,371) (10,161) (34,557)
Increase (decrease)
in accounts
payable............ 17,785 431,319 364,367 (100,254) 79,784 2,589,582
Increase (decrease)
in accrued
liabilities........ -- -- 77,671 (34,671) (77,671) (9,325)
---------- ----------- ----------- ----------- ---------- -----------
Cash provided by (used
in) operating
activities: ......... (210,134) (617,052) 41,497 (1,710,855) (131,817) 1,917,004
---------- ----------- ----------- ----------- ---------- -----------
Cash flows from
investing activities:
Capital
expenditures........ (177,000) (2,555,318) (1,896,615) (6,682,712) (1,337,884) (2,346,453)
Payments for license
and organizational
costs............... -- (541,823) (165,505) -- (17,707) (2,290,438)
Increase in deferred
costs and other
assets.............. -- -- -- (1,250,566) (287,263) (2,422,314)
Deposits for
acquisitions........ -- -- -- (100,000) -- --
Deposit for FCC
auction............. -- -- -- (450,000) -- --
Proceeds from short-
term investments.... -- -- -- 38,700 -- --
Purchase of short-
term investments.... -- -- (75,000) -- -- --
---------- ----------- ----------- ----------- ---------- -----------
Net cash used in
investing
activities.......... (177,000) (3,097,141) (2,137,120) (8,444,578) (1,642,854) (7,059,205)
---------- ----------- ----------- ----------- ---------- -----------
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 -- 5,553,430
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 -- 5,553,430
---------- ----------- ----------- ----------- ---------- -----------
Net increase
(decrease) in cash
and cash
equivalents.......... 693,866 183,969 1,835,016 (2,623,969) (1,774,671) 411,229
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 $ 938,180 $ 500,111
========== =========== =========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE>
TRUVISION WIRELESS, INC.
NOTES TO FINANCIAL STATEMENTS
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 ($4,403,000 at March 31, 1996). Losses incurred since inception are
attributable primarily to start-up costs, marketing and sales costs
F-33
<PAGE>
TRUVISION WIRELESS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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.
F-34
<PAGE>
TRUVISION WIRELESS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 and $36,000 in 1995 and 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:
<TABLE>
<S> <C>
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
</TABLE>
F-35
<PAGE>
TRUVISION WIRELESS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 $48,000 at March 31, 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
$150,000 at March 31, 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:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
-------- ----------
<S> <C> <C>
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..................................... $ -- $ --
======== ==========
</TABLE>
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,
F-36
<PAGE>
TRUVISION WIRELESS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 March 31, 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
three months ended March 31, 1996 interest of $85,072 was paid. No interest
was paid for the three months ended March 31, 1995 and no interest was
capitalized for the three month periods ended March 31, 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.
F-37
<PAGE>
TRUVISION WIRELESS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 three months ended March 31, 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.
F-38
<PAGE>
TRUVISION WIRELESS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4: SHORT-TERM DEBT
Short-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- MARCH 31,
1994 1995 1996
----- ---------- ----------
<S> <C> <C> <C>
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 $3,400,156
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. .................................... -- -- 6,000,000
Other......................................... -- -- 684,738
</TABLE>
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 ($387,000 and
$1,134,000, respectively, at March 31, 1995 and 1996). No preferred dividends
have been declared. See Note 11.
F-39
<PAGE>
TRUVISION WIRELESS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
MARCH 31,
1994 1995 1996
------- ---------- ----------
<S> <C> <C> <C>
Deferred costs and other assets consist of:
Deferred financing and acquisition costs
--Note 11.................................. $ -- $1,027,216 $2,586,178
Advances to EdNet--Note 3................... 84,000 132,000 120,924
Deposits for future acquisitions--Note 10... -- 100,000 562,650
FCC auction deposit......................... -- 450,000 450,000
Other....................................... 6,341 140,340 552,118
------- ---------- ----------
$90,341 $1,849,556 $4,271,870
======= ========== ==========
</TABLE>
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.
F-40
<PAGE>
TRUVISION WIRELESS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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:
<TABLE>
<S> <C>
1996............................................................. $369,920
1997............................................................. 397,744
1998............................................................. 309,657
1999............................................................. 190,228
2000............................................................. 132,502
Thereafter....................................................... 225,711
</TABLE>
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 March 31, 1996 and the results of its operations
for the period from the date of the consummation of the acquisition to March
31, 1996, are reflected in the Company's results for the three months ended
March 31, 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.
F-41
<PAGE>
TRUVISION WIRELESS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 Note 4.
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 ($1,134,000 at March 31,
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 of approximately $643,000 were deferred at March 31, 1996. The
Company intends to write off a portion of those costs in the period ended June
30, 1996, after management evaluates the applicability of the specific costs
to the proposed merger and the related public offering by Wireless One.
F-42
<PAGE>
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).
F-43
<PAGE>
MADISON COMMUNICATIONS, INC. AND BEASLEY COMMUNICATIONS, INC.
COMBINED BALANCE SHEETS (NOTE 1)
(DATA WITH RESPECT TO MARCH 31, 1996 ARE UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------ -----------
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash.................................. $ 5,705 $ 39,711 $ 63,946
Accounts receivable (less allowance
for doubtful accounts of $16,302,
$13,888 and $19,673, respectively)... 1,068 3,513 300
Other current assets.................. 7,804 13,401 6,518
----------- ----------- -----------
Total current assets................ 14,577 56,625 70,764
----------- ----------- -----------
Property, plant and equipment:
Cable system--wireless................ 2,337,362 2,462,318 2,475,403
Cable system--wired................... 1,042,923 1,062,824 1,065,176
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 3,761,144
Less: accumulated depreciation........ (1,944,781) (2,499,752) (2,627,219)
----------- ----------- -----------
1,675,862 1,245,955 1,133,925
Uninstalled subscriber premises
equipment.............................. 18,195 10,431 13,902
----------- ----------- -----------
1,694,057 1,256,386 1,147,827
----------- ----------- -----------
License costs, net--(note 2)............ 73,333 66,666 65,000
Other assets............................ 1,835 1,835 1,835
----------- ----------- -----------
Total assets........................ $ 1,783,802 $ 1,381,512 $ 1,285,426
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................... $ 84,042 $ 64,874 $ 55,691
Accrued expenses, primarily
programming costs.................... 275,294 319,424 321,462
Deferred income....................... 28,055 20,576 20,576
Borrowings under line of credit (note
3)................................... 275,000 125,000 100,000
----------- ----------- -----------
Total current liabilities........... 662,391 529,874 497,729
----------- ----------- -----------
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) (1,688,495)
----------- ----------- -----------
Total stockholders' equity.......... 1,121,411 851,638 787,697
----------- ----------- -----------
Total liabilities and stockholders'
equity............................. $ 1,783,802 $ 1,381,512 $ 1,285,426
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-44
<PAGE>
MADISON COMMUNICATIONS, INC. AND BEASLEY COMMUNICATIONS, INC.
COMBINED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(DATA WITH RESPECT TO MARCH 31, 1995 AND 1996 ARE UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------- ------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Service revenues...... $ 1,426,971 $ 1,493,337 $ 1,543,470 $ 388,811 $ 384,706
Installation reve-
nues................. 68,026 63,400 38,677 11,325 7,923
----------- ----------- ----------- ----------- -----------
Total revenues...... 1,494,997 1,556,737 1,582,147 400,136 392,629
----------- ----------- ----------- ----------- -----------
Expenses:
System operating
expenses............. 727,124 814,715 888,707 146,783 152,554
General and
administrative
expenses............. 386,911 402,897 404,804 152,046 191,675
Depreciation and
amortization......... 578,739 626,531 577,240 148,678 129,134
----------- ----------- ----------- ----------- -----------
Total operating
expenses........... 1,692,774 1,844,143 1,870,751 447,507 473,363
----------- ----------- ----------- ----------- -----------
Loss from operations.... (197,777) (287,406) (288,604) (47,371) (80,734)
Other income (expense):
Other income.......... 40,793 43,180 43,414 -- 19,703
Gain (loss) on sale of
assets............... 103,583 -- (7,143) -- --
Interest (expense).... (55,465) (31,090) (17,440) (6,009) (2,910)
----------- ----------- ----------- ----------- -----------
Net loss................ (108,866) (275,316) (269,773) (53,380) (63,941)
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) $(1,408,161) $(1,688,495)
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-45
<PAGE>
MADISON COMMUNICATIONS, INC. AND BEASLEY COMMUNICATIONS, INC.
COMBINED STATEMENTS OF CASH FLOWS
(DATA WITH RESPECT TO MARCH 31, 1995 AND 1996 ARE UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------- ------------------
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) $(53,380) $(63,941)
Adjustments to reconcile
net loss to net cash
provided by operating
activities:
Depreciation and
amortization.......... 578,739 626,531 577,240 148,678 129,134
(Gain) loss on sale of
assets................ (103,583) -- 7,143 -- --
Provision for losses on
accounts receivable... 22,500 18,000 15,505 4,500 4,500
(Increase) in other
assets................ (125) (65) -- -- --
Changes in operating
assets and
liabilities:
(Increase) decrease
in accounts
receivable.......... (17,720) (10,184) (17,950) 8,700 (1,287)
(Increase) decrease
in other current
assets.............. (8,110) 16,418 (5,597) 77 6,883
Increase (decrease)
in accounts
payable............. 3,170 39,575 (19,168) (21,995) (9,183)
Increase in accrued
expenses............ 127,134 91,610 44,130 45,680 2,038
Increase (decrease)
in deferred income.. 65 5,165 (7,479) (7,921) --
--------- --------- --------- -------- --------
Cash flows provided by
operating activities..... 493,204 511,734 324,051 124,339 68,144
--------- --------- --------- -------- --------
Cash flows used in
investing activities:
Capital expenditures..... (329,640) (220,778) (143,545) (39,797) (18,909)
Proceeds from sale of
assets.................. 180,000 -- 3,500 -- --
--------- --------- --------- -------- --------
Net cash used in
investing activities.... (149,640) (220,778) (140,045) (39,797) (18,909)
--------- --------- --------- -------- --------
Cash flows used in
financing activities:
Payment on bank
overdraft............... (21,815) -- -- -- --
Payments on line of
credit.................. (300,000) (307,000) (150,000) (50,000) (25,000)
--------- --------- --------- -------- --------
Net cash used by financing
activities............... (321,815) (307,000) (150,000) (50,000) (25,000)
--------- --------- --------- -------- --------
Net increase (decrease) in
cash and cash
equivalents.............. 21,749 (16,044) 34,006 34,542 24,235
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 $ 40,247 $ 63,946
========= ========= ========= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-46
<PAGE>
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
F-47
<PAGE>
MADISON COMMUNICATIONS, INC. AND BEASLEY COMMUNICATIONS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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:
<TABLE>
<S> <C>
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
</TABLE>
(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 $35,001 at March 31, 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 three months ended March
31, 1996. No interest was paid in the three months ended March 31, 1995. No
income taxes were paid in any of the periods presented.
F-48
<PAGE>
MADISON COMMUNICATIONS, INC. AND BEASLEY COMMUNICATIONS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(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 Rule10-01 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 three months ended March 31, 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:
<TABLE>
<S> <C>
1996................................................................. $26,407
1997................................................................. 10,560
1998................................................................. 6,600
1999................................................................. 2,640
2000................................................................. 1,540
</TABLE>
Rent expense for the years ended December 31, 1993, 1994 and 1995 was
approximately $13,200, $24,800 and $37,200, respectively.
F-49
<PAGE>
MADISON COMMUNICATIONS, INC. AND BEASLEY COMMUNICATIONS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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.
F-50
<PAGE>
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.
F-51
<PAGE>
BARTEL, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
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
=======
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-52
<PAGE>
BARTEL, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1995
------------------
<S> <C>
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
========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-53
<PAGE>
BARTEL, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1995
------------------
<S> <C>
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...................... $ --
=======
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-54
<PAGE>
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.
F-55
<PAGE>
BARTEL, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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.
F-56
<PAGE>
BARTEL, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(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.
F-57
<PAGE>
BARTEL, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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
F-58
<PAGE>
BARTEL, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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.
F-59
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON 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 OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTI-
TUTE 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.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 11
Formation of the Company.................................................. 21
Formation of TruVision.................................................... 22
The TruVision Transaction................................................. 22
Acquisitions.............................................................. 23
Use of Proceeds........................................................... 24
Dividends and Price Range of Common Stock.................................
Dilution..................................................................
Capitalization............................................................ 25
Unaudited Pro Forma Condensed Combined Financial Information.............. 26
Selected Historical Financial Data........................................ 32
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 35
Business.................................................................. 45
Wireless Cable Industry................................................... 65
Management................................................................ 74
Certain Transactions...................................................... 83
Principal Stockholders.................................................... 84
Description of Certain Indebtedness....................................... 86
Description of Units......................................................
Description of Notes...................................................... 86
Description of Warrants...................................................
Description of Capital Stock.............................................. 120
Shares Eligible for Future Sale...........................................
United States Federal Income Tax Matters.................................. 123
Underwriting.............................................................. 127
Legal Matters............................................................. 128
Experts................................................................... 128
Available Information..................................................... 129
Index to Financial Statements............................................. F-1
</TABLE>
PROSPECTUS
WIRELESS ONE, INC.
UNITS CONSISTING OF
$
% SENIOR DISCOUNT NOTES DUE 2006 AND WARRANTS TO PURCHASE SHARES OF COMMON
STOCK
WIRELESS ONE(SM)
CHASE SECURITIES INC.
BT SECURITIES CORPORATION
GERARD KLAUER MATTISON & CO., LLC
PRUDENTIAL SECURITIES INCORPORATED
,1996
<PAGE>
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, other than
underwriting discounts and commissions. All of the amounts shown are estimated
except the Securities and Exchange Commission registration fee and the NASD
filing fee.
<TABLE>
<S> <C>
SEC registration fee............................................. $ 60,345
NASD filing fee.................................................. 18,000
Rating agency fee................................................ 20,000
Blue sky fees and expenses....................................... 15,000
Printing and engraving expenses.................................. 600,000
Legal fees and expenses.......................................... 350,000
Accounting fees and expenses..................................... 150,000
Trustee fees..................................................... 10,000
Miscellaneous.................................................... 776,655
----------
Total.......................................................... $2,000,000
==========
</TABLE>
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 will enter into indemnity agreements with its directors (a form
of which is filed as Exhibit 10.6 to this Registration Statement), 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.
II-1
<PAGE>
Reference is made to the form of Underwriting Agreement filed as Exhibit 1.1
to this Registration Statement which provides for indemnification of the
directors and officers of the Registrant signing this Registration Statement
and certain controlling persons of the Registrant against certain liabilities,
including those arising under the Securities Act of 1933, as amended (the
"Securities Act"), in certain instances by the Underwriters.
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:
<TABLE>
<CAPTION>
INVESTORS SHARES
--------- ---------
<S> <C>
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........................................ 150,854
Wireless Investment Company........................................ 150,854
Concord Telephone.................................................. 75,427
Ronald L. Daniels.................................................. 75,427
OPCO Senior Executive Investment Partnership, L.P.................. 45,256
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............................................................ 6,538,467
=========
</TABLE>
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.
II-2
<PAGE>
(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
<TABLE>
<CAPTION>
INVESTORS SHARES
--------- ---------
<S> <C>
Mississippi Wireless TV, L.P. ..................................... 1,760,000
Chase Venture Capital Associates, L.P. ............................ 1,569,333
Vision Communications, Inc. ....................................... 180,000
VanCom, Inc. ...................................................... 44,000
---------
Total.............................................................. 3,553,333
=========
</TABLE>
(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.
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
1.1 Form of Underwriting Agreement between the Registrant and the
Underwriters**
2.1 TruVision Merger Agreement among the Registrant, TruVision and
Wireless One MergerSub, Inc., dated April 25, 1996**
3.1 Amended and Restated Certificate of Incorporation of the Registrant+++
3.2 Bylaws of the Registrant+++
4.1 Indenture between the Registrant and United States Trust Company of
New York, as Trustee dated October 24, 1995+++
4.2 Warrant Agreement between the Registrant and United States Trust
Company of New York, as Warrant Agent dated October 24, 1995+++
4.3 Escrow and Disbursement Agreement between the Registrant and Bankers
Trust Corporation, as Escrow Agent dated October 24, 1995+++
4.4 Unit Agreement between the Registrant and United States Trust Company
of New York, as Unit Agent dated October 24, 1995+++
4.5 Form of Supplemental Indenture between the Registrant and United
States Trust Company of New York as Trustee**
4.6 Form of Indenture between the Registrant and United States Trust
Company of New York as Trustee**
4.7 Form of Warrant Agreement between the Registrant and United States
Trust Company of New York, as Warrant Agent**
4.8 Form of Unit Agreement between the Registrant and United States Trust
Company of New York, as Unit Agent**
5.1 Opinion of Kirkland & Ellis (including the consent of such firm) as to
the validity of the notes being offered**
8.1 Opinion of Kirkland & Ellis as to certain tax matters**
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+++
10.2 Escrow Agreement among the parties to Exhibit 10.1 dated October 24,
1995+++
10.3 1995 Long-Term Performance Incentive Plan of the Registrant++
10.4 1995 Director's Stock Option Plan of the Registrant++
10.5 Warrant Agreement between the Registrant and GKM (including form of
warrant certificate) dated October 18, 1995+++
10.6 Form of Amended and Restated Registration Rights Agreement among the
Registrant, Heartland and certain stockholders+**
10.7 Form of Amended and Restated Stockholders Agreement among the
Registrant, and certain stockholders+**
10.8 Standard forms of MDS License Agreement of the Registrant+++
10.9 Standard forms of ITFS License Agreement of the Registrant+++
10.10 Form of Employment Agreement between the Registrant and certain
executive officers+**
10.11 Acquisition and Market Escrow Agreement among the parties to Exhibit
2.1 dated July 29, 1996.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
11.1 Statement re: Computation of Ratio of Per Share Earnings
12.1 Statement re: Computation of Ratio of Earnings to Fixed Charges of the
Company***
21.1 Subsidiaries of the Registrant**
23.1 Consent of Kirkland & Ellis (included in Exhibit 5.1)**
23.2 Consent of KPMG Peat Marwick LLP (Dallas, Texas)**
23.3 Consent of KPMG Peat Marwick LLP (New Orleans, Louisiana)**
23.4 Consent of Arthur Andersen & Co. SC (Jackson, Mississippi)**
24.1 Powers of Attorney***
25.1 Statement of Eligibility of Trustee**
</TABLE>
- --------
* To be filed by amendment.
** Filed herewith.
*** Previously filed.
+ Management contract or compensatory plan or arrangement.
++Incorporated herein by reference to the exhibit to the Registrant's
Registration Statement on Form S-1 (Registration Number 33-94942) as
declared effective by the Commission on October 18, 1995.
(b) Financial Statement Schedules
Independent Auditors' Report on Financial Statement Schedule and Consent
Schedule II--Valuation and Qualifying Accounts
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 Registrant hereby undertakes:
(1) That, for purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon
II-5
<PAGE>
Rule 430A and contained in the form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall
be deemed to be part of this registration statement as of the time it was
declared effective.
(2) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
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.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Baton Rouge, State of Louisiana, on
the 2nd day of August, 1996.
Wireless One, Inc.
By: *
___________________________________
HENRY M. BURKHALTER
PRESIDENT AND VICE CHAIRMAN OF THE
BOARD
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed on the 2nd day of August, 1996, by the following
persons in the capacities indicated:
SIGNATURE TITLE
Chairman of the Board
*
____________________________________
HANS J. STERNBERG
* Director
____________________________________
HENRY M. BURKHALTER
* Chief Executive Officer and Director
____________________________________ (Principal Executive Officer)
SEAN E. REILLY
* Executive Vice President--Operations
____________________________________ (Principal Financial and Accounting
ALTON C. RYE Officer)
Director
____________________________________
WILLIAM K. LUBY
* Director
____________________________________
ARNOLD L. CHAVKIN
* Director
____________________________________
DANIEL L. SHIMER
* Director
____________________________________
J.R. HOLLAND, JR.
II-7
<PAGE>
_____________________________________ Director
DAVID E. WEBB
/s/ Michael C. Ellis
*By:
_________________________________
MICHAEL C. ELLIS,
AS ATTORNEY-IN-FACT
II-8
<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 doubtful 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
subscription 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>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION OF EXHIBIT NO.
------- ---------------------- ----
<C> <S> <C>
1.1 Form of Underwriting Agreement between the Registrant and the
Underwriters**
2.1 TruVision Merger Agreement among the Registrant, TruVision and
Wireless One MergerSub, Inc., dated April 25, 1996**
3.1 Amended and Restated Certificate of Incorporation of the
Registrant+++
3.2 Bylaws of the Registrant+++
4.1 Indenture between the Registrant and United States Trust
Company of New York, as Trustee dated October 24, 1995+++
4.2 Warrant Agreement between the Registrant and United States
Trust Company of New York, as Warrant Agent dated October 24,
1995+++
4.3 Escrow and Disbursement Agreement between the Registrant and
Bankers Trust Corporation, as Escrow Agent dated October 24,
1995+++
4.4 Unit Agreement between the Registrant and United States Trust
Company of New York, as Unit Agent dated October 24, 1995+++
4.5 Form of Supplemental Indenture between the Registrant and
United States Trust Company of New York as Trustee**
4.6 Form of Indenture between the Registrant and United States
Trust Company of New York as Trustee**
4.7 Form of Warrant Agreement between the Registrant and United
States Trust Company of New York, as Warrant Agent**
4.8 Form of Unit Agreement between the Registrant and United States
Trust Company of New York, as Unit Agent**
5.1 Opinion of Kirkland & Ellis (including the consent of such
firm) as to the validity of the notes being offered**
8.1 Opinion of Kirkland & Ellis as to certain tax matters**
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+++
10.2 Escrow Agreement among the parties to Exhibit 10.1 dated
October 24, 1995+++
10.3 1995 Long-Term Performance Incentive Plan of the Registrant++
10.4 1995 Director's Stock Option Plan of the Registrant++
10.5 Warrant Agreement between the Registrant and GKM (including
form of warrant certificate) dated October 18, 1995+++
10.6 Form of Amended and Restated Registration Rights Agreement
among the Registrant, Heartland and certain stockholders+**
10.7 Form of Amended and Restated Stockholders Agreement among the
Registrant, and certain stockholders+**
10.8 Standard forms of MDS License Agreement of the Registrant+++
10.9 Standard forms of ITFS License Agreement of the Registrant+++
10.10 Form of Employment Agreement between the Registrant and certain
executive officers
10.11 Acquisition and Market Escrow Agreement among the parties to
Exhibit 2.1 dated July 29, 1996.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION OF EXHIBIT NO.
------- ---------------------- ----
<C> <S> <C>
11.1 Statement re: Computation of Earnings per Share**
12.1 Statement re: Computation of Ratio of Earnings to Fixed Charges
of the Company***
21.1 Subsidiaries of the Registrant**
23.1 Consent of Kirkland & Ellis (included in Exhibit 5.1)**
23.2 Consent of KPMG Peat Marwick LLP (Dallas, Texas)**
23.3 Consent of KPMG Peat Marwick LLP (New Orleans, Louisiana)**
23.4 Consent of Arthur Andersen & Co. SC (Jackson, Mississippi)**
24.1 Powers of Attorney***
25.1 Statement of Eligibility of Trustee**
</TABLE>
- -------
** Filed herewith.
*** Previously filed.
+ Management contract or compensatory plan or arrangement.
++Incorporated herein by reference to the exhibit to the Registrant's
Registration Statement on Form S-1 (Registration Number 33-94942) as
declared effective by the Commission on October 18, 1995.
<PAGE>
EXHIBIT 1.1
DRAFT 8/1
WIRELESS ONE, INC.
_____________ Units Consisting of
_____% Senior Discount Notes due 2006
and
Warrants to Purchase Shares of Common Stock
UNDERWRITING AGREEMENT
----------------------
August __, 1996
Chase Securities Inc.
270 Park Avenue
New York, New York 10017
BT Securities Corporation
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Gerard Klauer Mattison & Co., LLC
529 Fifth Avenue
New York, New York 10017
Prudential Securities Incorporated
One New York Plaza
16th Floor
New York, New York 10292
Dear Sirs:
Wireless One, Inc., a Delaware corporation (the "Company"), proposes to
-------
issue and sell ___________ Units (as defined) consisting of (a) $_____________
aggregate principal amount at maturity of its __% Senior Discount Notes due 2006
(the "Notes") and (b) _________ warrants (the "Warrants") to purchase per
----- --------
warrant __________ shares of the Company's common stock, par value $0.01 per
share (the "Common Stock").
------------
<PAGE>
2
The Notes are to be issued under an Indenture (the "Indenture") to be dated
---------
as of August __, 1996 by and between the Company and United States Trust Company
of New York, as trustee (the "Trustee"). The Warrants are to be issued under a
-------
Warrant Agreement to be dated as of August __, 1996 (the "Warrant Agreement"),
-----------------
between the Company and United States Trust Company of New York, National
Association, as warrant agent (in such capacity, the "Warrant Agent"). The
-------------
shares of Common Stock issuable upon the exercise of the Warrants are herein
referred to as the "Warrant Shares." The Notes and the Warrants will initially
--------------
be represented by [____] units (the "Units"), each Unit consisting of $1,000
-----
principal amount of Notes and [____] Warrants to purchase [____] Warrant Shares.
The term "Units" shall refer collectively and individually to the Notes and
Warrants. The Notes and the Warrants forming a part of the Units, the Warrant
Shares underlying the Warrants, and the Units collectively are referred to
herein as the "Securities." This is to confirm the agreement concerning the
----------
purchase of the Units from the Company by Chase Securities Inc. (the
"Representative"), BT Securities Corporation ("BTSC"), Gerard Klauer Mattison &
- --------------- ----
Co., LLC ("GKM") and Prudential Securities Incorporated ("Prudential"; and the
--- ----------
Representative, BTSC, GKM and Prudential shall be collectively referred to as
the "Underwriters").
The Units are to be issued under a Unit Agreement (the "Unit Agreement") to
--------------
be dated as of August __, 1996, between the Company, the Trustee, the Warrant
Agent and United States Trust Company of New York as unit agent (in such
capacity, the "Unit Agent").
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
---------------------------------------------------------
The Company represents and warrants to and agrees with each of the
Underwriters that:
(a) A registration statement on Form S-1 (No. 333-5109), including a form
of prospectus, relating to the Securities has been prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations (the "Rules and Regulations") of the
--- ---------------------
Securities and Exchange Commission (the "Commission"), and has been filed by the
----------
Company with the Commission. The Company may have filed one or more amendments
thereto, including the related Preliminary Prospectus (as hereinafter defined),
each of which has previously been furnished to you. The Company will next file
with the Commission either (i) prior to effectiveness of such registration
statement, a further amendment to such registration statement (including the
form of final prospectus) or (ii) after effectiveness of such registration
statement, a final prospectus in accordance with Rules 430A and 424(b)(1) or
(4). In the case of clause (ii) above, the Company has included in such
registration statement, as amended at the Effective Time (as hereinafter
defined), all information (other than information permitted to be omitted from
the registration statement when it becomes effective pursuant to Rule 430A
("Rule 430A Information")) required by the Act and the Rules and Regulations to
- -----------------------
be included in the final prospectus with respect to the Units and the offering
thereof. As filed, such amendment and form of final prospectus, or such final
prospectus, shall contain all Rule 430A Information, together with all other
such required information, with respect to the Units and the offering thereof
and, except to the extent the Representative shall agree in writing to a
modification, shall be in all substantive respects in the form furnished to the
Underwriters prior to the execution of this Agreement or, to the extent not
completed at such time, shall contain only such specific additional information
and other changes (beyond that contained in the latest
<PAGE>
3
Preliminary Prospectus) as the Company has advised you, prior to the execution
of this Agreement, will be included or made therein. For purposes of this
Agreement, "Effective Time" means the date and time as of which such
--------------
registration statement, or the most recent post-effective amendment thereto, if
any, was or is declared effective by the Commission. "Preliminary Prospectus"
----------------------
means each prospectus included in such registration statement, or amendments
thereof, before such registration statement becomes effective under the Act, any
prospectus filed with the Commission by the Company pursuant to Rule 424(a), and
the prospectus included in the Registration Statement at the Effective Time that
omits Rule 430A Information. Such registration statement, as amended at the
Effective Time, including all Rule 430A Information, if any, is hereinafter
referred to as the "Registration Statement," and the form of prospectus relating
----------------------
to the Units, as first filed with the Commission pursuant to and in accordance
with Rule 424(b) or, if no such filing is required, as included in the
Registration Statement is hereinafter referred to as the "Prospectus." With
----------
respect to the market making activities described in Section 15, (i)
"Registration Statement" shall also refer to the Registration Statement as
amended by post-effective amendments after the Closing Date (including all
documents incorporated therein by reference) and (ii) "Prospectus" shall also
refer to the prospectus included in the Registration Statement, as amended and
supplemented after the Closing Date (including all documents incorporated
therein by reference) as filed with the Commission pursuant to Rule 424(b) of
the Rules and Regulations.
(b) (i) At the Effective Time, the Registration Statement did or will, the
Prospectus, if not required to be filed pursuant to Rule 424(b), will, or
otherwise the Preliminary Prospectus did, (ii) when the Prospectus (and any
amendments or supplements thereto) is first filed (if required) in accordance
with Rule 424(b), such Prospectus (and any amendments or supplements thereto)
will, and (iii) on the Closing Date, the Prospectus (and any amendments or
supplements thereto) will, in the case of each of clauses (i), (ii), and (iii)
comply in all material respects with the applicable requirements of the Act and
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and the
-------------------
respective rules and regulations thereunder; at the Effective Time, the
Registration Statement did not or will not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading; at the
Effective Time and on the Closing Date, the Indenture did or will comply in all
material respects with the applicable requirements of the Trust Indenture Act
and the rules and regulations of the Commission thereunder; and at the Effective
Time, on the date of any filing pursuant to Rule 424(b) and on the Closing Date,
the Preliminary Prospectus or the Prospectus (together with any supplement
thereto), as the case may be, did not or will not include any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading. The preceding sentence does not apply to (x) that part of
the Registration Statement which shall constitute the Statement of Eligibility
and Qualification (Form T-1) of the Trustee under the Trust Indenture Act or (y)
information contained in or omitted from the Registration Statement or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company through the
Representative by or on behalf of the Underwriters specifically for use therein
(the "Underwriters' Information"). The parties acknowledge and agree that the
-------------------------
Underwriters' Information consists solely of the last paragraph on the cover
page of the Prospectus and the first paragraph, second paragraph, the third
paragraph, the seventh paragraph, the eighth paragraph and the ninth
<PAGE>
4
paragraph of the "Underwriting" section of the Registration Statement, the
Preliminary Prospectus and the Prospectus.
(c) The Company and each of its subsidiaries have been duly incorporated
(or formed as a limited liability company in the case of Wireless One of North
Carolina, L.L.C. ("WONC")) and are validly existing as corporations (or as a
limited liability company in the case of WONC) in good standing under the laws
of their respective jurisdictions of incorporation (or formation in the case of
WONC), are duly qualified to do business and are in good standing as foreign
corporations (or as a limited liability company in the case of WONC) in each
jurisdiction in which their respective current ownership or lease of property or
the conduct of their respective businesses as currently conducted requires such
qualification, and have all power and authority necessary to own, lease or hold
their respective properties and to conduct the respective businesses in which
they are currently engaged, except where the failure to so qualify or to have
such power or authority would not have, singularly or in the aggregate, a
material adverse effect on the condition (financial or otherwise), results of
operations, business or prospects of the Company and its subsidiaries taken as a
whole.
(d) The Company has full right, power and authority to execute and deliver
(and issue, with respect to the Warrant Shares) this Agreement, the Indenture,
the Unit Agreement, the Warrant Agreement, the TruVision Merger Agreement (as
defined in the Registration Statement) and the Securities, and to perform its
obligations hereunder and thereunder; and all corporate action required to be
taken for the due and proper authorization, execution and delivery (or issuance
in the case of the Warrant Shares) of this Agreement, the Indenture, the Unit
Agreement, the Warrant Agreement, the TruVision Merger Agreement and the
Securities, and the consummation of the transactions contemplated by this
Agreement, the Indenture, the Unit Agreement and the Warrant Agreement, has been
duly and validly taken.
(e) The Indenture, the Unit Agreement and the Warrant Agreement, when duly
executed by the proper officers of the Company and delivered by the Company,
will constitute valid and binding agreements of the Company enforceable against
the Company in accordance with their terms, except as enforceability may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally and (ii)
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law). The TruVision Merger Agreement
constitutes a valid and binding agreement of the Company enforceable against the
Company in accordance with its terms, except as enforceability may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and (ii) general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law). The Notes, when duly executed, authenticated,
issued and delivered as provided in the Indenture, will be duly and validly
issued and outstanding and will constitute valid and binding obligations of the
Company entitled to the benefits of the Indenture and enforceable in accordance
with their terms, except as enforceability may be limited by (x) bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and (y) general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). The Units, when duly executed, authenticated, issued and
delivered as provided in the Unit Agreement, will be duly and
<PAGE>
5
validly issued and outstanding and will constitute valid and binding obligations
of the Company entitled to the benefits of the Unit Agreement and enforceable in
accordance with their terms, except as enforceability may be limited by (x)
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and (y) general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law). The Indenture, the Warrant Agreement, the Unit
Agreement and the Securities conform to the descriptions thereof contained in
the Prospectus.
(f) This Agreement has been duly authorized, executed and delivered by the
Company.
(g) The Warrants have been duly authorized by the Company for issuance,
and when executed by the Company and countersigned by the Warrant Agent in
accordance with the provisions of the Warrant Agreement, and delivered to and
paid for in accordance with the terms hereof, will have been duly executed,
issued and delivered and will be entitled to the benefits of the Warrant
Agreement and will constitute valid and binding obligations of the Company
enforceable against the Company in accordance with the terms of such Warrants,
except as enforceability may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally and (ii) general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
(h) The Warrant Shares, when issued in accordance with the terms and
conditions contained in the Warrant Agreement upon exercise of the Warrants,
will be duly authorized, validly issued, fully paid and non-assessable, will not
be subject to any preemptive or similar rights, and will be free and clear of
all liens, encumbrances, equities and claims or restrictions on transferability
(other than those, if any, imposed by the Act and the securities or "Blue Sky"
laws of certain jurisdictions) or voting. The Warrant Shares have been duly
reserved for issuance in accordance with the terms of the Warrants and the
Warrant Agreement.
(i) The issued and outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid and non-assessable;
the capital stock conforms to all statements relating thereto in the Prospectus;
the Company has authorized, issued and outstanding capital stock as set forth
under the caption "Description of Capital Stock" in the Prospectus (except for
subsequent issuances pursuant to the exercise of the Warrants or pursuant to
reservations, agreements, employee benefits plans or the exercise of convertible
securities and warrants referred to in the Prospectus); and the stockholders
have no preemptive rights or similar rights with respect to the Common Stock.
(j) Except as set forth in the Prospectus, there are no outstanding (i)
securities or obligations of the Company convertible into or exchangeable for
any capital stock of the Company, (ii) warrants, rights or options to subscribe
for or purchase from the Company any such capital stock or any such convertible
or exchangeable securities or obligations, or (iii) obligations of the Company
to issue any such convertible or exchangeable securities or obligations, or any
such warrants, rights or obligations.
(k) All of the outstanding shares of capital stock or ownership interests
of each subsidiary of the Company have been duly and validly authorized and
issued and are fully paid
<PAGE>
6
and non-assessable and are owned directly by the Company, free and clear of any
claim, lien, encumbrance, security interest, restriction upon transfer or voting
or any other claim of any third party, and are in the possession of the Company;
and no options, warrants or other rights to purchase, agreements or other
obligations to issue other rights to convert any obligations into shares of
capital stock or ownership interests in the subsidiaries are outstanding.
(l) The execution, delivery and performance of this Agreement, the
Indenture, the Unit Agreement, the Warrant Agreement, the TruVision Merger
Agreement and the Securities by the Company, the issuance and sale of the
Warrant Shares and the consummation of the transactions contemplated hereby and
thereby do not and will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject (except where such breach,
violation or default would not have a material adverse effect on the condition
(financial or otherwise), results of operations, business or prospects of the
Company and its subsidiaries taken as a whole), nor will such actions result in
any violation of the provisions of the charter or the by-laws of the Company or
any of its subsidiaries or any statute or any order, rule or regulation of any
court or governmental agency or body (including without limitation the Federal
Communications Commission (the "FCC")) having jurisdiction over the Company or
---
any of its subsidiaries or any of their properties or assets; and except for (i)
the registration of the Securities under the Act, (ii) the qualification of the
Indenture under the Trust Indenture Act and (iii) such consents, approvals,
authorizations, registrations or qualifications as may be required under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and applicable
------------
state securities laws in connection with the purchase and distribution of the
Units by the Underwriters, no consent, approval, authorization or order of, or
filing or registration with, any such court or governmental agency or body is
required for (x) the execution, delivery and performance of this Agreement, the
Indenture, the Unit Agreement, the Warrant Agreement or the Securities by the
Company, (y) the issuance and sale of the Warrant Shares or (z) the consummation
of the transactions contemplated hereby and thereby.
(m) The financial statements (including the related notes and supporting
schedules) filed as part of the Registration Statement or included in the
Prospectus present fairly the financial condition and results of operations of
the entities purported to be shown thereby, at the dates and for the periods
indicated, and have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved, and there has occurred no material adverse change in such financial
condition or results of operations since the respective dates of such
statements; and each of KPMG Peat Marwick LLP and Arthur Andersen LLP, who have
certified the audited financial statements included in the Prospectus, whose
reports appear in the Prospectus and who have delivered the letters referred to
in Section 5(h) hereof, are independent public accountants as required by the
Act and the Rules and Regulations.
(n) The pro forma financial statements and other pro forma financial
information (including the notes thereto) included in the Registration Statement
or the Prospectus (A) present fairly in all material respects the information
shown therein, and (B) have been prepared in accordance with applicable
requirements of Regulation S-X promulgated under the Exchange Act.
<PAGE>
7
Based on discussions with KPMG Peat Marwick LLP and Arthur Andersen LLP, the
assumptions used in the preparation of the pro forma financial statements and
other pro forma financial information included in the Registration Statement and
the Prospectus are reasonable and the adjustments used therein are appropriate
to give effect to the transactions or circumstances referred to therein.
(o) There are no contracts or other documents which are required by the Act
or by the Rules and Regulations to be described in the Prospectus or filed as
exhibits to the Registration Statement which have not been so described or
filed.
(p) There is no action, suit or other legal or governmental proceeding to
which the Company or any of its subsidiaries is a party or of which any property
or assets, whether owned or leased, of the Company or any of its subsidiaries is
the subject, or circumstances that might give rise to the same (including
without limitation those relating to FCC, environmental, or similar matters),
domestic or foreign, pending or, to the best of the Company's knowledge,
threatened against or involving the properties or business of the Company or any
of the subsidiaries which (i) questions the validity of the capital stock of the
Company or any of the subsidiaries, this Agreement, the Indenture, the Unit
Agreement, the Warrant Agreement, or any action taken or to be taken by the
Company or any of the subsidiaries pursuant to or in connection with this
Agreement, the Indenture, the Unit Agreement or the Warrant Agreement, (ii)
questions the validity of the TruVision Merger Agreement or the consummation of
all or any part of the transactions contemplated thereby, (iii) is required to
be disclosed in the Registration Statement which is not so disclosed (and such
proceedings as are disclosed in the Registration Statement are accurately
summarized in all material respects) or (iv) except as disclosed in the
Registration Statement, which singly or in the aggregate, if determined
adversely to the Company or any of its subsidiaries, could reasonably be
expected to have a material adverse effect on the condition (financial or
otherwise), results of operations, business or prospects of the Company and its
subsidiaries taken as a whole.
(q) Neither the Company nor any of its subsidiaries (i) is in violation of
its charter or by-laws, (ii) is in default in any material respect, and no event
has occurred which, with notice or lapse of time or both, would constitute such
a default, in the due performance or observance of any term, covenant or
condition contained in any material indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which it is a party or by which it
is bound or to which any of its property or assets is subject or (iii) is in
violation in any respect of any law, ordinance, governmental rule, regulation or
court decree to which it or its property or assets may be subject, except in
each case any violation or default that would not have a material adverse effect
on the condition (financial or otherwise), results of operations, business or
prospects of the Company and its subsidiaries taken as a whole.
(r) Except as described in the Prospectus, the Company and each of its
subsidiaries and each of the lessors of the ITFS channels and MDS channels (each
as defined in the Prospectus) utilized by the Company possess all material
licenses, certificates, authorizations and permits issued by, and have made all
declarations and filings with, the appropriate state, federal or foreign
regulatory agencies or bodies (including, without limitation, the FCC) which are
necessary for the ownership or lease of their respective properties or the
conduct of their
<PAGE>
8
respective businesses as described in the Prospectus, except where the failure
to own, lease, possess or make the same would not have, singularly or in the
aggregate, a material adverse effect on the condition (financial or otherwise),
results of operations, business or prospects of the Company and its subsidiaries
taken as a whole, and the Company has not received notification of any
revocation or modification of any such license, authorization or permit and has
no reason to believe that any such license, certificate, authorization or permit
will not be renewed.
(s) The Company and each of its subsidiaries (i) own, lease or have the
right to use free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects, restrictions or equities of any kind
whatsoever, all governmental authorizations (including, without limitation, FCC
authorizations), patents, patent applications, trademarks, service marks, trade
names, trademark registrations, service mark registrations and copyrights, and
licenses and rights to the foregoing, used in the conduct of their respective
businesses as now conducted or as described in the Prospectus and without
infringing upon or otherwise acting adversely to the right or claimed right of
any other person, except to the extent that terminating such ownership, lease or
right to use does not have a material adverse effect on the Company and its
subsidiaries taken as a whole; and except as described under "Legal Proceedings"
in the Prospectus, neither the Company nor any of its subsidiaries has any
knowledge of any claim of conflict with any such rights or claimed rights of
others; and (ii) except as set forth in the Prospectus, are not obligated or
under any liability whatsoever to make any payment by way of royalties, fees or
otherwise to any owner or licensee of, or other claimant to, any patent, patent
application, trademark, service mark, trade name, copyright or Intellectual
Property (as hereinafter defined) with respect to the use thereof or in
connection with the conduct of their respective businesses or otherwise.
(t) The Company and each of its subsidiaries own and have the unrestricted
right to use all material trade secrets, know-how, technology (including all
other unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), inventions, designs, processes, works of authorship,
computer programs and technical data and information (collectively,
"Intellectual Property") that are or could reasonably be expected to be material
- ----------------------
to their respective businesses as currently conducted or as described in the
Prospectus or that are material to the development, manufacture, operation or
sale of any products or services sold or proposed to be sold by the Company or
any of its subsidiaries, free and clear of and without violation of any right,
claimed right, charge, encumbrance, pledge, security interest, defect,
restriction, equity or lien of any kind whatsoever of others, including without
limitation, former employers of its employees and have no reason to believe that
the conduct of their respective businesses will conflict with the rights of
others and have not received any notice of any such right, charge, encumbrance,
pledge, security interest, defect, restriction, equity or lien, except to the
extent such violation does not have a material adverse effect on the Company and
its subsidiaries, taken as a whole.
(u) No labor disturbance by the employees of the Company or any of its
subsidiaries exists or, to the best of the Company's knowledge, is imminent
which might be expected to have a material adverse effect on the condition
(financial or otherwise), results of operations, business or prospects of the
Company and its subsidiaries taken as a whole. The Company and each of its
subsidiaries is in material compliance with all federal, state, local and
foreign laws and
<PAGE>
9
regulations respecting employment and employment practices, terms and conditions
of employment and wages and hours. There are no pending or, to the best of the
Company's knowledge, threatened investigations involving the Company or any of
its subsidiaries by the U.S. Department of Labor or any other governmental
agency responsible for the enforcement of such federal, state, local or foreign
laws and regulations. There is no unfair labor practice charge or complaint
against the Company or any of its subsidiaries pending before the National Labor
Relations Board (the "NLRB") or any strike, picketing, boycott, slowdown or
----
stoppage pending or, to the Company's knowledge, threatened against or involving
the Company or any of its subsidiaries. No representation question exists
respecting the employees of the Company or any of its subsidiaries, and no
collective bargaining agreement or modification thereof is currently being
negotiated by the Company or any of its subsidiaries. No material grievance or
arbitration proceeding is pending under any expired or existing collective
bargaining agreements of the Company or any of its subsidiaries.
(v) No "prohibited transaction" (as defined in Section 406 of the Employee
Retirement Income Security Act of 1974, as amended, including the regulations
and published interpretations thereunder ("ERISA"), or Section 4975 of the
-----
Internal Revenue Code of 1986, as amended from time to time (the "Code")) or
----
"accumulated funding deficiency" (as defined in Section 302 of ERISA) or any of
the events set forth in Section 4043(b) of ERISA (other than events with respect
to which the 30-day notice requirement under Section 4043 of ERISA has been
waived) has occurred with respect to any employee benefit plan which could have
a material adverse effect on the condition (financial or otherwise), results of
operations, business or prospects of the Company and its subsidiaries taken as a
whole; each employee benefit plan is in compliance in all material respects with
applicable law, including ERISA and the Code; the Company has not incurred and
does not expect to incur any liability under Title IV of ERISA with respect to
the termination of, or withdrawal from, any "pension plan" (as defined in
ERISA); and each "pension plan" for which the Company would have any liability
that is intended to be qualified under Section 401(a) of the Code is so
qualified in all material respects, and nothing has occurred, whether by action
or by failure to act, which could cause the loss of such qualification.
(w) There has been no storage, generation, transportation, handling,
treatment, disposal, discharge, emission, or other release of any kind of toxic,
medical or other wastes or other hazardous wastes or substances by, due to, or
caused by the Company or any of its subsidiaries (or, to the best of the
Company's knowledge, any other entity for whose acts or omissions the Company or
any of its subsidiaries is or may be liable) upon any of the property now or
previously owned or leased by the Company or any of its subsidiaries, or upon
any other property, in violation of any statute or any ordinance, rule,
regulation, order, judgment, decree or permit or which would, under any statute
or any ordinance, rule (including rule of common law), regulation, order,
judgment, decree or permit, give rise to any liability, except for any violation
or liability which would not have, singularly or in the aggregate with all such
violations and liabilities, a material adverse effect on the condition
(financial or otherwise), results of operations, business or prospects of the
Company and its subsidiaries taken as a whole; there has been no disposal,
discharge, emission or other release of any kind onto such property or into the
environment surrounding such property of any toxic or other wastes or other
hazardous substances with respect to which the Company or any of its
subsidiaries have knowledge, except for any such disposal, discharge, emission,
or other release of any kind which would not have,
<PAGE>
10
singularly or in the aggregate with all such discharges and other releases, a
material adverse effect on the condition (financial or otherwise), results of
operations, business or prospects of the Company and its subsidiaries taken as a
whole.
(x) Except as described in the Prospectus, the Company (i) does not have
any material lending or other relationship with any banks or lending affiliates
of the Underwriters, and (ii) does not intend to use any of the proceeds from
the sale of the Units hereunder to repay any outstanding debt owed to any
affiliates of the Underwriters.
(y) There are no persons with registration or other similar rights either
to have any securities registered pursuant to the Registration Statement or to
have any securities otherwise registered by the Company under the Act in
connection with or as a result of the execution, delivery and performance of
this Agreement.
(z) No relationship, direct or indirect, exists between or among the
Company on the one hand, and the directors, officers, stockholders, customers or
suppliers of the Company on the other hand, which is required to be described in
the Prospectus which is not so described.
(aa) Neither the Company nor any of its subsidiaries is an "investment
company" within the meaning of the Investment Company Act of 1940, as amended
(the "Investment Company Act"), and the rules and regulations of the Commission
----------------------
thereunder.
(ab) The Company and its subsidiaries each (i) have filed all necessary
federal, state and foreign income and franchise tax returns, (ii) have paid all
federal, state, local and foreign taxes due and payable for which it is liable,
including, but not limited to, withholding taxes and amounts payable under the
Code, and has furnished all information returns it is required to furnish
pursuant to the Code, (iii) have established adequate reserves for all of such
taxes which are not yet due and payable and (iv) do not have any tax deficiency
or claims outstanding or assessed or, to the best of the Company's knowledge,
proposed against it which could reasonably be expected to have a material
adverse effect on the Company and its subsidiaries taken as a whole.
(ac) The Company and its subsidiaries each maintain insurance policies and
surety bonds, including, but not limited to, general liability and property
insurance, which insures the Company and each of its subsidiaries and their
respective employees against losses and risks generally insured against by
comparable companies in comparable businesses. Neither the Company nor any of
its subsidiaries (i) has failed to give notice or to present any insurance claim
with respect to any material matter, including, but not limited to, the
Company's or the subsidiaries' respective business, property or employees, under
any insurance policy or surety bond in a due and timely manner, (ii) has any
material disputes or claims against any underwriter of such insurance policies
or surety bonds or has failed to pay any premiums due and payable thereunder or
(iii) has failed to comply with any material conditions contained in such
insurance policies and surety bonds. To the best of the Company's knowledge,
there are no facts or circumstances under any such insurance policy or surety
bond which would relieve any insurer of its obligation to satisfy in full any
valid claim of the Company or any of its subsidiaries.
<PAGE>
11
(ad) The minute books of the Company and each of its subsidiaries have been
made available to the Underwriters and counsel for the Underwriters, and such
books (i) contain a complete summary of all meetings and actions of the
directors and stockholders of the Company and each of its subsidiaries since the
time of its respective incorporation through the date of the latest meeting and
action, and (ii) accurately in all material respects reflect all transactions
referred to in such minutes.
(ae) Neither the Company nor any of its subsidiaries has ever been denied
by the FCC, by virtue of any bad act or disqualification, any material license
it has sought to obtain.
(af) Neither the Company, nor to the Company's best knowledge, any of its
affiliates, has taken or may take, directly or indirectly, any action designed
to cause or result in, or which has constituted or which might reasonably be
expected to constitute, the stabilization or manipulation of the price of the
Units to facilitate the sale or resale of the Units.
(ag) No forward looking statement within the meaning to Section 27A of the
Securities Act and Section 21E of the Exchange Act contained in the Registration
Statement, the Preliminary Prospectus or the Prospectus has been made or
reaffirmed without a reasonable basis or has been disclosed other than in good
faith.
(ah) The Company is in compliance as of the date hereof with all provisions
of Section 1 of Laws of Florida, Chapter 92-198, An Act Relating to Disclosure
-----------------------------
of Doing Business with Cuba, and the rules and regulations applicable
- ---------------------------
thereunder.
2. PURCHASE BY THE UNDERWRITERS.
----------------------------
On the basis of the representations, warranties and agreements contained
herein, and subject to the terms and conditions set forth herein, the Company
agrees to issue and sell to each of the Underwriters, severally and not jointly,
and each of the Underwriters, severally and not jointly, agrees to purchase from
the Company, the number of Units set forth opposite the name of such Underwriter
in Schedule 1 hereto at a purchase price equal to $__________ per Unit, plus
accretion, if any, with respect to the Notes from _____, 1996 to the Closing
Date (as hereinafter defined).
The Company shall not be obligated to deliver any of the Units except upon
payment for all the Units to be purchased as provided herein.
The Company acknowledges and agrees that each Underwriter may sell Units to
any of its affiliates and that any such affiliate may sell Units purchased by it
to an Underwriter.
3. DELIVERY OF AND PAYMENT FOR THE UNITS.
-------------------------------------
Delivery of and payment for the Units shall be made at the offices of
Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York 10017, or
at such other place as shall be agreed upon by the Representative and the
Company, at 10:00 A.M., New York City time, on _____, 1996, or at such other
date or time, not later than seven full business days thereafter,
<PAGE>
12
as shall be agreed upon by the Representative and the Company (such date and
time being referred to herein as the "Closing Date"). On the Closing Date, the
------------
Company shall deliver or cause to be delivered to the Representative for the
account of each Underwriter through the book-entry facilities of The Depository
Trust Company (the "DTC") certificates for the Units (with any transfer taxes
---
payable in connection with the transfer of such Units to the Underwriters duly
paid by the Company) against payment of the purchase price to or upon the order
of the Company by wire transfer of same day funds. Time shall be of the
essence, and delivery at the time and place specified pursuant to this Agreement
is a further condition of the obligation of each of the Underwriters hereunder.
The Units so to be delivered will be represented by one or more permanent global
certificates registered in the name of the DTC or its nominee. The Company
shall make the certificates for the Units available for inspection by the
Representative and for delivery to the DTC in New York, New York, at least one
full business day prior to the Closing Date.
4. FURTHER AGREEMENTS OF THE COMPANY.
---------------------------------
The Company agrees with each of the Underwriters:
(a) That, if the Effective Time is prior to the execution and delivery of
this Agreement, to file the Prospectus with the Commission pursuant to and in
accordance with subparagraph (1) of Rule 424(b) (or, if applicable and if
consented to by the Representative, subparagraph (4) of Rule 424(b)) within the
time period prescribed by such rule, and provide evidence satisfactory to the
Representative of such timely filing;
(b) To advise the Representative promptly of any proposal to amend or
supplement (i) the registration statement as filed, (ii) the related prospectus,
(iii) the Registration Statement or (iv) the Prospectus, and not to effect such
amendment or supplementation without the consent of the Representative; to
advise the Representative promptly of the receipt of any comments from the
Commission and of the effectiveness of the Registration Statement (in each case
if the Effective Time is subsequent to the execution and delivery of this
Agreement) and of any amendment or supplementation of the Registration Statement
or the Prospectus, or of any request by the Commission therefor, and of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose; to
advise the Representative promptly of any order preventing or suspending the use
of any prospectus relating to the Units, of the suspension of the qualification
of the Units for offering or sale in any jurisdiction, and of the initiation or
threatening of any proceeding for any such purpose; and to use its best efforts
to prevent the issuance of any stop order or of any such order preventing or
suspending the use of any prospectus relating to the Units or suspending any
such qualification and, if any such stop order or order of suspension is issued,
to obtain the lifting thereof at the earliest possible time;
(c) To file (i) a post-effective amendment to the Registration Statement
or (ii) a registration statement, in either case including a form of prospectus
relating to the Warrant Shares, prepared in conformity with the requirements of
the Act and the Rules and Regulations of the Commission; and to have such post-
effective amendment or other registration statement
<PAGE>
13
declared effective prior to 360 days from the issuance of the Units, and to
maintain the effectiveness of such post-effective amendment or registration
statement;
(d) To furnish promptly to each of the Underwriters and counsel for the
Underwriters a signed copy of the Registration Statement as originally filed
with the Commission and each amendment thereto filed with the Commission,
including all consents and exhibits filed therewith; and to deliver promptly
without charge to the Underwriters such number of the following documents as the
Underwriters from time to time may reasonably request: (i) conformed copies of
the Registration Statement as originally filed with the Commission and each
amendment thereto (in each case excluding exhibits other than this Agreement,
the Indenture, the Unit Agreement, the Warrant Agreement, the computation of the
ratio of earnings to fixed charges and the computation of per share earnings)
and (ii) each Preliminary Prospectus, the Prospectus (not later than 10:00 A.M.,
New York City time, on the day following the execution and delivery of this
Agreement) and any amended or supplemented Prospectus (not later than 10:00 A.M.
New York City time, on the day following the date of such amendment or
supplement);
(e) If the delivery of a prospectus is required at any time in connection
with the sale of the Units and if at such time any events shall have occurred as
a result of which the Prospectus as then amended or supplemented would include
an untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such Prospectus is delivered, not
misleading, or if for any other reason it shall be necessary at such time to
amend or supplement the Prospectus in order to comply with the Act, then to
notify the Representative immediately thereof, and promptly to prepare and file
with the Commission an amended Prospectus or a supplement to the Prospectus
which will correct such statement or omission or effect such compliance;
(f) To file promptly with the Commission any amendment to the Registration
Statement or the Prospectus or any supplement to the Prospectus that may, in the
reasonable judgment of the Company or the Representative, be required by the Act
or requested by the Commission or advisable in connection with the distribution
of the Units;
(g) As soon as practicable to make generally available to the Company's
security holders and to deliver to the Representative an earning statement of
the Company and its subsidiaries (which need not be audited) complying with
Section 11(a) of the Act and the Rules and Regulations (including, at the option
of the Company, Rule 158);
(h) For so long as any of the Securities are outstanding, to furnish to the
Underwriters copies of all materials furnished by the Company to its
shareholders and all public reports and all reports and financial statements
furnished by the Company to the Commission pursuant to the Exchange Act or any
rule or regulation of the Commission thereunder as the Underwriters may
reasonably request;
(i) Promptly, from time to time, to take such action as the Representative
may reasonably request to qualify the Units for offering and sale under the
securities laws of such jurisdictions as the Representative may request and to
comply with such laws so as to permit the
<PAGE>
14
continuance of sales and dealings therein in such jurisdictions for as long as
may be necessary to complete the distribution of the Units; provided that in
--------
connection therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction;
(j) The Company shall apply the net proceeds of its sale of the Units as
set forth in the Prospectus;
(k) The Company will maintain a transfer agent and, if necessary under the
jurisdiction of incorporation of the Company, a registrar for the Common Stock;
(l) The Company will not take, directly or indirectly, any action designed
to cause or result in, or that has constituted or might reasonably be expect to
constitute, the stabilization or manipulation of the price of any securities of
the Company; and
(m) For a period of 180 days from the date of the Prospectus, not to offer
for sale, sell, contract to sell or otherwise dispose of, directly or
indirectly, or file a registration statement for, or announce any offering of,
any debt or equity securities (or securities convertible into debt securities)
of the Company (other than the Units in connection with this Offering or
indebtedness to the U.S. government in connection with the BTA Auction (as
defined in the Registration Statement)) without the prior written consent of the
Representative.
5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS.
---------------------------------------
The respective obligations of each of the Underwriters hereunder are
subject to the accuracy, when made and on the Closing Date, of the
representations and warranties of the Company contained herein, to the accuracy
of the statements of the Company made in any certificates pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder, and to each of the following additional terms and conditions:
(a) If the Effective Time is not prior to the execution and delivery of
this Agreement, then the Registration Statement shall have become effective and
the Indenture shall have been qualified under the Trust Indenture Act, and the
Representative shall have received notice thereof, not later than (i) 6:00 P.M.
New York City time, on the date of determination of the public offering price,
if such determination occurred at or prior to 3:00 P.M., New York City time, on
such date or (ii) 12:00 Noon, New York City time, on the business day following
the day on which the offering price was determined if such determination
occurred after 3:00 P.M., New York City time, on such date. If the Effective
Time is prior to the execution and delivery of this Agreement, then the
Prospectus shall have been timely filed with the Commission in accordance with
Section 4(a) of this Agreement. Prior to the Closing Date, no stop order
suspending the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose shall have been
initiated or threatened by the Commission; and any request of the Commission for
inclusion of additional information in the Registration Statement or the
Prospectus or otherwise shall have been complied with to the reasonable
satisfaction of the Representative.
<PAGE>
15
(b) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the Securities, the
Indenture, the Unit Agreement, the Warrant Agreement, the Registration Statement
and the Prospectus, and all other legal matters relating to this Agreement and
the transactions contemplated hereby, shall be reasonably satisfactory in all
material respects to counsel for the Underwriters, and the Company shall have
furnished to such counsel all documents and information that such counsel may
reasonably request to enable them to pass upon such matters.
(c) Kirkland & Ellis shall have furnished to the Representatives their
written opinion, as counsel to the Company, addressed to the Underwriters and
dated the Closing Date, in form and substance reasonably satisfactory to the
Representative, to the effect that:
(i) Each of the Company and its subsidiaries, excluding
TruVision Wireless, Inc. ("TruVision") and its subsidiaries, has been duly
incorporated (or formed as a limited liability company in the case of WONC)
and is validly existing as a corporation (or as a limited liability company
in the case of WONC) in good standing under the laws of its jurisdiction of
incorporation, is duly qualified to do business and is in good standing as
a foreign corporation (or as a limited liability company in the case of
WONC) in each jurisdiction in which its ownership or lease of property or
the current conduct of its business requires such qualification (other than
those jurisdictions in which the failure to so qualify would not have a
material adverse effect on the Company and its subsidiaries taken as a
whole), and has all power and authority necessary to own or hold its
properties and to conduct its business as described in the Prospectus;
(ii) The Company has the authorized capitalization set forth in
the Prospectus, and all of the issued shares of capital stock (or interests
in the case of WONC) of the Company and its subsidiaries (excluding
TruVision and its subsidiaries) have been duly and validly authorized and
issued, are fully paid and non-assessable and, in the case of the Company,
conform to the description thereof contained in the Prospectus; except as
described in or contemplated by the Prospectus, to the knowledge of such
counsel, there are no outstanding securities of the Company or its
subsidiaries (or interests in the case of WONC) convertible or exchangeable
into or evidencing the right to purchase or subscribe for any shares of any
capital stock of the Company or its subsidiaries (or interests in the case
of WONC), as the case may be, and there are no authorized or outstanding
options, warrants or rights of any character obligating the Company or any
of its subsidiaries to issue any shares of its capital stock (or interests
in the case of WONC) or any securities convertible or exchangeable into or
evidencing the right to purchase or subscribe for any shares of capital
stock (or interests in the case of WONC); the issuance and sale of the
Warrants and the Warrant Shares are not subject to preemptive rights
arising by operation of law; the stockholders of the Company have no
preemptive rights provided by statute or by the charter of the Company with
respect to the Warrants and the Warrant Shares; the Warrant Shares have
been duly reserved by the Company for issuance upon exercise of all of the
Warrants at the initial number of Warrant Shares deliverable upon exercise
of the Warrants, and the issuance of the Warrant Shares upon exercise of
the Warrants has been duly and validly authorized, and the Warrant Shares,
when issued, paid for and delivered in accordance with the terms of
<PAGE>
16
the Warrants and the Warrant Agreement, will be validly issued, fully paid
and non-assessable, free and clear of all liens, encumbrances, equities and
claims or restrictions on transferability or voting;
(iii) The shares (or interests in the case of WONC) of the
Company's subsidiaries (excluding the subsidiaries of TruVision) are owned
directly by the Company and, to the best of such counsel's knowledge, are
free and clear of all liens, encumbrances, equities or claims;
(iv) The Registration Statement was declared effective under
the Act and the Indenture was qualified under the Trust Indenture Act as of
the date and time specified in such opinion; the Prospectus was filed with
the Commission pursuant to the subparagraph of Rule 424(b) of the Rules and
Regulations specified in such opinion on the date specified therein; and no
stop order suspending the effectiveness of the Registration Statement has
been issued and, to the best of such counsel's knowledge, no proceeding for
that purpose is pending or threatened by the Commission;
(v) The Registration Statement and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus made by the Company prior to the Closing Date (other than the
financial statements and related schedules and the other financial and
statistical information contained therein, as to which such counsel need
express no opinion) comply as to form in all material respects with the
requirements of the Act and the Rules and Regulations;
(vi) The Indenture complies as to form in all material respects
with the requirements of the Trust Indenture Act and the rules and
regulations of the Commission thereunder;
(vii) The statements set forth under the caption "Certain
United States Federal Income Tax Consequences" in the Prospectus, to the
extent such statements represent statements or summaries of legal matters,
are true and correct and fairly summarize such legal matters in all
material respects; the statements set forth under the captions "Description
of Units," "Description of Notes," "Description of Warrants" and
"Description of Capital Stock," insofar as such statements purport to
summarize certain provisions of the Indenture, the Unit Agreement, the
Warrant Agreement and the capitalization of the Company, provide fair
summaries thereof and are accurate in all material respects; the Indenture,
the Units, the Notes, the Warrants, the Warrant Shares and conform in all
material respects to the descriptions thereof contained in the Prospectus,
insofar as they purport to constitute summaries of certain terms of the
documents and instruments referred to therein;
(viii) The Company has full corporate authority to execute and
deliver this Agreement, the Indenture, the TruVision Merger Agreement, the
Unit Agreement, the Warrant Agreement, the Units, the Notes and the
Warrants, to issue and sell the Warrant Shares and to perform its
obligations hereunder and thereunder; and all corporate action required to
be taken by the Company for the due and proper authorization, execution and
<PAGE>
17
delivery of the Indenture, the TruVision Merger Agreement, the Unit
Agreement, the Warrant Agreement, the Units, the Notes and the Warrants,
for the issuance and sale of the Warrant Shares and for the consummation of
the transactions contemplated by the Indenture, the TruVision Merger
Agreement, the Unit Agreement and the Warrant Agreement have been duly and
validly taken; and the Indenture, the Unit Agreement, the Warrant Agreement
and the TruVision Merger Agreement constitute valid and binding agreements
of the Company enforceable against the Company in accordance with the terms
of such agreements, subject to appropriate bankruptcy and similar
exceptions;
(ix) This Agreement has been duly authorized, executed and
delivered by the Company;
(x) The Units are in the form contemplated by the Indenture
and, upon the due authentication and delivery thereof by the Unit Agent
pursuant to the Unit Agreement, will be duly and validly issued and
outstanding and will constitute valid and binding obligations of the
Company entitled to the benefits of the Unit Agreement and enforceable in
accordance with their terms, subject to appropriate bankruptcy and similar
exceptions.
(xi) The Warrants have been duly authorized, executed and
issued by the Company and, upon due authentication or countersignature
thereof by the Warrant Agent in accordance with the provisions of the
Warrant Agreement, and upon their being duly delivered to and paid for in
accordance with the terms of this Agreement, the Warrants will constitute
valid and binding obligations of the Company, entitled to the benefits of
the Warrant Agreement and enforceable against the Company in accordance
with their terms, subject to appropriate bankruptcy exceptions;
(xii) The Notes are in the form contemplated by the Indenture
and, upon the due authentication and delivery thereof by the Trustee
pursuant to the Indenture, will be duly and validly issued and outstanding
and will constitute valid and binding obligations of the Company entitled
to the benefits of the Indenture and enforceable in accordance with their
terms, subject to appropriate bankruptcy and similar exceptions;
(xiii) The execution, delivery and performance of this
Agreement, the Indenture, the TruVision Merger Agreement, the Unit
Agreement, the Warrant Agreement, the Notes, the Warrants and the Units by
the Company, the issuance and sale of the Securities, and the consummation
of the transactions contemplated hereby and thereby will not (or have not,
as the case may be) conflict with or result in a breach or violation of any
of the terms or provisions of, or constitute a default under any indenture,
mortgage, deed of trust, loan agreement, or other agreement or instrument,
now known to such counsel to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries is subject;
nor will such actions result (or have resulted, as the case may be) in any
violation of the provisions of the charter or by-laws of the Company or any
of its subsidiaries or any statute or any order, rule or regulation known
to such counsel of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
properties or assets; and except for (A) the registration of the Securities
under the Act, (B) the qualification of the Indenture
<PAGE>
18
under the Trust Indenture Act and (C) such consents, approvals,
authorizations, registrations or qualifications as may be required under
the Exchange Act and applicable state securities laws in connection with
the purchase and distribution of the Units by the Underwriters, no consent,
approval, authorization or order of, or filing or registration with, any
such court or governmental agency or body (excluding any consent, approval,
authorization or order of, or filing or registration with, the FCC) is
required for (x) the execution, delivery and performance of this Agreement,
the Indenture, the Warrant Agreement, the Unit Agreement, the Notes, the
Warrants or the Units by the Company, (y) the issuance and sale of the
Securities, and (z) the consummation of the transactions contemplated
hereby and thereby;
(xiv) To the best of such counsel's knowledge, there are no
contracts, agreements or understandings between the Company and any person
granting such person the right to require the Company to include securities
owned or to be owned by such person in the securities registered pursuant
to the Registration Statement; and such counsel does not know of any
contracts or documents required to be filed as exhibits to the Registration
Statement or described in the Registration Statement or the Prospectus
which are not so filed or described as required, and such contracts and
documents as are summarized in the Registration Statement or the Prospectus
are fairly summarized in all material respects.
(xv) To the best of such counsel's knowledge and except as
disclosed in the Prospectus, there are no legal or governmental proceedings
pending to which the Company or any of its subsidiaries is a party or of
which any property or assets of the Company or any of its subsidiaries is
the subject, or circumstances that might give rise to the same (including
without limitation those relating to FCC, environmental, or similar
matters), domestic or foreign, pending or threatened against or involving
the properties or business of the Company or any of the subsidiaries which
(i) questions the validity of the capital stock (or interests in the case
of WONC) of the Company or any of its subsidiaries, this Agreement, the
TruVision Merger Agreement, the Unit Agreement, the Warrant Agreement or
the Indenture, or any action taken or to be taken by the Company or any of
the subsidiaries pursuant to or in connection with this Agreement, the
TruVision Merger Agreement, the Unit Agreement, the Warrant Agreement or
the Indenture, (ii) is required to be disclosed in the Registration
Statement which is not so disclosed (and such proceedings as are disclosed
in the Registration Statement are accurately summarized in all material
respects) or (iii) except as disclosed in "Legal Proceedings" in the
Prospectus, which singly or in the aggregate, if determined adversely to
the Company or any of its subsidiaries, are reasonably likely to have a
material adverse effect on the condition (financial or otherwise), results
of operations, business or prospects of the Company and its subsidiaries
taken as a whole; and
(xvi) Such counsel has no reason to believe that the
Registration Statement (or any post-effective amendment thereto)(other than
the financial statements and the notes thereto and the supporting schedules
and other financial and statistical data set forth therein, as to which
such counsel need express no opinion), at the time of its effective date,
contained any untrue statement of a material fact or omitted to state a
material fact
<PAGE>
19
required to be stated therein or necessary to make the statements therein
not misleading, or that the Prospectus contains any untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statement therein, in the light of the
circumstances under which they were made, not misleading.
References to the Prospectus in this paragraph (c) include any supplements
thereto at the Closing Date.
(d) Latham & Watkins, special counsel to TruVision, shall have furnished to
the Representatives their written opinion, as counsel to the Company, addressed
to the Underwriters and dated the Closing Date, in form and substance reasonably
satisfactory to the Representative, to the effect that:
(i) TruVision and each of its subsidiaries, exclusive of
BarTel, Inc. ("BarTel"), has been duly incorporated and is validly existing
as a corporation in good standing under the laws of its jurisdiction of
incorporation, is duly qualified to do business and is in good standing as
foreign corporation in each jurisdiction in which its ownership or lease of
property or the current conduct of its business requires such qualification
(other than those jurisdictions in which the failure to so qualify would
not have a material adverse effect on TruVision and its subsidiaries), and
has all power and authority necessary to own or hold its properties and to
conduct its business as described in the Prospectus; and
(ii) all of the issued shares of capital stock of TruVision and
its subsidiaries (excluding BarTel) have been duly issued and are fully
paid and non assessable; and there are no outstanding securities of
TruVision or its subsidiaries (excluding BarTel) convertible or
exchangeable into or evidencing the right to purchase or subscribe for any
shares of any capital stock of TruVision or its subsidiaries (excluding
BarTel), and there are no authorized or outstanding options, warrants, or
rights of any character obligating TruVision or any of its subsidiaries
(excluding BarTel) to issue any shares of its capital stock or any
securities convertible or exchangeable into or evidencing the right to
purchase or subscribe for any shares of capital stock.
(e) Alabama counsel to the Company shall have furnished to the
Representatives their written opinion, as counsel to the Company, addressed to
the Underwriters and dated the Closing Date, in form and substance reasonably
satisfactory to the Representative, to the effect that:
(i) BarTel, Inc. ("BarTel") has been duly incorporated and is
validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which its
ownership or lease of property or the conduct of its business requires such
qualification (other than those jurisdictions in which the failure to so
qualify would not have a material adverse effect on BarTel), and has all
power and authority necessary to own or hold its properties and to conduct
its business as described in the Prospectus; and
<PAGE>
20
(ii) all of the issued shares of capital stock of BarTel have
been duly issued and are fully paid and non assessable; and there are no
outstanding securities of BarTel convertible or exchangeable into or
evidencing the right to purchase or subscribe for any shares of any capital
stock of BarTel, and there are no authorized or outstanding options,
warrants, or rights of any character obligating BarTel to issue any shares
of its capital stock or any securities convertible or exchangeable into or
evidencing the right to purchase or subscribe for any shares of capital
stock.
(f) Gardner Carton & Douglas shall have furnished to the Representative
their written opinion, as special FCC counsel to the Company, addressed to the
Underwriters and dated the Closing Date, in form and substance reasonably
satisfactory to the Representative and Simpson Thacher & Bartlett, counsel for
the Underwriters, with respect to wireless cable channel rights, cable systems
and certain FCC regulatory matters.
(g) The Representative shall have received from Simpson Thacher & Bartlett,
counsel for the Underwriters, such opinion or opinions, dated the Closing Date,
with respect to such matters as the Underwriters may reasonably require, and the
Company shall have furnished to such counsel such documents as such counsel
reasonably request for enabling them to pass upon such matters.
(h) Rini, Coran & Lancellotta, P.C., shall have furnished to the
Representative their written opinion, as special FCC counsel to the
Underwriters, addressed to the Underwriters and dated the Closing Date, in form
and substance reasonably satisfactory to the Representative and Simpson Thacher
& Bartlett with respect to wireless cable channel rights, cable systems and
certain FCC regulatory matters.
(i) The Company shall have furnished to the Representatives a letter (the
"bring-down letter") of KPMG Peat Marwick LLP and Arthur Andersen LLP, addressed
- ------------------
to the Underwriters and dated the Closing Date confirming, as of the date of the
bring-down letter (or, with respect to matters involving changes or developments
since the respective dates as of which specified financial information is given
in the Prospectus, as of a date not more than five days prior to the date of the
bring-down letter), the conclusions and findings of such firm with respect to
the financial information and other matters covered by a letter delivered to the
Representative concurrently with the execution of this Agreement.
(j) The Company shall have furnished to the Representative a certificate,
dated the Closing Date, of its Chairman of the Board and its President and its
Chief Financial Officer stating that:
(i) such officers have carefully examined the Registration
Statement and the Prospectus;
(ii) in their opinion, as of the Effective Time, the
Registration Statement did not, and as of its date and the Closing Date,
the Prospectus did not and does not include any untrue statement of a
material fact and did not and does not omit to state a material fact
required to be stated therein or necessary to make the statements therein
not
<PAGE>
21
misleading, and since the Effective Time, no event has occurred which
should have been set forth in a supplement or amendment to the Registration
Statement or the Prospectus; and
(iii) to the best of his or her knowledge after reasonable
investigation, as of the Closing Date (A) the representations and
warranties of the Company in this Agreement are true and correct, (B) the
Company has complied with all agreements and satisfied all conditions on
its part to be performed or satisfied hereunder at or prior to the Closing
Date, (C) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are contemplated by the Commission, and subsequent to the
date of the most recent financial statements in the Prospectus, there has
been no material adverse change in the financial position or results of
operation of the entities purported to be shown thereby, or any change, or
any development including a prospective change, in or affecting the
condition (financial or otherwise), results of operations, business or
prospects of the Company and its subsidiaries taken as a whole, except as
set forth in the Prospectus.
(k) Subsequent to the execution and delivery of this Agreement or, if
earlier, the dates as of which information is given in the Registration
Statement (exclusive of any amendment thereof) and the Prospectus (exclusive of
any supplement thereto), there shall not have been any change in the capital
stock or consolidated long-term debt of the Company and its subsidiaries or any
change, or any development involving a prospective change, in or affecting the
condition (financial or otherwise), results of operations, business or prospects
of the Company and its subsidiaries taken as a whole, the effect of which, in
any such case described above, is, in the judgment of the Representative so
material and adverse as to make it impracticable or inadvisable to proceed with
the public offering or the delivery of the Securities on the terms and in the
manner contemplated in the Prospectus (exclusive of any supplement).
(l) Subsequent to the execution and delivery of this Agreement (i) no
downgrading shall have occurred in the rating accorded the Notes or any of the
Company's other debt securities by any "nationally recognized statistical rating
organization," as that term is defined by the Commission for purposes of Rule
436(g)(2) of the Rules and Regulations, and (ii) no such organization shall have
publicly announced that it has under surveillance or review (other than an
announcement with positive implications of a possible upgrading), its rating of
the Notes or any of the Company's other debt securities.
(m) Subsequent to the execution and delivery of this Agreement there shall
not have occurred any of the following: (A) trading in securities generally on
the New York Stock Exchange, the American Stock Exchange or the over-the-counter
market shall have been suspended or limited, or minimum prices shall have been
established on either of such exchanges or such market by the Commission, by
such exchange or by any other regulatory body or governmental authority having
jurisdiction, or trading in securities of the Company on any exchange or in the
over-the-counter market shall have been suspended, (B) a general moratorium on
commercial banking activities shall have been declared by Federal, Louisiana or
New York State authorities or (C) an outbreak or escalation of hostilities or a
declaration by the United States of a national emergency or war or such a
material adverse change in general economic,
<PAGE>
22
political or financial conditions (or the effect of international conditions on
the financial markets in the United States shall be such) as to make it, in the
judgment of the Representative impracticable or inadvisable to proceed with the
public offering or the delivery of the Units on the terms and in the manner
contemplated in the Prospectus.
(n) On or prior to the closing of the issuance and sale of the Units, the
Company shall have completed the TruVision Transaction (as defined in the
Registration Statement).
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.
6. TERMINATION.
-----------
This Agreement shall become effective (other than Sections 8 and 12 which
shall become effective upon the execution hereof) upon the later of when (i) the
Representative and the Company shall have received notification of the
effectiveness of the Registration Statement or (ii) the execution of this
Agreement. The obligations of the Underwriters hereunder may be terminated by
the Representative in its absolute discretion, by notice given to and received
by the Company prior to delivery of and payment for the Units, if, prior to that
time, any of the events described in Sections 5(k), 5(l) or 5(m) shall have
occurred.
7. DEFAULTING UNDERWRITERS.
-----------------------
If, on the Closing Date, any Underwriter or Underwriters default in the
performance of its or their obligations under this Agreement, the Representative
may make arrangements for the purchase of such Units by other persons
satisfactory to the Company and the Representative, including any of the
Underwriters, but if no such arrangements are made by the Closing Date, then
each remaining non-defaulting Underwriter shall be obligated severally to
purchase the Units which the defaulting Underwriter or Underwriters agreed but
failed to purchase on the Closing Date in the respective proportions which the
principal amount of Units set forth opposite the name of each remaining non-
defaulting Underwriter in Schedule 1 hereto bears to the aggregate principal
amount of Units set forth opposite the names of all the remaining non-defaulting
Underwriters in Schedule 1 hereto; provided, however, that the remaining non-
-------- -------
defaulting Underwriters shall not be obligated to purchase any of the Units on
the Closing Date if the aggregate principal amount of Units which the defaulting
Underwriter or Underwriters agreed but failed to purchase on such date exceeds
one-eleventh of the aggregate principal amount of the Units to be purchased on
the Closing Date, and any remaining non-defaulting Underwriter shall not be
obligated to purchase in total more than 110% of the principal amount of the
Notes which it agreed to purchase on the Closing Date pursuant to the terms of
Section 2 hereof. If the foregoing maximums are exceeded and the remaining
Underwriter or other underwriters satisfactory to the Representative and the
Company do not elect to purchase the Units which the defaulting Underwriter or
Underwriters agreed but failed to purchase within 36 hours of such failure, this
Agreement shall terminate without liability on the part of the non-defaulting
Underwriters or the Company, except that the Company will continue to be liable
for the payment of expenses to the extent set forth in Section 12 hereof and
except that the provisions
<PAGE>
23
of Sections 9 and 10 hereof shall not terminate and shall remain in effect. As
used in this Agreement, the term "Underwriter" includes, for all purposes of
-----------
this Agreement unless the context otherwise requires, any party not listed in
Schedule 1 hereto who, pursuant to this Section 7 purchases Units which a
defaulting Underwriter agreed but failed to purchase.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have for damages caused by its default. If other underwriters
are obligated or agree to purchase the Units of a defaulting Underwriter, either
the Representative or the Company may postpone the Closing Date for up to seven
full business days in order to effect any changes that in the opinion of counsel
for the Company or counsel for the Underwriters may be necessary in the
Registration Statement, the Prospectus or in any other document or arrangement,
and the Company agrees to file promptly any amendment or supplement to the
Registration Statement or the Prospectus that would effect any such changes.
8. REIMBURSEMENT OF UNDERWRITERS' EXPENSES.
---------------------------------------
If (a) notice shall have been given pursuant to Section 6 terminating this
Agreement or if this Agreement (other than this Section 8 or Section 12) does
not become effective pursuant to Section 6, (b) the Company shall fail to tender
the Units for delivery to the Underwriters for any reason permitted under this
Agreement or (c) the Underwriters shall decline to purchase the Units for any
reason permitted under this Agreement, the Company shall reimburse the
Underwriters for the fees and expenses of their counsel and for such other
reasonable out-of-pocket expenses as shall have been incurred by them in
connection with this Agreement and the proposed purchase of the Units, and upon
demand the Company shall pay the full amount thereof to the Representative. If
this Agreement is terminated pursuant to Section 7 solely by reason of the
default of one or more of the Underwriters, the Company shall not be obligated
to reimburse the defaulting Underwriters on account of those expenses.
9. INDEMNIFICATION.
---------------
(a) The Company shall indemnify and hold harmless each Underwriter
(including Chase Securities Inc. in its capacity as Market Maker as provided in
Section 15), its directors, officers and employees and each person, if any, who
controls any Underwriter within the meaning of the Act, and each affiliate (as
defined in Rule 144(a)(i) of the Rules and Regulations) of any Underwriter, its
directors, officers and employees and each person, if any, who controls such
affiliate (collectively referred to for the purposes of this Section 9 and
Section 10 as an Underwriter), against any loss, claim, damage or liability,
joint or several, or any action in respect thereof, to which that Underwriter
may become subject, under the Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of or is based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus or in any
amendment or supplement thereto or (ii) the omission or alleged omission to
state in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or in any amendment or supplement thereto, any material fact
required to be stated therein or necessary to make the statements therein not
misleading, and shall reimburse each Underwriter for any legal or other expenses
reasonably incurred by that Underwriter in connection with investigating or
preparing to defend or defending against or
<PAGE>
24
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
-------- -------
that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or action arises out of or is based upon an
untrue statement or alleged untrue statement in or omission or alleged omission
from any Preliminary Prospectus, the Registration Statement or the Prospectus or
any such amendment or supplement in reliance upon and in conformity with any
information furnished to the Company through the Representative on behalf of any
Underwriter specifically for use therein, which information the parties hereto
agree is limited to the Underwriters' Information.
(b) Each Underwriter, severally and not jointly, shall indemnify and hold
harmless the Company, each of its directors, each officer of the Company who
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of the Act (collectively referred to as the Company
for the purposes of this Section 9 and Section 10 hereof), against any loss,
claim, damage or liability, joint or several, or any action in respect thereof,
to which the Company may become subject, under the Act or otherwise, insofar as
such loss, claim, damage, liability or action arises out of or is based upon (i)
any untrue statement or alleged untrue statement of a material fact contained in
any Preliminary Prospectus, the Registration Statement or the Prospectus or in
any amendment or supplement thereto or (ii) the omission or alleged omission to
state in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or in any amendment or supplement thereto, any material fact
required to be stated therein or necessary to make the statements therein not
misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company through
the Representative on behalf of that Underwriter specifically for use therein,
and shall reimburse the Company for any legal or other expenses reasonably
incurred by the Company in connection with investigating or preparing to defend
or defending against or appearing as third party witness in connection with any
such loss, claim, damage, liability or action as such expenses are incurred;
provided that the parties hereto hereby agree that such written information
- --------
provided by the Representative consists solely of the Underwriters' Information.
(c) The Company also agrees to indemnify and hold harmless Prudential, its
directors, officers and employees and each person, if any, who controls
Prudential within the meaning of either Section 15 of the Act or Section 20 of
the Exchange Act, from and against any and all losses, claims, damages,
liabilities and judgments incurred as a result of Prudential's participation as
a "qualified independent underwriter" within the meaning of Conduct Rule 2720 of
the By-Laws of the National Association of Securities Dealers, Inc. in
connection with the offering of the Units, insofar as such loss, claim, damage,
liability or action arises out of or is based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or in any
amendment or supplement thereto, any material fact required to be stated therein
or necessary to make the statements therein not misleading, except for any
losses, claims, damages, liabilities and judgments resulting from Prudential's,
or such controlling person's, willful misconduct or gross negligence.
<PAGE>
25
(d) Promptly after receipt by an indemnified party under this Section 9 of
notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 9, notify the indemnifying party in writing of the
claim or the commencement of that action; provided, however, that the failure to
-------- -------
notify the indemnifying party shall not relieve it from any liability which it
may have under this Section 9 except to the extent it has been materially
prejudiced by such failure; and, provided, further, that the failure to notify
-------- -------
the indemnifying party shall not relieve such indemnifying party from any
liability which it may have to an indemnified party otherwise than under this
Section 9. If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 9 for any legal
or other expenses subsequently incurred by the indemnified party in connection
with the defense thereof other than reasonable costs of investigation; provided,
--------
however, that the Representative shall have the right to employ separate counsel
- -------
to represent jointly the Representative and those other Underwriters who may be
subject to liability arising out of any claim in respect of which indemnity may
be sought by the Representatives or the Underwriters against the Company under
this Section 9 if, in the reasonable judgment of the Representative, it is
advisable for the Representative and those Underwriters to be jointly
represented by a separate counsel, and in that event the fees and expenses of
such separate counsel shall be paid by the Company. Each indemnified party, as
a condition of the indemnity agreements contained in Sections 9(a), 9(b), and
9(c) hereof, shall use all reasonable efforts to cooperate with the indemnifying
party in the defense of any such action or claim. No indemnifying party shall
be liable for any settlement of any such action effected without its written
consent (which consent shall not be unreasonably withheld), but if settled with
its written consent or if there be a final judgment of the plaintiff in any such
action, the indemnifying party agrees to indemnify and hold harmless any
indemnified party from and against any loss or liability by reason of such
settlement or judgment.
The obligations of the Company and the Underwriters in this Section 9 and
in Section 10 hereof are in addition to any other liability which the Company or
the Underwriters, as the case may be, otherwise may have.
10. CONTRIBUTION.
------------
If the indemnification provided for in Section 9 hereof is unavailable or
insufficient to hold harmless an indemnified party under Section 9(a), (b) or
(c) hereof, then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other from the offering of the Units, or (ii) if the allocation (even if the
Underwriters were treated as one entity for such purpose) provided by clause (i)
above is not permitted by applicable law, then in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also
<PAGE>
26
the relative fault of the Company on the one hand and the Underwriters on the
other with respect to the statements or omissions which resulted in such loss,
claim, damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other with respect to such
offering shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Units purchased under this Agreement (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters with respect to the Units purchased
under this Agreement, in each case as set forth in the table on the cover page
of the Prospectus. The relative fault shall be determined by reference to,
among other things, (x) whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the
Underwriters on the other, (y) the intent of the parties and (z) their relative
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission; provided that the parties hereto agree that the
only written information furnished to the Company for use in the Preliminary
Prospectus, the Registration Statement or the Prospectus is limited to the
Underwriters' Information. The Company and the Underwriters agree that it would
not be just and equitable if contributions pursuant to this Section 10 were to
be determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take into account the equitable considerations referred to herein. The amount
paid or payable by an indemnified party as a result of the loss, claim, damage
or liability, or action in respect thereof, referred to above in this Section 10
shall be deemed to include, for purposes of this Section 10, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 10, no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the
Securities underwritten by it and distributed to the public were offered to the
public less the amount of any damages which such Underwriter has otherwise paid
or become liable to pay by reason of any untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
The Underwriters' obligations to contribute as provided in this Section 10
are several in proportion to their respective underwriting obligations, and are
not joint.
11. PERSONS ENTITLED TO BENEFIT OF AGREEMENT.
----------------------------------------
This Agreement shall inure to the benefit of and be binding upon the
Underwriters, the Company, and their respective successors. Nothing expressed
or mentioned in this Agreement is intended or shall be construed to give any
person, firm or corporation, other than the Underwriters and the Company and
their respective successors and the controlling persons and officers and
directors referred to in Sections 9 and 10 hereof, and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein. The term
"successors" shall not include a purchaser of any of the Units, Notes or
Warrants from any of the several Underwriters merely because of such purchase.
<PAGE>
27
12. EXPENSES.
--------
The Company agrees with the Underwriters to pay (a) the costs incident to
the authorization, issuance, sale, preparation and delivery of the Securities
and any taxes payable in that respect; (b) the costs incident to the
preparation, printing and filing under the Act of the Registration Statement and
any amendments and exhibits thereto (including the filing fees of the
Commission); (c) the costs of distributing the Registration Statement as
originally filed and each amendment thereto and any post-effective amendments
thereof (including, in each case, exhibits), any Preliminary Prospectus, the
Prospectus and any amendment or supplement to the Prospectus, all as provided in
this Agreement; (d) the costs of printing, reproducing and distributing this
Agreement and any other underwriting and selling group documents by mail, telex
or other means of communications; (e) the filing fees incident to securing any
required review by the National Association of Securities Dealers, Inc. of the
terms of sale of the Securities; (f) the fees and expenses of qualifying the
Securities under the securities laws of the several jurisdictions, as provided
in Section 4(h) hereof, and of preparing, printing and distributing Blue Sky
Memoranda and Legal Investment Surveys (including related fees and expenses of
counsel to the Underwriters); (g) any fees charged by securities rating services
for rating the Securities; (h) all fees and expenses of the Trustee and any
agent thereof; (i) any fees charged by the Nasdaq National Market System for
listing the Warrant Shares; (j) all fees and expenses of the Unit Agent, Warrant
Agent and the transfer agent for the Warrant Shares; (k) all other costs and
expenses incident to the performance of the obligations of the Company under
this Agreement (including without limitation legal fees and expenses of counsel
to the Company (including special regulatory counsel to the Company and the fees
and expenses of Arthur Andersen, LLP and KPMG Peat Marwick LLP); and (l) all
expenses in connection with any meetings with prospective investors (including,
without limitation, slides, private charters and public speaking lessons);
provided that, except as otherwise provided in this Section 12 and in Section 8
- --------
hereof, the Underwriters shall pay their own costs and expenses, including the
costs and expenses of their counsel, and the expenses of advertising any
offering of the Notes made by the Underwriters.
13. SURVIVAL.
--------
The respective indemnities, rights of contribution, representations,
warranties and agreements of the Company and the Underwriters contained in this
Agreement or made by or on behalf on them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Units and shall
remain in full force and effect, regardless of any termination or cancellation
of this Agreement or any investigation made by or on behalf of any of them or
any person controlling any of them.
14. NOTICES, ETC.
-------------
All statements, requests, notices and agreements hereunder shall be in
writing, and:
(a) if to the Representative, shall be delivered or sent by mail, telex or
facsimile transmission to:
Chase Securities Inc.
<PAGE>
28
270 Park Avenue
4th Floor
New York, New York 10017
Attention: Thomas Walker
Phone: (212) 270-0300
Facsimile: (212) 270-0994
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Jeremiah L. Thomas III, Esq.
Phone: (212) 455-2000
Facsimile: (212) 455-2502
and
(b) if to the Company, shall be delivered or sent by mail, telex or
facsimile transmission to:
Wireless One, Inc.
11301 Industriplex Boulevard
Suite 4
Baton Rouge, Louisiana 70809-4115
Attention: Hans J. Sternberg
Phone: (504) 293-5000
Facsimile: (504) 293-5400
With a copy to:
Kirkland & Ellis
153 East 53rd Street
New York New York 10022
Attention: Lance C. Balk, Esq.
Phone: (212) 446-4800
Facsimile: (212) 446-4900
provided, however, that any notice to an Underwriter pursuant to Section 9(d)
- -------- -------
hereof shall be delivered or sent by mail, telex or facsimile transmission to
such Underwriter at its address set forth in its acceptance telex to the
Representative, which address will be supplied to any other party hereto by the
Representative upon request.
<PAGE>
29
Any such statements, requests, notices or agreements shall take effect at
the time of receipt thereof. The Company shall be entitled to act and rely upon
any request, consent, notice or agreement given or made by the Representative on
behalf of the Underwriters.
15. MARKET MAKING.
-------------
(a) If required by the Securities Act and the interpretations thereof by
the Commission, the Company will, for the sole benefit of Chase Securities Inc.
(the "Market Maker"), and for so long as any of the Securities are outstanding
------------
and the Market Maker or any of its Affiliates (as defined in the Rules and
Regulations) owns any equity securities of the Company and proposes to make a
market in the Securities as part of its business in the ordinary course:
(i) (A) Periodically amend the Registration Statement so that
the information contained in the Registration Statement complies with the
requirements of Section 10(a) under the Act; (B) if requested by the Market
Maker, within 45 days following the end of the Company's most recent fiscal
quarter, file a supplement to the Prospectus which sets forth the financial
results of the Company for the previous quarter; (C) amend the Registration
Statement or supplement the Prospectus when necessary to reflect any
material changes in the information provided therein; and (D) amend the
Registration Statement when required to do so in order to comply with
Section 10(a)(3) of the Act; provided, however, that (l) prior to filing
-------- -------
any post-effective amendment to the Registration Statement or any
supplement to the Prospectus, the Company will furnish to the Market Maker
copies of all such documents proposed to be filed, which documents will be
subject to the review of the Market Maker and its counsel, (2) the Company
will not file any post-effective amendment to the Registration Statement of
any supplement to the Prospectus to which the Market Maker and its counsel
shall reasonably object and (3) the Company will provide such Market
Maker's counsel and the Market Maker with copies of each amendment or
supplement filed.
(ii) Promptly upon the Company satisfying the eligibility
criteria for use of Form S-3, the Company shall file a post-effective
amendment to the Registration Statement to convert it from a Form S-1 to a
Form S-3.
(iii) Notify the Market Maker and (if requested by the Market
Maker) confirm such advice in writing, (A) when any Prospectus supplement
or amendment or post-effective amendment to the Registration Statement has
been filed, and, with respect to any post-effective amendment, when the
same has become effective; (B) of any request by the Commission for any
post-effective amendment or supplement to the Registration Statement, any
supplement or amendment to the Prospectus or for additional information;
(C) the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose; (D) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the initiation or threatening of
any proceedings for such purpose; (E) of the happening of any event which
makes any statement made in the Registration Statement, the Prospectus or
any amendment or supplement thereto untrue or which requires the making of
any changes in the
<PAGE>
30
Registration Statement, the Prospectus or any amendment or supplement
thereto, in order to make the statements therein not misleading; and (F) of
any advice from a nationally recognized statistical rating organization
that such organization has placed the Company under surveillance or review
with negative implications or has determined to downgrade the rating of the
Notes or any other debt obligation of the Company whether or not such
downgrade shall have been publicly announced.
(iv) Furnish to the Market Maker, without charge, (i) at least
one conformed copy of any post-effective amendment to the Registration
Statement; and (ii) as many copies of any amendment or supplement to the
Prospectus as the Market Maker may request.
(v) Consent to the use of the Prospectus or any amendment or
supplement thereto by the Market Maker in connection with the offering and
sale of the Securities.
(vi) For so long as the Notes shall be outstanding, furnish to
the Market Maker (A) as soon as practicable after the end of each fiscal
year, the number of copies reasonably requested by the Market Maker of its
annual report to stockholders for such year, (B) as soon as available, the
number of copies reasonably requested by the Market Maker of each report
(including, without limitation, Reports on Forms 10-K, 10-Q and 8-K) or
definitive proxy statements of the Company filed under the Exchange Act or
mailed to stockholders and (iii) all public reports and all reports and
financial statements furnished by the Company to the Nasdaq National Market
System or any U.S. national securities exchange or quotation service upon
which the Securities may be listed pursuant to requirements of or
agreements with such exchange or quotation service or to the Commission
pursuant to the Exchange Act or any rule or regulation of the Commission
thereunder; and
(vii) In the event of the issuance of any stop order
suspending the effectiveness of the Registration Statement or of any order
suspending the qualification of the Notes for sale in any jurisdiction, to
use promptly its best efforts to obtain its withdrawal.
(b) The Company represents that any post-effective amendments to the
Registration Statement, any amendments or supplements to the Prospectus and
documents filed under the Exchange Act will, when they become effective or are
filed with the Commission as the case may be, conform in all respects to the
requirements of the Act and the Rules and Regulations and will not, as of the
effective date of such post-effective amendments and as of the filing date of
amendments or supplements to the Prospectus or filings under the Exchange Act
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided that no representation or warranty is made as to
--------
information contained in or omitted from the Registration Statement or the
Prospectus in reliance upon and in conformity with written information furnished
to the Company by the Market Maker specifically for inclusion therein, which
information the parties hereto agree will be limited to the statements
concerning the market-making activities of the Marker Maker to be set forth on
the cover page and in the "Plan of Distribution" section of the
<PAGE>
31
Prospectus (which for purposes of analyzing the indemnification provision of
Section 9 to the activities of the Market Maker such statement shall be deemed
the Underwriters' Information).
(c) Each time that the Registration Statement or Prospectus shall be
amended or the Prospectus shall be supplemented, the Company shall, concurrently
with such amendment or supplement, furnish the Market Maker and its counsel with
a certificate of its Chairman of the Board or its President and its chief
financial officer to the effect that:
(i) The Registration Statement has been declared effective and
such amendment has become effective under the Act as of the date and time
specified in such certificate; such amendment to the Prospectus (or such
supplement to the Prospectus, as the case may be) was filed with the
Commission pursuant to the subparagraph of Rule 424(b) of the Rules and
Regulations specified in such certificate on the date specified therein;
and, to the knowledge of such officers, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceeding for that purpose is pending or threatened by the Commission; and
(ii) Such officers have carefully examined the Registration
Statement and the Prospectus and such amendment or supplement thereto and,
in their opinion, as of the date of such amendment or supplement, the
Registration Statement and the Prospectus, as amended or supplemented, as
the case may be, did not include any untrue statement of a material fact
and did not omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(d) Each time that the Registration Statement or Prospectus shall be
amended or the Prospectus shall be supplemented, the Company shall, concurrently
with such amendment or supplement, furnish the Market Maker and its counsel with
the written opinion of counsel satisfactory to the Market Maker to the effect
that:
(i) The Registration Statement has been declared effective and
such amendment has become effective under the Act as of the date and time
specified in such certificate; such amendment to the Prospectus (or such
supplement to the Prospectus, as the case may be) was filed with the
Commission pursuant to the subparagraph
Rule 424(b) of the Rules and Regulations specified in such opinion on the
date specified therein; and, to the knowledge of such counsel, no stop
order suspending the effectiveness of the Registration Statement has been
issued and no proceeding for that purchase is pending or threatened by the
Commission; and
(ii) Counsel for the Company has reviewed such amendment or
supplement and participated with officers of the Company and independent
public accountants for the Company in the preparation of such amendment or
supplement and has no reason to believe that the Registration Statement (or
any post-effective amendment thereto), at the time of its effective date,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus contains any
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the
<PAGE>
32
statement therein, in the light of the circumstances under which they were
made, not misleading.
(e) Each time that the Registration Statement or Prospectus shall be
amended or the Prospectus shall be supplemented to include audited annual
financial information, the Company shall, concurrently with such amendment or
supplement, furnish the Market Maker and its counsel with letters of KPMG Peat
Marwick LLP and Arthur Andersen LLP (or other independent public accountants for
the Company of nationally recognized standing), in form satisfactory to the
Market Maker addressed to the Market Maker and dated the date of delivery of
such letter, (i) confirming that they are independent public accountants within
the meaning of the Act and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of Regulation S-X
of the Commission and (ii) a letter substantially in the form of the letters
delivered to the Underwriters pursuant to Section 5(h) of this Agreement with
such changes as may be necessary to reflect the amended and supplemental
financial information.
(f) The Company hereby agrees to indemnify the Market Maker, and if
applicable, contribute to the Market Maker, in accordance with Sections 9 and 10
of this Agreement.
(g) The Company will comply with the provisions of this Section 15 at its
own expense and will reimburse the Market Maker for its expenses associated with
this Section 15 (including fees of counsel).
(h) The Company agrees that if it commences engaging in business with the
government of Cuba or with any person or affiliate located in Cuba after the
date the Registration Statement becomes or has become effective with the
Commission or with the Florida Department of Banking and Finance (the
"Department"), whichever date is later, or if the information reported in the
Prospectus, if any, concerning the Company's business with Cuba or with any
person or affiliate located in Cuba changes in any material way, the Company
will provide the Department notice of such business or change, in accordance
with the rules and regulations of such Department, in a form acceptable to the
Department.
(i) The Agreements contained in this Section 15 and the representations,
warranties and agreements contained in this Agreement shall survive all offers
and sales of the Units and shall remain in full force and effect, regardless of
any termination or cancellation of this Agreement or any investigation made by
or on behalf of any indemnified party. Notwithstanding any other provision of
this Agreement to the contrary, the obligations of the Company under this
Section 15 will terminate 30 days after written notice by the Company to the
Market Maker stating that the Company no longer needs the Market Maker to act as
a market maker with respect to the Securities.
(j) For purposes of this Section 15, any reference to the terms "amend,"
"amendment" or "supplement" with respect to the Registration Statement or the
Prospectus shall be deemed to refer to and include the filing under the Exchange
Act on or after the date the Registration Statement is converted to Form S-3 of
any document deemed to be incorporated therein by reference.
<PAGE>
33
16. DEFINITIONS OF CERTAIN TERMS.
----------------------------
For purposes of this Agreement, (a) "business day" means any day on which
------------
the New York Stock Exchange, Inc. is open for trading and (b) "subsidiary" has
----------
the meaning set forth in Rule 405 of the Rules and Regulations.
17. GOVERNING LAW.
-------------
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
18. COUNTERPARTS.
------------
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all such counterparts together shall
constitute one and the same instrument.
19. HEADINGS.
--------
The headings herein are inserted for convenience of reference only and are
not intended to be part of, or to affect the meaning or interpretation of, this
Agreement.
<PAGE>
If the foregoing is in accordance with your understanding of the agreement
between the Company and the several Underwriters, kindly indicate your
acceptance in the space provided for that purpose below.
Very truly yours,
WIRELESS ONE, INC.
By: ______________________________
Name:
Title:
Accepted:
CHASE SECURITIES INC.
By: ______________________________
Name:
Title:
BT SECURITIES CORPORATION
By: ______________________________
Name:
Title:
GERARD KLAUER MATTISON & CO., LLC
By: ______________________________
Name:
Title:
PRUDENTIAL SECURITIES INCORPORATED
By: ______________________________
Name:
Title:
<PAGE>
SCHEDULE 1
----------
Underwriter of Securities Principal Amount of Securities
- ------------------------- ------------------------------
Chase Securities Inc.
BT Securities Corporation
Gerard Klauer Mattison & Co., LLC
Prudential Securities Incorporated
Total:
==============
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF APRIL 25, 1996
AMONG
TRUVISION WIRELESS, INC.
(A DELAWARE CORPORATION)
AND
WIRELESS ONE MERGERSUB, INC.
(A DELAWARE CORPORATION)
AND
WIRELESS ONE, INC.
(A DELAWARE CORPORATION)
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), is made and entered
into as of the 25th day of April, 1996, by and among TRUVISION WIRELESS, INC., a
Delaware corporation ("TWI"), WIRELESS ONE MERGERSUB, INC., a Delaware
corporation ("MergerSub") and WIRELESS ONE, INC., a Delaware corporation
("WOI").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of TWI, MergerSub and WOI have
approved the merger of MergerSub with and into TWI pursuant and subject to the
terms and conditions of this Agreement (the "Merger"), whereby each issued and
outstanding share of common stock, par value $0.01 per share, of TWI at the
Effective Time ("TWI Common Share") will be converted into the right to receive
the Per-Share Portion of the Conversion Amount for such TWI Common Share; and
WHEREAS, TWI, MergerSub and WOI contemplate that the Merger will be
classified as a tax-free reorganization pursuant to Section 368(a)(i)(B) of the
Code; and
WHEREAS, TWI, MergerSub and WOI desire to make certain representations,
warranties and agreements in connection with the Merger and also to set forth
the various conditions to the Merger; and
WHEREAS, the respective Boards of Directors of TWI, MergerSub and WOI have
adopted resolutions approving this Agreement; and
WHEREAS, the terms used in this Agreement shall have the meanings
respectively ascribed to them in Article 11.1 hereof.
NOW, THEREFORE, the parties hereto hereby adopt the above recitals and
agree as follows:
ARTICLE 1. THE MERGER
1.1 THE MERGER. At the Effective Time, MergerSub will merge with and
into TWI in accordance with the terms and conditions of this Agreement. TWI
shall be the corporation surviving the Merger (the "Surviving Corporation") and
shall continue to be governed by the laws of the State of Delaware. The Merger
shall have the effects specified under the Delaware General Corporation Law
("DGCL").
B-1
<PAGE>
1.2 EFFECT OF THE MERGER.
(A) EFFECTIVE TIME. At the Effective Time, subject in all instances
to each of the terms, conditions, provisions and limitations contained in this
Agreement, (i) MergerSub will merge with and into TWI by the filing with the
Secretary of the State of Delaware of a Certificate of Merger; (ii) each TWI
Common Share outstanding at the Effective Time, by said occurrence and with no
further action on the part of the holder thereof, shall be transformed and
converted into the right to receive, upon surrender of the certificate for such
TWI Common Share, the Per-Share Portion of the Merger Shares for such TWI Common
Share without interest or any similar payment thereon or with respect thereto;
(iii) each share of common stock of MergerSub outstanding prior to the Merger
will, by said occurrence and with no further action on the part of the holder
thereof, be transformed and converted into one share of common stock of the
Surviving Corporation, so that thereafter WOI will be the sole and exclusive
owner of all equity securities of the Surviving Corporation; and (iv) the
Surviving Corporation shall be the owner of all of the business, assets, rights
and other attributes thereto of, or held by, either TWI or MergerSub.
(B) MERGER SHARES. On the Closing Date, the Outstanding TWI Shares,
in the aggregate, shall be converted into the right to receive the number of WOI
Common Shares equal to the "Merger Shares," which shall consist of the aggregate
of (i) the Non-Contingent Amount, (ii) upon the expiration of the General Escrow
Period, the General Contingent Amount, (iii) if the Gadsden Acquisition has not
been consummated prior to the Effective Time, then the Gadsden Contingent
Amount, if and when the Gadsden Acquisition is consummated and the Market
Delivery Requirement is satisfied with respect to the Gadsden, Alabama market,
(iv) if the Huntsville Acquisition has not been consummated prior to the
Effective Time, the Huntsville Contingent Amount, if and when the Huntsville
Acquisition is consummated and the Market Delivery Requirement is satisfied with
respect to the Huntsville, Alabama market, (v) if the Jackson Acquisition has
not been consummated prior to the Effective Time, then the Jackson Contingent
Amount, if and when the Jackson Acquisition is consummated and the Market
Delivery Requirement is satisfied with respect to the Jackson, Tennessee market,
(vi) if the Memphis Acquisition has not been consummated prior to the Effective
Time, then the Memphis Contingent Amount, if and when the Memphis Acquisition is
consummated and the Market Delivery Requirement is satisfied with respect to the
Memphis, Tennessee Market, and (vii) as and when additional WOI Common Shares
become issuable pursuant to Section 10.3, the WOI Contingent Amount. As used
herein:
(A) the "General Contingent Amount" shall mean 168,667 WOI Common
Shares, subject to reduction as provided herein and in accordance with the terms
of the General Escrow Agreement;
(B) if the Gadsden Acquisition is consummated prior to the Effective
Time, then the "Gadsden Contingent Amount" shall mean zero (0) WOI Common
Shares,
B-2
<PAGE>
and if the Gadsden Acquisition is not consummated prior to the Effective Time,
then the "Gadsden Contingent Amount" shall mean 258,793 WOI Common Shares;
(C) if the Huntsville Acquisition is consummated prior to the
Effective Time, then the "Huntsville Contingent Amount" shall mean zero (0) WOI
Common Shares, and if the Huntsville Acquisition is not consummated prior to the
Effective Time, then the "Huntsville Contingent Amount" shall mean 121,447 WOI
Common Shares;
(D) if the Jackson Acquisition is consummated prior to the Effective
Time, then the "Jackson Contingent Amount" shall mean zero (0) WOI Common
Shares, and if the Jackson Acquisition is not consummated prior to the Effective
Time, then the "Jackson Contingent Amount" shall mean 36,633 WOI Common Shares;
(E) if the Memphis Acquisition is consummated prior to the Effective
Time, then the "Memphis Contingent Amount" shall mean zero (0) WOI Common
Shares, and if the Memphis Acquisition is not consummated prior to the Effective
Time, then the "Memphis Contingent Amount" shall mean 731,167 WOI Common Shares;
(F) the "Non-Contingent Amount" shall mean (1) the number of Base
Shares, reduced by (2) 168,667, and further reduced by (3) the aggregate of the
Acquisition Contingent Amounts;
(G) the "Acquisition Contingent Amounts" means the Gadsden Contingent
Amount, the Huntsville Contingent Amount, the Jackson Contingent Amount and the
Memphis Contingent Amount;
(H) the "Market Delivery Requirement" shall be deemed to have been
satisfied with respect to any Market at the time in question if, at such time,
at least 12 Channels licensed by the FCC to, or leased to, TWI or any of its
Subsidiaries in such Market are both Granted Channels and Good Channels;
(I) A "Granted Channel" means a Channel authorized by conditional
license, license or construction authorization (in each case, other than a STA,
experimental or developmental authorization) which is in full force and effect,
validly issued, not subject to a pending revocation proceeding, not in jeopardy
of cancellation under FCC Rule 21.303 for removal of equipment, and not subject
to forfeiture for any failure to meet a condition of the instrument; and
(J) A "Good Channel" means a Channel as to which at the time in
question (1) if such Channel has been authorized pursuant to a construction
authorization, either the last date for construction printed on such
construction authorization has not occurred or such Channel is the subject of a
pending application for the extension of such last date which was filed prior to
such last date, (2) each Consent, if any, which is required
B-3
<PAGE>
with respect to such Channel (including under the related TWI Channel Lease, if
any) has been obtained and is in effect, (3) if such Channel is the subject of a
TWI Channel Lease, then such Channel Lease is in full force and effect, such TWI
Channel Lease is not subject to termination at the option of the TWI Lessor, and
no party to such TWI Channel Lease is in default or breach in any material
respect under such Channel Lease, (4) if such Channel is an MDS Channel, then
TWI or a Subsidiary of TWI has full-time use of the capacity of such Channel,
and (5) in the case of a Channel which is the subject of a Specified
Acquisition, such Specified Acquisition has been consummated and there have been
obtained all consents, approvals, authorizations and waivers of any public,
government or regulatory body, authority, agency or unit and any and all
consents, approvals, authorizations and waivers from parties to any contract or
agreement related thereto or any other person that are required for the lawful
consummation of such Specified Acquisition or are necessary for TWI and its
Subsidiaries to conduct their operations with respect to such Channel after the
consummation of such Specified Acquisition.
Notwithstanding the foregoing, if at the Effective Time the Market Delivery
Requirement has not been satisfied with respect to any Owned Market (a "Non-
Delivery Market"), then there shall be withheld from the Non-Contingent Amount a
number of WOI Common Shares which is equal to the number of shares specified on
the attached Exhibit 1.2(b) for such Owned Market (the "Market Delivery
Contingent Shares" for such Owned Market). The Market Delivery Contingent
Shares for any Non-Delivery Market shall be restored to the Non-Contingent
Amount if and when, after the Effective Time, the Market Delivery Requirement is
satisfied with respect to such Non-Delivery Market.
Except as set forth in Section 7.3(d), the fact that any Channel or Channels are
not Granted Channels or Good Channels shall not (i) constitute a breach of any
representation, warranty, covenant or agreement set forth herein or failure of
any condition set forth herein to be satisfied, (ii) be considered in
determining whether or not there has been a Material Adverse Effect with respect
to TWI or (iii) constitute the basis or part of the basis for any right of WOI
not to proceed with the Closing.
The respective quantities of WOI Common Shares which constitute the General
Contingent Amount, the Gadsden Contingent Amount, the Huntsville Contingent
Amount, the Jackson Contingent Amount, the Memphis Contingent Amount and any
Market Delivery Contingent Amount will be (x) proportionately increased to
reflect any stock dividend, stock split or other subdivision of the WOI Common
Shares effected after the date of this Agreement and prior to the Effective
Time, and (y) proportionately decreased to reflect any reverse stock split or
other combination of the WOI Common Shares which is effected after the date of
this Agreement and prior to the Effective Time.
(C) BASE SHARES; ADJUSTMENTS. As used herein, the "Base Shares" means
the number of WOI Common Shares equal to the Aggregate Initial Share Amount
minus the Adjustment Shares, and the "Adjustment Shares" means the number of WOI
Common Shares,
B-4
<PAGE>
equal to the Adjustment Amount divided by the Exchange Price. As used herein,
the term "Adjustment Amount" means
(i) the product of (A) 14,200 minus the number of Bona Fide
Subscribers in the Existing Markets on March 31, 1996 multiplied by (B) $1,275;
plus
(ii) the amount of the Net GAAP Debt as of March 31, 1996 in excess of
the amount of the Permitted Net GAAP Debt; plus
(iii) the excess of the aggregate amount of all Prior Offering
Expenses over $1,000,000; plus
(iv) the aggregate amount of any payments to TWI's officers,
directors, employees or any of TWI's or their Affiliates in violation of the
terms of this Agreement; and
(v) the aggregate amount of any payments made or required to be made
pursuant to the terms of all TWI Channel Leases by reason of the Merger (other
than the acceleration of any scheduled amount which would otherwise be payable
pursuant to any TWI Channel Lease) in excess of $60,000.
(D) OUTSTANDING TWI SHARES. As used herein, the "Outstanding TWI
Shares" means the TWI Common Shares which are outstanding immediately prior to
the Effective Time.
(E) CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION. The
certificate of incorporation of the Surviving Corporation shall be the
certificate of incorporation of MergerSub immediately prior to the Effective
Time.
(F) BYLAWS OF THE SURVIVING CORPORATION. The bylaws of the Surviving
Corporation shall be the bylaws of MergerSub immediately prior to the Effective
Time.
(G) BOARD OF DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The
board of directors and officers of MergerSub immediately prior to the Effective
Time shall be the board of directors and the officers of the Surviving
Corporation, respectively, immediately upon the Effective Time, and such persons
shall serve in such positions for the respective terms provided by applicable
Legal Requirements or in the bylaws of the Surviving Corporation and until their
respective successors are elected and qualified.
(H) WOI TO ESTABLISH ESCROWS.
B-5
<PAGE>
(i) United States Trust Company of New York, or another person who is
selected prior to the Effective Time by TWI and WOI, shall act as the General
Escrow Agent, the Acquisition Escrow Agent and the Market Delivery Escrow Agent
for purposes of administering the distribution of the General Contingent
Amount, the Acquisition Contingent Amounts, if any, and the Market Delivery
Contingent Shares, if any, respectively. In the event United States Trust
Company of New York or any other person so selected is unable or unwilling to
act as the General Escrow Agent, the Acquisition Escrow Agent or the Market
Delivery Escrow Agent, then TWI and WOI shall, upon mutual agreement, seek to
select a comparable party to act as such. Neither WOI nor TWI will unreasonably
withhold its approval of any financial institution proposed by the other of
them to act as the General Escrow Agent, the Acquisition Escrow Agent or the
Market Delivery Escrow Agent.
(ii) WOI Common Shares representing the General Contingent Amount
shall be held by the General Escrow Agent pursuant to the terms of an Escrow
Agreement (the "General Escrow Agreement") in the form attached hereto as
Exhibit 1.2(h).
(iii) WOI Common Shares representing the Acquisition Contingent
Amounts, if any, shall be held by the Acquisition Escrow Agent pursuant to the
terms of an escrow agreement (the "Acquisition Escrow Agreement") which will
provide for the release of the WOI Common Shares constituting the Acquisition
Contingent Amount for any Specified Acquisition upon the later of the
consummation after the Effective Time of such Specified Acquisition and the
satisfaction of the Market Delivery Requirement with respect to the related
Market, in accordance with procedural, dispute and resolution mechanism and
other provisions comparable to those set forth in the General Escrow Agreement.
(iv) WOI Common Shares representing the Market Delivery Contingent
Share for the Non-Delivery Market(s), if any, shall be held by the Market
Delivery Escrow Agent pursuant to the terms of an escrow agreement (the "Market
Delivery Escrow Agreement") which will provide for the release of the WOI
Common Shares constituting the Market Delivery Contingent Shares for each Non-
Delivery Market upon the satisfaction of the Market Delivery Requirement with
respect to such Non-Delivery Market, in accordance with procedural, dispute and
resolution mechanism and other provisions comparable to those set forth in the
General Escrow Agreement.
(I) EXCHANGE PROCEDURES. At or prior to the Effective Time, each
holder of record of Outstanding TWI Shares shall deliver to WOI for
cancellation the certificates representing such Outstanding TWI Shares (the
"Certificates"). Upon surrender of a Certificate for cancellation, together
with an investment letter in the form attached hereto as Exhibit 1.2(i)
("Stockholder Letter"), duly executed as of such time, (i) the holder of such
Certificate shall receive in exchange therefor the Per-Share Portion of the
Non-Contingent Amount, and shall be
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entitled to receive (A) upon the expiration of the General Escrow Period, the
Per-Share Portion of the General Contingent Amount (to the extent not released
to WOI pursuant to the General Escrow Agreement), (B) the Per-Share Portion of
the Acquisition Contingent Amount(s), if any, pursuant to the Acquisition Escrow
Agreement, (C) the Per-Share Portion of the Market Delivery Contingent Shares,
if any, pursuant to the Market Delivery Escrow Agreement, and (D) to the extent
issued or issuable pursuant to Section 10.3, the Per-Share Portion of the WOI
Contingent Amount, in each case for the Outstanding TWI Shares represented by
such Certificate, and (ii) the Certificate so surrendered shall forthwith be
canceled. Until surrendered as contemplated by this Section 1.2(i), each
Certificate shall, at and after the Effective Time, be deemed to represent only
the right to receive, upon surrender of such Certificate, the Per-Share Portion
of the Merger Shares with respect to each Outstanding TWI Share represented
thereby in accordance with the terms of this Agreement, as follows:
(I) Upon the Closing Date (or, if later, on the date of the surrender
of such Certificate), the holder of the Outstanding TWI Shares represented by
such Certificate shall receive the Per-Share Portion of the Non-Contingent
Amount for the Outstanding TWI Shares represented by such Certificate;
(II) Subject to the terms of the General Escrow Agreement, the holder
of the Outstanding TWI Shares represented by such Certificate shall be entitled
to receive the Per-Share Portion of the General Contingent Amount for the
Outstanding TWI Shares represented by such Certificate;
(III) Subject to the terms of the Acquisition Escrow Agreement,
the holder of the Outstanding TWI Shares represented by such Certificate shall
be entitled to receive the Per-Share Portion of the Acquisition Contingent
Amount(s), if any, for the Outstanding TWI Shares represented by such
Certificate;
(IV) Subject to the terms of the Market Delivery Escrow Agreement, the
holder of the Outstanding TWI Shares represented by such Certificate shall be
entitled to receive the Market Delivery Contingent Shares, if any, for the
Outstanding TWI Shares represented by such Certificate; and
(V) As and when issued pursuant to Section 10.3 (or, if later, on the
date of the surrender of such Certificate), the holder of the Outstanding TWI
Shares represented by such Certificate shall be entitled to receive the Per-
Share Portion of the WOI Contingent Amount for the Outstanding TWI Shares
represented by such Certificate.
(J) REGISTRATION RIGHTS AND STOCKHOLDERS AGREEMENT. The WOI shares to
be received by the TWI Stockholders will be offered and sold in reliance upon
an exemption from the Securities Act of 1933, as amended, and will bear the
restrictive legend set forth in Exhibit 1.2(j)-1 hereto. On the Closing Date,
(i) WOI shall amend and restate that
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certain Registration Agreement dated October 24, 1995 among WOI and the WOI
stockholders who are parties thereto (collectively, the "WOI Initial
Stockholders"), as provided in the Amended and Restated Registration Agreement
attached in the form of Exhibit 1.2(j)-2 hereto, and each TWI Stockholder upon
his or its counter signature thereto shall be bound by and entitled to the
benefits of such agreement; and (ii) WOI shall amend and restate that certain
Stockholders Agreement dated October 24, 1995 among WOI and certain of the WOI
Initial Stockholders, as provided in the Amended and Restated Stockholders
Agreement attached in the form of Exhibit 1.2(j)-3 hereto, and each TWI
Stockholder upon his or its counter signature thereto shall be bound by and
entitled to the benefits of such agreement (such Amended and Restated
Registration Agreement and such Amended and Restated Stockholders Agreement
being collectively referred to as the "Amended Agreements").
(K) DIVIDENDS; TRANSFER TAXES. No dividends or other distributions
that are declared on or after the Effective Time on WOI Common Shares or are
payable to the holders of record of WOI Common Shares on or after the Effective
Time will be paid to persons entitled by reason of the Merger to receive WOI
Common Shares until such persons surrender their Certificates, as provided in
this Article 1. Subject to the effect of applicable Legal Requirements, there
shall be paid to the record holder of such WOI Common Shares (i) at the time of
such surrender or as promptly as practicable thereafter, the amount of any
dividends or other distributions theretofore paid with respect to whole WOI
Common Shares and having a record date on or after the Effective Time and a
payment date prior to such surrender and (ii) at the appropriate payment date or
as promptly as practicable thereafter, the amount of dividends or other
distributions payable with respect to whole WOI Common Shares and having a
record date on or after the Effective Time but prior to surrender and a payment
date subsequent to surrender. In no event shall the person entitled to receive
such dividends or other distributions be entitled to receive interest on such
dividends or other distributions. If any dividends, cash in lieu of fractional
shares or WOI Common Shares are to be paid to or issued in a name other than
that in which the Certificate surrendered in exchange therefor is registered, it
shall be a condition of such exchange that the Certificate so surrendered shall
be properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange shall pay to Wireless One any transfer or other
taxes required by reason of the issuance of WOI Common Shares in a name other
than that of the registered holder of the Certificate surrendered or shall
establish to the satisfaction of Wireless One that such tax has been paid or is
not applicable.
(L) NO FRACTIONAL SHARES. No certificates or scrip representing
fractional WOI Common Shares shall be issued upon the surrender for exchange of
Certificates pursuant to this Article 1, and, except as provided in this Section
1.2(l), no dividend or other distribution, stock split or interest shall relate
to any such fractional security, and such fractional interests shall not entitle
the owner thereof to vote or to any rights of a security holder of WOI. In lieu
of any fractional security, each holder of Outstanding TWI Shares who would
otherwise have been entitled to a fraction of a WOI Common Share upon surrender
of Certificates for exchange pursuant to this Article 1 will be paid an amount
in cash (without interest) equal to the value of the fractional share based upon
the Exchange Price. WOI shall repurchase any
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fractional shares at the Exchange Price, and the proceeds thereof shall be
disbursed to the former holders of Outstanding TWI Shares at the time of the
distribution of the Non-Contingent Amount, the General Contingent Amount, the
Acquisition Contingent Amount(s), if any, the Market Delivery Contingent Shares,
if any, and/or the WOI Contingent Amount, as the case may be.
(M) RETURN OF SHARES. Any portion of the Merger Shares and any
dividends or distributions with respect to WOI Common Shares which remain
undistributed to the former holders of Outstanding TWI Shares for three (3)
months after the expiration of the General Escrow Period (as it may be extended
pursuant to the General Escrow Agreement) shall be delivered to WOI, upon demand
of WOI, and any former holders of Outstanding TWI Shares who have not
theretofore complied with this Article 1 shall thereafter look only to the
Surviving Corporation and WOI for payment of their claim for the Merger Shares
into which such Outstanding TWI Shares are convertible, any cash in lieu of
fractional WOI Common Shares, and any dividends or distributions with respect to
WOI Common Shares.
(N) NO FURTHER OWNERSHIP RIGHTS IN COMMON STOCK. All WOI Common
Shares issued, and any cash paid pursuant to this Section 1.2, upon the
surrender for exchange of Certificates in accordance with the terms hereof,
shall be deemed to have been issued or paid, as the case may be, in full
satisfaction of all rights pertaining to the Outstanding TWI Shares.
(O) CLOSING OF TWI TRANSFER BOOKS. At the Effective Time, the stock
transfer books of TWI shall be closed and no transfer of TWI Common Shares shall
thereafter be made. If, after the Effective Time, Certificates are presented to
the Surviving Corporation, they shall be cancelled and exchanged as provided in
this Article 1.
(P) FURTHER ASSURANCES. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (i) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation, its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of TWI, or (ii)
otherwise to carry out the purposes of this Agreement, the Surviving Corporation
and its proper officers and directors or their designees shall be authorized to
execute and deliver, in the name and on behalf of each such corporation, all
such deeds, bills of sale, assignments and assurances and do, in the name and on
behalf of each of such corporations, all such other acts and things necessary,
desirable or proper to vest, perfect or confirm its right, title or interest in,
to or under any of the rights, privileges, powers, franchises, properties or
assets of such corporations and otherwise to carry out the purposes of this
Agreement.
1.3 CLOSING. The Closing of the Merger (the "Closing") shall take place
at 10:00 a.m. on a date (the "Closing Date") to be specified by the parties,
which shall be no later than the fifth (5th) business day after the satisfaction
or waiver of the conditions set forth in Articles
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6, 7 and 8 hereof, unless another date or place is agreed to in writing by the
parties hereto, at the offices of Kirkland & Ellis, 153 East 53rd Street, New
York, New York, or some other mutually agreeable location in New York, New York.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF TWI.
TWI hereby represents and warrants to WOI and MergerSub, that as of the
date hereof:
2.1 ORGANIZATION; GOOD STANDING. TWI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
TWI and each of its Subsidiaries is qualified as a foreign corporation in all
jurisdictions in which it is required to qualify as a result of the conduct of
its business or ownership of its properties, other than any jurisdiction in
which the failure of any such person(s) to be so qualified would not have a
Material Adverse Effect on TWI.
2.2 SUBSIDIARIES. [LIST SUBSIDIARIES] are the only Subsidiaries of TWI.
Except as set forth on Schedule 2.2 or as disclosed in the TWI SEC Filings, TWI
owns directly, free and clear of Liens, all outstanding shares or equity
interests of each Subsidiary of TWI, and all such shares are validly issued,
fully paid, non-assessable and not subject to preemptive rights. Except as set
forth on Schedule 2.2 or as disclosed in the TWI SEC Filings, there are no
outstanding subscriptions, options, warrants, calls, conversion or exchange
rights, commitments or agreements of any character obligating any Subsidiary of
TWI to issue, deliver or sell additional shares of its capital stock or equity
interests of any class or any securities convertible into or exchangeable for
any such capital stock or equity interests, and there are no rights of first
refusal, transfer restrictions or similar rights or obligations with respect to
the ownership interests of TWI in any Subsidiary of TWI. Except as set forth on
Schedule 2.2 or as disclosed in the TWI SEC Filings, TWI does not own, directly
or indirectly, any shares of stock or any other equity or long-term debt
securities of any corporation or have any equity interest in any firm,
partnership, Joint Venture, association or other Person.
2.3 CAPITALIZATION. The authorized capital stock of TWI as of the date of
this Agreement consists of (i) 8,077,778 shares of common stock, $0.01 par value
per share, of which 2,400,000 are issued and outstanding, and (ii) 2,077,778
shares of preferred stock, $0.01 per share, consisting of 800,000 shares of
Series A Preferred Stock and 300,000 shares of Series B Preferred Stock,
(collectively, "TWI Preferred Stock"), of which 1,100,000 shares ("TWI Preferred
Shares") have been issued and are convertible into 2,200,000 TWI Common Shares.
There are no outstanding options, warrants, calls, puts, commitments or other
rights to purchase, or securities or other rights convertible into or
exercisable or exchangeable for, capital stock of TWI other than as set forth on
Schedule 2.3 or as disclosed in the TWI SEC Filings, which in each case
indicates the record and the beneficial owner thereof, the exercise, conversion
or exchange price and period thereof, the term and any vesting or other
conditions thereof. Except as set forth on Schedule 2.3 or as disclosed in the
TWI SEC Filings, no Person has rights to the registration of any securities of
TWI or any Subsidiary of TWI. All securities issued by TWI
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have been paid for and delivered in accordance with the terms of applicable
agreements or instruments, duly authorized and validly issued and are fully paid
and non-assessable; the holders thereof have no rights of rescission with
respect thereto and are not subject to personal liability by reason of being
such holders; none of such securities were issued in violation of the preemptive
rights of any holder of any security of TWI or any similar rights granted by TWI
or applicable Legal Requirements.
2.4 AUTHORITY; ENFORCEABILITY; NON-CONTRAVENTION. TWI has the corporate
power and authority to conduct the business and activities conducted by it and
to own or lease the assets owned or leased by it. TWI has the corporate power
and authority (subject to stockholder approval as set forth in Section 8.1 and
obtaining all required Consents as set forth in Section 4.2) to execute and
deliver this Agreement and all other documents required to be executed and
delivered by TWI hereunder, to consummate the transactions hereby contemplated,
and to take all other actions required to be taken by TWI pursuant to the
provisions hereof. This Agreement and all other documents required to be
executed and delivered by TWI hereunder have been duly authorized by all
corporate action necessary on the part of TWI (subject to stockholder approval
as set forth in Section 8.1 and obtaining all required Consents as set forth in
Section 4.2) and have been duly or will when executed and delivered be duly
executed and delivered by TWI and constitute the legal, valid and binding
obligations of TWI, enforceable against TWI in accordance with their terms.
Except as disclosed in Schedule 2.4, neither the execution nor the delivery of
this Agreement and all other documents required to be executed and delivered by
TWI hereunder or the consummation of the transactions hereby contemplated by TWI
(i) conflicts with or constitutes any violation or breach of the Certificate of
Incorporation or the Bylaws of TWI; (ii) constitutes any violation or breach of,
or gives any other Person any rights (including any right of acceleration,
termination or cancellation) under, any Material Contract; (iii) constitutes a
violation of any Order or Legal Requirement; or (iv) may result in the creation
of any Lien on any of the assets or properties of TWI or any of its
Subsidiaries.
2.5 CERTAIN ACTIVITIES AND SERVICES. Except with respect to the
Huntsville Wired System (as that term is defined in the TWI SEC Filings),
neither TWI nor any Subsidiary of TWI engages in any business other than the
Wireless Cable Business.
2.6 EMPLOYEE PLANS.
(A) Schedule 2.6 sets forth a true and complete list of each "employee
benefit plan," as such term is defined in section 3(3) of the ERISA, whether or
not subject to ERISA, and each bonus, incentive or deferred compensation,
severance, termination, retention, change of control, stock option, stock
appreciation, stock purchase, phantom stock or other equity-based, performance
or other employee or retiree benefit or compensation plan, program, arrangement,
agreement, policy or understanding, whether written or unwritten, that provides
benefits or compensation in respect of any employee or former employee of TWI or
any Subsidiary of TWI or the beneficiaries or dependents of any such employee or
former employee (such employees, former employees, beneficiaries and dependents
collectively, the "TWI
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Employees") or under which any TWI Employee is or may become eligible to
participate or derive a benefit and that is or has been maintained or
established by TWI or to which TWI or any Subsidiary of TWI contributes or is or
has been obligated or required to contribute or with respect to which TWI or any
Subsidiary of TWI may have any liability or obligation (collectively, the "TWI
Plans"). TWI has not communicated to any TWI Employee any intention or
commitment to modify any TWI Plan or to establish or implement any other
employee or retiree benefit or compensation arrangement other than in a manner
which would conform the terms of such TWI Plan or arrangement with any
description set forth in the TWI SEC Filings.
(B) All TWI Plans conform (and at all times within the five years
preceding the date hereof have conformed) in all material respects to, and are
being administered and operated (and have at all times within the five years
preceding the date hereof been administered and operated) in material compliance
with, the requirements of ERISA, the Code and all other applicable Legal
Requirements. All returns, reports and disclosure statements required to be
made under ERISA and the Code with respect to all TWI Plans have been timely
filed or delivered. There have not been any "prohibited transactions," as such
term is defined in Section 4975 of the Code or Section 406 of ERISA, involving
any of the TWI Plans that could subject TWI or any Subsidiary of TWI to any
material penalty or tax imposed under the Code or ERISA. Neither TWI nor any
Subsidiary of TWI maintains or has maintained any TWI Plan qualified under
Section 401(a) of the Code and exempt from tax under Section 501(a) of the Code.
Neither TWI nor any Subsidiary of TWI has any announced plan or legally binding
commitment to create any TWI Plans or to materially amend or modify any existing
TWI Plan.
(C) There are no pending or threatened claims asserted or instituted
against
(i) any TWI Plan or its assets,
(ii) any fiduciary with respect to any such TWI Plan, or
(iii) TWI or any Subsidiary of TWI or any of its officers, directors
or employees,
under ERISA or any other applicable Legal Requirements and rules and regulations
promulgated thereunder, or claiming benefit payments other than those made in
the ordinary operation of such plans, nor is there any basis for such claim. To
the knowledge of TWI, the TWI Plans are not the subject of any investigation,
audit or action by any governmental agency, including, but not limited to, the
IRS, the Department of Labor, the Equal Employment Opportunity Commission or the
Pension Benefit Guaranty Corporation ("PBGC").
2.7 FINDER'S FEES. Except as set forth on Schedule 2.7, neither TWI nor
any Subsidiary of TWI has taken any action which would impose upon TWI, any
Subsidiary of TWI, MergerSub or WOI any obligation or liability to any person
for finder's fees, agent's
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commissions or like payments in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.
2.8 SEC FILINGS. TWI has previously delivered to WOI the TWI SEC Filings.
No TWI SEC Filing contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (i) as of the time such
document was filed and (ii) as of the date of this Agreement, in each case
except as set forth on Schedule 2.8 or in a TWI SEC Filing of a subsequent date.
2.9 DIRECTORS, OFFICERS AND EMPLOYEES. Other than as set forth on
Schedule 2.9 or as described in any TWI SEC Filing, neither TWI nor any
Subsidiary of TWI has any outstanding loans or extension of credit to, or any
contracts, agreements or understandings with, any executive officer or director
or member of their immediate family or any person with which any such person has
a material relationship. Schedule 2.9 sets forth a list of (a) the names and
positions of each employee of TWI and each Subsidiary of TWI who was paid an
aggregate compensation for the fiscal year ended December 31, 1995 in excess of
$50,000, together with the amount thereof; and (b) any agreement or arrangement
with any current or former employees, officers or directors of such parties that
would entitle such person to receive any compensation or other payment upon or
arising from (i) the termination of such person's services as an employee,
officer or director, or (ii) the consummation of the Merger, together with the
amount thereof (such aggregate amount is referred to herein as "Severance
Obligations"). TWI has made available to WOI a true and correct copy of the
current payroll which lists all employees of TWI and each Subsidiary of TWI by
category of employment and salary.
2.10 TWI FCC REPRESENTATIONS.
(A) Except for agreements executed after the date of this Agreement,
Schedule 2.10(a) hereto sets forth a true and correct list of the TWI Channel
Leases. Except as stated on Schedule 2.10(a), no TWI Channel Lease (i) requires
the consent of the lessor thereunder (a "TWI Lessor") to the Merger, (ii) will
terminate or allow the lessor thereunder to terminate it as a result of the
Merger, or (iii) will require a change in the compensation payable to the lessor
thereunder, or the formula for determining that compensation as a result of the
Merger. Except as stated on Schedule 2.10(a), each such TWI Channel Lease which
is not pending acquisition by TWI or a Subsidiary of TWI is in full force and
effect and, to the knowledge of TWI, each other TWI Channel Lease is in full
force and effect. Except as set forth on Schedule 2.10(a), neither TWI nor any
Subsidiary of TWI has received, or has knowledge that any other party has
received, any notice from a TWI Lessor that a TWI Channel Lease is in default or
is terminated, except for such notices of default which have been cured prior to
termination and for such notices of termination which have been withdrawn.
(B) Schedule 2.10(b) lists (i) each application to the FCC for
commercial ITFS, MDS, MMDS, cable antenna relay service or low power commercial
television FCC Licenses
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pending before the FCC in the name of TWI or any of its Subsidiaries or
Affiliates and proposing facilities which are within the State of Mississippi or
any of the Target Markets, (ii) each FCC License held by TWI or any of its
Subsidiaries or Affiliates (or pending acquisition by TWI or any of its
Subsidiaries or Affiliates) and authorizing facilities which are within the
State of Mississippi or any of the Target Markets, and (iii) each cable
television franchise which is held by TWI or any of its Subsidiaries or
Affiliates (or pending acquisition by TWI or any of its Subsidiaries or
Affiliates) and authorizing facilities which are within the State of Mississippi
or any of the Target Markets.
(C) Schedule 2.10(c)-1 hereto lists each Rand McNally Basic Trading
Area ("BTA") for which TWI or a Subsidiary of TWI is the highest bidder in the
FCC's MDS auction. Neither TWI nor any Subsidiary of TWI is in default of its
payment obligations to the U.S. Treasury for any such BTA, as such obligations
are imposed under the FCC's small business payment regulations. Except as set
forth on Schedule 2.10(c)-2 or as described in any TWI SEC Filing, neither TWI
nor any Subsidiary of TWI has agreed to sell or otherwise transfer the whole or
any part of the MDS channel rights accorded to the MDS BTA authorization holder
for any of those BTAs.
2.11 ACCREDITED INVESTORS. Each TWI Stockholder is, and VCI is, an
"accredited investor," as such term is defined in Rule 501(a) of Regulation D
promulgated under the Securities Act of 1933, as amended.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF MERGERSUB AND WOI.
WOI and MergerSub each hereby represent and warrant to TWI and to the
stockholders of TWI, the following:
3.1 ORGANIZATION AND GOOD STANDING. WOI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
MergerSub is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. WOI and each of its Subsidiaries is
qualified as a foreign corporation in all jurisdictions in which it is required
to qualify as a result of the conduct of its business or ownership of its
properties, other than any jurisdiction in which the failure of any such
person(s) to be so qualified would not have a Material Adverse Effect on WOI.
3.2 AUTHORITY; ENFORCEABILITY; NON-CONTRAVENTION. WOI has the corporate
power and authority to conduct the business and activities conducted by it and
to own or lease the assets owned or leased by it. WOI has corporate power and
authority (subject to stockholder approval and obtaining lenders' Consents as
set forth in Sections 7.1 and 7.6) to execute and deliver this Agreement and all
other documents required to be executed by WOI hereunder, to consummate the
transactions hereby contemplated, and to take all other actions required to be
taken by WOI pursuant to the provisions hereof. This Agreement and all other
documents required to be
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executed and delivered by WOI hereunder have been duly authorized by all
corporate action necessary on the part of WOI (subject to stockholder approval
and obtaining lenders' Consents as set forth in Sections 7.1 and 7.6) and have
been duly or will when executed and delivered be duly executed and delivered by
WOI, and constitute the legal, valid and binding obligations of WOI enforceable
against WOI in accordance with their terms. Neither the execution nor the
delivery of this Agreement and all the documents required to be executed and
delivered by WOI hereunder or the consummation of the transactions hereby
contemplated by WOI (i) conflicts with or constitutes any violation or breach of
the Certificate of Incorporation or the Bylaws of WOI; (ii) constitutes any
violation or breach of, or gives any other Person any rights (including any
right of acceleration, termination or cancellation) under, any Material Contract
to which WOI is a party; (iii) constitutes a violation of any Order or Legal
Requirement; or (iv) may result in the creation of any Lien on any of the assets
or properties of WOI or any of its Subsidiaries. MergerSub has the corporate
power and authority to conduct the business and activities conducted by it and
to own or lease the assets owned or leased by it. MergerSub has corporate power
and authority (subject to stockholder approval and obtaining lenders' Consents
as set forth in Sections 7.1 and 7.6) to execute and deliver this Agreement and
all other documents required to be executed by MergerSub, to consummate the
transactions hereby contemplated, and to take all other actions required to be
taken by MergerSub pursuant to the provisions hereof. This Agreement and all
other documents required to be executed and delivered by MergerSub hereunder
have been duly authorized by all corporate action necessary on the part of
MergerSub (subject to stockholder approval and obtaining lenders' Consents as
set forth in Sections 7.1 and 7.6) and have been duly or will when executed and
delivered be duly executed and delivered by MergerSub, and constitute the legal,
valid and binding obligations of MergerSub enforceable against MergerSub in
accordance with their terms. Neither the execution nor delivery of this
Agreement and all other documents required to be executed and delivered by
MergerSub hereunder or the consummation of the transactions hereby contemplated
by MergerSub conflict with or constitute a violation or breach of the
Certificate of Incorporation or the Bylaws of MergerSub.
3.3 CAPITALIZATION. The authorized capital stock of WOI as of the date
hereof consists of 50,000,000 shares of common stock, par value $.01 per share,
of which 13,498,752 shares are issued and outstanding, and 10,000,000 of
preferred stock, par value $.01 per share, of which no shares have been issued.
WOI Common Shares to be issued pursuant to this Agreement will be, upon
issuance, validly issued, fully paid and non-assessable. There are no
outstanding options, warrants, calls, puts, commitments or other rights to
purchase, or securities or other rights convertible into or exercisable or
exchangeable for, capital stock of WOI other than as described in the WOI SEC
Filings. Except as disclosed in the WOI SEC Filings, no Person has rights to
the registration of any securities of WOI or any Subsidiary or WOI. All
securities issued by WOI have been paid for and delivered in accordance with the
terms of applicable agreements or instruments, duly authorized and validly
issued and are fully paid and non-assessable; the holders thereof have no rights
of rescission with respect thereto and are not subject to personal liability by
reason of being such holders; none of such securities were issued
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in violation of the preemptive rights of any holder of any security of WOI or
any similar rights granted by WOI or applicable Legal Requirements.
3.4 SEC FILINGS. WOI has previously delivered to TWI copies of (i) its
Form 10-K for the period ended December 31, 1995, (ii) its Registration
Statement on Form S-1 (File No. 33-94942) declared effective by the SEC on
October 18, 1995, and (iii) its Registration Statement on Form S-1 (File No. 33-
95106) declared effective by the SEC on October 18, 1995 ("WOI SEC Filings").
Each such filing was timely filed with the SEC, and did not contain any untrue
statement of material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading (i) as of the time such document was filed and (ii) except
as does not reflect a Material Adverse Effect on WOI, as of the date of this
Agreement, in each case except as set forth in a WOI SEC Filing of a subsequent
date or as set forth on Schedule 3.4.
3.5 WOI FCC REPRESENTATIONS.
(A) Except for agreements executed after the date of this Agreement,
Schedule 3.5(a) hereto sets forth a true and correct list of the WOI Channel
Leases. Except as stated on Schedule 3.5(a), no WOI Channel Lease (i) requires
the consent of the lessor thereunder (a "WOI Lessor") to the Merger, (ii) will
terminate or allow the lessor thereunder to terminate it as a result of the
Merger, or (iii) will require a change in the compensation payable to the lessor
thereunder, or the formula for determining that compensation as a result of the
Merger. Except as stated on Schedule 3.5(a), each such WOI Channel Lease which
is not pending acquisition by WOI or a Subsidiary of WOI is in full force and
effect and, to the knowledge of WOI, each other WOI Channel Lease is in full
force and effect. Except as set forth on Schedule 3.5(a), neither WOI nor any
of its Subsidiaries has received, or has knowledge that any other party has
received, any notice from a WOI Lessor that a WOI Channel Lease is in default or
is terminated, except for such notices of default which have been cured prior to
termination and for such notices of termination which have been withdrawn.
(B) [Reserved.]
(C) Schedule 3.5(c)-1 hereto lists each BTA for which WOI or any of
its Subsidiaries is the highest bidder in the FCC's MDS auction. WOI is not in
default of its payment obligations to the U.S. Treasury for any such BTA, as
such obligations are imposed under the FCC's small business payment regulations.
Except as set forth on Schedule 3.5(c)-2 or as described in any WOI SEC Filing,
neither WOI nor any of its Subsidiaries has agreed to sell or otherwise transfer
the whole or any part of the MDS channel rights accorded to the MDS BTA
authorization holder for any of those BTAs.
3.6 FINDER'S FEES. Neither MergerSub nor WOI has taken any action which
would impose upon TWI, MergerSub, WOI or any Subsidiary of WOI any obligation or
liability to any
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person for finder's fees, agent's commissions or like payments in connection
with the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
3.7 EMPLOYEE PLANS.
(A) For purposes of this Agreement, "WOI Plan" shall mean each
"employee benefit plan" as such term is defined in section 3(3) of the ERISA,
whether or not subject to ERISA, and each bonus, incentive or deferred
compensation, severance, termination, retention, change of control, stock
option, stock appreciation, stock purchase, phantom stock or other equity-based,
performance or other employee or retiree benefit or compensation plan, program,
arrangement, agreement, policy or understanding, whether written or unwritten,
that provides benefits or compensation in respect of any employee or former
employee of WOI or any Subsidiary of WOI or the beneficiaries or dependents of
any such employee or former employee (such employees, former employees,
beneficiaries and dependents collectively, the "WOI Employees") or under which
any WOI Employee is or may become eligible to participate or derive a benefit
and that is or has been maintained or established by WOI or to which WOI or any
Subsidiary of WOI contributes or is or has been obligated or required to
contribute or with respect to which WOI or any Subsidiary of WOI may have any
liability or obligation.
(B) All WOI Plans conform (and at all times within the five years
preceding the date hereof have conformed) in all material respects to, and are
being administered and operated (and have at all times within the five years
preceding the date hereof been administered and operated) in material compliance
with, the requirements of ERISA, the Code and all other applicable Legal
Requirements. All returns, reports and disclosure statements required to be
made under ERISA and the Code with respect to all WOI Plans have been timely
filed or delivered. There have not been any "prohibited transactions," as such
term is defined in Section 4975 of the Code or Section 406 of ERISA, involving
any of the WOI Plans that could subject WOI or any Subsidiary of WOI to any
material penalty or tax imposed under the Code or ERISA. Neither WOI nor any
Subsidiary of WOI maintains or has maintained any WOI Plan qualified under
Section 401(a) of the Code and exempt from tax under Section 501(a) of the Code.
Neither WOI nor any Subsidiary of WOI has any announced plan or legally binding
commitment to create any WOI Plans or to materially amend or modify any existing
WOI Plan.
(C) There are no pending or threatened claims asserted or instituted
against
(i) any WOI Plan or its assets,
(ii) any fiduciary with respect to any such WOI Plan, or
(iii) WOI or any Subsidiary of WOI or any of its officers, directors
or employees,
under ERISA or any other applicable Legal Requirements and rules and regulations
promulgated thereunder, or claiming benefit payments other than those made in
the ordinary operation of such
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plans, nor is there any basis for such claim. To the knowledge of WOI, the WOI
Plans are not the subject of any investigation, audit or action by any
governmental agency, including, but not limited to, the IRS, the Department of
Labor, the Equal Employment Opportunity Commission or the PBGC.
ARTICLE 4. COVENANTS OF TWI.
TWI hereby agrees to perform as follows:
4.1 OPERATION PRIOR TO THE CLOSING DATE. From the date hereof through the
Closing Date:
(A) Other than consummating the acquisitions of the Target Markets
pursuant to the Target Market Existing Agreements, neither TWI nor any
Subsidiary of TWI shall engage in any practice, take any action or enter into
any transaction other than in the customary and ordinary course of business.
(B) TWI will, and will cause each Subsidiary of TWI to, use reasonable
efforts to keep its business, properties and business relationships
substantially intact.
(C) TWI will, and will cause each Subsidiary of TWI to, (i) pay and
perform all of its debts, liabilities and obligations as and when due, except to
the extent either (A) being contested in good faith or (B) as to which adequate
liabilities have been accrued and recorded (determined in accordance with GAAP),
(ii) perform its material obligations under all Authorizations and Material
Contracts, and (iii) comply in all material respects with all Governmental
Rules.
(D) TWI agrees that (i) TWI will not take any action or cause or
permit any of its Subsidiaries to take any action, and will endeavor in good
faith not to permit any event to occur, which would cause or constitute one or
more breaches of the representations or warranties of TWI set forth in Article
2, if such representations and warranties were made at the time of the taking of
such action or the occurrence of such event, which breaches individually or in
the aggregate would reflect a Material Adverse Effect on TWI as compared with
the state of affairs which would exist if all such representations and
warranties were true and correct in all respects at such time; (ii) TWI will,
and will cause its Subsidiaries to, in the event of, and promptly after the
occurrence of, or promptly after becoming aware of the occurrence of or the
impending or threatened occurrence of, any event which would cause or constitute
such a breach or would, if it had occurred immediately prior to the date hereof,
have caused or constituted such a breach of any of the representations and
warranties set forth in said Article 2, give notice thereof to WOI; and (iii)
TWI shall and shall cause its Subsidiaries to use reasonable efforts to prevent
or promptly to remedy any such breach.
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(E) TWI will, and will cause each of its Subsidiaries to, use
reasonable efforts to preserve, protect and maintain its and their rights and
interests in the TWI Channel Leases, FCC Licenses, and Material Contracts,
including, but not limited to, filing or having licensees or permittees file
with the FCC any and all reports, applications or other documents necessary to
preserve the FCC Licenses in full force and effect.
(F) Other than in the ordinary course of business, without WOI's
consent (which consent will not be unreasonably withheld or delayed, with such
reasonableness to be adjudged with respect to the maintenance and development of
TWI's business), TWI will not, and will not cause or permit any of its
Subsidiaries to, enter into, amend in any material respect or terminate, or
agree to enter into, amend in any material respect or terminate, except to
comply with this Agreement, any TWI Channel Lease, FCC License, Application or
Material Contract; provided that TWI or any of its Subsidiaries may enter into
any TWI Channel Lease or make any Application as may be required by the terms
and conditions of any Target Market Existing Agreement.
(G) TWI shall not repurchase, declare or pay any dividends (other than
the amount payable with respect to accrued and unpaid dividends on the TWI
Preferred Shares upon the conversion thereof into TWI Common Shares in
accordance with the terms of the TWI Preferred Stock), or make any other
distributions with respect to its shares of capital stock (including, without
limitation, the TWI Preferred Shares) consisting of cash or marketable
securities or any contribution thereof, nor shall TWI or any of its Subsidiaries
issue, sell or agree to sell any shares of its capital stock, or any securities
convertible into, or options with respect to, or warrants to purchase or rights
to subscribe for, any shares of its capital stock (other than upon conversion of
the TWI Preferred Stock into TWI Common Shares in accordance with the terms of
the TWI Preferred Stock).
(H) TWI will not, and will not cause or permit any of its Subsidiaries
to, sell, lease, transfer or otherwise dispose of any of its assets, except as
provided for by, or contemplated in, this Agreement, or in the ordinary course
of business, or as it may be required to do so as described in any TWI SEC
Filing.
(I) TWI will not, and will not cause any of its Subsidiaries to,
increase in any manner the base compensation of, or enter into any new bonus or
incentive agreement or arrangement with, any of its directors, officers or
employees, pay bonuses to any such director, officer of employee, to the extent
the aggregate of the foregoing for all such persons exceeds $50,000, or pay any
salaries except in the ordinary course of business, except as required under any
existing written employment agreement with any officer, director or employee of
TWI or any Subsidiary of TWI, except with respect to new employees who are
compensated at a rate of less than $50,000 per annum.
(J) TWI shall not transfer, or cause or permit any Subsidiary of TWI
to transfer, any interest in any Subsidiary.
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4.2 ESTOPPEL CERTIFICATES AND CONSENTS. Except as otherwise provided
herein, TWI shall use reasonable efforts to obtain or cause to be made, all
consents, governmental authorizations, approvals and filings necessary by virtue
of the Merger contemplated by this Agreement on or before the Closing Date, so
as to endeavor to ensure (a) that the Surviving Corporation will as of the
Effective Time enjoy all of the rights and privileges currently enjoyed by TWI
and each Subsidiary of TWI under each of the TWI Channel Leases (including,
without limitation, those listed on Schedule 2.10(a)), Licenses and Material
Contracts, (b) that the FCC has consented to the transfer of control to WOI with
respect to each cable antenna relay service license held by TWI or any of its
Subsidiaries or listed on Schedule 2.10(b), (c) that the FCC has consented to
the transfer of control to WOI of each other FCC License held by TWI or any of
its Subsidiaries or listed on Schedule 2.10(b), (d) that the franchising
authorities with jurisdiction over the matters have consented to the transfer of
control to WOI of all cable television franchises of TWI or any of its
Subsidiaries or listed on Schedule 2.10(b), and (e) that the FCC has waived FCC
Rule 21.952(c)(3) so that the consummation of the transactions contemplated by
this Agreement will not cause TWI's or any its Subsidiaries' BTA applications to
be dismissed. WOI will use reasonable efforts to join in and cooperate with the
filing and prosecution of applications for the consents and waivers described in
clauses (b) through (e) above. Upon request of WOI, TWI shall use reasonable
efforts to assist WOI to obtain from each of the other respective parties to
each of such Channel Leases and Material Contracts estoppel certificates in the
form of Exhibit 4.2 ("Estoppel Certificates"), certifying that TWI or a
Subsidiary of TWI, as applicable, is not in breach or violation of or in default
under any of such Channel Leases or Material Contracts and that it will not be
by virtue of the transaction contemplated hereby, and other matters specified
therein.
4.3 RENEWAL OR EXTENSION OF FCC AUTHORIZATIONS. TWI shall, and shall
cause each Subsidiary of TWI to:
(A) timely file, or cause to be filed, all applications, reports and
other submissions in such form and with such information as may be required by
the FCC, including but not limited to renewal applications, applications for
extensions of time to complete construction and Annual FCC Reports, to assure
that all Channels licensed or authorized to either TWI or any Subsidiary of TWI
remain in full force and effect without material adverse alteration or
modification, except to the extent that such alteration or modification results
from changes in the FCC's rules or policies of general applicability. TWI shall
utilize reasonable efforts to prosecute in good faith all applications, reports
and submissions submitted in accordance with this Section 4.3. TWI shall
promptly disclose to WOI any information TWI or any of its Subsidiaries receives
regarding any conditions or circumstances that would cause the FCC to decline to
accept such applications, reports and submissions as may be necessary or
desirable to keep the Licenses in full force and effect.
(B) use reasonable efforts to assure that the licensees or permittees
under the TWI Channel Leases timely file all applications, reports, and other
submissions in such form and with such information as may be required by the
FCC, including, but not limited to, renewal
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applications, applications for extensions of time to complete construction and
Annual FCC Reports, to assure that the FCC Licenses subject to such TWI Channel
Leases remain in full force and effect without material adverse alteration or
modification, except to the extent that such alteration or modification results
from changes in the FCC's rules or policies of general applicability. TWI shall
use its reasonable efforts to assure that the licensees or permittees under the
TWI Channel Leases diligently prosecute in good faith all such applications,
reports and submissions. TWI shall promptly disclose to WOI any information TWI
or any of its Subsidiaries receives regarding any conditions or circumstances
that would cause, or could reasonably be expected cause, the FCC to decline to
issue such authorizations as may be necessary or desirable to keep the Licenses
in full force and effect.
(C) use reasonable efforts to prosecute its FCC Form 175-M application
for MDS Licenses to the extent that it was the high bidder in the MDS BTA
auction, including, without limitation, making all payments with respect thereto
to the United States Treasury, when and as required by applicable Legal
Requirements, and in filing applications for initial BTA authorizations or
statements of intention when and as required by applicable Legal Requirements to
preserve its rights as the high bidder in such BTAs.
4.4 NO SOLICITATION. From and after the date hereof, TWI will not, and
will not authorize any of its Subsidiaries or officers, directors, employees,
agents and other representatives or those of any Subsidiary of TWI
(collectively, "TWI Representatives") to, solicit, initiate or encourage
(including by way of furnishing information) any inquiries or the making of any
proposal which constitutes, or may reasonably be expected to lead to, an
Acquisition Proposal (as defined herein) from any Person or engage in any
discussion or negotiations relating thereto, or accept any Acquisition Proposal.
TWI shall immediately cease and cause to be terminated any existing
solicitation, discussion or negotiation with any parties conducted heretofore by
TWI or any TWI Representatives with respect to any of the foregoing. To the
extent permitted by applicable Legal Requirements, TWI will promptly notify WOI
of any such discussion or negotiations, requests for such information or the
receipt of any Acquisition Proposal, including the identity of the person or
group engaging in such discussions or negotiations requesting such information
or making such Acquisition Proposal, and the material terms and conditions of
any Acquisition Proposal. As used in this Agreement, "Acquisition Proposal"
shall mean any proposal or offer considered by the Board of Directors of TWI to
be bona fide, other than a proposal or offer by WOI or any of its affiliates,
for a tender or exchange offer, a merger, consolidation or other business
combination involving TWI or any Subsidiary of TWI or any proposal to acquire in
any manner (a) a substantial equity interest in TWI or any Subsidiary of TWI,
(b) any rights of TWI or any Subsidiary of TWI to any Channels or (c) any
Wireless Cable Television System.
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4.5 RESIGNATION OF DIRECTORS OF TWI. TWI shall deliver to WOI on the
Closing Date, except as otherwise requested by WOI, the written resignation of
all directors of TWI and each Subsidiary of TWI.
ARTICLE 5. ADDITIONAL AGREEMENTS.
5.1 SHAREHOLDERS MEETING. TWI and WOI shall each take all action
necessary in accordance with applicable Legal Requirements and in accordance
with their respective certificates of incorporation and bylaws to convene a
meeting of their respective stockholders (in the case of WOI, the "WOI
Stockholders Meeting") as promptly as practicable to consider and vote upon the
approval of this Agreement. TWI and WOI each, through its board of directors,
shall recommend to its stockholders (and, if applicable, its lenders) approval
of this Agreement and shall use best efforts to obtain approval and adoption of
this Agreement by such stockholders. Without limiting the foregoing, promptly
following the date of this Agreement, WOI shall prepare and file with the
Securities Exchange Commission (i) a proxy statement relating to the WOI
Stockholders Meeting (as amended from time to time, the "Proxy Statement"). The
Proxy Statement shall include the recommendation of WOI's board of directors
that this Agreement be approved and shall comply with all applicable laws and
regulations. WOI shall use its best efforts to cause the Proxy Statement to be
mailed to the Company's stockholders as promptly as practicable after the date
of this Agreement. WOI and TWI each shall also use its reasonable efforts to
take any action required to be taken under any applicable state securities laws
in connection with the issuance of WOI Common Shares in the Merger. WOI shall
cause all information included in the Proxy Statement to be true and correct in
all material respects and not omit to state any material fact required to be
stated therein or necessary in order to make such information not misleading in
light of the circumstances in which they are made, and WOI agrees to correct any
information in the Proxy Statement as may be required by applicable laws and
regulations. All costs of preparing, distributing and filing the Proxy
Statement and all other incremental costs incurred in obtaining the consent of
WOI's stockholders to the Merger shall be borne in full by WOI. All incremental
costs incurred in obtaining the consent of TWI's stockholders to the Merger
shall be borne in full by TWI. In addition, WOI shall use its best efforts to
obtain the WOI Bondholder Consent (as defined in Section 7.6) as promptly as
practicable, including, without limitation, preparing, obtaining and filing all
necessary documentation, complying with all applicable Legal Requirements and
requirements under the applicable indenture, and paying any consent fees or
other fees or premiums reasonably required by the holders of WOI's 13% Senior
Notes due 2003.
5.2 ACCESS.
(A) WOI and its officers, employees and representatives (including
independent public accountants, investment bankers, environmental consultants
and counsel), as applicable, will at all reasonable times during regular
business hours be permitted reasonable access to the Facilities and TWI's
corporate offices; will be permitted to make copies of or abstracts from all of
the books and records, financial and operating data and other information
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of TWI and each Subsidiary of TWI; and will be permitted to discuss the affairs
and accounts of TWI and each Subsidiary of TWI with the directors, officers,
employees, counsel, and accountants of TWI and each Subsidiary of TWI. Such
investigation shall not, however, affect the representations and warranties of
TWI set forth in Article 2 hereof.
(B) TWI and its officers, employees and representatives (including
independent public accountants, investment bankers, environmental consultants
and counsel), as applicable, will at all reasonable times during regular
business hours be permitted reasonable access to the facilities of WOI and its
Subsidiaries and WOI's corporate offices; will be permitted to make copies of or
abstracts from all of the books and records, financial and operating data and
other information of WOI and each Subsidiary of WOI; and will be permitted to
discuss the affairs and accounts of WOI and each Subsidiary of WOI with the
directors, officers, employees, counsel, and accountants of WOI and each
Subsidiary of WOI. Such investigation shall not, however, affect the
representations and warranties of WOI set forth in Article 3 hereof.
5.3 STOCK OPTIONS.
(A) All TWI Stock Option Plans shall terminate as of the Effective
Time and the provisions in any other plan, program or arrangement providing for
the issuance or grant of any other interest in respect of the capital stock of
TWI or any Subsidiary shall be deleted as of the Effective Time, and TWI shall
take all action necessary to ensure that following the Effective Time no
participant in any TWI Stock Option Plan or other plans, programs or
arrangements shall have any right thereunder to acquire equity securities of
TWI, the Surviving Corporation or any subsidiary thereof, and to terminate all
such rights. A "TWI Stock Option Plan" means any TWI stock option plan for its
directors or employees or the directors or employees of any Subsidiary or any
other person.
(B) At the Closing, upon and in consideration for the surrender,
cancellation and exchange of the Existing Burkhalter Options, WOI will issue to
Henry M. Burkhalter fully-vested options which will entitle him to acquire an
aggregate of 78,015 WOI Common Shares for an exercise price of $6.82 per WOI
Common Share and which will have substantially the same other terms and
conditions as are described in the TWI SEC Filings for the options to acquire
TWI Common Shares which are presently held by Burkhalter (the "Existing
Burkhalter Options").
(C) At the Closing, upon and in consideration for the surrender,
cancellation and exchange of the Existing Byer Options, WOI will issue to Bill
R. Byer, Jr. fully-vested options which will entitle him to acquire an aggregate
of 62,411 WOI Common Shares for an exercise price of $6.82 per WOI Common Share
and which will have substantially the same other terms and conditions as are
described in the TWI SEC Filings for the options to acquire TWI Common Shares
which are presently held by Byer (the "Existing Byer Options").
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(D) At the Closing, upon and in consideration for the surrender,
cancellation and exchange of the Existing Woolhiser Options, WOI will issue to
Laurence O. Woolhiser, Jr. fully-vested options which will entitle him to
acquire an aggregate of 22,000 WOI Common Shares for an exercise price of $6.82
per WOI Common Share and which will have substantially the same other terms and
conditions as are described in the TWI SEC Filings for the options to acquire
TWI Common Shares which are presently held by Woolhiser (the "Existing Woolhiser
Options").
(E) At the Closing, upon and in consideration for the surrender,
cancellation and exchange of the Existing Eilers Options, WOI will issue to
Walter Eilers fully-vested options which will entitle him to acquire an
aggregate of 14,467 WOI Common Shares for an exercise price of $6.82 per WOI
Common Share and which will have substantially the same other terms and
conditions as are described in the TWI SEC Filings for the options to acquire
TWI Common Shares which are presently held by Eilers (the "Existing Eilers
Options").
(F) At the Effective Time, the Existing Burkhalter Options, the
Existing Byer Options, the Existing Woolhiser Options and the Existing Eilers
Options will be canceled. The number of WOI Common Shares covered by the
options described in clauses (b), (c), (d) and (e) above will be proportionately
increased, and the exercise price per share thereunder will be proportionately
reduced, to reflect any stock dividend, stock split or other subdivision of the
WOI Common Shares effected after the date of this Agreement and prior to the
Effective Time. The number of WOI Common Shares covered by the options
described in clauses (b), (c), (d) and (e) above will be proportionately
reduced, and the exercise price per share thereunder will be proportionately
increased, to reflect any reverse stock split or other combination of the WOI
Common Shares effected after the date of this Agreement and prior to the
Effective Time.
5.4 EFFORTS TO CONSUMMATE SPECIFIED ACQUISITIONS. If at the Effective
Time any of the Specified Acquisition has not been consummated and the related
Target Market Existing Agreement has not been terminated, then after the
Effective Time WOI will use, and will cause the Surviving Corporation to use,
reasonable efforts to consummate such Specified Acquisition and to cause the
Market Delivery Requirement to be satisfied with respect to such specified
Acquisition.
5.5 REASONABLE EFFORTS. Upon the terms and subject to the conditions set
forth in this Agreement, each of the parties agrees to use its reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including (a) the obtaining of all necessary
actions or non-actions, waivers, consents and approvals from Governmental
Authorities and the making of all necessary registrations and filings (including
filings with Governmental Entities) and the taking of all reasonable steps as
may be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by any Governmental Entity (including, without limitation, the TWI
BTA Waiver); (b) the obtaining of all necessary consents, approvals or waivers
from third parties
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(including, without limitation, the WOI Bondholder Consent); (c) the defending
of any lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions contemplated
hereby including seeking to have any stay or temporary restraining order entered
by any court or other Governmental Entity vacated or reversed; and (d) the
execution and delivery of any additional instruments necessary to consummate the
transactions contemplated by this Agreement.
5.6 PUBLIC ANNOUNCEMENTS. WOI and MergerSub, on the one hand, and TWI, on
the other hand, will consult with each other before issuing any press release
with respect to the transactions contemplated by this Agreement, and shall not
issue any such press release prior to such consultation, unless otherwise
required under applicable Legal Requirements.
5.7 NOTIFICATION OF CERTAIN MATTERS. TWI shall give to WOI prompt notice
of: (i) any notice of, or other communication relating to, a default or event
that, with notice or lapse of time or both, would become a default, received
subsequent to the date of this Agreement and prior to the Effective Time under
any note, license, agreement or other instrument or obligation other than in
respect of defaults which, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect on TWI; and (ii) any Material
Adverse Effect on TWI or the occurrence of any event which, so far as reasonably
can be foreseen at the time of its occurrence, is reasonably likely to result in
a Material Adverse Effect on TWI. WOI shall give to TWI prompt notice of: (i)
any notice of, or other communication relating to, a default or event that, with
notice or lapse of time or both, would become a default, received subsequent to
the date of this Agreement and prior to the Effective Time under any note,
license, agreement or other instrument or obligation other than in respect of
defaults which, individually or in the aggregate, could reasonably be expected
to result in a Material Adverse Effect on WOI; and (ii) any Material Adverse
Effect on WOI or the occurrence of any event which, so far as reasonably can be
foreseen at the time of its occurrence, is reasonably likely to result in a
Material Adverse Effect on WOI. Each party shall give the other prompt notice
of any written notice or other written communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement.
5.8 HART-SCOTT-RODINO ACT FILING. The parties will cooperate in preparing
and filing any Notification and Report Forms and related material that it may be
required to file with the Federal Trade Commission and the Antitrust Division of
the United States Department of Justice under the HSR Act, and will use their
respective best efforts to obtain an early termination of the applicable waiting
period, and will make any further filings pursuant thereto that may be
necessary, proper, or advisable with respect to the transactions contemplated
hereby.
5.9 ACQUISITION OF TARGET MARKETS. Notwithstanding any provisions
contained herein to the contrary, TWI shall have the right to acquire the
Wireless Cable Television System and related assets servicing the Target Markets
pursuant to the terms of the Target Markets' Existing Agreements, as the same
may be amended; provided that (i) TWI shall keep WOI fully informed regarding
the status of any negotiations regarding the acquisition of the Target Markets,
and (ii)
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WOI shall have the right to approve any material amendment or waiver of any
matter regarding or material condition of any Target Market Existing Agreement.
5.10 TERMINATION OF CERTAIN AGREEMENTS. On the Closing Date and at the
request of WOI, TWI shall terminate any items described on Schedule 2.9
Affiliate Agreements and employment or other management agreements designated by
WOI.
5.11 EXCESS CONSENTS. If on the date which is six months after the Closing
Date any Channel described in the TWI SEC Filings for any Owned Market is not a
Good Channel (any such Channel being an "Adjustment Channel"), then WOI shall
have recourse to the WOI Common Shares held pursuant to the General Escrow
Agreement (the "General Escrow Shares") in accordance with the terms of the
General Escrow Agreement. In such event, General Escrow Shares having an
aggregate Exchange Price equal to the Stipulated Consent Amount for such
Adjustment Channel shall be delivered to WOI, as further provided in the General
Escrow Agreement.
5.12 WOI LOAN. Promptly after the date of this Agreement, TWI and WOI will
enter into a loan agreement having terms and conditions, and in a form,
reasonably acceptable to TWI and WOI providing for loans (collectively, the
"Bridge Loan") to TWI and its Subsidiaries and having material terms which
include those set forth on the attached Exhibit 5.11.
5.13 PAYMENT OF CERTAIN AMOUNTS. Immediately following the Effective Time,
WOI or the Surviving Corporation shall satisfy TWI's present obligation to pay
$4.5 million to Vision Communications, Inc. ("VCI") by delivery of (i)
$1,800,000 in cash and (ii) 180,000 WOI Common Shares (the "VCI WOI Shares").
WOI's obligations set forth in this Section 5.13 shall be subject to VCI
executing on the Closing Date (i) a Stockholder Letter, and (ii) the Amended
Agreements, with respect to the VCI WOI Shares so issued.
5.14 CAPITAL STRUCTURE. Prior to the Effective Time, TWI shall not alter
its capital structure by stock split, stock dividend, recapitalization or other
event. This Section 5.14 shall not be deemed to prohibit the conversion of the
TWI Preferred Shares into TWI Common Shares in accordance with the terms of the
TWI Preferred Stock.
5.15 GUARANTY OF INTERIM FACILITY. From and after the Effective Time, WOI
hereby guarantees the payment in full by the Surviving Corporation of the
principal amount of, and interest in respect of, the "Interim Facility," as that
term is defined in the TWI SEC Filings. Chase Venture Capital Associates is an
express, third-party beneficiary of the agreement of WOI set forth in this
Section 5.15.
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ARTICLE 6. CONDITIONS PRECEDENT TO MERGER.
The obligation of the parties hereto to consummate the Merger is subject to
fulfillment, or written waiver signed by all parties hereto, of each of the
following conditions precedent on or prior to the Closing Date or the date
specified therein.
6.1 SECURITIES MATTERS. All necessary state securities or blue sky
authorizations shall have been received.
6.2 NO ORDER. No Governmental Authority or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order or
Legal Requirement (whether temporary, preliminary or permanent) which is then in
effect and has the effect of prohibiting the Merger or any of the transactions
contemplated hereby or otherwise making the consummation of the Merger or any of
the transactions contemplated hereby illegal.
6.3 OTHER APPROVALS. The waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been terminated and all
filings required to be made prior to the Effective Time with, and all consents,
approvals, permits and authorizations required to be obtained prior to the
Effective Time from, any Governmental Authority in connection with the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby by TWI, WOI and MergerSub, shall have been made or obtained
(as the case may be) without restrictions.
ARTICLE 7. CONDITIONS PRECEDENT TO CLOSING BY WOI AND MERGERSUB.
The obligations of WOI and MergerSub to consummate the Merger are subject
to fulfillment, or written waiver signed by WOI and MergerSub, of each of the
following conditions precedent on or prior to the Closing Date.
7.1 STOCKHOLDER APPROVAL. The Merger shall have been approved by the
requisite vote of the holders of WOI Common Shares in accordance with applicable
Legal Requirements, its Certificate of Incorporation and Bylaws or any rule or
regulation of any securities exchange or market upon which WOI's securities are
traded or quoted.
7.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by TWI shall be true and correct in all material respects when made and
shall be true and correct in all respects as if originally made on and as of the
Closing Date (except as to such matters which have arisen or occurred, or any
actions taken, since the date of this Agreement and which, in the aggregate, do
not reflect a Material Adverse Effect on TWI as compared with the state of
affairs which would exist if all such representations and warranties were true
and correct in all respects as if originally made on and as of the Closing
Date).
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7.3 TWI DOCUMENTS. TWI shall have delivered the following to WOI in form
and substance satisfactory to WOI and its counsel:
(A) A certificate signed by the chief executive officer of TWI, on
behalf of and in his capacity as an officer of TWI, confirming, on and as of the
Closing Date, that each representation and warranty set forth in Article 2
hereof was true and correct on the date made and is true and correct on and as
of the Closing Date (in each case, other than as set forth in such certificate)
and that TWI is in compliance with the applicable covenants set forth in
Articles 4 and 5 (other than as set forth in such certificate).
(B) An opinion of corporate and FCC counsel to TWI and each Subsidiary
of TWI in form reasonably acceptable to WOI.
(C) The minute books, bylaws, certificate of incorporation and other
organizational documents of TWI and each Subsidiary of TWI.
(D) An Estoppel Certificate from Mississippi EdNet Institute, Inc.
with respect to the "EdNet Agreement" referred to in the TWI SEC Filings.
(E) (i) Waiver of Rule 21.952(c)(3) of the FCC with respect to TWI's
BTA Applications (the "TWI BTA Waiver"); and
(ii) A "final" order by the FCC consenting, without any
materially adverse or onerous condition, to the transfers of control of FCC
Licenses described in Section 4.2. For purposes of this Section, the term
"final" shall mean an order of the FCC which has not been stayed and, by lapse
of time or otherwise, is no longer subject to administrative or judicial
reconsideration, review, appeal or stay.
(F) The resignations described in Section 4.5.
7.4 NO MATERIAL ADVERSE CHANGE. No change shall have occurred with
respect to TWI or any Subsidiary of TWI, or their respective assets, from the
date hereof through the Closing Date which would have a Material Adverse Effect
on TWI.
7.5 ABSENCE OF DISSENTERS' RIGHTS. The Merger shall be approved by all of
the holders of TWI Common Shares issued and outstanding at the Effective Time.
7.6 BONDHOLDERS' CONSENTS. WOI shall have obtained on or before the
Effective Time written consent and/or approval of the Merger, and the related
transactions contemplated by this Agreement, by the holders of the $150,000,000
of 13% Senior Notes due 2003 of WOI (the "WOI Bondholder Consent").
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7.7 TWI OBLIGATIONS PERFORMED. All obligations of TWI to be performed
hereunder through and including the Closing Date shall have been performed in
all material respects.
7.8 STOCK OPTIONS. Each of the Existing Burkhalter Options, the Existing
Byer Options, the Existing Eilers Options and the Existing Woolhiser Options
shall have been surrendered as provided in Section 5.3, and each other stock
option and warrant to purchase TWI Common Shares that has not been exercised
prior to the Effective Time shall have been exercised, canceled or otherwise
terminated.
7.9 TWI PREFERRED STOCK. Each TWI Preferred Share shall have been
converted into TWI Common Shares prior to the Effective Time.
7.10 [RESERVED.]
7.11 STOCKHOLDER DOCUMENTS. Each holder of TWI Common Shares at the
Effective Time (the "TWI Stockholders") shall have executed and delivered to WOI
(a) the General Escrow Agreement, (b) a Stockholder Letter, (c) the Amended
Agreements, (d) the Acquisition Escrow Agreement, if there is any Acquisition
Contingent Amount, and (e) the Market Delivery Escrow Agreement, if the Market
Delivery Requirement is not satisfied with respect to any Owed Market as of the
Effective Time. VCI shall have executed and delivered to WOI the Amended
Agreements and a Stockholder Letter.
7.12 [RESERVED.]
7.13 [RESERVED.]
7.14 [RESERVED.]
7.15 EMPLOYMENT AGREEMENTS. Henry Burkhalter and Bill R. Byer, Jr. shall
have executed employment agreements in the form attached hereto as Exhibit
7.15(a) and 7.15(b), respectively, which agreements shall supersede (and
terminate) any prior employment agreements between such parties and TWI and its
Subsidiaries (collectively, the "Amended Employment Agreements").
ARTICLE 8. CONDITIONS PRECEDENT TO CLOSING BY TWI.
The obligation of TWI to consummate the Merger is subject to fulfillment,
or written waiver signed by TWI, of each of the following conditions precedent
on or prior to the Closing Date.
8.1 STOCKHOLDER APPROVAL. The Merger shall have been approved by the
requisite vote of the holders of the TWI Common Shares in accordance with
applicable Legal Requirements and its Certificate of Incorporation and Bylaws.
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8.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by WOI and/or MergerSub shall be true and correct in all material respects
when made and shall be true and correct in all respects as if originally made on
and as of the Closing Date (except as to such matters which have arisen or
occurred, or any actions taken, since the date of this Agreement and which, in
the aggregate, do not reflect a Material Adverse Effect on WOI as compared with
the state of affairs which would exist if all such representations and
warranties were true and correct in all respects as if originally made on and as
of the Closing Date).
8.3 WOI AND/OR MERGERSUB DOCUMENTS. WOI and/or MergerSub, as the
applicable case may be, shall have executed and delivered to TWI in form and
substance satisfactory to TWI and to counsel:
(A) A certificate signed by the chief executive officer of WOI and
MergerSub, on behalf of and in his respective capacity as an officer of WOI or
MergerSub, confirming, on and as of the Closing Date, that each of the
representations and warranties set forth in Article 3 hereof was true and
correct on the date made and is true and correct on and as of the Closing Date
(in each case, other than as set forth in such certificate), and that WOI and
MergerSub are in compliance with their respective covenants set forth in
Articles 4 and 5 (other than as set forth in such certificate).
(B) An opinion of corporate counsel to WOI and/or MergerSub in forms
reasonably acceptable to TWI.
(C) The General Escrow Agreement (and the Acquisition Escrow
Agreement, if there is any Acquisition Contingent Amount, and the Market
Delivery Escrow Agreement, if the Market Delivery Requirement is not satisfied
with respect to any Owned Market as of the Effective Time), executed by WOI or
the Acquisition Escrow Agent, as the case may be.
(D) The Amended Agreements, executed by WOI and each WOI Initial
Stockholder.
(E) The Amended Employment Agreements, executed by WOI.
(F) A certificate substantially in the form of the attached Exhibit
8.3, executed by WOI.
8.4 WOI AND MERGERSUB OBLIGATIONS PERFORMED. All obligations of WOI and
MergerSub to be performed hereunder through and including the Closing Date shall
have been performed in all material respects.
8.5 NO MATERIAL ADVERSE CHANGE. No change shall have occurred with
respect to WOI or any Subsidiaries of WOI, or their respective assets, from the
date hereof through the
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Closing Date which could reasonably be expected to have a Material Adverse
Effect on WOI or any Subsidiaries of WOI.
ARTICLE 9. TERMINATION.
9.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated and
may be abandoned at any time prior to the Effective Time, before or after the
approval of this Agreement by the stockholders of TWI and WOI, by the mutual
consent of WOI, MergerSub and TWI.
9.2 TERMINATION BY TWI. This Agreement may be terminated and the Merger
may be abandoned by TWI if the Closing conditions set forth in Articles 6 and 8
shall not have been satisfied in full or waived on or before December 31, 1996.
9.3 TERMINATION BY WOI OR MERGERSUB. This Agreement may be terminated and
the Merger may be abandoned by WOI or MergerSub if the Closing conditions set
forth in Articles 6 and 7 shall not have been satisfied in full or waived on or
before December 31, 1996.
9.4 EFFECT OF TERMINATION AND ABANDONMENT.
(A) In the event of the termination of this Agreement and the
abandonment of the Merger pursuant to this Article 9, the remedies set forth
below shall constitute the minimum Damages payable by a party hereunder with
regard to the circumstances set forth therein. The amounts set forth below are
minimum amounts payable hereunder, and nothing contained herein shall preclude
any party from pursuing Damages in excess of the amounts set forth below or
pursuing any equitable remedies.
(B) In the event that this Agreement is terminated solely as a result
of the failure of one or more of the conditions set forth in Sections 7.2, 7.3,
7.5, 7.7, 7.8, 7.9, 7.11, 7.15 or 8.1, or if TWI is obligated to, but does not,
consummate the Merger, then TWI shall deliver to WOI the TWI Default Shares.
The TWI Default Shares shall mean 204,545 TWI Common Shares (subject to
adjustment for any stock split, recapitalization, or related event) plus an
additional number of TWI Common Shares equal to the TWI IPO Adjustment Shares.
The "TWI IPO Adjustment Shares" shall mean additional TWI Common Shares to be
issued upon consummation of any initial public offering of TWI Common Shares
effected following the termination of this Agreement or such failure to
consummate the Merger and prior to the third anniversary of the date of this
Agreement at a price ("IPO Price") less than $11.00 per share (adjusted for
stock splits, recapitalizations and other events) determined as follows: the
product of (a)(i) $11.00 divided by the IPO Price, minus (ii) $1.00, multiplied
by (b) 204,545. The TWI Default Shares shall be issued in a private placement,
with one long-form, and (when, as and if available under applicable Legal
Requirements) one short-form, demand registration right similar to those set
forth in the Stockholders Agreement described in the TWI SEC Filings.
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(C) In the event that this Agreement is terminated solely as a result
of the failure of one or more of the conditions set forth in Sections 7.1, 7.6,
8.2, 8.3 or 8.4, or if WOI is obligated to, but does not, cause MergerSub to
consummate the Merger, then WOI shall deliver to TWI a number of WOI Common
Shares which is equal to $2,250,000 divided by the lesser of (i) the Exchange
Price and (ii) the WOI Market Price determined as of the last day prior to such
delivery. Such shares shall be issued in a private placement, with demand
registration rights similar to those set forth in the Amended Agreements for the
"TruVision Registrable Securities" described therein.
ARTICLE 10. CONDITIONS FOR RELEASE OR ISSUANCE OF GENERAL CONTINGENT AMOUNT
AND WOI CONTINGENT AMOUNT.
10.1 PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES; INDEMNIFICATIONS.
The statements, certifications, representations and warranties made by
TWI in this Agreement, and any schedule or in any exhibit, certificate, or other
instrument delivered by or on behalf of TWI or any Subsidiary of TWI pursuant to
this Agreement shall survive the Merger for a period of six (6) months from the
Closing Date. TWI shall indemnify and hold WOI and Merger Sub and their
respective officers and directors ("WOI Indemnitees") harmless from any and all
Damages relating to or arising from any material breach or material non-
performance of any representation or warranty or covenant of TWI contained in
this Agreement. The statements, certifications, representations and warranties
made by WOI and MergerSub in this Agreement, and any schedule or in any exhibit,
certificate, or other instrument delivered by or on behalf of WOI or any
Subsidiary of WOI pursuant to this Agreement shall survive the Merger for a
period of six (6) months from the Closing Date. WOI shall indemnify and hold
the TWI Stockholders and their respective officers, partners and directors ("TWI
Indemnitees") harmless from any and all Damages relating to or arising from any
material breach or material non-performance of any representation or warranty or
covenant of WOI or MergerSub contained in this Agreement.
10.2 GENERAL CONTINGENT AMOUNT; CONSENTS. The General Contingent Amount
shall be held by the General Escrow Agent pursuant to the terms of the General
Escrow Agreement, which shall remain in effect until the expiration of the
General Escrow Period. The indemnification obligations of TWI shall be limited
to and satisfied solely from the General Contingent Amount in accordance with
the terms of the General Escrow Agreement. Upon the expiration of the General
Escrow Period, the General Contingent Amount to be received by each former
holder of TWI Common Shares shall be proportionately reduced by the amount of
the Claims properly charged against the General Contingent Amount in accordance
with the terms of the General Escrow Agreement and by the Stipulated Consent
Amount for all Adjustment Channels. WOI acknowledges and agrees that there
shall be no remedy or other recourse by WOI or MergerSub, or its successors or
assigns, against TWI or its shareholders, or their successors and assigns of any
nature whatsoever, including, but not limited to breaches of
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representations, warranties or covenants of this Agreement, other than the
General Contingent Amount and other than for fraud, and that the General
Contingent Amount shall be the sole remedy and recourse by WOI or MergerSub
against TWI or its shareholders.
10.3 WOI CONTINGENT AMOUNT. The indemnification obligations of WOI
shall be limited to and satisfied solely by the issuance by WOI of WOI Common
Shares in quantities such that the aggregate Exchange Price of the shares so
issued is equal to the aggregate amount of the Damages deemed paid or satisfied
thereby; provided that in no event will WOI be required to issue pursuant to
this Section 10.3 WOI Common Shares having an aggregate Exchange Price in excess
of $2,530,000. Any dispute as to the indemnity obligations of WOI pursuant to
this Section 10.3 which cannot be resolved by WOI and the "Stockholder
Representative" referred to in General Escrow Agreement (any which resolution
will be binding upon WOI and the TWI Stockholders) will be resolved in the
manner provided in Section 3.3(c) of the General Escrow Agreement. There shall
be no remedy or other recourse by any TWI Stockholder, or of its successors or
assigns, against WOI or its shareholders, or their successors and assigns of any
nature whatsoever, including, but not limited to breaches of representations,
warranties or covenants of this Agreement to be performed by WOI prior to the
Effective Time, other than the WOI Contingent Amount and other than for fraud,
and the WOI Contingent Amount shall be the sole remedy and recourse by the TWI
Stockholders against WOI, MergerSub or their respective shareholders.
ARTICLE 11. DEFINITIONS.
11.1 The terms used in this Agreement have the respective meanings
specified or referred to in this Article 12:
"ACQUISITION CONTINGENT AMOUNTS" shall have the meaning set forth in
Section 1.2(b).
"ACQUISITION ESCROW AGENT" means the "Escrow Agent" referred to in the
Acquisition Escrow Agreement.
"ACQUISITION ESCROW AGREEMENT" shall have the meaning set forth in Section
1.2(h).
"ACQUISITION PROPOSAL" shall have the meaning set forth in Section 4.4.
"ACT" means The Communications Act of 1934, as amended.
"ADJUSTMENT AMOUNT" shall have the meaning set forth in Section 1.2(c).
"ADJUSTMENT SHARES" shall have the meaning set forth in Section 1.2(c).
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"AFFILIATE" means with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such Person, and any other Person who or which, directly or indirectly, has any
equity interest in such Person, is a director, officer or employee of such
Person, or a member of the immediate family of any of the foregoing Persons,
whether or not living under the same roof with such Person.
"AGGREGATE INITIAL SHARE AMOUNT" means 3,373,333, as such amount may be
proportionately increased to reflect any stock dividend, stock split or other
subdivision of the WOI Common Shares which may be effected after the date of
this Agreement and prior to the Effective Time, and as such amount may be
proportionately decreased to reflect any reverse stock split or other
combination of the WOI Common Shares which may be effected after the date of
this Agreement and prior to the Effective Time.
"AMENDED AGREEMENTS" shall have the meaning set forth in Section 1.2(j).
"AMENDED EMPLOYMENT AGREEMENTS" shall have the meaning set forth in Section
7.15.
"ANNUAL FCC REPORT" means the reports which a licensee in the MDS service
is required to file annually with the FCC pursuant to Section 21.911 of the FCC
Rules.
"APPLICATION" means a pending application by TWI or any Subsidiary of TWI
or Institution or other Person to the FCC for a License in any Market.
"AUTHORIZATION" means any license, permit, authorization, franchise, grant,
registration, certificate, consent and waiver awarded to a Person (or which a
Person has the right to acquire in any market) by a Governmental Authority which
is used, useable or held for use in or in conjunction with or otherwise
associated with the provision of wireless cable services.
"BASE SHARES" shall have the meaning set forth in Section 1.2(c).
"BONA FIDE SUBSCRIBER" means a customer or subscriber receiving and paying
for (either as an individual subscriber or as an "equivalent subscriber")
regular monthly basic wireless cable television services of TWI or a Subsidiary
of TWI in an Existing Market, who has paid for at least one month of basic
service at the normal rate applicable to such customer or subscriber, and whose
account receivable for such service does not include any amount overdue (and for
which a bill has been or should have been received by such subscriber) for more
than a total of 75 days' subscription service, except for (i) customers or
subscribers repaying such balances in accordance with a reasonable repayment
arrangement with the Company or (ii) institutional customers or subscribers that
the Company has reasonably determined are not credit risks. Any
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inactive subscriber or active subscriber whose accounts receivable balance
included any amount overdue in excess of 75 days as of March 31, 1996 who
becomes current and (if disconnected) whose service is reconnected prior to
Closing will also be considered a Bona Fide Subscriber. For purposes of this
definition, the number of "equivalent subscribers" in a given multiple dwelling
unit means (i) the number of subscribers in such multiple dwelling unit, times
(ii) the basic bulk rate for such subscribers, divided by (iii) the basic
service rate for individual subscribers in the applicable market.
"BRIDGE LOAN" shall have the meaning set forth in Section 5.12.
"BTA" shall have the meaning set forth in Section 2.10(c).
"CERTIFICATES" shall have the meaning set forth in Section 1.2(i).
"CHANNEL" means a frequency band which may be licensed by the FCC to an
eligible Person for the provision of ITFS, MDS or MMDS service in any Market.
"CHANNEL LEASE" means an agreement pursuant to which the channel capacity
licensed or to be licensed under an Authorization has been leased to TWI, WOI or
a Subsidiary of TWI or WOI or which TWI or a Subsidiary of TWI otherwise has
rights to acquire in any Market.
"CLOSE" OR "CLOSING" means the consummation of the transactions
contemplated in Article 1 hereof as provided for in Section 1.3.
"CLOSING DATE" means the date on which the Closing shall occur as provided
for in Section 1.3.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONSENTS" means the consents (including, without limitation, FCC
Consents), approvals, authorizations, and waivers of any public, government, or
regulatory body, authority, agency, or unit and any and all consents, approvals,
authorizations and waivers from parties to any of the Material Contracts or any
other Person that are (i) required for the lawful consummation of this Agreement
and/or any other transaction contemplated by this Agreement, or (ii) necessary
for WOI and its Subsidiaries to conduct the operations currently conducted by
TWI and its Subsidiaries or to consummate the acquisition of the Target Markets
and fulfill their other obligations after the Closing.
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"COPYRIGHT ACT" means the Copyright Act of 1976, as amended.
"COPYRIGHT OFFICE" means the United States Copyright Office of the Library
of Congress.
"COPYRIGHT RULES" means the rules and regulations promulgated by the
Copyright Office under authority of the Copyright Act, as set forth in Part 201,
Volume 37 of the Code of Federal Regulations.
"DAMAGES" means all losses, obligations, liabilities, settlement payments,
awards, judgments, fines, penalties, damages, deficiencies, court costs, costs
of arbitration or administrative proceedings, attorneys' fees and other
reasonable expenses and costs.
"DGCL" means the Delaware General Corporation Law.
"EFFECTIVE TIME" shall mean the date and time of the filing of the
applicable certificate of merger in the State of Delaware.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESTOPPEL CERTIFICATE" shall have the meaning set forth in Section 4.2.
"EXCHANGE PRICE" means $15.00, as such amount may be proportionately
decreased to reflect any stock dividend, stock split or other subdivision of the
WOI Common Shares which may be effected after the date of this Agreement and
prior to the Effective Time, and as such amount may be proportionately increased
to reflect any reverse stock split or other combination of the WOI Common Shares
which may be effected after the date of this Agreement and prior to the
Effective Time.
"EXISTING MARKETS" shall mean Jackson, Delta, Gulf Coast, Tupelo,
Hattiesburg, Natchez, Meridian, Starkville and Oxford, Mississippi and Demopolis
and Tuscaloosa, Alabama.
"FAA" means the Federal Aviation Administration or any successor
agency(ies) with jurisdiction over towers and other antenna structures.
"FAA RULES" means the rules promulgated by the FAA and applicable to
antenna towers and other structures.
"FCC" means the Federal Communications Commission.
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"FCC CONSENT" shall mean the consent of the FCC to the transfer of
control or assignment of any MDS and MMDS License.
"FCC LICENSE" shall mean an FCC-issued Authorization to construct and/or
operate a MDS, MMDS, low power television or ITFS facility, including any
special temporary authority.
"FCC PROCEEDING" means a Proceeding relating to Applications or Licenses.
"FCC RULES" means the rules and regulations promulgated by the FCC under
authority of the Act, as set forth in Volume 47 of the Code of Federal
Regulations.
"FLIPPIN ACQUISITION" means the purchase and sale of assets relating to the
Flippin, Tennessee market pursuant to the Flippin Purchase Agreement.
"FLIPPIN PURCHASE AGREEMENT" means the Purchase and Sale Agreement dated as
of November 7, 1995 between TWI and Heartland Wireless Communications, Inc., as
such Agreement may be amended or otherwise modified after the date of this
Agreement as permitted by this Agreement and prior to the Effective Time or
after the Effective Time.
"GAAP" means generally accepted accounting principles in effect as of the
applicable time or the date of any financial statements in the United States of
America. The term "generally accepted accounting principles" shall mean
accounting principles which are (a) consistent with the principles promulgated
or adopted by the Financial Accounting Standards Board and its predecessors as
generally accepted accounting principles, and (b) such that a certified public
accountant would, insofar as the use of accounting principles is pertinent, be
in a position to deliver an unqualified opinion as to financial statements in
which such principles have been properly applied.
"GAAP DEBT" means indebtedness for borrowed money (other than indebtedness
to the United States government incurred in connection with the "BTA Auction"
referred to in the TWI SEC Filings) on March 31, 1996 which would be properly
reportable as such on a consolidated balance sheet for TWI and its Subsidiaries
prepared in accordance with GAAP.
"GADSDEN ACQUISITION" means the purchase and sale of assets relating to the
Gadsden, Alabama market pursuant to the Flippin Purchase Agreement.
"GADSDEN CONTINGENT AMOUNT" shall have the meaning set forth in Section
1.2(b).
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"GADSDEN PURCHASE AGREEMENT" means the Purchase and Sale Agreement
dated as of February 15, 1996 between TWI and Gadsden Wireless Cable
Corporation, Inc., as such Agreement may be amended or otherwise modified after
the date of this Agreement as permitted by this Agreement and prior to the
Effective Time or after the Effective Time.
"GENERAL CONTINGENT AMOUNT" shall have the meaning set forth in Section
1.2(b).
"GENERAL ESCROW AGENT" means the "Escrow Agent" referred to in the General
Escrow Agreement.
"GENERAL ESCROW AGREEMENT" shall have the meaning set forth in Section
1.2(h).
"GENERAL ESCROW PERIOD" means the "Escrow Period," as that term is defined
in the General Escrow Agreement.
"GENERAL ESCROW SHARES" has the meaning set forth in Section 5.11.
"GOOD CHANNEL" has the meaning set forth in Section 1.2(b).
"GOVERNMENTAL AUTHORITY" means any federal, state, local, municipal,
foreign or other government or any federal, state or local regulatory authority.
"GRANTED LICENSE" has the meaning set forth in Section 1.2(b).
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976.
"HUNTSVILLE ACQUISITION" means the purchase and sale of assets relating to
the Huntsville, Alabama market pursuant to the Huntsville Purchase Agreement.
"HUNTSVILLE CONTINGENT AMOUNT" shall have the meaning set forth in Section
1.2(b).
"HUNTSVILLE PURCHASE AGREEMENT" means the Purchase and Sale Agreement dated
as of February 6, 1996 among TWI, Madison Communications, Inc. and Beasley
Communications, Inc., as such Agreement may be amended or otherwise modified
after the date of this Agreement and prior to the Effective Time as permitted by
this Agreement or after the Effective Time.
"INSTITUTION" shall mean an accredited institution or a governmental
organization engaged in the formal education of enrolled students, or a non-
profit organization whose
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purposes are educational, which is a qualified applicant for any Channel and has
entered into a Channel Lease.
"IRS" means the Internal Revenue Service.
"ITFS" means Instructional Television Fixed Service.
"JACKSON ACQUISITION" means the purchase and sale of assets relating to the
Jackson, Tennessee market pursuant to the Jackson Purchase Agreement.
"JACKSON CONTINGENT AMOUNT" shall have the meaning set forth in Section
1.2(b).
"JACKSON PURCHASE AGREEMENT" means the Purchase and Sale Agreement dated
February 7, 1996 between TWI and SkyView Wireless Cable, Inc., as such Agreement
may be amended or otherwise modified after the date of this Agreement as
permitted by this Agreement and prior to the Effective Time or after the
Effective Time.
"JOINT VENTURE" means a joint venture, partnership, limited liability
company or other similar arrangement, whether in corporate, partnership or other
legal form; provided that in no event shall any corporate Subsidiary of any
Person be considered a Joint Venture to which such Person is a party.
"LEGAL REQUIREMENT" means any federal, state, local, municipal, foreign or
other law, statute, legislation, act, constitution, ordinance, code, treaty,
rule, regulation or FCC guideline applicable to or against TWI or any Subsidiary
of TWI, or to which TWI will become subject upon the acquisition of any Target
Market or Other Market.
"LIABILITIES" means damages, obligations, claims, demands, judgments or
settlements of any nature or kind, known or unknown, fixed, accrued, absolute or
contingent, liquidated or unliquidated, including all costs and expenses (legal,
accounting or otherwise).
"LICENSES" means all FCC licenses, conditional licenses, construction
permits, authorizations and approvals which are required to transmit commercial
programming, educational programming or any other use currently authorized by
any legal requirement.
"LIENS" means any lien, pledge, hypothecation, charge, mortgage, deed of
trust, security interest or encumbrance against any assets or properties of any
Person or any of its Subsidiaries (or assets or properties that any Person or
any of its Subsidiaries has rights to acquire).
"MARKETS" means the Existing Markets and Target Markets, or any of them.
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<PAGE>
"MARKET DELIVERY CONTINGENT SHARES" shall have the meaning set forth
in Section 1.2(b).
"MARKET DELIVERY ESCROW AGENT" shall have the meaning set forth in Section
1.2(h).
"MARKET DELIVERY ESCROW AGREEMENT" shall have the meaning set forth in
Section 1.2(h).
"MARKET DELIVERY REQUIREMENT" shall have the meaning set forth in Section
1.2(b).
"MATERIAL ADVERSE EFFECT" with respect to any Person means any event or
circumstance which results in or is reasonably likely to result in a material
adverse change in (i) the financial condition, business, operations or
properties of such person and its Subsidiaries, taken as a whole, other than
general economic change over which neither such person nor any Subsidiary of
such person has control; (ii) the ability of such person or any Subsidiary of
such person prior to the Effective Time to perform its obligations under this
Agreement, or (iii) the validity or enforceability of this Agreement.
"MATERIAL CONTRACTS" shall mean the Target Market Existing Agreements, the
"EdNet Agreement" referred to in the TWI SEC Filings, and any agreement the
termination of which prior to the end of its stated term, or the breach or
default under which by any person, could reasonably be expected to have a
Material Adverse Effect on TWI.
"MDS" shall mean a Multipoint Distribution Service, including (unless
otherwise specified) the former Operational Fixed Service ("OFS") H-channels.
"MEMPHIS ACQUISITION" means the purchase and sale of assets relating to the
Memphis, Tennessee market pursuant to the Memphis Purchase Agreement.
"MEMPHIS CONTINGENT AMOUNT" shall have the meaning set forth in Section
1.2(b).
"MEMPHIS PURCHASE AGREEMENT" means the Purchase and Sale Agreement dated as
of November 7, 1995 between TWI and American Wireless Systems, Inc., as such
Agreement may be amended or otherwise modified after the date of this Agreement
as permitted by this Agreement and prior to the Effective Time or after the
Effective Time.
"MERGER" means the merger described in the recitals.
"MERGER SHARES" shall have the meaning set forth in Section 1.2(c).
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<PAGE>
"MMDS" means the Multichannel Multipoint Distribution Service.
"NET GAAP DEBT" means (i) GAAP Debt minus (ii) cash of TWI and its
Subsidiaries as of March 31, 1996 on a consolidated basis in accordance with
GAAP.
"NON-CONTINGENT AMOUNT" shall have the meaning set forth in Section 1.2(b).
"ORDER" means any order, judgment, injunction, or FCC ruling issued, made,
entered or rendered by any court, administrative agency or other Governmental
Authority or by any arbitrator as to which a person or any Subsidiary of such
person is a party or will become a party upon this consummation of any
acquisition in a Target Market or Other Market.
"OTHER MARKETS" shall mean Chattanooga, Tennessee; Hot Springs, Arkansas;
Lawrenceburg, Tennessee; and Jacksonville, North Carolina.
"OUTSTANDING TWI SHARES" shall have the meaning set forth in Section
1.2(d).
"OWNED MARKET" means each Existing Market (other than Tuscaloosa, Alabama)
and (a) Flippin, Tennessee, if the Flippin Acquisition is consummated prior to
the Effective Time, (b) Gadsden, Alabama, if the Gadsden Acquisition is
consummated prior to the Effective Time, (c) Huntsville, Alabama, if the
Huntsville Acquisition is consummated prior to the Effective Time, (d) Jackson,
Tennessee, if the Jackson Acquisition is consummated prior to the Effective
Time, and (e) Memphis, Tennessee, if the Memphis Acquisition is consummated
prior to the Effective Time.
"PBGC" shall have the meaning set forth in Section 2.6.
"PERMITTED NET GAAP DEBT" means $10,050,000.
"PERSON" OR "PERSON" means any individual, corporation, partnership, joint
venture, estate, trust, cooperative, foundation, union, syndicate, league,
consortium, coalition, committee, society, firm, company or other enterprise,
association, organization or other entity or Governmental Authority.
"PER-SHARE PORTION" for any Outstanding TWI Share means 1.0 divided by the
number of Outstanding TWI Shares.
"PRIOR OFFERING EXPENSES" means all costs and expenses of TWI paid or
accrued through the date hereof associated with the preparation of the TWI SEC
Filings and the proposed sale of securities of TWI to be registered thereunder,
other than accounting and engineering costs.
B-41
<PAGE>
"PROCEEDING" means any suit, litigation, arbitration, proceeding
(including any civil, criminal, administrative, investigative or appellate
proceeding or FCC Proceeding).
"PROXY STATEMENT" shall have the meaning set forth in Section 5.1.
"REQUIRED CONSENTS" means, with respect to each Wireless Cable Television
System, Consents with respect to twelve (12) authorized Channels in the
applicable Market.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SEVERANCE OBLIGATIONS" shall have the meaning set forth in Section 2.9.
"SITE" means a wireless cable television site with respect to which TWI is
operating or has rights to acquire a Wireless Cable Business and transmitting
programming to subscribers in connection therewith.
"SPECIFIED ACQUISITIONS" means the Flippin Acquisition, the Gadsden
Acquisition, the Huntsville Acquisition, the Jackson Acquisition and the Memphis
Acquisition.
"SITE LEASE" shall mean an agreement for the lease of real estate or tower
space permitting the construction of a transmitter on a Site.
"SITE OPTION" shall mean an option or right to obtain a Site Lease.
"SPECIFIED MARKETS" shall mean Flippin, Tennessee, Memphis, Tennessee,
Huntsville, Alabama, Jackson, Tennessee and Gadsden, Alabama.
"STIPULATED CONSENT AMOUNT" for any Adjustment Channel means the product of
(a) a fraction, the numerator of which is one and the denominator of which is
the number of "Channels" set forth for the Market to which such Adjustment
Channel relates on the attached Schedule A, multiplied by (b) $43.00, and
further multiplied by (c) the number of "LOS Households" set forth for such
Market on the attached Schedule A.
"STOCKHOLDER LETTER" shall have the meaning set forth in Section 1.2(i).
"SUBSIDIARY" of any person means any other person, of which a majority of
the capital stock or other equity interests is owned directly or indirectly by
such first person.
"SURVIVING CORPORATION" shall have the meaning set forth in Section 1.1.
B-42
<PAGE>
"TARGET MARKETS" means the Specified Markets and the Other Markets.
"TARGET MARKET EXISTING AGREEMENTS" shall mean the agreements between TWI,
as purchaser, and the owners of the Wireless Cable Television Systems (or of the
capital stock of such owners) in the Target Markets, as described in the TWI SEC
Filings, copies of which agreements are appended hereto, as the same may be
amended or otherwise modified in accordance with this Agreement.
"TWI BTA WAIVER" shall have the meaning set forth in Section 7.3.
"TWI CHANNEL LEASE" means any Channel Lease under which TWI or any of its
Subsidiaries is the lessee or which TWI or any of its Subsidiaries has the right
to acquire.
"TWI COMMON SHARES" shall mean all of the issued and outstanding capital
stock of TWI immediately before the Merger.
"TWI EMPLOYEES" shall have the meaning set forth in Section 2.6(a).
"TWI LESSOR" shall have the meaning set forth in Section 2.10(a).
"TWI PLAN" shall have the meaning set forth in Section 2.6(a).
"TWI LESSOR APPLICATION" shall have the meaning set forth in Section
2.10(b).
"TWI PREFERRED SHARES" shall have the meaning set forth in Section 2.3.
"TWI PREFERRED STOCK" shall have the meaning set forth in Section 2.3.
"TWI REPRESENTATIVES" shall have the meaning set forth in Section 4.4.
"TWI SEC FILINGS" means Form S-1 Registration Statements (File Nos. 333-
1282 and 333-01284) filed with the SEC on April 11, 1996.
"TWI STOCK OPTION PLANS" shall have the meaning set forth in Section 5.3.
"TWI STOCKHOLDERS" shall have the meaning set forth in Section 7.11.
"VCI" shall have the meaning set forth in Section 5.13.
"VCI WOI SHARES" shall have the meaning set forth in Section 5.13.
B-43
<PAGE>
"WIRELESS CABLE BUSINESS" means the business of transmitting
programming to subscribers through the use of MMDS, MDS or ITFS channels.
"WIRELESS CABLE TELEVISION SYSTEMS" means all wireless cable television
systems or prospective wireless cable television systems, whether or not
operational or constructed, and all assets relating thereto relative to the
Markets.
"WOI" shall have the meaning set forth in the Recitals.
"WOI BONDHOLDER CONSENT" shall have the meaning set forth in Section 7.6.
"WOI CHANNEL LEASE" means any Channel Lease under which WOI or any of its
Subsidiaries is the lessee or which WOI or any of its Subsidiaries has the right
to acquire.
"WOI COMMON SHARES" means shares of common stock, $.01 par value per share,
WOI.
"WOI CONTINGENT AMOUNT" shall have the meaning set forth in Section 1.2(b).
"WOI EMPLOYEE" shall have the meaning set forth in Section 3.7(a).
"WOI LESSOR" shall have the meaning set forth in Section 3.5(a).
"WOI LESSOR APPLICATION" shall have the meaning set forth in Section
3.5(b).
"WOI MARKET PRICE" for any day means the average of the closing prices for
WOI shares as reported on the NASDAQ NMS on the 20 trading days prior to such
day. If WOI Common Shares do not trade on any trading day during such 20-
trading-day-period, the closing price for such day will be deemed to be the
closing price on the trading day preceding such trading day.
"WOI PLAN" shall have the meaning set forth in Section 3.7(a).
"WOI SEC FILINGS" shall have the meaning set forth in Section 4.7.
"WOI STOCKHOLDERS MEETING" shall have the meaning set forth in Section 5.1.
11.2 DEFINED TERMS. In this Agreement, all definitions shall be
equally applicable to both the singular and the plural forms.
B-44
<PAGE>
ARTICLE 12. MISCELLANEOUS.
12.1 EXPENSES OF THE TRANSACTION. Each of TWI, WOI and MergerSub
agrees to pay its own fees and expenses in connection with this Agreement and
the transactions hereby contemplated.
12.2 FURTHER ASSURANCES. Each of TWI, WOI and MergerSub agrees that
it will, at any time and from time to time after the Closing Date, upon the
request of the other party, do, execute, acknowledge and deliver, or will cause
to be done, executed, acknowledged and delivered, all such further acts,
assignments, transfers, conveyances, powers of attorney and assurances as may be
reasonably required from time to time in order to effectuate the provisions and
purposes of this Agreement.
12.3 NOTICES. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given or delivered
(a) when delivered personally or by private courier, (b) when actually delivered
by registered United States mail, return receipt requested, or (c) when sent by
telecopy (provided, however, that, it is telephonically or electronically
confirmed), addressed as follows:
If to WOI, to:
11301 Industriplex Boulevard
Suite 4
Baton Rouge, LA 70809-5400
Attention: Hans J. Sternberg
Sean Reilly
Telecopy: (504) 293-5400
With copy (which copy will not constitute notice to WOI) to:
John Kuehn, Esq.
Kirkland & Ellis
153 E. 53rd Street
New York, New York 10022
Telecopy: (212) 446-4900
If to TWI, to:
181 Kroger Drive
Suite H
Jackson, MS 39218
Attention: Henry M. Burkhalter
Telecopy: (601) 936-1517
B-45
<PAGE>
With copy (which copy will not constitute notice to TWI) to:
Samuel A. Fishman
Latham & Watkins
885 Third Avenue
Suite 1000
New York, New York 10022
Telecopy: (212) 751-4864
or such other address as such party may indicate by a notice delivered to the
other parties hereto in the manner herein provided.
12.4 NO MODIFICATION EXCEPT IN WRITING. This Agreement shall not be
changed, modified, or amended except by a writing signed by the party to be
charged and this Agreement may not be discharged except by performance in
accordance with its terms or by a writing signed by the party to which
performance is to be rendered.
12.5 ENTIRE AGREEMENT. This Agreement, together with the Schedules
and Exhibits hereto, sets forth the entire agreement and understanding among the
parties as to the subject matter hereof. The execution and delivery of this
Agreement shall have no effect on the confidentiality agreements executed as of
April 19, 1996, among WOI, TWI and Heartland Wireless Communications, Inc.
12.6 SEVERABILITY. If any provision of this Agreement or the
application of any provision hereof to any person or in any circumstances is
held invalid, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected unless the
provision held invalid shall substantially impair the benefits of the remaining
portions of this Agreement.
12.7 ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns. This Agreement may not be assigned by any party hereto except with the
prior written consent of the other parties. Any purported assignment contrary to
the terms of this Agreement shall be void.
12.8 CHOICE OF LAW. This Agreement shall be deemed to have been made
in, and shall be construed in accordance with the laws of the State of Delaware,
and its validity, construction, interpretation and legal effect shall be
governed by the laws of the State of Delaware applicable to contracts entered
into and performed entirely therein.
12.9 CAPTIONS; CONSTRUCTION. The captions appearing in this Agreement
are inserted only as a matter of convenience and for reference and in no way
define, limit or describe the scope and intent of this Agreement or any of the
provisions hereof. All uses of the term
B-46
<PAGE>
"including" shall be construed as descriptive and not a limitation of the item
described. All words used herein shall be construed to be of such gender as the
circumstances require.
12.10 SPECIFIC PERFORMANCE. In the event of a breach of any obligations
under this Agreement, each party hereto, in addition to being entitled to
exercise all rights provided herein or granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The parties hereto agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach of any of the
provisions of this Agreement.
12.11 SCHEDULES AND EXHIBITS. The Schedules and Exhibits referred to
herein attached hereto are hereby made a part of this Agreement.
12.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original. This Agreement may
also be executed by facsimile signature.
[SIGNATURE PAGE(S) FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the day and year first above written.
TWI:
TRUVISION WIRELESS, INC.
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
-------------------------------------------
WOI:
WIRELESS ONE, INC.
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
-------------------------------------------
MERGERSUB:
WIRELESS ONE MERGERSUB, INC.
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
-------------------------------------------
B-48
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Market Channels LOS Households
- ------ -------- --------------
<S> <C> <C>
Jackson, MS 32 179,000
Delta, MS 32 92,800
Gulf Coast, MS 32 121,700
Tupelo, MS 32 90,600
Hattiesburg, MS 32 88,800
Natchez, MS 32 60,000
Meridian, MS 32 44,800
Starkville, MS 32 65,200
Oxford, MS 32 53,600
Memphis, TN 33 381,200
Huntsville, AL 32 181,900
Jackson, TN 32 96,500
Flippin, TN 32 41,300
Demopolis, AL 32 15,600
Gadsden, AL 32 133,300
</TABLE>
B-49
<PAGE>
EXHIBIT 4.5
FIRST SUPPLEMENTAL INDENTURE, DATED AS OF JULY ___, 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,
<PAGE>
2
(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."
<PAGE>
3
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
<PAGE>
4
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
<PAGE>
5
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
<PAGE>
6
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
<PAGE>
7
(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
<PAGE>
8
(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;
<PAGE>
9
(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
<PAGE>
10
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
<PAGE>
11
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
<PAGE>
12
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
<PAGE>
13
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
<PAGE>
14
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
<PAGE>
15
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
--------
<PAGE>
16
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.
<PAGE>
17
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.
<PAGE>
18
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:________________________________
[SEAL]
Attest:
_____________________________
Title:
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By:________________________________
[SEAL]
Attest:
____________________________
Title:
<PAGE>
EXHIBIT 4.6
WIRELESS ONE, INC.
___% SENIOR DISCOUNT NOTES DUE 2006
___________________________________
_______________
INDENTURE
DATED AS OF JULY __, 1996
_______________
_______________
UNITED STATES TRUST COMPANY OF NEW YORK
AS TRUSTEE
_______________
================================================================================
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
<S> <C>
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
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of this Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
<TABLE>
<S> <C>
Section 1.01. Definitions.............................................. 1
Section 1.02. Other Definitions......................................... 19
Section 1.03. Incorporation by Reference of Trust Indenture Act......... 19
Section 1.04. Rules of Construction..................................... 20
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating........................................... 20
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...................... 22
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............................................ 24
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 26
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......................... 28
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.................................... 30
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........................... 32
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Section 4.03. Provision of Financial Statements........ 33
Section 4.04. Compliance Certificate................... 33
Section 4.05. Taxes ................................... 34
Section 4.06. Stay, Extension and Usury Laws........... 34
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... 42
Section 4.11. Limitation on Preferred Stock of
Subsidiaries............................. 43
Section 4.12. Limitation on Sale of Assets............. 43
Section 4.13. Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiari........ 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............................. 48
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........................ 50
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...................... 54
Section 6.06. Limitation on Suits...................... 55
Section 6.07. Rights of Holders of Notes to Receive
Payment.................................. 55
Section 6.08. Collection Suit by Trustee............... 55
Section 6.09. Trustee May File Proofs of Claim......... 56
Section 6.10. Priorities............................... 56
Section 6.11. Undertaking for Costs.................... 57
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee........................ 57
Section 7.02. Rights of Trustee........................ 58
Section 7.03. Individual Rights of Trustee............. 59
Section 7.04. Trustee's Disclaimer..................... 59
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............... 60
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Section 7.08. Replacement of Trustee............................. 61
Section 7.09. Successor Trustee by Merger, etc................... 62
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........................... 63
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............ 68
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............... 72
Section 10.04. Revocation and Effect of Consents................. 72
Section 10.05. Notation on or Exchange of Notes.................. 73
Section 10.06. Trustee to Sign Amendments, etc................... 73
ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls...................... 73
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........................................... 75
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........................................ 76
Section 11.10. Successors........................................ 76
Section 11.11. Severability...................................... 77
Section 11.12. Counterpart Originals............................. 77
Section 11.13. Table of Contents, Headings, etc.................. 77
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EXHIBITS
Exhibit A Form of Note
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<PAGE>
INDENTURE, dated as of July __, 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 __% 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 , 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 % per annum of
the initial offering price of such Note, compounded semi-annually on each
and 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 , 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
<PAGE>
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
2
<PAGE>
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
3
<PAGE>
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
defracture 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
4
<PAGE>
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.
5
<PAGE>
"Common Stock" means the common stock, $.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,
6
<PAGE>
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 correlative 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 ____________ to the end of the
Company's most recently ended full fiscal quarter date for which financial
statements are available prior to such, taken as a single accounting period.
"Cumulative Operating Cash Flow" means, as of any date of
determination, Operating Cash Flow from _____________ 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
7
<PAGE>
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.
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"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.
"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.
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"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
10
<PAGE>
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
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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.
"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
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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 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; provided further 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; (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).
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"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 Trustee, 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 Trustee, (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 _______ or _______ 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
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<PAGE>
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 Services 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
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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.
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"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
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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.
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"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.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"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
</TABLE>
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;
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"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
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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 Secretary, shall sign, or
one Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Notes for the Company by manual or facsimile
signature.
If an Officer or Assistant Secretary whose signature is on a Note was
an Officer or Assistant Secretary at the time of such execution but no longer
holds that office or position at the time the Trustee authenticates the Note,
the Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
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 of $___,000,000. 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 $___,000,000, 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 appointment, an Authenticating Agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such Authenticating
Agent. An Authenticating Agent has the same rights as an Agent to deal with the
Company or with any Affiliate of the Company.
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<PAGE>
The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency (which shall be located
in the Borough of Manhattan in the City of New York, State of New York) where
(a) Notes may be presented or surrendered for registration of transfer
("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
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<PAGE>
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 satisfactory to the Company and the Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing. To permit registrations of
transfer and exchanges, the Company shall execute and the Trustee shall
authenticate Notes at the Registrar's request. No service charge shall be made
for any registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes or
similar governmental charge payable upon exchanges or transfers pursuant to
Sections 2.10, 3.06, 3.07(b), 4.12, 4.16 or 10.05, in which event the Company
shall be responsible for the payment of such taxes).
The Registrar shall not be required to register the transfer of or
exchange of any Note (i) during a period beginning at the opening of business 15
days before the mailing of a notice of redemption of Notes and ending at the
close of business on the day of such mailing and (ii) selected for redemption in
whole or in part pursuant to Article 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.
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<PAGE>
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
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes as to which a Responsible Officer of the Trustee has received written
notice of such ownership shall be so considered. The Company shall notify the
Trustee, in writing, when it or any of its Affiliates repurchases or otherwise
acquires Notes, of the aggregate principal amount of such Notes so repurchased
or otherwise acquired.
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<PAGE>
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 surrendered to the Trustee for cancellation pursuant to this Section
2.11.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it
shall pay the 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
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<PAGE>
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 Interest 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
immediately 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
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<PAGE>
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
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<PAGE>
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 Indenture 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
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<PAGE>
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
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<PAGE>
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 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.
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Section 3.07. Optional Redemption.
(a) Optional Redemption. The Notes will not be redeemable at the
Company's option prior to __________, 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 October 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
- ------------------------------- -----------------------------------
<S> <C>
2001........................... _____%
2002........................... _____%
2003........................... _____%
2004........................... 100.00%
and thereafter at 100% of the principal amount, in each case,
together with accreted or 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).
</TABLE>
(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 __________, 1999 of $_____ 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 ___% 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 30 nor more than
60 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.
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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
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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
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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.
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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 acquire 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 Wholly Owned 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
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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 (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) 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 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
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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
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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
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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, 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
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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;
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(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 existing as of the date of this 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,
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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.
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
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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 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
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$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") 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 _________, 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 _________, 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
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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 _______,
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
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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
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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 ________, 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
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
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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
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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
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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);
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(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 and (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;
(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;
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(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)
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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
Trustee or 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 , 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 the Accreted Value of the Notes, together with
accrued and unpaid interest, if any, 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.
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Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal (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 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.
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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,
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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
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Third: to the Company or any other obligor on the Notes, as their
interests may appear, or to such party as a court of competent jurisdiction
shall direct.
The Trustee, upon prior notice to the Company, 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
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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
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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.
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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 __________ beginning with the __________
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 (S) 313(a) (but if no event described in Trust Indenture Act
(S) 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 (S) 313(b), (c) and (d). The Trustee shall also transmit by mail
all reports as required by Trust Indenture Act (S) 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
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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;
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(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.
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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 $100
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 (S)(S) 310(a)(1), (2) and (5). The Trustee
is subject to Trust Indenture Act (S) 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to Trust Indenture Act (S) 311(a), excluding
any creditor relationship listed in Trust Indenture Act (S) 311(b). A Trustee
who has resigned or been removed shall be subject to Trust Indenture Act (S)
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:
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(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.
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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
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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
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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 (y) the Holders will be entitled to receive adequate protection of
their interests in such trust funds if such trust funds are used in such
case or proceeding;
(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.
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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
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(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 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.
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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;
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(e) to add a Guarantor under this Indenture;
(f) to evidence and provide the acceptance of the appointment of
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 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.
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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, 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
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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 (S) 318(c), the imposed duties shall
control.
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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.
_________________________________
_________________________________
Baton Rouge, Louisiana [70808-2549]
Telecopier No.: ____________________
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 (S) 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.
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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
(S) 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 (S) 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;
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(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.
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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]
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SIGNATURES
Dated as of July, 1996 WIRELESS ONE, INC.
(SEAL) By:___________________________
Name:
Attest: Title:
___________________________ By:___________________________
Name: Name:
Title: Title:
Dated as of July, 1996 UNITED STATES TRUST COMPANY
OF NEW YORK
(SEAL) By:___________________________
Name:
Title:
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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.: __________
WIRELESS ONE, INC.
___% 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 _________,
2006.
Interest Payment Dates: _____________ and _____________
A-1
<PAGE>
Record Dates (whether or not a Business Day): ____________ and
___________
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:
Dated:
A-2
<PAGE>
Trustee's Certificate of Authentication
This is one of the ___% Senior Discount Notes due 2006 referred to
in the within-mentioned Indenture.
UNITED STATES TRUST COMPANY OF NEW
YORK, as Trustee
By:____________________________________________
Authorized Signatory
A-3
<PAGE>
[Not yet revised pending
finalization of indenture]
(REVERSE OF SECURITY)
___% 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 _____, 1996
through July 31, 1996 at a rate of ___% per annum, compounded semi-annually.
From and after August 1, 2001, interest on the Notes will accrue and interest on
the Accreted Value of the Notes will be paid semi-annually in arrears on each
________ and ________, commencing ______, 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 _______ __, 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 __% Senior
Discount Notes due 2006 (the "Notes"). The Notes are limited in aggregate
principal amount to $[125,000,000]. 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 (S)(S) 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.
A-4
<PAGE>
5. Optional Redemption. (a) Optional Redemption. The Notes will
-------------------
not be redeemable at the Company's option prior to _______ __, 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 _______ __ of the years
indicated below:
<TABLE>
<CAPTION>
Year Percentage
- ------------------------------ ---------------------------------
<S> <C>
2001.......................... _______%
2002.......................... _______%
2003.......................... _______%
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).
</TABLE>
(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 _______ __, 1999 of
$___________ 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
___% 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 30 nor more than 60 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.
A-5
<PAGE>
6. Notice of Redemption. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption of
the Notes called for redemption shall have been deposited with the Paying Agent
for redemption on such redemption date, then, unless the Company defaults in the
payment of such redemption price plus accrued interest, if any, the Notes called
for redemption will cease to bear interest from and after such redemption date
and the only right of the Holders of such Notes will be to receive payment of
the redemption price plus accrued interest, if any.
7. Offers to Purchase. Sections 4.12 and 4.16 of the Indenture
provide that, after certain Asset Sales (as defined in the Indenture) and upon
the occurrence of a Change of Control (as defined in the Indenture) subject to
further limitations contained therein, the Company will make an offer to
purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture.
8. Denominations; Transfer; Exchange. The Notes are in registered
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in connection therewith
as permitted by the Indenture. The Registrar need not register the transfer of
or exchange of any Notes or portions thereof selected for redemption.
9. Persons Deemed Owners. The registered Holder of a Note shall be
treated as the owner of it for all purposes.
10. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years after such principal or interest has
become due and payable, the Trustee and the Paying Agent will pay such money
back to the Company. After that, all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
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
A-6
<PAGE>
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, the Trustee or 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 declare all the Notes to be due and payable in the manner, at
the time and with the effect provided in the Indenture. Holders of Notes may
not enforce the Indenture or the Notes except as provided in the Indenture. The
Trustee is not obligated to enforce the Indenture or the Notes unless it has
received indemnity reasonably satisfactory to it. The Indenture permits,
subject to certain limitations therein provided, Holders of a majority in
aggregate principal amount of the Notes then outstanding to direct the Trustee
in its exercise of any trust or power. The Trustee may withhold from Holders of
Notes notice of any continuing Default or Event of Default (except a Default in
payment of principal 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.
A-7
<PAGE>
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-8
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ______________________________________, agent to
transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Dated: _____________ Signed: ________________________________
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee: _____________________________
A-9
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.12 or 4.16 of the Indenture, check the appropriate box:
Section 4.12 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.12 or 4.16 of the Indenture, state the amount you
elect to have purchased:
$_______________________
Dated: __________________ ___________________________________
NOTICE: The signature on this assignment must
correspond with the name as it appears upon the face
of the within Note in every particular without
alteration or enlargement or any change whatsoever
and be guaranteed by the endorser's bank or broker.
Signature Guarantee: ____________________________________
A-10
<PAGE>
EXHIBIT 4.7
WIRELESS ONE, INC.
and
UNITED STATES TRUST COMPANY OF NEW YORK,
as Warrant Agent
-------------------------
WARRANT AGREEMENT
Dated as of __________, 1996
<PAGE>
WARRANT AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. Certain Definitions.................................. 1
SECTION 2. Issuance, Form, Execution, Delivery and
Registration of Warrant Certificates................. 3
2.1 Issuance of Warrants 3
2.2 Form of Warrant Certificates......................... 4
2.3 Execution of Warrant Certificates.................... 4
2.4 Countersignature and Delivery........................ 4
2.5 Temporary Warrant Certificates....................... 5
2.6 Separation of Warrants and Notes..................... 6
2.7 Registration......................................... 6
2.8 Registration of Transfers and Exchanges.............. 6
2.9 Lost, Stolen, Destroyed, Defaced or Mutilated Warrant
Certificates 9
2.10 Offices for Exercise, etc............................ 10
SECTION 3. Terms of Warrants; Exercise of Warrants.............. 10
SECTION 4. Payment of Taxes..................................... 12
SECTION 5. Reservation of Warrant Shares........................ 12
SECTION 6. Obtaining Stock Exchange Listings.................... 13
SECTION 7. Adjustment of Exercise Price and Number of
Warrant Shares Issuable 13
SECTION 8. Statement on Warrants................................ 20
SECTION 9. Fractional Interest.................................. 20
SECTION 10. When Adjustment Not Required......................... 20
SECTION 11. Escrow of Warrant Stock.............................. 20
SECTION 12. Challenge to Good Faith Determination................ 21
SECTION 13. Treasury Stock....................................... 21
SECTION 14. Notices to Warrant Holders........................... 21
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 15. Merger, Consolidation or Change of Name of
Warrant Agent 22
SECTION 16. Warrant Agent........................................ 22
SECTION 17. Resignation and Removal of Warrant Agent;
Appointment of Successor 26
SECTION 18. Registration......................................... 27
18.1 Warrant Shares Registration Statement................ 27
18.2 Registration Expenses................................ 27
SECTION 19. Reports.............................................. 28
SECTION 20. Notices to Company and Warrant Agent................. 28
SECTION 21. Supplements and Amendments........................... 29
SECTION 22. Severability......................................... 29
SECTION 23. Successors........................................... 30
SECTION 24. Termination.......................................... 30
SECTION 25. GOVERNING LAW........................................ 30
SECTION 26. Benefits of This Agreement........................... 30
SECTION 27. Entire Agreement..................................... 31
SECTION 28. Counterparts......................................... 31
EXHIBIT A................... A-1
EXHIBIT B................... B-1
EXHIBIT C................... C-1
</TABLE>
-ii-
<PAGE>
WARRANT AGREEMENT dated as of __________, 1996 (the "Agreement")
between Wireless One, Inc., a Delaware corporation (the "Company"), and United
States Trust Company of New York, as warrant agent (in such capacity, the
"Warrant Agent").
WHEREAS, the Company proposes to issue warrants, as hereinafter
described (the "Warrants"), to purchase up to an aggregate of _________ shares
of Common Stock (as defined below), in connection with an offering of an
aggregate of $_________ principal amount of the Company's __% Senior Discount
Notes due 2006 (the "Notes") and _________ Warrants to purchase an equal number
of shares of common stock pursuant to the Indenture, dated as of __________,
1996 (the "Indenture"), between the Company and United States Trust Company of
New York, as trustee (the "Trustee"), each Warrant entitling the holder thereof
to purchase _______ shares of Common Stock. The Notes and Warrants will be sold
in Units (the "Units"), each Unit consisting of $1,000 principal amount of Notes
and one Warrant.
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance of Warrant Certificates (as defined below) and other matters as
provided herein;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, and for the purpose of defining the respective
rights and obligations of the Company, the Warrant Agent and the Holders (as
defined below), the parties hereto agree as follows:
SECTION 1. Certain Definitions. Capitalized terms used but not
defined herein have the meanings set forth in the Indenture. In addition, the
following terms shall have the following respective meanings:
"Affiliate" of any Person means any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For purposes of this definition, "control" when used with respect
to any Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Capital Stock" means any and all shares, interests, participations,
warrants, options, rights or other equivalents of or interests in (however
designated and whether voting or non-voting) corporate stock of a corporation
and any and all equivalent ownership interests in a Person (other than a
corporation), in each case whether outstanding on the date of issuance of the
Notes or thereafter issued, including any preferred stock.
"Commission" means the Securities and Exchange Commission.
"Common Stock" of any Person means Capital Stock of such Person that
does not rank prior, as to the payment of dividends or as to the distribution of
assets upon any
<PAGE>
2
voluntary or involuntary liquidation, dissolution or winding up of such Person,
to shares of Capital Stock of any other class of such Person.
"Company" means Wireless One, Inc., a Delaware corporation, and its
successors and assigns.
"Convertible Securities" mean any shares of stock or securities which
are convertible or exchangeable, either immediately or upon the occurrence of a
specified date or a specified event, for shares of Common Stock.
"Distribution" has the meaning specified in Section 7(c).
"Exchange Act" means the Securities Exchange Act of 1934, as amended
(or any successor act), and the rules and regulations promulgated thereunder.
"Exercisability Date" means __________, 1997 (the first anniversary of
the Issue Date).
"Exercise Price" means the purchase price per share of Common Stock to
be paid upon the exercise of each Warrant in accordance with the terms hereof,
which price shall initially be $____ per share, subject to adjustment from time
to time pursuant to Section 7 hereof.
"Expiration Date" means __________, 2001 (the fifth anniversary of the
Issue Date).
"Expiration Time" means the last time tenders or exchanges may be made
pursuant to a tender or exchange offer.
"Holder" means the registered holder of a Warrant.
"Majority Holders" means the Holders of Warrants exercisable for in
excess of 50% of the aggregate number of shares of Common Stock then receivable
upon exercise of all Warrants, whether or not then exercisable.
"Issue Date" means the date on which Notes are first authenticated and
issued.
"Nasdaq National Market" means the Nasdaq Stock Market National
Market.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Purchased Shares" has the meaning specified in Section 7(e).
<PAGE>
3
"Purchasers" mean Chase Securities Inc., BT Securities Corporation,
Gerard Klauer Mattison & Co., LLC and Prudential Securities Incorporated, as
initial Purchasers of the Units.
"SEC Reports" has the meaning specified in Section 19(a).
"Securities Act" means the Securities Act of 1933, as amended.
"Separability Date" shall mean the earlier of (i) __________, 1996 (90
days after the Issue Date) and (ii) such date as the Purchasers may, in their
discretion, deem appropriate.
"Time of Determination" has the meaning specified in Section 7(g).
"Transfer Agent" has the meaning specified in Section 5.
"Unit" means the $1,000 principal amount of Notes and three Warrants
that comprise each Unit.
"Warrant Agent" means United States Trust Company of New York or the
successor or successors of such Warrant Agent appointed in accordance with the
terms hereof.
"Warrant Certificates" means the certificates evidencing the warrants
to be delivered pursuant to this Agreement, substantially in the form of Exhibit
A hereto.
"Warrants" shall mean this Warrant and all warrants issued upon
transfer, division or combination of, or in substitution for, any thereof. All
Warrants shall at all times be identical as to terms and conditions and date,
except as to the number of shares of Common Stock for which they may be
exercised.
"Warrant Shares" has the meaning specified in Section 2.1.
SECTION 2. Issuance, Form, Execution, Delivery and Registration of
Warrant Certificates.
2.1 Issuance of Warrants. Warrants comprising part of the Units
--------------------
shall be originally issued in connection with the issuance of the Units and such
Warrants shall not be separately transferable from the Notes until on or after
the Separability Date as provided in Section 2.6 hereof.
Each Warrant Certificate shall evidence the number of Warrants
specified therein, and each Warrant evidenced thereby shall represent the right,
subject to the provisions contained herein and therein, to purchase from the
Company (and the Company shall issue and sell to such holder of the
Warrant)__________ fully paid and non-assessable share of the Company's Common
Stock (the shares purchasable upon exercise of a Warrant being hereinafter
referred to as the "Warrant Shares" and, where appropriate, such term shall also
<PAGE>
4
mean the other securities or property purchasable and deliverable upon exercise
of a Warrant as provided in Section 7 at the price specified herein and therein,
in each case subject to adjustment as provided herein and therein).
2.2 Form of Warrant Certificates. The Warrant Certificates will
----------------------------
initially be issued either in global form (the "Global Warrants"), substantially
in the form of Exhibit A hereto (including footnote 1 thereto) or in registered
form as definitive Warrant Certificates (the "Definitive Warrants"). The
Warrant Certificates evidencing the Global Warrants or the Definitive Warrants
to be delivered pursuant to this Agreement shall be substantially in the form
set forth in Exhibit A attached hereto. Such Global Warrants shall represent
such of the outstanding Warrants as shall be specified therein and each shall
provide that it shall represent the aggregate amount of outstanding Warrants
from time to time endorsed thereon and that the aggregate amount of outstanding
Warrants represented thereby may from time to time be decreased or increased, as
appropriate. Any endorsement of a Global Warrant to reflect the amount of any
increase or decrease in the amount of outstanding Warrants represented thereby
shall be made by the Warrant Agent and Depositary (as defined below) in
accordance with instructions given by the holder thereof. The Depository Trust
Company shall act as the Depositary (the "Depositary") with respect to the
Global Warrants until a successor shall be appointed by the Company. Upon
written request, and subject to Section 2.8 hereof, a Warrant holder may receive
from the Warrant Agent Definitive Warrants as set forth in Section 2.8 hereof.
2.3 Execution of Warrant Certificates. The Warrant Certificates
---------------------------------
shall be executed on behalf of the Company by the chairman of its Board of
Directors, its president or any vice president and attested by its secretary or
assistant secretary, under its corporate seal. Such signatures may be the
manual or facsimile signatures of the present or any future such officers. The
seal of the Company may be in the form of a facsimile thereof and may be
impressed, affixed, imprinted or otherwise reproduced on the Warrant
Certificates. Typographical and other minor errors or defects in any such
reproduction of the seal or any such signature shall not affect the validity or
enforceability of any Warrant Certificate that has been duly countersigned and
delivered by the Warrant Agent.
In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificate so signed shall be countersigned and delivered by the Warrant Agent
or disposed of by the Company, such Warrant Certificate nevertheless may be
countersigned and delivered or disposed of as though the Person who signed such
Warrant Certificate had not ceased to be such officer of the Company; and any
Warrant Certificate may be signed on behalf of the Company by such Persons as,
at the actual date of the execution of such Warrant Certificate, shall be the
proper officers of the Company, although at the date of the execution and
delivery of this Agreement any such Person was not such an officer.
2.4 Countersignature and Delivery. Subject to the immediately
-----------------------------
following paragraph, Warrant Certificates shall be countersigned by manual
signature and dated the date of countersignature by the Warrant Agent and shall
not be valid for any purpose unless so
<PAGE>
5
countersigned and dated. The Warrant Certificates shall be numbered and shall
be registered in the Warrant Register (as defined in Section 2.7 hereof).
Upon the receipt by the Warrant Agent of a written order of the
Company set forth in an Officers' Certificate, which order shall be signed by
the chairman of its Board of Directors, its president or any vice president and
attested by its secretary or assistant secretary, and shall specify the amount
of Warrants to be countersigned, whether the Warrants are to be Global Warrants
or Definitive Warrants, the date of such Warrants and such other information as
the Warrant Agent may reasonably request, without any further action by the
Company, the Warrant Agent is authorized, upon receipt from the Company at any
time and from time to time of the Warrant Certificates, duly executed as
provided in Section 2.3 hereof, to countersign the Warrant Certificates and
deliver them. Such countersignature shall be by a duly authorized signatory of
the Warrant Agent (although it shall not be necessary for the same signatory to
sign all Warrant Certificates).
In case any authorized signatory of the Warrant Agent who shall have
countersigned any of the Warrant Certificates shall cease to be such authorized
signatory before the Warrant Certificate shall be disposed of by the Company,
such Warrant Certificate nevertheless may be delivered or disposed of as though
the Person who countersigned such Warrant Certificate had not ceased to be such
authorized signatory of the Warrant Agent; and any Warrant Certificate may be
countersigned on behalf of the Warrant Agent by such Persons as, at the actual
time of countersignature of such Warrant Certificates, shall be the duly
authorized signatories of the Warrant Agent, although at the time of the
execution and delivery of this Agreement any such Person is not such an
authorized signatory.
The Warrant Agent's countersignature on all Warrant Certificates shall
be in substantially the form set forth in Exhibit A hereto.
2.5 Temporary Warrant Certificates. Pending the preparation of
------------------------------
definitive Warrant Certificates, the Company may execute, and the Warrant Agent
shall countersign and deliver, temporary Warrant Certificates, which are
printed, lithographed, typewritten or otherwise produced, substantially of the
tenor of the definitive Warrant Certificates in lieu of which they are issued
and with such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Warrant Certificates may determine, as
evidenced by their execution of such Warrant Certificates.
If temporary Warrant Certificates are issued, the Company will cause
definitive Warrant Certificates to be prepared without unreasonable delay.
After the preparation of definitive Warrant Certificates, the temporary Warrant
Certificates shall be exchangeable for definitive Warrant Certificates upon
surrender of the temporary Warrant Certificates at any office or agency
maintained by the Company for that purpose pursuant to Section 2.10 hereof.
Subject to the provisions of Section 4 hereof, such exchange shall be without
charge to the holder. Upon surrender for cancellation of any one or more
temporary Warrant Certificates, the Company shall execute, and the Warrant Agent
shall countersign and deliver in exchange therefor, one or more definitive
Warrant Certificates representing in the aggregate a like number of Warrants.
Until so exchanged, the holder of a temporary Warrant Certificate shall
<PAGE>
6
in all respects be entitled to the same benefits under this Agreement as a
holder of a definitive Warrant Certificate.
2.6 Separation of Warrants and Notes. The Notes and Warrants will
--------------------------------
not be separately transferable until the Separability Date. The surrender of a
Unit Certificate for separate Warrant and Note certificates is herein referred
to as a "Separation" and the related Warrants being referred to as "Separated."
2.7 Registration. The Company will keep, at the office or agency
------------
maintained by the Company for such purpose, a register or registers in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of, and registration of transfer and exchange of,
Warrants as provided in Sections 2.8 and 2.9. Each Person designated by the
Company from time to time as a Person authorized to register the transfer and
exchange of the Warrants is hereinafter called, individually and collectively,
the "Registrar." The Company hereby initially appoints the Warrant Agent as
Registrar. Upon written notice to the Warrant Agent and any acting Registrar,
the Company may appoint a successor Registrar for such purposes.
The Company will at all times designate one Person (who may be the
Company and who need not be a Registrar) to act as repository of a master list
of names and addresses of the holders of Warrants (the "Warrant Register"). The
Warrant Agent will act as such repository unless and until some other Person is,
by written notice from the Company to the Warrant Agent and the Registrar,
designated by the Company to act as such. In the event the Registrar is not the
repository, the Company shall cause the Registrar to furnish to such repository,
on a current basis, such information as to all registrations of transfer and
exchanges effected by the Registrar, as may be necessary to enable such
repository to maintain the Warrant Register on as current a basis as is
practicable.
2.8 Registration of Transfers and Exchanges.
---------------------------------------
(a) Transfer and Exchange of Definitive Warrants. When Definitive
Warrants are presented to the Warrant Agent with a request:
(i) to register the transfer of the Definitive Warrants; or
(ii) to exchange such Definitive Warrants for an equal number of Definitive
Warrants of other authorized denominations,
the Warrant Agent shall register the transfer or make the exchange as requested
if the requirements under this Warrant Agreement as set forth in this Section
2.8 hereof for such transactions are met; provided, however, that the Definitive
Warrants presented or surrendered for registration of transfer or exchange shall
be duly endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Company and the Warrant Agent, duly executed by the holder
thereof or by his attorney, duly authorized in writing
<PAGE>
7
(b) Restrictions on Transfer of a Definitive Warrant for a Beneficial
Interest in a Global Warrant. A Definitive Warrant may not be exchanged for a
beneficial interest in a Global Warrant except upon satisfaction of the
requirements set forth below. Upon receipt by the Warrant Agent of a Definitive
Warrant, duly endorsed or accompanied by appropriate instruments of transfer, in
form satisfactory to the Warrant Agent, together with written instructions
directing the Warrant Agent to make, or to direct the Depositary to make, an
endorsement on the Global Warrant to reflect an increase in the aggregate amount
of the Warrants represented by the Global Warrant, the Warrant Agent shall
cancel such Definitive Warrant and cause, or direct the Depositary to cause, in
accordance with the standing instructions and procedures existing between the
Depositary and the Warrant Agent, the number of Warrants represented by the
Global Warrant to be increased accordingly. If no Global Warrant is then
outstanding, the Company shall issue and the Warrant Agent shall countersign a
new Global Warrant in the appropriate amount.
(c) Transfer and Exchange of Global Warrants. The transfer and
exchange of Global Warrants or beneficial interests therein shall be effected
through the Depositary, in accordance with this Warrant Agreement (including the
restrictions on transfer set forth herein) and the procedures of the Depositary
therefor.
(d) Transfer of a Beneficial Interest in a Global Warrant for a
Definitive Warrant.
(i) Any Person having a beneficial interest in a Global Warrant may upon
request exchange such beneficial interest for a Definitive Warrant.
Upon receipt by the Warrant Agent of written instructions or such
other form of instructions as is customary for the Depositary from the
Depositary or its nominee on behalf of any Person having a beneficial
interest in a Global Warrant and upon receipt by the Warrant Agent of
a written order or such other form of instructions as is customary for
the Depositary or the Person designated by the Depositary as having
such a beneficial interest containing registration instructions
the Warrant Agent will cause, in accordance with the standing instructions
and procedures existing between the Depositary and the Warrant Agent, the
aggregate amount of the Global Warrant to be reduced and, following such
reduction, the Company will execute and, upon receipt of a countersignature
order in the form of an Officers' Certificate (as defined in Section
2.8(f)), the Warrant Agent will authenticate and deliver to the transferee
a Definitive Warrant.
(ii) Definitive Warrants issued in exchange for a beneficial interest in a
Global Warrant pursuant to this Section 2.8(d) shall be registered in
such names and in such authorized denominations as the Depositary,
pursuant to instructions from its direct or indirect participants or
otherwise, shall instruct the Warrant Agent in writing. The Warrant
Agent shall deliver such Definitive Warrants to the Persons in whose
names such Warrants are so registered.
<PAGE>
8
(e) Restrictions on Transfer and Exchange of Global Warrants.
Notwithstanding any other provisions of this Warrant Agreement (other than the
provisions set forth in subsection (f) of this Section 2.8), a Global Warrant
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Countersignature of Definitive Warrants in Absence of Depositary. If
at any time:
(i) the Depositary for the Warrants notifies the Company that the
Depositary is unwilling or unable to continue as Depositary for the
Global Warrant and a successor Depositary for the Global Warrant is
not appointed by the Company within 90 days after delivery of such
notice; or
(ii) the Company, at its sole discretion, notifies the Warrant Agent in
writing that it elects to cause the issuance of Definitive Warrants in
place of the Global Warrant under this Warrant Agreement,
then the Company will execute, and the Warrant Agent, upon receipt of an
Officers' Certificate requesting the countersignature and delivery of Definitive
Warrants, will authenticate and deliver Definitive Warrants, in an aggregate
number equal to the aggregate number of Warrants represented by the Global
Warrant, in exchange for such Global Warrant.
(g) Cancellation and/or Adjustment of a Global Warrant. At such time as
all beneficial interests in a Global Warrant have either been exchanged for
Definitive Warrants, redeemed, repurchased or cancelled, such Global Warrant
shall be returned to or retained and cancelled by the Warrant Agent. At any
time prior to such cancellation, if any beneficial interest in a Global Warrant
is exchanged for Definitive Warrants, redeemed, repurchased or cancelled, the
number of Warrants represented by such Global Warrant shall be reduced and an
endorsement shall be made on such Global Warrant, by the Warrant Agent to
reflect such reduction.
(h) Obligations with Respect to Transfers and Exchanges of Definitive
Warrants.
(i) To permit registrations of transfers and exchanges, the
Company shall deliver to the Warrant Agent, upon execution
of this Agreement and from time to time thereafter,
sufficient inventory of executed Definitive Warrants and
Global Warrants.
(ii) All Definitive Warrants and Global Warrants issued upon any
registration, transfer or exchange of Definitive Warrants
or Global Warrants shall be the valid obligations of the
Company, entitled to the same benefits under this Warrant
Agreement as the Definitive Warrants or Global Warrants
surrendered upon the registration of transfer or exchange.
<PAGE>
9
(iii) Prior to due presentment for registration of transfer of any
Warrant, the Warrant Agent and the Company may deem and treat the
Person in whose name any Warrant is registered as the absolute
owner of such Warrant, and neither the Warrant Agent nor the
Company shall be affected by notice to the contrary.
(i) Payment of Taxes. The Company will pay all documentary stamp
taxes attributable to the initial issuance of the Warrants and the Warrant
Shares issuable upon the exercise of Warrants; provided, however, that the
Company shall not be required to pay any tax or taxes which may be payable in
respect of any transfer involved in the issue of any Warrant Certificates or any
certificates for the Warrant Shares in a name other than that of the registered
holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and
the Company shall not be required to issue or deliver such Warrant Certificates
unless or until the Person or Persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
(j) General. The Warrant Agent shall be under no duty to monitor
compliance with any federal, state or other securities laws.
2.9 Lost, Stolen, Destroyed, Defaced or Mutilated Warrant
------------------------------------------------------
Certificates. Upon receipt by the Company and the Warrant Agent (or any agent of
- ------------
the Company or the Warrant Agent, if requested by the Company) of evidence
satisfactory to them of the loss, theft, destruction, defacement, or mutilation
of any Warrant Certificate and of indemnity satisfactory to them (which may
include posting a bond) and, in the case of mutilation or defacement, upon
surrender thereof to the Warrant Agent for cancellation, then, in the absence of
notice to the Company or the Warrant Agent that such Warrant Certificate has
been acquired by a bona fide purchaser or holder in due course, the Company
shall execute, and an authorized signatory of the Warrant Agent shall manually
countersign and deliver, in exchange for or in lieu of the lost, stolen,
destroyed, defaced or mutilated Warrant Certificate, a new Warrant Certificate
representing a like number of Warrants, bearing a number or other distinguishing
symbol not contemporaneously outstanding. Upon the issuance of any new Warrant
Certificate under this Section, the Company may require the payment from the
holder of such Warrant Certificate of a sum sufficient to cover any tax, stamp
tax or other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Warrant Agent and the
Registrar) in connection therewith. Every substitute Warrant Certificate
executed and delivered pursuant to this Section in lieu of any lost, stolen or
destroyed Warrant Certificate shall constitute an additional contractual
obligation of the Company, whether or not the lost, stolen or destroyed Warrant
Certificate shall be at any time enforceable by anyone, and shall be entitled to
the benefits of (but shall be subject to all the limitations of rights set forth
in) this Agreement equally and proportionately with any and all other Warrant
Certificates duly executed and delivered hereunder. The provisions of this
Section 2.9 are exclusive with respect to the replacement of lost, stolen,
destroyed, defaced or mutilated Warrant Certificates and shall preclude (to the
extent lawful) any and all other rights or remedies notwithstanding any law or
statute existing or hereafter enacted to the
<PAGE>
10
contrary with respect to the replacement of lost, stolen, destroyed, defaced or
mutilated Warrant Certificates.
The Warrant Agent is hereby authorized to countersign in accordance with
the provisions of this Agreement, and deliver the new Warrant Certificates
required pursuant to the provisions of this Section.
2.10 Offices for Exercise, etc. So long as any of the Warrants remain
--------------------------
outstanding, the Company will designate and maintain in the Borough of
Manhattan, The City of New York: (a) an office or agency where the Warrant
Certificates may be presented for exercise, (b) an office or agency where the
Warrant Certificates may be presented for registration of transfer and for
exchange (including the exchange of temporary Warrant Certificates for
definitive Warrant Certificates pursuant to Section 2.5 hereof), and (c) an
office or agency where notices and demands to or upon the Company in respect of
the Warrants or of this Agreement may be served. The Company may from time to
time change or rescind such designation, as it may deem desirable or expedient;
provided, however, that an office or agency shall at all times be maintained in
the Borough of Manhattan, The City of New York, as provided in the first
sentence of this Section. In addition to such office or offices or agency or
agencies, the Company may from time to time designate and maintain one or more
additional offices or agencies within or outside The City of New York, where
Warrant Certificates may be presented for exercise or for registration of
transfer or for exchange, and the Company may from time to time change or
rescind such designation, as it may deem desirable or expedient. The Company
will give to the Warrant Agent written notice of the location of any such office
or agency and of any change of location thereof. The Company hereby designates
the Warrant Agent at its corporate trust office in the Borough of Manhattan, The
City of New York (the "Warrant Agent Office"), as the initial agency maintained
for each such purpose. In case the Company shall fail to maintain any such
office or agency or shall fail to give such notice of the location or of any
change in the location thereof, presentations and demands may be made and notice
may be served at the Warrant Agent Office and the Company appoints the Warrant
Agent as its agent to receive all such presentations, surrenders, notices and
demands.
SECTION 3. Terms of Warrants; Exercise of Warrants. Subject to the terms
of this Agreement, each Holder shall have the right, which may be exercised
commencing at the opening of business on the Exercisability Date and until 5:00
p.m., New York City time on the Expiration Date, to receive from the Company the
number of fully paid and nonassessable Warrant Shares which the Holder may at
the time be entitled to receive on exercise of such Warrants and payment of the
Exercise Price then in effect for such Warrant Shares. Each Warrant not
exercised prior to 5:00 p.m., New York City time, on the Expiration Date shall
become void and all rights thereunder and all rights in respect thereof under
this Agreement shall cease as of such time. No adjustments as to dividends will
be made upon exercise of the Warrants.
Until the earlier to occur of (i) 90 days after the issuance of the Units,
and (ii) such date as the Purchasers may in their discretion deem appropriate
(which is specified to the Company and the Warrant Agent in writing), each
$1,000 principal amount of Notes, and
<PAGE>
11
Warrants which comprise each Unit, may not be separately transferred or
exchanged. The Warrant Agent shall coordinate its activities hereunder with the
Trustee under the Indenture and the Unit Agent under the Unit Agreement, and may
rely upon information provided by such Trustee regarding ownership or transfer
of the Notes and/or by the Unit Agent regarding ownership or transfer of the
Units.
The Company shall give notice not less than 90, and not more than 120, days
prior to the Expiration Date to the Holders of all then outstanding Warrants to
the effect that the Warrants will terminate and become void as of 5:00 p.m., New
York City time, on the Expiration Date; provided, however, that the failure by
the Company to give such notice as provided in this Section shall not affect
such termination and becoming void of the Warrants as of 5:00 p.m., New York
City time, on the Expiration Date.
A Warrant may be exercised at any time on or after the Exercisabilty Date
and prior to 5:00 p.m., New York City Time, on the Expiration Date upon
surrender to the Company at the principal office of the Warrant Agent of the
certificate or certificates evidencing the Warrant to be exercised with the form
of election to purchase on the reverse thereof duly filled in and signed, which
signature shall be guaranteed by a member of the "Medallion System", and upon
payment to the Warrant Agent for the account of the Company of the Exercise
Price, as adjusted as herein provided, for each of the Warrant Shares in respect
of which such Warrant is then exercised. Payment of the aggregate Exercise
Price shall be made in cash or by certified or official bank check payable to
the order of the Company.
Subject to the provisions of Section 4 hereof, upon surrender of Warrants
and payment of the Exercise Price as provided above, the Warrant Agent shall
thereupon promptly notify the Company, and the Company shall transfer to the
Holder of such Warrant Certificate appropriate evidence of ownership of any
Warrant Shares or other securities or property (including any money) to which
the Holder is entitled, registered or otherwise placed in, or payable to the
order of, such name or names as may be directed in writing by the Holder, and
shall deliver such evidence of ownership and any other securities or property
(including any money) to the Person or Persons entitled to receive the same,
together with an amount in cash in lieu of any fraction of a share as provided
in Section 9. Any such evidence of ownership shall be deemed to have been
issued and any Person so designated to be named therein shall be deemed to have
become a holder of record of such Warrant Shares as of the date of the surrender
of such Warrants and payment of the Exercise Price.
The Warrants shall be exercisable commencing on the Exercisability Date, at
the election of the Holders thereof, either in full or from time to time in part
and, in the event that a certificate evidencing Warrants is exercised in respect
of fewer than all of the Warrant Shares issuable on such exercise at any time
prior to the date of expiration of the Warrants, a new certificate evidencing
the remaining Warrant or Warrants will be issued, and the Warrant Agent is
hereby irrevocably authorized to countersign and to deliver the required new
Warrant Certificate or Certificates pursuant to the provisions of this Section
and of Section 2.3 hereof, and the Company, whenever required by the Warrant
Agent, will supply the Warrant Agent with Warrant Certificates duly executed on
behalf of the Company for such purpose.
<PAGE>
12
All Warrant Certificates surrendered for the purpose of exercise (in whole
or in part), exchange, substitution or transfer shall, if surrendered to the
Company or to any of its agents, be delivered to the Warrant Agent for
cancellation or in cancelled form, or if surrendered to the Warrant Agent shall
be cancelled by it, and no Warrant Certificates shall be issued in lieu thereof
except as expressly permitted by any of the provisions of this Agreement. If
the Company purchases or acquires Warrants and if the Company so chooses, the
Company may deliver to the Warrant Agent for cancellation and retirement, and
the Warrant Agent shall so cancel and retire, the Warrant Certificates
evidencing said Warrants. The Warrant Agent shall destroy such cancelled
Warrant Certificates, and in such case shall upon the written request of the
Company deliver a certificate of destruction thereof to the Company. The
Warrant Agent shall account promptly to the Company with respect to Warrants
exercised and concurrently pay to the Company all monies received by the Warrant
Agent for the purchase of the Warrant Shares through the exercise of such
Warrants.
The Warrant Agent shall keep copies of this Agreement and any notices given
or received hereunder by or from the Company available for inspection by the
Holders during normal business hours at its office. The Company shall supply
the Warrant Agent from time to time with such numbers of copies of this
Agreement as the Warrant Agent may request.
SECTION 4. Payment of Taxes. The Company will pay all documentary stamp
taxes attributable to the initial issuance of the Warrants and the Warrant
Shares issuable upon the exercise of Warrants; provided, however, that the
Company shall not be required to pay any tax or taxes which may be payable in
respect of any transfer involved in the issue of any Warrant Certificates or any
certificates for Warrant Shares in a name other than that of the Holder of a
Warrant Certificate surrendered upon the exercise of a Warrant, and the Company
shall not be required to issue or deliver such Warrant Certificates unless or
until the Person or Persons requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
SECTION 5. Reservation of Warrant Shares. The Company will at all times
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued Common Stock or its authorized and issued Common
Stock held in its treasury, for the purpose of enabling it to satisfy any
obligation to issue Warrant Shares upon exercise of Warrants, the maximum number
of shares of Common Stock which may then be deliverable upon the exercise of all
outstanding Warrants.
The Company or, if appointed, the transfer agent for the Common Stock (the
"Transfer Agent") and every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of any of the rights of
purchase aforesaid will be irrevocably authorized and directed at all times to
reserve such number of authorized shares as shall be required for such purpose.
The Company will keep a copy of this Agreement on file with the Transfer Agent
and with every subsequent transfer agent for any shares of the Company's capital
stock issuable upon the exercise of the rights of purchase represented by the
Warrants. The Warrant Agent is hereby irrevocably authorized to requisition
from time to time from such Transfer Agent the stock certificates required to
honor outstanding Warrants
<PAGE>
13
upon exercise thereof in accordance with the terms of this Agreement. The
Company will supply such Transfer Agent with duly executed certificates for such
purposes and will provide or otherwise make available any cash which may be
payable as provided in Section 9. The Company will furnish such Transfer Agent
a copy of all notices of adjustments and certificates related thereto,
transmitted to each Holder of the Warrants pursuant to Section 14 hereof. As of
the date of this Agreement, the Transfer Agent is First Chicago Trust Company of
New York.
Before taking any action which would cause an adjustment pursuant to
Section 7 hereof to reduce the Exercise Price below the then par value (if any)
of the Warrant Shares, the Company will take any corporate action which may, in
the opinion of its counsel, be necessary in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares at the Exercise
Price as so adjusted.
The Company covenants that all Warrant Shares which may be issued upon
exercise of Warrants will, upon issue and payment of the Exercise Price
therefor, be duly and validly issued, fully paid, nonassessable, free of
preemptive rights and free from all taxes, liens, charges and security interests
with respect to the issue thereof.
SECTION 6. Obtaining Stock Exchange Listings. The Company will from time
to time take all action which may be necessary so that the Warrant Shares,
immediately upon their issuance upon the exercise of Warrants, will be listed on
the principal securities exchanges and markets (including, without limitation,
the Nasdaq National Market) within the United States of America, if any, on
which other shares of Common Stock are then listed.
SECTION 7. Adjustment of Exercise Price and Number of Warrant Shares
Issuable. The number and kind of shares purchasable upon the exercise of
Warrants and the Exercise Price shall be subject to adjustment from time to time
as follows:
(a) Stock Splits, Combinations, etc. In case the Company shall hereafter
(A) pay a dividend or make a distribution on its Common Stock in shares of its
capital stock (whether shares of Common Stock or of capital stock of any other
class), (B) subdivide its outstanding shares of Common Stock or (C) combine its
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price in effect immediately prior to such action shall be adjusted so that the
Holder of any Warrant thereafter exercised shall be entitled to receive the
number of shares of Capital Stock of the Company which such Holder would have
owned immediately following such action had such Warrant been exercised
immediately prior thereto. An adjustment made pursuant to this paragraph shall
become effective immediately after the record date in the case of a dividend and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification. If, as a result of an adjustment
made pursuant to this paragraph, the Holder of any Warrant thereafter exercised
shall become entitled to receive shares of two or more classes of Capital Stock
of the Company, the Board of Directors of the Company (whose determination shall
be conclusive) shall determine the allocation of the adjusted Exercise Price
between or among shares of such classes of Capital Stock.
<PAGE>
14
(b) Reclassification, Combinations, Mergers, etc. In case of any
reclassification or change of outstanding shares of Common Stock issuable upon
exercise of the Warrants (other than as set forth in paragraph (a) above and
other than a change in par value, or from par value to no par value, or from no
par value to par value or as a result of a subdivision or combination), or in
case of any consolidation or merger of the Company with or into another
corporation (other than a merger in which the Company is the continuing
corporation and which does not result in any reclassification or change of the
then outstanding shares of Common Stock or other Capital Stock issuable upon
exercise of the Warrants (other than a change in par value, or from par value to
no par value, or from no par value to par value or as a result of a subdivision
or combination)) or in case of any sale or conveyance to another corporation of
all or substantially all of the assets of the Company, then, as a condition of
such reclassification, change, consolidation, merger, sale or conveyance, the
Company or such a successor or purchasing corporation, as the case may be, shall
forthwith make lawful and adequate provision whereby the Holder of such Warrant
then outstanding shall have the right thereafter to receive on exercise of such
Warrant the kind and amount of shares of stock and other securities and property
receivable upon such reclassification, change, consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock issuable upon
exercise of such Warrant immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance and enter into a supplemental warrant
agreement so providing. Such provisions shall include provision for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 7. If the issuer of securities deliverable upon
exercise of Warrants under the supplemental warrant agreement is an Affiliate of
the formed, surviving or transferee corporation, that issuer shall join in the
supplemental warrant agreement. The above provisions of this paragraph (b)
shall similarly apply to successive reclassifications and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances.
In case of any such reorganization, reclassification, merger, consolidation
or disposition of assets, the successor or acquiring corporation (if other than
the Company) shall expressly assume the due and punctual observance and
performance of each and every covenant and condition of this Warrant Agreement
to be performed and observed by the Company and all the obligations and
liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board of Directors of the
Company) in order to provide for adjustments of shares of the Common Stock for
which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 7. For purposes of
this Section 7(b) "shares of stock and other securities" of a successor or
acquiring corporation shall include stock of such corporation of any class which
is not preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 7(b) shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
<PAGE>
15
(c) Issuance of Options or Convertible Securities. In the event the
Company shall, at any time or from time to time after the date hereof, issue,
sell, distribute or otherwise grant in any manner (including by assumption) to
all holders of the Common Stock any rights to subscribe for or to purchase, or
any warrants or options for the purchase of, Common Stock or any stock or
securities convertible into or exchangeable for Common Stock (any such rights,
warrants or options being herein called "Options" and any such convertible or
exchangeable stock or securities being herein called "Convertible Securities")
or any Convertible Securities (other than upon exercise of any Option), whether
or not such Options or the rights to convert or exchange such Convertible
Securities are immediately exercisable, and the price per share at which Common
Stock is issuable upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities (determined by dividing (i) the
aggregate amount, if any, received or receivable by the Company as consideration
for the issuance, sale, distribution or granting of such Options or any such
Convertible Security, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of all such
Options or upon conversion or exchange of all such Convertible Securities, plus,
in the case of Options to acquire Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the conversion or
exchange of all such Convertible Securities, by (ii) the total maximum number of
shares of Common Stock issuable upon the exercise of all such Options or upon
the conversion or exchange of all such Convertible Securities or upon the
conversion or exchange of all Convertible Securities issuable upon the exercise
of all such Options) shall be less than the Current Market Price per share of
Common Stock (determined pursuant to Section 7(g)) on the record date for the
issuance, sale, distribution or granting of such Options (any such event being
herein called a "Distribution") then, effective upon such Distribution, the
Exercise Price shall be reduced to the price (calculated to the nearest 1/1,000
of one cent) determined by multiplying the Exercise Price in effect immediately
prior to such Distribution by a fraction, the numerator of which shall be the
sum of (i) the number of shares of Common Stock outstanding (exclusive of any
treasury shares) immediately prior to such Distribution multiplied by the
Current Market Price per share of Common Stock on the date of such Distribution
plus (ii) the consideration, if any, received by the Company upon such
Distribution, and the denominator of which shall be the product of (A) the total
number of shares of Common Stock outstanding (exclusive of any treasury shares)
immediately after such Distribution multiplied by (B) the Current Market Price
per share of Common Stock on the record date for such Distribution. For
purposes of the foregoing, the total maximum number of shares of Common Stock
issuable upon exercise of all such Options or upon conversion or exchange of all
such Convertible Securities or upon the conversion or exchange of the total
maximum amount of the Convertible Securities issuable upon the exercise of all
such Options shall be deemed to have been issued as of the date of such
Distribution and thereafter shall be deemed to be outstanding and the Company
shall be deemed to have received as consideration therefor such price per share,
determined as provided above. Except as provided in paragraphs (j) and (k)
below, no additional adjustment of the Exercise Price shall be made upon the
actual exercise of such Options or upon conversion or exchange of the
Convertible Securities or upon the conversion or exchange of the Convertible
Securities issuable upon the exercise of such Options.
<PAGE>
16
(d) Dividends and Distributions. In the event the Company shall, at any
time or from time to time after the date hereof, distribute to all the holders
of Common Stock any dividend or other distribution of cash, evidences of its
indebtedness, other securities or other properties or assets (in each case other
than (i) dividends payable in Common Stock, Options or Convertible Securities
and (ii) any cash dividend from current or retained earnings), or any options,
warrants or other rights to subscribe for or purchase any of the foregoing, then
(A) the Exercise Price shall be decreased to a price determined by multiplying
the Exercise Price then in effect by a fraction, the numerator of which shall be
the Current Market Price per share of Common Stock on the record date for such
distribution less the sum of (X) the cash portion, if any, of such distribution
per share of Common Stock outstanding (exclusive of any treasury shares) on the
record date for such distribution plus (Y) the then fair market value (as
determined in good faith by the Board of Directors of the Company) per share of
Common Stock outstanding (exclusive of any treasury shares) on the record date
for such distribution of that portion, if any, of such distribution consisting
of evidences of indebtedness, other securities, properties, assets, options,
warrants or subscription or purchase rights, and the denominator of which shall
be such Current Market Price per share of Common Stock and (B) the number of
shares of Common Stock purchasable upon the exercise of each Warrant shall be
increased to a number determined by multiplying the number of shares of Common
Stock so purchasable immediately prior to the record date for such distribution
by a fraction, the numerator of which shall be the Exercise Price in effect
immediately prior to the adjustment required by clause (A) of this sentence and
the denominator of which shall be the Exercise Price in effect immediately after
such adjustment. The adjustments required by this paragraph (d) shall be made
whenever any such distribution occurs retroactive to the record date for the
determination of stockholders entitled to receive such distribution.
(e) Self-Tenders. In case of the consummation of a tender or exchange
offer (other than an odd-lot tender offer) made by the Company or any subsidiary
of the Company for all or any portion of the Common Stock to the extent that the
cash and value of any other consideration included in such payment per share of
Common Stock exceeds the first reported sales price per share of Common Stock on
the trading day next succeeding the Expiration Time, the Exercise Price shall be
reduced so that the same shall equal the price determined by multiplying the
Exercise Price in effect immediately prior to the Expiration Time by a fraction
the numerator of which shall be the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) at the Expiration Time multiplied
by the first reported sales price of the Common Stock on the trading day next
succeeding the Expiration Time, and the denominator shall be the sum of (A) the
fair market value (determined by the Board of Directors of the Company, whose
determination shall be conclusive and described in a resolution of the Board of
Directors) of the aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the tender or exchange
offer) of all shares validly tendered or exchanged and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such maximum, being
referred to as the "Purchased Shares") and (B) the product of the number of
shares of Common Stock outstanding (less any Purchased Shares) on the Expiration
Time and the first reported sales price of the Common Stock on the trading day
next succeeding the Expiration Time, such
<PAGE>
17
reduction to become effective immediately prior to the opening of business on
the day following the Expiration Time.
(f) Issuance of Additional Shares of Common Stock. If at any time the
Company shall (except as hereinafter provided) issue or sell any additional
shares of Common Stock for consideration in an amount per additional share of
Common Stock less than the Current Market Price, then the number of shares of
Common Stock for which this Warrant is exercisable shall be adjusted to equal
the product obtained by multiplying the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such issue or sale by a
fraction (A) the numerator of which shall be the number of shares of Common
Stock outstanding immediately after such issue or sale, and (B) the denominator
of which shall be the sum of (1) the number of shares of Common Stock
outstanding immediately prior to such issue or sale, and (2) the aggregate
consideration received from the issuance or sale of the additional shares of
Common Stock divided by the Current Market Price. For the purposes of this
paragraph (f), the date as of which the Current Market Price per share of Common
Stock shall be computed shall be the earlier of (a) the date on which the
Company shall enter into a firm contract for the issuance of such additional
shares of Common Stock or (b) the date of actual issuance of such additional
shares of Common Stock. Notwithstanding the foregoing, no adjustment shall be
made under this paragraph for issuances of shares of Common Stock (i) with
respect to options issued under the Company's stock options plans as currently
in effect, (ii) upon exercise of the Warrants, (iii) upon exercise of the
warrants issued to Gerard Klauer Mattison & Co., L.L.C. in connection with the
offerings completed by the Company in October 1995 and the Heartland Transaction
(as defined in the prospectus relating to the Warrants), (iv) upon exercise of
the warrants issued in connection with the Company's issuance of its 13% Senior
Notes due 2003, or (v) pursuant to the terms of the Agreement and Plan of
Merger, dated April 25, 1996, among TruVision Wireless, Inc., Wireless One
Mergersub, Inc. and the Company, including shares of Common Stock issued to
Vision Communications, Inc.
(g) Current Market Price. For the purpose of any computation of Current
Market Price under this Section 7 and Section 9, the Current Market Price per
share of Common Stock at any date shall be (x) for purposes of Section 9, the
closing price on the business day immediately prior to the exercise of the
applicable Warrant pursuant to Section 3 and (y) in all other cases, the average
of the daily closing prices for the shorter of (i) the 20 consecutive trading
days ending on the last full trading day on the exchange or market specified in
the second succeeding sentence prior to the Time of Determination (as defined
below) and (ii) the period commencing on the date next succeeding the first
public announcement of the issuance, sale, distribution or granting in question
through such last full trading day prior to the Time of Determination; provided
--------
that in the case of a firm commitment underwritten public offering, the Current
- ----
Market Price shall mean the closing price of the Common Stock on the day of the
pricing of such offering. The term "Time of Determination" as used herein shall
be the time and date of the earlier to occur of (A) the date as of which the
Current Market Price is to be computed and (B) the last full trading day on such
exchange or market before the commencement of "ex-dividend" trading in the
Common Stock relating to the event giving rise to the adjustment required by
paragraph (a), (b), (c) or (d). The closing price for any day shall be the last
reported sale price regular way
<PAGE>
18
or, in case no such reported sale takes place on such day, the average of the
closing bid and asked prices regular way for such day, in each case (1) on the
principal national securities exchange on which the shares of Common Stock are
listed or to which such shares are admitted to trading or (2) if the Common
Stock is not listed or admitted to trading on a national securities exchange, in
the over-the-counter market as reported by the Nasdaq National Market or any
comparable system or (3) if the Common Stock is not listed on the Nasdaq
National Market or a comparable system, as furnished by two members of the NASD
selected from time to time in good faith by the Board of Directors of the
Company for that purpose. In the absence of all of the foregoing, or if for any
other reason the Current Market Price per share cannot be determined pursuant to
the foregoing provisions of this paragraph (g), the Current Market Price per
share shall be the fair market value thereof as determined in good faith by the
Board of Directors of the Company.
(h) Certain Distributions. If the Company shall pay a dividend or make
any other distribution payable in Options or Convertible Securities, then, for
purposes of paragraph (c) above, such Options or Convertible Securities shall be
deemed to have been issued or sold without consideration.
(i) Consideration Received. If any shares of Common Stock, Options or
Convertible Securities shall be issued, sold or distributed for a consideration
other than cash, the amount of the consideration other than cash received by the
Company in respect thereof shall be deemed to be the then fair market value of
such consideration (as determined in good faith by the Board of Directors of the
Company). If any Options shall be issued in connection with the issuance and
sale of other securities of the Company, together comprising one integral
transaction in which no specific consideration is allocated to such Options by
the parties thereto, such Options shall be deemed to have been issued without
consideration; provided, however, that if such Options have an exercise price
equal to or greater than the Current Market Price of the Common Stock on the
date of issuance of such Options, then such Options shall be deemed to have been
issued for consideration equal to such exercise price.
(j) Deferral of Certain Adjustments. No adjustment to the Exercise Price
(including the related adjustment to the number of shares of Common Stock
purchasable upon the exercise of each Warrant) shall be required hereunder
unless such adjustment, together with other adjustments carried forward as
provided below, would result in an increase or decrease of at least one percent
(1%) of the Exercise Price; provided that any adjustments which by reason of
this paragraph (j) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. No adjustment need be made for
a change in the par value of the Common Stock. All calculations under this
Section shall be made to the nearest 1/1,000 of one cent or to the nearest
1/1000th of a share, as the case may be.
(k) Changes in Options and Convertible Securities. If the exercise price
provided for in any Options referred to in paragraph (c) above, the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in paragraph (c) above, or the rate at which
any Convertible Securities referred to in paragraph (c) above are convertible
into or exchangeable for Common Stock shall change at any time
<PAGE>
19
(other than under or by reason of provisions designed to protect against
dilution upon an event which results in a related adjustment pursuant to this
Section 7), the Exercise Price then in effect and the number of shares of Common
Stock purchasable upon the exercise of each Warrant shall forthwith be
readjusted (effective only with respect to any exercise of any Warrant after
such readjustment) to the Exercise Price and number of shares of Common Stock so
purchasable that would then be in effect had the adjustment made upon the
issuance, sale, distribution or granting of such Options or Convertible
Securities been made based upon such changed purchase price, additional
consideration or conversion rate, as the case may be, but only with respect to
such Options and Convertible Securities as then remain outstanding.
(l) Expiration of Options and Convertible Securities. If, at any time
after any adjustment to the number of shares of Common Stock purchasable upon
the exercise of each Warrant shall have been made pursuant to paragraph (c) or
(k) above or this paragraph (l), any Options or Convertible Securities shall
have expired unexercised, the number of such shares so purchasable shall, upon
such expiration, be readjusted and shall thereafter be such as they would have
been had they been originally adjusted (or had the original adjustment not been
required, as the case may be) as if (i) the only shares of Common Stock deemed
to have been issued in connection with such Options or Convertible Securities
were the shares of Common Stock, if any, actually issued or sold upon the
exercise of such Options or Convertible Securities and (ii) such shares of
Common Stock, if any, were issued or sold for the consideration actually
received by the Company upon such exercise plus the aggregate consideration, if
any, actually received by the Company for the issuance, sale, distribution or
granting of all such Options or Convertible Securities, whether or not
exercised; provided that no such readjustment shall have the effect of
decreasing the number of such shares so purchasable by an amount (calculated by
adjusting such decrease to account for all other adjustments made pursuant to
this Section 7 following the date of the original adjustment referred to above)
in excess of the amount of the adjustment initially made in respect of the
issuance, sale, distribution or granting of such Options or Convertible
Securities.
(m) Other Adjustments. In the event that at any time, as a result of an
adjustment made pursuant to this Section 7, the Holders shall become entitled to
receive any securities of the Company other than shares of Common Stock,
thereafter the number of such other securities so receivable upon exercise of
the Warrants and the Exercise Price applicable to such exercise shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the shares of Common Stock
contained in this Section 7.
(n) Other Action Affecting Common Stock. In case at any time or from time
to time the Company shall take any action in respect of its Common Stock, other
than any action described in this Section 7, then the number of shares of Common
Stock or other stock for which this Warrant is exercisable shall be adjusted in
such manner as may be equitable in the circumstances. If the Company shall at
any time and from time to time issue or sell (i) any shares of any class of
common stock other than Common Stock, (ii) any evidences of its indebtedness,
shares of stock or other securities which are convertible into or exchangeable
for such shares of common stock, with or without the payment of additional
consideration in cash or property or (iii) any warrants or other rights to
subscribe for or purchase any such
<PAGE>
20
shares of common stock or any such evidences, shares of stock or other
securities, then in each such case such issuance shall be deemed to be of, or in
respect of, Common Stock for purposes of this Section 7; provided, however,
that, without limiting the generality of the foregoing, if the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend payable in, or other distribution of, common stock
other than Common Stock, including shares of non-voting common stock, then the
number of shares of Common Stock for which this Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the aggregate number of shares of such common stock and of Common Stock which a
record holder of the same number of shares of Common Stock for which this
Warrant is exercisable immediately prior to the occurrence of such event would
own or be entitled to receive after the happening of such event.
SECTION 8. Statement on Warrants. Irrespective of any adjustment in the
number or kind of shares issuable upon the exercise of the Warrants or the
Exercise Price, Warrants theretofore or thereafter issued may continue to
express the same number and kind of shares as are stated in the Warrants
initially issuable pursuant to this Agreement.
SECTION 9. Fractional Interest. The Company shall not be required to
issue fractional shares of Common Stock on the exercise of Warrants. If more
than one Warrant shall be presented for exercise in full at the same time by the
same Holder, the number of full shares of Common Stock which shall be issuable
upon such exercise shall be computed on the basis of the aggregate number of
shares of Common Stock acquirable on exercise of the Warrants so presented. If
any fraction of a share of Common Stock would, except for the provisions of this
Section, be issuable on the exercise of any Warrant (or specified portion
thereof), the Company shall direct the Transfer Agent to pay an amount in cash
calculated by it to equal the then Current Market Price per share (determined
pursuant to Section 7(g)) multiplied by such fraction computed to the nearest
whole cent. The Holders, by their acceptance of the Warrant Certificates,
expressly waive any and all rights to receive any fraction of a share of Common
Stock or a stock certificate representing a fraction of a share of Common Stock.
SECTION 10. When Adjustment Not Required. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
SECTION 11. Escrow of Warrant Stock. If after any property becomes
distributable pursuant to Section 7 by reason of the taking of any record of the
holders of Common Stock, but prior to the occurrence of the event for which such
record is taken, and the Holder exercises this Warrant, any additional shares of
Common Stock issuable upon exercise by reason of such adjustment shall be deemed
the last shares of Common Stock for which this Warrant is exercised
(notwithstanding any other provision to the contrary herein)
<PAGE>
21
and such shares or other property shall be held in escrow for the Holder by the
Company to be issued to the Holder upon and to the extent that the event
actually takes place. Notwithstanding any other provision to the contrary
herein, if the event for which such record was taken fails to occur or is
rescinded, then such escrowed shares shall be cancelled by the Company and
escrowed property returned.
SECTION 12. Challenge to Good Faith Determination. Whenever the Board of
Directors of the Company shall be required to make a determination in good faith
of the fair value of any item under Section 7, such determination may be
challenged in good faith by the Majority Holders, and any dispute shall be
resolved by an investment banking firm of national standing selected by the
Company. The fee of such investment banking firm shall be paid by the Company,
unless such fair market value as determined by the investment banking firm is
more than 95% of the fair market value determined by the Board of Directors of
the Company, in which case the challenging Holders shall be jointly and
severally liable for such fee.
SECTION 13. Treasury Stock. The sale or other disposition of any issued
shares of Common Stock owned or held by or for the account of the Company shall
be deemed an issuance thereof and a repurchase thereof and designation of such
shares as treasury stock shall be deemed to be a redemption thereof for the
purposes of this Agreement.
SECTION 14. Notices to Warrant Holders. Upon any adjustment of the
Exercise Price pursuant to Section 7, the Company shall promptly thereafter (i)
cause to be filed with the Warrant Agent a certificate of a firm of independent
public accountants of recognized standing selected by the Board of Directors of
the Company (who may be the regular auditors of the Company) setting forth the
Exercise Price after such adjustment and setting forth in reasonable detail the
method of calculation and the facts upon which such calculations are based and
setting forth the number of Warrant Shares (or portion thereof) issuable after
such adjustment in the Exercise Price, upon exercise of a Warrant and payment of
the adjusted Exercise Price, which certificate shall be conclusive evidence of
the correctness of the matters set forth therein, and (ii) cause to be given to
each of the registered Holders of the Warrant Certificates at his address
appearing on the Warrant Register written notice of such adjustments by first-
class mail, postage prepaid. The Warrant Agent shall be entitled to
conclusively rely on the above-referenced accountant's certificate and shall be
under no duty or responsibility with respect to any such certificate, except to
exhibit the same from time to time to any Holder desiring an inspection thereof
during normal business hours upon reasonable notice. The Warrant Agent shall
not at any time be under any duty or responsibility to any Holder to determine
whether any facts exist that may require any adjustment of the number of shares
of Common Stock or other stock or property issuable on exercise of the Warrants
or the Exercise Price, or with respect to the nature or extent of any such
adjustment when made, or with respect to the method employed in making such
adjustment or the validity or value (or the kind or amount) of any shares of
Common Stock or other stock or property which may be issuable on exercise of the
Warrants. The Warrant Agent shall not be responsible for any failure of the
Company to make any cash payment or to issue, transfer or deliver any shares of
Common Stock or stock certificates or other common stock or property upon the
exercise of any Warrant.
<PAGE>
22
The Company shall, in addition, promptly notify the Holders of the Warrants
of any determination of its Board of Directors pursuant to Section 7(n) that any
actions affecting its Common Stock will not require an adjustment to the
Exercise Price or the number of shares for which a Warrant is exercisable, and
shall specify in such notice the reasons for such determination. In the event
that the Majority Holders shall challenge any of the calculations set forth in
such notice within 20 days after the Company's delivery thereof, the Company
shall retain a firm of independent certified public accountants of national
standing selected by the Company to prepare and execute a certificate verifying
that no adjustment is required. The Company shall promptly cause a signed copy
of any certificate prepared pursuant to this Section 14 to be delivered to each
Holder in accordance with Section 20. The Company shall keep at its office or
agency designated pursuant to Section 2.10 copies of all such certificates and
cause the same to be available for inspection at said office during normal
business hours upon reasonable notice by any Holder or any prospective purchaser
of a Warrant designated by a Holder thereof.
SECTION 15. Merger, Consolidation or Change of Name of Warrant Agent. Any
corporation into which the Warrant Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Warrant Agent shall be a party, or any corporation succeeding to the
business of the Warrant Agent, shall be the successor to the Warrant Agent
hereunder without the execution or filing of any paper or any further act on the
part of any of the parties hereto, provided that such corporation would be
eligible for appointment as a successor warrant agent under the provisions of
Section 17. In case at the time such successor to the Warrant Agent shall
succeed to the agency created by this Agreement, and in case at that time any of
the Warrant Certificates shall have been countersigned but not delivered, any
such successor to the Warrant Agent may adopt the countersignature of the
original Warrant Agent; and in case at that time any of the Warrant Certificates
shall not have been countersigned, any successor to the Warrant Agent may
countersign such Warrant Certificates either in the name of the predecessor
Warrant Agent or in the name of the successor to the Warrant Agent; and in all
such cases such Warrant Certificates shall have the full force and effect
provided in the Warrant Certificates and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and at
such time any of the Warrant Certificates shall have been countersigned but not
delivered, the Warrant Agent whose name has been changed may adopt the
countersignature under its prior name, and in case at that time any of the
Warrant Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its changed
name, and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
SECTION 16. Warrant Agent. The Warrant Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Warrants, by their
acceptance thereof, shall be bound:
<PAGE>
23
(a) The statements contained herein and in the Warrant Certificates
shall be taken as statements of the Company and the Warrant Agent assumes no
responsibility for the correctness of any of the same. The Warrant Agent
assumes no responsibility with respect to the distribution of the Warrant
Certificates except as herein otherwise provided.
(b) The Warrant Agent shall not be responsible for any failure of
the Company to comply with any of the covenants contained in this Agreement or
in the Warrant Certificates to be complied with by the Company.
(c) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any holder of
any Warrant Certificate in respect of any action taken, suffered or omitted by
it hereunder in good faith and in accordance with the opinion or the advice of
such counsel.
(d) The Warrant Agent shall incur no liability or responsibility to
the Company or to any holder of any Warrant Certificate for any action taken
in reliance on any Warrant Certificate, certificate of shares, notice,
resolution, waiver, consent, order, certificate, opinion, direction or other
paper, document or instrument believed by it to be genuine and to have been
signed, sent or presented by the proper party or parties.
(e) The Company agrees to pay to the Warrant Agent reasonable
compensation, as agreed in writing from time to time, for all services
rendered by the Warrant Agent in connection with this Agreement, to reimburse
the Warrant Agent for all expenses, taxes and governmental charges and other
charges of any kind and nature reasonably incurred by the Warrant Agent in
connection with this Agreement (including, without limitation, reasonable fees
and expenses of counsel) and to indemnify the Warrant Agent and its agents,
employees, directors, officers and affiliates and save it and them harmless
against any and all losses, liabilities and expenses of any nature whatsoever,
including, without limitation, judgments, costs and counsel fees and actual
expenses, for any action taken or omitted by the Warrant Agent or arising in
connection with this Agreement and the exercise by the Warrant Agent of its
rights hereunder and the performance by the Warrant Agent of any of its
obligations hereunder except as a result of the Warrant Agent's gross
negligence or bad faith or willful misconduct.
(f) The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to involve
expense unless the Company or one or more Holders of Warrant Certificates
shall furnish the Warrant Agent with reasonable security and indemnity
satisfactory to the Warrant Agent for any costs and expenses which may be
incurred, but this provision shall not affect the power of the Warrant Agent
to take such action as it may consider proper, whether with or without any
such security or indemnity. All rights of action under this Agreement or
under any of the Warrants may be enforced by the Warrant Agent without the
possession of any of the Warrant Certificates or the production thereof at any
trial or other proceeding relative thereto, and any such action, suit or
proceeding
<PAGE>
24
instituted by the Warrant Agent shall be brought in its name as Warrant Agent
and any recovery of judgment shall be for the ratable benefit of the Holders
of the Warrants, as their respective rights or interests may appear.
(g) The Warrant Agent, and any stockholder, director, officer or
employee of it, may buy, sell or deal in any of the Warrants or other
securities of the Company or become pecuniarily interested in any transaction
in which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Warrant
Agent under this Agreement. Nothing herein shall preclude the Warrant Agent
from acting in any other capacity for the Company or for any other legal
entity.
(h) The Warrant Agent shall act hereunder solely as agent for the
Company, and its duties shall be determined solely by the provisions hereof.
The Warrant Agent shall not be liable for anything which it may do or refrain
from doing in connection with this Agreement except for its own willful
misconduct, gross negligence or bad faith.
(i) The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of any Warrant Certificate to make or cause to be
made any adjustment of the Exercise Price or number of the Warrant Shares or
other securities or property deliverable as provided in this Agreement, or to
determine whether any facts exist which may require any of such adjustments,
or with respect to the nature or extent of any such adjustments, when made, or
with respect to the method employed in making the same. The Warrant Agent
shall not be accountable with respect to the validity or value or the kind or
amount of any Warrant Shares or of any securities or property which may at any
time be issued or delivered upon the exercise of any Warrant or with respect
to whether any such Warrant Shares or other securities will when issued be
validly issued and fully paid and nonassessable, and makes no representation
with respect thereto.
(j) Before the Warrant Agent acts or refrains from acting with
respect to any matter contemplated by this Warrant Agreement, it may require:
(1) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Warrant
Agreement relating to the proposed action have been complied with; and
(2) if reasonably necessary in the sole judgment of the Warrant
Agent, an Opinion of Counsel for the Company stating that, in the opinion
of such counsel, all such conditions precedent have been complied with.
Each Officers' Certificate or, if requested, an Opinion of Counsel
with respect to compliance with a condition or covenant provided for in this
Warrant Agreement shall include:
<PAGE>
25
(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 Warrant Agent shall not be liable for any action it takes or
omits to take in good faith in reliance on any such certificate or opinion.
(k) The Warrant Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President, a Senior Vice President, the Secretary,
an Assistant Secretary, the Treasurer or an Assistant Treasurer of the
Company, and to apply to such officers for advice or instructions in
connection with its duties, and it shall not be liable for any action taken or
suffered to be taken by it in good faith in accordance with instructions of
any such officer.
(l) The Warrant Agent shall not have any duty to calculate or
determine any adjustments with respect either to the Exercise Price or the
kind and amount of shares or other securities or any property receivable by
holders of Warrant Certificates upon the exercise or tender of Warrants
required from time to time, and the Warrant Agent shall have no duty or
responsibility in determining the accuracy or correctness of such
calculations.
(m) The Company will perform, execute, acknowledge and deliver or
cause to be performed, executed, acknowledged and delivered all such further
acts, instruments and assurances as may be required by the Warrant Agent in
order to enable it to carry out or perform its duties under this Agreement.
(n) The Warrant 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 Warrant Agent need not investigate any
fact or matter stated in the document.
(o) The Warrant Agent may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
<PAGE>
26
SECTION 17. Resignation and Removal of Warrant Agent; Appointment
of Successor. (a) No resignation or removal of the Warrant Agent and no
appointment of a successor warrant agent shall become effective until the
acceptance of appointment by the successor warrant agent as provided herein.
The Warrant Agent may resign its duties and be discharged from all further
duties and liability hereunder (except liability arising as a result of the
Warrant Agent's own gross negligence, willful misconduct or bad faith) upon
not less than 30 days' prior written notice to the Company. The Company may
remove the Warrant Agent upon written notice, and the Warrant Agent shall
thereupon in like manner be discharged from all further duties and liabilities
hereunder, except as aforesaid. The Warrant Agent shall, at the Company's
expense, cause to be mailed (by first class mail, postage prepaid) to each
Holder of a Warrant at his last address as shown on the Warrant Register a
copy of said notice of resignation or notice of removal, as the case may be.
Upon such resignation or removal, the Company shall appoint in writing a new
warrant agent. If the Company shall fail to make such appointment within a
period of 30 days after it has been notified in writing of such resignation by
the resigning Warrant Agent or after such removal, then the resigning Warrant
Agent or the Holder of any Warrant may apply to any court of competent
jurisdiction for the appointment of a new warrant agent. Any new warrant
agent, whether appointed by the Company or by such a court, shall be a
corporation doing business under the laws of the United States or any state
thereof, in good standing and having a combined capital and surplus of not
less than $50,000,000. The combined capital and surplus of any such new
warrant agent shall be deemed to be the combined capital and surplus as set
forth in the most recent annual report of its condition published by such
warrant agent prior to its appointment, provided that such reports are
published at least annually pursuant to law or to the requirements of a
federal or state supervising or examining authority. After acceptance in
writing of such appointment by the new warrant agent, it shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named herein as the Warrant Agent, without any further assurance,
conveyance, act or deed; but if for any reason it shall be necessary or
expedient to execute and deliver any further assurance, conveyance, act or
deed, the same shall be done at the expense of the Company and shall be
legally and validly executed and delivered by the resigning or removed Warrant
Agent. Not later than the effective date of any such appointment, the Company
shall give notice thereof to the resigning or removed Warrant Agent. Failure
to give any notice provided for in this Section, however, or any defect
therein, shall not affect the legality or validity of the resignation of the
Warrant Agent or the appointment of a new warrant agent, as the case may be.
Notwithstanding any resignation or removal of the Warrant Agent or the failure
to exercise the Warrants, the Company's obligations under Section 16(e) shall
survive for the benefit of the retiring Warrant Agent.
(b) Any corporation into which the Warrant Agent or any new warrant
agent may be merged or any corporation resulting from any consolidation to
which the Warrant Agent or any new warrant agent shall be a party or any
corporation to which the Warrant Agent transfers substantially all of its
corporate trust or shareholder business shall be a successor Warrant Agent
under this Agreement without any further
<PAGE>
27
act, provided that such corporation (i) would be eligible for appointment as
successor to the Warrant Agent under the provisions of Section 17(a) or (ii)
is a wholly owned subsidiary of the Warrant Agent. Any such successor Warrant
Agent shall promptly cause notice of its succession as Warrant Agent to be
mailed (by first class mail, postage prepaid) to each Holder at such Holder's
last address as shown on the Warrant Register.
SECTION 18. Registration.
18.1 Warrant Shares Registration Statement. The Company agrees
-------------------------------------
with and for the benefit of the holders of Warrants that on or prior to the
Exercisability Date, the Company will have registered (the "Warrant Shares
Registration Statement") or otherwise qualified all Warrant Shares pursuant to
the provisions of the Securities Act and pursuant to all applicable state
"Blue Sky" or securities laws. So long as any unexpired and exercisable
Warrants remain outstanding, the Company will file such amendments and/or
supplements to any registration statement under the Securities Act or under
any applicable state securities laws covering the issuance of such Warrant
Shares, and supplement and keep current any prospectus forming a part of such
registration statement, as may be necessary to permit the Company to comply
with the Securities Act and the rules and regulations thereunder and as may be
necessary to comply with all applicable state "Blue Sky" or securities laws,
and to permit the Company to deliver to each Person exercising a Warrant a
prospectus meeting the requirements of Section 10(a)(3) of the Securities Act
and otherwise comply therewith; and the Company will deliver such prospectus
to each such Person. The Company shall, upon the request of any holder of
Warrants that may be required pursuant to the Securities Act to deliver a
prospectus in connection with any sale or other disposition of Warrant Shares,
include within the plan of distribution section of the prospectus and in such
other places in the prospectus as may be necessary, all information necessary
under the Securities Act to enable such holder to deliver such prospectus in
connection with sales or other dispositions of such Warrant Shares, and the
Company shall also take such action as may be necessary under the Securities
Act with respect to the related registration statement to enable such holder
to effect such delivery in connection with such sale or other disposition.
The Company further agrees to provide any holder who may be required to
deliver a prospectus upon the sale or other disposition of such Warrant
Shares, such number of copies of the prospectus as such holder reasonably
requests.
18.2 Registration Expenses. All expenses incident to the Company's
---------------------
performance of or compliance with this Section 18 will be borne by the
Company, including without limitation: (i) all registration and filing fees
and expenses; (ii) all fees and expenses of compliance with federal securities
and state Blue Sky or securities laws; (iii) all expenses of printing
(including printing certificates for the Warrant Shares and printing of
prospectuses), messenger and delivery services; (iv) all fees and
disbursements of counsel for the Company; (v) all fees and disbursements of
independent certified public accountants of the Company (including the
expenses of any special audit and comfort letters required by or incident to
such performance); and (vi)
<PAGE>
28
the Company's internal expenses, the expenses of any annual or other audit and
the fees and expenses of any Person, including special experts, retained by
the Company.
SECTION 19. Reports.
(a) So long as any of the Warrants remain outstanding, and to the
extent such documents are required to be sent by the Company to the holders of
its outstanding Common Stock, the Company shall cause copies of all quarterly
and annual financial reports and of the information, documents, and other
reports (or copies of such portions of any of the foregoing as the Commission
may by rules and regulations prescribe) which the Company is required to file
with the Commission pursuant to Section 13 or 15(d) of the Exchange Act ("SEC
Reports") to be filed with the Warrant Agent and mailed to the Holders of the
Warrants at their addresses appearing in the Warrant Register, in each case,
within 15 days of filing with the Commission. If the Company is not subject
to the requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall nevertheless continue to cause SEC Reports, comparable to those which it
would be required to file pursuant to Section 13 or 15(d) of the Exchange Act
if it were subject to the requirements of either such Section, to be so filed
with the Commission (but only if the Commission permits such filings) and, to
the extent it is required to send such SEC Reports to the holders of its
outstanding Common Stock, with the Warrant Agent and mailed to the holders, in
each case, within the same time periods as would have applied (including under
the preceding sentence) had the Company been subject to the requirements of
Section 13 or 15(d) of the Exchange Act.
(b) The Company shall provide the Warrant Agent with a sufficient
number of copies of all SEC Reports that the Warrant Agent may be required to
deliver to the Holders of the Warrants under this Section 19, and any such
cost of delivery will be at the expense of the Company.
SECTION 20. Notices to Company and Warrant Agent. Any notice or
demand authorized by this Agreement to be given or made by the Warrant Agent
or by the Holder of any Warrant Certificate to or on the Company shall be
sufficiently given or made (i) five business days after deposited in the mail,
first class or registered, postage prepaid, (ii) one business day after being
timely delivered to a next-day air courier or (ii) when receipt is
acknowledged by the addressee, if telecopied, addressed (until another address
is filed in writing by the Company with the Warrant Agent), as follows:
Wireless One, Inc.
11301 Industriplex Boulevard
Suite 4
Baton Rouge, Louisiana 70808-4115
Telecopy: (504) 293-5400
Telephone: (504) 293-5000
Attention: Chief Financial Officer
<PAGE>
29
In case the Company shall fail to maintain such office or agency or
shall fail to give such notice of the location or of any change in the
location thereof, presentations may be made and notices and demands may be
served at the principal office of the Warrant Agent.
Any notice pursuant to this Agreement to be given by the Company or
by the Holder(s) of any Warrant Certificate to the Warrant Agent shall be
sufficiently given or made (i) five business days after deposited in the mail,
first-class or registered, postage prepaid, (ii) one business day after being
timely delivered to a next-day air courier or (ii) when receipt is
acknowledged by the addressee, if telecopied, addressed (until another address
is filed in writing by the Warrant Agent with the Company) to the Warrant
Agent as follows:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Telecopy: (212) 852-1625
Telephone: (212) 852-1000
Attention: Corporate Trust Division
SECTION 21. Supplements and Amendments. The Company and the
Warrant Agent may from time to time supplement or amend this Agreement without
the approval of any holders of Warrant Certificates in order to cure any
ambiguity or to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Warrant Agent may deem necessary or desirable and which shall
not in any way adversely affect the interests of the holders of Warrant
Certificates. Any amendment or supplement to this Agreement that has a
material adverse effect on the interests of holders shall require the written
consent of Majority Holders representing a majority of the then outstanding
Warrants. The consent of each Holder of a Warrant affected shall be required
for any amendment pursuant to which the Exercise Price would be increased or
the number of Warrant Shares purchasable upon exercise of Warrants would be
decreased (except pursuant to Section 7 herein). The Warrant Agent shall be
entitled to receive and, subject to Section 16, shall be fully protected in
relying upon, an Officers' Certificate and Opinion of Counsel as conclusive
evidence that any such amendment or supplement is authorized or permitted
hereunder, that it is not inconsistent herewith, and that it will be valid and
binding upon the Company in accordance with its terms. The Company may not
sign any amendment or supplement until the Company's Board of Directors
approves it.
SECTION 22. Severability. Wherever possible, each provision of
this Warrant Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Warrant Agreement
shall be prohibited by or invalid under applicable law, such provision shall
be ineffective to the extent of
<PAGE>
30
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant Agreement.
SECTION 23. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
SECTION 24. Termination. This Agreement (other than the Company's
obligations with respect to Warrants previously exercised) shall terminate at
5:00 p.m., New York City time on the Expiration Date, except for Section 16(e)
hereto.
SECTION 25. GOVERNING LAW. THIS AGREEMENT AND EACH WARRANT
CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE
LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF SAID STATE. Service of process on the
Company or Holder in any action arising out of or relating to this Agreement
shall be effective if mailed to such party in accordance with the procedures
and requirements set forth in Section 20. Nothing herein shall preclude any
Holder or the Company from bringing suit or taking other legal action in any
other jurisdiction.
SECTION 26. Benefits of This Agreement. (a) Nothing in this
Agreement shall be construed to give to any Person or corporation other than
the Company, the Warrant Agent and the holders of the Warrant Certificates any
legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company, the
Warrant Agent and the holders of the Warrant Certificates.
(b) Prior to the exercise of the Warrants, no Holder of a Warrant
Certificate, as such, shall be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to receive dividends or
subscription rights, the right to vote, to consent, to exercise any preemptive
right, to receive any notice of meetings of stockholders for the election of
directors of the Company, to share in the assets of the Company in the event
of the liquidation, dissolution or winding up of the Company's affairs or any
other matter or to receive any notice of any proceedings of the Company,
except as may be specifically provided for herein.
(c) All rights of action in respect of this Agreement are vested in
the Holders of the Warrants, and any Holder of any Warrant, without the
consent of the Warrant Agent or the Holder of any other Warrant, may, on such
Holder's own behalf and for such Holder's own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company
suitable to enforce, or otherwise in respect of, such Holder's rights
hereunder, including the right to exercise, exchange or surrender for purchase
such Holder's Warrants in the manner provided in this Agreement.
<PAGE>
31
SECTION 27. Entire Agreement. This Agreement, together with the
Unit Agreement, dated as of __________, 1996 among the Company, the Warrant
Agent, the Trustee and United States Trust Company of New York, as Unit Agent
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 28. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
(Signature Page Follows)
<PAGE>
32
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________________________
Name:
Title:
UNITED STATES TRUST COMPANY OF NEW YORK
By________________________
Name:
Title:
<PAGE>
EXHIBIT A
Unless and until it is exchanged in whole or in part for Warrants in
certificated form, this Warrant may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the issuer or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or such other
name as requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY Person IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
EXERCISABLE ON OR AFTER __________, 1997
AND BEFORE __________, 2001
CUSIP No. _________
No._______ __ Warrants
Warrant Certificate
Wireless One, Inc.
This Warrant Certificate certifies that ___________, or registered
assigns, is the registered holder of Warrants expiring __________, 2001 (the
"Warrants") to purchase Common Stock, par value $.01 (the "Common Stock"), of
Wireless One, Inc., a Delaware corporation (the "Company"). Each Warrant
entitles the registered holder upon exercise on or before 5:00 p.m. New York
City Time on __________, 2001, to receive from the Company _________ fully paid
and nonassessable shares of Common Stock (each such share a "Warrant Share") at
the initial exercise price (the "Exercise Price") of $_____ per share payable in
lawful money of the United States of America upon surrender of this 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 Exercise Price and
number of Warrant Shares issuable upon exercise of the Warrants are subject to
adjustment upon the occurrence of certain events as set forth in the Warrant
Agreement.
As provided in the Warrant Agreement until the earlier of (i) 90 days
after the issuance of the Units (as defined in the Warrant Agreement), and (ii)
such date as the Purchasers (as defined in the Warrant Agreement) may in their
discretion deem appropriate,
A-1
<PAGE>
each $1,000 principal amount of Notes (as defined in the Warrant Agreement) and
three Warrants which comprise each Unit may not be transferred or exchanged
separately.
No Warrant may be exercised after 5:00 p.m., New York City Time on
__________, 2001, and to the extent not exercised by such time such Warrants
shall become void.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by
the Warrant Agent, as such term is used in the Warrant Agreement.
This Warrant Certificate shall be governed and construed in accordance
with the internal laws of the State of New York.
IN WITNESS WHEREOF, Wireless One, Inc. has caused this Warrant
Certificate to be signed by its President and by its Secretary and has caused
its corporate seal to be affixed hereunto or imprinted hereon.
Dated:
WIRELESS ONE, INC.
By__________________
President
By__________________
Secretary
Countersigned:
UNITED STATES TRUST COMPANY OF NEW YORK,
as Warrant Agent
By____________________________
Authorized Signature
A-2
<PAGE>
[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring __________, 2001 entitling the Holder on
exercise to receive shares of Common Stock, par value $.01, of the Company (the
"Common Stock"), and are issued or to be issued pursuant to a Warrant Agreement
dated as of __________, 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 __________, 1996 and
on or before 5:00 p.m., New York City time on __________, 2001. The holder of
Warrants evidenced by this Warrant Certificate may exercise them by surrendering
this Warrant Certificate, with the form of election to purchase set forth hereon
properly completed and executed, together with payment of the Exercise Price in
cash at the office of the Warrant Agent. In the event that upon any exercise of
Warrants evidenced hereby the number of Warrants exercised shall be less than
the total number of Warrants evidenced hereby, there shall be issued to the
holder hereof or his assignee a new Warrant Certificate evidencing the number of
Warrants not exercised. No adjustment shall be made for any dividends on any
Common Stock issuable upon exercise of this Warrant.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price set forth on the face hereof and/or the number of
shares of Common Stock issuable upon the exercise of each Warrant shall, subject
to certain conditions, be adjusted. No fractions of a share of Common Stock
will be issued upon the exercise of any Warrant, but the Company will pay the
cash value thereof determined as provided in the Warrant Agreement.
The Warrant Agreement provides certain registration obligations of the
Company 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.
A-3
<PAGE>
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
A-4
<PAGE>
(FORM OF ELECTION TO EXERCISE)
(To be executed upon exercise of Warrants on the Exercise Date)
The undersigned hereby irrevocably elects to exercise _____ of the
Warrants represented by this Warrant Certificate and purchase the whole number
of Warrant Shares issuable upon the exercise of such Warrants and herewith
tenders payment for such Warrant Shares in the amount of $________ in cash or by
certified or official bank check, in accordance with the terms hereof. The
undersigned requests that a certificate representing such Warrant Shares be
registered in the name of ______________________ whose address is
____________________________ and that such certificate be delivered to
_________________________ whose address is ___________________________. Any
cash payments to be paid in lieu of a fractional Warrant Share should be made to
_____________________ whose address is ___________________________ and the check
representing payment thereof should be delivered to _______________________
whose address is ______________________.
Dated __________________, [19][20]__
Name of holder of Warrant Certificate: _____________________
(Please Print)
Tax Identification or Social Security Number: ___________________________
Address: ________________________________________________________________
________________________________________________________________
Signature: ______________________________________________________________
Note: The above signature must correspond with the name as
written upon the face of this Warrant Certificate in
every particular, without alteration or enlargement or
any change whatever and if the certificate representing
the Warrant Shares or any Warrant Certificate
representing Warrants not exercised is to be registered
in a name other than that in which this Warrant
Certificate is registered, or if any cash payment to be
paid in lieu of a fractional share is to be made to a
Person other than the registered holder of this Warrant
Certificate, the signature of the holder hereof must be
guaranteed as provided in the Warrant Agreement.
Dated ____________________, [19][20]__
Signature Guaranteed:_________________________________________________
A-5
<PAGE>
[FORM OF ASSIGNMENT]
For value received ____________________________ hereby
sells, assigns and transfers unto _________________ the within Warrant
Certificate, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint ________________ attorney, to transfer
said Warrant Certificate on the books of the within-named Company, with full
power of substitution in the premises.
Dated _________________, [19][20]__
Signature:___________________________________________________________
Note: The above signature must correspond with the name as
written upon the face of this Warrant Certificate in
every particular, without alteration or enlargement
or any change whatever.
Signature Guaranteed:________________________________________________
A-6
<PAGE>
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL WARRANTS/1/
The following increases or decreases in this Global Warrant have been made:
<TABLE>
<CAPTION> Number of Warrants of
Amount of decrease in Amount of increase in this Global Warrant
Date of Number of Warrants of Number of Warrants of following such decrease Signature of authorized
Exchange this Global Warrant this Global Warrant or increase officer of Warrant Agent
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- ----------
1/ This is to be included only if the Warrant is in global form.
_
A-7
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants") of Wireless One, Inc.
This Certificate relates to ________ Warrants held in* _____ book-
entry or* ________ certificated form by _________ (the "Transferor").
The Transferor:*
[ ] has requested the Warrant Agent by written order to deliver in
exchange for its beneficial interest in the Global Warrant held by the
Depositary a Warrant or Warrants in definitive, registered form of authorized
denominations and an aggregate number equal to its beneficial interest in such
Global Warrant (or the portion thereof indicated above); or
[ ] has requested the Warrant Agent by written order to exchange or
register the transfer of a Warrant or Warrants.
In connection with such request and in respect of each such Warrant,
the Transferor does hereby certify that Transferor is familiar with the Warrant
Agreement relating to the above captioned Warrants and the restrictions on
transfers thereof as provided in Section 2.8 of such Warrant Agreement.
(INSERT NAME OF TRANSFEROR]
By:____________________________
Date: ____________
B-1
<PAGE>
EXHIBIT 4.8
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 _______ __, 1996
<PAGE>
UNIT AGREEMENT dated as of _______ __, 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 $_________ aggregate principal
amount of its __% Senior Discount Notes due 2006 (the "Notes") pursuant to an
-----
Indenture dated as of _______ __, 1996 (the "Indenture") between the Company and
---------
the Trustee, and the Company proposes to issue _______ warrants (the "Warrants")
--------
to purchase initially an aggregate _______ shares of its Common Stock, par value
$0.01 per share (the "Common Stock") pursuant to a Warrant Agreement dated as
of _______ __, 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) _______ __, 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.
<PAGE>
2
(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 President 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.
<PAGE>
3
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
[____________] 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.
<PAGE>
4
(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
<PAGE>
5
(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 __% SENIOR DISCOUNT NOTES DUE 2006
(THE "NOTES") OF WIRELESS ONE, INC. AND ONE WARRANT OF WIRELESS ONE,
-----
INC., EACH WARRANT INITIALLY EXERCISABLE TO PURCHASE _____ 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) _______ __, 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 registrations 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
<PAGE>
6
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
<PAGE>
7
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
<PAGE>
8
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.
<PAGE>
9
(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
<PAGE>
10
Telecopier: (504) 926-7583
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.
<PAGE>
11
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.
<PAGE>
12
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: ________________________
Name:
Title:
UNITED STATES TRUST COMPANY OF
NEW YORK, as Unit Agent
By: ________________________
Name:
Title:
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By: ________________________
Name:
Title:
UNITED STATES TRUST COMPANY OF
NEW YORK, as Warrant Agent
By: _________________________
Name:
Title:
<PAGE>
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 __% SENIOR DISCOUNT NOTES
DUE 2006 (THE "NOTES") OF WIRELESS ONE, INC. AND ONE WARRANT OF
-----
WIRELESS ONE, INC., EACH WARRANT INITIALLY EXERCISABLE TO PURCHASE
_______ 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) _______ __, 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.
________ Units
WIRELESS ONE, INC.
Units each Consisting of a $1,000 Principal Amount
__% Senior Discount Note due 2006 and
[Three] Warrants to Purchase [an Equal Number of] Shares of
Common Stock of Wireless One, Inc.
No. ________ CUSIP No. _________
Wireless One, Inc., a Delaware corporation (the "Company"), which term
-------
includes any successor corporation), hereby certifies that [ ] is
the owner of [ ] 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 one $1,000 principal amount __% Senior Discount
Note due 2006 of the Company (the "Notes") and one Warrant to purchase
-----
___________ shares of common stock, par value $0.01 per share, of the
Company (the "Common Stock") at an exercise price of $_________. This Unit is
------------
issued pursuant to the Unit Agreement (the "Unit Agreement") dated as of _______
--------------
__, 1996 among the Company, United States Trust Company of New York, as Unit
Agent (the "Unit Agent"), United States Trust
----------
A-1
<PAGE>
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 _______ __, 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 _______ __, 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) _______ __, 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.
A-2
<PAGE>
Capitalized terms used but not otherwise defined in this Unit
Certificate shall have the meanings given thereto in the Indenture.
Dated: _______ __, 1996
WIRELESS ONE, INC.
By:__________________________
Name:
Title:
By:__________________________
Name:
Title:
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-3
<PAGE>
[FORM OF REVERSE OF UNIT CERTIFICATE]
WIRELESS ONE, INC.
Units Each Consisting of a $1,000 Principal Amount
__% Senior Discount Note due 2006 and
One Warrant to Purchase
___________ of Shares of Common Stock
of Wireless One, Inc.
I. PROVISIONS RELATING TO THE __%
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 _____, 1996
through July 31, 1996 at a rate of ___% per annum, compounded semi-annually.
From and after August 1, 2001, interest on the Notes will accrue and interest on
the Accreted Value of the Notes will be paid semi-annually in arrears on each
________ and ________, commencing ______, 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.
A-4
<PAGE>
4. Indenture. The Company issued the Notes under an Indenture, dated
as of _______ __, 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 __% Senior
Discount Notes due 2006 (the "Notes"). The Notes are limited in aggregate
principal amount to $[____________]. 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 (S)(S) 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 _______ __, 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 _______ __ of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
- ------------------------------ ---------------------------------
<S> <C>
2001.......................... _______%
2002.......................... _______%
2003.......................... _______%
2004.......................... 100.00%
</TABLE>
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 _______ __, 1999 of
$___________ 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
___% 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
A-5
<PAGE>
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 30 nor more than 60 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.
A-6
<PAGE>
10. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years after such principal or interest has
become due and payable, the Trustee and the Paying Agent will pay such money
back to the Company. After that, all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
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.
A-7
<PAGE>
15. Defaults and Remedies. If an Event of Default occurs and is
continuing, the Trustee or the Holders of not less than 25% in aggregate
principal amount or the Accreted Value, as the case may be, of Notes then
outstanding may declare all the Notes to be due and payable in the manner, at
the time and with the effect provided in the Indenture. Holders of Notes may
not enforce the Indenture or the Notes except as provided in the Indenture. The
Trustee is not obligated to enforce the Indenture or the Notes unless it has
received indemnity reasonably satisfactory to it. The Indenture permits,
subject to certain limitations therein provided, Holders of a majority in
aggregate principal amount of the Notes then outstanding to direct the Trustee
in its exercise of any trust or power. The Trustee may withhold from Holders of
Notes notice of any continuing Default or Event of Default (except a Default in
payment of principal 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.
A-8
<PAGE>
22. Indenture. Each Holder, by accepting a Note, agrees to be bound
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time.
The Company will furnish to any Holder of a Note upon written request
and without charge a copy of the Indenture, which has the text of this Note in
larger type. Requests may be made to: Wireless One, Inc., 5551 Corporate
Boulevard, Suite 2G, Baton Rouge, Louisiana 70808-2549, Attn: Chief Financial
Officer.
A-9
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ______________________________________, agent to
transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Dated: _____________ Signed: ________________________________
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee: _____________________________
A-10
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.12 or 4.16 of the Indenture, check the appropriate box:
Section 4.12 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.12 or 4.16 of the Indenture, state the amount you
elect to have purchased:
$_______________________
Dated: __________________ ____________________________________________
NOTICE: The signature on this assignment must
correspond with the name as it appears upon the face
of the within Note in every particular without
alteration or enlargement or any change whatsoever
and be guaranteed by the endorser's bank or broker.
Signature Guarantee: ____________________________________
A-11
<PAGE>
II. PROVISIONS RELATING TO THE WARRANTS
WIRELESS ONE, INC.
The Warrants are part of a duly authorized issue of Warrants expiring
_______ __, ____ entitling the Holder on exercise to receive shares of Common
Stock, $.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 _______ __,
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 _______ __, 1996 and
on or before 5:00 p.m., New York City time on _______ __, ____. Each Warrant
entitles the registered holder upon exercise on or before 5:00 p.m. New York
City Time on _________, 2001, to receive from the Company _____ fully paid and
nonassessable shares of Common Stock (each such share a "Warrant Share") at the
-------------
initial exercise price (the "Exercise Price") of $______ 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.
A-12
<PAGE>
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-13
<PAGE>
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-14
<PAGE>
SCHEDULE OF INCREASES OR DECREASES OF UNITS/1/
The following increases or decreases in this Global Unit have been made:
<TABLE>
<CAPTION>
Number of Units Signature of
of this Global authorized
Amount of decrease Amount of increase Unit following signatory of
Date of in Number of Units in Number of Units such decrease Unit
Exchange of this Global Unit of this Global Unit or increase Agent
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- --------------------
/1/ This is to be included only if the Unit is in global form.
A-15
<PAGE>
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.
<PAGE>
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 __%
-----
Senior Discount Notes due 2006 of Wireless One, Inc. and one Warrant
to Purchase ______________ 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:_____________________
<PAGE>
KIRKLAND & ELLIS
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
Citicorp Center
153 East 53rd Street
New York, NY 10022-4675
Joshua N. Korff
To Call Writer Direct: 212 446-4800 Facsimile:
212 446-4943 212 446-4900
August 2, 1996
Wireless One Inc.
11301 Industriplex Boulevard
Baton Rouge, Louisiana 70709-4115
Re: Wireless One, Inc.
Registration Statement on Form S-1
Registration No. 33-95106
----------------------------------
Dear Ladies and Gentlemen:
We are acting as special counsel to Wireless One, Inc., a Delaware
corporation (the "Company"), in connection with the proposed registration by the
Company of an offering of (i) units (collectively, the "Units"), each consisting
of a $1,000 principal amount of % Senior Notes due 2006 (collectively, the
"Notes") and warrants (collectively, the Warrants") to purchase shares of the
Company's Common Stock, $.01 par value per share; (ii) $125,000 gross proceeds
of Notes; and (iii) Warrants, pursuant to a Registration Statement on Form S-1
(Registration No. 333-5109) filed with the Securities and Exchange Commission
(the "Commission") on June 4, 1996 under the Securities Act of 1933, as amended
(the "Act") (such Registration Statement, as amended or supplemented, is
hereinafter referred to as the "Registration Statement"). The Notes are to be
issued pursuant to an Indenture (the "Indenture") between the Company and U.S.
Trust Company of New York, as Trustee, and the Warrants are to be pursuant to a
Warrant Agreement (the "Warrant Agreement") between the Company and U.S. Trust
Company of New York, as Warrant Agent.
In that connection, we have examined such corporate proceedings, documents,
records, and matters of law as we have deemed necessary to enable us to render
this opinion.
<PAGE>
KIRKLAND & ELLIS
Wireless One
August 2, 1996
Page 2
For purposes of this opinion, we have assumed the authenticity of all
documents submitted to us as originals, the conformity to the originals of all
documents submitted to us as copies and the authenticity of the originals of all
documents submitted to us as copies. We have assumed the legal capacity of all
natural persons, the genuineness of the signatures of persons signing all
documents in connection with which this opinion is rendered, the authority of
such persons signing on behalf of the parties thereto other than the Company and
the due authorization, execution and delivery of all documents by the parties
thereto other than the Company. As to any facts material to the opinions
expressed herein which we have not independently established or verified, we
have relied upon statements and representations of officers and other
representatives of the Company and others.
Our opinion expressed below is subject to the qualifications that we
express no opinion as to the applicability of, compliance with, or effect of (i)
any bankruptcy, insolvency, reorganization, fraudulent transfer, fraudulent
conveyance, moratorium or other similar law affecting the enforcement of
creditors' rights generally, (ii) general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law), (iii)
public policy considerations which may limit the rights of parties to obtain
certain remedies and (iv) any laws except the internal laws of the State of New
York, the General Corporation law of the State of Delaware and the federal laws
of the United States of America.
Based upon and subject to the foregoing qualifications, assumptions and
limitations and the further limitations set forth below, we hereby advise you
that in our opinion:
(1) The Company is a corporation validly existing and in good standing
under the laws of the State of Delaware;
(2) The Notes have been duly authorized, and, when (i) the Registration
Statement becomes effective under the Act, (ii) the Board of Directors of the
Company has taken all necessary action to fix and approve the terms of the
Notes, (iii) the
<PAGE>
KIRKLAND & ELLIS
Wireless One
August 2, 1996
Page 3
Indenture has been duly qualified under the Trust Indenture Act of 1939, as
amended, and (iv) the Notes have been duly executed and authenticated in
accordance with the provisions of the Indenture and duly delivered to the
purchasers thereof in exchange for the consideration provided for therein, the
Notes will be validly issued and binding obligations of the Company.
(3) The Warrants have been duly authorized, and, when (i) the Registration
Statement becomes effective under the Act, (ii) the Board of Directors has taken
all necessary action to fix and approve the terms of the Warrants, and (iii) the
Warrants have been duly executed and delivered on behalf of the Company and
issued in accordance with the terms of the Warrant Agreement, the Warrants will
be validly issued and outstanding.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 5.1 to the Registration Statement. We also consent to the reference to
our firm under the headings "United States Federal Income Tax Matters" in the
Registration Statement. In giving this consent, we do not thereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Act or the rules and regulations of the Commission.
We do not find it necessary for the purposes of this opinion, and
accordingly, we do not purport to cover herein, the application of the
securities or "Blue Sky" laws of the various states to the issuance and sale of
the Unties, Notes and Warrants.
This opinion is limited to the specific issues addressed herein, and no
opinion may be inferred or implied beyond that expressly stated herein. We
assume no obligation to revise or supplement this opinion should the present
laws of the States of New York or Delaware or the federal law of the United
States be changed by legislative action, judicial decision or otherwise.
<PAGE>
KIRKLAND & ELLIS
Wireless One
August 2, 1996
Page 4
This opinion is furnished to you in connection with the filing of the
Registration Statement and is not to be used, circulated, quoted or otherwise
relied upon for any other purpose.
Very truly yours,
KIRKLAND & ELLIS
<PAGE>
[LETTERHEAD OF KIRKLAND & ELLIS]
August 2, 1996
Wireless One, Inc.
11301 Industriplex Boulevard
Suite 4
Baton Rouge, Louisiana 70809-4115
Gentlemen:
We have acted as counsel to Wireless One, Inc., a Delaware corporation
("Wireless One") in connection with the preparation and filing with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Securities Act"), of a registration statement on Form
S-1 (Registration No. 333-5109) and the amendments thereto (the "Registration
Statement") relating to the issuance and sale of units (collectively, the
"Units") consisting of (a) senior discount notes due 2006 (the "Notes") and (b)
warrants (the "Warrants") to purchase of shares of the Company's common stock,
par value $0.01 per share. The Notes are to be issued under that certain
indenture to be entered into by and between Wireless One and the United States
Trust Company of New York, as trustee, and the Warrants are to be issued under
that certain warrant agreement between the Company and the United States Trust
Company of New York, as warrant agent.
As such counsel, we have reviewed or participated in the preparation
of the Registration Statement and other agreements and documents relating to the
transactions therein contemplated, and we have examined and relied upon
originals (or copies certified or otherwise identified to our satisfaction) of
such documents, corporate records and other instruments as we have deemed
necessary or advisable for the purposes of this opinion. Furthermore, in
preparing this opinion we have relied on the certificate provided to us by
Wireless One, and attached hereto as Exhibit A, with respect to certain factual
matters.
The opinion set forth herein is based on and limited to the federal
laws of the United States. This opinion is based on the laws, regulations,
rulings and decisions now in effect, all of which are subject to change or
different interpretation, perhaps with retroactive effect.
Based on the foregoing, we are of the opinion that the statements
contained in the prospectus constituting part of Amendment No. 2 to the
Registration Statement (the "Prospectus") under the heading "United States
Federal Income Tax Matters," to the extent that they constitute matters of law
or legal conclusions with respect thereto, are correct in all material respects.
<PAGE>
Wireless One, Inc.
August 2, 1996
Page 2
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and the use of our name in the Prospectus in the first
sentence under the caption "United States Federal Income Tax Matters." In
giving such consent, we do not thereby concede that we are within the category
of persons whose consent is required under Section 7 of the Securities Act and
the regulations promulgated by the Commission thereunder.
Very truly yours,
KIRKLAND AND ELLIS
By: /s/ Kirkland & Ellis
------------------------------
<PAGE>
EXHIBIT A
WIRELESS ONE, INC.
------------------
The undersigned acknowledges that Kirkland & Ellis has acted as
counsel to Wireless One, Inc., a Delaware corporation ("Wireless One"), in
connection with the preparation and filing with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, of a registration
statement on Form S-1 (Registration No. 333-5109) and amendments thereto
relating to the issuance and sale of units (collectively, the "Units")
consisting of (a) senior discount notes due 2006 (the "Notes") and (b) warrants
(the "Warrants") to purchase an equal number of shares of the Company's common
stock, par value $0.01 per share. The Notes are to be issued under that certain
indenture to be entered into by and between Wireless One and the United States
Trust Company of New York, as trustee, and the Warrants are to be issued under
that certain warrant agreement between the Company and the United States Trust
Company of New York, as warrant agent.
The undersigned, as an officer of and on behalf of Wireless One,
hereby certifies to Kirkland & Ellis, as of the date hereof, that:
1. Based on all facts and circumstances as of the issue date, it is
significantly more likely that payments will be made according to
the Notes' stated payment schedule than that the Notes will be
redeemed before their scheduled maturity.
2. The interest that accrues and is payable semi-annually on the
Notes beginning on February 1, 2002 will be computed at a rate
that is approximately equal to, but does not exceed, the overall
yield on the Notes (determined by assuming that the Notes remain
outstanding until their final maturity date).
3. The redemption price of the Notes on each optional redemption
date will be equal to or greater than the sum of (i) the adjusted
issue price (as defined in Section 1272(a)(4) of the Internal
Revenue Code of 1986, as amended (the "Code")) of the Notes at
the start of the accrual period in which such optional redemption
date occurs plus (ii) the original issue discount (as defined in
Section 1273 of the Code) that has accrued on the Notes from the
beginning of such accrual period through such optional redemption
date.
4. During the term of the Notes, the Company will not pay or incur
interest in any taxable year in excess of $5,000,000 that is
attributable to an obligation evidenced by a bond, debenture,
note, certificate or other evidence of indebtedness ("Debt")
issued to provide direct or indirect consideration for the
acquisition (an "Acquisition") of (A) stock in another
corporation (an "acquired corporation") or (B) assets of another
corporation (an "acquired corporation") pursuant to a plan under
which at least two-thirds (in value) of
<PAGE>
all the assets (excluding money) used in trades and business
carried on by such corporation are acquired. For this purpose,
Debt issued to provide consideration for an Acquisition includes
(without limitation):
(i) Debt issued directly in exchange for the acquired
corporation's stock or assets;
(ii) Debt issued to raise the money necessary to purchase the
acquired corporation's stock or assets, including,
without limitation, where the Company, when it issued
the Debt, anticipated the Acquisition and the Debt would
not have been issued if the Company had not so
anticipated such Acquisition; and
(iii) Debt issued to replace the Company working capital spent
to acquire the acquired corporation where the Company,
when it used working capital to purchase the acquired
corporation, foresaw or reasonably should have foreseen
that it would be required to issue the Debt, which it
would not otherwise have been required to issue if the
Acquisition had not occurred, in order to meet its
future economic needs.
IN WITNESS WHEREOF, the undersigned has executed this certificate as
of August 2, 1996.
WIRELESS ONE, INC.
By: /s/ Michael C. Ellis
---------------------------------------
Name: Michael C. Ellis
Title: Vice President
<PAGE>
EXHIBIT 10.6
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);
<PAGE>
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
- -------------
2
<PAGE>
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
3
<PAGE>
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
4
<PAGE>
(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.
5
<PAGE>
(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
6
<PAGE>
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
7
<PAGE>
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:
8
<PAGE>
(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
9
<PAGE>
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
10
<PAGE>
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
11
<PAGE>
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
12
<PAGE>
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
13
<PAGE>
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
14
<PAGE>
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
15
<PAGE>
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.
16
<PAGE>
"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
17
<PAGE>
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,
18
<PAGE>
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
19
<PAGE>
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.
20
<PAGE>
(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.
* * * * *
21
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
CHASE MANHATTAN CAPITAL CORPORATION
By: ______________________________
Name:
Title:
BASEBALL PARTNERS
By: ______________________________
Name:
Title:
PREMIER VENTURE CAPITAL CORPORATION
By: ______________________________
Name:
Title:
HEARTLAND WIRELESS COMMUNICATIONS, INC.
By: ______________________________
Name:
Title:
WIRELESS ONE, INC.
By: ______________________________
Name:
Title:
22
<PAGE>
WIRELESS ONE STOCKHOLDERS
By: PREMIER VENTURE CAPITAL CORPORATION,
attorney-in-fact
By: ______________________________
Name:
Title:
MISSISSIPPI WIRELESS TV, L.P.
By: WIRELESS TV, INC.
Its: General Partner
By: ______________________________
Name:
Title:
VISION COMMUNICATIONS, INC.
By: ______________________________
Name: Henry M. Burkhalter
Title: President
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By: Chase Capital Partners
Its: General Partner
By: _______________________________
Name:
Title:
VANCOM, INC.
By: _______________________________
Name:
Title:
23
<PAGE>
___________________________________
Laurence O. Woolhiser, Jr.
___________________________________
Walter Eilers
___________________________________
Henry M. Burkhalter
___________________________________
Bill R. Byer, Jr.
___________________________________
Kelly Balius
___________________________________
Douglas Goodwin
___________________________________
Sam Robertson
___________________________________
Jerrod Pitts
24
<PAGE>
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
25
<PAGE>
SCHEDULE II
-----------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
NAME ADDRESS
---- -------
- ----------------------------------------------------------------
<S> <C>
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
- ----------------------------------------------------------------
</TABLE>
26
<PAGE>
SCHEDULE III
------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------
NAME ADDRESS
---- -------
- ---------------------------------------------------------
<S> <C>
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
- ---------------------------------------------------------
</TABLE>
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
27
<PAGE>
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
28
<PAGE>
EXHIBIT 10.7
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
<PAGE>
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
- 2 -
<PAGE>
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,
- 3 -
<PAGE>
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;
- 4 -
<PAGE>
(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 Board (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 Stockholder 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
- 5 -
<PAGE>
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
- 6 -
<PAGE>
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
- 7 -
<PAGE>
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
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.
"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.
- 8 -
<PAGE>
"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.
- 9 -
<PAGE>
"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.
- 10 -
<PAGE>
"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).
- 11 -
<PAGE>
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 thereafter 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
- 12 -
<PAGE>
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
- 13 -
<PAGE>
virtue of such execution by Heartland, and Heartland agrees to cause each
Heartland Subsidiary to perform and honor each of its obligations hereunder.
* * * * *
- 14 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
CHASE MANHATTAN CAPITAL CORPORATION
By: ______________________________
Name:
Title:
BASEBALL PARTNERS
By: ______________________________
Name:
Title:
PREMIER VENTURE CAPITAL CORPORATION
By: ______________________________
Name:
Title:
HEARTLAND WIRELESS COMMUNICATIONS, INC.
By: ______________________________
Name:
Title:
WIRELESS ONE, INC.
By: ______________________________
Name:
Title:
MISSISSIPPI WIRELESS TV, L.P.
By: WIRELESS TV, INC.
Its: General Partner
By: ______________________________
Name:
Title:
<PAGE>
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By: Chase Capital Partners, L.P.
Its: General Partner
By: ______________________________
Name:
Title:
VANCOM, INC.
By: ______________________________
Name:
Title:
VISION COMMUNICIATIONS, INC.
By: ______________________________
Name:
Title:
___________________________________
Hans Sternberg
___________________________________
Sean R. Reilly
<PAGE>
SCHEDULE I
----------
TRUVISION STOCKHOLDERS
Mississippi Wireless TV, L.P.
VanCom, Inc.
Vision Communications, Inc.
<PAGE>
SCHEDULE II
-----------
Advantage Capital Partners, Limited Partnership
Advantage Capital Partners II, Limited Partnership
Premier Venture Capital Corporation
Hans Sternberg
Sean Reilly
<PAGE>
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
<PAGE>
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
<PAGE>
EXHIBIT 10.10
FORM OF EMPLOYMENT AGREEMENT
----------------------------
THIS EXECUTIVE EMPLOYMENT AGREEMENT is made as of July 29, 1996
between Wireless One, Inc., a Delaware corporation, (the "Company"),
-------
and_____________ ("Executive").
---------
The Company desires to retain the services of Executive as President
of the Company, and Executive desires to provide the services to the Company
provided by this Agreement.
Executive and the Company acknowledge that each intends that this
Agreement supersede and replace the Prior Employment Agreement and that upon
execution of this Agreement the Prior Employment Agreement will be terminated
and have no further force and effect.
In consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Employment. The Company will employ Executive as the Company's
----------
____________ and Executive shall have the normal duties, responsibilities and
authority of the President, and Executive hereby accepts employment with the
Company, upon the terms and conditions set forth in this Agreement for the
period beginning on the date of this Agreement and ending as provided in
paragraph 5 (the "Employment Period").
-----------------
2. Position and Duties.
-------------------
(a) During the Employment Period, Executive will render to the Company
and its Subsidiaries such services as the Company's board of directors
(including any committee thereof, the "Board") may from time to time direct.
-----
Executive will report to the Board, and Executive will devote his best efforts
and his substantial business time and attention to the business and affairs of
the Company and its Subsidiaries. Executive will perform his duties
and responsibilities to the best of his abilities in a diligent, trustworthy,
businesslike and efficient manner. For purposes of this Agreement, the term
"Subsidiaries" will have the meaning which the Merger Agreement assigns to that
- -------------
term and the term "Affiliate" will mean any person who owns 15% or more of the
---------
outstanding voting securities of the Company as of the date of this Agreement
and giving effect to the transactions contemplated by the Merger Agreement or is
a party to a joint venture or similar agreement with the Company or any of its
subsidiaries.
<PAGE>
3. Base Salary and Benefits
------------------------
(a) During the Employment Period, Executive's initial base salary will
be $_______ per annum (as in effect at any time, the "Initial Base Salary"),
-------------------
which salary will be payable in regular installments in accordance with the
Company's general payroll practices and will be subject to customary
withholdings. During the Employment Period, effective on each April 14
(commencing with April 14, 1997), Executive's Initial Base Salary shall be
adjusted to an amount equal to Executive's Initial Base Salary multiplied by a
-------------
fraction (i) the numerator of which is the Index for the calendar month in which
such anniversary falls and (ii) the denominator of which is the Index for April
1995. In addition, during the Employment Period, Executive will be entitled to
participate in all of the Company's employee benefit programs for which senior
executive employees of the Company and its Subsidiaries are generally eligible,
on a basis consistent with that of other senior executive officers of the
Company. For purposes of this Agreement, the "Index" in any particular month
shall mean the Revised Consumer Price Index for All Urban Consumers, U.S. --
City Average: All Items (base index year 1982-84=100), as published by the
United States Department of Labor, Bureau of Labor Statistics (or, if available,
a comparable index for the southeastern region of the United States). If the
Index is not published by the Bureau of Labor Statistics or another governmental
agency at any time, then such calculation shall be made using the most closely
comparable statistics on the purchasing power of the consumer dollar as
published by a responsible financial authority selected in good faith by the
Board.
(b) The Company will reimburse Executive for all reasonable expenses
incurred by him in the course of performing his duties under this Agreement
which are consistent with the Company's policies in effect from time to time
with respect to travel, entertainment and other business expenses, subject to
the Company's requirements with respect to reporting and documentation of such
expenses. Executive shall be entitled to each of the Company's executive
perquisites in accordance with the terms and provisions of such arrangements for
the Company's senior officers generally and, in addition, shall be entitled to
(i) an allowance of $____ per month to defray the cost of purchasing or leasing
an automobile selected by Executive and fuel, oil and other vehicle necessities
and maintenance and repair costs and expenses for or to such automobile, and
(ii) payment or reimbursement of the cost of an annual physical examination.
(c) In addition to the Base Salary, the Compensation Committee of the
Board may, in its sole discretion, award a bonus
-2-
<PAGE>
to Executive based upon Executive's performance and the Company's operating
results.
(d) Executive shall be entitled to participate in (i) all regular
employee benefits of the Company, including, but not limited to, pension, profit
sharing and other retirement plans, group term life insurance and deferred
compensation plans, disability and health and medical and supplemental
insurance, savings investment plans, stock option and bonus plans and other
employment benefit programs or plans provided by the Company to its employees
generally or to Executive and his dependents (collectively "Family")
specifically, and (ii) all employee benefits provided by the Company to other
senior executives generally, on a basis consistent with that of other senior
executive officers of the Company.
(e) If at any time the Company's health and medical insurance has a
pre-existing condition exclusion, the Company will (i) obtain a waiver of such
provision with respect to Executive and his Family, (ii) obtain supplemental
health insurance for the Executive and his Family with respect to any medical
claims which would not be covered during such a pre-existing condition
elimination period, or (iii) self-insure any medical claims described in Section
3(e)(ii). Executive shall assist the Company in the selection from among viable
health and medical insurance alternatives for pre-existing conditions coverage
which have the most reasonable cost, including, if necessary, continuation of
coverage provided to Executive and/or his Family prior to or as of the date of
this Agreement.
(f) Executive shall be entitled to at least three weeks of vacation in
each full calendar year. At Executive's option, vacation may be taken either in
whole or in part, consecutively or not, in the calendar year that his
entitlement to such vacation accrues or, if unused during such calendar year,
such unused vacation shall be carried over and may be used or taken in any
subsequent calendar year, provided that not more than six weeks of vacation may
be taken in any calendar year. Upon termination of this Agreement, Executive
shall be paid on a pro rata basis for all unused vacation at the Base Salary
rate then existing, but Executive shall not be paid for more than six weeks of
unused vacation, and in the event of termination for "cause" (as defined in
Section 6), shall not be paid for any unused vacation. In any event, to the
extent allowed by law, any unused vacation not taken over six weeks shall be
forfeited.
4. Illness, Death or Physical Incapacity. During the Employment
-------------------------------------
Period, if Executive shall be prevented from performing his duties hereunder
because of extended illness or physical
-3-
<PAGE>
incapacity (as determined by the disinterested Board of Directors of the
Company), the following provisions shall apply:
(a) In such event, the Company shall pay, and Executive shall be
entitled to receive, all compensation otherwise payable to Executive under this
Agreement, including pursuant to Sections 3(a) and 3(c) of this Agreement for 6
full calendar months of such illness or physical incapacity. No compensation
shall be payable to Executive for periods of illness or physical incapacity
which exceed such period.
(b) While Executive is entitled to receive compensation pursuant to
Section 3(a), the Company shall provide Executive with, and Executive shall be
entitled to receive and participate in, all employee benefits which Executive
would otherwise have been entitled to hereunder if Executive not been ill or
physically incapacitated, including, but not limited to, all employee benefit
programs and plans described in this Agreement. Thereafter, at the option of
Executive and at Executive's cost, the Company shall continue to provide health
and medical insurance to Executive or his Family or both (at the election of
Executive) under the Company's health and medical insurance plans, to the extent
that the Company is permitted to do so under such plans (or, if Executive and/or
his Family are is not eligible to participate under such plans, such comparable
coverage as is reasonably available to the Company).
5. Termination. The initial Employment Period will continue until
-----------
April 14, 1998 or until it is earlier terminated by Executive's resignation,
death or disability or other incapacity (as determined by the Board in its good
faith judgment) or by the Board for any reason or for no reason. On each April
14 hereafter (so long as Executive's employment has not terminated prior to such
April 14), the Employment Period shall automatically be extended for an
additional year; provided, however, that in no event shall any such extension
--------
cause the Employment Period to extend beyond April 14, 2005. Upon termination
of the Employment Period, Executive shall be entitled to receive his Base Salary
and fringe benefits for the remainder of such Employment Period (as if such
termination had not occurred) (the "Post-Employment Payment Period") so long as
------------------------------
Executive is not in violation of paragraph 7 or 8; provided, however, that if
--------
Executive's Employment Period is terminated by (a) Executive's death, (b)
Executive's resignation or (c) for Cause (as defined below), Executive shall not
be entitled to receive his Base Salary or any fringe benefits or bonuses for any
period after the termination of the Employment Period.
6. Definition of "Cause." For purposes of this Agreement, "Cause"
---------------------- -----
means (i) a material breach of this Agreement by Executive, (ii) a breach of
Executive's duty of loyalty to the
-4-
<PAGE>
Company or any of its Subsidiaries or any act of dishonesty or fraud with
respect to the Company or any of its Subsidiaries, (iii) the commission by
Executive of a felony, a crime involving moral turpitude or other act or
omission causing material harm to the standing and reputation of the Company and
its Subsidiaries or (iv) Executive's continued failure to perform his duties to
the Company and its Subsidiaries.
7. Confidential Information. Executive acknowledges that the
------------------------
information, observations and data obtained by him while employed by the Company
and its Subsidiaries (including those obtained prior to the date of this
Agreement) concerning the business or affairs of the Company, any Subsidiary or
Affiliate ("Confidential Information") are the property of the Company or such
------------------------
Subsidiary or Affiliate. Therefore, Executive agrees that he will not disclose
to any unauthorized person or use for his own purposes any Confidential
Information without the prior written consent of the Board, unless and to the
extent that the aforemen tioned matters become generally known to and available
for use by the public other than as a result of Executive's acts or omissions.
Executive will deliver to the Company at the termination of his employment by
the Company, or at any other time the Company may request, all memoranda, notes,
plans, records, reports, computer tapes, printouts and software and other
documents and data (and copies thereof) relating to the Confidential Information
or the business of the Company, any Subsidiary or Affiliate which he may then
possess or have under his control.
8. Non-Compete, Non-Solicitation.
-----------------------------
(a) In further consideration of the compensation to be paid to
Executive under this Agreement, Executive acknowledges that in the course of his
employment with the Company he will become familiar, and during his employment
with the Company he has become familiar, with the Company's and its
Subsidiaries' trade secrets and with other Confidential Information concerning
the Company, its predecessors, its Subsidiaries and its Affiliates and that his
services have been and will be of special, unique and extraordinary value to the
Company and its Subsidiaries. Therefore, Executive agrees that, during the
period of Executive's employment by the Company and for two years thereafter
(the "Noncompete Period"), he will not, directly or indirectly through another
-----------------
entity
(i) own any interest in, manage, control, participate in, consult
with, render services for, or in any manner carry on or engage in the business
of providing wireless cable television service or that competes with the
business of the Company or any of its Subsidiaries, as such businesses exist, or
that the Board has determined to cause the Company or any of its Subsidiaries to
enter into and that
-5-
<PAGE>
are in the process of being developed, on the date of the termination of
Executive's employment, or
(ii) solicit in any manner in connection with any business described
in clause (i) above any customers of the Company, its Subsidiaries or
Affiliates,
within (A) the communities within the States of Alabama, Arkansas, Florida,
Georgia, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee and
Texas in which the Company or its Subsidiaries carry on or engage in such
business at the time of the enforcement of this paragraph 8, (B) the following
parishes in the State of Louisiana in which the Company or its Subsidiaries
carry on or engage in such business at the time of the enforcement of this
paragraph 8: Allen, Beauregard, East Baton Rouge, Vermillion, Acadia,
Lafayette, Saint Martin, Calcasieu, Jefferson Davis, Cameron, Iberia, Saint
Landry, Caldwell, Franklin, Jackson, Lincoln, Madison, Morehouse, Ouachita,
Richland, Union and West Carroll, and (C) any other area outside such States
within a 50 mile radius of any transmission site being operated by the Company
or its Subsidiaries at the time of the enforcement of this paragraph 8. Nothing
in this paragraph 8 will prohibit Executive from (X) being a passive owner of
not more than 5% of the outstanding stock of any class of a corporation which is
publicly traded, so long as Executive has no active participation in the
business of such corporation , (Y) co-investing (with the approval of the Board)
with the Company and/or any Subsidiary of the Company in any entity and
otherwise participating in and managing, controlling or consulting with or
rendering services for any such entity, and (Z) investing (with the approval of
the Board) as a passive owner in any entity in which an investment opportunity
is made available to the Company and/or any Subsidiary of the Company but as to
which the Board declines to cause the Company or any Subsidiary of the Company
to make such investment.
(b) During the Employment Period, Executive will not directly or
indirectly through another entity (i) induce or attempt to induce any employee
of the Company, any Subsidiary or Affiliate to leave the employ of the Company,
such Subsidiary or Affiliate, or in any way interfere with the relationship
between the Company, any Subsidiary or Affiliate and any employee thereof, (ii)
hire any person who was an employee of the Company, any Subsidiary or Affiliate
at any time during the period of Executive's employment by the Company, or (iii)
induce or attempt to induce any customer, supplier, licensee, licensor,
franchisee or other business relation of the Company, any Subsidiary or
Affiliate to cease doing business with the Company, such Subsidiary or
Affiliate, or in any way interfere with the relationship between any such
supplier, licensee or business relation and the Company, any Subsidiary or
Affiliate
-6-
<PAGE>
(including, without limitation, making any negative statements or communications
about the Company, its Subsidiaries or Affiliates).
9. Enforcement. If, at the time of enforcement of paragraph 7 or 8,
-----------
a court holds that the restrictions stated in either such paragraph are
unreasonable under circumstances then existing, the Company and Executive agree
that the maximum period, scope or geographical area reasonable under such
circumstances will be substituted for the stated period, scope or area. Because
Executive's services are unique and because Executive has access to Confidential
Information, the Company and Executive agree that money damages would not be an
adequate remedy for any breach of this Agreement. Therefore, in the event a
breach or threatened breach of this Agreement, the Company or its successors or
assigns may, in addition to other rights and remedies existing in their favor,
apply to any court of competent jurisdiction for specific performance and/or
injunctive or other relief in order to enforce, or prevent any violations of,
the provisions of paragraph 7 or 8 (without posting a bond or other security).
In addition, in the event of an alleged breach or violation by Executive of
paragraph 8, the running of the Post-Employment Payment Period will be tolled
until such breach or violation has been duly cured. Executive agrees that the
restrictions contained in paragraph 8 are reason able.
10. Representations. Executive hereby represents and warrants to the
---------------
Company that (i) the execution, delivery and performance of this Agreement by
Executive do not and will not conflict with, breach, violate or cause a default
under any contract, agreement, instrument, order, judgment or decree to which
Executive is a party or by which he is bound, (ii) Executive is not a party to
or bound by any employment agreement, noncompete agreement or confidentiality
agreement with any other person or entity, and (iii) upon the execution and
delivery of this Agreement by the Company, this Agreement will be the valid and
binding obligation of Executive, enforceable in accordance with its terms.
Executive hereby acknowledges and represents that he has consulted with
independent legal counsel regarding his rights and obligations under this
Agreement and that he fully understands the terms and conditions contained
herein. The Company hereby represents and warrants to Executive that (i) the
execution, delivery and performance of this Agreement by the Company do not and
will not conflict with, breach, violate or cause a default under any contract,
agreement, instrument, order, judgment or decree to which the Company is a party
or by which he is bound, and (ii) upon the execution and delivery of this
Agreement by the Executive, this Agreement will be the valid and binding
obligation of the Company, enforceable in accordance with its terms.
-7-
<PAGE>
11. Survival. Paragraphs 7, 8 and 9 and paragraphs 12 through 20
--------
will survive and continue in full force in accordance with their terms
notwithstanding any termination of the Employment Period.
12. Severance. The Company shall give Executive sixty (60) days
---------
prior notice if the Company intends to move Executive to a location more than
sixty (60) miles from_______ (a "Significant Relocation"). If Executive submits
----------------------
his resignation in writing to the Board at least thirty (30) days prior to any
Significant Relocation which resignation states that such Significant Relocation
is the reason for such Executive's resignation, Executive shall be entitled to
receive his Base Salary and fringe benefits for the remainder of the current
Employment Period (as if such termination had not occurred) so long as Executive
is not in violation of paragraph 7 or 8. The Severance Payments payable
pursuant to this paragraph shall be payable in regular installments in
accordance with the Company's payroll practices in effect on the date
Executive's Employment Period is terminated.
13. Notices. Any notice provided for in this Agreement will be in
-------
writing and will be either personally delivered, or mailed by first class mail,
return receipt requested, to the recipient at the address below indicated:
Notices to Executive:
--------------------
c/o TruVision Wireless, Inc.
1080 River Oaks Drive, Suite A150
Jackson, MS 39208
Attention: Henry M.Burkhalter
Notices to the Company:
----------------------
11301 Industriplex Boulevard
Suite 4
Baton Rouge, LA 70809-5400
Attention: Chief Executive Officer
with copies (which copies will not constitute notice to the Company)
to:
Chase Capital Partners Heartland Wireless Communications, Inc
380 Madison Avenue c\o Hunt Capital Group, L.L.C.
12th Floor 4000 Thanksgiving Tower
New York, NY 10014 1601 Elm Street
Attention: Arnold Chavkin Dallas, Texas 75201
Attention: J.R.Holland, Jr.
or such other address or to the attention of such other person as the recipient
party has specified by prior written notice to the sending party. Any notice
under this Agreement will be deemed to have been given when so delivered or
mailed.
-8-
<PAGE>
14. Severability. Whenever possible, each provision of this
------------
Agreement will 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 invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained in this Agreement.
15. Complete Agreement. This Agreement, the Merger Agreement and any
------------------
documents referred to hereby or thereby embody the complete agreement and
understanding among the parties and supersede and preempt any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter of this Agreement in any
way (including, without limitation, any oral agreement which may have existed
between the Company and Executive prior to the date of this Agreement).
16. No Strict Construction. The language used in this Agreement will
----------------------
be deemed to be the language chosen by the Company and Executive to express
their mutual intent, and no rule of strict construction will be applied against
any party.
17. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
18. Successors and Assigns. This Agreement is intended to bind and
----------------------
inure to the benefit of and be enforceable by Execu tive, the Company and their
respective heirs, successors and assigns, except that Executive may not assign
his rights or delegate his obligations under this Agreement without the prior
written consent of the Company.
19. CHOICE OF LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
-------------
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT WILL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR
PROVISIONS (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT
WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE
OF DELAWARE. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE STATE OF
DELAWARE WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT (AND
ALL
-9-
<PAGE>
SCHEDULES AND EXHIBITS HERETO), EVEN THOUGH UNDER THAT JURISDICTION'S CHOICE OF
LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION
WOULD ORDINARILY APPLY.
20. Amendment and Waiver. The provisions of this Agreement may be
--------------------
amended or waived only with the prior written consent of the Company and
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement will affect the validity, binding effect or
enforceability of this Agreement.
21. Termination of Prior Employment Agreement. Upon execution of
-----------------------------------------
this Agreement and the consummation of the "Merger" described in the Merger
Agreement, the Prior Employment Agreement will be terminated and have no further
force and effect.
* * * * *
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Executive
Employment Agreement as of the date first written above.
WIRELESS ONE, INC.
By __________________________
Its _________________________
_____________________________
Executive Officer
-11-
<PAGE>
EXHIBIT 10.11
ACQUISITION AND MARKET ESCROW AGREEMENT
THIS ACQUISITION AND MARKET ESCROW AGREEMENT (the "Agreement") is made as
---------
of July 29, 1996 by and among the persons executing this Agreement on the
signature page hereto as "TWI Stockholders," WIRELESS ONE, INC., a Delaware
----------------
corporation ("WOI"), U.S. TRUST COMPANY OF NEW YORK (the "Escrow Agent") and
--- ------------
Henry M. Burkhalter (the "Stockholder Representative"). Capitalized terms used
--------------------------
but not defined herein shall have the meanings given to them in that certain
Agreement and Plan of Merger (as in effect from time to time, the "Merger
------
Agreement"), dated as of April 25, 1996, among WOI, TruVision Wireless, Inc., a
- ---------
Delaware corporation ("TWI") and Wireless One Merger Sub, Inc. ("Merger Sub").
--- ----------
Capitalized terms used herein and are not otherwise defined shall have the
meaning ascribed thereto in the Merger Agreement. This Agreement is both the
"Acquisition Escrow Agreement" and the "Market Delivery Escrow Agreement"
referred to in the Merger Agreement.
R E C I T A L S:
WHEREAS, TWI, WOI and Merger Sub have entered into the Merger Agreement to
provide for the merger of Merger Sub with and into TWI (the "Merger"); and
------
WHEREAS, the TWI Stockholders were, prior to the Effective Time,
collectively the owners of all of the outstanding TWI Common Shares;
WHEREAS, the Closing of the transactions contemplated by the Merger
Agreement is taking place as of the date hereof;
WHEREAS, WOI has relied upon the representations, warranties and covenants
of TWI provided in the Merger Agreement and in Schedules, Certificates and other
documents delivered to WOI pursuant to the Merger Agreement;
WHEREAS, pursuant to Section 1.2 of the Merger Agreement, the parties are
establishing escrows hereunder because (a) the Jackson Acquisition will not be
consummated at or prior to the Effective Time, (b) the Huntsville Acquisition
will not be consummated at or prior to the Effective Time, and (c) the Market
Delivery Requirement will not be satisfied at or prior to the Effective Time
with respect to the Demopolis, Alabama, market;
NOW, THEREFORE, to induce WOI and Merger Sub to proceed with the Closing
and the Merger, and in consideration of such Closing and Merger, and in further
consideration of the mutual covenants and agreements contained herein and in the
Merger Agreement, and intending to be legally bound, the parties hereto do
hereby agree as follows:
<PAGE>
ARTICLE 1: APPOINTMENT OF STOCKHOLDER REPRESENTATIVE
The TWI Stockholders hereby appoint the Stockholder Representative, and the
Stockholder Representative agrees to act, as the representative of the TWI
Stockholders (subject to the terms hereof and the Merger Agreement) with respect
to the Escrow Shares (as that term is defined below), in accordance with this
Escrow Agreement. No bond shall be required of the Stockholder Representative,
and the Stockholder Representative shall not receive any compensation for
services hereunder. The Escrow Agent, WOI, TWI and the TWI Stockholders are
hereby relieved from any liability for any acts done by them, or any of them, in
accordance with any resolution, action, decision, consent or instruction of the
Stockholder Representative. The Stockholder Representative in his capacity as
Stockholder Representative is hereby relieved from any liability for any acts
done by him without gross negligence or willful misconduct.
ARTICLE 2: APPOINTMENT OF ESCROW AGENT; ESCROW FUNDS
2.1 APPOINTMENT OF ESCROW AGENT. WOI, the TWI Stockholders and the
Stockholder Representative hereby appoint the Escrow Agent, and the Escrow Agent
hereby agrees to act, as the agent of such parties in performing the duties of
the Escrow Agent provided herein. As compensation for Escrow Agent's services
hereunder, Escrow Agent shall receive compensation of $5,000 per annum, which
shall be payable annually in advance, and the reimbursement of all other
Administrative Costs (as such term is defined in Section 5.2).
2.2 ESTABLISHMENT OF JACKSON ESCROW FUND. WOI shall cause to be deposited
with the Escrow Agent 36,633 WOI Common Shares (the "Jackson Escrow Shares"),
---------------------
representing the Jackson Contingent Amount to be received, subject to the terms
hereof and the Merger Agreement, by the TWI Stockholders pursuant to the Merger
Agreement, such deposit, together with any dividends or other distributions paid
thereon, to constitute an escrow fund (the "Jackson Escrow Fund") to be governed
-------------------
by the terms set forth herein.
2.3 ESTABLISHMENT OF HUNTSVILLE ESCROW FUND. WOI shall cause to be
deposited with the Escrow Agent 121,447 WOI Common Shares (the "Huntsville
----------
Escrow Shares"), representing the Huntsville Contingent Amount to be received,
- -------------
subject to the terms hereof and the Merger Agreement, by the TWI Stockholders
pursuant to the Merger Agreement, such deposit, together with any dividends or
other distributions paid thereon, to constitute an escrow fund (the "Huntsville
----------
Escrow Fund") to be governed by the terms set forth herein.
- -----------
2.4 ESTABLISHMENT OF DEMOPOLIS ESCROW FUND. WOI shall cause to be
deposited with the Escrow Agent 44,720 WOI Common Shares (the "Demopolis Escrow
----------------
Shares"), representing the Market Delivery Contingent Shares for the Demopolis,
- ------
Alabama, market to be received, subject to the terms hereof and the Merger
Agreement, by the TWI Stockholders pursuant to the Merger Agreement, such
deposit, together with any dividends or other distributions paid thereon, to
constitute an escrow fund (the "Demopolis Escrow Fund") to be governed by the
---------------------
terms set forth herein.
2
<PAGE>
2.5 ESCROW SHARES. Each of the Jackson Escrow Fund, the Huntsville Escrow
Fund and the Demopolis Escrow Fund is referred to as an "Escrow Fund," and the
-----------
Jackson Escrow Shares, the Huntsville Escrow Shares and the Demopolis Escrow
Shares are collectively referred to as the "Escrow Shares."
-------------
2.6 ESCROW. The escrow created hereby shall remain in existence until the
date all of the Escrow Shares and other assets in the Escrow Funds have been
distributed in accordance herewith (such period being referred to herein as the
"Escrow Period").
-------------
ARTICLE 3: ACQUISITION-RELATED MATTERS
3.1 JACKSON CLAIM SUBMISSION. In order to assert a claim (a "Jackson
-------
Claim") against the Jackson Escrow Fund, the Stockholder Representative shall
- -----
deliver (in accordance with Section 6.1 hereof) to WOI and the Escrow Agent, a
certificate signed by the Stockholder Representative (a "Jackson Claim
-------------
Certificate") stating that the Jackson Acquisition has been consummated. Upon
- -----------
the Escrow Agent's and WOI's receipt of a Jackson Claim Certificate, the related
Jackson Claim shall be administered by the Escrow Agent pursuant to Section 3.2
below.
3.2 ADMINISTRATION OF JACKSON CLAIM.
(a) ACCEPTED AND REJECTED JACKSON CLAIMS. WOI shall have a period of ten
(10) business days from its receipt of a Jackson Claim Certificate (the "Jackson
-------
Claim Rejection Period") to review the Jackson Claim Certificate and deliver to
- ----------------------
the Stockholder Representative and the Escrow Agent written notice to the effect
that WOI disputes the assertion that the Jackson Acquisition has been
consummated (a "Jackson Claim Rejection Notice"). During any Jackson Claim
------------------------------
Rejection Period and until the related Jackson Claim becomes the Accepted
Jackson Claim, the Stockholder Representative and the TWI Stockholders shall,
upon written request from WOI, make available or provide any records or other
information reasonably requested by WOI relevant to such Jackson Claim. If no
Jackson Claim Rejection Notice is received by the Stockholder Representative and
the Escrow Agent within the relevant Jackson Claim Rejection Period, then such
Jackson Claim shall become the "Accepted Jackson Claim."
----------------------
(b) ADMINISTRATION OF REJECTED JACKSON CLAIMS. If a Jackson Claim is the
subject of a Jackson Claim Rejection Notice (and, therefore, is a "Rejected
--------
Jackson Claim"), then the Stockholder Representative and WOI shall attempt in
- -------------
good faith to agree upon the rights of the respective parties with respect to
such Jackson Claim. If the Stockholder Representative and WOI so agree, a
memorandum setting forth such agreement shall be prepared and signed by WOI and
the Stockholder Representative and shall be furnished to the Escrow Agent and,
if the Stockholder Representative and WOI so agree that the Jackson
Acquisition has been consummated, then the Rejected Jackson Claim shall become
the "Accepted Jackson Claim."
----------------------
3
<PAGE>
(c) RESOLUTION OF DISPUTES AS TO A JACKSON CLAIM. If no such agreement
between the Stockholder Representative and WOI can be reached with respect to a
Rejected Jackson Claim after good faith negotiation within thirty (30) days of
the Stockholder Representative's receipt of the related Jackson Claim Rejection
Notice, then WOI and the Stockholder Representative shall mutually select an
independent third party (a "Jackson Claim Arbiter"), whose determination as to
---------------------
whether the Jackson Acquisition has been consummated shall be final,
nonappealable and binding. Each Jackson Claim Arbiter shall be a person
knowledgeable regarding the wireless cable television business and the value of
related assets, and shall be generally knowledgeable with regard to business and
financial matters. In the event WOI and the Stockholder Representative fail to
agree upon a Jackson Claim Arbiter for any Rejected Jackson Claim within forty-
five (45) days after the Stockholder Representative's receipt of the related
Jackson Claim Rejection Notice in question, the Jackson Claim Arbiter shall be
the managing partner of the New York office of an independent "Big Six"
accounting firm other than KPMG Peat Marwick LLP or Arthur Andersen, L.L.P., as
selected jointly by the Stockholder Representative and WOI, and in the absence
of said joint election, as selected by the managing partner of the New York
office of the accounting firm of Price Waterhouse LLP or his designee. Upon a
determination of a Jackson Claim Arbiter in accordance herewith to the effect
that the Jackson Acquisition has been consummated, the Rejected Jackson Claim in
question shall become the "Accepted Jackson Claim," and notice thereof will be
----------------------
furnished to the Escrow Agent by the Stockholder Representative or WOI. All
determinations by any Jackson Claim Arbiter hereunder shall be made in
accordance with the expedited commercial rules of the American Arbitration
Association.
(d) PAYMENT OF ACCEPTED JACKSON CLAIM. Once a Jackson Claim has become the
Accepted Jackson Claim in accordance with the terms of this Agreement, the
Escrow Agent shall, within five business days of written request of the
Stockholder Representative, deliver to the Stockholder Representative (for
further delivery by the Stockholder Representative to the TWI Stockholders pro
rata according to their respective common ownership interests in TWI immediately
prior to the Merger), all of the Jackson Escrow Shares.
3.3 HUNTSVILLE CLAIM SUBMISSION. In order to assert a claim (a
"Huntsville Claim") against the Huntsville Escrow Fund, the Stockholder
- -----------------
Representative shall deliver (in accordance with Section 6.1 hereof) to WOI and
the Escrow Agent, a certificate signed by the Stockholder Representative (a
"Huntsville Claim Certificate") stating that the Huntsville Acquisition has been
- -----------------------------
consummated. Upon the Escrow Agent's and WOI's receipt of a Huntsville Claim
Certificate, the related Huntsville Claim shall be administered by the Escrow
Agent pursuant to Section 3.4 below.
4
<PAGE>
3.4 ADMINISTRATION OF HUNTSVILLE CLAIM.
(a) ACCEPTED AND REJECTED HUNTSVILLE CLAIMS. WOI shall have a period of
ten (10) business days from its receipt of a Huntsville Claim Certificate (the
"Huntsville Claim Rejection Period") to review the Huntsville Claim Certificate
- ----------------------------------
and deliver to the Stockholder Representative and the Escrow Agent written
notice to the effect that WOI disputes the assertion that the Huntsville
Acquisition has been consummated (a "Huntsville Claim Rejection Notice").
---------------------------------
During any Huntsville Claim Rejection Period and until the related Huntsville
Claim becomes the Accepted Huntsville Claim, the Stockholder Representative and
the TWI Stockholders shall, upon written request from WOI, make available or
provide any records or other information reasonably requested by WOI relevant to
such Huntsville Claim. If no Huntsville Claim Rejection Notice is received by
the Stockholder Representative and the Escrow Agent within the relevant
Huntsville Claim Rejection Period, then such Huntsville Claim shall become the
"Accepted Huntsville Claim."
- --------------------------
(b) ADMINISTRATION OF REJECTED HUNTSVILLE CLAIMS. If a Huntsville Claim is
the subject of a Huntsville Claim Rejection Notice (and, therefore, is a
"Rejected Huntsville Claim"), then the Stockholder Representative and WOI shall
- --------------------------
attempt in good faith to agree upon the rights of the respective parties with
respect to such Huntsville Claim. If the Stockholder Representative and WOI so
agree, a memorandum setting forth such agreement shall be prepared and signed by
WOI and the Stockholder Representative and shall be furnished to the Escrow
Agent and, if the Stockholder Representative and WOI so agree that the
Huntsville Acquisition has been consummated, then the Rejected Huntsville Claim
shall become the "Accepted Huntsville Claim."
-------------------------
(c) RESOLUTION OF DISPUTES AS TO A HUNTSVILLE CLAIM. If no such agreement
between the Stockholder Representative and WOI can be reached with respect to a
Rejected Huntsville Claim after good faith negotiation within thirty (30) days
of the Stockholder Representative's receipt of the related Huntsville Claim
Rejection Notice, then WOI and the Stockholder Representative shall mutually
select an independent third party (a "Huntsville Claim Arbiter"), whose
------------------------
determination as to whether the Huntsville Acquisition has been consummated
shall be final, nonappealable and binding. Each Huntsville Claim Arbiter shall
be a person knowledgeable regarding the wireless cable television business and
the value of related assets, and shall be generally knowledgeable with regard to
business and financial matters. In the event WOI and the Stockholder
Representative fail to agree upon a Huntsville Claim Arbiter for any Rejected
Huntsville Claim within forty-five (45) days after the Stockholder
Representative's receipt of the related Huntsville Claim Rejection Notice in
question, the Huntsville Claim Arbiter shall be the managing partner of the New
York office of an independent "Big Six" accounting firm other than KPMG Peat
Marwick LLP or Arthur Andersen, L.L.P., as selected jointly by the Stockholder
Representative and WOI, and in the absence of said joint election, as selected
by the managing partner of the New York office of the accounting firm of Price
Waterhouse LLP or his designee. Upon a determination of a Huntsville Claim
Arbiter in accordance herewith to the effect that the
5
<PAGE>
Huntsville Acquisition has been consummated, the Rejected Huntsville Claim in
question shall become the "Accepted Huntsville Claim," and notice thereof will
-------------------------
be furnished to the Escrow Agent by the Stockholder Representative or WOI. All
determinations by any Huntsville Claim Arbiter hereunder shall be made in
accordance with the expedited commercial rules of the American Arbitration
Association.
(d) PAYMENT OF ACCEPTED HUNTSVILLE CLAIM. Once a Huntsville Claim has
become the Accepted Huntsville Claim in accordance with the terms of this
Agreement, the Escrow Agent shall, within five business days of written request
of the Stockholder Representative, deliver to the Stockholder Representative
(for further delivery by the Stockholder Representative to the TWI Stockholders
pro rata according to their respective common ownership interests in TWI
immediately prior to the Merger), all of the Huntsville Escrow Shares.
ARTICLE 4: MARKET-DELIVERY-RELATED MATTERS
4.1 DEMOPOLIS CLAIM SUBMISSION. In order to assert a claim (a "Demopolis
---------
Claim") against the Demopolis Escrow Fund, the Stockholder Representative shall
- -----
deliver (in accordance with Section 6.1 hereof) to WOI and the Escrow Agent, a
certificate signed by the Stockholder Representative (a "Demopolis Claim
---------------
Certificate") stating that the Market Delivery Requirement has been satisfied
- -----------
with respect to the Demopolis, Alabama, market. Upon the Escrow Agent's and
WOI's receipt of a Demopolis Claim Certificate, the related Demopolis Claim
shall be administered by the Escrow Agent pursuant to Section 4.2 below.
4.2 ADMINISTRATION OF DEMOPOLIS CLAIM.
(a) ACCEPTED AND REJECTED DEMOPOLIS CLAIMS. WOI shall have a period of ten
(10) business days from its receipt of a Demopolis Claim Certificate (the
"Demopolis Claim Rejection Period") to review the Demopolis Claim Certificate
- ---------------------------------
and deliver to the Stockholder Representative and the Escrow Agent written
notice to the effect that WOI disputes the assertion that the Market Delivery
Requirement has been satisfied with respect to the Demopolis, Alabama, market (a
"Demopolis Claim Rejection Notice"). During any Demopolis Claim Rejection
--------------------------------
Period and until the related Demopolis Claim becomes the Accepted Demopolis
Claim, the Stockholder Representative and the TWI Stockholders shall, upon
written request from WOI, make available or provide any records or other
information reasonably requested by WOI relevant to such Demopolis Claim. If no
Demopolis Claim Rejection Notice is received by the Stockholder Representative
and the Escrow Agent within the relevant Demopolis Claim Rejection Period, then
such Demopolis Claim shall become the "Accepted Demopolis Claim."
------------------------
6
<PAGE>
(b) ADMINISTRATION OF REJECTED DEMOPOLIS CLAIMS. If a Demopolis Claim is
the subject of a Demopolis Claim Rejection Notice (and, therefore, is a
"Rejected Demopolis Claim"), then the Stockholder Representative and WOI shall
- -------------------------
attempt in good faith to agree upon the rights of the respective parties with
respect to such Demopolis Claim. If the Stockholder Representative and WOI so
agree, a memorandum setting forth such agreement shall be prepared and signed by
WOI and the Stockholder Representative and shall be furnished to the Escrow
Agent and, if the Stockholder Representative and WOI so agree that the Market
Delivery Requirement has been satisfied with respect to the Demopolis, Alabama,
market, then the Rejected Demopolis Claim shall become the "Accepted Demopolis
------------------
Claim."
- -----
(c) RESOLUTION OF DISPUTES AS TO A DEMOPOLIS CLAIM. If no such agreement
between the Stockholder Representative and WOI can be reached with respect to a
Rejected Demopolis Claim after good faith negotiation within thirty (30) days of
the Stockholder Representative's receipt of the related Demopolis Claim
Rejection Notice, then WOI and the Stockholder Representative shall mutually
select an independent third party (a "Demopolis Claim Arbiter"), whose
-----------------------
determination as to whether the Market Delivery Requirement has been satisfied
with respect to the Demopolis, Alabama, market shall be final, nonappealable and
binding. Each Demopolis Claim Arbiter shall be a person knowledgeable regarding
the wireless cable television business and the value of related assets, and
shall be generally knowledgeable with regard to business and financial matters.
In the event WOI and the Stockholder Representative fail to agree upon a
Demopolis Claim Arbiter for any Rejected Demopolis Claim within forty-five (45)
days after the Stockholder Representative's receipt of the related Demopolis
Claim Rejection Notice in question, the Demopolis Claim Arbiter shall be the
managing partner of the New York office of an independent "Big Six" accounting
firm other than KPMG Peat Marwick LLP or Arthur Andersen, L.L.P., as selected
jointly by the Stockholder Representative and WOI, and in the absence of said
joint election, as selected by the managing partner of the New York office of
the accounting firm of Price Waterhouse LLP or his designee. Upon a
determination of a Demopolis Claim Arbiter in accordance herewith to the effect
that the Market Delivery Requirement has been satisfied with respect to the
Demopolis, Alabama, market, the Rejected Demopolis Claim in question shall
become the "Accepted Demopolis Claim," and notice thereof will be furnished to
------------------------
the Escrow Agent by the Stockholder Representative or WOI. All determinations
by any Demopolis Claim Arbiter hereunder shall be made in accordance with the
expedited commercial rules of the American Arbitration Association.
(d) PAYMENT OF ACCEPTED DEMOPOLIS CLAIM. Once a Demopolis Claim has become
the Accepted Demopolis Claim in accordance with the terms of this Agreement, the
Escrow Agent shall, within five business days of written request of the
Stockholder Representative, deliver to the Stockholder Representative (for
further delivery by the Stockholder Representative to the TWI Stockholders pro
rata according to their respective common ownership interests in TWI immediately
prior to the Merger), all of the Demopolis Escrow Shares.
7
<PAGE>
ARTICLE 5: EXPIRATION OF ESCROWS;
COSTS; CERTAIN RESPONSIBILITIES
5.1 APPLICATION OF PROVISIONS FOLLOWING EXPIRATION. Following the
expiration of the Escrow Period and distribution in accordance herewith of the
Escrow Funds, the escrow created hereby and this Agreement, other than the
provisions of Sections 5.2(b), 5.2(c) and 5.4 shall terminate.
5.2 ADMINISTRATIVE COSTS AND INDEMNIFICATION.
(a) ADMINISTRATIVE COSTS. All costs and expenses of administering
this Agreement (including, without limitation, fees and expenses of the Escrow
Agent and any Jackson Claim Arbiter, Huntsville Claim Arbiter or Demopolis Claim
Arbiter) (collectively, "Administrative Costs") shall be paid as provided in
--------------------
Section 5.2(b). The Escrow Agent shall from time to time invoice such costs and
expenses in accordance with its standard practice and provide copies thereof to
the Stockholder Representative and WOI. Within fifteen (15) business days after
WOI's receipt of an invoice from the Escrow Agent, WOI shall pay to the Escrow
Agent the amount of such invoice for use by the Escrow Agent in paying or
reimbursing such costs and expenses.
(b) INDEMNIFICATION OF ESCROW AGENT. The Escrow Agent shall be
indemnified and saved harmless by WOI from and against any and all liability,
including all expenses reasonably incurred in its defense, to which the Escrow
Agent shall be subjected by reason of any action taken or omitted or any
investment or disbursement of any part of the Escrow Fund made by the Escrow
Agent pursuant to this Agreement, unless caused by the negligence or willful
misconduct of the Escrow Agent. The costs and expenses of enforcing this right
of indemnification (the "Indemnification Costs") shall also be paid by WOI, and
---------------------
this right of indemnification shall survive the termination of this Agreement
and/or the resignation or removal of the Escrow Agent. The Indemnification
Costs and Administrative Costs of WOI to the Escrow Agent set forth in
Subsections 5.2(a) and (b) shall be paid in cash by WOI, and the TWI
Stockholders shall be obligated to pay in cash to WOI one-half of such
Indemnification Costs and Administrative Costs within a reasonable time after
notice thereof from WOI.
5.3 INVESTMENT OF ESCROW FUNDS; STATUS OF ESCROW SHARES.
(a) INVESTMENT. The Escrow Agent shall invest any cash held in either
Escrow Fund in an interest-bearing account or money market instruments in
accordance with written instructions from the WOI. Any interest payable on the
funds shall be added to the Escrow Fund in question and become a part thereof.
The parties acknowledge that the Escrow Agent shall not be liable for any
diminution in either Escrow Fund due to losses resulting from investments made
pursuant to this Escrow Agreement.
8
<PAGE>
(b) STATUS OF SHARES. Unless and until they are delivered to the
Stockholder Representative hereunder, all Escrow Shares and any other voting
securities which may from time to time be part of any Escrow Fund shall be
considered to be treasury shares of WOI and shall not be deemed to be held by
the Escrow Agent, the Stockholder Representative or any TWI Stockholder. The
Escrow Agent shall execute and deliver to the WOI all such proxies, forms for
election or other instruments which it receives as may be required with respect
to the Escrow Shares or any such other voting securities in order to give effect
to the foregoing.
5.4 ESCROW AGENT'S RIGHTS AND RESPONSIBILITIES. To induce the Escrow
Agent to act hereunder, it is further agreed that:
(a) DEGREE OF CARE. The Escrow Agent shall not be under any duty to
give the property held hereunder any greater degree of care than it gives its
own similar property. The Escrow Agent undertakes to perform such duties as are
specifically set forth in this Escrow Agreement, and the Escrow Agent shall not
be liable except for the performance of such duties as are specifically set
forth in this Agreement, and no implied covenants or obligations shall be read
into this Agreement against the Escrow Agent.
(b) ADVICE OF COUNSEL. The Escrow Agent may act upon advice of
counsel in reference to any matter connected herewith and shall not be liable
for any acts or omissions while acting in good faith and exercising reasonable
judgment.
(c) LIABILITY AS TO PARTIES. The Escrow Agent shall not be liable in
any respect on account of the identity, authority or rights of the parties
executing or delivering or purporting to execute or deliver this Agreement or
any documents or papers deposited or called for hereunder.
(d) LIABILITY AS TO VALIDITY. The Escrow Agent shall not be liable
for the outlawing of any rights under any statute of limitations with respect to
this Agreement or any documents deposited with the Escrow Agent.
(e) COMPLIANCE WITH COURTS OF LAW. The Escrow Agent is hereby
expressly authorized to disregard any and all warnings given by any of the
parties hereto or by any other person, excepting only orders or process of
courts of law, and is hereby expressly authorized to comply with and obey
orders, judgments or decrees of any court. In case the Escrow Agent obeys or
complies with any such order, judgment or decree of any court, the Escrow Agent
shall not be liable to any of the parties hereto or to any other person by
reason of such compliance, notwithstanding any such order, judgment or decree
being subsequently reversed, modified, annulled, set aside, vacated or found to
have been entered without jurisdiction.
(f) INSTRUCTIONS OF STOCKHOLDER REPRESENTATIVE. The Escrow Agent is
authorized to rely on the written instructions of the Stockholder Representative
as being
9
<PAGE>
the act of all of TWI Stockholders and the written instructions of the President
or any executive officer of WOI as being the act of WOI.
(g) NO IMPLIED DUTIES. This Agreement sets forth the exclusive duties
of the Escrow Agent with respect to any and all matters pertinent hereto and no
implied duties or obligations of the Escrow Agent shall be read into this
Agreement.
(h) NO ADVICE. The Escrow Agent shall not be called upon to advise a
ny party as to its rights and obligations hereunder.
(i) COMPLIANCE WITH OBLIGATIONS. The Escrow Agent shall be deemed to
have fully complied with its obligations hereunder to transfer Escrow Shares by
delivery to the transfer agent of WOI (the "Transfer Agent") of WOI Common
--------------
Shares, all in form satisfactory to such Transfer Agent, of certificates
properly endorsed for transfer with instructions to the Transfer Agent to issue
in the name of and deliver to the person to whom such transfer is to be made a
certificate or certificates for the required number of shares. Transfer taxes,
if any, applicable to such transfer shall be payable by the person to whom the
Escrow Shares are being transferred.
(j) PROTECTION OF ACTS. The Escrow Agent shall be fully protected in
acting in accordance with any instructions given to it hereunder and believed by
it to have been executed by the proper parties. The Escrow Agent's duties shall
be determined only with reference to this Agreement and applicable laws and is
not charged with any duties or responsibilities in connection with any other
document or agreement.
5.5 RECORDS; FINAL ACCOUNTING. The Escrow Agent shall maintain a
record of each Indemnity Claim or Offering Expense Claim (collectively,
"Claims") and the against the Escrow Funds filed with it pursuant to this
------
Agreement, a record of all such Claims which shall become payable claimed as
provided herein, a record of all requests and notices filed with it pursuant to
the term hereof, and payments or distributions from the Escrow Funds. Upon the
termination or resignation of the Escrow Agent or termination or expiration of
this Agreement, the Escrow Agent shall within ten (10) business days deliver to
WOI and the Stockholder Representative a full and final accounting with regard
to the Escrow Funds.
5.6 RESIGNATION OF ESCROW AGENT. The Escrow Agent, or any successor,
may resign as Escrow Agent hereunder by giving written notice thereof to WOI and
the Stockholder Representative. Such resignation shall become effective
following such written notice upon the earlier of the appointment by WOI and the
Stockholder Representative of a successor Escrow Agent that accepts the
appointment and agrees to be bound by the provisions of this Agreement or the
expiration of sixty (60) days thereafter. Upon the effectiveness of such
resignation, all duties of the Escrow Agent so resigning shall cease, other than
the duty to account in accordance with Section 5.5. WOI and the Stockholder
Representative shall have the right to terminate the appointment of the Escrow
Agent hereunder by giving written notice thereof to the Escrow Agent, specifying
the date upon which such termination shall take effect. A condition precedent
to such termination shall be the designation of a successor Escrow Agent that
has accepted the
10
<PAGE>
appointment and agreed to be bound by the provisions of this Agreement, or an
agreement executed by WOI and the Stockholder Representative directing the
release or payment of the remaining Escrow Shares and other items and amounts in
the Escrow Funds. In event of such termination, the Escrow Agent shall turn
over and deliver to such successor Escrow Agent the Escrow Funds, and any other
sums and the records and instruments held by it under this Agreement and render
the accounting required by Section 5.5.
ARTICLE 6: MISCELLANEOUS
6.1 NOTICES. All notices and other communications pursuant to this
Agreement shall be in writing and shall be deemed given if delivered personally,
sent by nationally recognized, overnight courier, or mailed by registered or
certified mail (return receipt requested), postage prepaid, or sent by facsimile
(followed by a copy sent by courier or registered or certified mail) to the
parties at the following addresses (or at such other address for a party as
shall be specified by notice hereunder):
If to WOI, to:
11301 Industriplex Boulevard
Suite 4
Baton Rouge, LA 70809-5400
Attention: Sean Reilly
Telecopy: (504) 293-5400
With copy (which copy will not constitute notice to WOI) to:
John Kuehn, Esq.
Kirkland & Ellis
153 E. 53rd Street
New York, New York 10022
Telecopy: (212) 446-4900
If to TWI or the Stockholder Representative, to:
1080 River Oaks Drive
Suite A150
Jackson, MS 39208
Attention: Henry M. Burkhalter
Telecopy: (601) 936-1517
11
<PAGE>
With copy (which copy will not constitute notice to TWI or the
Stockholder Representative) to:
Samuel A. Fishman
Latham & Watkins
885 Third Avenue
Suite 1000
New York, New York 10022
Telecopy: (212) 751-4864
If to the Escrow Agent:
114 W. 47th Street
New York, NY 10036
Attention: Peggy Ciesmelewski
Telecopy: (212) 852-1626
All such notices and other communications shall be deemed to have been
received (a) in the case of personal delivery or by a nationally recognized
overnight courier, on the date of such delivery, (b) in the case of mailing, on
the date received, and (c) in the case of a facsimile, when the party receiving
such facsimile shall have confirmed receipt of the communication.
6.2 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of the parties hereto.
6.3 GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware as such laws
are applied to agreements between Delaware residents entered into and to be
performed entirely in Delaware.
6.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall constitute an original
hereof, but all of which together shall constitute one agreement.
* * * * * * * *
12
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Escrow
Agreement as of the day and year first above written.
WIRELESS ONE, INC.
By:
----------------------------------
Title:
-------------------------------
---------------------------------------
Henry M. Burkhalter, in his capacity as
the Stockholder Representative
U.S. TRUST COMPANY OF NEW YORK
By:
----------------------------------
Title:
-------------------------------
TWI STOCKHOLDERS:
----------------
MISSISSIPPI WIRELESS TV, L.P.
By: Wireless TV, Inc.
Its: General Partner
By:
----------------------------------
Title:
-------------------------------
CHASE VENTURE CAPITAL ASSOCIATES L.P.
By: Chase Capital Partners
Its: General Partner
By:
----------------------------------
Title:
-------------------------------
13
<PAGE>
VANCOM, INC.
By:
----------------------------------
Title:
-------------------------------
14
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11
Wireless One, Inc.
Earnings Per Share Computation Information
Period from
February 4,
1993 Year Year Pro Forma
(inception) to Ended Ended Combined
December 31 December 31, December 31, As Adjusted
1993 1994 1995 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net loss (162,610) (2,261,813) (7,692,474) (9,865,128)
Preferred stock dividends and discount accretion - - (786,389) -
--------------- -------------- ------------- ------------
Net loss applicable to common stock (162,610) (2,261,813) (8,478,863) (9,865,128)
=============== ============== ============= ============
Weighted avg shares outstanding 538,127 1,863,512 4,187,736 7,741,069
Primary and fully-diluted loss per common share (0.30) (1.21) (2.02) (1.27)
=============== ============== ============= ============
<CAPTION>
Pro Forma
Three Months Combined
Ended March 31, As Adjusted
----------------
1995 1996 3/31/96
---- ---- -------
<S> <C> <C> <C>
Net loss (703,293) (6,079,832) (5,479,666)
Preferred stock dividends and discount accretion - - -
--------------- -------------- -------------
Net loss applicable to common stock (703,293) (6,079,832) (5,479,666)
=============== ============== =============
Weighted avg shares outstanding 2,013,950 13,498,752 17,052,085
Primary and fully-diluted loss per common share (0.35) (0.45) (0.32)
=============== ============== =============
</TABLE>
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:
<TABLE>
<CAPTION>
Period from
February 4,
1993 Year Year Pro Forma
(inception) to Ended Ended Combined
December 31 December 31, December 31, As Adjusted
1993 1994 1995 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted avg shares outstanding 538,127 1,863,512 4,187,736 7,741,069
Shares issuable upon exercise of options
and warrants - 248,917 804,187 663,355
---------------- -------------- ------------- ------------
Weighted avg shares outstanding 538,127 2,112,429 4,991,923 8,404,424
Net loss per common share (0.30) (1.07) (1.70) (1.17)
================ ============== ============= ============
<CAPTION>
Pro Forma
Three Months Combined
Ended March 31, As Adjusted
----------------
1995 1996 3/31/96
---- ---- -------
<S> <C> <C> <C>
Weighted avg shares outstanding 2,013,950 13,498,752 17,052,085
Shares issuable upon exercise of options
and warrants 248,917 564,244 663,355
---------------- -------------- -------------
Weighted avg shares outstanding 2,262,867 14,062,996 17,715,440
Net loss per common share (0.31) (0.43) (0.31)
================ ============== =============
</TABLE>
<PAGE>
EXHIBIT 21.1
Subsidiaries State of Organization
- ------------ ---------------------
TruVision Wireless, Inc Delaware
TruVision Wireless of Chattanooga, Inc. Delaware
TruVision Wireless of Flippin, Inc. Delaware
TruVision Wireless of Gadsden, Inc. Delaware
TruVision Wireless of Memphis, Inc. Delaware
TruVision Wireless of Jacksonville, Inc. Delaware
TruVision Wireless of Huntsville, Inc. Delaware
TruVision Wireless of 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
<PAGE>
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 Marwick LLP
Dallas, Texas
August 2, 1996
<PAGE>
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, 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
Operating Data" and "Selected Historical Financial Data" in the prospectus.
KPMG Peat Marwick LLP
New Orleans, Louisiana
August 2, 1996
<PAGE>
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.
Arthur Andersen LLP
Jackson, Mississippi,
August 2, 1996.
1
<PAGE>
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
__________________________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
__________________________
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) _______
__________________________
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I. R. S. Employer
if not a U. S. national bank) Identification No.)
114 West 47th Street 10036
New York, New York (Zip Code)
(Address of principal
executive offices)
__________________________
Wireless One, Inc.
(Exact name of OBLIGOR as specified in its charter)
Delaware 72-1300837
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
11301 Industriplex Boulevard 70809-4115
Suite 4 (Zip code)
Baton Rouge, Louisiana
(Address of principal executive offices)
__________________________
Senior Discount Notes Due 2006 and Warrants
(Title of the indenture securities)
<PAGE>
- 2 -
GENERAL
1. General Information
-------------------
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System).
Federal Deposit Insurance Corporation, Washington, D. C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with the Obligor
-----------------------------
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
3,4,5,6,7,8,9,10,11,12,13,14 and 15.
Wireless One, Inc. is currently not in default under any of its
outstanding securities for which United States Trust Company of New
York is Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9,
10, 11, 12, 13, 14 and 15 of Form T-1 are not required under General
Instruction B.
16. List of Exhibits
----------------
T-1.1-- Organization Certificate, as amended, issued by the State of
New York Banking Department to transact business as a Trust
Company, is incorporated by reference to Exhibit T-1.1 to Form
T-1 filed on September 15, 1995 with the Commission pursuant to
the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 (Registration No. 33-97056).
<PAGE>
- 3 -
16. List of Exhibits
(cont'd)
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
T-1.4 -- The By-Laws of United States Trust Company of New York, as
amended, is incorporated by reference to Exhibit T-1.4 to Form T-
1 filed on September 15, 1995 with the Commission pursuant to the
Trust Indenture Act of 1939, as amended by the Trust Indenture
Reform Act of 1990 (Registration No. 33-97056).
T-1.6-- The consent of the trustee required by Section 321(b) of the Trust
Indenture Act of 1939, as amended by the Trust Indenture Reform
Act of 1990.
T-1.7-- A copy of the latest report of condition of the trustee pursuant
to law or the requirements of its supervising or examining
authority.
NOTE
As of August 2, 1996, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U. S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States
Trust Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility, as to matters
peculiarly within the knowledge of the obligor or its directors, the
trustee has relied upon information furnished to it by the obligor and will
rely on information to be furnished by the obligor and the trustee
disclaims responsibility for the accuracy or completeness of such
information.
_____________________
<PAGE>
- 4 -
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, United States Trust Company of New York, a corporation organized
and existing under the laws of the State of New York, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of New
York, on the 2nd day of August, 1996.
UNITED STATES TRUST COMPANY OF
NEW YORK, Trustee
By: /s/ Margaret Ciesmelewski
--------------------------
Margaret Ciesmelewski
Assistant Vice President
PC/pg
080296
<PAGE>
EXHIBIT T-1.6
-------------
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
--------------------------
By: S/Gerard F. Ganey
Senior Vice President
<PAGE>
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
MARCH 31, 1996
--------------
($ IN THOUSANDS)
ASSETS
- ------
Cash and Due from Banks $ 47,046
Short-Term Investments 50
Securities, Available for Sale 758,118
Loans 1,221,210
Less: Allowance for Credit Losses 13,113
----------
Net Loans 1,208,097
Premises and Equipment 58,360
Other Assets 125,979
----------
TOTAL ASSETS $2,197,650
----------
LIABILITIES
- -----------
Deposits:
Non-Interest Bearing $ 387,509
Interest Bearing 1,446,148
----------
Total Deposits 1,833,657
Short-Term Credit Facilities 82,285
Accounts Payable and Accrued Liabilities 128,745
----------
TOTAL LIABILITIES $2,044,687
----------
STOCKHOLDER'S EQUITY
- ---------------------
Common Stock 14,995
Capital Surplus 42,394
Retained Earnings 96,511
Unrealized Gains on Securities Available
for Sale (Net of Taxes) (937)
----------
TOTAL STOCKHOLDER'S EQUITY 152,963
----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $2,197,650
----------
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory authority
and is true to the best of my knowledge and belief.
Richard E. Brinkman, SVP & Controller
June 7, 1996
