CS WIRELESS SYSTEMS INC, S-1/A, 1996-07-08

CS WIRELESS SYSTEMS INC
S-1/A, 1996-07-08
CABLE & OTHER PAY TELEVISION SERVICES

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 8, 1996

REGISTRATION NO. 333-3288

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------

CS WIRELESS SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 4841 23-2751747
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

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200 CHISHOLM PLACE
SUITE 200
PLANO, TEXAS 75075
(214) 423-9494
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
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JOHN R. BAILEY
ACTING CHIEF FINANCIAL OFFICER
200 CHISHOLM PLACE
SUITE 200
PLANO, TEXAS 75075
(214) 423-9494
(Name, address, including zip code and telephone number,
including area code of agent for service)
-------------------

COPY TO:

M. LOUISE TURILLI, ESQ.
DAY, BERRY & HOWARD
CITYPLACE I
HARTFORD, CONNECTICUT 06103-0100
(860) 275-0178

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

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. / /

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<PAGE>
CS WIRELESS SYSTEMS, INC.
FORM S-1
REGISTRATION STATEMENT
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K

<TABLE>
<CAPTION>
FORM S-1 ITEM CAPTION OR LOCATION
NUMBER AND CAPTION IN PROSPECTUS
------------------------------------------- -------------------------------------------
<C> <S> <C>

1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus..... Facing Page; Outside Front Cover Page of
Prospectus

2. Inside Front and Outside Back Cover Pages
of Prospectus.............................. Inside Front Cover Page of Prospectus;
Available Information; Outside Back Cover
Page of Prospectus

3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges............... Prospectus Summary; Risk Factors; Selected
Historical Financial Data

4. Use of Proceeds............................ Prospectus Summary; Use of Proceeds

5. Determination of Offering Price............ Not Applicable

6. Dilution................................... Not Applicable

7. Selling Security Holders................... Not Applicable

8. Plan of Distribution....................... Outside Front Cover Page of Prospectus;
Plan of Distribution; The Exchange Offer

9. Description of Securities to be
Registered................................. Outside Front Cover Page of Prospectus;
Description of the Notes

10. Interests of Named Experts and Counsel..... Legal Opinions

11. Information with Respect to the
Registrant................................. Prospectus Summary; Risk Factors; The
Contributions; Capitalization; Selected
Historical Financial Data; Summary Pro
Forma Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Stock Ownership;
Description of the Notes; Description of
Capital Stock; Registration Rights; Certain
Relationships and Related Transactions;
Financial Statements

12. Disclosure of Commission Position on
Indemnification for Securities Act
Liability.................................. Not Applicable
</TABLE>
<PAGE>

SUBJECT TO COMPLETION: DATED JULY 8, 1996

PRELIMINARY PROSPECTUS

OFFER FOR ALL OUTSTANDING
11 3/8% SENIOR DISCOUNT NOTES DUE 2006
IN EXCHANGE FOR
11 3/8% SERIES B SENIOR DISCOUNT NOTES DUE 2006
EACH ISSUED BY
CS WIRELESS SYSTEMS, INC.
-------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1996,
UNLESS EXTENDED.
-------------------

CS Wireless Systems, Inc., a Delaware corporation (the "Company" or "CS
Wireless"), hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and the accompanying Letter of Transmittal (which
together constitute the "Exchange Offer"), to exchange an aggregate principal
amount at maturity of up to $400,000,000 of its 11 3/8% Series B Senior Discount
Notes due 2006 (the "New Notes") for a like principal amount of its issued and
outstanding 11 3/8% Senior Discount Notes due 2006 (the "Old Notes" and together
with the New Notes, the "Notes"). The Company will not receive any proceeds from
the Exchange Offer and will pay all the expenses incident to the Exchange Offer.
The New Notes will be issued under, and entitled to the benefits of, the
Indenture (as defined) governing the Old Notes. The New Notes are identical in
all material respects to the Old Notes, except for certain transfer restrictions
and registration rights relating to the Old Notes. The New Notes are being
offered hereunder in order to satisfy certain obligations of the Company
contained in a Notes Registration Rights Agreement dated as of February 15, 1996
(the "Notes Registration Rights Agreement"). See "Registration
Rights--Registration Rights of Note Holders."

The Notes will mature on March 1, 2006. Cash interest on the Notes will
neither accrue nor be payable prior to March 1, 2001. Commencing September 1,
2001, cash interest will be payable on the Notes semi-annually in arrears on
each March 1 and September 1 at the rate of 11 3/8% per annum. The Notes will be
redeemable at the option of the Company, in whole or in part, at any time on and
after March 1, 2001 at the redemption prices specified herein, plus accrued and
unpaid interest to the date of redemption. In addition, the Company may redeem
at its option at any time prior to March 1, 1999 up to 35% of the aggregate
outstanding principal amount of the Notes at 111% of the Accreted Value (as
defined) thereof on the date of redemption, with the net proceeds of one or more
public offerings of its Common Stock (as defined) or from the issuance or sale
of its Common Stock to a Strategic Equity Investor (as defined). In the event of
a Change of Control (as defined), each holder will have the option to require
the Company to repurchase such holder's Notes at 101% of the Accreted Value
thereof on the date of repurchase (if prior to March 1, 2001) or 101% of the
principal amount thereof (if on or after March 1, 2001) plus accrued and unpaid
interest to the repurchase date. In addition, the Company will be obligated to
make an offer to repurchase the Notes for cash at a price equal to 100% of the
Accreted Value on the date of repurchase (if prior to March 1, 2001) or 100% of
the principal amount thereof (if on or after March 1, 2001), plus accrued and
unpaid interest, if any, thereon to the date of repurchase with the net cash
proceeds of certain asset sales.

The Notes will rank senior in right of payment to all existing and future
subordinated Indebtedness (as defined) of the Company and pari passu in right of
payment with all other senior Indebtedness of the Company. The Notes will be
effectively subordinated to all secured Indebtedness of the Company to the
extent of the value of the assets securing such Indebtedness and will be
effectively subordinated to all Indebtedness and other liabilities (including
trade payables) of subsidiaries of the Company. As of March 31, 1996, the
Company had $246.9 million of Indebtedness outstanding, of which approximately
$400,000 was senior to the Notes. See "The Contributions."

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SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN RISKS THAT
SHOULD BE CONSIDERED BY
HOLDERS OF OLD NOTES WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------
The date of this Prospectus is , 1996.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
Tenders of Old Notes pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date (as defined). In the event the Company
terminates the Exchange Offer and does not accept for exchange any Old Notes,
the Company will promptly return the Old Notes to the Holders thereof. See "The
Exchange Offer."

The Old Notes were sold to Smith Barney Inc., BT Securities Corporation and
Gerard Klauer Mattison & Co., LLC (collectively, the "Initial Purchasers") in
the Unit Offering (as defined), in a transaction not registered under the
Securities Act of 1933, as amended (the "Securities Act"), in reliance upon the
exemption provided in Section 4(2) of the Securities Act. The Initial Purchasers
subsequently placed the Old Notes with "qualified institutional buyers," as
defined in Rule 144A under the Securities Act and to a limited number of other
institutional "accredited investors," as defined in Rule 501(a)(1), (2), (3) and
(7) of Regulation D under the Securities Act. Accordingly, the Old Notes may not
be reoffered, resold or otherwise transferred in the United States unless so
registered or unless an applicable exemption from the registration requirements
of the Securities Act is available. The New Notes are being offered hereunder in
order to satisfy the obligations of the Company under the Notes Registration
Rights Agreement. See "Registration Rights--Registration Rights of Note
Holders."

Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") issued to other issuers in similar contexts, New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by holders thereof (other
than any such holder which is an "affiliate" of the Company within the meaning
of Rule 405 under the Securities Act without compliance with the registration
and prospectus delivery provisions of the Securities Act provided that such New
Notes are acquired in the ordinary course of such holders' business and such
holders have no arrangement with any person to participate in the distribution
of such New Notes.

Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that it will make this Prospectus available to any broker-dealer for use
in connection with any such resale. See "Plan of Distribution."

Prior to this Exchange Offer, there has been no public market for the Old
Notes. The Company does not intend to list the New Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system. There can be no assurance that an active market for the New Notes will
develop. See "Risk Factors--Absence of a Public Market." Moreover, to the extent
that Old Notes are tendered and accepted in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Old Notes could be adversely
affected. If a market for the New Notes should develop, the New Notes could
trade at a discount from their Accreted Value. There can be no assurance that an
active public market for the New Notes will develop.

Holders whose Old Notes are not tendered and accepted in the Exchange Offer
will continue to hold such Old Notes and will be entitled to all the rights and
preferences, and will be subject to the limitations applicable thereto under the
Indenture (as herein defined) and, with respect to transfer, under the
Securities Act. See "Risk Factors--Consequences of Failure to Exchange."

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<PAGE>
AVAILABLE INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 (the "Registration Statement") under the Securities Act for the registration
of the New Notes offered hereby. This Prospectus, which constitutes a part of
the Registration Statement, does not contain all the information set forth in
the Registration Statement, certain portions of which are omitted from the
Prospectus as permitted by the rules and regulations of the Commission. For
further information with respect to the Company and the New Notes offered
hereby, reference is made to the Registration Statement, including the exhibits
thereto, and financial statements and notes filed as a part thereof. Statements
made in this Prospectus concerning the contents of any documents referred to
herein are not necessarily complete. With respect to each such document filed
with the Commission 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.

As a result of the Exchange Offer, the Company will be subject to the
periodic reporting and certain other informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company
has agreed that, whether or not it is required to do so by the rules and
regulations of the Commission, for so long as any of the Old Notes or the New
Notes as applicable, remain outstanding, it will furnish to the holders of the
Old Notes or the New Notes, as applicable, and file with the Commission (unless
the Commission will not accept such a filing) (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file such
forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
reports that would be required to be filed with the Commission on Form 8-K if
the Company were required to file such reports. In addition, for so long as any
of the Old Notes remain outstanding, the Company has agreed to make available to
any prospective purchaser of the Old Notes or beneficial owner of the Old Notes,
in connection with any sale thereof, the information required by Rule 144A(d)(4)
under the Securities Act.

The Registration Statement and the exhibits and schedules thereto, as well
as such reports and other information filed by the Company with the Commission,
may be inspected and copied, at prescribed rates, at the public reference
facilities of the Commission, at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, or at the Commission's regional offices at 7 World
Trade Center, 13th Floor, New York, New York 10048, and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material also can be obtained by mail from the public reference facilities
of the Commission, at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.

Anyone who receives this Prospectus may obtain a copy of the Indenture and
the Notes Registration Rights Agreement without charge by writing to John R.
Bailey, Acting Chief Financial Officer, at the Company's principal executive
offices at 200 Chisholm Place, Suite 200, Plano, Texas 75075 or by telephone at
(214) 423-9494.

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(This Page Intentionally Left Blank)

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PROSPECTUS SUMMARY

The following summary does not purport to be complete and is qualified in
its entirety by the more detailed information and financial statements and
related notes appearing elsewhere in this Prospectus.

THE COMPANY

CS Wireless Systems, Inc. (the "Company" or "CS Wireless") is one of the
largest wireless cable television companies in the United States in terms of
line-of-sight ("LOS") households and subscribers. The Company's 12 markets
encompass approximately 7.0 million television households, approximately 5.7
million of which are LOS households, as estimated by the Company. The Company
provided service to approximately 58,400 subscribers as of March 31, 1996. The
Company is a majority-owned subsidiary of CAI Wireless Systems, Inc. ("CAI"),
the largest developer, owner and operator of wireless cable television systems
in the United States in terms of LOS households and the first wireless cable
operator to enter into a strategic arrangement with Regional Bell Operating
Companies ("RBOCs") through its strategic business relationship with affiliates
of Bell Atlantic Corporation ("Bell Atlantic") and NYNEX Corporation ("NYNEX").
The Company is also affiliated with Heartland Wireless Communications, Inc.
("Heartland"), a leading developer, owner and operator of wireless cable systems
in small to mid-size markets. See "--Company Formation."

BUSINESS STRATEGY

The Company's objective is to become a leading regional provider of
subscription television services. The Company expects to achieve its goal
through: (i) the deployment of digital wireless cable equipment in most of its
markets; (ii) the acquisition and/or swapping of wireless cable assets or
systems to increase the Company's regional concentration of markets; (iii) the
aggressive pursuit of strategic partners; and (iv) the rapid penetration of its
markets.

(i) Deploy Digital Wireless Cable Equipment. The Company expects that
digital wireless cable equipment will become commercially available in late 1996
and expects to convert or build most of its markets using digital technology in
1997. Digital technology, capable of delivering in excess of 100 channels, will
allow CS Wireless to offer more programming choices than almost all of its
hard-wire cable competitors in its markets. An upgrade to digital technology for
a wireless cable system is expected to be less expensive and faster than that
for hard-wire cable systems because new equipment need only be installed at the
subscriber site and at the head-end instead of throughout the cable plant. The
Company believes that cable subscribers are most sensitive to programming,
price, service and reliability and that digital technology will enable the
Company to offer its subscribers a service that is comparable or superior to
hard-wire cable in each of these respects. The Company's value pricing strategy
is to offer more programming than its hard-wire cable competitors at a price
level comparable to that of its hard-wire cable competitors' expanded basic
service. The availability of channels in excess of those used to provide a
complete selection of local television stations and cable networks will be used
to provide an expanded variety of premium and pay-per-view channels. In
addition, high channel capacity may enable the Company to use its channels for
other uses, such as interactive programming, as these services and technologies
become available. CS Wireless will explore other delivery technologies that can
enhance its video services to its subscribers.

(ii) Increase Regional Concentration. An important part of the Company's
growth strategy is to expand its markets and subscriber base through the
acquisition of wireless cable systems and channel rights in targeted markets
primarily throughout the midwest and southwest regions of the United States.
Through selected acquisitions, divestitures, asset swaps and joint ventures, the
Company will seek to increase its regional concentration of wireless cable
television systems in order to realize

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economies of scale and operating efficiencies and to increase its attractiveness
to strategic partners. Consistent with this strategy, the Company continues to
explore and pursue opportunities to acquire additional wireless cable television
assets in markets that meet the Company's selection criteria, to divest itself
of wireless cable television assets that are not consistent with the Company's
regional market emphasis, and to continually evaluate its current markets to
ensure that its portfolio of operating systems and channel interests reflect the
Company's growth strategy.

(iii) Aggressively Pursue Strategic Relationships. The Company believes that
its strategy of increasing regional concentration of wireless cable television
systems and channel rights will enhance the Company's ability to attract
potential joint venture opportunities with large strategic partners, including
RBOCs, long distance telephone companies and other large telecommunications
conglomerates. The Company also believes that such relationships will enable it
to benefit from such partners' capital, infrastructure and brand identity,
thereby increasing the Company's ability to penetrate its markets.

(iv) Rapidly Penetrate Markets. The Company's operating strategy focuses on
rapidly penetrating its markets through value pricing, competitive programming
offerings, commitment to digital and other technologies, responsive customer
service, signal quality and reliability, and targeted marketing. This operating
strategy is designed to attract and retain subscribers, enabling the Company to
compete effectively with hard-wire cable providers.

OPERATING AND PLANNED MARKETS

The table below outlines as of March 31, 1996 (except as indicated in
footnote (a) below) the characteristics of the Company's operational and
pre-launch markets, as well as its market under development and markets held for
sale. The Company expects that the pre-launch markets and the market under
development will be operational by the end of 1998.

PRE-LAUNCH MARKETS
Dallas, TX (d)............................ 981,000 872,000 29 --
Salt Lake City, UT (d).................... 454,000 434,000 34(j) --

MARKET UNDER DEVELOPMENT
Charlotte, NC (c)......................... 580,000 72,000 9(k) --

MARKETS HELD FOR SALE
Stockton/Modesto, CA (c).................. 350,000 300,000 24 --
Bakersfield, CA (c)....................... 162,000 151,000 42 8,500
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Total................................... 6,955,000 5,735,000 58,400
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</TABLE>

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(a) The Estimated Total Service Area Households for each market represents the Company's
estimate of the number of households within the service area for the primary
transmitter in each market based on census data. The Estimated LOS Households for each
market represents the approximate number of Estimated Total Service Area Households
within the service area of the primary transmitter that can receive an adequate
unobstructed signal, as estimated by the Company, based on topographical and
engineering analyses. The service area for a market varies based on a number of
factors, including the transmitter height, transmitter power and the proximity of
adjacent wireless cable systems.

(b) The Number of Channels Available comprises analog wireless cable and local broadcast
channels that can be received by subscribers. Wireless cable channels either are
licensed to the Company or are leased to the Company from other license holders. The
Number of Channels Available includes 8, 8, 5, 6, 13, 7, 8, 13, 7, 0, 6 and 10 off-air
channels, and 16, 12, 20, 20, 12, 16, 20, 12, 15, 8, 7 and 19 ITFS channels, in
Cleveland, Ohio; Minneapolis, Minnesota; Dayton, Ohio; San Antonio, Texas; Fort Worth,
Texas; Grand Rapids, Michigan; Kansas City (suburbs), Missouri; Dallas, Texas; Salt
Lake City, Utah; Charlotte, North Carolina; Stockton/Modesto, California; and
Bakersfield, California, respectively. The Number of Channels Available also includes
certain channels that are subject to FCC (as defined) approval of applications for new
station authorizations, power increases, transmitter relocations, as well as third
party interference agreements. The FCC's failure to grant one or more new station
applications could decrease the number of channels. The FCC's failure to grant one or
more power increase or transmitter relocation applications, or the failure to obtain
certain third party interference agreements, could delay the initiation of service
and/or reduce the coverage area of the affected system or systems.

(d) Market contributed by Heartland.

(e) Does not include four channels whose authorization is the subject of a petition for
reconsideration and, in the alternative, a new station application.

(f) For purposes of Estimated Total Service Area Households and Estimated LOS Households,
the Dayton, Ohio market includes Bloom Center, Indiana, a suburban market adjacent to
Dayton. The Bloom Center market is not yet operational.

(g) When the FCC issues a station authorization, the licensee is afforded a certain period
of time to complete construction. If the licensee cannot complete construction within
the specified time frame, the licensee must file a request with the FCC for additional
time to complete construction. The Bloom Center, Indiana market has 20 channels, all of
which are the subject of currently pending requests for additional time to complete
construction.

(h) The Company's Kansas City (suburbs) market is comprised of systems in Maysville and
Sweet Springs, Missouri. The transmitting facilities for these markets are located
approximately 35 miles from Kansas City.

(i) Includes 24 wireless cable channels in Maysville, Missouri, one of which is the subject
of a pending application, and 20 wireless cable channels in Sweet Springs, Missouri.

(j) Includes seven channels that are the subject of new station applications.

(k) This market is under development because the channel rights held by the Company at
present are insufficient to launch a commercially viable wireless cable television
system. The Company's ability to launch its service in this market will depend upon its
ability to obtain additional channel rights. The Number of Channels Available in this
market includes five channels for which the Company has secured channel rights and four
channels for which the Company has submitted new station applications that the Company
believes have a high likelihood of being granted. The Company has also sponsored new
station applications for eight channels, which applications are subject to competition
with other applications.
</TABLE>

AFFILIATION WITH CAI AND HEARTLAND

CS Wireless believes that its affiliation with CAI and Heartland will permit
it to achieve economies of scale in the purchase of equipment and programming,
which the Company believes will facilitate meeting its objective of becoming a
leading regional provider of subscription television services. The Company has
contracted with Heartland for the provision of certain miscellaneous
administrative

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services, including the maintenance of the Company's financial information, on
an interim basis. CAI has also agreed to permit two of its employees to assist
the Company with programming and licensing functions. In addition, the
affiliation provides access to management with significant experience in the
wireless cable industry, including expertise in executing strategic
relationships. See "Certain Relationships and Related Transactions."

COMPANY FORMATION

On February 23, 1996, CAI contributed to the Company (the "CAI
Contributions") wireless cable television assets or stock of subsidiaries owning
wireless cable television assets comprising four markets located in Bakersfield
and Stockton/Modesto, California; Charlotte, North Carolina; and Cleveland,
Ohio. CAI received from the Company shares of Common Stock initially
constituting approximately 60% of the Company's common stock, $.001 par value
per share (the "Common Stock"). Simultaneously, Heartland contributed or sold to
the Company (the "Heartland Contributions" and, together with the CAI
Contributions, the "Contributions") wireless cable television assets comprising
eight markets located in Grand Rapids, Michigan; Minneapolis, Minnesota; Kansas
City (suburbs), Missouri; Dayton, Ohio; Dallas, Fort Worth and San Antonio,
Texas; and Salt Lake City, Utah. Heartland received from the Company shares of
Common Stock initially constituting approximately 40% of the Common Stock,
approximately $28.3 million in cash, a nine-month note for $25 million (the
"Heartland Short-Term Note") and a 10-year note for $15 million (the "Heartland
Long-Term Note," and together with the Heartland Short-Term Note, the "Heartland
Notes"). The Heartland Short-Term Note was repaid on March 1, 1996 with a
portion of the net proceeds from the Unit Offering. See "The Contributions." The
equity interests of CAI and Heartland in the Company (i) have been diluted by
the issuance of the Common Shares to the purchasers of the Units (as defined)
and the issuance of a total of 1,000,000 shares (the "BANX Shares") to MMDS
Holdings II, Inc., an affiliate of Bell Atlantic, and NYNEX MMDS Holding
Company, an affiliate of NYNEX (collectively, the "BANX Affiliates"), and (ii)
are subject to further dilution for the issuance of Common Stock issuable upon
the exercise of options that have been or may be issued to the Company's
management. As of March 31, 1996, CAI owned approximately 54% of the Common
Stock, Heartland owned approximately 35% of the Common Stock, the BANX
Affiliates owned approximately 10% of the Common Stock, and the holders of the
Common Shares owned approximately 1% of the Common Stock. See "Stock Ownership."

THE UNIT OFFERING

On February 23, 1996, the Company issued and sold 100,000 Units (the
"Units"), with each Unit consisting of four Old Notes (each at $1,000 principal
amount at maturity) and 1.1 shares (the "Common Shares") of Common Stock, of the
Company (the "Unit Offering"). Units were sold pursuant to exemptions from or in
transactions not subject to the registration requirements of the Securities Act
and applicable state securities laws. See "The Exchange Offer."

INDUSTRY OVERVIEW

The market for subscription television has annual sales in the United States
of approximately $20 billion. According to a report issued by the Federal
Communications Commission (the "FCC") in September 1995, of the approximately 96
million total television households nationwide, approximately 85 million are
passed by hard-wire cable systems, and of those homes that are passed by cable,
approximately 62 million are hard-wire cable subscribers. On average, hard-wire
cable subscribers pay approximately $32.50 per month for programming services,
according to Paul Kagan Associates Inc. ("Kagan").

The Company believes that wireless cable has several competitive advantages
compared with hard-wire cable television providers, including: (i) Low cost
provider. Unlike traditional hard-wire cable

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systems, wireless cable does not require extensive coaxial cable networks,
amplifiers and related equipment ("Cable Plant"), thereby reducing necessary
capital and maintenance expenditures significantly. Therefore, a major
percentage of wireless cable capital expenditures are demand driven and are not
made until a new subscriber is added; (ii) High reliability. Although wireless
cable transmission requires a clear line of sight, wireless cable typically
enjoys a lower rate of transmission disruption since the signal is transmitted
over airwaves as opposed to through a Cable Plant; (iii) Superior picture
quality. An equivalent or higher quality picture is provided as a result of the
elimination of signal noise inherent in Cable Plant; and (iv) Faster and less
expensive to upgrade to digital technology. An upgrade to digital technology for
a wireless cable system is expected to be less expensive and faster because new
equipment need only be installed at the subscriber site and at the head-end as
opposed to through a Cable Plant.

CS Wireless is a Delaware corporation. Its principal executive offices are
located at 200 Chisholm Place, Suite 200, Plano, Texas 75075. The Company's
telephone number is (214) 423-9494.

9
<PAGE>
THE EXCHANGE OFFER

<TABLE>
<CAPTION>
<S> <C>
Securities Offered............. Up to $400,000,000 aggregate principal amount at maturity
of the Company's 11 3/8% Series B Senior Discount Notes
due 2006 (the "New Notes").

The Exchange Offer............. The New Notes are being offered in exchange for a like
principal amount of Old Notes. The issuance of the New
Notes is intended to satisfy obligations of the Company
contained in the Notes Registration Rights Agreement. For
procedures for tendering the Old Notes, see "The Exchange
Offer."

Tenders; Expiration Date; The Exchange Offer will expire at 5:00 p.m., New York City
Withdrawal................... time, on , 1996, or such later date and time to
which it is extended (the "Expiration Date"). The tender
of Old Notes pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date. Any
Old Note not accepted for exchange for any reason will be
returned without expense to the tendering holder thereof
promptly after expiration or termination of the Exchange
Offer.

Federal Income Tax The exchange pursuant to the Exchange Offer will not
Consequences................. result in any income, gain or loss to the holders of the
Notes or the Company for federal income tax purposes. See
"Certain Federal Income Tax Considerations."

Use of Proceeds................ There will be no cash proceeds to the Company from the
exchange pursuant to the Exchange Offer.

Exchange Agent................. Fleet National Bank has agreed to act as Exchange Agent
for the Exchange Offer.
</TABLE>

SUMMARY DESCRIPTION OF THE NEW NOTES

The terms of the New Notes and the Old Notes are substantially identical
except for certain transfer restrictions and registration rights relating to the
Old Notes.

<TABLE>
<CAPTION>
<S> <C>
Interest Rate and Payment The Notes will accrete in value from the date of issuance
Dates........................ to March 1, 2001, at a rate of 11 3/8% per annum,
compounded semi-annually. Cash interest on the Notes will
neither accrue nor be payable prior to March 1, 2001.
Commencing September 1, 2001, cash interest will be
payable on the Notes semi-annually in arrears on each
March 1 and September 1 at the rate of 11 3/8% per annum.

Maturity....................... March 1, 2006.

Optional Redemption............ The Notes will be redeemable at the option of the Company,
in whole or in part, at any time on or after March 1, 2001
at the redemption prices set forth herein, plus accrued
and unpaid interest, if any, to the date of redemption. In
addition, at any time on or prior to March 1, 1999, the
Company may redeem up to 35% of the aggregate principal
amount of the Notes originally issued with the net
proceeds of one or more public offerings of its Common
Stock or from the sale or issuance for cash of its Common
Stock to a Strategic Equity Investor (as defined) at a
redemption price equal to 111% of the Accreted Value (as
defined) on the date of redemption; provided, however,
that immediately after giving effect to any such
redemption, not less than 65% of the aggregate principal
amount of the Notes originally issued remains outstanding.
See "Description of the Notes--Optional Redemption."
</TABLE>

10
<PAGE>

<TABLE>
<S> <C>
Mandatory Redemption........... There will be no sinking fund requirements.

Offers to Purchase............. In the event of a Change of Control, each holder will have
the option to require the Company to repurchase such
holder's Notes at a price equal to 101% of the Accreted
Value on the date of repurchase (if prior to March 1,
2001) or 101% of the principal amount thereof (if on or
after March 1, 2001) plus accrued and unpaid interest, if
any, to the date of repurchase. See "Description of the
Notes--Change of Control." In addition, the Company will
be obligated to make an offer to repurchase the Notes for
cash at a price equal to 100% of the Accreted Value on the
date of repurchase (if prior to March 1, 2001) or 100% of
the principal amount thereof (if on or after March 1,
2001), plus accrued and unpaid interest, if any, thereon
to the date of repurchase with the net cash proceeds of
certain asset sales. See "Description of the
Notes--Limitation on Asset Sales."

Ranking........................ The Notes will be general unsecured senior obligations of
the Company ranking senior in right of payment to all
existing and future subordinated Indebtedness of the
Company, including the Indebtedness evidenced by the
Heartland Long-Term Note, and pari passu in right of
payment with all of senior Indebtedness of the Company.
The Notes will be effectively subordinated to all secured
Indebtedness of the Company to the extent of the value of
the assets securing such Indebtedness, and will be
effectively subordinated to all Indebtedness and other
liabilities (including trade payables) of the subsidiaries
of the Company.

Certain Covenants.............. The Indenture (as defined) will impose certain limitations
on the ability of the Company and the Restricted
Subsidiaries (as defined) to, among other things, incur
additional indebtedness, pay dividends or make certain
other restricted payments and investments, consummate
certain asset sales, enter into certain transactions with
affiliates, redesignate an Unrestricted Subsidiary (as
defined) to be a Restricted Subsidiary, designate a
Restricted Subsidiary as an Unrestricted Subsidiary, incur
liens, enter into certain sale and leaseback transactions,
engage in certain businesses, and merge or consolidate
with any other person or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of
its assets. The Indenture will also impose limitations on
the Company's ability to restrict the ability of its
Restricted Subsidiaries to pay dividends or make certain
payments to the Company or any of its Restricted
Subsidiaries and on the ability of the Company's
Restricted Subsidiaries to issue preferred stock. See
"Description of the Notes."

Original Issue Discount........ Because the New Notes are treated as a continuation of the
Old Notes for federal income tax purposes, the New Notes
will be treated as having been issued with original issue
discount for Federal income tax purposes. See "Certain
Federal Income Tax Considerations."
</TABLE>

For additional information regarding the Notes, see "Description of the
Notes."

RISK FACTORS

See "Risk Factors" beginning on page 13 for a discussion of certain risks
that should be considered by holders who tender their Old Notes in the Exchange
Offer.

11
<PAGE>

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

The following table sets forth certain historical financial data of the
Company as of March 31, 1996, and certain unaudited pro forma financial data of
the Company for the year ended December 31, 1995 and the three months ended
March 31, 1996. The summary historical balance sheet data was derived from the
unaudited condensed consolidated financial statements of the Company. The
summary unaudited pro forma statement of operations data gives effect to (i) the
consummation of the Acquisitions (as defined), (ii) the consummation of the
Contributions, (iii) the exclusion of historical operating results related to
the Sale Assets (as defined), (iv) the issuance of the Heartland Notes and the
prepayment of the Heartland Short-Term Note and (v) the issuance of the Units,
as if such events had occurred on January 1, 1995. The pro forma financial data
does not purport to represent what the Company's results of operations would
actually have been if the aforementioned transactions or events occurred on the
date specified or to project the Company's results of operations for any future
periods. The information contained in this table should be read in conjunction
with "Selected Historical Financial Data," "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Pro Forma Financial
Information" and the unaudited condensed consolidated financial statements
(including the notes thereto) of the Company appearing elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
PRO FORMA
-----------------------------------
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1995 MARCH 31, 1996
----------------- --------------
(IN THOUSANDS)
<S> <C> <C>
PRO FORMA STATEMENT OF OPERATIONS DATA:
Revenues................................................... $ 16,618 $ 5,341
Costs and expenses, excluding depreciation and
amortization............................................. 19,062 6,156
Depreciation and amortization.............................. 18,526 4,668
Operating loss............................................. (20,970) (5,483)
Interest expense........................................... (29,319) (8,075)
Interest income and other.................................. 765 897
Net loss (1) (2)........................................... (34,968) (8,204)
EBITDA (3)................................................. (2,444) (815)
Ratio of earnings to fixed charges (4)..................... -- --
<CAPTION>
HISTORICAL
--------------
MARCH 31, 1996
--------------
<S> <C> <C>
HISTORICAL BALANCE SHEET DATA:
Total assets............................................... $416,760
Total debt................................................. 246,876
Total stockholders' equity................................. 146,840
</TABLE>

- ------------

(1) Pro forma net loss includes an income tax benefit of approximately $14,556
and $4,457 for the year ended December 31, 1995 and the three months ended
March 31, 1996, respectively.

(2) Pro forma net loss for the year ended December 31, 1995 and the period
January 1, 1996 through February 23, 1996 for the three months ended March
31, 1996 does not include interest income that would be earned on cash
placed in interest bearing investments until expended.

(3) EBITDA means earnings before interest expense, income taxes, depreciation,
amortization and other non-cash charges. EBITDA is a financial measure
commonly used in the Company's industry and should not be considered as an
alternative to cash flow from operating activities (as determined in
accordance with generally accepted accounting principles) as an indicator of
operating performance or as a measure of liquidity.

(4) In calculating the ratio of earnings to fixed charges, earnings consist of
losses prior to income tax benefit and fixed charges. Fixed charges consist
of interest expense, amortization of debt issuance costs and one-third of
rental expense on operating leases (such amount having been deemed by the
Company to represent the interest portion of such payments). On a pro forma
basis, earnings were inadequate to cover fixed charges by the amount of
$49,524 and $12,661 for the year ended December 31, 1995 and the three
months ended March 31, 1996, respectively.

12
<PAGE>
RISK FACTORS

Holders of Old Notes should consider carefully all of the information set
forth in this Prospectus and, in particular, should evaluate the following risks
before tendering their Old Notes in the Exchange Offer, although the risk
factors set forth below (other than the first two factors) are generally
applicable to the Old Notes as well as the New Notes.

CONSEQUENCES OF FAILURE TO EXCHANGE

Holders of Old Notes who do not participate in the Exchange Offer will
continue to be subject to the restrictions on transfer of the Old Notes as set
forth in the legend thereon. In general, the Old Notes may not be offered or
sold, unless registered under, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state securities
laws. The Company does not currently anticipate that it will register the Old
Notes under the Securities Act. Based on interpretations of the Securities Act
by the staff of the Commission, New Notes issued pursuant to the Exchange Offer
in exchange for Old Notes may be offered for resale, resold, or otherwise
transferred by holders thereof (other than any such holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such New Notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement with any
person to participate in the distribution of such New Notes. Notwithstanding the
foregoing, each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with any resale of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities (other than Old Notes acquired directly
from the Company). The Company has agreed that, for a period of 180 days from
the consummation of the Exchange Offer, it will make this Prospectus available
to any broker-dealer for use in connection with any such resale. See "Plan of
Distribution." However, the ability of any holder to resell the New Notes is
subject to applicable state securities laws as described in "Blue Sky
Restrictions on Resale of New Notes" below.

BLUE SKY RESTRICTIONS ON RESALE OF NEW NOTES

In order to comply with the securities laws of certain jurisdictions, the
New Notes may not be offered or resold by any holder unless they have been
registered or qualified for sale in such jurisdictions or an exemption from
registration or qualification is available and the requirements of such
exemption have been satisfied. The Company does not currently intend to register
or qualify the resale of the New Notes in any such jurisdictions. Therefore, if
an exemption is not available in a particular state, a holder of New Notes may
not be able to resell New Notes in or from that state, depending on the state
statute. However, an exemption is generally available for sales to registered
broker-dealers and certain institutional buyers. Other exemptions under
applicable state securities laws may also be available.

COMPLIANCE WITH EXCHANGE OFFER PROCEDURES

To participate in the Exchange Offer and to avoid the restrictions on
transfer of the Old Notes, holders of Old Notes must transmit a properly
completed Letter of Transmittal, including all other documents required by such
Letter of Transmittal, to the Exchange Agent at the address set forth below
under "The Exchange Offer--Exchange Agent" on or prior to the Expiration Date.
In addition, either (i) certificates for such Old Notes must be received by the
Exchange Agent along with the Letter of

13
<PAGE>
Transmittal or (ii) a timely confirmation of a book-entry transfer of such Old
Notes, if such procedure is available, into the Exchange Agent's account at The
Depository Trust Company pursuant to the procedure for book-entry transfer
described herein, must be received by the Exchange Agent prior to the Expiration
Date, or (iii) the holder must comply with the guaranteed delivery procedures
described herein.

SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT

As of March 31, 1996, the Company had outstanding Indebtedness of
approximately $246.9 million. Giving effect to the consummation of the Unit
Offering and the Contributions, earnings were insufficient to cover fixed
charges by $49.5 million and $12.7 million for the year ended December 31, 1995
and the three months ended March 31, 1996, respectively. The ability of the
Company to meet its debt service requirements (including in respect of the
Notes) will depend upon achieving significant and sustained growth in the
Company's cash flow. The Company expects that such growth in the cash flow will
result from the successful implementation of the Company's business and
operating strategies. See "Business--Business Strategy" and "--Operating
Strategy." The Company currently anticipates that revenues generated from the
operation of its wireless cable systems in accordance with its business and
operating strategies, along with a portion of the net proceeds of the Unit
Offering, should be sufficient to make principal and interest payments on the
Notes and the Company's other Indebtedness as they become due. However, there
can be no assurance that the Company's operations will generate sufficient cash
flow to pay its obligations, including its obligations on the Notes. The
Company's ability to generate such cash flow is subject to a number of risks and
contingencies. Accordingly, there can be no assurance as to whether or when the
Company's operations will become profitable or whether the Company will at any
time have sufficient resources to meet its debt service obligations as they
become due, which include its ability to make principal and interest payments on
the Notes.

Certain terms of the Heartland Long-Term Note impose further restrictions on
the Company's use of proceeds from asset sales and public sales of Common Stock
and therefore restrict the Company's ability to repay the Notes from such
proceeds. To the extent so applied, such proceeds will not be available for the
Company's build-out of wireless cable systems.

The Company will be permitted to incur additional Indebtedness, subject to
certain restrictions. See "Description of the Notes--Limitation on Incurrence of
Additional Indebtedness." The degree to which the Company is leveraged could
have important consequences to holders of the Notes, including, but not limited
to, the following: (i) the Company's ability to obtain additional financing in
the future for working capital, capital expenditures, product development,
acquisitions, general corporate purposes or other purposes may be materially
limited or impaired; (ii) a substantial portion of the Company's cash flow from
operations must be dedicated to the payment of principal and interest on its
Indebtedness; (iii) the terms of future Indebtedness may restrict the redemption
of the Notes as required in the Indenture upon certain events, such as a Change
of Control; and (iv) the Company's high degree of leverage may make it more
vulnerable to economic downturns, may limit its ability to withstand competitive
pressures and may reduce its flexibility in responding to changing business and
economic conditions.

HOLDING COMPANY STRUCTURE

To the extent not already accomplished, the Company intends to transfer
ownership of the wireless cable television assets comprising the Company's
markets to wholly owned subsidiaries. At such time, the assets of the Company
will consist of the outstanding shares of capital stock of such subsidiaries.
The Company is the sole obligor on the Notes and the Notes are not guaranteed by
any subsidiary of the Company. Therefore, the Notes will be structurally
subordinated to all Indebtedness and other liabilities (including trade
payables) of subsidiaries of the Company. The Company must rely on dividends and
other advances and transfers of funds from its subsidiaries to provide the funds
necessary

14
<PAGE>
to meet its debt service obligations under the Notes. The ability of such
subsidiaries to pay such dividends and make such advances and transfers will be
subject to applicable state laws regulating the payment of dividends. Claims of
creditors of the Company's subsidiaries, including general creditors and
lenders, will generally have priority as to the assets of such subsidiaries over
the claims of the Company and the holders of the Notes. In addition, the
Indenture restricts, but does not prohibit, future investment by the Company in
less than wholly owned subsidiaries and joint ventures, the cash flow from which
may not be readily available to the Company to service Indebtedness or meet its
other obligations.

LACK OF PROFITABLE OPERATIONS; LIMITED BUSINESS HISTORY

The wireless cable systems and assets that the Company acquired in the
Contributions have experienced operating losses through the date of the
Contribution Closing (as defined). The Company, following the Contribution
Closing, expects to realize additional net losses on a consolidated basis while
it develops and expands its wireless cable systems. There can be no assurance
that the Company will be able to develop or expand its wireless cable systems or
that it or its individual subsidiaries will achieve profitability in future
years.

The Company has a limited operating history. Prospective investors,
therefore, have limited historical financial information about the Company upon
which to base an evaluation of its performance and an investment in the
Securities. Given the Company's limited operating history, there is no assurance
that the Company will be able to achieve positive cash flow from operating
activities and to compete successfully in the subscription television industry.

NEED FOR ADDITIONAL FINANCING FOR CAPITAL EXPENDITURES AND OPERATIONS

The Company's business requires substantial investment to finance capital
expenditures and operating expenses for subscriber growth and systems
development. The Company has budgeted capital expenditures of approximately
$31.5 million, $86.6 million and $150.0 million for 1996, 1997 and 1998,
respectively. The Company believes that the net proceeds from the Unit Offering
available for capital expenditures will provide sufficient funds to meet its
needs for approximately the next 12 months. Capital expenditures in excess of
such net proceeds may be financed, in whole or in part, by the Company through
debt or equity financings, subscriber equipment lease financings, joint ventures
or other arrangements. There is no assurance that any additional financing
necessary to expand the build-out of the Company's wireless cable systems or to
acquire new systems will be available on satisfactory terms and conditions, if
at all. Additional debt could result in a substantial portion of the Company's
cash flow from operations being dedicated to the payment of principal and
interest on such Indebtedness and may render the Company more vulnerable to
competitive pressures and economic downturns. Failure to obtain additional
financing could adversely affect the growth of the Company and its ability to
compete successfully in the subscription television industry. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

HIGHLY COMPETITIVE INDUSTRY

The subscription television industry is highly competitive. The Company's
principal subscription television competitors in each market are traditional
hard-wire cable, direct broadcast satellite ("DBS") and private cable operators.
Hard-wire cable companies generally are well-established and known to potential
customers and have significantly greater financial and other resources than the
Company. 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, cable
television systems also have faced competition from the availability of
broadcast signals generally and

15
<PAGE>
have found market penetration to be more difficult. Legislative, regulatory and
technological developments may result in additional and significant competition,
including competition from local telephone companies and from a proposed new
wireless service known as Local Multipoint Distribution Service ("LMDS"). See
"Industry Overview--Competition."

Digital capability is essential for wireless to compete with hard-wire
cable, which in its current analog state offers between 36 to 75 channel
offerings depending on a given market. With the deployment of digital, hard-wire
cable is expected to offer over 150 channels. In addition, within each market,
the Company initially must compete with others to acquire, from the limited
number of wireless cable channels issued or issuable, rights to a minimum number
of wireless cable channels needed to establish a commercially viable system.
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,
including digital compression, fiber optic networks, DBS transmission and LMDS,
are in various stages of development. These technologies are being developed and
supported by entities, such as hard-wire cable companies and RBOCs and other
large telecommunications companies, that have significantly greater financial
and other resources than the Company. These new technologies could have a
material adverse effect on the demand for wireless cable services. There can be
no assurance that the Company will be able to compete successfully with existing
hard-wire cable competitors or new entrants in the market for subscription
television services.

COMPETITIVE PRESSURES OF RAPID CHANGES IN TECHNOLOGY

The wireless cable industry and the subscription television industry in
general are subject to rapid and significant changes in technology which may
increase competitive pressures on the Company or require capital investments to
remain competitive that are beyond the Company's resources at the time. Because
of the rapid and high level of technological change in the industry in which the
Company competes, the effect of technological changes on the businesses of the
Company cannot be predicted.

DIGITAL TECHNOLOGY NOT COMMERCIALLY AVAILABLE

Currently, wireless cable companies can offer up to 33 analog channels of
programming. The ability to offer substantially more programming utilizing
existing wireless channel capacity is dependent on effectively applying digital
technology. FCC approval is required before the Company's wireless cable systems
can be converted to digital technology. However, at present, the FCC has not
adopted specific rules to govern the transition from analog to digital
technology. CAI and Heartland, along with almost 100 participants in the
wireless cable industry, have petitioned the FCC to adopt interim transitional
rules to govern the use of digital technology. There can be no assurance as to
what rules and policies the FCC will adopt to govern the use of digital
technology, when such rules and policies will be adopted, or the Company's
ability to comply with those rules and policies. It is expected that digital
technology will be commercially available in late 1996, although the Company
does not expect to have such technology available to it until 1997. It is also
expected that the cost of digital equipment will exceed the cost of analog
equipment. There can be no assurance, however, that digital converter boxes and
other equipment necessary to implement digital technology, including satellite
delivery of digital signals, will be available on this timetable or that digital
technology can be successfully deployed. Conversion from current analog
technology to a digital technology will not take place in all markets
simultaneously.

16
<PAGE>
RESTRICTIONS IMPOSED BY GOVERNMENT AND COMMUNITY REGULATION.

The wireless cable industry is regulated by the FCC. The FCC governs, among
other things, the issuance, renewal, assignment, transfer and modification of
licenses necessary for wireless cable systems to operate and the time afforded
to licensees to construct their facilities. The FCC requires 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. In
the top 50 markets, the FCC has authorized up to 33 channels (constituting a
spectrum bandwidth of 198 MHz) primarily for wireless cable transmission of
video programming. In markets below the top 50 markets, the FCC has authorized
up to 32 channels (constituting a spectrum bandwidth of 192 MHz). Between 5 and
13 Multi-Channel Distribution Service and Multipoint Multi-Channel Distribution
Service (collectively, "MMDS") channels can be licensed by the FCC to commercial
operators for full-time usage without programming restrictions. The remaining
Instructional Television Fixed Services ("ITFS") channels typically are
authorized for educational purposes, although excess capacity can be leased to
wireless cable operators, subject to certain programming restrictions. Licenses
for both MMDS and ITFS channels are granted based upon applications filed with
the FCC. FCC approval also is required for assignment of existing licenses or
transfer of control of license holders. The FCC imposes restrictions and
conditions upon the use, control and operation of channels. FCC licenses are
limited in duration and subject to renewal procedures. While current FCC rules
are intended to promote development of a competitive subscription television
industry, the statutes, rules and regulations affecting the subscription
television industry could change, and any future changes in FCC rules,
regulations, policies or procedures could have a negative impact on the industry
as a whole, and on the Company in particular.

In addition, wireless cable operators are subject to regulation by the
Federal Aviation Administration ("FAA") with respect to construction 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. 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 "Industry
Overview--Regulation."

DEPENDENCE ON CHANNEL LEASES AND LICENSES; NEED FOR LICENSE EXTENSIONS

ITFS licenses generally are granted for a term of 10 years and are subject
to renewal by the FCC. FCC licenses also specify construction deadlines which,
if not met, could result in the loss of the license. Requests for additional
time to construct a channel may be filed and are subject to review pursuant to
FCC rules. Certain of the Company's ITFS 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. For most of its channel rights,
the Company is dependent upon leases of transmission capacity with various
third-party license holders. The Company's channel leases typically cover four
ITFS channels and/or one to four MMDS channels each. Under the rules of the FCC,
the term of leases for ITFS channels, which constitute up to 20 of the 33
available wireless channels within any major wireless cable market, may not
exceed 10 years. There is no such restriction on MMDS leases. Following the
expiration of the initial term of a lease for ITFS channels, the leases under
which the Company operates generally provide that the ITFS license holders may
negotiate for the lease of channel capacity for one or more additional renewal
terms with only the Company or its sublessor. In addition, if a renewal
agreement is not reached within a specified time frame during which only the
Company or its sublessor has the use of the channel capacity, the Company will
thereafter typically have a right of first refusal to match any competing offers
from one or more third parties. Because the ITFS license holders have generally
received their FCC licenses within the last 10 years, the Company and other
similarly situated entities in the industry have had little or no experience
negotiating renewals of ITFS channel lease agreements. The Company anticipates,
however,

17
<PAGE>
that it will be able to negotiate additional renewals with either the incumbent
license holder, or with successor license holders, although there is no
assurance that it will be successful in doing so. The MMDS channel leases held
by the Company generally grant the Company the right to renew the channel lease.
All ITFS and MMDS channel leases are dependent upon the continued validity of
the corresponding FCC license. The Company anticipates that upon the expiration
of the current license terms, all such FCC licenses will be renewed following
completion of the FCC review process, although there is no assurance that such
renewal applications will be granted. The termination of or failure to renew a
channel license or lease (due to a breach by the Company or its lessor,
cancellation of the license held by a third party lessor for failure to timely
construct and/or perfect the wireless cable facility or otherwise) 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 such channel(s) unless it were able to lease excess capacity from
a successor license holder. Such a termination or failure could have a material
adverse effect on the Company. See "Business" and "Industry
Overview--Regulation." In addition, the anticipated conversion to digital
technology may require renegotiation of the Company's channel leases, and there
is no assurance that such renegotiated leases will be on terms as favorable as
the Company's current leases.

UNCERTAINTIES OF A NEW INDUSTRY

While wireless cable television is not a new technology, it is a new
industry with a limited 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.

DEPENDENCE ON KEY INDIVIDUALS

The success of the Company is largely dependent on the experience and
knowledge of its executive officers. The loss of the services of one or more of
these individuals and the Company's inability to attract and retain other key
members of the Company's management could have a material adverse effect upon
the Company.

CABLE SUBSCRIBER CONVERSION

In each of the principal markets serviced by the Company there is or will be
significant competition for households that are presently subscribers of
hard-wire cable service. There can be no assurance that the Company will be able
to attract to its services existing cable customers, who for a variety of
reasons may be reluctant to shift from their present cable service.

NO ASSURANCE THAT THE COMPANY WILL MANAGE GROWTH EFFECTIVELY

If the Company grows rapidly it may experience a significant strain on its
management, operating and financial resources. The Company's ability to manage
growth effectively will require it to continue to implement and improve its
operating and financial systems and to expand, train and manage its employee
base. These demands are expected to require the addition of new management
personnel and the development of additional expertise by existing management
personnel. Managing growth is especially challenging for a company with limited
financial resources, and the failure to effectively manage growth could have a
material adverse effect on the Company's operations. Further, the Company has
been created by combining various wireless cable systems from several different
companies, and there can be no assurance that such systems can be continued and
operated in accordance with the Company's business and operating strategies.

18
<PAGE>
ORIGINAL ISSUE DISCOUNT

The Old Notes were issued at a substantial discount from their principal
amount at maturity. Consequently, although cash interest will not accrue in
respect of the Notes prior to March 1, 2001, Original Issue Discount (the
difference between the stated redemption price at maturity of the Notes and the
issue price of the Notes) will accrue from the issue date of the Notes and
generally will be includable as interest income in the Note holder's gross
income for United States federal income tax purposes in advance of the cash
payments to which the income is attributable.

Furthermore, the Notes will be subject to the high yield discount obligation
rules which will defer and may in part eliminate the Company's ability to deduct
the Original Issue Discount attributable to the Notes. Accordingly, the
Company's after tax cash flow might be less than if the Original Issue Discount
on the Notes was deductible when it accrued. See "Certain Federal Income Tax
Considerations--Notes--Applicable High Yield Discount Obligations." Similar
results may apply under state tax laws.

If a bankruptcy case were commenced by or against the Company under the
Federal Bankruptcy Code of 1978, as amended (the "Bankruptcy Code"), after the
issuance of the Notes, the claim of a holder is the sum of: (i) the initial
offering price; and (ii) that portion of the Original Issue Discount that is not
deemed to constitute "unmatured interest" for purposes of the Bankruptcy Code.
Any Original Issue Discount that was not accrued as of the date of any such
bankruptcy filing would constitute "unmatured interest."

ABSENCE OF A PUBLIC MARKET

The Old Notes are eligible for trading in the Private Offerings, Resales and
Trading through Automated Linkage Market by Qualified Institutional Buyers
("QIBs"). The New Notes will be new securities for which there is currently no
public market. The Company does not intend to list the New Notes on any national
securities exchange or to seek the admission thereof to trading in the National
Association of Securities Dealers Automated Quotation System. The Initial
Purchasers have advised the Company that they currently intend to make a market
in the New Notes but that they are not obligated to do so and, if commenced, may
discontinue such market making at any time. Therefore, there can be no assurance
that an active trading market for any of the New Notes will develop, or if one
does develop, that it will be sustained. Accordingly, no assurance can be made
as to the development or liquidity of any market for the New Notes. If an active
public market does not develop, the market, price and liquidity of the New Notes
may be adversely affected. If any of the New Notes are traded after their
initial issuance, they may trade at a discount from their initial offering
price, depending on prevailing interest rates, the market for similar securities
and other factors, including general economic conditions and the financial
condition and performance of the Company. Prospective investors in the New Notes
should be aware that they may be required to bear the financial risks of such
investment for an indefinite period of time. See "Description of the Notes."

POSSIBLE VOLATILITY OF THE STOCK MARKET

In recent years the stock market has experienced extreme price and volume
fluctuations. These fluctuations have had a substantial effect on the market
prices for many emerging growth companies, often unrelated to the operating
performance of the specific companies. Such market fluctuations could adversely
affect the price of the Notes to the extent that the Company's business requires
additional financing.

19
<PAGE>
IMPACT OF RECENTLY ENACTED LEGISLATION

The recently enacted Telecommunications Act of 1996 (the "1996 Act") could
have a material impact on the wireless cable industry and the competitive
environment in which the Company operates. The 1996 Act will result in
comprehensive changes to the regulatory environment for the telecommunications
industry as a whole. The legislation will, among other things, substantially
reduce regulatory authority over cable rates. Another provision of the 1996 Act
will afford hard-wire cable operators greater flexibility to offer lower rates
to certain of their subscribers, and would thereby permit cable operators to
offer discounts on hard-wire cable service to the Company's subscribers or
prospective subscribers. The legislation will permit telephone companies to
enter the video distribution business, subject to certain conditions. The entry
of telephone companies into the video distribution business, with greater access
to capital and other resources, could provide significant competition to the
wireless cable industry, including the Company. In addition, the legislation
will afford relief to DBS by exempting DBS providers from local restrictions on
reception antennas and preempting the authority of local governments to impose
certain taxes. The Company cannot predict the substance of rules and policies to
be adopted by the FCC in implementing the provisions of the legislation. See
"Industry Overview-- Recently Enacted Legislation."

CONTROL BY CAI AND HEARTLAND

In connection with the Contributions, CAI and Heartland entered into a
Stockholders' Agreement (as defined) which, among other matters, provides that
at all times prior to an initial public offering of Common Stock or a sale by
CAI of all or substantially all of its Common Stock of the Company, CAI will own
more shares of Common Stock than any other stockholder and will maintain
operational control of the Company. The Stockholders' Agreement also provides
that CAI and Heartland will vote their shares of Common Stock in favor of a
board of directors comprised of four members designated by CAI and three members
designated by Heartland, thereby enabling CAI and Heartland to effectively elect
and control the Company's Board of Directors. Most major decisions require the
affirmative approval of at least 70% (7 of 9) of the Directors of the Company so
that neither CAI nor Heartland can unilaterally control major decisions
affecting the Company. See "The Contributions" and "Certain Relationships and
Related Transactions." Under its existing contractual relationships with the
BANX Affiliates, CAI has agreed that neither it nor any of its subsidiaries,
including the Company, may take certain actions without the consent of the BANX
Affiliates. These restrictions are binding on CAI, but not necessarily on the
Company, which is not a party to such agreements.

20
<PAGE>
USE OF PROCEEDS

The Company will not receive any cash proceeds from the issuance of the New
Notes pursuant to this Prospectus.

THE CONTRIBUTIONS

On February 23, 1996 (the "Contribution Closing"), Heartland and its
subsidiaries contributed or sold to the Company the wireless cable television
assets and all related liabilities associated with the wireless cable television
markets of Grand Rapids, Michigan; Minneapolis, Minnesota; Kansas City
(suburbs), Missouri; Dayton, Ohio; Dallas, Fort Worth and San Antonio, Texas;
and Salt Lake City, Utah, that Heartland owned or acquired through transactions
described more fully below (the "Acquisitions"). Simultaneous with Heartland's
contribution and sale of these assets to the Company, CAI or its subsidiaries
contributed to the Company the wireless cable television assets and all related
liabilities or stock of subsidiaries owning wireless cable television assets
associated with the wireless cable television markets of Bakersfield and
Stockton/Modesto, California; Charlotte, North Carolina; and Cleveland, Ohio,
all of which were held by CAI or its subsidiaries. The Contributions were made
to the Company by CAI and Heartland pursuant to a Participation Agreement, as
amended (the "Participation Agreement"), among the Company, CAI and Heartland.

One of the conditions to Heartland's obligation under the Participation
Agreement was the consummation of the Acquisitions, which occurred immediately
prior to the Contribution Closing. The Acquisitions consisted of: (i) the merger
of Heartland Merger Sub, Inc., a wholly-owned subsidiary of Heartland, with and
into American Wireless Systems, Inc. ("AWS"), which owned wireless cable
television assets (and equity interests in certain entities owning wireless
cable television assets) in several markets including Minneapolis, Minnesota and
Dallas and Fort Worth, Texas; (ii) Heartland's purchase of substantially all of
the assets and assumption of certain associated liabilities of Fort Worth
Wireless Cable T.V. Associates, which owned, as its principal asset, an
approximately 80% interest in a joint venture that owns and operates the Fort
Worth, Texas system (AWS owned the remaining beneficial interest in the joint
venture); (iii) Heartland's purchase of substantially all of the assets and
assumption of certain associated liabilities of Wireless Cable T.V. Associates
#38, which owned, as its principal asset, a 75% membership interest in American
Wireless System of Minneapolis LLC, the former owner and operator of the
Minneapolis, Minnesota system (AWS owned the remaining beneficial interest in
this entity); (iv) the merger of Heartland Merger Sub 2, Inc., a wholly-owned
subsidiary of Heartland, with and into CableMaxx, Inc., which owned wireless
cable television assets in several markets, including San Antonio, Texas and
Salt Lake City, Utah; and (v) Heartland's purchase of substantially all of the
assets and assumption of certain associated liabilities of Three Sixty Corp.,
which consisted of wireless cable television assets in Dayton, Ohio and other
markets.

At the Contribution Closing, CAI received shares of Common Stock initially
constituting approximately 60% of the outstanding shares of Common Stock and
Heartland received (i) shares of Common Stock initially constituting
approximately 40% of the outstanding shares of Common Stock, (ii) approximately
$28.3 million in cash payable by the Company out of the approximately $219.8
million of net proceeds of the Unit Offering, (iii) the Heartland Short-Term
Note, and (iv) the Heartland Long-Term Note. The Heartland Short-Term Note was
repaid on March 1, 1996 with a portion of the net proceeds from the Unit
Offering. See "The Unit Offering." The Heartland Long-Term Note (i) bears
interest at the annual rate of 10% per annum until the first anniversary of the
date thereof and 15% per annum thereafter; provided that no cash interest will
be payable until the Notes have been paid in full; (ii) requires that all of the
net proceeds received by the Company from the sale of assets shall be applied by
the Company to the repayment of the Heartland Long-Term Note; and (iii) requires
that at least 30% of the net proceeds of any public offering of Common Stock
shall be applied to the repayment of the Heartland Long-Term Note to the extent
not otherwise paid out of the proceeds of asset sales.

21
<PAGE>

The equity interests that CAI and Heartland received in the Company at the
Contribution Closing (i) have been diluted by the issuance of the Common Shares
issued as a part of the Unit Offering and the issuance of the BANX Shares and
(ii) are subject to dilution for the issuance of shares of Common Stock issuable
upon the exercise of options that have been or may be issued to the Company's
management. See "Stock Ownership." Following the Contribution Closing, CS
Wireless, CAI and Heartland will complete certain post-closing adjustments.
Components of such adjustments will include the relative accounts payable,
accounts receivable and related working capital assets of the contributed
systems, the number of granted channels represented and actually contributed to
the Company for each market, the increase or decrease in the number of
subscribers in each contributed system from the date of the Participation
Agreement until the Contribution Closing and other related factors. Following
calculation of such adjustments, (i) the Heartland Long-Term Note may be
adjusted to reflect amounts either owed by Heartland to the Company or owed by
the Company to Heartland, (ii) cash payments may be made to reflect amounts
either owed by CAI or Heartland to the Company or owed by the Company to CAI or
Heartland, (iii) CAI may issue to the Company an unsecured promissory note with
a maturity date five years following the date of such adjustment and an interest
rate equal to 10% per annum for all or part of any amount due to the Company by
CAI, (iv) shares of Common Stock may be transferred among the Company, CAI and
Heartland, in lieu of amounts otherwise owed to or by such parties, or (v) the
parties may combine one or more such manners of payment.

In connection with the Contribution Closing, CAI, Heartland and the Company
entered into a stockholders' agreement (the "Stockholders' Agreement"). The
Stockholders' Agreement provides, among other things, that CAI and Heartland for
a period of 10 years will vote their shares of Common Stock in favor of a Board
of Directors of the Company having nine members, consisting of: (i) up to four
members designated by CAI (provided that at least one of whom cannot be an
affiliate of either CAI or Heartland and that CAI has not disposed of more than
one-half of the Common Stock it held on the Contribution Closing Date); (ii) up
to three members designated by Heartland (provided that at least one of whom
cannot be an affiliate of either CAI or Heartland and that Heartland has not
disposed of more than one-half of the Common Stock it held on the Contribution
Closing Date); (iii) the Chief Executive Officer of the Company; and (iv) the
Chief Operating Officer of the Company. The Stockholders' Agreement and the
Company's Bylaws further provide that certain transactions require the
affirmative approval of at least 70% (7 of 9) of the Directors of the Company.
Such transactions include (i) the participation of the Company in a merger or
consolidation, or the sale, lease, exchange or other disposition of all or any
substantial part of the assets of the Company, or the liquidation of all or a
substantial part of the Company; (ii) the issuance or sale by the Company of any
capital stock of the Company, including the type and amount to be issued or
sold, except for the issuances and sales contemplated by the Stockholders'
Agreement; (iii) the taking of any action by the Company in its capacity as a
stockholder of any subsidiary of the Company similar to the foregoing; (iv) any
increase or decrease in the total number of directorships of the Company; (v)
engaging in any business other than the designated business of the Company
(transmitting video, voice or data, inclusive of related activities and
services, including the use of wireless channels for any commercial purpose
permitted by the FCC) or any business that violates the MFJ (as defined); (vi)
establishing any executive or other committee of the Board of the Company; (vii)
the creation, incurrence, assumption or guaranty of or in any manner becoming
liable by the Company or any of its subsidiaries upon any obligation for money
borrowed in excess of $10 million in the aggregate principal amount at any time
outstanding or the incurrence of any obligation in excess of such amount in
connection with the acquisition of property; (viii) the making of or having
outstanding any loans or advances to any of the Company's past or present
officers, directors or stockholders or to any member of their immediate family;
(ix) the entering into, directly or indirectly, of any arrangement, contract or
agreement not in the ordinary course of business with a monetary value in excess
of $10 million; (x) the sale or other disposition (including contribution) of
assets or capital stock (by merger or otherwise) of the Company or any of its
subsidiaries, the value of which exceeds $10 million in either original cost or
appraised value within any one-year period; (xi) the acquisition of securities
or assets by the Company or any of its subsidiaries, the value of which exceeds
$10 million in

22
<PAGE>
appraised value within any one-year period; (xii) any change in the business of
the Company from its stated business; or (xiii) replacement of the Chief
Executive Officer or the Chief Financial Officer of the Company. Under its
existing contractual relationships with the BANX Affiliates, CAI has agreed that
neither it nor any of its subsidiaries, including the Company, may take certain
actions without the consent of the BANX Affiliates. These restrictions are
binding on CAI, but not necessarily on the Company, which is not a party to such
agreements.

THE UNIT OFFERING

On February 23, 1996, in the Unit Offering, the Company issued and sold to
the Initial Purchasers 100,000 Units, with each Unit consisting of four Old
Notes (each at $1,000 principal amount at maturity) and 1.1 Common Shares for an
aggregate purchase price of approximately $229.5 million. Units were sold
pursuant to exemptions from or in transactions not subject to the registration
requirements of the Securities Act and applicable state securities laws. The
Initial Purchasers subsequently placed the Units with "qualified institutional
buyers," as defined in Rule 144A under the Securities Act and to a limited
number of other institutional "accredited investors," as defined in subsections
(a)(1), (2), (3) and (7) of Rule 501 of Regulation D under the Securities Act.
See "The Exchange Offer." The Company received approximately $219.8 million of
net proceeds from the Unit Offering. Of this amount, $28.3 million was used to
pay Heartland in connection with the Contribution Closing, $25.0 million was
deposited into a segregated bank account to secure payment of the Heartland
Short-Term Note (and was used to repay the Heartland Short-Term Note on March 1,
1996), $3.03 million of a total of $17.9 million was paid to CAI and Heartland
in connection with the transfer by CAI and Heartland to the Company of
commercial wireless cable spectrum acquired by CAI and Heartland in the BTA
Auction (as defined herein) and the remainder is being used for capital
expenditures to build out cable systems and to add subscribers, for certain
formation costs, working capital and general corporate purposes, including
reimbursement to CAI and Heartland of the remaining $14.9 million in connection
with the transfer of spectrum referred above.

23
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company at March
31, 1996. This table should be read in conjunction with the Company's historical
condensed consolidated financial statements included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
MARCH 31,
1996
---------
(IN
THOUSANDS)
<S> <C>
Cash and cash equivalents........................................................ $ 165,072
---------
---------
Long-term debt:
Heartland Long-Term Note(1).................................................... $ 15,000
11 3/8% Series B Senior Discount Notes due 2006................................ 231,489
Other.......................................................................... 201
---------
Total long-term debt....................................................... 246,690
---------
Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized; no shares issued
and outstanding.............................................................. --
Common stock, $.001 par value; 40,000,000 shares authorized; 10,110,000 shares
issued and outstanding........................................................... 10
Additional paid-in capital..................................................... 151,100
Accumulated deficit............................................................ (4,270)
---------
Total stockholders' equity................................................. 146,840
---------
Total capitalization....................................................... $ 393,530
---------
---------
</TABLE>

- ------------

(1) The interest rate of the Heartland Long-Term Note increases from 10% to 15%
if the Heartland Long-Term Note is not repaid within one year of issuance,
with interest accruing and added to the balance annually. No cash interest
will be paid on the Heartland Long-Term Note until after the Notes have been
paid in full. The principal amount of the Heartland Long-Term Note may be
adjusted (increased or decreased) based upon the results of certain
post-closing calculations. See "The Contributions" and "Certain
Relationships and Related Transactions--Heartland Notes."

24
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA

The following table sets forth selected historical financial data for the
Company and the Company's Cleveland, Ohio market (the "Predecessor") as of
February 28, 1992, 1993 and 1994, and December 31, 1994 and 1995 and for the
years ended February 28, 1992, 1993 and 1994, the period from March 1, 1994 to
March 8, 1994, the period from March 9, 1994 to December 31, 1994, the period
from January 1, 1995 to September 29, 1995 and the period from September 30,
1995 to December 31, 1995, which have been derived from the financial statements
of Metropolitan Cablevision, Inc. ("Cablevision"), MetroCable, Inc.
("MetroCable"), Metropolitan Satellite Corp. ("Metro Satellite"), ACS Ohio, Inc.
and Subsidiaries ("ACS Ohio") and CS Wireless Systems, Inc. and Subsidiaries and
certain assets of Atlantic Microsystems, Inc., which have been audited by
independent public accountants. The following table also sets forth selected
historical financial data for the Company and the Predecessor as of March 31,
1996 and for the three months ended March 31, 1995 and 1996, which have been
derived from the unaudited financial statements of ACS Ohio and the Company 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. Period-to-period
comparisons of financial results are not necessarily meaningful and should not
be relied upon as an indication of future performance due to the acquisition of
the Predecessor on March 9, 1994 by ACS Enterprises, Inc. ("ACS Enterprises")
and the subsequent acquisition of the Predecessor on September 29, 1995 by CAI.
As a result of the acquisitions, financial information for periods through March
8, 1994, periods from March 9, 1994 through September 29, 1995 and periods
subsequent to September 29, 1995 is presented on different cost bases and,
therefore, such information is not comparable. This data should be read in
conjunction with the historical financial statements, related notes, and other
financial information included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
CS WIRELESS
PREDECESSOR SYSTEMS, INC.
------------------------------------------------------------------------------------------ -------------
MARCH 1, MARCH 9, JANUARY 1, SEPTEMBER 30,
YEAR ENDED FEBRUARY 28, 1994 TO 1994 TO THREE MONTHS 1995 TO 1995 TO
------------------------------ MARCH 8, DECEMBER 31, ENDED SEPTEMBER 29, DECEMBER 31,
1992(1) 1993(1) 1994(1) 1994(1) 1994(2) MARCH 31, 1995(2) 1995(2) 1995(3)
-------- -------- -------- -------- ------------ ----------------- ------------- -------------
(IN THOUSANDS, EXCEPT SYSTEM AND SUBSCRIBER DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenues............ $ 5,290 $ 5,190 $ 5,267 $116 $ 4,332 $ 1,729 $ 6,170 $ 2,301
Costs and expenses,
excluding
depreciation
and
amortization......... 4,191 5,461 4,256 76 3,454 1,537 5,441 2,103
Depreciation and
amortization......... 1,937 1,560 836 10 1,571 548 3,020 1,796
Operating income
(loss)............... (838) (1,831) 175 30 (693) (356) (2,291) (1,598)
Interest expense.... 5,923 6,356 2,846 39 62 (6) 233 2
Net loss............ (7,039) (8,137) (2,162) (9) (576) (274) (1,875) (1,207)
EBITDA(4)........... $ 1,099 $ 1,429 $ 1,011 $ 40 $ 878 $ 192 $ 729 $ 198
Ratio of earnings to
fixed
charges(5)........... -- -- -- -- -- -- -- --
BALANCE SHEET DATA
(AT PERIOD END):
Total assets........ $ 7,532 $ 4,581 $ 3,797 $ 19,741 $20,457 $75,688
Total debt
(excluding accrued
interest)............ 34,938 35,190 10,117 2,471 2,477 112
Total
equity/(deficit)..... (50,234) (58,371) (10,846) 15,375 15,013 62,147

<CAPTION>
THREE MONTHS
ENDED
MARCH 31, 1996(3)
-----------------
<S> <C>
STATEMENT OF
OPERATIONS DATA:
Revenues............ $ 3,856
Costs and expenses,
excluding
depreciation
and
amortization......... 3,728
Depreciation and
amortization......... 2,853
Operating income
(loss)............... (2,725)
Interest expense.... 3,023
Net loss............ (2,903)
EBITDA(4)........... $ 128
Ratio of earnings to
fixed
charges(5)........... --
BALANCE SHEET DATA
(AT PERIOD END):
Total assets........ $ 416,760
Total debt
(excluding accrued
interest)............ 246,876
Total
equity/(deficit)..... 146,840
</TABLE>

25
<PAGE>
The following table sets forth selected historical combined financial and
other data for the Company's operational markets. This data should be read in
conjunction with the historical financial statements, related notes, and other
financial information included elsewhere in this Prospectus.

<TABLE><CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS
----------------------------------------------- ENDED MARCH 31,
1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- ---------------
(IN THOUSANDS, EXCEPT SYSTEM AND SUBSCRIBER DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenues (6)(7)............................ $ 5,386 $ 6,087 $ 8,557 $13,710 $20,193 $ 5,881
Systems in operation (at period end)(8).... 2 3 6 6 8 8
Subscribers (at period end)(9)............. 15,778 17,764 27,711 44,012 55,800 58,400
</TABLE>

- ------------
(1) Through March 8, 1994, the wireless cable television system serving the
Predecessor was comprised of MetroCable (and its predecessor, Cablevision)
and Metro Satellite. The selected historical financial information has been
derived from the financial statements of (i) Cablevision for the period from
March 1, 1991 to June 3, 1993 and MetroCable for the period from June 4,
1993 to March 8, 1994 and (ii) Metro Satellite for the period March 1, 1991
to March 8, 1994.

(2) From March 9, 1994 through September 29, 1995, ACS Ohio provided wireless
cable television service to the Predecessor. The selected historical
financial information has been derived from the financial statements of ACS
Ohio for the period from March 9, 1994 to September 29, 1995.

(3) Subsequent to September 29, 1995, CS Wireless provided wireless cable
television service to the Predecessor. The selected historical financial
information has been derived from the financial statements of CS Wireless
Systems, Inc. and Subsidiaries and certain assets of Atlantic Microsystems,
Inc. for the period from September 30, 1995 to December 31, 1995, and the
financial statements of CS Wireless for the three months ended March 31,
1996.

(4) EBITDA means earnings before interest expense, income taxes, depreciation,
amortization and other non-cash charges. EBITDA is a financial measure
commonly used in the Company's industry and should not be considered as an
alternative to cash flow from operating activities (as determined in
accordance with generally accepted accounting principles) as an indicator of
operating performance or as a measure of liquidity.

(5) In calculating the ratio of earnings to fixed charges, earnings consists of
losses prior to income tax benefit and fixed charges. Fixed charges consists
of interest expense, amortization of debt issuance costs and one-third of
rental expense on operating leases (such amount having been deemed by the
Company to represent the interest portion of such payments). Earnings were
inadequate to cover fixed charges by $7,039, $8,137, $2,162 and $9 for the
years ended February 28, 1992, 1993 and 1994 and the period from March 1,
1994 to March 8, 1994 for combined Cablevision, MetroCable, and Metro
Satellite, respectively, $755, $2,524 and $362 for the period from March 9,
1994 to December 31, 1994 the period from January 1, 1995 to September 29,
1995 and the three months ended March 31, 1995 for ACS Ohio, respectively,
and $1,600 for the period from September 30, 1995 to December 31, 1995 for
CS Wireless Systems, Inc. and Subsidiaries and certain assets of Atlantic
Microsystems, Inc., and $4,502 for the three months ended March 31, 1996 for
CS Wireless.

(6) The historical combined revenues information for each of the years in the
three-year period ended December 31, 1993 includes combined historical
financial information of (i) Cablevision and MetroCable and (ii) Metro
Satellite for each of the years in the three-year period ended February 28,
1994, respectively. The historical combined subscriber information as of
December 31, 1991, 1992 and 1993 includes combined subscriber information of
(i) Cablevision and MetroCable and (ii) Metro Satellite as of February 28,
1992, 1993 and 1994, respectively.

(7) The historical combined revenues information includes revenues related to
the Bakersfield, California market which is held for sale by the Company.

(8) Prior to 1990, the Company's only operational market was in Cleveland, Ohio.
Through March 31, 1996, the Company's markets began operations as follows:
Bakersfield, California--1991; Fort Worth, Texas--November 1992; San
Antonio, Texas--March 1993; Minneapolis, Minnesota--March 1993; Dayton,
Ohio--November 1993; Grand Rapids, Michigan--September 1995; and Kansas City
(suburbs), Missouri--October 1995.

(9) Subscribers are calculated based on the number of equivalent basic unit
subscribers (includes MDU subscribers calculated by dividing the aggregate
billed monthly revenues by the normal monthly basic rate for that system).

26
<PAGE>
THE EXCHANGE OFFER

PURPOSE AND EFFECT OF THE EXCHANGE OFFER

The Old Notes were sold to Initial Purchasers in the Unit Offering in a
transaction not registered under the Securities Act, in reliance upon the
exemption provided in Section 4(2) of the Securities Act. The Initial Purchasers
subsequently placed the Old Notes with "qualified institutional buyers," as
defined in Rule 144A under the Securities Act and to a limited number of other
institutional "accredited investors," as defined in subsections (a)(1), (2), (3)
and (7) of Rule 501 of Regulation D under the Securities Act. Accordingly, the
Old Notes may not be reoffered, resold or otherwise transferred in the United
States unless so registered or unless an applicable exemption from the
registration requirements of the Securities Act is available. The New Notes are
being offered hereunder in order to satisfy the obligations of the Company under
the Notes Registration Rights Agreement. See "Registration Rights--Registration
Rights of Note Holders."

Pursuant to the Notes Registration Rights Agreement, the Company agreed, for
the benefit of the holders of the Old Notes, that the Company would, at its sole
cost, (i) within 45 days following the original issuance of the Old Notes, file
with the Commission the Exchange Registration Statement (as defined) (of which
this Prospectus is a part) under the Securities Act with respect to the New
Notes, (ii) use its best efforts to cause such Exchange Registration Statement
to become effective under the Securities Act within 120 days following the
original issuance of the Old Notes and (iii) use its best efforts to consummate
the Exchange Offer within 150 days following the original issuance of the Old
Notes. Upon the effectiveness of the Exchange Registration Statement, the
Company will offer to the holders of the Old Notes the opportunity to exchange
their Old Notes for a like principal amount of New Notes, to be issued without a
restrictive legend and which might be reoffered and resold by the holder without
restrictions or limitations under the Securities Act. The term "holder" with
respect to the Exchange Offer means any person in whose name Old Notes are
registered on the books of the Company or any other person who has obtained a
properly completed bond power from the registered holder.

Based on interpretations by the staff of the Commission issued to other
issuers in similar contexts, New Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale, resold and otherwise
transferred by any holder of such New Notes (other than any such holder which is
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holder's business and such holder has no arrangement
or understanding with any person to participate in the distribution of such New
Notes. Each holder is required to acknowledge in the Letter of Transmittal that
it is not engaged in, and does not intend to engage in, a distribution of the
New Notes. Any holder who tenders in the Exchange Offer for the purpose of
participating in a distribution of the New Notes must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction.

Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer will also be required to acknowledge that (i) Old Notes
tendered by it in the Exchange Offer were acquired in the ordinary course of its
business as a result of market-making or other trading activities and (ii) it
will deliver a prospectus in connection with any resale of New Notes received in
the Exchange Offer. The Letter of Transmittal will also state that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities (other than
Old Notes acquired directly from the Company). The Company has agreed that, for
a period of 180 days after Consummation of the Exchange Offer, it will make this

27
<PAGE>
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution." Notwithstanding the foregoing, based on the
above-mentioned interpretations by the staff of the Commission, the Company
believes that broker-dealers who acquired the Old Notes directly from the
Company and not as a result of market-making activities or other trading
activities cannot rely on such interpretations by the staff of the Commission
and must, in the absence of an exemption, comply with the registration and
prospectus delivery requirements of the Securities Act in connection with
secondary resales of the New Notes. Such broker-dealers may not use this
Prospectus, as it may be amended or supplemented from time to time, in
connection with any such resales of the New Notes.

If Old Notes may not be exchanged for New Notes in circumstances more fully
described in "Registration Rights," the Company has agreed to file a shelf
registration statement covering resales of the Old Notes. See "Registration
Rights."

TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES

Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Old Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m., New
York City time, on , 1996; provided, however, that if the Company, in its
sole discretion, has extended the period of time for which the Exchange Offer is
open, the term "Expiration Date" means the latest time and date to which the
Exchange Offer is extended.

As of the date of this Prospectus, $400,000,000 aggregate principal amount
at maturity of the Old Notes was outstanding. This Prospectus, together with the
Letter of Transmittal, is first being sent to all holders of Old Notes known to
the Company on or about , 1996. The Company's obligation to accept Old
Notes for exchange pursuant to the Exchange Offer is subject to certain
conditions as set forth under "--Certain Conditions to the Exchange Offer"
below.

The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Old Notes, by giving oral or
written notice of such extension to the holders thereof. During any such
extension, all Old Notes previously tendered will remain subject to the Exchange
Offer and may be accepted for exchange by the Company. Any Old Notes not
accepted for exchange for any reason will be returned without expense to the
tendering holder thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.

PROCEDURES FOR TENDERING OLD NOTES

The tender to the Company of Old Notes by a holder thereof as set forth
below and acceptance thereof by the Company will constitute a binding agreement
between the tendering holder and the Company upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal. Except as set forth below, a holder who wishes to tender Old Notes
for exchange pursuant to the Exchange Offer must transmit a properly completed
and duly executed Letter of Transmittal, including all other documents required
by such Letter of Transmittal, to Fleet National Bank (the "Exchange Agent"), at
the address set forth below under "Exchange Agent" on or prior to the Expiration
Date. In addition, either (i) certificates for such Old Notes must be received
by the Exchange Agent along with the Letter of Transmittal, or (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Old
Notes, if such procedure is available, into the Exchange Agent's account at The
Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent on or prior to the Expiration Date, or (iii) the holder must
comply with the guaranteed delivery procedures described below. THE METHOD OF
DELIVERY OF OLD NOTES, LETTERS

28
<PAGE>

OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF
THE HOLDERS. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD
BE SENT TO THE COMPANY.

Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered holder of the Old Notes who
has not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of a
registered national securities exchange, a member of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company having an officer
or correspondent in the United States (collectively, "Eligible Institutions.")
In the event that signatures on a Letter of Transmittal or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantees
must be by an eligible guarantor institution which is a member of one of the
following recognized Medallion Signature Guarantee Programs: the Securities
Transfer Agents Medallion Program (STAMP), the New York Stock Exchange Medallion
Signature Program (MSP) or the Stock Exchanges Medallion Program (SEMP)
(collectively, "Eligible Guarantor Institutions"). If Old Notes are registered
in the name of a person other than a signer of the Letter of Transmittal, the
Old Notes surrendered for exchange must be endorsed by, or be accompanied by a
written instrument or instruments of transfer or exchange, in satisfactory form
as determined by the Company in its sole discretion, duly executed by the
registered holder with the signature thereon guaranteed by an Eligible Guarantor
Institution.

All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of Old Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and all
tenders of any particular Old Notes not properly tendered or to not accept any
particular Old Notes which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right to waive
any defects, irregularities or conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
right to waive the ineligibility of any holder who seeks to tender Old Notes in
the Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (including the Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
for exchange must be cured within such reasonable period of time as the Company
shall determine. Neither the Company, the Exchange Agent nor any other person
shall be under any duty to give notification of any defect or irregularity with
respect to any tender of Old Notes for exchange, nor shall any of them incur any
liability for failure to give such notification.

If the Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Old Notes, such Old Notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly as
the name or names of the registered holder or holders appear on the Old Notes.

If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by the
Company, proper evidence satisfactory to the Company of their authority to so
act must be submitted.

By tendering, each holder will represent to the Company that, among other
things, (i) the New Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of

29
<PAGE>
the person receiving such New Notes, whether or not such person is the holder;
(ii) neither the holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such New
Notes; and (iii) neither the holder nor any such other person is an "affiliate,"
as defined under Rule 405 of the Securities Act, of the Company. Each
broker-dealer that receives New Notes for its own account in exchange for Old
Notes will also acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes.

ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES

Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after acceptance of the
Old Notes. See "--Certain Conditions to the Exchange Offer" below. For purposes
of the Exchange Offer, the Company shall be deemed to have accepted properly
tendered Old Notes for exchange when, as and if the Company has given oral or
written notice thereof to the Exchange Agent.

In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old Notes are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged Old Notes will be
returned without expense to the tendering holder thereof (or, in the case of Old
Notes tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry procedures described
below, such non-exchanged Old Notes will be credited to an account maintained
with such Book-Entry Transfer Facility) as promptly as practicable after the
expiration or termination of the Exchange Offer.

BOOK-ENTRY TRANSFER

The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal, together with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under "Exchange Agent" on or prior to the Expiration
Date or the guaranteed delivery procedures described below must be complied
with.

GUARANTEED DELIVERY PROCEDURES

If a registered holder of the Old Notes desires to tender such Old Notes and
the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange
Agent received from such Eligible Institution a properly completed and duly
executed Letter of Transmittal and Notice of Guaranteed Delivery, substantially
in the form provided by the Company (by mail or hand delivery), setting forth
the name

30
<PAGE>

and address of the holder of Old Notes, the certificate number or numbers of
such Old Notes and the principal amount of Old Notes tendered, stating that the
tender is being made thereby and guaranteeing that within five business days
after the Expiration Date, the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, the Letter of Transmittal and any other documents required by the Letter
of Transmittal will be deposited by the Eligible Institution with the Exchange
Agent, and (iii) the certificates for all physically tendered Old Notes, in
proper form for transfer, or a Book-Entry Confirmation, as the case may be, and
all other documents required by the Letter of Transmittal are received by the
Exchange Agent within five business days after the Expiration Date.

WITHDRAWAL RIGHTS

Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.

For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at the address set forth below under "Exchange
Agent." Any such notice of withdrawal must specify the name of the person having
tendered the Old Notes to be withdrawn, identify the Old Notes to be withdrawn
(including the principal amount of such Old Notes), and (where certificates for
Old Notes have been transmitted) specify the name in which such Old Notes are
registered, if different from that of the withdrawing holder. If certificates
for Old Notes have been delivered or otherwise identified to the Exchange Agent,
then, prior to the release of such certificates the withdrawing holder must also
submit the serial numbers of the particular certificates to be withdrawn and a
signed notice of withdrawal with signatures guaranteed by an Eligible
Institution unless such holder is an Eligible Institution. If Old Notes have
been tendered pursuant to the procedure for book-entry transfer described above,
any notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Old Notes and
otherwise comply with the procedures of such facility. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Company, who determination shall be final and binding on
all parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer. Any Old Notes which
have been tendered for exchange but which are not exchanged for any reason will
be returned to the holder thereof without cost to such holder (or, in the case
of Old Notes tendered by book-entry transfer into the Exchange Agent's account
at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Old Notes will be credited to an account
maintained at such Book-Entry Transfer Facility for the Old Notes) as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Old Notes may be retendered by following one of the
procedures described under "-- Procedures for Tendering Old Notes" above at any
time on or prior to the Expiration Date.

CERTAIN CONDITIONS TO THE EXCHANGE OFFER

Notwithstanding any other provision of the Exchange Offer, the Company shall
not be required to accept for exchange, or to issue New Notes in exchange for,
any Old Notes and may terminate or amend the Exchange Offer, at any time prior
to the consummation of the Exchange Offer if: (i) the Exchange Offer would
violate applicable law or any applicable interpretation of the staff of the
Commission; (ii) an action or proceeding is instituted or threatened in any
court or by any governmental agency which might materially impair the ability of
the Company to proceed with the Exchange Offer or a material adverse development
has occurred in any existing action or proceeding with respect to the Company;
or (iii) all governmental approvals which the Company deems necessary for the
consummation of the Exchange Offer have not been obtained.

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<PAGE>
EXCHANGE AGENT

Fleet National Bank has been appointed as the Exchange Agent for the
Exchange Offer. All executed Letters of Transmittal should be directed to the
Exchange Agent at the address set forth below. Questions and requests for
assistance, requests for additional copies of this Prospectus or of the Letter
of Transmittal and requests for Notices of Guaranteed Delivery should be
directed to the Exchange Agent addressed as follows:

BY MAIL:
Fleet National Bank
Corporate Trust Department
P.O Box 1440
CTMO 0224
Hartford, Connecticut 06143
Attention: Patricia Williams

BY HAND OR OVERNIGHT DELIVERY:
Fleet National Bank
Corporate Trust Operations
777 Main Street, Lower Level
Hartford, Connecticut 06115
Attention: Patricia Williams

DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.

FEES AND EXPENSES

The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.

The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.

The fees and expenses incident to the Exchange Offer will be paid by the
Company. Such expenses include fees and expenses of the Exchange Agent and
Trustee, accounting and legal fees and printing costs, among others.

CONSEQUENCES OF FAILURE TO EXCHANGE

Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. The Company does not currently anticipate
that it will register the Old Notes under the Securities Act. See "Risk
Factors--Consequences of Failure to Exchange."

ACCOUNTING TREATMENT

The New Notes will be recorded at the same carrying value as the Old Notes,
which is face value less accrued original issue discount, as reflected in the
Company's accounting records on the date of the exchange. Accordingly, no gain
or loss for accounting purposes will be recognized. The expenses of the Exchange
Offer and the unamortized expenses related to the issuance of the Old Notes will
be amortized over the term of the New Notes.

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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

OVERVIEW

This section should be read in conjunction with the pro forma financial
information of CS Wireless and with the combined financial statements of the
Predecessor, the notes thereto and other information presented elsewhere herein.

ACS Ohio was formed as a wholly owned subsidiary of ACS Enterprises on March
9, 1994, for the purpose of purchasing two related companies, MetroCable and
Metro Satellite, that together comprise the wireless cable system serving the
Cleveland, Ohio metropolitan area. MetroCable was formed on June 4, 1993 as the
successor in interest to Cablevision. ACS Enterprises was acquired by CAI on
September 29, 1995. ACS Ohio became a direct subsidiary of CAI upon the merger
of ACS Enterprises with and into CAI as of December 29, 1995.

The Predecessor's revenues are derived principally from the sale of
subscription video services using wireless technology. Its principal costs of
operations are programming, license fees, and general and administrative
expenses.

On a pro forma basis, the Company had revenues of $16.6 million and $5.3
million, for the year ended December 31, 1995 and the three months ended March
31, 1996, respectively. Net loss, on a pro forma basis, was $35.0 million and
$8.2 million for the year ended December 31, 1995 and the three months ended
March 31, 1996, respectively. As of March 31, 1996, the Company had
approximately 58,400 subscribers.

LIQUIDITY AND CAPITAL RESOURCES

Companies within the wireless cable industry require significant capital.
Funds are required for the lease or acquisition of channel rights, the
acquisition of wireless cable systems, the construction of system head-end and
transmission equipment, the conversion of analog systems to digital technology,
start-up costs related to the commencement of operations and subscriber
installation costs. The Company intends to finance its capital requirements
through a combination of the issuance of debt and equity securities, the
disposition of wireless cable systems that are inconsistent with the Company's
business strategy, the incurrence of loans and the assumption of debt and other
liabilities in connection with acquisitions. Each of the operating systems that
has been contributed to the Company in connection with the Contributions has
incurred operating losses since inception. The combined cash flow from operating
activities of the Company's operating systems has to date been insufficient to
cover the combined operating expenses of such systems. See "Risk Factors--Need
for Additional Financing for Capital Expenditures and Operations."

The Company estimates that the launch of a new digital wireless cable system
in a typical market will require capital expenditures of approximately $4.0 to
$5.0 million of start-up expenses for head-end and transmission equipment and
booster sites. The Company estimates that the conversion of an existing analog
wireless cable system in a typical market to a digital wireless cable system
will require the expenditure of approximately $2.0 to $3.0 million. These costs
reflect the Company's good faith estimates; however, such estimates are
speculative because to date there are no operating digital wireless cable
systems, and the Company's estimates assume the efficacy and ready availability
of digital technology. The Company estimates that the launch of a new analog
wireless cable system in a typical market requires the aggregate capital
expenditure of approximately $2.2 million. Incremental installation costs are
estimated by the Company to be approximately $750 to $800 per subscriber in the
case of a digital wireless system and approximately $400 to $450 per subscriber
in the case of an analog system. The head-end and transmission expenditures must
be made before programming can be delivered to subscribers and in certain
instances, booster sites will be required to increase LOS households. Labor
installation costs for a subscriber are incurred only after that subscriber
signs up for services.

The research and development of digital technology performed by the Company
to date has been de minimis. The Company, however, participated with CAI and
Heartland in a demonstration of digital satellite television transmission using
MMDS technology as a delivery platform and incorporating a digital television
set-top converter.

A portion of the net proceeds of the Unit Offering were used to pay $28.3
million to Heartland in connection with the Contributions, to repay the $25.0
million Heartland Short-Term Note, and to pay

33
<PAGE>
for certain formation costs and expenses associated with the Unit Offering. The
Company has budgeted capital expenditures of approximately $31.5 million for the
balance of 1996, consisting of approximately $18.0 million for uncommitted
channel acquisitions, $8.9 million for head-end transmitters and $4.6 million
for subscriber installations. The Company also anticipates a shortfall in cash
from operating activities in the foreseeable future which will require funding
from a portion of the remaining proceeds of the Unit Offering. For 1997, the
Company has budgeted approximately $86.6 million in capital expenditures,
including approximately $48.1 million for subscriber installation costs relating
to the conversion of existing systems to digital technology, approximately $25.1
million for retrofits to convert from analog to digital and $13.4 million for
new head-end transmitters and booster sites. For 1998, the Company has budgeted
approximately $150.0 million of additional capital expenditures. Based upon the
Company's current operating plans, it believes that the net proceeds from the
Unit Offering will provide sufficient funds to meet its needs for approximately
the next 12 months.

Capital expenditures in excess of the net proceeds from the Unit Offering
may be financed, in whole or in part, by the Company through debt or equity
financings, subscriber equipment lease financings, joint ventures or other
arrangements. The Company also intends to sell its Bakersfield and
Stockton/Modesto markets (the "Sale Assets") and upon the sale of the Sale
Assets, the Company will have an additional $25.0 million available to it upon
release of the Short-Term Note Collateral; however, the Company has not entered
into agreements for the sale of the Sale Assets nor has it arranged public or
private equity financing or bank or other institutional debt financing. In the
event the Company is unable to effect sales of the Sale Assets, arrange equity
financing or place debt in amounts and on terms satisfactory to the Company and
consistent with its budgeted financing requirements, the ability of the Company
to develop and expand its operations and to satisfy its fixed obligations,
including its debt service and principal payment obligations in respect of the
Notes, would be materially adversely affected. The ability of the Company to
take any of the foregoing steps or enter into other significant transactions
will likely require the unanimous approval of CAI and Heartland.

RESULTS OF OPERATIONS

With respect to the discussion of the results of operations of the Company
and the Predecessor, the results presented are comprised of financial
information for the following entities and periods:

<TABLE>
<S> <C>
Three Months Ended March 31, 1996 and 1995
CS Wireless.................................. Three months ended March 31, 1996
ACS Ohio..................................... Three months ended March 31, 1995
Twelve Months Ended December 31, 1995
ACS Ohio..................................... January 1, 1995 to September 29, 1995
CS Wireless Systems, Inc. and Subsidiaries
and Certain Assets of Atlantic
Microsystems, Inc............................ September 30, 1995 to December 31, 1995
Ten Months Ended December 31, 1994
MetroCable................................... March 1, 1994 to March 8, 1994
Metro Satellite.............................. March 1, 1994 to March 8, 1994
ACS Ohio..................................... March 9, 1994 to December 31, 1994
Twelve Months Ended February 28, 1994
Cablevision.................................. March 1, 1993 to June 3, 1993
MetroCable................................... June 4, 1993 to February 28, 1994
Metro Satellite.............................. March 1, 1993 to February 28, 1994
</TABLE>

The change in year end from February 28 to December 31 occurred as a result
of the acquisition of MetroCable and Metro Satellite by ACS Ohio.

Period-to-period comparisons of financial results are not necessarily
meaningful and should not be relied upon as an indication of future performance
due to the acquisition of MetroCable and Metro Satellite on March 9, 1994 by ACS
Ohio and the subsequent acquisition of ACS Ohio on September 29, 1995 by CAI.
ACS Ohio had no operations prior to March 9, 1994, when it acquired MetroCable
and Metro Satellite in a stock acquisition accounted for under the purchase
method of accounting. MetroCable commenced operations on June 4, 1993 as
successor in interest to Cablevision. Metro Satellite had been in operation for
several years prior to its acquisition. As a result of the acquisitions,
financial information for periods through March 8, 1994, periods from March 9,
1994 through

34
<PAGE>
September 29, 1995 and periods subsequent to September 29, 1995 is presented on
a different cost basis and, therefore, such information is not comparable.

Three Months Ended March 31, 1996 Compared to Three Months Ended March 31, 1995

Revenue for the three-month period ended March 31, 1996 was $3.8 million as
compared to revenue for the three months ended March 31, 1995 of $1.7 million,
an increase of 123%. The increase resulted primarily from the increase in
subscribers brought about by the February 23, 1996 contribution of markets by
CAI and Heartland to CS Wireless.

Currently, the Company has been adding an average aggregate of 1,000 new
subscribers per month. The retention period of all subscribers is approximately
three years.

Operating expenses were $6.2 million and $2.1 million for the three-month
periods ended March 31, 1996 and 1995, respectively. The $4.1 million increase
was attributable to increases in programming and license fees of $1.7 million
(1996 - $2.3 million; 1995 - $0.6 million), selling, general and administrative
costs of $0.4 million (1996 - $1.4 million; 1995 - $1.0 million) and
depreciation and amortization expense of $2.0 million (1996 - $2.5 million; 1995
- -$0.5 million). These increases are primarily due to increases in the subscriber
base and subscriber equipment resulting from the February 23, 1996 contribution
of markets by CAI and Heartland to CS Wireless.

Other expense increased from less than $0.1 million in 1995 to $2.1 million
in 1996, primarily due to the accretion on discount notes and amortization of
debt issuance costs related to the issuance of the Units as of February 23, 1996
totaling $2.8 million and other interest expense of $0.2 million, partially
offset by interest income in 1996 of $0.9 million with no comparable amount in
1995.

The $3.1 million net loss for the three months ended March 31, 1996 compares
to a net loss of $0.3 million for the same period of 1995. The $2.8 million
increase in net loss resulted primarily from the increase in operating expenses,
offset by an increase in deferred income tax benefits from $0.1 million for the
three months ended March 31, 1995 to $1.4 million for the same three-month
period of 1996.

The FCC recently conducted an auction (the "BTA Auction") of available
commercial wireless cable spectrum in 487 basic trading areas ("BTAs") and six
additional BTA-like geographic areas around the country. The winner of a BTA has
the right to develop the vacant MMDS frequencies throughout the BTA, consistent
with certain specified interference criteria that protect existing ITFS and MMDS
channels. Existing ITFS and MMDS channel rights holders also must protect the
BTA winner's spectrum from interference caused by power increases or tower
relocations. CAI was the high bidder for 32 BTA authorizations, for a total of
$48.8 million. Heartland was the high bidder for 93 BTA authorizations, for a
total of $19.8 million. CAI and Heartland are obligated to convey to the
Company, at their cost, and the Company has agreed to purchase, any rights
acquired in the BTA Auction relating to the Company's markets, as well as
certain other BTAs. Rights to BTAs for the Company's Bakersfield and
Stockton/Modesto, California; Charlotte, North Carolina; and Cleveland, Ohio
markets were acquired by CAI for approximately $5.6 million. In addition, CAI
purchased BTAs relating to Atlanta, Georgia and Louisville, Kentucky for
approximately $7 million. Of the aggregate $12.6 million, approximately $2.5
million has been paid by CAI to the FCC in accordance with the rules of the BTA
Auction for these BTAs. Heartland purchased BTAs relating to Little Rock,
Arkansas, Long View, Washington and Oklahoma City, Oklahoma for approximately
$5.3 million. Of this amount, approximately $532,000 has been paid by Heartland
to the FCC for these BTAs. The Company has reimbursed CAI and Heartland, using a
portion of the proceeds from the Unit Offering, in the amount of $3.03 million,
and will continue to reimburse CAI and Heartland for any and all costs incurred
by CAI and Heartland in connection with these BTAs in accordance with the terms
of the Participation Agreement. The Company's ability to increase power or
relocate its transmission facilities in markets where it is not the owner of the
BTA may be limited, which could increase the cost to the Company of, and extend
the time for, developing a commercially viable system.

Twelve Months Ended December 31, 1995 Compared to Ten Months Ended December 31,
1994

Revenue for the twelve-month period ended December 31, 1995 (the "1995
Twelve-month Period") was $8.5 million as compared to revenue for the ten-month
period ended December 31, 1994 (the "1994 Ten-month Period") of $4.4 million, an
increase of $4.1 million. The increase resulted primarily from the addition of
new subscribers and the two-month difference in the comparative periods. The
Company averaged 23,896 subscribers with an average $27.72 per subscriber for
the 1995

35
<PAGE>

Twelve-month period as compared to an average of 16,327 subscribers with an
average $25.78 per subscriber for the 1994 Ten-month period. Additionally,
installation revenue of $0.4 million for the 1995 Twelve-month period was $0.3
million more than the $0.1 million for the 1994 Ten-month period. The Company
spurred growth by lowering the basic subscription rate, but was able to increase
the per subscriber yield through higher penetration of premium services, passing
along certain programmer incentives to subscribers. The effect of the lower
basis subscription rate and the higher premium penetration caused a lower gross
profit percentage.

Operating expenses amounted to $12.4 million for the 1995 Twelve-month
Period compared to $5.1 million for the 1994 Ten-month Period. The $7.3 million
increase was attributable to increases in programming and license fees of $1.6
million (1995--$2.8 million; 1994--$1.2 million), general and administrative
expenses of $1.9 million (1995--$3.9 million; 1994--$2.0 million) and marketing
expenses of $0.5 million (1995--$0.7 million; 1994--$0.2 million) resulting from
expanding operations. Depreciation and amortization expense represented the
remaining $3.2 million in increased operating expenses, primarily resulting from
amortization of increased subscriber installation costs.

Interest expense increased from less than $0.1 million in 1994 Ten-month
Period to $0.2 million in the 1995 Twelve-month Period. This increase resulted
primarily from the increased indebtedness due to ACS Enterprises which was
subject to interest charges.

The $3.1 million net loss during the 1995 Twelve-month Period was compared
to a net loss of $0.6 million during the 1994 Ten-month Period. The $2.5 million
increase in the net loss resulted from expenses rising faster than revenues by
$3.4 million, and an offset of $1.1 million resulting from a deferred income tax
benefit in the 1995 Twelve-month Period compared to an offset of $0.2 million
resulting from a deferred income tax benefit in the 1994 Ten-month Period.
During the 1995 Twelve-month Period CS Wireless experienced rapid subscriber
growth which increased revenues; however, the high cost associated with adding
subscribers kept the operating income before depreciation and amortization
comparable to the 1994 Ten-month Period.

Ten Months Ended December 31, 1994 Compared to Twelve Months Ended February 28,
1994

Subscription television revenues were $4.4 million for the 1994 Ten-month
Period compared to $4.9 million in pay television revenues and $0.4 million in
other revenue, totaling $5.3 million, for the twelve-month period ended February
28, 1994 (the "1994 Twelve-month Period").

Operating expenses were $5.1 million for the 1994 Ten-month Period compared
to $5.2 million for the 1994 Twelve-month Period. The components of operating
expenses for the 1994 Ten-month Period versus the 1994 Twelve-month Period
changed as follows: programming and licensing was $1.3 million versus $1.6
million; selling, general, and administrative expense was $2.3 million versus
$2.8 million; and depreciation and amortization was $1.6 million versus $0.8
million. Programming and licensing and selling, general, and administrative
expenses were comparable relative to the 1994 Ten-month Period versus the 1994
Twelve-month Period presented. Depreciation and amortization increased by $0.8
primarily due to amortization on the step-up in basis of depreciable and
amortizable assets, including goodwill, resulting from the acquisition of Metro
Satellite and MetroCable.

Interest expenses, amounting to less than $0.1 million for the 1994
Ten-month Period were less than interest expenses of $2.8 million for the 1994
Twelve-month Period due to the settlement of prior debt occurring at the date of
acquisition. The prior year's interest expense includes interest expense to
related parties of $2.7 million.

The net loss for the 1994 Ten-month Period of $0.6 million differed from the
$2.1 million net loss for the 1994 Twelve-month Period primarily because of
related party interest expense in the 1994 Twelve-month Period with no
corresponding expense in the 1994 Ten-month Period.

RECENT ACCOUNTING PRONOUNCEMENTS

The Company's adoption of Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," during 1996 did not have a significant effect on its
financial position or results of operations.

The Company does not plan to adopt the fair value-based measurement
methodology for employees stock options contemplated by Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation."
Accordingly, this Standard is not expected to have a significant effect on the
Company's financial position or results of operations.

36
<PAGE>
BUSINESS

The following description of the business of CS Wireless, unless
specifically stated otherwise, assumes that the Contribution Closing occurred on
December 31, 1995.

OVERVIEW

The Company is one of the largest wireless cable television companies in the
United States in terms of LOS households and subscribers. The Company's 12
markets encompass approximately 7.0 million television households, approximately
5.7 million of which are LOS households, as estimated by the Company. CS
Wireless provided service to approximately 58,400 subscribers as of March 31,
1996.

The Company is a majority-owned subsidiary of CAI. CAI is the largest
developer, owner and operator of wireless cable television systems in the United
States in terms of LOS households and the first wireless cable operator to enter
into a strategic arrangement with RBOCs. CAI's 14 markets encompass
approximately 18.0 million television households, of which approximately 13.8
million are LOS households, as estimated by CAI. CAI provided wireless cable
service to approximately 85,100 subscribers as of March 31, 1996. The Company is
also affiliated with Heartland, a leading developer, owner and operator of
wireless cable systems in small to mid-size markets. Heartland's 79 markets
encompass approximately 8.2 million television households, of which
approximately 6.7 million are LOS households, as estimated by Heartland.
Heartland provided wireless cable service to approximately 142,190 subscribers
as of March 31, 1996.

Wireless cable programing is transmitted through the air via microwave
frequencies from a transmission facility to a small receiving antenna at each
subscriber's location, which generally requires an unobstructed LOS from the
transmission facility to the subscriber's receiving antenna. Traditional
hard-wire cable systems also transmit signals from a central transmission
facility, but deliver the signal to a subscriber's location through an extensive
network of fiber optic and/or coaxial cable and amplifiers. Since wireless cable
systems do not require a network of fiber optic and coaxial cable, wireless
cable operators such as the Company can provide subscribers with a high quality
picture with fewer transmission disruptions at a significantly lower capital
cost per installed subscriber than traditional hard-wire cable systems. In
addition, not having to maintain a hard-wire transmission system results in
lower ongoing maintenance costs for wireless cable systems. As a result of the
generally low capital expenditure requirements and low maintenance costs, the
Company believes it should be able to achieve positive cash flow at lower levels
of subscriber penetration than hard-wire cable companies.

BUSINESS STRATEGY

The Company's objective is to become a leading regional provider of
subscription television services. The Company expects to achieve its goal
through: (i) the deployment of digital wireless cable equipment in most of its
markets; (ii) the acquisition and/or swapping of wireless cable assets or
systems that increase the Company's regional concentration of markets; (iii) the
aggressive pursuit of strategic relationships that will enable the Company to
benefit from the capital, infrastructure and brand identity associated with such
relationships; and (iv) the rapid penetration of its markets.

The Company expects that digital wireless cable equipment will become
commercially available in late 1996 and expects to convert or build most of its
markets using digital technology in 1997. Digital technology, capable of
delivering in excess of 100 channels, will allow the Company to offer more
programming choices than almost all of its hard-wire cable competitors in its
markets. The Company believes that cable subscribers are most sensitive to
programming quality and choice, price, service and reliability and that its
digital technology will enable the Company to offer its subscribers a service
that is comparable or superior to hard-wire cable in each of these respects. The
Company's value pricing strategy is to offer more programming at a price level
comparable to that of its competitors' most

37
<PAGE>
common service. The availability of channels in excess of those used to provide
a complete selection of local television stations and cable networks will be
used to provide an expanded variety of premium and pay-per view channels. In
addition, high channel capacity will enable the Company to use its channels for
other uses, such as interactive programming, as these services and technologies
become available. CS Wireless will continue to explore other delivery
technologies that can enhance its video services to its subscribers.

An important part of the Company's growth strategy is to expand its markets
and subscriber base through the acquisition of wireless cable systems and
channel rights in targeted markets throughout the midwest and southwest regions
of the United States. Through selected acquisitions, divestitures, asset swaps
and joint ventures, the Company will seek to increase its regional concentration
of wireless cable television systems in order to realize economies of scale and
operating efficiencies. The Company believes that its strategy of increasing
regional concentration of wireless cable television systems and channel rights
will also enhance the Company's ability to attract potential joint venture
opportunities with large strategic partners. The Company also believes that
these partnerships will enable it to benefit from the partners' capital,
infrastructure and brand identity, thereby increasing the Company's ability to
penetrate its markets. Consistent with this strategy, the Company continues to
explore and pursue opportunities to acquire additional wireless cable television
assets in markets that meet the Company's selection criteria, to divest itself
of wireless cable television assets that are inconsistent with the Company's
regional market emphasis, and to continually evaluate its current markets to
ensure that its portfolio of operating systems and channel interests reflect the
Company's growth strategy. It is CS Wireless's policy not to discuss or comment
upon negotiations regarding such transactions until a definitive agreement is
signed or other circumstances indicate a high degree of probability that a
transaction will be consummated, unless the law otherwise requires. Currently,
CS Wireless is negotiating with Heartland to acquire all of the outstanding
stock of Heartland Wireless Georgia Properties, Inc., a Georgia corporation
("Heartland Georgia") and a wholly-owned subsidiary of Heartland. Heartland
Georgia owns (i) leases and licenses for wireless cable frequency rights for
wireless cable channels transmitting in Adairsville, Powers Crossroads and
Rutledge, Georgia and (ii) leases for four tower sites. The purchase price is
anticipated to be approximately $7.2 million, subject to adjustment. There can
be no assurance that such acquisition will be consummated.

OPERATING STRATEGY

The Company believes that, with respect to television services, subscribers
are generally indifferent to the delivery methodology employed (such as wireless
or hard-wire cable), but are concerned with such features as programming, price,
service and reliability. The Company's operating strategy focuses on (i) value
pricing, (ii) competitive programming offerings, (iii) commitment to digital and
other technologies, (iv) responsive customer service, (v) signal quality and
reliability, and (vi) targeted marketing. This operating strategy is designed to
attract and retain subscribers, enabling the Company to compete effectively with
hard-wire cable providers.

Value Pricing. The Company believes that its lower capital requirements and
low operating costs will allow it to compete effectively with hard-wire cable
operators based on price. As its basic service, the Company expects to offer, at
an equal or lower price, a greater number of channels than the majority of its
hard-wire cable competitors offer as their expanded basic service.

Competitive Programming Offerings. The Company provides its subscribers with
a variety of programming choices, including local broadcast television stations;
cable television networks such as CNN, ESPN, A&E, MTV, Nickelodeon, The
Discovery Channel, HBO, Showtime and The Disney Channel; pay-per-view
programming services; and various feature films and sporting events. Upon
completion of conversion to digital technology, the Company expects to offer
more programming channels than those currently offered by the majority of
hard-wire cable providers in its markets.

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<PAGE>
Additionally, the Company will have the capacity to offer extensive pay-per-view
programming opportunities to all of its subscribers utilizing addressable
converter technology.

Commitment to Digital and Other Technologies. The Company intends to
implement digital technology in most of its operating and targeted markets. The
Company estimates that digital converter boxes could be commercially available
in late 1996, although it does not expect to obtain any such equipment until
1997. Digital technology is expected to permit between four and 10 video
channels to be transmitted over each analog wireless channel. The Company
believes digital technology may provide additional uses of its wireless spectrum
and may potentially increase its total LOS household reach. The Company will
continue to evaluate new technologies and services as they become commercially
available, including anticipated developments in interactive services.

Responsive Customer Service. The Company's objective is to provide its
subscribers with a high level of efficient and responsive customer service. The
Company believes that the quality of its customer service will provide it with a
competitive advantage. The Company will seek to achieve a high level of customer
service through numerous initiatives, including maintaining extended hours of
service, providing extensive training of its customer service representatives,
implementing an automated response unit that provides after-hour assistance
(e.g., billing inquiries, account balance information) and developing other
computer-assisted customer service efficiency programs.

Signal Quality and Reliability. The Company will strive to achieve the
highest level of quality and reliability afforded by commercially available
technology. The Company believes its microwave transmission equipment will
deliver a signal to its subscribers that meets or exceeds the signal quality
generally available from hard-wire cable service. The Company's wireless
transmission system eliminates the need for cascading signal amplifiers that
degrade television signal quality. Since there are fewer network components, the
Company's wireless system achieves greater reliability and fewer outages as
compared to most hard-wire cable systems. This reliability results in lower
operating costs and fewer customer complaints from loss of service.

Targeted Marketing. The Company will target its marketing efforts in
specific neighborhoods identified as being particularly attractive and
well-suited for its services. Once selected, the marketing campaign consists of
cost-effective local advertising (including billboards and local print-media),
door-to-door campaigns, direct mail and customer-referral promotions. This
targeted approach will allow the Company to control roll-out and marketing
costs. In the future, the Company may include mass marketing strategies in
conjunction with its targeted marketing strategy.

OPERATING AND PLANNED MARKETS

The table below outlines as of March 31, 1996 (except as indicated in
footnote (a) below) the characteristics of the Company's operational and
pre-launch markets, as well as its market under

39
<PAGE>

development and markets held for sale. The Company expects that the pre-launch
markets and the market under development will be operational by the end of 1998.

<TABLE>
<CAPTION>
ESTIMATED
TOTAL ESTIMATED NUMBER OF APPROXIMATE
SERVICE AREA LOS CHANNELS NUMBER OF
MARKET HOUSEHOLDS(A) HOUSEHOLDS(A) AVAILABLE(B) SUBSCRIBERS
- --------------------------------------------- ------------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
OPERATIONAL MARKETS
Cleveland, OH (c)............................ 1,178,000 884,000 34 25,400
Minneapolis, MN (d).......................... 959,000 882,000 29(e) 3,600
Dayton, OH (d)(f)(g)......................... 610,000 413,000 32 4,000
San Antonio, TX (d).......................... 550,000 440,000 37 11,700
Fort Worth, TX (d)........................... 540,000 443,000 35 1,500
Grand Rapids, MI (d)......................... 458,000 344,000 23 400
Kansas City (suburbs), MO (d)(h)............. 133,000 100,000 28(i) 3,300
PRE-LAUNCH MARKETS
Dallas, TX (d)............................... 981,000 872,000 29 --
Salt Lake City, UT (d)....................... 454,000 434,000 34(j) --
MARKET UNDER DEVELOPMENT
Charlotte, NC (c)............................ 580,000 472,000 9(k) --
MARKETS HELD FOR SALE
Stockton/Modesto, CA (c)..................... 350,000 300,000 24 --
Bakersfield, CA (c).......................... 162,000 151,000 42 8,500
------------- ------------- -----------
Total.................................... 6,955,000 5,735,000 58,400
------------- ------------- -----------
------------- ------------- -----------
</TABLE>

- ------------

(b) The Number of Channels Available comprises analog wireless cable and local broadcast
channels that can be received by subscribers. Wireless cable channels either are
licensed to the Company or are leased to the Company from other license holders. The
Number of Channels Available includes 8, 8, 5, 6, 13, 7, 8, 13, 7, 0, 6 and 10 off-air
channels, and 16, 12, 20, 20, 12, 16, 20,12, 15, 8, 7 and 19 ITFS channels, in
Cleveland, Ohio; Minneapolis, Minnesota; Dayton, Ohio; San Antonio, Texas; Fort Worth,
Texas; Grand Rapids, Michigan; Kansas City (suburbs), Missouri; Dallas, Texas; Salt
Lake City, Utah; Charlotte, North Carolina; Stockton/Modesto, California; and
Bakersfield, California, respectively. The Number of Channels Available also includes
certain channels that are subject to FCC approval of applications for new station
authorizations, power increases, transmitter relocations, as well as third party
interference agreements. The FCC's failure to grant one or more new station
applications could decrease the number of channels. The FCC's failure to grant one or
more power increase or transmitter relocation applications, or the failure to obtain
certain third party interference agreements, could delay the initiation of service
and/or reduce the coverage area of the affected system or systems.

(d) Market contributed by Heartland.

(e) Does not include four channels whose authorization is the subject of a petition for
reconsideration and, in the alternative, a new station application.
</TABLE>

(Footnotes continued on following page)

40
<PAGE>
(Footnotes continued from preceding page)
<TABLE>
<C> <S>
(f) For purpose of Estimated Total Service Area Households and Estimated LOS Households,
the Dayton, Ohio market includes Bloom Center, Indiana, a suburban market adjacent to
Dayton. The Bloom Center market is not yet operational.

(i) Includes 24 wireless cable channels in Maysville, Missouri, one of which is the subject
of a pending application, and 20 wireless cable channels in Sweet Springs, Missouri.

(j) Includes seven channels that are the subject of new station applications.

THE COMPANY'S MARKETS

The Company operates wireless cable systems in Bakersfield, California;
Cleveland, Ohio; Fort Worth, Texas; Dayton, Ohio; Grand Rapids, Michigan; Kansas
City (suburbs), Missouri; Minneapolis, Minnesota; and San Antonio, Texas and has
acquired channel rights in Charlotte, North Carolina; Dallas, Texas; Salt Lake
City, Utah and Stockton/Modesto, California. The Sale Assets do not fit with the
Company's strategy of regional concentration, and therefore, the Company intends
to sell these systems. The Company has had preliminary discussions with
potential buyers with respect to such sales; however, it cannot predict if or
when such sales will occur.

Cable Penetration (defined as the number of current hard-wire cable
subscribers divided by the number of television households in a market area),
television households and homes passed data for each of the markets described
below have been derived from the 1995 edition of the Television and Cable
Factbook; all other information, unless otherwise noted, is as of December 31,
1995.

The Company has programming agreements with a wide variety of programmers
and offers various programming packages to its subscribers in each of its
markets based largely upon subscriber viewing preferences. The Company also
rebroadcasts local television channels in certain of its markets.

OPERATIONAL MARKETS

CLEVELAND, OHIO. The Cleveland system has approximately 25,400 subscribers,
which represents 2.9% of all LOS households in this market. The Cleveland system
offers subscribers 26 wireless cable channels and eight local television
stations, for a total of 34 channels of programming. Cleveland is the largest
city in Ohio and the 13th largest Designated Market Area ("DMA") in the United
States with 1,460,000 television households. The Cleveland system encompasses an
estimated 1,178,000 television households, of which the Company estimates
884,000 television households are serviceable by wireless cable, which
represents 75% of the Estimated Total Service Area Households. The principal
hard-wire cable competitors of the Company in the Cleveland market include
Cablevision Systems Corporation and Cox Communications, Inc. Cable Penetration
in Cleveland is approximately 65%.

41
<PAGE>

MINNEAPOLIS, MINNESOTA. The Minneapolis system has approximately 3,600
subscribers, which represents 0.4% of all LOS households in this market. The
Minneapolis system offers subscribers 21 wireless cable channels and eight local
television stations, for a total of 29 channels of programming. Minneapolis-St.
Paul is the 14th largest DMA in the United States with 1,407,000 television
households. The Minneapolis system encompasses an estimated 959,000 television
households, of which the Company estimates 882,000 television households are
serviceable by wireless cable, which represents 92% of the Estimated Total
Service Area Households. The principal hard-wire cable competitors of the
Company in the Minneapolis market are Paragon Cable, Continental Cablevision and
King Cable. Cable Penetration in Minneapolis is approximately 47%.

DAYTON, OHIO. The Dayton system has approximately 4,000 subscribers, which
represents 1.0% of all LOS households in this market. The Dayton system offers
subscribers 27 wireless cable channels and five local television stations, for a
total of 32 channels of programming. Dayton is the 4th largest city in Ohio and
the 53rd largest DMA in the United States with 515,000 television households.
The Dayton system encompasses an estimated 469,000 television households, of
which the Company estimates 300,000 television households are serviceable by
wireless cable, which represents 64% of the Estimated Total Service Area
Households. The principal hard-wire cable competitor of the Company in the
Dayton market is Continental Cablevision. Cable Penetration in Dayton is
approximately 50%. In addition to the Dayton market, the Company holds licenses
or leases the rights to 20 wireless cable channels in Bloom Center, Indiana, a
suburban market adjacent to Dayton that has an estimated 141,000 total
households, of which the Company estimates 113,000 households are serviceable by
wireless cable, which represents 80% of the Estimated Total Service Area
Households. With five local television stations available, the Company
anticipates that at least 25 channels of programming could be provided when
operational.

SAN ANTONIO, TEXAS. The San Antonio system has 11,700 subscribers, which
represents 2.7% of all LOS households in this market. The San Antonio system
currently offers 31 wireless channels, plus six local television station
channels, for a total of 37 channels of programming. San Antonio is the 39th
largest DMA in the United States with 629,000 television households. The San
Antonio system encompasses an estimated 550,000 television households, of which
the Company estimates 440,000 television households are serviceable by wireless
cable, which represents 80% of the Estimated Total Service Area Households. The
principal hard-wire cable competitor of the Company in the San Antonio market is
Paragon. Cable Penetration in San Antonio is approximately 64%.

FORT WORTH, TEXAS. The Fort Worth system has approximately 1,500
subscribers, which represents 0.3% of all LOS households in this market. The
Fort Worth system currently offers subscribers 14 wireless cable channels and 13
local television stations, for a total of 27 channels of programming. The
Company also has the rights to eight additional wireless cable channels which
must be relocated to the Company's head-end transmission facility before these
channels can be added to the Fort Worth system. Fort Worth-Dallas is the 8th
largest DMA in the United States with approximately 1,820,700 television
households. The Fort Worth system encompasses an estimated 540,000 television
households, of which the Company estimates 443,000 television households are
serviceable by wireless cable, which represents 82% of the Estimated Total
Service Area Households. The principal hard-wire cable competitors of the
Company in the Fort Worth market are Marcus Cable, Arlington Telecable and
Paragon. Cable Penetration in Fort Worth is approximately 49%.

GRAND RAPIDS, MICHIGAN. The Grand Rapids, Michigan system has approximately
400 subscribers, which represents 0.1% of all LOS households in this market. The
Grand Rapids system offers subscribers 16 wireless cable channels and seven
local television stations for a total of 23 channels of programming. Grand
Rapids is the second largest city in Michigan and the 38th largest DMA in the
United States with 634,000 television households. The Grand Rapids system
encompasses an estimated 458,000 television households, of which the Company
estimates 344,000 television households are serviceable by wireless cable, which
represents 75% of the Estimated Total Service Area Households.

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<PAGE>
The principal hard-wire cable competitor of the Company in the Grand Rapids
market is TCI Cablevision of West Michigan, Inc. Cable Penetration in Grand
Rapids is approximately 59%.

KANSAS CITY (SUBURBS), MISSOURI. The Company provides service to 3,300
subscribers in the Kansas City (suburbs) market, which represents 3.3% of all
LOS households in this market. The Kansas City (suburbs) market is centered in
Maysville and Sweet Springs, Missouri, suburban markets adjacent to Kansas City.
The Kansas City (suburbs) system offers subscribers 25 wireless cable channels
and five local television stations in Maysville, Missouri, and 20 wireless cable
channels and eight local television stations in Sweet Springs, Missouri, for a
total of 28 channels of programming in each market. The Kansas City (suburbs)
system encompasses an estimated 133,000 television households, of which the
Company estimates 100,000 television households are serviceable by wireless
cable, which represents 75% of the Estimated Total Service Area Households. The
principal hard-wire cable competitor of the Company in the Kansas City (suburbs)
market is American Cablevision. Cable Penetration in Kansas City (suburbs) is
approximately 62%.

PRE-LAUNCH MARKETS

DALLAS, TEXAS. Fort Worth-Dallas is the 8th largest DMA in the United States
with 1,820,700 television households. The Company expects that the Dallas market
will encompass an estimated 981,000 television households, of which the Company
estimates that 872,000 television households are serviceable by wireless cable,
which represents 89% of the Estimated Total Service Area Households. The Company
currently holds licenses or leases the rights to 16 wireless cable channels in
the Dallas market. These channels have not yet been co-located. With 13 local
television stations available, the Company anticipates that the Dallas system
could provide at least 29 channels of programming when it is operational. In
connection with the development of a system marketed to residential subscribers,
the Company intends to co-locate its channels and increase its channel capacity.
The principal hard-wire cable competitors of the Company in the Dallas market
include TCI, Telecable and Paragon. Cable Penetration in Dallas is approximately
50%.

SALT LAKE CITY, UTAH. The Company holds licenses or leases the rights to 27
wireless cable channels. With seven local television stations available, the
Company anticipates that this system could provide at least 34 channels of
programming when it is operational. Salt Lake City is the largest metropolitan
area in Utah, and is the 37th largest DMA in the United States with 638,450
television households. The Salt Lake City system encompasses an estimated
454,000 television households, of which the Company estimates 434,000 television
households are serviceable by wireless cable, which represents 96% of the
Estimated Total Service Area Households. The principal hard-wire cable
competitor of the Company in the Salt Lake City market is TCI Cablevision of
Utah, Inc. Cable Penetration in the Salt Lake City market is approximately 52%.

MARKET UNDER DEVELOPMENT

CHARLOTTE, NORTH CAROLINA. The Company currently holds licenses or leases
for five wireless cable channels in the Charlotte market, four of which are not
yet authorized at the desired location. There is pending at the FCC an
application to relocate the four channels to the desired location and it is
anticipated that the FCC will approve that application in late 1996 or early
1997. CAI was also the high bidder for the Charlotte basic trading area ("BTA")
in the FCC's recently conducted auction of available commercial wireless cable
spectrum in 487 BTAs and six additional BTA-like geographic areas around the
country ("BTA Auction"). CAI is obligated to convey to the Company, at cost, its
rights to the Charlotte BTA. The authorization for one of the five channels that
the Company has rights to has been deemed forfeited by the FCC, and is subject
to a pending petition for reinstatement. The Company will acquire rights to that
channel either as a result of the grant of the petition, or as a result of its
rights, as the Charlotte BTA winner, to available spectrum. The Company will
also have the right to develop an additional seven to eight channels, depending
on interference considerations, in the

43
<PAGE>

Charlotte market as a result of its ownership of the Charlotte BTA. Charlotte is
the largest city in North Carolina and the 28th largest DMA in the United States
with 793,500 television households. The Company expects that the Charlotte
market will encompass an estimated 580,000 television households, of which the
Company estimates 472,000 television households are serviceable by wireless
cable, which represents 81% of the Estimated Total Service Area Households. The
principal hard-wire cable competitor of the Company in the Charlotte market is
Cablevision of Charlotte. Cable Penetration in the Charlotte market is
approximately 64%.

MARKETS HELD FOR SALE

STOCKTON/MODESTO, CALIFORNIA. Construction of the first stage of the
Stockton/Modesto transmission facility was completed in June 1995. Following the
commercial launch of the Stockton/Modesto system, the Company will offer
subscribers at least 18 wireless cable channels, plus six off-air channels, for
a total of 24 channels of programming. Stockton/Modesto is part of the
Sacramento/Stockton-Modesto DMA, the 21st largest in the United States with
1,109,000 television households. The Company expects that the Stockton/Modesto
system will encompass an estimated 350,000 television households, of which the
Company estimates 300,000 television households are serviceable by wireless
cable, which represents 86% of the Estimated Total Service Area Households. The
principal hard-wire cable competitors of the Company in the Stockton/Modesto
market include Continental Cablevision and Post-Newsweek Cable Inc. Cable
Penetration in the Stockton/Modesto market is approximately 61%.

BAKERSFIELD, CALIFORNIA. The Bakersfield system has approximately 8,500
subscribers, which represents 5.6% of all LOS households in this market. The
Bakersfield system offers subscribers 32 wireless channels, plus 10 off-air
channels, for a total of 42 channels of programming. Bakersfield is the 15th
largest city in California and the 129th largest DMA in the United States with
171,000 television households. The Bakersfield system encompasses an estimated
162,000 television households, of which the Company estimates 151,000 television
households are serviceable by wireless cable, which represents 93% of the
Estimated Total Service Area Households. The principal hard-wire cable
competitors of the Company in the Bakersfield market are Time Warner Cable and
Cox Communications Inc. Cable Penetration in Bakersfield is approximately 72%.

EMPLOYEES

The Company has approximately 307 employees as of March 31, 1996. The
Company has experienced no work stoppages and believes that it has good
relations with its employees.

PROPERTIES

The Company leases office sites in Dallas, Texas and Philadelphia,
Pennsylvania. The Company also leases or owns transmitting facilities, including
tower space, tower sites and head-end facilities, in all of its markets. The
Company believes adequate leasehold space is available in all locations in which
the Company currently leases office or transmission sites.

The Company owns substantially all of the equipment which is necessary to
conduct its operations, except certain vehicles and certain test equipment. A
significant portion of the Company's investment in plant and equipment consists
of subscriber equipment, which includes antennae, block-down converters, remotes
and related installation equipment, principally located at the subscribers'
premises, and the reception and transmitter equipment located at leased
transmitter sites.

LITIGATION

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.

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One of the Company's markets, Bakersfield, was the subject of pending
litigation as of December 31, 1995. On August 31, 1995, John deCelis d/b/a
Haddonfield Wireless ("plaintiff") commenced an action against ACS Enterprises,
Valley Wireless Cable, Inc. and ACS License California, Inc., predecessors in
ownership to the Bakersfield system ("defendants"), alleging breach of contract
in connection with an alleged failure to negotiate with the plaintiff and the
failure to give the plaintiff an opportunity to acquire the Bakersfield system,
as the plaintiff alleged was required by the Channel Lease Agreement between
Haddonfield and Valley Wireless Cable, Inc. Haddonfield alleged that this breach
was caused by the merger, effective September 29, 1995, of ACS Enterprises with
CAI. Defendants asserted that the CAI-ACS Enterprises' merger neither created an
obligation to notify Haddonfield nor gave it a right of first refusal to acquire
the Bakersfield system. In conjunction with the complaint, plaintiff moved for a
preliminary injunction to enjoin ACS Enterprises' merger with CAI. The parties
negotiated a resolution of the preliminary injunction motion by agreeing that,
while the merger could go forward, if Haddonfield ultimately prevailed on its
claim to have a right of first refusal to purchase Valley Wireless Cable, Inc.,
it would then be made available for sale. Both the defendants and plaintiff
subsequently filed motions for summary judgment. In addition, the plaintiff
filed a supplemental motion for summary judgment as a result of the contribution
of the Bakersfield system to the Company pursuant to the Participation
Agreement. On March 5, 1996, defendants' motion for summary judgment was granted
by the court, and judgment in favor of defendents and against plaintiff was
entered. Plaintiff agreed not to appeal the March 5, 1996 ruling.

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INDUSTRY OVERVIEW

SUBSCRIPTION TELEVISION INDUSTRY

The subscription television industry began in the late 1940s to serve the
needs of residents in predominantly rural areas with limited access to local
broadcast television stations. The industry expanded to metropolitan areas due
to, among other things, the fact that it offered better reception and more
programming. Currently, such systems offer various types of programming, which
generally include basic service, enhanced basic, premium service and, in some
instances, pay-per-view service.

A subscription television customer generally pays an initial connection
charge and a fixed monthly fee for basic service. The amount of the monthly
basic service fee varies from one area to another and is a function, in part, of
the number of channels and services included in the basic service package and
the cost of such services to the television system operator. In most instances,
a separate monthly fee for each premium service and certain other specific
programming is charged to customers, with discounts generally available to
customers receiving multiple premium services. Monthly service fees for basic,
enhanced basic and premium services constitute the major source of revenue for
subscription television systems. Converter rentals, remote control rentals,
installation charges and reconnect charges for customers who were previously
disconnected are also included in a subscription television system's revenues,
but generally are not a major component of such revenues.

WIRELESS CABLE INDUSTRY BACKGROUND

Wireless cable, as an alternative to traditional, hard-wire cable
television, was made possible by a series of FCC rule changes in the 1980s.
However, regulatory and other obstacles impeded the growth of the wireless cable
industry through the remainder of the 1980s. During the 1990s, several factors
have encouraged the growth of the wireless cable industry, including (i)
regulatory reforms by Congress and the FCC to facilitate competition with
hard-wire cable, (ii) federal legislation that increased the availability of
programming for wireless cable systems on non-discretionary terms, (iii)
consumer demand for alternatives to traditional hard-wire cable service, (iv)
enhanced ability of wireless cable operators to aggregate a sufficient number of
channels in each market to create a competitive product, and (v) increased
availability of capital to wireless cable operators in the public and private
markets. According to Kagan, there are approximately 200 wireless cable systems
currently operating in the United States, serving approximately 850,000
subscribers at the end of 1995.

Like a traditional hard-wire cable system, a wireless cable system receives
programming at a head-end. Wireless cable programming, however, is then
retransmitted by microwave transmitters operating in the 2150-2162 MHz and
2500-2686 MHz portions of the radio spectrum from an antenna typically located
on a tower associated with the head-end to a small receiving antenna located on
a subscriber's rooftop. At the subscriber's location, the signals are converted
to frequencies that can pass through conventional coaxial cable into a
descrambling converter located on top of a television set. Wireless cable
requires a clear LOS, because the microwave frequencies used will not pass
through dense foliage, hills, buildings or other obstructions and the potential
subscribers will not receive the signals. To ensure the clearest LOS possible in
the Company's markets, the Company has placed, and plans to place, its transmit
antennae on towers or tall buildings in areas located in such markets. There
exists, in each of the Company's operating and targeted markets, a number of
acceptable locations for the placement of its transmit antennae, 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 operations in such
market. Additionally, some LOS obstructions can be overcome with the use of
signal repeaters which retransmit an otherwise blocked signal over a limited
area. The Company believes that its coverage will be further enhanced upon the
implementation of digital technology. See "Business--Strategy--Commitment to
Digital and Other Technologies." Since wireless cable systems do not require an
extensive Cable Plant, wireless cable operators can provide subscribers with a
reliable signal and a high quality picture with few transmission disruptions at
a significantly lower system capital cost per installed subscriber than
traditional hard-wire cable systems.

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REGULATION

General. The wireless cable industry is subject to regulation by the FCC
pursuant to 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 other
obligations and reporting requirements on wireless cable channel license holders
and operators.

The FCC has determined that wireless cable 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. Moreover, 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 have to lease
the right to use wireless cable channels from the holders of channel licenses,
unlike hard-wire cable operators they do not have to pay local franchise fees.
Recently, legislation has been introduced in some states, including Illinois,
Maryland, Pennsylvania and Virginia, to authorize state and local authorities to
impose on all video program distributors (including wireless cable operators) a
tax on the distributors' gross receipts comparable to the franchise fees cable
operators pay. Similar legislation might be introduced in several other states.
While the proposals vary among states, the bills all would require, if passed,
as much as 5.0% of gross receipts to be paid by wireless distributors to local
authorities. Efforts are underway by the industry trade association to preempt
such state taxes through federal legislation. In addition, the industry is
opposing the state bills as they are introduced, and, in Virginia, it has
succeeded in being exempted from the video tax that was eventually enacted into
law. However, it is not possible to predict whether new state laws will be
enacted which impose new taxes on wireless cable operators. The imposition of a
gross receipts tax on the Company could have a material adverse effect on the
Company's business.

In 50 large markets, 33 analog channels are available for wireless cable (in
addition to any local broadcast television channels that are not retransmitted
over the microwave channels). The FCC licenses and regulates the use of channels
by license holders and system operators. In each geographic service area of all
other markets, 32 analog channels are available for wireless cable (in addition
to any local broadcast television channels that are not retransmitted over the
microwave channels). Except in limited circumstances, 20 wireless cable channels
in each of these geographic service areas are generally licensed to qualified
non-profit educational organizations (commonly referred to as ITFS channels). In
general, each of these channels must be used a minimum of 20 hours per week for
instructional programming. The remaining "excess air time" on an 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, or such other restrictions, including the recapture of additional
hours of air time, as may be included in any lease). Lessees of ITFS' "excess
air time," including the Company, generally have the right to transmit to their
customers the educational programming provided by the lessor at no incremental
cost. The FCC recently amended its rules to permit ITFS license holders to
consolidate their educational programming on one or more of their ITFS channels,
thereby providing wireless cable operators leasing such channels, including the
Company, with greater flexibility in their use of ITFS channels. The remaining
13 analog channels available in most of the Company's operating and targeted
markets are made available by the FCC for full-time usage without programming
restrictions.

Licensing Procedures. The actual number of wireless cable channels available
for licensing in any market is determined by the FCC's interference protection
and channel allocation rules. The FCC awards ITFS and MMDS licenses based upon
applications demonstrating that the applicant is legally, financially and
technically qualified to hold the license and that the operation of the proposed
station will not cause interference to other stations or proposed stations
entitled to interference protection.

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In order to be eligible for the BTA Auction, CAI and Heartland were required
to file, prior to the start of the auction, applications and up-front payments.
After the BTA Auction, in any markets where CAI or Heartland are the winning
bidders, they will have certain post-auction filing obligations, including, but
not limited to, applications that propose new transmission facilities, exhibits
concerning their involvement in bidding consortia, and their plans to build-out
two-thirds of the market over a five-year period. Due to the unique nature of
the BTA Auction, there is no prior regulatory history regarding the scope and
nature of the information the FCC will require, or how the FCC will treat the
information.

Under rules and policies for applications for new MMDS facilities filed
before the BTA Auction, the FCC would generally issue a conditional license that
permits the conditional licensee to commence construction of its facilities upon
the satisfaction of specified conditions. Construction of MMDS stations
generally must be completed within one year of grant of the conditional license.

In February 1995, the FCC amended its rules and established "windows" for
the filing of new ITFS applications or major modifications to authorized ITFS
facilities. The first filing "window" was October 16-20, 1995. Where two or more
ITFS applicants file applications for the same channels and the proposed
facilities could not be operated without impermissible interference, the FCC
employs a set of comparative criteria to select from among the competing
applicants. Construction of ITFS stations generally must be completed within 18
months of the date of grant of the authorization.

If construction of MMDS 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. ITFS and MMDS licenses
generally have terms of 10 years. Licenses must be renewed thereafter, and may
be revoked for cause in a manner similar to other FCC licenses. FCC rules
prohibit the sale for profit of a conditional MMDS license or a controlling
interest in the conditional licensee prior to construction of the station or, in
certain circumstances, prior to the completion of one year of operation.
However, the FCC does permit the

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leasing of 100% of an MMDS licensee's spectrum to a wireless cable operator and
the granting of options to purchase a controlling interest in a license even
before such holding period has lapsed.

Wireless cable transmissions are subject to FCC regulations governing
interference and reception quality. These regulations specify important signal
characteristics such as modulation (i.e., AM/FM) or encoding formats (analog or
digital). Current FCC regulations require wireless cable systems to transmit
only analog signals and those regulations will have to be modified, either by
rulemaking or by individual application, to permit the use of digital
transmissions. CAI and Heartland are parties to a pending petition for
declaratory ruling filed in July 1995 seeking adoption of interim regulations
authorizing digital transmission. If granted, the declaratory ruling will permit
the Company to commence installation and operations in a digital mode under
existing FCC technical interference criteria. It is likely that, in the longer
term, the FCC will consider adopting both new technical and service rules
tailored to digital operations. The service rules could modify the respective
rights and obligations of the ITFS lessors and their commercial lessees of
"excess air time" in light of the increased capacity that would result from
digital compression. Even if the FCC does adopt new service rules governing the
allocation of "excess air time" in a digital environment, it is anticipated that
there would be a dramatic increase in the number of channels that will be
available to the Company following the conversion to digital transmissions. The
Company believes that the necessary FCC approvals will be obtained to permit use
of digital compression by the time it becomes commercially available; however,
there can be no assurance that these approvals will be forthcoming or timely. In
addition, such modifications filed with the FCC after the BTA Auction will be
subject to the interference protection rights of BTA Auction winners.

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
transmission characteristics (such as power and polarity). In order to commence
the operations of certain of the Company's markets, applications have been or
will be filed with the FCC to relocate and modify existing transmission
facilities. A total of 8, 12, 5, 4 and 14 channels in Fort Worth and Dallas,
Texas; Salt Lake City, Utah; Charlotte, North Carolina; and Stockton/Modesto,
California, respectively, are subject to pending applications for co-location.

Under current FCC regulations, a wireless cable operator generally may serve
subscribers anywhere within the LOS of its transmission facility, provided that
it complies with interference standards. Under new rules adopted by the FCC on
June 15, 1995, an MMDS channel license holder generally has a protected area of
35 miles around its transmitter site. The new rules became effective on
September 18, 1995. An ITFS channel license holder has protection as to all of
its receive sites, but the same protected area during excess capacity use by a
wireless cable operator as an MMDS license holder. In launching or upgrading a
system, the Company may wish to relocate its transmission facility or increase
its height or power. If such changes cause the Company's signal to violate
interference standards with respect to the protected area of other wireless
license holders, the Company would be required to obtain the consent of such
other license holders; however, there can be no assurance that such consents
would be received.

Interference Issues. Interference from other wireless cable systems can
limit the ability of a wireless cable system to serve any particular point. In
licensing ITFS and MMDS systems, a primary concern of the FCC is avoiding
situations where proposed stations are predicted to cause interference with the
reception of previously proposed stations. Pursuant to FCC rules, a wireless
cable system is generally protected from interference within a radius of 35
miles of the transmission site. In addition, modification applications submitted
after the BTA Auction will be required to protect auction winners from
interference. The FCC's interference protection standards may make one or more
of these proposed modifications or new grants unavailable. In such event, it may
be necessary to negotiate interference agreements with the licensees of the
systems which would otherwise block such modifications or grants. There can be
no assurance that the Company will be able to negotiate all necessary
interference agreements that are on terms acceptable to the Company. In the
event the Company

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cannot obtain interference agreements required to implement the Company's plans
for a market, the Company may have to curtail or modify operations in that
market, utilize a less optimal tower location, or reduce the height or power of
the transmission facility, any of which could have a material adverse effect on
the growth of the Company in that market. In addition, while the Company's
leases with ITFS and MMDS 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.

The 1992 Cable Act. On October 5, 1992, Congress enacted the 1992 Cable Act,
which compels the FCC to, among other things, (i) adopt comprehensive federal
standards for the local regulation of certain rates charged by hard-wire cable
operators, (ii) impose customer service standards on hard-wire cable operators,
(iii) govern carriage of certain broadcast signals by all multi-channel video
providers, and (iv) compel non-discriminatory access to programming owned or
controlled by vertically-integrated cable operators.

The rate regulations adopted by the FCC do not regulate cable rates once
other multi-channel video providers serve, in the aggregate, at least 15% of the
households within the cable franchise area. The customer service rules adopted
by the FCC establish certain minimum standards to be maintained by traditional
hard-wire cable operators. These standards include prompt responses to customer
telephone inquiries, reliable and timely installations and repairs, and readily
understandable billing practices. These rules do not apply to wireless cable
operators, although the Company believes that it provides and will continue to
provide customer service superior to its hard-wire cable competitors.

Under the retransmission consent provisions of the 1992 Cable Act and the
FCC's implementing regulations, all multi-channel video providers (including
both hard-wire and wireless cable) seeking to retransmit certain commercial
broadcast signals must first obtain the permission of the broadcast station.
Hard-wire cable systems, but not wireless cable systems, are required under the
1992 Cable Act and the FCC's "must carry" rules to retransmit a specified number
of local commercial television or qualified low power television signals. See
"Industry Overview--Regulation--Retransmission Consent."

The 1992 Cable Act and the FCC's implementing regulations impose limits on
exclusive programming contracts and prohibit programmers in which a cable
operator has an attributable interest from discriminating against cable
competitors with respect to the price, terms and conditions of programming.
Certain provisions of the 1992 Cable Act and the FCC's implementing regulations
have been challenged in the courts and the FCC. Under the 1996 Act, Congress has
directed the FCC to eliminate cable rate regulations for "small systems," as
defined in the 1996 Act, and for large systems under certain prescribed
circumstances, and for all cable systems effective three years after enactment
of the 1996 Act. See "Industry Overview--Regulation--General."

While current FCC regulations are intended to promote the development of a
competitive subscription television industry, the rules and regulations
affecting the wireless cable industry may change, and any future changes in FCC
rules, regulations, policies and procedures could have a material adverse effect
on the Company. In addition, a number of legal challenges to the 1992 Cable Act
and the regulations promulgated thereunder have been filed, both in the courts
and before the FCC. These challenges, if successful, could result in increases
in the Company's operating costs and otherwise have a material adverse effect on
the Company. The Company's costs to acquire satellite-delivered programming may
be affected by the outcome of those challenges. Other aspects of the 1992 Cable
Act that have been challenged, the outcome of which could adversely affect the
Company, include the 1992 Cable Act's provisions governing rate regulation to be
met by traditional hard-wire cable companies. The 1992 Cable Act empowered the
FCC to regulate the basic subscription rates charged by traditional hard-wire
cable operators. The FCC recently issued rules requiring such cable operators,
under certain circumstances, to reduce the rates charged for non-premium
services by as much as 17%. Should these regulations withstand court and
regulatory challenges, the extent to which wireless cable operators may

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continue to maintain a price advantage over traditional hard-wire cable
operators could be diminished. On the other hand, continued strict rate
regulation of cable rates would tend to impede the ability of hard-wire cable
operators to upgrade their cable plant and gain a competitive advantage over
wireless cable.

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.

Copyright. Under the federal copyright laws, permission from the copyright
holder generally must be secured before a video program 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 upon the filing of certain reports with and the payment of certain fees
to the U.S. Copyright Office. In 1994, Congress enacted the Satellite Home
Viewers Act of 1994 which enables operators of wireless cable television systems
to rely on the cable compulsory license under Section 111 of the Copyright Act.

Retransmission Consent. Under the retransmission consent provisions of the
1992 Cable Act, wireless and hard-wire cable operators seeking to retransmit
certain commercial television broadcast signals must first obtain the permission
of the broadcast station in order to cover their signal. However, wireless cable
systems, unlike hard-wire cable systems, are not required under the FCC's "must
carry" rules to retransmit a specified number of local commercial television or
qualified low power television signals. Although there can be no assurances that
the Company will be able to obtain requisite broadcaster consents, the Company
believes in most cases it will be able to do so for little or no additional
cost.

RECENTLY ENACTED LEGISLATION

The 1996 Act will result in comprehensive changes to the regulatory
environment for the telecommunications industry as a whole. The 1996 Act will,
among other things, substantially reduce regulatory authority over cable rates.
The legislation affords hard-wire cable operators greater flexibility to offer
lower rates to certain of their customers and will thereby permit hard-wire
cable operators to target discounts to the Company's current or prospective
subscribers.

The legislation will permit telephone companies to enter the video
distribution business, subject to certain conditions. The entry of telephone
companies in the video distribution business, with greater access to capital and
other resources, could provide significant competition to the wireless cable
industry, including the Company.

In addition, the legislation will afford relief to wireless cable operators
and DBS by exempting them from local restrictions on reception antennae and
preempting the authority of local governments to impose certain taxes.

The Company cannot reasonably predict the substance of rules and policies to
be adopted by the FCC in implementing the provisions of the legislation.

OTHER REGULATIONS

Wireless cable license holders are subject to regulation by the FAA with
respect to the construction, marking, and lighting of transmission towers and to
certain local zoning regulations affecting construction of towers and other
facilities. There may also be restrictions imposed by local authorities. There
can be no assurance that the Company will not be required to incur additional
costs in complying with such regulations or restrictions.

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COMPETITION

Wireless cable television operators face competition from a number of
sources, including potential competition from emerging trends and technologies
in the subscription television industry, some of which are described below.

Hard-Wire Cable. The Company's principal subscription television competitors
in each market are traditional hard-wire cable operators. Hard-wire cable
companies are generally well-established and known to potential customers and
have significantly greater financial and other resources than the Company.
According to a report issued by the FCC in September 1995, of the approximately
96 million total television households nationwide, approximately 85 million are
passed by hard-wire cable systems, and of those homes that are passed by cable,
approximately 62 million are hard-wire cable subscribers.

Direct-to-Home ("DTH"). DTH satellite television services originally were
available via satellite receivers which generally were 7-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 payment of fees. Having to purchase
decoders and pay for programming has reduced their popularity, although the
Company will to some degree compete with these systems in marketing its
services.

Direct Broadcast Satellite ("DBS"). DBS involves the transmission of an
encoded signal direct from a satellite to the customer's home. Because the
signal is at a higher power level and frequency than most satellite-transmitted
signals, its reception can be accomplished with a relatively small (18-inch)
dish mounted on a rooftop or in the yard. DBS cannot, for technical and legal
reasons, provide local VHF/UHF broadcast channels as part of its service,
although many DBS subscribers receive such channels via standard over-the-air
receive antennas. Moreover, DBS may provide subscribers with access to broadcast
network distant signals only when such subscribers reside in areas unserved by
any broadcast station. The cost to a DBS subscriber for equipment and service is
generally substantially higher than the cost to wireless cable subscribers.
Three DBS services currently are available nationwide, and two more are expected
to commence service in 1996. AT&T Corp. has invested $137.5 million in DirecTv
Inc., a leading provider of DBS service, and MCI Communications Corp. has
entered into a DBS joint venture arrangement with The News Corporation Limited,
using a license that MCI won at a FCC auction for which it is paying a reported
$682.5 million. DBS currently has approximately 2.3 million subscribers
nationwide.

Private Cable. Private cable, also known as satellite master antenna
television, is a multi-channel 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 exclusive rights of entry into larger MDUs, commercial
establishments and hotels.

Telephone Companies. The Communications Act prohibits local exchange
carriers ("LECs"), including the RBOCs, from providing video programming
directly to subscribers in their respective telephone service areas. This
restriction does not apply to wireless cable, however, certain federal courts
have held that this cross-ownership ban abridges the First Amendment rights of
LECs to free expression under the U.S. Constitution. Such rulings cover nearly
all the approximately 1,300 LECs in the United States. The United States Supreme
Court has decided to hear an appeal on this issue. A final determination of
unconstitutionality of the cross-ownership ban would eliminate federal barriers
to telephone company provision of video service. Both the United States Senate
and House of Representatives have passed legislation that would, if enacted,
lift barriers to the provision of video service by telephone companies. The FCC
already permits LECs to provide "video dialtone" service, thereby allowing LECs
to make available to multiple service providers, on a nondiscriminatory common
carrier

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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 plants in conjunction with a local cable
operator to offer video dialtone service, or (iii) acquire or merge with
existing hard-wire cable systems outside their telephone service areas. Some
LECs have indicated that they intend to construct or acquire separate hard-wire
cable systems within their telephone service areas if authorized. While the
competitive effect of the entry of telephone companies into the video
programming business is still uncertain, the Company believes that wireless
cable systems will continue to maintain a cost advantage over video dialtone
service and fiber optic distribution technologies due to the high capital
expenditures associated with such technologies. In July 1995, Pacific Telesis
Group ("PacTel"), an LEC based in California, acquired Cross Country Wireless,
Inc., a wireless cable system operator in southern California, for approximately
$175 million. 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. and
Videotron Bay Area Inc., which operate wireless cable systems in San Francisco,
California, Tampa, Florida and Spokane, Washington, and own channel rights in
San Diego, California and Greenville, South Carolina, for approximately $170
million. The competitive effect of the entry of telephone companies into the
subscription television business, including wireless cable, is still uncertain.

Local Off-Air VHF/UHF Broadcasts. Local off-air VHF/UHF broadcast television
stations (such as ABC, NBC, CBS and Fox) provide free programming to the public.
Previously, subscription television operators could retransmit these broadcast
signals without permission. However, effective October 6, 1993, pursuant to the
1992 Cable Act, local broadcasters may require that subscription television
operators obtain their consent before retransmitting local television
broadcasts. The Company has obtained such consents for its operating systems.
See "Risk Factors--Restrictions Imposed by Government and Community Regulation."
The Company will be required to obtain such consents in certain of its markets
to re-broadcast any such channels. The Company believes that it will be able to
obtain such consents, but no assurance can be given that it will be able to
obtain all such consents. The FCC also has recently permitted broadcast networks
to acquire, subject to certain restriction, ownership interests in hard-wire
cable systems. In some areas, several low power television ("LPTV") stations
authorized by the FCC are used to provide multi-channel 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 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, but the proposal is for
one to two licenses. It is expected that LMDS licensees will share the 28 GHz
frequency band with the Mobile Satellite Service. One license would be awarded
on a primary basis for an 850 MHz frequency block, and the other on a co-primary
basis for a 150 MHz frequency block. The FCC contemplates allowing LMDS
licensees to use the spectrum for a variety of services, including telephony,
interactive video, video distribution, data transmission, teleconferencing, and
other applications. Depending on the type and number of services offered, the
cost of the customer-premises equipment could range from $300 (for a video
receive antenna), to $1,000 (for telephony, video and data capabilities). The
FCC has yet to issue final rules, although it is anticipated that an LMDS
auction will be conducted in 1996.

53
<PAGE>
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 became an executive officer or
director of the Company effective upon the Contribution Closing.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ------------------------------------------
<S> <C> <C>
Jared E. Abbruzzese....................... 41 Chairman of the Board
David Webb................................ 48 Vice Chairman of the Board
Alan Sonnenberg........................... 43 Vice Chairman of the Board
Lowell Hussey............................. 43 President, Chief Executive Officer and
Director
John R. Bailey............................ 42 Acting Chief Financial Officer
Thomas W. Dixon........................... 48 Senior Vice President of Operations
James P. Ashman........................... 41 Director
Robert D. Happ............................ 55 Director
J.R. Holland, Jr.......................... 52 Director
D. Michael Sitton......................... 46 Director
William W. Sprague........................ 38 Director
</TABLE>

JARED E. ABBRUZZESE, CHAIRMAN OF THE BOARD. Jared E. Abbruzzese is and has
been the Chairman, Chief Executive Officer and Director of CAI Wireless Systems,
Inc. since its formation in 1991. On August 28, 1992, Tri-Mark Communications,
Ltd. ("Tri-Mark") named Mr. Abbruzzese as acting President of Tri-Mark and its
subsidiary Capital Wireless in order to guide Capital Wireless through its
Chapter 11 bankruptcy proceeding. He served as acting President through
September 1993. He served as President of The Diabetes Institute Foundation in
Virginia Beach, VA from October 1988 until August 1991.

DAVID WEBB, VICE CHAIRMAN OF THE BOARD. David Webb is a co-founder of
Heartland and has been President and Chief Executive Officer and a Director of
Heartland since its formation in 1990. Mr. Webb is also a director of Wireless
One, Inc. From 1979 to 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. Mr Webb is also a
director of Wireless One, Inc.

ALAN SONNENBERG, VICE CHAIRMAN OF THE BOARD. Alan Sonnenberg has been a
Director of CAI since September 29 1995. Mr. Sonnenberg served as President of
CAI from September 29,1995, upon the acquisition of ACS Enterprises by CAI,
until February 23, 1996, when he became President of the Company. Mr. Sonnenberg
served as President of the Company until May 1, 1996, and currently serves as
Vice Chairman of the Board. From 1988 until September 29, 1995, Mr. Sonnenberg
was Chairman of the Board of Directors and Chief Executive Officer of ACS
Enterprises. Mr. Sonnenberg also served as President of ACS Enterprises from
1987 until September 29, 1995. Since 1989, Mr. Sonnenberg has been a director of
the Wireless Cable Association International, Inc.

LOWELL HUSSEY, PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR. Lowell
Hussey has been President and Chief Executive Officer of the Company since May
1, 1996 and served as Vice Chairman of the Board from February 23, 1996 until
May 1, 1996. Prior to that, Mr. Hussey was Chief Operating Officer of Cross
Country Wireless, Inc. ("Cross Country"), which owned the then largest wireless
system in the United States in San Bernadino/Riverside, CA and was subsequently
sold to Pacific Telesis for consideration of approximately $175 million. Prior
to joining Cross Country, Mr. Hussey

54
<PAGE>
spent 12 years with Warner Communications and Time Warner, Inc. in a succession
of management posts, most recently as Senior Vice President of Marketing and
Programming for the entire Cable Television Division. In that position, Mr.
Hussey was responsible for 120 cable television systems serving over 2 million
customers and generating over $700 million in annual revenues.

JOHN R. BAILEY, ACTING CHIEF FINANCIAL OFFICER. Mr. Bailey has agreed to
serve as the Company's Acting Chief Financial Officer until such time as the
Company names a full-time Chief Financial Officer. Mr. Bailey continues to be
employed by Heartland serving as its Chief Financial Officer. Mr. Bailey has
been Senior Vice President--Finance, Chief Financial Officer, Treasurer and
Secretary of Heartland since August 1994. Mr. Bailey joined Heartland in
September 1993 as Vice President-Finance, Chief Financial Officer, Treasurer and
Secretary. From 1988 to September 1993, Mr. Bailey was the founder and Managing
Director of Berkshire Partners, Inc., a private investment bank focusing upon
private placements and mergers and acquisitions for communications clients.

THOMAS W. DIXON, SENIOR VICE PRESIDENT OF OPERATIONS. Thomas W. Dixon is
currently Senior Vice President for Heartland Wireless Communications. He began
advising Heartland as an Operations Consultant in March 1992 and joined
Heartland in September 1993. From 1985 to March 1992, Mr. Dixon was employed as
Vice President/Marketing for LDS, a long distance telephone company. Mr. Dixon
was responsible for sales, customer service, operations and acquisitions for 30
offices located throughout Texas, Oklahoma and Louisiana.

JAMES P. ASHMAN, DIRECTOR. James P. Ashman has been Executive Vice President
and Chief Financial Officer of CAI since December 1995 and a Director of CAI
since March 1994. Prior to his appointment as Executive Vice President and Chief
Financial Officer, Mr. Ashman was Senior Vice President and Treasurer of CAI,
positions he held since September 1994. From November 1992 to September 1994, he
was a senior advisor of, and independent consultant affiliated with, Carolina
Barnes Capital, Inc. ("CBC"), a registered broker dealer. CBC served as
financial advisor to CAI and Tri-Mark from January 1993 until September 1994.
Mr. Ashman was Vice President of Richter & Co., Inc. from June 1990 to November
1992.

ROBERT D. HAPP, DIRECTOR. Robert D. Happ has been a Director of CAI since
September 1995. Mr. Happ had been the Managing Partner of the Boston,
Massachusetts office of KPMG Peat Marwick LLP ("KPMG") from 1985 until his
retirement in 1994. Prior to that, Mr. Happ served in various capacities with
KPMG. Mr. Happ is also a director of Galileo Electro-Optics Corp.

J.R. HOLLAND, JR., DIRECTOR. J.R. Holland, Jr. began advising Heartland as a
consultant in October 1992 and became Chairman of the Board of Directors in
October 1993. Mr. Holland has been employed as President of Unity Hunt
Resources, Inc. since September 1991. Unity Hunt Resources is a large
international, private holding company with interests in entertainment, cable
television, retail, investments, real estate, natural resources and energy
businesses. Mr. Holland is also the President of Hunt Capital. 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 management consulting firm. Mr. Holland is also a director
of Wireless One, Inc.

D. MICHAEL SITTON, DIRECTOR. D. Michael Sitton has been President of Sitton
Properties & Co., LLC since 1995. Prior to that, Mr. Sitton was the Executive
Vice President of Sitton Motor Lines, Inc., a company he co-founded in 1979.

WILLIAM W. SPRAGUE, DIRECTOR. William W. Sprague has been the President of
Crest International Holdings, LLC ("Crest") since February 22, 1996. Crest is a
private company whose primary focus is investing in, raising capital for, and
managing selected telecommunications projects. Mr. Sprague is

55
<PAGE>
also the Chief Financial Officer of TelQuest Ventures, LLC. For the previous
five years, Mr. Sprague worked in the Investment Banking Department at Smith
Barney Inc., most recently as a Managing Director and head of the Media and
Telecommunications Group. Mr. Sprague is also a director of Ethan Allen
Interiors, Inc.

See "The Contributions" for a description of the provisions of the
Stockholders' Agreement between CAI and Heartland with respect to, among other
matters, the election of directors and officers of the Company and the required
director vote on certain types of transactions.

EXECUTIVE COMPENSATION AND EMPLOYMENT AGREEMENTS

The Company and Alan Sonnenberg entered into an employment agreement
pursuant to which Mr. Sonnenberg has agreed to serve as Vice Chairman of the
Board of the Company. Under the employment agreement, Mr. Sonnenberg will
receive a base salary of $200,000 per year and will be granted options to
purchase 215,054 shares of Common Stock, vesting in 30 equal monthly
installments, commencing 30 days after the Contribution Closing, at an exercise
price of $9.40 per share. Mr. Sonnenberg served, until the Contribution Closing,
as the President of CAI. Mr. Sonnenberg and CAI have mutually agreed to
terminate the employment agreement between Mr. Sonnenberg and CAI, and Mr.
Sonnenberg has surrendered all options to purchase CAI common stock that he
previously received in connection with his employment agreement with CAI. Mr.
Sonnenberg will continue to serve as a director of CAI.

The Company and Lowell Hussey entered into an employment agreement pursuant
to which Mr. Hussey has agreed to serve as President and Chief Executive Officer
of the Company. Pursuant to the Company's Bylaws, Mr. Hussey, as Chief Executive
Officer of the Company, became a Director of the Company. Mr. Hussey will
receive a base salary of $150,000 per year and will be granted options to
purchase 322,581 shares of Common Stock, vesting in 36 equal monthly
installments, commencing 30 days after the Contribution Closing, at an exercise
price of $9.40 per share.

The Company and Thomas W. Dixon entered into an employment agreement
pursuant to which he became Senior Vice President of Operations of the Company.
Mr. Dixon will receive a base salary of $125,000 per year and will be granted
options to purchase 53,763 shares of Common Stock, vesting in 36 equal monthly
installments, commencing 30 days after the Contribution Closing, at an exercise
price of $9.40 per share.

Mr. Bailey will not receive compensation from the Company for serving as
Acting Chief Financial Officer of the Company; however, he will be granted
options to purchase 53,763 shares of Common Stock, all of which will be vested
upon grant, at an exercise price of $9.40.

The $9.40 per share exercise price of the options granted to Messrs.
Sonnenberg, Hussey, Dixon and Bailey was determined by the Board based on the
value attributed to the Common Stock component of the Units offered pursuant to
the Unit Offering.

COMPENSATION OF DIRECTORS

Directors who are not officers of the Company will be paid an annual fee of
$5,000 and a fee of $625 per meeting attended (including committee meetings),
plus out-of-pocket expenses. Officers who also serve as directors will not
receive fees for serving as directors.

STOCK OPTION PLAN

The Company has adopted a stock option plan (the "Stock Option Plan")
pursuant to which an aggregate of not more than 752,688 shares of Common Stock
may be subject to options to be granted from time to time to key employees
(including officers), as well as advisors and independent consultants

56
<PAGE>
to the Company or to any of its subsidiaries. Options granted to officers and
employees may be designated as incentive stock options ("ISOs") or non-qualified
stock options ("NQSOs"). Options granted to independent consultants and agents
may only be designated NQSOs. Options to purchase 645,161 shares at various
exercise prices have been granted under the Stock Option Plan.

The Stock Option Plan will be administered by a committee (the "Committee")
established by the Company's Board of Directors which is intended to satisfy the
"disinterested director" requirements of Rule 16b-3 under the Exchange Act. The
Committee is generally empowered to interpret the Stock Option Plan, to
prescribe rules and regulations relating thereto, to determine the terms of the
option agreements, to determine the employees to whom options are to be granted,
to determine the time when options may be exercised, and to determine the number
of shares subject to each option and the exercise price thereof. The per share
exercise price of ISOs granted under the Stock Option Plan will be not less than
100% of the fair market value per share of Common Stock on the date the options
are granted.

Options will be exercisable for a term that will not be greater than 10
years from the date of grant. ISOs may be exercised only while the original
grantee has a relationship with the Company that confers eligibility to be
granted options or within three months after the termination of such
relationship with the Company, or up to one year after death, retirement or
permanent disability. In the event of the termination of such relationship
between the original grantee and the Company for cause (as defined in the Stock
Option Plan), all options granted to that original grantee terminate
immediately. ISOs and NQSOs granted under the Stock Option Plan are not
transferable other than by will or the laws of descent and distribution. Options
may be exercised during the grantee's lifetime only by the grantee, or his or
her guardian or legal representative.

Options granted pursuant to the Stock Option Plan that are ISOs will enjoy
the attendant tax benefits provided under Sections 421 and 422 of the Internal
Revenue Code of 1986, as amended. Accordingly, the Stock Option Plan provides
that the aggregate fair market value (determined at the time an ISO is granted)
of the Common Stock subject to ISOs exercisable for the first time by an
employee during any calendar year (under all plans of the Company and its
subsidiaries) may not exceed $100,000.

57
<PAGE>
STOCK OWNERSHIP

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company by (a) each person that is the
beneficial owner of more than five percent of the Common Stock of the Company,
(b) the directors of the Company, (c) the executive officers of the Company, and
(d) all directors and executive officers of the Company as a group:

<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENT
BENEFICIAL OWNER OWNED OF CLASS
- -------------------------------------------------------------------- ---------------- --------

<S> <C> <C>
CAI Wireless Systems, Inc. ......................................... 5,421,166 53.62%
18 Corporate Woods Blvd., 3rd Floor
Albany, New York 12211

Heartland Wireless Communications, Inc. ............................ 3,578,834 35.40%
200 Chisholm Place, Suite 200
Plano, Texas 75075

MMDS Holdings II, Inc............................................... 500,000(1) 4.95%
3900 Washington Street
Wilmington, Delaware 19802

NYNEX Corporation................................................... 500,000(1) 4.95%
1111 Westchester Avenue
White Plains, NY 10604

Alan Sonnenberg..................................................... 71,685(2) *
18 Corporate Woods Blvd., 3rd Floor
Albany, New York 12211

Lowell Hussey....................................................... 44,803(2) *
200 Chisholm Place, Suite 200
Plano, Texas 75075

Thomas W. Dixon..................................................... 11,201(2) *
200 Chisholm Place, Suite 200
Plano, Texas 75075

John R. Bailey...................................................... 53,763(2) *
200 Chisholm Place, Suite 200
Plano, Texas 75075

All directors and executive officers of the Company as a group
(9 persons)....................................................... 181,452(2) 1.76%
</TABLE>

- ------------

* Less than 1%.

(1) Does not include 5,421,166 shares of Common Stock owned by CAI. The BANX
Affiliates have presently exercisable warrants and conversion rights to
acquire approximately 45% of the common stock of CAI.

(2) Represents shares of Common Stock issuable upon the exercise of stock
options granted by the Company which are exercisable currently or within 60
days after the date of this Prospectus.

58
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

INTERIM SERVICE AND EMPLOYEE SHARING ARRANGEMENTS

The Company has entered into an interim services agreement with Heartland
whereby, effective as of the Contribution Closing, Heartland has been providing
miscellaneous administrative services to the Company, including the maintenance
of the Company's financial information for a transition period. The Company has
agreed to pay Heartland's out-of-pocket costs and to reimburse it for its
employees' time expended. At present, the Company intends to develop the
capability to provide such services for itself.

Except for two employees of CAI, both of whom CAI employs to assist with
programming and licensing functions and shares with the Company on an
appropriate cost-sharing basis, CAI does not at present expect to provide any
services to the Company.

The Company believes that the terms of the interim services and
employee-sharing arrangements are at least as favorable to the Company as it
could obtain from unrelated third parties.

BANX SHARES AND OTHER MATTERS

MMDS Holdings II, Inc., an affiliate of Bell Atlantic, and NYNEX MMDS
Holding Company, an affiliate of NYNEX, were each issued 500,000 shares of
Common Stock, which collectively represented a 10% equity interest in the
Company (prior to dilution), in exchange for non-cash consideration. See
"Registration Rights."

Under its existing contractual relationships with the BANX Affiliates, CAI
has agreed that neither it nor any of its subsidiaries, including the Company,
may take certain actions without the consent of the BANX Affiliates. These
restrictions are binding on CAI, but not necessarily on the Company, which is
not a party to such agreements. The CAI/BANX relationship also requires CAI and
its subsidiaries, including the Company, to comply with the restrictions placed
on RBOCs, such as Bell Atlantic and NYNEX and their affiliated enterprises, by
the Modification of Final Judgment entered by the United States District Court
for the District of Columbia on August 24, 1982 (the "MFJ"). The 1996 Act
repeals the MFJ; however, the legislation enacts certain restrictions on RBOCs
similar to those that were contained in the MFJ. It is unlikely that CAI and its
subsidiaries, including the Company, will be subject to these restrictions.
Until the FCC adopts implementing regulations, however, the Company cannot
predict with certainty the extent to which it and its subsidiaries will be
subject to such restrictions.

A representative from each of Bell Atlantic and NYNEX (the "BANX Observers")
shall be entitled to attend all meetings of the Company's board of directors
(and committees thereof), or, in lieu of designating the BANX Observers, the
BANX Affiliates may designate a representative to the Company's board (which
representative will be one of the CAI-designated directors).

HEARTLAND NOTES

The Heartland Short-Term Note was in the principal amount of $25 million and
was repaid on March 1, 1996, with a portion of the net proceeds from the Unit
Offering.

The Heartland Long-Term Note: (i) is in the principal amount of $15 million
and has a final maturity date that is 10 years and one day after the
Contribution Closing; (ii) bears interest at an annual rate of 10% until the
first anniversary of the Contribution Closing and 15% thereafter; (iii) requires
that all of the net proceeds received by the Company from the sale of assets be
applied to the repayment of the Heartland Long-Term Note; (iv) requires that at
least 30% of the net proceeds of any public offering of Common Stock be applied
to the repayment of the Heartland Long-Term Note; (v) provides that no cash
interest will be paid on the Heartland Long-Term Note until the Notes have been

59
<PAGE>
paid in full; and (vi) is subordinated to the Notes upon the occurrence of any
event of bankruptcy or insolvency or any default by the Company in the payment
or performance of any of its obligations under or in respect of the Notes, in
accordance with subordination provisions to be set forth in the Heartland
Long-Term Note.

ACQUISITION

CS Wireless is negotiating with Heartland to acquire all of the outstanding
stock of Heartland Georgia . Heartland Georgia owns (i) leases and licenses for
wireless cable frequency rights for wireless cable channels transmitting in
Adairsville, Powers Crossroads and Rutledge, Georgia and (ii) leases for four
tower sites. The purchase price is anticipated to be approximately $7.2
million, subject to adjustment. There can be no assurance that such
acquisition will be consummated.

OTHER

The Company has reimbursed CAI in the amount of $700,000 for expenses
incurred by CAI in connection with an amendment to its senior note indenture
permitting CAI to consummate the transactions contemplated by the Participation
Agreement. The Company has also reimbursed CAI in the amounts of $45,000 for
filing fees under the Hart-Scott-Rodino Act ("HSR Act") and $2.5 million for
payments made by CAI to the FCC in connection with the BTA Auction with respect
to the Company's markets. The Company has reimbursed Heartland in the amounts of
$700,000 for expenses incurred by Heartland in connection with obtaining the
consent of its creditors to the transactions contemplated by the Participation
Agreement, $45,000 for filing fees under the HSR Act, $1.8 million for expenses
incurred by Heartland in connection with the Acquisitions and $532,000 for
payments made by Heartland in connection with the BTA Auction. See "Industry
Overview--Regulation."

60
<PAGE>
DESCRIPTION OF THE NOTES

The Old Notes were, and the New Notes to be issued in exchange for the Old
Notes will be, issued under an indenture dated as of February 15, 1996 (the
"Indenture") between the Company and Fleet National Bank of Connecticut, as
Trustee (the "Trustee"). The following summary of the material provisions of the
Indenture does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the provisions of the Indenture, including the
definitions of certain terms contained therein and those terms made a part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended, as in
effect on the date of the Indenture (the "TIA"). The definitions of certain
terms used in the following summary are set forth below under "--Certain
Definitions." As used below in this "Description of the Notes" section, the
"Company" means CS Wireless Systems, Inc., but not any of its subsidiaries,
unless the context otherwise requires.

GENERAL

The terms of the New Notes are identical in all material respects to the
terms of the Old Notes, except for certain transfer restrictions and
registration rights relating to the Old Notes.

The Notes are unsecured senior obligations of the Company. The Notes rank
senior to all subordinated Indebtedness of the Company, including the
Indebtedness evidenced by the Heartland Long-Term Note, and pari passu with all
unsecured Indebtedness of the Company which is not by its terms expressly
subordinated to the Notes. The Notes are effectively subordinated to all
Indebtedness and other liabilities (including trade payables) of the
Subsidiaries of the Company, and will be effectively subordinated to all secured
Indebtedness of the Company to the extent of the value of the assets securing
such Indebtedness. As of March 31, 1996, the Company had $15 million of
indebtedness outstanding ranking subordinate to the Notes.

The Notes will be issued only in registered form, without coupons, in
principal denominations of $1,000 and integral multiples thereof. Principal of,
premium, if any, and interest on the Notes will be payable, and the Notes will
be transferable, at the office of the Company's agent in the City of New York
located at the corporate trust office of the Trustee. In addition, interest may
be paid at the option of the Company, by check mailed to the person entitled
thereto as shown on the security register. No service charge will be made for
any transfer, exchange or redemption of Notes, except in certain circumstances
for any tax or other governmental charge that may be imposed in connection
therewith. Initially, the Trustee will act as paying agent and registrar for the
Notes. The Company may change any paying agent and registrar without notice to
the holders.

MATURITY, INTEREST AND PRINCIPAL

The Notes are limited to an aggregate principal amount at maturity of
$400,000,000 and will mature on March 1, 2006. For each Old Note accepted for
exchange, the holder of such Old Note will receive a New Note having a principal
amount at maturity equal to that of the surrendered Old Note. Cash interest on
the Notes will neither accrue nor be payable prior to March 1, 2001. Thereafter,
cash interest will accrue at a rate of 11 3/8% per annum and will be payable
semi-annually on each March 1 and September 1, commencing on September 1, 2001,
to the persons who are registered holders at the close of business on the
February 15 and August 15 immediately preceding the applicable interest payment
date. The Company will pay interest on overdue principal from time to time on
demand at the rate of 2% per annum in excess of the rate shown on the cover page
of this Prospectus. The Company shall, to the extent lawful, pay interest on
overdue installments of interest (without regard to any applicable grace
periods) from time to time on demand at the rate of 2% per annum in excess of
the rate shown on the cover page of this Prospectus. Interest will be computed
on the basis of a 360-day year comprised of twelve 30-day months, and, in the
case of a partial month, the actual number of days elapsed.

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<PAGE>
The Notes are not entitled to the benefit of any mandatory sinking fund.

OPTIONAL REDEMPTION

The Indenture provides that the Notes will not be redeemable prior to March
1, 2001. On and after March 1, 2001 the Notes will be redeemable, at the option
of the Company, in whole or in part, on not less than 30 nor more than 60 days'
prior notice, at the redemption prices (expressed as percentages of principal
amount) set forth below, plus accrued and unpaid interest, if any, to the
redemption date if redeemed during the 12-month period beginning on March 1 of
the years indicated below:

<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2001............................................................. 105.688%
2002............................................................. 103.792%
2003............................................................. 101.896%
2004 and thereafter.............................................. 100.000%
</TABLE>

The Indenture provides that in the event that on or prior to March 1, 1999,
the Company consummates one or more public offerings of its Common Stock or
issues or sells its Common Stock to a Strategic Equity Investor, the Company
may, at its option, redeem from the proceeds of such public offerings or
issuance or sale of the Company's Common Stock to a Strategic Equity Investor no
later than 60 days following the consummation of such offering or issuance or
sale up to 35% of the aggregate principal amount at maturity of the Notes
originally issued at a redemption price equal to 111% of the Accreted Value on
the date of redemption of the Notes so redeemed; provided, however, that
immediately after giving effect to any such redemption, not less than 65% of the
aggregate principal amount of the Notes originally issued remains outstanding.

CHANGE OF CONTROL

The Indenture provides that upon the occurrence of a Change of Control, each
holder will have the right to require that the Company repurchase all or a
portion of such holder's Notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101% of the Accreted
Value thereof on the date of purchase (if prior to March 1, 2001) or 101% of the
aggregate principal amount thereof (if on or after March 1, 2001), plus accrued
and unpaid interest, if any, to the date of repurchase.

The Indenture provides that within 30 days following the date upon which a
Change of Control occurs, the Company must send, by first class mail, a notice
to each holder, with a copy to the Trustee, which notice shall govern the terms
of the Change of Control Offer. Such notice will state, among other things, the
purchase date, which must be not less than 30 days nor more than 45 days from
the date such notice is mailed, other than as may be required by law (the
"Change of Control Payment Date"). Holders electing to have a Note purchased
pursuant to a Change of Control Offer will be required to surrender the Note,
properly endorsed for transfer together with such other customary documents as
the Company may reasonably request, to the paying agent at the address specified
in the notice prior to the close of business on the business day prior to the
Change of Control Payment Date.

The Indenture provides that the Company will comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the purchase of Notes pursuant to a Change of Control Offer.

If a Change of Control were to occur, there can be no assurance that the
Company would have sufficient funds to pay the purchase price for all Notes that
the Company might be required to purchase.

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<PAGE>
In the event that the Company were required to purchase Notes pursuant to a
Change of Control Offer, the Company expects that it would need to seek
third-party financing to the extent it does not have available funds to meet its
purchase obligations. However, there can be no assurance that the Company would
be able to obtain such financing on favorable terms, if at all.

With respect to the sale of assets referred to in the definition of Change
of Control, the phrase "all or substantially all" as used in such definition
varies according to the facts and circumstances of the subject transaction, has
no clearly established meaning under relevant law and is subject to judicial
interpretation. Accordingly, in certain circumstances there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of a person and
therefore it may be unclear whether a Change of Control has occurred and whether
the Notes are subject to a Change of Control Offer.

The foregoing provisions may not necessarily afford the holders of the Notes
protection in the event of a highly leveraged transaction, including a
reorganization, restructuring, merger or other similar transaction involving the
Company that may adversely affect the holders because (i) such transactions may
not involve a shift in voting power or beneficial ownership or, even if they do,
may not involve a shift of the magnitude required under the definition of Change
of Control to trigger the provisions or (ii) such transactions may include an
actual shift in voting power or beneficial ownership to a Strategic Equity
Investor or Permitted Holder which is excluded under the definition of Change of
Control from the amount of shares involved in determining whether or not the
transaction involves a shift of the magnitude required to trigger the
provisions.

SELECTION AND NOTICE

The Indenture provides that in the event that less than all of the Notes are
to be redeemed at any time, selection of such Notes for redemption will be made
by the Trustee pro rata, by lot or by such method as the Trustee shall deem fair
and appropriate; provided, however, that if the Notes are redeemed in part with
the proceeds of a public offering of Common Stock or an issuance or sale of
Common Stock to a Strategic Equity Investor, the Trustee shall select the Notes
to be redeemed by prorating, as nearly as may be, the principal amount of Notes
to be redeemed among the holders of the Notes in proportion to the principal
amount of Notes registered in their respective names. In any proration pursuant
to a public offering of Common Stock or an issuance or sale of Common Stock to a
Strategic Equity Investor, the Trustee shall make such adjustments,
reallocations and eliminations as it shall deem proper to the end that the
principal amount of Notes so prorated shall be $1,000 or a multiple thereof, by
increasing or decreasing or eliminating the amount which would be allocable to
any holder on the basis of exact proportion by an amount not exceeding $1,000.
The Trustee in its discretion may determine the particular Notes (if there are
more than one) registered in the name of any holder which are to be redeemed, in
whole or in part. No Notes of 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 thereof to be redeemed. A new Note in a
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon surrender for cancellation of the original Note.
On and after the redemption date, interest will cease to accrue on Notes or
portions thereof called for redemption, unless the Company defaults in the
payment of the redemption price therefor.

CERTAIN COVENANTS

The Indenture contains, among others, the following covenants.

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Limitation on Incurrence of Additional Indebtedness. The Indenture provides
that neither the Company nor any Restricted Subsidiary will, directly or
indirectly, create, incur, assume, guarantee, acquire or become liable,
contingently or otherwise, for (collectively "incur") any Indebtedness other
than Permitted Indebtedness. Notwithstanding the foregoing limitations, the
Company may incur Indebtedness (including, without limitation, any Acquired
Indebtedness) if after giving pro forma effect to the incurrence of such
Indebtedness and the receipt and application of the proceeds therefrom the
Company's Leverage Ratio would be less than 5.0 to 1.

The Indenture provides that any Indebtedness of an entity existing at the
time it becomes a Restricted Subsidiary (whether by merger, consolidation,
acquisition of Capital Stock or otherwise) or is merged with or into the Company
or any Restricted Subsidiary shall be deemed to be incurred as of the date such
entity becomes a Restricted Subsidiary or the date of such merger; provided,
however, that such Indebtedness shall be deemed incurred as of the last day of
the Measurement Period for purposes of calculating the Leverage Ratio with
respect to such incurrence.

The Indenture provides that the Company will not, directly or indirectly,
incur any Indebtedness that is subordinate to any other Indebtedness of the
Company unless such Indebtedness is also expressly subordinated to the Notes;
provided, however, that no Indebtedness of the Company shall be deemed to be
subordinate to any other Indebtedness of the Company solely because such other
Indebtedness is secured.

Limitation on Restricted Payments. The Indenture provides that neither the
Company nor any Restricted Subsidiary will, directly or indirectly:

(i) declare or pay any dividend or make any distribution (other than
dividends or distributions payable in Qualified Capital Stock of the Company
or payable by any Restricted Subsidiary to the Company or any Wholly Owned
Restricted Subsidiary of the Company) on shares of the Capital Stock of the
Company or any Restricted Subsidiary;

(ii) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or of any Restricted Subsidiary or any
warrants, rights or options to acquire shares of any class of such Capital
Stock, other than (x) the exchange of such Capital Stock or any warrants,
rights or options to acquire shares of any class of such Capital Stock for
Qualified Capital Stock of the Company or warrants, rights or options to
acquire Qualified Capital Stock of the Company or (y) to the extent that
such Capital Stock or warrants, rights or options are owned by the Company
or any Wholly Owned Restricted Subsidiary of the Company;

(iii) make any principal payment on, purchase, defease, redeem, prepay,
decrease or otherwise acquire or retire for value, prior to any scheduled
final maturity, scheduled repayment or scheduled sinking fund payment, any
Indebtedness (other than the Heartland Long-Term Note) that is subordinate
or junior in right of payment to the Notes (other than any such Indebtedness
owing to the Company or any Wholly Owned Restricted Subsidiary of the
Company);

(iv) make any Investment (other than Permitted Investments) after the
Issue Date; or

(v) make any (a) principal payment on the Heartland Long-Term Note
(except to the extent permitted under clause (iii)(A) of "--Limitation on
Asset Sales" covenant below) or (b) payment of cash interest on the
Heartland Long-Term Note

(each of the foregoing prohibited actions set forth in clauses (i), (ii), (iii),
(iv) and (v) being referred to as a "Restricted Payment"), if at the time of
such Restricted Payment or immediately after giving effect thereto, (a) a
Default or an Event of Default under the Indenture shall have occurred and be
continuing or would result therefrom, (b) the Company is not able to incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the Leverage Ratio described under the covenant "--Limitation on
Incurrence of Additional Indebtedness" above, or (c) the

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aggregate amount of Restricted Payments made subsequent to the Issue Date (the
amount expended for such purposes, if other than in cash, being the fair market
value of such property as determined by the Board of Directors of the Company in
good faith) exceeds or would exceed the sum of:

(A) the difference between (x) Cumulative EBITDA as of the date of such
Restricted Payment, minus (y) the product of 2.0 times Cumulative Interest
Expense as of the date of such Restricted Payment, plus

(B) 100% of the aggregate net cash proceeds received by the Company from
any Person (other than a Restricted Subsidiary) from the issuance and sale
subsequent to the Issue Date of Qualified Capital Stock of the Company
(excluding net cash proceeds attributable to the equity securities
comprising a part of the Units and any net proceeds from any public offering
of Common Stock or issuance or sale of Common Stock to a Strategic Equity
Investor but only to the extent used to redeem the Notes pursuant to the
second paragraph of "Optional Redemption" and excluding (A) any Qualified
Capital Stock of the Company paid as a dividend on any Capital Stock of the
Company or of any Restricted Subsidiary and (B) any Qualified Capital Stock
of the Company with respect to which the purchase price thereof has been
financed directly or indirectly using funds (x) borrowed from the Company or
from any Restricted Subsidiary, unless and until and to the extent such
borrowing is repaid or (y) contributed, extended, guaranteed or advanced by
the Company or by any Restricted Subsidiary (including, without limitation,
in respect of any employee stock ownership or benefit plan)), plus

(C) without duplication of any amounts included in the immediately
preceding subclause (B), 100% of the aggregate net proceeds (determined
pursuant to the penultimate paragraph of this covenant) received by the
Company from the issuance and sale (other than to any Restricted Subsidiary)
of any Qualified Capital Stock of the Company upon the conversion of, or in
exchange for, any Indebtedness of the Company or any Restricted Subsidiary
(other than any subordinated Indebtedness outstanding immediately after the
Issue Date), plus

(D) an amount equal to the net reduction in Investments in Unrestricted
Subsidiaries resulting from cash dividends, repayments of loans or advances
in cash, or other transfers of cash, in each case to the Company or to any
Wholly Owned Restricted Subsidiary of the Company from Unrestricted
Subsidiaries (but without duplication of any such amount included in
calculating Cumulative EBITDA of the Company), or from redesignations of
Unrestricted Subsidiaries as Restricted Subsidiaries (in each case valued as
provided in the covenant described under "-- Limitation on Restricted and
Unrestricted Subsidiaries" below), not to exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously made by the
Company or any Restricted Subsidiary in such Unrestricted Subsidiary and
which was treated as a Restricted Payment under the Indenture, plus

(E) without duplication of the immediately preceding subclause (D), an
amount equal to the lesser of the cost or net cash proceeds received upon
the sale or other disposition of any Investment made after the Issue Date
which had been treated as a Restricted Payment (but without duplication of
any amount included in calculating Cumulative EBITDA of the Company).

Notwithstanding the foregoing, these provisions do not prohibit:

(1) the payment of any dividend or the making of any distribution within
60 days after the date of its declaration if the dividend or distribution
would have been permitted on the date of declaration; or

(2) the acquisition of Capital Stock of the Company or any Restricted
Subsidiary or warrants, options or other rights to acquire such Capital
Stock through the application of the net proceeds of any capital
contribution (other than from a Restricted Subsidiary) or a substantially

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concurrent sale for cash (other than to a Restricted Subsidiary) of
Qualified Capital Stock of the Company or warrants, options or other rights
to acquire Qualified Capital Stock of the Company; or

(3) the acquisition of Indebtedness of the Company that is subordinate
or junior in right of payment to the Notes, either (i) solely in exchange
for shares of Qualified Capital Stock of the Company (or warrants, options
or other rights to acquire Qualified Capital Stock of the Company) or for
Indebtedness of the Company which is subordinate or junior in right of
payment to the Notes, at least to the extent that the Indebtedness being
acquired is subordinated to the Notes and has a Weighted Average Life to
Maturity no less than that of the Indebtedness being exchanged or (ii)
through the application of the net proceeds of any capital contribution or a
substantially concurrent sale for cash (other than to or from a Restricted
Subsidiary) of Qualified Capital Stock of the Company (or warrants, options
or other rights to acquire Qualified Capital Stock of the Company) or
Indebtedness of the Company which is subordinate or junior in right of
payment to the Notes, at least to the extent and in the manner that the
Indebtedness being acquired is subordinated to the Notes and has a Weighted
Average Life to Maturity no less than that of the Indebtedness being
refinanced; or

(4) 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 for
consideration which, when added to all loans made pursuant to clause (5)
below of this paragraph during the same fiscal year and then outstanding
(determined as provided in clause (5) below) does not exceed $500,000 in the
aggregate in any fiscal year; or

(5) the making of loans and advances to employees of the Company or any
Restricted Subsidiary 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 (4)
of this paragraph during the same fiscal year, does not exceed $500,000 in
any fiscal year;

provided, however, that in the case of the immediately preceding clauses (2),
(3), (4) and (5), and in the case of clause (vi) of the definition of "Permitted
Investment," no Default or Event of Default shall have occurred or be continuing
at the time of such Restricted Payment or Permitted Investment, as the case may
be, or would occur as a result thereof.

The Indenture provides that in determining the aggregate amount of
Restricted Payments made subsequent to the Issue Date, amounts expended pursuant
to clauses (1), (2), (3) (but only to the extent that Indebtedness is acquired
in exchange for, or with the net proceeds from, the issuance of Qualified
Capital Stock of the Company or warrants, options or other rights to acquire
Qualified Capital Stock of the Company), (4) and (5) of the immediately
preceding paragraph, and clause (vi) of the definition of "Permitted
Investment," shall be included in such calculation.

The Indenture provides that for purposes of calculating the net proceeds
received by the Company from the issuance or sale of its Capital Stock either
upon the conversion of, or exchange for, Indebtedness of the Company or any
Restricted Subsidiary, such amount will be deemed to be an amount equal to the
difference of (a) the sum of (i) the principal amount or accreted value
(whichever is less) of such Indebtedness on the date of such conversion or
exchange and (ii) the additional cash consideration, if any, received by the
Company upon such conversion or exchange, less any payment on account of
fractional shares, minus (b) all expenses incurred in connection with such
issuance or sale. In addition, for purposes of calculating the net proceeds
received by the Company from the issuance or sale of its Capital Stock upon the
exercise of any options or warrants of the Company, such amount will be deemed
to be an amount equal to the difference of (a) the additional cash
consideration, if any, received by the Company upon such exercise, minus (b) all
expenses incurred in connection with such issuance or sale.

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The Indenture provides that not later than the date of making any Restricted
Payment, the Company shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by this covenant were computed, which
calculation may be based on the Company's latest financial statements.

Limitation on Asset Sales. The Indenture provides that neither the Company
nor any Restricted Subsidiary will, directly or indirectly, consummate any Asset
Sale unless:

(i) the Company or the applicable Restricted Subsidiary, as the case may
be, receives consideration at the time of such Asset Sale at least equal to
the fair market value of the assets sold or otherwise disposed of, and, in
the event such consideration is greater than $20,000,000, an opinion from a
nationally recognized investment banking firm states that such fair market
value, determined as of the date a definitive agreement has been entered
into for such Asset Sale, is fair, from a financial point of view, to the
Company or such Restricted Subsidiary;

(ii) at least 75% of the consideration received by the Company or the
Restricted Subsidiary, as the case may be, from such Asset Sale is cash or
Cash Equivalents (other than in the case where the Company is exchanging all
or substantially all the assets of one or more geographic service areas
operated by the Company or any Restricted Subsidiary (including by way of
the transfer of Capital Stock) for all or substantially all the assets
(including by way of the transfer of Capital Stock) constituting one or more
geographic service areas operated by another Person (each, a "Permitted
Exchange"), in which event the foregoing requirement with respect to the
receipt of cash or Cash Equivalents shall not apply) and is received at the
time of such disposition; and

(iii) upon the consummation of an Asset Sale (other than any Permitted
Exchange), the Company applies, or causes such Restricted Subsidiary to
apply, or enters into, or causes such Restricted Subsidiary to enter into, a
binding commitment to apply, any Net Cash Proceeds within 180 days of
receipt thereof (it being understood that any binding commitment to so apply
must be consummated within 240 days of such receipt) either (A) to prepay or
repay the Heartland Notes in accordance with the terms of the Notes and the
Participation Agreement, or (B) to reinvest in Productive Assets, or (C) to
repay or prepay Indebtedness (other than non-recourse Indebtedness) of any
Restricted Subsidiary, or (D) to repay or prepay any Indebtedness of the
Company that is secured by a Lien permitted to be incurred pursuant to
"--Limitation on Liens" below, or (E) to the extent not applied pursuant to
the immediately preceding clauses (A), (B), (C) or (D), pro rata (based on
the aggregate principal amount at maturity of the Notes and such other
Indebtedness then outstanding) to (I) the repayment or prepayment of any
Indebtedness of the Company (other than the Notes, and any Indebtedness
subordinated to the Notes) that is at the time redeemable or prepayable (and
is so redeemed or prepaid) and (II) purchase Notes tendered to the Company
for purchase at a price equal to 100% of the Accreted Value thereof on the
date of repurchase (if prior to March 1, 2001) or 100% of the principal
amount thereof (if on or after March 1, 2001), plus in each case accrued and
unpaid interest, if any, to the date of purchase pursuant to an offer to
purchase made by the Company as set forth below (an "Asset Sale Offer");
provided, however, that if at any time any non-cash consideration received
by the Company or any Restricted Subsidiary, as the case may be, in
connection with any Asset Sale is converted into or sold or otherwise
disposed of for cash, then such conversion or disposition shall be deemed to
constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall
be applied in accordance with this clause (iii); provided, further, however,
that the Company may defer making an Asset Sale Offer until the aggregate
Net Cash Proceeds from Asset Sales to be applied equal or exceed $5,000,000.

The Indenture provides that each notice of an Asset Sale Offer will be
mailed, by first class mail, to holders of Notes as shown on the applicable
register of holders of Notes. Such notice will specify, among other things, the
purchase date (which will be not less than 30 days nor more than 45 days from
the date such notice is mailed, except as otherwise required by law) and the
amount of Net Cash Proceeds

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available to repurchase Notes and will otherwise comply with the procedures set
forth in the Indenture. Upon receiving notice of the Asset Sale Offer, holders
of Notes may elect to tender their Notes in whole or in part in integral
multiples of $1,000 in principal amount at maturity. To the extent holders
properly tender Notes with an aggregate principal amount exceeding the Net Cash
Proceeds available to repurchase Notes in the Asset Sale Offer, Notes of
tendering holders will be repurchased on a pro rata basis (based upon the
aggregate principal amount at maturity tendered). To the extent that the
Accreted Value (if prior to March 1, 2001) or the aggregate principal amount of
Notes (if on or after March 1, 2001) tendered pursuant to an Asset Sale Offer is
less than the amount of Net Cash Proceeds available therefor, the Company may
use any remaining portion of such available Net Cash Proceeds not required to
fund the repurchase of tendered Notes for any purposes otherwise permitted by
the Indenture. Upon the consummation of any Asset Sale Offer, the amount of Net
Cash Proceeds from the Asset Sale in question to be the subject of future Asset
Sale Offers shall be deemed to be zero.

In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and the Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under "--Merger, Consolidation
and Sale of Assets" the successor Person shall be deemed to have sold the
properties and assets of the Company and the Restricted Subsidiaries not so
transferred for purposes of this covenant and shall comply with the provisions
of this covenant with respect to such deemed sale as if it were an Asset Sale;
provided, however, that to the extent that the Company is required to make an
offer to repurchase the Notes pursuant to the provisions described under
"--Change of Control" above, in connection with any transaction that would
otherwise be within the terms of this paragraph, the successor Person need not
comply with the provisions of this paragraph. In addition, the fair market value
of such properties and assets of the Company or the Restricted Subsidiaries
deemed to be sold shall be deemed to be Net Cash Proceeds for purposes of this
covenant.

The Indenture provides that the Company will comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of Notes pursuant to an Asset Sale Offer.

Limitations on Transactions with Affiliates. The Indenture provides that
neither the Company nor any Restricted Subsidiary will, directly or indirectly,
enter into, amend or permit or suffer to exist any transaction (including,
without limitation, the purchase, sale, lease or exchange of any property, the
guaranteeing of any Indebtedness or the rendering of any service) with or for
the benefit of any of its Affiliates (an "Affiliate Transaction"), other than
any Affiliate Transaction or Affiliate Transactions that are on terms that are
fair and reasonable to the Company and no less favorable to the Company than
those that might reasonably have been obtained at such time in a comparable
transaction by the Company on an arm's-length basis from a Person that is not an
Affiliate; provided, however, that for a transaction or series of related
transactions involving value of $5,000,000 or more, such determination will be
made in good faith by a majority of the members of the Board of Directors of the
Company and by a majority of the disinterested members of the Board of Directors
of the Company, if any; provided, further, however, that for a transaction or
series of related transactions involving value of $10,000,000 or more, the Board
of Directors of the Company shall have received, prior to the consummation
thereof, an opinion from a nationally recognized investment banking firm that
such Affiliate Transaction is fair, from a financial point of view, to the
Company or such Restricted Subsidiary. The foregoing provisions shall not
prohibit or restrict (a) transactions between the Company and a Wholly Owned
Restricted Subsidiary of the Company or among Wholly Owned Restricted
Subsidiaries of the Company, (b) Restricted Payments and Permitted Investments
made in accordance with the covenant described under "--Limitation on Restricted
Payments" above, (c) the payment of reasonable and customary fees to directors
of the Company who are not employees of the Company and the payment of
reasonable and customary compensation for director and Board of Director
observer fees, meeting expenses, insurance premiums and indemnities, to the
extent permitted by law, (d) making loans or advances to officers, employees or
consultants of the Company and the Restricted Subsidiaries (including travel and
moving expenses) in the ordinary course of business for bona fide business
purposes of the Company or such

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Restricted Subsidiary not in excess of $1,000,000 in the aggregate at any one
time outstanding, (e) rights or agreements with respect to Affiliate
Transactions contemplated by the Participation Agreement, (f) any employment or
option agreement entered into by the Company or any Restricted Subsidiary in the
ordinary course of business that is approved by the Compensation Committee of
the Board of Directors of the Company, (g) Affiliate Transactions in existence,
or for which rights or agreements are in existence, on the Issue Date, in each
case as in effect on the Issue Date, (h) channel leases and options with
Affiliates entered into after the Issue Date provided such leases are no less
beneficial to the Company or the applicable Subsidiary than any such leases in
effect on the Issue Date, and are approved by a majority of the Board of
Directors of the Company, (i) amendments to, or renewals of, the agreements and
leases referred to in clause (h) of this sentence; provided, however, that any
such amendments or renewals are no less beneficial to the Company or applicable
Restricted Subsidiary than the agreement or lease being amended or renewed and
are approved by a majority of the Board of Directors of the Company and (j) the
issuance of stock options (and shares of stock upon the exercise thereof)
pursuant to any stock option plan approved by the Board of Directors and
shareholders of the Company.

Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Indenture provides that neither the Company nor any Restricted
Subsidiary will, directly or indirectly, create or otherwise cause or permit to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to: (a) pay dividends or make any other distributions on
its Capital Stock; (b) make loans or advances or to pay any Indebtedness or
other obligation owed to the Company or any Restricted Subsidiary; (c) guarantee
any Indebtedness or any other obligation of the Company or any Restricted
Subsidiary; or (d) transfer any of its property or assets to the Company or any
Restricted Subsidiary (each of the foregoing restrictions, a "Payment
Restriction"), except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) the Indenture; (3) customary non-assignment
provisions of any lease governing a leasehold interest of the Company or any
Restricted Subsidiary; (4) any instrument governing Acquired Indebtedness, which
encumbrance or restriction was not incurred in connection with, as a result of,
or in anticipation of the incurrence of such Indebtedness and 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; (5) instruments governing
Indebtedness of Restricted Subsidiaries permitted under clause (j) of the
definition of Permitted Indebtedness; provided, however, that no such
encumbrance or restriction shall be effective other than at such time as there
is a payment default or financial covenant default pursuant to the terms of the
instrument governing such Indebtedness (it being understood that such covenants
shall be of the type customarily included in the financings incurred in the
ordinary course of business); (6) agreements existing on the Issue Date as such
agreements are from time to time in effect; provided, however, that any
amendments or modifications of such agreements which affect the encumbrances or
restrictions of the types subject to this covenant shall not result in such
encumbrances or restrictions being less favorable to the Company in any material
respect, as determined in good faith by the Board of Directors of the Company,
than the provisions as in effect before giving effect to the respective
amendment or modification; (7) an agreement effecting a refinancing, replacement
or substitution of Indebtedness issued, assumed or incurred pursuant to an
agreement described in clause (4), (5) or (6) of this covenant; provided,
however, that the provisions relating to such encumbrance or restriction
contained in any such refinancing, replacement or substitution agreement are not
less favorable to the Company in any material respect as determined in good
faith by the Board of Directors of the Company than the provisions relating to
such encumbrance or restriction contained in agreements referred to in such
clause (4), (5) or (6) of this covenant; (8) Liens permitted under the Indenture
to the extent that such Liens restrict the transfer of the asset or assets
subject thereto; and (9) with respect to clause (d) above, purchase money
obligations for property acquired in the ordinary course of business pursuant to
ordinary business terms.

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Limitation on Restricted and Unrestricted Subsidiaries. The Indenture
provides that the Board of Directors of the Company may (subject to the
penultimate paragraph of this covenant), if no Default or Event of Default shall
have occurred and be continuing or would arise therefrom, designate an
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that
(i) any such redesignation shall be deemed to be an incurrence as of the date of
such redesignation by the Company and the Restricted Subsidiaries of the
Indebtedness (if any) of such redesignated Subsidiary for purposes of the
covenant described under "--Limitation on Incurrence of Additional Indebtedness"
above; and (ii) unless such redesignated Subsidiary shall not have any
Indebtedness outstanding, other than Indebtedness which would be Permitted
Indebtedness, no such designation shall be permitted if immediately after giving
effect to such redesignation and the incurrence of any such additional
Indebtedness the Company could not incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) pursuant to the Leverage Ratio of the covenant
described under "--Limitation on Incurrence of Additional Indebtedness" above.
The Board of Directors of the Company also may, if no Default or Event of
Default shall have occurred and be continuing or would arise therefrom,
designate any Restricted Subsidiary to be an Unrestricted Subsidiary if (i) such
designation is at that time permitted under the covenant described under
"--Limitation on Restricted Payments" above and (ii) immediately after giving
effect to such designation, the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the Leverage Ratio
of the covenant described under "-- Limitation on Incurrence of Additional
Indebtedness" above. Any such designation by the Board of Directors of the
Company shall be evidenced to the Trustee by the filing with the Trustee of a
certified copy of the resolution of the Company's Board of Directors giving
effect to such designation or redesignation and an Officers' Certificate
certifying that such designation or redesignation complied with the foregoing
conditions and setting forth in reasonable detail the underlying calculations.

The Indenture provides that for purposes of the covenant described under
"--Limitation on Restricted Payments" above, (i) an "Investment" shall be deemed
to have been made at the time any Restricted Subsidiary is designated as an
Unrestricted Subsidiary in an amount (proportionate to the Company's equity
interest in such Subsidiary) equal to the net worth of such Restricted
Subsidiary at the time that such Restricted Subsidiary is designated as an
Unrestricted Subsidiary; (ii) at any date the aggregate of all Restricted
Payments made as Investments since the Issue Date shall exclude and be reduced
by an amount (proportionate to the Company's equity interest in such Subsidiary)
equal to (A) the amount of Investments in any Unrestricted Subsidiary that
becomes a Wholly Owned Restricted Subsidiary after the date of such Investment
or (B) the net worth of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Restricted Subsidiary, not to exceed, in
the case of any such redesignation of an Unrestricted Subsidiary as a Restricted
Subsidiary, the amount of Investments previously made by the Company and the
Restricted Subsidiaries in such Unrestricted Subsidiary that were treated as
Restricted Payments under the Indenture (in each case (i) and (ii) "net worth"
to be calculated based upon the fair market value of the assets of such
Subsidiary as of any such date of designation); and (iii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer.

The Indenture provides that notwithstanding the foregoing, the Board of
Directors of the Company may not designate any Subsidiary of the Company to be
an Unrestricted Subsidiary if, after such designation, (a) the Company or any
other Restricted Subsidiary (i) provides credit support for, or a guarantee of,
any Indebtedness of such Subsidiary (including any undertaking, agreement or
instrument evidencing such Indebtedness) or (ii) is directly or indirectly
liable for any Indebtedness of such Subsidiary, (b) a default with respect to
any Indebtedness of such Subsidiary (including any right which the holders
thereof may have to take enforcement action against such Subsidiary) would
permit (upon notice, lapse of time or both) any holder of any other Indebtedness
of the Company or any Restricted Subsidiary to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its final scheduled maturity or (c) such Subsidiary owns any Capital Stock of,
or owns or holds any Lien on any property of, any Restricted Subsidiary which is
not a Subsidiary of the Subsidiary to be so designated.

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The Indenture provides that Subsidiaries of the Company that are not
designated by the Board of Directors as Restricted or Unrestricted Subsidiaries
will be deemed to be Restricted Subsidiaries. Notwithstanding any provisions of
this covenant, all Subsidiaries of a Restricted Subsidiary will be Restricted
Subsidiaries and all Subsidiaries of an Unrestricted Subsidiary will be
Unrestricted Subsidiaries. The Board of Directors of the Company may not change
the designation of a Subsidiary of the Company more than twice in any period of
five years.

Limitation on Preferred Stock of Restricted Subsidiaries. The Indenture
provides that the Company will not permit any Restricted Subsidiary to, directly
or indirectly, issue any Preferred Stock (other than to the Company or to a
Wholly Owned Restricted Subsidiary of the Company) or permit any Person (other
than the Company or a Wholly Owned Subsidiary of the Company) to own any
Preferred Stock of any Restricted Subsidiary; provided, however, that this
covenant shall not prevent the issuance of or be violated by reason of (i)
Preferred Stock of Restricted Subsidiaries to the extent that such Preferred
Stock is outstanding on the Issue Date; (ii) Preferred Stock issued by a Person
prior to the time that (a) such Person becomes 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 only if such Preferred Stock was not issued
in anticipation of or in connection with or as a result of such transaction; and
(iii) Preferred Stock issued in exchange for, or the proceeds of which are used
to refinance, Preferred Stock referred to in the foregoing clauses (i) or (ii)
(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 that date of redemption or maturity of
the Preferred Stock being so refinanced); provided, further, however, that (a)
the liquidation value of such Preferred Stock so issued shall not exceed the
liquidation value of the Preferred Stock so refinanced and (b) the Preferred
Stock so issued (I) shall have a stated maturity not earlier than the stated
maturity of the Preferred Stock being refinanced and (II) shall have a Weighted
Average Life to Maturity equal to or greater than the remaining Weighted Average
Life to Maturity of the Preferred Stock being refinanced.

Limitation on Liens. The Indenture provides that neither the Company nor any
Restricted Subsidiary will, directly or indirectly, create, incur, assume or
suffer to exist any Liens upon any of their respective property or assets or on
any income or profits therefrom, or assign or otherwise convey any right to
receive income or profits thereon, whether owned on the date of the Indenture or
thereafter acquired, unless (x) in the case of Liens securing Indebtedness
subordinate to the Notes, the Notes are secured by a valid, perfected Lien on
such property, assets or proceeds that is senior in priority to such Liens and
(y) in all other cases, the Notes are equally and ratably secured; provided,
however,that the foregoing shall not prohibit or restrict, and the Company need
not equally and ratably secure the Notes as a result of, Permitted Liens.

Limitation on Sale and Leaseback Transactions. The Indenture provides that
neither the Company nor any Restricted Subsidiary will, directly or indirectly,
enter into any Sale and Leaseback Transaction, except that the Company or any
Restricted Subsidiary may enter into a Sale and Leaseback Transaction if (i)
immediately prior thereto, and after giving effect to such Sale and Leaseback
Transaction (the Indebtedness thereunder being equivalent to the Attributable
Value thereof) the Company could incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with the Leverage Ratio of the
covenant described under "--Limitation on Incurrence of Additional Indebtedness"
above and (ii) the Sale and Leaseback Transaction constitutes an Asset Sale
effected in accordance with the requirements of the covenant described under "--
Limitation on Asset Sales" above.

Limitation on Line of Business. The Indenture provides that for so long as
any Notes are outstanding, the Company and the Restricted Subsidiaries will
engage solely in the business of (i) transmitting video, voice or data primarily
through wireless cable transmission facilities, (ii) utilizing

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wireless channels for any commercial purpose permitted by the FCC, and (iii)
evaluating, participating or pursuing any other activity or opportunity that is
related to those identified in (i) or (ii) above (including pursuant to
acquisitions of entities or divisions or lines of business of entities in the
foregoing business); notwithstanding the foregoing, however, ownership by the
Company or any Restricted Subsidiary of stock in any Unrestricted Subsidiary, or
any other entity which is not a Restricted Subsidiary, shall not be deemed to
violate this covenant.

Merger, Consolidation and Sale of Assets. The Indenture provides that the
Company will not, in any transaction or series of transactions, merge or
consolidate with or into, or sell, assign, convey, transfer, lease or otherwise
dispose of all or substantially all of its properties and assets as an entirety
to, any Person or Persons, and the Company will not permit any Restricted
Subsidiary to enter into any such transaction or series of transactions if such
transaction or series of transactions, in the aggregate, would result in a sale,
assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of the Company or the Company and
the Restricted Subsidiaries, taken as a whole, to any other Person or Persons,
unless at the time of and after giving effect thereto (a) either (i) if the
transaction or series of transactions is a merger or consolidation involving the
Company, the Company shall be the surviving Person of such merger or
consolidation, or (ii) the Person formed by such consolidation or into which the
Company is merged or to which the properties and assets of the Company or such
Restricted Subsidiary, as the case may be, are sold, assigned, conveyed,
transferred, leased or otherwise disposed of (including, with respect to the
Restricted Subsidiaries, by merger or consolidation) (any such surviving Person
or Persons of such merger or consolidation or to whom such sale, assignment,
conveyance, lease or other disposition has been made being the "Surviving
Entity") shall be a corporation organized and existing under the laws of the
United States of America, any state thereof or the District of Columbia and
shall expressly assume by a supplemental indenture executed and delivered to the
Trustee, in form reasonably satisfactory to the Trustee, all the obligations of
the Company under the Notes, the Indenture and, if then in effect, the Notes
Registration Rights Agreement, and in each case, the Indenture, and, if then in
effect, the Notes Registration Rights Agreement shall remain in full force and
effect; (b) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (including, without
limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of transactions), no
Default or Event of Default shall have occurred and be continuing and the
Company or the Surviving Entity, as the case may be, after giving effect to such
transaction or series of transactions on a pro forma basis (including, without
limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of transactions),
could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the Leverage Ratio in the covenant described under "--Limitation on
Incurrence of Additional Indebtedness" above; and (c) immediately after giving
effect to such transaction or series of transactions on a pro forma basis
(including, without limitation, any Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction or series of
transactions), the Consolidated Net Worth of the Company or the Surviving
Entity, as the case may be, is at least equal to the Consolidated Net Worth of
the Company immediately before such transaction or series of transactions.

The Indenture provides that for purposes of the foregoing, the transfer (by
lease, assignment, sale or otherwise, in a single transaction or series of
related transactions) of all or substantially all of the properties and assets
of one or more Restricted Subsidiaries, the Capital Stock of which constitutes
all or substantially all of the properties and assets of the Company, will be
deemed to be the transfer of all or substantially all of the properties and
assets of the Company.

The Indenture provides that in connection with any consolidation, merger,
sale, assignment, conveyance, transfer, lease or other disposition contemplated
hereby, the Company shall deliver, or cause to be delivered, to the Trustee, in
form and substance reasonably satisfactory to the Trustee, an officer's
certificate and an opinion of counsel, each stating that such consolidation,
merger, transfer,

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lease, assignment or other disposition and the supplemental indenture in respect
thereof complies with the requirements under the Indenture.

The Indenture provides that upon any consolidation or merger or any sale,
assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the assets of the Company in accordance with the foregoing,
in which the Company is not the continuing corporation, the successor
corporation formed by such a consolidation or into which the Company is merged
or to which such transfer is made shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under the Indenture with the
same effect as if such successor corporation had been named as the Company
therein, and thereafter, except in the case of a lease, the predecessor
corporation shall be relieved of all obligations and covenants under the
Indenture, the Notes, and if then in effect, the Notes Registration Rights
Agreement; provided, however, that solely for purposes of calculating Cumulative
EBITDA in connection with the covenant described under "--Limitation on
Restricted Payments" above, any such successor Person 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 or sale,
assignment, conveyance, transfer, lease or other disposition of assets.

The Indenture provides that for all purposes of the Indenture and the Notes
(including the provisions of this covenant and the covenants described under
"--Limitation on Incurrence of Additional Indebtedness," "--Limitation on
Restricted and Unrestricted Subsidiaries" and "--Limitation on Liens"),
Subsidiaries of any Surviving Entity will, upon such transaction or series of
transactions, become Restricted Subsidiaries or Unrestricted Subsidiaries as
provided pursuant to the covenant described under "--Limitation on Restricted
and Unrestricted Subsidiaries" and all Indebtedness, and all Liens on property
or assets, of the Company and the Restricted Subsidiaries immediately prior to
such transaction or series of transactions will be deemed to have been incurred
upon such transaction or series of transactions.

EVENTS OF DEFAULT

The Indenture provides that the following events will be defined in the
Indenture as "Events of Default":

(i) the failure to pay interest on the Notes when the same becomes due
and payable and the Default continues for a period of 30 days;

(ii) the failure to pay the principal or Accreted Value of any Note when
such principal or Accreted Value becomes due and payable, at maturity, upon
acceleration, redemption, pursuant to a required offer to purchase or
otherwise;

(iii) a default in the observance or performance of any other covenant
or agreement contained in the Notes or the Indenture which default continues
for a period of 60 days after the Company receives written notice thereof
from the Trustee specifying the default and stating that such notice is a
"Notice of Default" under the Indenture or the Company and the Trustee
receive such notice from holders of at least 25% in aggregate principal
amount of the outstanding Notes;

(iv) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any Restricted Subsidiary
(or the payment of which is guaranteed by the Company or any Restricted
Subsidiary), whether such Indebtedness or guarantee now exists, or is
created after the Issue Date, which default (a) is caused by a failure to
pay when due principal on such Indebtedness within the grace period provided
in such Indebtedness (which failure continues beyond any applicable grace
period) (a "Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any
other such Indebtedness under which

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there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5,000,000 or more and with respect to such clauses
(a) and (b) such Payment Default or acceleration has not been rescinded or
annulled or such Indebtedness discharged or paid in full in cash within 20
days;

(v) one or more judgments in an aggregate amount in excess of $5,000,000
(unless covered by insurance by a reputable insurer as to which the insurer
has acknowledged coverage) being rendered against the Company or any of its
Material Subsidiaries and such judgments remain undischarged or unstayed for
a period of 60 days after such judgment or judgments become final and
non-appealable;

(vi) certain events of bankruptcy, insolvency or reorganization
affecting the Company or any of its Subsidiaries; or

(vii) any holder of at least $5,000,000 in aggregate principal amount of
Indebtedness of the Company or any Restricted Subsidiary shall foreclose
upon assets of the Company or any Restricted Subsidiary having an aggregate
fair market value, individually or in the aggregate, of at least $5,000,000
or shall have exercised any right under applicable law or applicable
security documents to take ownership of any such assets in lieu of
foreclosure.

The Indenture provides that upon the happening of any Event of Default
specified in the Indenture, the Trustee may, or the holders of at least 25% in
principal amount of outstanding Notes may, declare the Accreted Value (if prior
to March 1, 2001), or all unpaid principal amount of, and accrued but unpaid
interest, if any, on (if on or after March 1, 2001) all the Notes to be due and
payable by notice in writing to the Company and the Trustee specifying the
respective Event of Default and that it is a "notice of acceleration" (the
"Acceleration Notice") and upon such declaration the same shall become
immediately due and payable, notwithstanding anything contained in the Notes or
the Indenture to the contrary. If an Event of Default with respect to bankruptcy
proceedings relating to the Company occurs and is continuing, then such amount
will ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any holder of the Notes.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitation, holders of not less
than a majority in aggregate principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. If a Default or an
Event of Default occurs and is continuing and is known to the Trustee, the
Trustee shall mail to each holder of the Notes notice of the Default or Event of
Default within 30 days after obtaining knowledge thereof. The Trustee may
withhold from holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest or a failure to comply with the covenants and provisions
described under "--Change of Control"; "-- Certain Covenants--Limitation on
Asset Sales"; and "--Merger, Consolidation and Sale of Assets" above) if it
determines that withholding notice is in their interest.

The Indenture provides that, 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 of money due in respect of the Notes has been obtained, the
holders of not less than a majority in principal amount of the Notes then
outstanding by written notice to the Company and the Trustee may rescind 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, (iii) the principal of and premium, if any, on any Notes which have
become due otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the Notes, and (iv) to the extent that payment of
such interest is lawful, interest upon overdue interest and overdue principal at
the rate provided for in the Notes which has become due otherwise than by such
declaration of acceleration; (b) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction; and

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(c) all Events of Default, other than the non-payment of principal of, premium,
if any, and interest on the Notes that have become due solely by such
declaration of acceleration, have been cured or waived. Prior to the declaration
of acceleration of the Notes, the holders of not less than a majority in
principal amount of the Notes may waive any existing Default or Event of Default
under the Indenture, and its consequences, except a default in the payment of
the principal of or interest on any Notes or any default in respect of any
covenant which cannot be amended without the consent of each holder affected.

The Indenture provides that no holder of any of the Notes has any right to
institute any proceeding with respect to the Indenture or the Notes or any
remedy thereunder, unless the holders of at least 25% in aggregate principal
amount of the outstanding Notes have made written request, and offered
reasonable indemnity, to the Trustee to institute such proceeding as Trustee
under the Notes and the Indenture, the Trustee has failed to institute such
proceeding within 30 days after receipt of such notice, request and offer of
indemnity and the Trustee, within such 30-day period, has not received
directions inconsistent with such written request by holders of not less than a
majority in aggregate principal amount of the outstanding Notes. Such
limitations do not apply, however, to a suit instituted by a holder of a Note
for the enforcement of the payment of the principal of, premium, if any, or
interest on such Note on or after the respective due dates expressed or provided
for in such Note.

During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, whether or not an Event of Default shall occur and be continuing, the
Trustee under the Indenture is not under any obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any of the
holders unless such holders shall have offered to the Trustee reasonable
security or indemnity. Subject to certain provisions concerning the rights of
the Trustee, the holders of not less than a majority in aggregate principal
amount of the outstanding Notes have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee under the Indenture.

The Company is required to furnish to the Trustee annual and quarterly
statements as to the performance by the Company of its obligations under the
Indenture and as to any default in such performance. The Company is also
required to notify the Trustee within ten days of any event which is, or after
notice or lapse of time or both would become, an Event of Default.

DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE

The Indenture provides that the Company may, at its option and at any time,
terminate the obligations of the Company with respect to the outstanding Notes
("defeasance"). Such defeasance means that the Company shall be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
Notes, except for (i) the rights of holders of outstanding Notes to receive
payment in respect of the principal of, premium, if any, and interest on such
Notes when such payments are due, (ii) the Company's obligations to issue
temporary Notes, register the transfer or exchange of any Notes, replace
mutilated, destroyed, lost or stolen Notes and maintain an office or agency for
payments in respect of the Notes, (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 terminate
the obligations of the Company with respect to certain covenants that are set
forth in the Indenture, some of which are described under "--Certain Covenants"
above (including the covenant described under "--Change of Control" above) and
any subsequent failure to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Notes ("covenant defeasance").

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The Indenture provides that 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 Obligations (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, to pay the
principal of, premium, if any, and interest on the outstanding Notes to
redemption or maturity (except lost, stolen or destroyed Notes which have been
replaced or paid); (ii) the Company shall have delivered to the Trustee an
opinion of counsel 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 defeasance or 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 defeasance or covenant defeasance had not occurred (in the
case of defeasance, such opinion must refer to and be based upon a ruling of the
Internal Revenue Service or a change in applicable federal income tax laws);
(iii) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit; (iv) such defeasance or covenant defeasance shall not
cause the Trustee to have a conflicting interest with respect to any securities
of the Company; (v) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument to which the Company is a party or by which it is bound; (vi) the
Company shall have delivered to the Trustee an opinion of counsel 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; and (vii) the Company
shall have delivered to the Trustee an officers' certificate and an opinion of
counsel, each stating that all conditions precedent under the Indenture to
either defeasance or covenant defeasance, as the case may be, have been complied
with.

SATISFACTION AND DISCHARGE

The Indenture provides that the Indenture will be discharged and will cease
to be of further effect (except as to surviving rights or registration of
transfer or exchange of the Notes, as expressly provided for in the Indenture)
as to all outstanding Notes when (i) either (a) all the Notes theretofore
authenticated and delivered (except lost, stolen or destroyed Notes which have
been replaced or repaid, Notes for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust) have been delivered to the
Trustee for cancellation or (b) all Notes not theretofore delivered to the
Trustee for cancellation (except lost, stolen or destroyed Notes which have been
replaced or paid) have been called for redemption pursuant to the terms of the
Notes or have otherwise become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (ii)
the Company has paid all other sums payable under the Indenture by the Company;
(iii) there exists no Default or Event of Default under the Indenture; and (iv)
the Company has delivered to the Trustee an officers' certificate and an opinion
of counsel stating that all conditions precedent under the Indenture relating to
the satisfaction and discharge of the Indenture have been complied with.

REPORTS TO HOLDERS

The Indenture provides that the Company shall deliver to the Trustee, within
15 days after it files them with the Commission, copies of its annual report 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 within the time periods prescribed under such rules
and regulations.

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Notwithstanding that the Company may not be required to remain subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act or otherwise
report on an annual and quarterly basis on forms provided for such annual and
quarterly reporting pursuant to rules and regulations promulgated by the
Commission, the Indenture requires the Company to continue to file with the
Commission and provide to the Trustee such annual and interim reports on Forms
10-K and 10-Q, respectively, as the Company would be required to file were it
subject to such reporting requirements within the time periods prescribed under
such rules and regulations. Upon qualification of the Indenture under the TIA,
the Company shall also comply with the provisions of TIA Sec. 314(a). The
Company shall not be obligated to file any such reports with the Commission if
the Commission does not permit such filings but shall remain obligated to
provide such reports to the Trustee and the holders within the periods of time
referred to in the preceding sentence. The Company shall provide to any holder
of Notes any information reasonably requested by such holder concerning the
Company (including financial statements) necessary in order to permit such
holder to sell or transfer Notes in accordance with Rule 144A promulgated under
the Securities Act.

MODIFICATION OF THE INDENTURE

The Indenture provides that the Company, when authorized by a Board
Resolution, and the Trustee may amend, waive or supplement the Indenture or the
Notes without notice to or consent of any Holder: (a) to cure any ambiguity,
defect or inconsistency; (b) to comply with "--Certain Covenants-- Merger,
Consolidation, and Sale of Assets" above; (c) to provide for uncertificated
Notes in addition to certificated Notes; (d) to comply with any requirements of
the Commission in order to effect or maintain the qualification of the Indenture
under the TIA; (e) to provide for issuance of the New Notes (which will have
terms substantially identical in all material respects to the Old Notes except
that the transfer restrictions contained in the Old Notes will be modified or
eliminated, as appropriate), and which will be treated together with any
outstanding Old Notes, as a single issue of securities; or (f) to make any
change that would provide any additional benefit or rights to the Holders or
that does not adversely affect the rights of any Holder. Notwithstanding the
foregoing, the Trustee and the Company may not make any change that adversely
affects the rights of any Holder under the Indenture. Other modifications and
amendments of the Indenture or the Notes may be made with the consent of the
holders of not less than a majority in aggregate principal amount of the then
outstanding Notes, except that, without the consent of each holder of the Notes
affected thereby, no amendment may, directly or indirectly: (i) reduce the
amount of Notes whose holders must consent to any amendment; (ii) reduce the
rate of or change the time for payment of interest, including defaulted interest
or additional interest, on any Notes; (iii) reduce the principal amount or
Accreted Value (or rate of accretion) of or change the fixed maturity of any
Notes, or change the date on which any Notes may be subject to redemption or
repurchase, or reduce the redemption or repurchase price therefor; (iv) make any
Notes payable in money other than that stated in the Notes; (v) make any change
in provisions of the Indenture protecting the right of each holder of a Note to
receive payment of principal of and interest on such Note on or after the date
thereof or to bring suit to enforce such payment or permitting holders of a
majority in principal amount of the Notes to waive Defaults or Events of
Default; (vi) subordinate in right of payment, or otherwise subordinate, the
Notes to any other Indebtedness or obligation of the Company; or (vii) amend,
alter, change or modify the obligation of the Company to make and consummate a
Change of Control Offer in the event of a Change of Control or make and
consummate an Asset Sale Offer or waive any Default in the performance of any
such offers or modify any of the provisions or definitions with respect to any
such offers.

TRANSFER AND EXCHANGE

A holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a holder to pay any taxes and fees required by law or

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permitted by the Indenture. The Company is not required to transfer or exchange
any Note selected for redemption. Also, the Company is not required to transfer
or exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.

THE TRUSTEE

The Indenture provides that, except during the continuance of an Event of
Default, the Trustee thereunder will perform only such duties as are
specifically set forth in the Indenture. If an Event of Default has occurred and
is continuing, the Trustee will exercise such rights and powers vested in it
under the Indenture and use the same degree of care and skill in its exercise as
a prudent person would exercise under the circumstances in the conduct of such
person's own affairs.

The Indenture and provisions of the Trust Indenture Act of 1939, as amended,
incorporated by reference therein contain limitations on the rights of the
Trustee thereunder, should it become a creditor of the Company, 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, however, that if it
acquires any conflicting interest (as defined in such Act) it must eliminate
such conflict or resign.

GOVERNING LAW

The Indenture provides that the Indenture and the Notes will be governed by
the laws of the State of New York, without regard to the principles of conflicts
of law.

CERTAIN DEFINITIONS

Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.

"Accreted Value" means with respect to any Note, as of any date of the
determination prior to March 1, 2001, the sum of (a) $573.71 and (b) the portion
of the excess of the principal amount of such Note over the amount which shall
have been accreted thereon through such date, such amount to be so accreted on a
daily basis at the rate of 11 3/8% per annum, compounded semi-annually on each
March 1 and September 1 from the Issue Date through the date of determination.

"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary or
at the time it merges or consolidates with the Company or any Restricted
Subsidiary or assumed in connection with the acquisition of assets from such
Person, including any such Indebtedness incurred by such Person in connection
with, or in anticipation or contemplation of, such Person's becoming a
Restricted Subsidiary or such acquisition, merger or consolidation.

"Affiliate" means a Person who, directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the Company or any Restricted Subsidiary. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. Notwithstanding the
foregoing, the term "Affiliate" shall not, with respect to the Company, include
any Wholly Owned Restricted Subsidiary of the Company.

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"Analog Customer" means a Qualifying Customer who is not a Digital Customer.

"Asset Acquisition" means (a) an Investment by the Company or any Restricted
Subsidiary in any other Person pursuant to which such Person shall become a
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary, (b) the acquisition by the Company or any Restricted
Subsidiary of the assets of any Person which constitute all or substantially all
of the assets of such Person or (c) the acquisition by the Company or any
Restricted Subsidiary of any division or line of business of any Person.

"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business pursuant to ordinary business terms), assignment or other transfer
or disposition for value (for purposes of this definition, each, a
"disposition") by the Company or any Restricted Subsidiary (including, without
limitation, pursuant to any Sale and Leaseback Transaction or any merger or
consolidation of any Subsidiary of the Company with or into another Person
(other than the Company or any Wholly Owned Restricted Subsidiary of the
Company) whereby such Subsidiary shall cease to be a Restricted Subsidiary) to
any Person of (i) any Capital Stock of any Restricted Subsidiary (other than in
respect of director's qualifying shares or investments by foreign nationals
mandated by applicable law); (ii) all or substantially all of the properties and
assets of any division or line of business of the Company or any Restricted
Subsidiary; or (iii) any other properties or assets of the Company or any
Restricted Subsidiary, other than in the ordinary course of business pursuant to
ordinary business terms; provided, however, that for purposes of the covenant
described under "--Certain Covenants--Limitation on Asset Sales" above, Asset
Sales shall not include: (a) a transaction or series of related transactions for
which the Company or the applicable Restricted Subsidiary receives aggregate
consideration of less than $1,000,000 in any fiscal year; (b) transactions
complying with the covenant described under "--Certain Covenants--Merger,
Consolidation and Sale of Assets" above; (c) any disposition to the Company; (d)
any disposition to a Wholly Owned Restricted Subsidiary of the Company that is
not subject to any Payment Restriction; (e) any Lien securing Indebtedness to
the extent that such Lien is granted in compliance with the covenant described
under "--Certain Covenants--Limitation on Liens" above; (f) any Restricted
Payment (or Permitted Investment) permitted by the covenant described under
"--Certain Covenants--Limitation on Restricted Payments" above; and (g) any
disposition of assets or property in the ordinary course of business and on
ordinary business terms to the extent such property or assets are obsolete, worn
out or no longer useful in the Company's or any Restricted Subsidiary's
business.

"Attributable Value" means, as to any particular lease under which any
Person is at the time liable other than a Capitalized Lease Obligation, and at
any date as of which the amount thereof is to be determined, the total net
amount of rent required to be paid by such Person under such lease during the
initial term thereof as determined in accordance with GAAP, discounted from the
last date of such initial term to the date of determination at a rate per annum
equal to the discount rate which would be applicable to a Capitalized Lease
Obligation with a like term in accordance with GAAP. The net amount of rent
required to be paid under any such lease for any such period shall be the
aggregate amount of rent payable by the lessee with respect to such period after
excluding amounts required to be paid on account of insurance, taxes,
assessments, utility, operating and labor costs and similar charges. In the case
of any lease which is terminable by the lessee upon the payment of a penalty,
such net amount shall also include the amount of such penalty, but no rent shall
be considered as required to be paid under such lease subsequent to the first
date upon which it may be so terminated. "Attributable Value" means, as to a
Capitalized Lease Obligation under which any Person is at the time liable and at
any date as of which the amount thereof is to be determined, the capitalized
amount thereof that would appear on the face of a balance sheet of such Person
in accordance with GAAP.

"BANX Affiliates" means Bell Atlantic Corporation, a Delaware corporation,
and NYNEX Corporation, a Delaware corporation, and their Affiliates.

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"CAI" means CAI Wireless Systems, Inc., a Connecticut corporation.

"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated) of capital stock, including each class of common stock and Preferred
Stock of such Person and (ii) with respect to any Person that is not a
corporation, any and all partnership or other equity interests of such Person.

"Capitalized Lease Obligation" means any obligation under a lease of (or
other agreement conveying the right to use) any property (whether real, personal
or mixed) that is required to be classified and accounted for as a capital lease
obligation under GAAP, and, for purposes of the Indenture, the amount of any
such obligation at any date shall be the capitalized amount thereof at such
date, determined in accordance with GAAP.

"Cash Equivalents" means, at any time, (i) any evidence of Indebtedness with
a maturity of 180 days or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof); (ii) certificates of deposit or acceptances with a
maturity of 180 days or less of any financial institution that is a member of
the Federal Reserve System having combined capital and surplus and undivided
profits of not less than $500,000,000; (iii) certificates of deposit with a
maturity of 180 days or less of any financial institution that is not organized
under the laws of the United States, any state thereof or the District of
Columbia that are rated at least A-1 by S&P or at least P-1 by Moody's or at
least an equivalent rating category of another nationally recognized securities
rating agency; (iv) repurchase agreements and reverse repurchase agreements
relating to marketable direct obligations issued or unconditionally guaranteed
by the government of the United States of America or issued by any agency
thereof and backed by the full faith and credit of the United States of America,
in each case maturing within 180 days from the date of acquisition; provided
that the terms of such agreements comply with the guidelines set forth in the
Federal Financial Agreements of Depository Institutions With Securities Dealers
and Others, as adopted by the Comptroller of the Currency on October 31, 1985.

"Change of Control" means the occurrence of one or more of the following
events:

(i) any sale, lease, exchange, transfer or other disposition (in one
transaction or a series of related transactions) of all or substantially all
of the assets of the Company and the Restricted Subsidiaries to any Person
or group of related Persons for purposes of Section 13(d) of the Exchange
Act (a "Group") (whether or not otherwise in compliance with the provisions
of the Indenture), other than to any Strategic Equity Investor, in any such
event pursuant to a transaction in which immediately after the consummation
thereof the Person or Persons owning a majority of the voting power of the
Voting Stock of the Company immediately prior to the consummation of such
transaction, or a Strategic Equity Investor and the Persons owning a
majority of the Voting Stock of the Company immediately prior to such
transaction shall not own, directly or indirectly, a majority of the voting
power of the Voting Stock of the Person to whom such sale, lease, exchange,
transfer or other disposition has been made; or

(ii) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election to such Board of Directors
or whose nomination for election by the shareholders of the Company was
approved by a vote of a majority of the directors of the Company then still
in office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the Board of Directors of the Company
then in office; or

(iii) any Person or Group, excluding any Strategic Equity Investor and
any Permitted Holder, either (1) is or becomes, by purchase, tender offer,
exchange offer, open market purchases,

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privately negotiated purchases or otherwise, the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not
applicable, except that a Person shall be deemed to have "beneficial
ownership" of all securities that such Person has the right to acquire,
whether such right is exercisable immediately or after the passage of time
only), directly or indirectly, of more than 50% of the total then
outstanding voting power of the Voting Stock of the Company (for the purpose
of this clause (iii), such Person or Group will be deemed to "beneficially
own" (determined as aforesaid) the voting power of the Voting Stock of a
corporation (the "specified corporation") held by any other corporation (the
"parent corporation") if such Person or Group "beneficially owns," directly
or indirectly, a majority of the voting power of the Voting Stock of such
parent corporation) or (2) otherwise has the ability to elect, directly or
indirectly, a majority of the members of the Board of Directors of the
Company (for purposes of this clause (iii), any Strategic Equity Investor or
Permitted Holder, as the case may be, will be deemed to "beneficially own"
(determined as aforesaid) the voting power of the Voting Stock of a
specified corporation held by a parent corporation so long as such Strategic
Equity Investor or Permitted Holder, as the case may be, "beneficially
owns," directly or indirectly, in the aggregate a majority of the voting
power of the Voting Stock of the parent corporation); provided, however,
that no Change of Control shall be deemed to have occurred pursuant to this
clause (iii) solely due to a Person that on the date of acquisition of such
Voting Stock was a Strategic Equity Investor thereafter failing to be a
Strategic Equity Investor due to a change in such Person's Total Market
Capitalization; or

(iv) the Company consolidates with or merges into another Person (other
than a Strategic Equity Investor) and the stockholders immediately prior to
such merger or consolidation, or a Strategic Equity Investor and the
stockholders immediately prior to such merger or consolidation, hold less
than a majority of the voting power of the Voting Stock of the resulting
entity.

"Closing Price" means on any Trading Day with respect to the per share price
of any shares of Capital Stock 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 Nasdaq 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.

"Consolidated EBITDA" means, with respect to any Person, for any period, the
sum (without duplication) of (i) Consolidated Net Income of such Person, plus
(ii) to the extent such Consolidated Net Income has been reduced thereby, (A)
all income taxes of such Person and its Restricted Subsidiaries paid or accrued
in accordance with GAAP for such period (other than income taxes attributable to
extraordinary or nonrecurring gains or losses), (B) Consolidated Interest
Expense of such Person and (C) without duplication of any amount included in
subclause (A) or (B) of this clause (ii), Consolidated Non-Cash Charges of such
Person, all as determined on a consolidated basis for such Person and its
Restricted Subsidiaries in conformity with GAAP, less (iii) (A) all non-cash
items increasing such Consolidated Net Income for such period and (B) all cash
payments during such period relating to non-cash charges that were added back in
determining Consolidated EBITDA in any prior

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period, all as determined on a consolidated basis for such Person and its
Restricted Subsidiaries in conformity with GAAP.

"Consolidated Interest Expense" means, with respect to any Person for any
period, without duplication, the sum of (i) the interest expense of such Person
and its Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP, including, without limitation, (a) any
amortization of debt discount, (b) the net cost under Interest Swap Obligations
(including any amortization of discounts), (c) the interest portion of any
deferred payment obligation, (d) all commissions, discounts and other fees and
charges owed with respect to letters of credit, bankers' acceptance financing or
similar facilities, and (e) all accrued interest and (ii) the interest component
of Capitalized Lease Obligations paid or accrued by such Person and its
Restricted Subsidiaries during such period as determined on a consolidated basis
in accordance with GAAP.

"Consolidated Net Income" means, with respect to any Person, for any period,
the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided, however, that there shall be excluded therefrom, without
duplication, (a) gains and losses from sales or other dispositions of assets of
such Person or any Restricted Subsidiary of such Person or of Capital Stock of
any Restricted Subsidiary of such Person or abandonments or reserves relating
thereto and the related tax effects according to GAAP, (b) items classified as
extraordinary or nonrecurring gains and losses, and the related tax effects
according to GAAP, (c) the net income of any Unrestricted Subsidiary and Persons
(other than Restricted Subsidiaries) accounted for by such Person using the
equity method of accounting, except to the extent of cash dividends or
distributions actually paid in cash to such Person or any Restricted Subsidiary
(in the case of any such payment to a Restricted Subsidiary, subject to the
limitations set forth in clause (e) of this definition), not to exceed such
Person's proportionate share of such net income for such period, (d) the net
income (or loss) of any Person acquired in a "pooling of interests" transaction
accrued prior to the date it becomes a Restricted Subsidiary of such first
referred to Person or is merged or consolidated with such Person or any of its
Restricted Subsidiaries, (e) the net income (but not loss) of any Restricted
Subsidiary of such Person for such period to the extent that the declaration of
dividends or similar distributions by that Restricted Subsidiary of that income
is restricted by charter, contract, operation of law or otherwise (regardless of
any waiver), and (f) any gain or loss realized upon the termination of any
employee benefit plan, on an after-tax basis.

"Consolidated Net Worth" means, with respect to any Person, at any date, the
consolidated stockholders' equity of such Person and its Restricted
Subsidiaries, as determined on a consolidated basis in accordance with GAAP,
less any amounts attributable to Disqualified Capital Stock of such Person and
any Preferred Stock of any of its Restricted Subsidiaries (other than to the
extent held by such Person or any of its Wholly Owned Restricted Subsidiaries).

"Consolidated Non-Cash Charges" means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Restricted Subsidiaries reducing Consolidated Net Income of
such Person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary or nonrecurring item).

"Consolidated Total Indebtedness" means, with respect to any Person, on any
date, without duplication, the aggregate outstanding principal amount of
Indebtedness of such Person and its Restricted Subsidiaries.

"Cumulative EBITDA" means the cumulative Consolidated EBITDA of the Company
from and after the first day of the first fiscal quarter beginning after the
Issue Date to the end of the fiscal quarter immediately preceding the date of
determination ending not more than 135 days prior to the date of determination,
or, if such cumulative Consolidated EBITDA for such period is negative, minus
the amount by which such cumulative Consolidated EBITDA is less than zero.

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"Cumulative Interest Expense" means the aggregate amount of Consolidated
Interest Expense of the Company paid or accrued by the Company from and after
the first day of the first fiscal quarter beginning after the Issue Date to the
end of the fiscal quarter immediately preceding the date of determination ending
not more than 135 days prior to the date of determination.

"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.

"Determination Date" shall have the meaning set forth in the definition of
Leverage Ratio.

"Digital Customer" means a Qualifying Customer who is served utilizing
digital technology.

"Disqualified Capital Stock" means any Capital Stock which, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures (excluding any
maturity as the result of an optional redemption by the issuer thereof) or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof (except, in each case,
upon the occurrence of a Change of Control), in whole or in part, on or prior to
the final maturity date of the Notes.

"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.

"Existing Qualifying Customers" means 50,000, reduced by the number of
Qualifying Customers that may be sold in connection with the sale of assets
comprising Markets Held for Sale.

"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between an informed and willing seller and an informed and willing and able
buyer, neither of whom is under undue pressure or compulsion to complete the
transaction. Except as provided in the Trust Indenture Act of 1939, as amended,
and except with respect to non-cash Investments not exceeding $5,000,000, fair
market value shall be determined (I) with respect to any Asset Sale involving
consideration of less than $5,000,000, by management of the Company and (II) in
all other cases (whether or not involving an Asset Sale), by the Board of
Directors of the Company acting in good faith and shall be evidenced by a board
resolution (certified by the Secretary or Assistant Secretary of the Company)
delivered to the Trustee; provided, however, that if (A) the aggregate non-cash
consideration to be received by the Company or any Restricted Subsidiary from
any Asset Sale shall reasonably be expected to exceed $5,000,000 or (B) if the
net worth of any Restricted Subsidiary to be designated as an Unrestricted
Subsidiary shall reasonably be expected to exceed $10,000,000, then fair market
value shall be determined by a nationally recognized investment banking firm.

"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States of America, which are applicable from time to
time and are consistently applied.

"guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such other Person (whether arising by virtue
of partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain

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financial statement conditions or otherwise) or (ii) entered into for purposes
of assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part) (but if in part, only to the extent
thereof); provided, however, that the term "guarantee" shall not include (A)
endorsements for collection or deposit in the ordinary course of business and
(B) guarantees (other than guarantees of Indebtedness) by the Company in respect
of assisting one or more Subsidiaries in the ordinary course of their respective
businesses, including without limitation guarantees of trade obligations and
operating leases, on ordinary business terms. The term "guarantee" used as a
verb has a corresponding meaning.

"Heartland" means Heartland Wireless Communications, Inc., a Delaware
corporation.

"Heartland Long-Term Note" means the promissory note of the Company in the
principal amount of $15.0 million, in the form issued to Heartland on the Issue
Date.

"Heartland Notes" means, collectively, the Heartland Short-Term Note and the
Heartland Long-Term Note.

"Heartland Short-Term Note" means the promissory note of the Company in the
principal amount of $25.0 million, in the form issued to Heartland on the Issue
Date.

"Heartland Short-Term Note Collateral" means $25.0 million that was
deposited in a segregated bank account or invested in a cash equivalent
investment by the Company on the Issue Date, which funds, together with the
interest thereon, shall secure the obligation of the Company to repay the
Heartland Short-Term Note.

"Incremental Qualifying Customers" means, as of the date of determination,
the aggregate number of Qualifying Customers of the Company and its Restricted
Subsidiaries minus Existing Qualifying Customers.

"incur" shall have the meaning set forth in "--Certain Covenants--Limitation
on Incurrence of Additional Indebtedness" above; and "incurrence" and "incurred"
shall have meanings correlative to the foregoing.

"Indebtedness" means with respect to any Person, without duplication, any
liability of such Person or such Person's Restricted Subsidiaries (i) for
borrowed money, (ii) evidenced by bonds, debentures, notes or other similar
instruments, (iii) constituting Capitalized Lease Obligations, (iv) incurred or
assumed as the deferred purchase price of property (including, without
limitation, obligations which constitute wireless channel rights obligations as
they have been calculated in the financial statements included in this
Prospectus), or pursuant to conditional sale obligations and title retention
agreements (but excluding trade accounts payable arising in the ordinary course
of business), (v) for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (vi) for Indebtedness of
others guaranteed by such Person, (vii) for Interest Swap Obligations, (viii)
for the higher of the voluntary liquidation preference, involuntary liquidation
preference, fixed redemption price or repurchase price of all Disqualified
Capital Stock and (ix) for Indebtedness of any other Person of the type referred
to in clauses (i) through (viii) which is secured by any Lien on any property or
asset of such first referred to Person, whether or not such Indebtedness is
assumed by such Person or is not otherwise such Person's legal liability;
provided, however, that if the obligations so secured have not been assumed by
such Person or are otherwise not such Person's legal liability, the amount of
such Indebtedness for the purposes of this definition shall be limited to the
lesser of the amount of such Indebtedness secured by such Lien or the fair
market value of the assets or property securing such Lien. The amount of
Indebtedness of any Person at any date shall be the outstanding principal amount
of all unconditional obligations described above, as such amount would be
reflected on a balance sheet prepared in accordance with GAAP, and the maximum
liability at such date of such Person for any contingent obligations described
above.

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"Interest Swap Obligations" means the obligations of any Person under any
interest rate protection agreement, interest rate future, interest rate option,
interest rate swap, interest rate cap or other interest rate hedge or
arrangement.

"Investment" by any Person means any direct or indirect (i) loan, advance or
other extension of credit or capital contribution (by means of transfers of cash
or other property (valued at the fair market value thereof as of the date of
transfer) to others or payments for property or services for the account or use
of others, or otherwise), (ii) purchase or acquisition of Capital Stock, bonds,
notes, debentures or other securities or evidences of Indebtedness issued by any
other Person (whether by merger, consolidation, amalgamation or otherwise and
whether or not purchased directly from the issuer of such securities or
evidences of Indebtedness) and (iii) guarantee or assumption of the Indebtedness
of any other Person (except for an assumption of Indebtedness for which the
assuming Person receives consideration with a fair market value at least equal
to the principal amount of the Indebtedness assumed). Investments shall exclude
extensions of trade credit and advances to customers and suppliers to the extent
made in the ordinary course of business on ordinary business terms. The amount
of any non-cash Investment shall be the fair market value of such Investment, as
determined conclusively in good faith by management of the Company unless the
fair market value of such Investment exceeds $5,000,000, in which case the fair
market value shall be determined conclusively in good faith by the Board of
Directors of the Company at the time such Investment is made. Notwithstanding
the foregoing, the purchase or acquisition of any securities of any other Person
to the extent effected with Qualified Capital Stock of the Company shall not be
deemed to be an Investment. The amount of any Investment shall not be adjusted
for increases or decreases in value, or write-ups, write-downs or write-offs
with respect to such Investment.

"Issue Date" means the actual date of original issuance of the Notes, which
was February 23, 1996.

"Leverage Ratio" means, as to any Person, the ratio of (i) the Consolidated
Total Indebtedness of such Person as of the date of the transaction or event
giving rise to the need to calculate the Leverage Ratio (the "Determination
Date") on a consolidated basis in accordance with GAAP to (ii) the product of
(A) the Consolidated EBITDA of such Person for the full fiscal quarter for which
financial information is available ending immediately prior to the Determination
Date (such fiscal quarter, the "Measurement Period") and (B) four.

For purposes of this definition, the Consolidated Total Indebtedness of the
Person as of the Determination Date shall be adjusted as if the Indebtedness
giving rise to the need to perform such calculation had been incurred and the
proceeds therefrom had been applied on the Determination Date. For purposes of
calculating Consolidated EBITDA of the Company for the Measurement Period
immediately prior to the relevant Determination Date, (I) any Person that is a
Restricted Subsidiary on such Determination Date (or would become a Restricted
Subsidiary on such Determination Date in connection with the transaction that
requires the determination of such ratio) will be deemed to have been a
Restricted Subsidiary at all times during such Measurement Period, (II) any
Person that is not a Restricted Subsidiary on such Determination Date (or would
cease to be a Restricted Subsidiary on such Determination Date in connection
with the transaction that requires the determination of such ratio) will be
deemed not to have been a Restricted Subsidiary at any time during such
Measurement Period and (III) if the Company or any Restricted Subsidiary shall
have in any manner (x) acquired (including through an Asset Acquisition or the
commencement of activities constituting such operating business) or (y) disposed
of (including by way of an Asset Sale or the termination or discontinuance of
activities constituting such operating business) any operating business during
the Measurement Period or after the end of such Measurement Period and on or
prior to the Determination Date, such calculation will be made on a pro forma
basis in accordance with GAAP as if, in the case of an Asset Acquisition or the
commencement of activities constituting such operating business, all such
transactions had been consummated on the first day of such Measurement Period
and, in the case of an Asset

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Sale or termination or discontinuance of activities constituting such operating
business, all such transactions had been consummated prior to the first day of
such Measurement Period; provided, however, that such pro forma adjustment shall
not give effect to the Consolidated EBITDA of any acquired Person to the extent
that such Person's net income would be excluded pursuant to clause (e) of the
definition of Consolidated Net Income.

"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any option or other
agreement to sell, and any filing of or any agreement to give, any security
interest).

"Markets Held for Sale" means the Bakersfield and Stockton/Modesto,
California markets and related assets.

"Material Subsidiary" means, at any date of determination, any Restricted
Subsidiary that, together with its Subsidiaries and each Defaulting Subsidiary
(as defined below), (i) for the most recent fiscal year of the Company accounted
for more than 10% of the consolidated revenues of the Company (exclusive of all
Unrestricted Subsidiaries) or (ii) as of the end of such fiscal year, was the
owner of more than 10% of the consolidated assets of the Company (exclusive of
all Unrestricted Subsidiaries), all as set forth on the most recently available
consolidated financial statements of the Company and its consolidated Restricted
Subsidiaries for such fiscal year prepared in conformity with GAAP. "Defaulting
Subsidiary" means any Restricted Subsidiary with respect to which an event
described under clause (v) of the first paragraph of "--Events of Default" above
has occurred and is continuing, determined as if the words "Material Subsidiary"
in such clause were the words "Restricted Subsidiary" therein.

"Measurement Period" shall have the meaning set forth in the definition of
Leverage Ratio.

"Moody's" means Moody's Investors Service, Inc. and its successors.

"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents (including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents)
received by the Company or any Restricted Subsidiary from such Asset Sale net of
(i) reasonable out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees
and sales commissions, recording fees, title insurance premiums, appraisers'
fees and costs reasonably incurred in preparation of any asset or property for
sale), (ii) taxes paid or reasonably estimated to be payable (calculated based
on the combined state, federal and foreign statutory tax rates applicable to the
Company or the Restricted Subsidiary consummating such Asset Sale) and (iii)
repayment of Indebtedness secured by assets subject to such Asset Sale, (iv)
appropriate amounts to be provided by the Company or any Restricted Subsidiary
as a reserve, in accordance with GAAP against any liabilities associated with
such assets and retained by the Company or any Restricted Subsidiary after such
Asset Sale, including, without limitation, pension and other post-employment
benefit liabilities and liabilities related to environmental matters and the
after-tax cost of any indemnification payments (fixed or contingent)
attributable to the seller's indemnities to the purchaser undertaken by the
Company or any Restricted Subsidiary in connection with any such Asset Sale (but
excluding any payments which, by the terms of the indemnities will not, under
any circumstances, be made during the term of the Notes) and (v) all
distributions and other payments required to be made to minority interests
holders in Restricted Subsidiaries or joint ventures as a result of such Asset
Sale; provided, however, that if the instrument or agreement governing such
Asset Sale requires the transferor to maintain a portion of the purchase price
in escrow (whether as a reserve for adjustment of the purchase price or
otherwise) or to provide for indemnification of the transferee for specified
liabilities in a maximum specified amount, the portion of the cash or Cash
Equivalents that is actually placed in escrow or segregated and set aside by the
transferor for such indemnification obligations shall not be deemed to be Net
Cash Proceeds until the escrow terminates or the transferor ceases to segregate
and set aside such funds, in whole or in part, and

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then only to the extent of the proceeds released from escrow to the transferor
or that are no longer segregated and set aside by the transferor.

"Participation Agreement" means the Participation Agreement dated as of
December 12, 1995, among CAI, Heartland and the Company, as amended by Amendment
No. 1 to the Participation Agreement dated as of February 22, 1996, among CAI,
Heartland and the Company.

"Payment Restriction" shall have the meaning set forth in "--Certain
Covenants--Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries" above.

"Permitted Exchange" shall have the meaning set forth in "--Certain
Covenants--Limitation on Asset Sales" above.

"Permitted Holder" means any of (i) CAI and its Affiliates; (ii) Heartland
and its Affiliates; or (iii) the BANX Affiliates.

"Permitted Indebtedness" means, without duplication, each of the following:

(a) the Notes;

(b) Indebtedness of the Company evidenced by (i) the Heartland Short-Term
Note and (ii) the Heartland Long-Term Note;

(d) Interest Swap Obligations; provided, however, that such Interest Swap
Obligations are entered into to protect the Company from fluctuations in
interest rates of its Indebtedness, to the extent the notional principal amount
of such Interest Swap Obligation do not exceed the principal amount of the
Indebtedness to which such Interest Swap Obligations relate;

(e) Indebtedness incurred by the Company the proceeds of which are to be
used to effect the acquisition of any rights relating to wireless cable
channels, or of any entity or division or line of business or geographic market
of an entity engaged in the Wireless Cable Business (including through the
acquisition of Capital Stock or all or substantially all of the assets of such
entity or division or line of business); provided, however, that no such
Indebtedness may be incurred pursuant to this clause (e) if the aggregate amount
of Indebtedness and other payment obligations incurred in connection with such
acquisition (including in such calculation any covenants not to compete (other
than pursuant to customary employment contracts) and other deferred payment
arrangements) is in excess of 50% of the total consideration paid or payable in
connection with such acquisition;

(f) the incurrence of additional Indebtedness by the Company and any
Indebtedness incurred by the Company to refinance any such Indebtedness;
provided, however, that (i) the proceeds of such Indebtedness are used to fund
the build-out of the Wireless Cable Business of the Company or the Restricted
Subsidiaries (including the purchase and installation of wireless cable
equipment); and (ii) such Indebtedness does not exceed at the time of incurrence
the sum of:

(A) the product of the number of Incremental Qualifying Customers who
are Digital Customers on the date of incurrence times $650; plus

(B) the product of the number of Incremental Qualifying Customers who
are Analog Customers on the date of incurrence times $550;

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(g) Refinancing Indebtedness;

(h) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except in the
case of daylight overdrafts) drawn against insufficient funds in the ordinary
course of business; provided, however, that such Indebtedness is extinguished
within two business days of incurrence;

(i) Acquired Indebtedness of any corporation that becomes a Restricted
Subsidiary after the Issue Date which Indebtedness is existing at the time such
corporation becomes a Restricted Subsidiary; provided however, that (A)
immediately before and immediately after giving effect to such corporation
becoming a Restricted Subsidiary (as if such Indebtedness were incurred on the
first day of the Measurement Period) the Company could incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in accordance with
the Leverage Ratio of the covenant described under "-- Certain
Covenants--Limitation on Incurrence of Additional Indebtedness" above, (B) such
Indebtedness is without recourse to the Company or to any Restricted Subsidiary
or to any of their respective properties or assets other than the Person
becoming a Restricted Subsidiary or its properties and assets and (C) such
Indebtedness was not incurred as a result of or in connection with or in
contemplation of such entity becoming a Restricted Subsidiary;

(j) additional Indebtedness incurred by the Company and Indebtedness of
Restricted Subsidiaries, and any Indebtedness incurred by the Company or any
Restricted Subsidiary to refinance any such Indebtedness; provided, however,
that the aggregate principal amount of Indebtedness incurred and outstanding
pursuant to this clause (j) shall not exceed $5 million in the aggregate at any
time outstanding;

(k) Indebtedness of a Wholly Owned Restricted Subsidiary of the Company owed
to and held by the Company or another Wholly Owned Restricted Subsidiary of the
Company, in each case which is not subordinated in right of payment to any
Indebtedness of such Restricted Subsidiary, except that (i) any transfer of such
Indebtedness by the Company or a Wholly Owned Restricted Subsidiary of the
Company (other than to the Company or to a Wholly Owned Restricted Subsidiary of
the Company) and (ii) the sale, transfer or other disposition by the Company or
any Restricted Subsidiary of Capital Stock of a Wholly Owned Restricted
Subsidiary of the Company which is owed Indebtedness of another Wholly Owned
Restricted Subsidiary of the Company such that it ceases to be a Wholly Owned
Restricted Subsidiary of the Company shall, in each case, be an incurrence of
Indebtedness by such Restricted Subsidiary subject to the other provisions of
the covenant described under "--Certain Covenants--Limitation on Incurrence of
Additional Indebtedness" above;

(l) Indebtedness of the Company owed to and held by a Wholly Owned
Restricted Subsidiary of the Company which is unsecured and subordinated in
right of payment to the payment and performance of the Company's obligations
under the Indenture and the Notes, except that (i) any transfer of such
Indebtedness by a Wholly Owned Restricted Subsidiary of the Company (other than
to another Wholly Owned Restricted Subsidiary of the Company) and (ii) the sale,
transfer or other disposition by the Company or any Restricted Subsidiary of
Capital Stock of a Wholly Owned Restricted Subsidiary of the Company which holds
Indebtedness of the Company such that it ceases to be a Wholly Owned Restricted
Subsidiary of the Company shall, in each case, be an incurrence of Indebtedness
by the Company, subject to the other provisions of the covenant described under
"--Certain Covenants-- Limitation on Incurrence of Additional Indebtedness"
above;

(m) Indebtedness of the Company or any Restricted Subsidiary represented by
letters of credit for the account of the Company or such Restricted Subsidiary,
as the case may be, in order to provide security for workers' compensation
claims, payment obligations in connection with self-insurance or similar
requirements in the ordinary course of business pursuant to ordinary business
terms; and

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(n) subordinated Indebtedness incurred by the Company and owing to any
Strategic Equity Investor and any Indebtedness incurred by the Company to
refinance such Indebtedness and owing to a Strategic Equity Investor; provided,
however, that the aggregate principal amount of Indebtedness at any time
outstanding pursuant to this clause (n) shall not exceed $100 million (or if
such Indebtedness is issued at a discount from the face amount thereof, with an
initial issue price of not more than $100 million); provided, further, however,
that such subordinated Indebtedness shall (i) not by its terms provide for the
payment of any cash interest thereon or for any payments of principal thereof
(whether pursuant to sinking fund or otherwise) at any time prior to the date
which is six months after the earlier to occur of the Final Maturity Date or the
date on which all of the Notes are repaid in full or are no longer outstanding;
(ii) be expressly subordinated in right of payment to the Notes (and any
refinancing thereof, including any refinancing that increases the amount
thereof) and all other Indebtedness of the Company at any time outstanding
(unless such Indebtedness expressly provides that it is not senior debt in
respect of such subordinated Indebtedness) pursuant to subordination terms which
are at least substantially equivalent to those set forth as an exhibit to the
Indenture; (iii) have a stated maturity not earlier than the date which is six
months after the earlier to occur of the Final Maturity Date or the date on
which all of the Notes are repaid in full or are no longer outstanding; (iv) not
have in the documentation evidencing such Indebtedness any term, covenant,
provision or default or event of default which is materially more favorable to
the holder thereof than the terms, covenants, provisions or defaults or events
of default set forth in the Notes and the Indenture (it being expressly
understood that any such Indebtedness incurred under this clause (n) may have an
interest rate and interest terms different from the Notes); and (v) not be
secured by any Lien on any property or asset of the Company or any Restricted
Subsidiary.

"Permitted Investment" means, without duplication, each of the following:

(i) Investments arising as a result of the receipt by the Company or any
Restricted Subsidiary of non-cash consideration for an Asset Sale effected in
compliance with "--Certain Covenants--Limitation on Asset Sales" above (other
than pursuant to a Permitted Exchange);

(ii) Investments by the Company or any Wholly Owned Restricted Subsidiary of
the Company in any Wholly Owned Restricted Subsidiary of the Company (whether
existing on the Issue Date or created thereafter) or any Person that after such
Investment and, as a result thereof, becomes a Wholly Owned Restricted
Subsidiary of the Company and Investments in the Company by any Subsidiary of
the Company;

(iii) Cash and Cash Equivalents;

(iv) Investments in securities of trade creditors, wholesalers or customers
received pursuant to any plan of reorganization or similar arrangement;

(v) Investments existing on the Issue Date to the extent and in the manner
so existing on the Issue Date; and

(vi) Investments by the Company or any Restricted Subsidiary to acquire the
stock of or assets of a Person engaged in the subscription television business,
including transmission and related services, not to exceed the sum of (i)
$15,000,000, and (ii) the net cash proceeds of any capital contribution (other
than from a Restricted Subsidiary) or a substantially concurrent sale for cash
(other than to a Restricted Subsidiary) of Qualified Capital Stock of the
Company, at any time outstanding.

"Permitted Liens" means, without duplication, each of the following:

(i) Liens in favor of the Trustee in its capacity as trustee for the
Holders;

(ii) Liens existing on the Issue Date as in effect on such date;

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(iii) Liens on property of the Company securing Indebtedness incurred
pursuant to clauses (e), (f) or (j) of Permitted Indebtedness;

(iv) Liens on property existing on the date of acquisition thereof;
provided, however, that such Liens are not incurred as a result of, or in
connection with or in anticipation of, such transaction and such Liens relate
solely to the property so acquired;

(v) Liens to secure the payment of all or a part of the purchase price or
construction cost of acquired or constructed property which is to be used by the
Company exclusively in the Wireless Cable Business, including related activities
and services, after the Issue Date; provided, however, that the Indebtedness
secured by such Liens shall not exceed the lesser of 100% of the cost of such
property or of the fair market value of such property and such Liens shall not
extend to any other property or assets of the Company or of any Restricted
Subsidiary other than the property or assets so acquired;

(vi) Liens for taxes, assessments and governmental charges to the extent not
required to be paid under the Indenture;

(vii) statutory Liens of landlords and carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen or other like Liens to the extent not required
to be paid under the Indenture;

(viii) pledges or deposits to secure lease obligations or nondelinquent
obligations under workers' compensation, unemployment insurance or similar
legislation (other than the Employee Retirement Income Security Act of 1974, as
amended from time to time ("ERISA"));

(ix) Liens to secure the performance of public statutory obligations that
are not delinquent, performance bonds or other obligations of a like nature
(other than for borrowed money), in each case incurred in the ordinary course of
business pursuant to ordinary business terms;

(x) easements, rights-of-way, restrictions, minor defects or irregularities
in title and other similar charges or encumbrances incurred in the ordinary
course of business pursuant to ordinary business terms not interfering in any
material respect with the business of the Company or any Restricted Subsidiary;

(xi) Liens upon specific items of inventory or other goods and proceeds of
any Person securing such Person's obligations in respect of letters of credit or
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other goods in
the ordinary course of business pursuant to ordinary business terms;

(xii) judgment and attachment Liens not giving rise to an Event of Default;

(xiii) leases or subleases granted to others in the ordinary course of
business pursuant to ordinary business terms and consistent with past practice
not interfering in any material respect with the business of the Company or any
Restricted Subsidiary;

(xiv) any interest or title of a lessor in the property subject to any
lease, whether characterized as capitalized or operating other than any such
interest or title resulting from or arising out of a default by the Company or
any Restricted Subsidiary of its obligations under such lease;

(xv) Liens arising from filing UCC financing statements for precautionary
purposes in connection with true leases of personal property that are otherwise
permitted under the Indenture and under which the Company or any Restricted
Subsidiary is a lessee;

(xvi) Liens with respect to Acquired Indebtedness incurred in accordance
with the covenant described under "--Certain Covenants--Limitation of Incurrence
of Additional Indebtedness" above; provided, however, that (A) such Liens
secured such Acquired Indebtedness at the time of and prior to the incurrence of
such Acquired Indebtedness by the Company and were not granted as a result of,
in

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connection with, or in anticipation of, the incurrence of such Acquired
Indebtedness by the Company and (B) such Liens do not extend to or cover any
property or assets of the Company or of any Restricted Subsidiary other than the
property or assets that secured the Acquired Indebtedness prior to the time such
Indebtedness became Acquired Indebtedness of the Company and are no more
favorable to the lienholders than those securing the Acquired Indebtedness prior
to the incurrence of such Acquired Indebtedness by the Company;

(xvii) Liens to secure Capitalized Lease Obligations to the extent arising
from transactions consummated in compliance with "--Certain
Covenants--Limitation on Incurrence of Additional Indebtedness" and
"--Limitation on Sale and Leaseback Transactions" above; provided, however, that
such Liens do not extend to or cover any property or assets of the Company or of
any Restricted Subsidiary, other than the property or assets subject to such
Capitalized Lease Obligation;

(xviii) any Lien to secure the refinancing of any Indebtedness described in
the foregoing clauses; provided, however, that to the extent any such clause
limits the amount secured or the asset subject to such Liens, no refinancing
shall increase the assets subject to such Liens or the amount secured thereby
beyond the assets or amounts set forth in such clauses; and

(xix) any Lien created by the grant of the security interest in the
Heartland Short-Term Note Collateral for the purpose of securing repayment of
the Heartland Short-Term Note.

"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.

"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.

"Productive Assets" means assets of a kind used or usable by the Company and
the Restricted Subsidiaries in wireless cable television businesses or
businesses reasonably related thereto.

"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.

"Qualifying Customers" means, as of any date of determination, the aggregate
number of Subscribers for the Company and the Restricted Subsidiaries as of the
last day of the most recent month ending not more than 45 days prior to the date
of determination; provided, however, that the Company shall have received all
fees due from such Customer within 90 days of billing by the Company; and
provided, further, however, that to the extent any Strategic Equity Investor is
then realizing an economic interest in the revenues of a Subscriber, whether
through contract, joint marketing arrangements, equity interests in a Restricted
Subsidiary or otherwise, such Subscriber shall not be deemed a Qualifying
Customer.

"refinance" means, in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part; "refinanced" and "refinancing" shall have
correlative meanings.

"Refinancing Indebtedness" means any refinancing by the Company of
Indebtedness of the Company or of any Restricted Subsidiaries incurred in
accordance with "--Certain Covenants-- Limitation on Incurrence of Additional
Indebtedness" above (other than pursuant to clauses (b)(i), (d), (f), (h), (j),
(k), (l) and (m) of the definition of Permitted Indebtedness); provided,
however, that such Indebtedness so incurred to refinance such other Indebtedness
(the "Existing Indebtedness") (1) is not in an aggregate principal amount as of
the date of the consummation of such proposed refinancing in excess of (or if
such Indebtedness being incurred to refinance the Existing Indebtedness is
issued with original issue discount, at an original issue price not in excess
of) the sum of (i) the aggregate principal

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amount outstanding of the Existing Indebtedness (provided that (a) if such
Existing Indebtedness was issued with original issue discount, in excess of the
accreted amount of such Existing Indebtedness (as determined in accordance with
GAAP) as of the date of such proposed refinancing, (b) if such Existing
Indebtedness was incurred pursuant to a revolving credit facility or any other
agreement providing a commitment for subsequent borrowings, with a maximum
commitment under the agreement governing the Indebtedness proposed to be
incurred not in excess of the maximum commitment amount under such Existing
Indebtedness and (c) any amount of such Existing Indebtedness owned or held by
the Company or any of its Subsidiaries shall not be deemed to be outstanding for
the purposes hereof) as of the date of such proposed refinancing, plus (ii) the
amount of any premium required to be paid under the terms of the instrument
governing such Existing Indebtedness and plus (iii) the amount of reasonable
expenses incurred by the Company in connection with such refinancing and (2)
does not have (I) a Weighted Average Life to Maturity that is less than the
Weighted Average Life to Maturity of the Existing Indebtedness or (II) a final
maturity earlier than the final maturity of the Existing Indebtedness; provided,
further, however, that (y) if such Existing Indebtedness is subordinate or
junior to the Notes, then such Indebtedness proposed to be incurred to refinance
the Existing Indebtedness shall be subordinate to the Notes at least to the same
extent and in the same manner as the Existing Indebtedness and (z) such
Indebtedness proposed to be incurred to refinance the Existing Indebtedness is
not incurred more than three months prior to the complete retirement or
defeasance of the Existing Indebtedness with the proceeds thereof.

"Restricted Payment" shall have the meaning set forth in the covenant
described under "--Certain Covenants--Limitation on Restricted Payments" above.

"Restricted Subsidiary" means any Subsidiary of the Company which, as of the
determination date, is not an Unrestricted Subsidiary.

"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party providing for the leasing
to the Company or a Restricted Subsidiary of any property, whether owned by the
Company or any Restricted Subsidiary at the Issue Date or later acquired, which
has been or is to be sold or transferred by the Company or such Restricted
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such property.

"Stated Maturity," when used with respect to a Note or any installment of
interest thereon, means the date specified in such Note as the fixed date on
which the principal of such Note or such installment of interest is due and
payable.

"Strategic Equity Investor" means (i) any Person engaged principally in the
telecommunications business which, both as of the Trading Day immediately before
the day of determination and the Trading Day immediately after the day of
determination, has a Total Market Capitalization of at least $2.0 billion (or
for purposes of the definition of "Qualifying Customers," $500 million) and (ii)
any Person which is wholly owned and controlled by any Person or Persons
referred to in clause (i) of this definition. In calculating Total Market
Capitalization for the purpose of clause (i) of this definition, the
consolidated Indebtedness of such Person, solely when calculated as of the
Trading Day immediately after the day of determination, will be calculated after
giving effect to the transactions to occur on any such date of determination
(including any Indebtedness incurred in connection with any sale of Capital
Stock to such Person) and the Closing Price of the Common Stock of such Person,
solely when calculated as of the Trading Date immediately after the day of
determination, will be deemed to be the Closing Price of such Common Stock on
such succeeding Trading Day, subject to the last sentence of the definition of
"Total Market Capitalization." For purposes of this definition, the date of
determination shall be the date on which any transaction which requires a
determination of whether a Person is a Strategic Equity Investor under the
Indenture shall have been consummated.

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"Subscriber" means, as of any determination date, any individual customer or
bulk or commercial account (computed on an equivalent customer basis) to whom
the Company or any Restricted Subsidiary provides subscription basic programming
services as well as accounts to whom the Company or any Restricted Subsidiary
provides other wireless service for a fee (computed on an equivalent customer
basis based on the basic programming service subscriber fee), in each case as of
such date.

"Subsidiary," with respect to any Person, means (i) any corporation of which
at least a majority of the outstanding Voting Stock shall at the time be owned,
directly or indirectly, by such Person or (ii) any other Person of which at
least a majority of the outstanding Voting Stock is at the time, directly or
indirectly, owned by such Person.

"Surviving Entity" shall have the meaning set forth in the covenant
described under "--Certain Covenants--Merger, Consolidation and Sale of Assets."

"Total Market Capitalization" of any Person means, as of any day of
determination (and as modified for purposes of the definition of "Strategic
Equity Investor"), the sum of (1) the consolidated Indebtedness of such Person
and its Subsidiaries on such day, plus (2) the product of (i) the aggregate
number of outstanding primary shares of Common Stock of such Person on such day
(which shall not include any options or warrants on, or securities convertible
or exchangeable into, shares of Common Stock of such Person) and (ii) the
average Closing Price of such Common Stock over the 20 consecutive Trading Days
immediately preceding such day, plus (3) the liquidation value of any
outstanding shares of Preferred Stock of such Person on such day. If no such
Closing Price exists with respect to shares of any such class, the value of such
shares for purposes of clause (2) of the preceding sentence shall be determined
by the Company's Board of Directors in good faith and evidenced by a resolution
of such Board of Directors delivered to the Trustee.

"Trading Day" means with respect to a securities exchange or automated
quotation system, a day on which such exchange or system is open for a full day
of trading.

"Unrestricted Subsidiary" means a Subsidiary of the Company created after
the Issue Date and so designated by a resolution adopted by the Board of
Directors of the Company in accordance with the covenant described under
"--Certain Covenants--Limitation on Restricted and Unrestricted Subsidiaries"
above.

"Voting Stock" means, with respect to any Person, securities of any class or
classes of Capital Stock in such Person entitling the holders thereof (whether
at all times or only so long as no senior class of stock has voting power by
reason of any contingency) to vote in the election of members of the Board of
Directors of such Person.

"Weighted Average Life to Maturity" means, when applied to any Indebtedness
or Preferred Stock at any date, the number of years obtained by dividing (a) the
then outstanding aggregate principal amount or liquidation preference of such
Indebtedness or Preferred Stock into (b) the total of the product obtained by
multiplying (i) the amount of each then remaining installment, sinking fund,
serial maturity or other required payment of principal or liquidation
preference, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.

"Wholly Owned Restricted Subsidiary" of any Person means any Subsidiary of
such Person of which all the outstanding Capital Stock (other than directors'
qualifying shares) are owned by such Person or any Wholly Owned Restricted
Subsidiary of such Person.

"Wireless Cable Business" means transmitting video, voice or data primarily
through wireless cable transmission facilities, utilizing wireless channels for
any commercial purpose permitted by the FCC and other activities directly
related thereto.

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DESCRIPTION OF CAPITAL STOCK

The following summary of the terms of the Company's capital stock does not
purport to be complete and is qualified in its entirety by reference to the
actual terms of the capital stock contained in the Company's Certificate of
Incorporation (as defined).

The Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") authorizes the issuance of up to 40,000,000
shares of Common Stock and 5,000,000 shares of preferred stock, $.01 par value
("Preferred Stock").

As of July 1, 1996, (i) 10,110,000 shares of Common Stock were issued and
outstanding and (ii) no shares of Preferred Stock were issued and outstanding.

COMMON STOCK

The holders of Common Stock are entitled to one vote per share on all
matters voted on by stockholders, including elections of directors, and, except
as otherwise required by law or provided by the express provisions of any series
of Preferred Stock of the Company, the holders of such shares will exclusively
possess all voting power of the Company. There is no cumulative voting in the
election of directors, and no holder of Common Stock is entitled as such, as a
matter of right, to subscribe for or purchase any shares of Common Stock or
Preferred Stock. Subject to the preferential rights of any outstanding series of
Preferred Stock, the holders of Common Stock are entitled to receive ratably
such dividends as may be declared from time to time by the Board of Directors
from funds legally available therefor. In the event of a liquidation,
dissolution or winding up of the Company, holders of Common Stock are entitled
to share ratably in all assets remaining after payment or provision for
liabilities and amounts owing in respect of any outstanding Preferred Stock.

Certain agreements to which the Company is a party contain covenants which
have the effect of restricting the payment of dividends on capital stock by the
Company. In the event of a deterioration in the financial condition or results
of operations of the Company, such covenants could limit or prohibit the payment
of dividends on Common Stock. In addition, the Company intends to operate as a
holding company substantially all of whose consolidated assets will be held by
its subsidiaries, and the cash flow of the Company and the consequent ability to
pay dividends on Common Stock would be largely dependent upon the earnings of
such subsidiaries.

Fleet National Bank shall act as the transfer agent for the Common Stock.

PREFERRED STOCK

Preferred Stock may be issued from time to time in one or more series.
Subject to limitations prescribed by Delaware law and the Certificate of
Incorporation, the Board of Directors is authorized to fix the number of shares
constituting each series of Preferred Stock and the designations, powers,
preferences and relative participating, optional or other special rights of the
shares of each such series, and the qualifications, limitations or restrictions
thereof, including, without limitation, the dividend rights, dividend rates,
conversion rights, exchange rights, voting rights, rights and terms of
redemption (including sinking and purchase fund provisions), the redemption
prices and the dissolution preferences. The issuance of Preferred Stock, while
providing flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, adversely, affect the voting
power of the holders of Common Stock and, under certain circumstances, make it
more difficult for a third party to gain control of the Company and could have
the effect of delaying or preventing a merger, tender offer or other attempted
takeover of the Company. No holder of Preferred Stock shall be entitled, as a
matter of right, to subscribe for or purchase any shares of Preferred Stock or
Common Stock.

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DELAWARE ANTI-TAKEOVER STATUTE

Section 203 of the Delaware General Corporation Law (the "Delaware
Anti-Takeover Statute") applies to Delaware corporations with a class of voting
stock listed on a national securities exchange, authorized for quotation on an
inter-dealer quotation system, or held of record by 2,000 or more persons, and
restricts transactions which may be entered into by such a corporation and
certain of its stockholders. Although the Delaware Anti-Takeover Statute
currently does not apply to the Company, the Company has not opted out of the
Delaware Takeover Statute and therefore may become subject to its provisions in
the future. The Delaware Anti-Takeover Statute provides, in essence, that a
stockholder acquiring more than 15% of the outstanding voting shares of a
corporation subject to the statute (an "Interested Stockholder"), but less than
85% of such shares, may not engage in certain "Business Combinations" with the
corporation for a period of three years subsequent to the date on which the
stockholder became an Interested Stockholder, unless (i) prior to such date the
corporation's board of directors approved either the Business Combination or the
transaction in which the stockholder became an Interested Stockholder or (ii)
the Business Combination is approved by the corporation's board of directors and
authorized by a vote of at least 66 2/3% of the outstanding voting stock of the
corporation not owned by the Interested Stockholder.

The Delaware Anti-Takeover Statute defines the term "Business Combination"
to encompass a wide variety of transactions with or caused by an Interested
Stockholder in which the Interested Stockholder receives or could receive
benefit on other than a pro rata basis with other stockholders, including
mergers, certain asset sales, certain issuances of additional shares to the
Interested Stockholder, transactions with the corporation which increase the
proportionate interest of the Interested Stockholder, or transactions in which
the Interested Stockholder receives certain other benefits.

REGISTRATION RIGHTS

REGISTRATION RIGHTS OF NOTE HOLDERS

The Company and the Initial Purchasers entered into the Notes Registration
Rights Agreement pursuant to which the Company agreed, for the benefit of the
holders of the Old Notes, that (A) the Company would, at the sole expense of the
Company, within 45 days of the Contribution Closing, file a registration
statement (the "Exchange Registration Statement") of which this Prospectus is a
part, with respect to this Exchange Offer. In the Exchange Offer, the Company is
offering the New Notes in exchange for surrender of the Old Notes. The Company
will keep the Exchange Offer open until , 199 (or longer if required by
applicable law). For each of the Old Notes surrendered to the Company pursuant
to the Exchange Offer, the holder who surrendered such Old Notes will receive a
New Note having a principal amount equal to that of the surrendered Old Notes.
Under existing Commission interpretations, the New Notes would be freely
transferable by holders thereof other than affiliates of the Company after the
Exchange Offer without further registration under the Securities Act if the
holder of the New Notes represents that it is acquiring the New Notes in the
ordinary course of business, that it has no arrangement or understanding with
any person to participate in the distribution of the New Notes and that it is
not an affiliate of the Company, as such terms are interpreted by the
Commission; provided, however, that broker-dealers ("Participating
Broker-Dealers") receiving New Notes in the Exchange Offer will have a
prospectus delivery requirement with respect to resales of such New Notes. The
Commission has taken the position that Participating Broker-Dealers may fulfill
their prospectus delivery requirements with respect to the New Notes (other than
a resale of an unsold allotment from the original sale of the Old Notes) with
the prospectus contained in the Exchange Registration Statement. The Company has
agreed that for a period of 180 days after consummation of the Exchange Offer
(or such longer period as may be required under the Securities Act) the Company
will make available a prospectus meeting the requirements of Securities Act to
Participating Broker-Dealers and other persons, if any, with similar prospectus
delivery requirements for use in connection with any resale of such New Notes. A
broker-dealer that delivers such a prospectus to purchasers in

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connection with such resales will be subject to certain of the civil liability
provisions under the Securities Act, and will be bound by the provisions of the
Notes Registration Rights Agreement (including certain indemnification rights
and obligations).

Each holder of Old Notes who wishes to exchange such Old Notes for New Notes
in the Exchange Offer will be required to make certain representations including
representations that (i) any New Notes to be received by it will be acquired in
the ordinary course of its business, (ii) that at the time of the commencement
of the Exchange Offer it has no arrangement or understanding with any person to
participate in the distribution (within the meaning of the Securities Act) of
the New Notes and (iii) it is not an "affiliate," as defined in Rule 405
promulgated under the Securities Act, of the Company.

If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the Commission, the Company is not permitted to
effect the Exchange Offer, (ii) the Exchange Offer is not consummated within 150
days of the Contribution Closing, (iii) in certain circumstances, upon the
written request of any holder of Old Notes not entitled to participate in this
Exchange Offer, or (iv) upon the written request of any holder who participates
in the Exchange Offer, but does not receive New Notes on the date of the
exchange that may be sold without restriction under state and federal securities
laws, then in the case of each of the foregoing instances, the Company shall
promptly deliver to the holders and the Trustee written notice thereof and the
Company will, at the sole expense of the Company, (a) as promptly as
practicable, file a shelf registration statement covering resales of the Old
Notes (the "Shelf Registration Statement"), (b) use its best efforts to cause
the Shelf Registration Statement to be declared effective under the Securities
Act and (c) use its best efforts to keep effective the Shelf Registration
Statement until the earlier of three years after its effective date or such time
as all of the applicable Old Notes have been sold thereunder. The Company will,
in the event of the Shelf Registration Statement, provide to each holder of the
Old Notes copies of the prospectus, which is a part of the Shelf Registration
Statement, notify each such holder when the Shelf Registration Statement for the
Old Notes has become effective and take certain other actions as are required to
permit unrestricted resales of the Old Notes. A holder of Old Notes who sells
such Old Notes pursuant to the Shelf Registration Statement will be required to
be named as a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Notes Registration Rights Agreement which are
applicable to such a holder (including certain indemnification rights and
obligations).

If the Company fails to comply with the above provision or if such
registration statement fails to become effective, then, as liquidated damages,
additional interest (the "Additional Interest") shall become payable in respect
of the Old Notes as follows:

(i) if (A) neither the Exchange Registration Statement nor Shelf
Registration Statement is filed with the Commission on or prior to the
Filing Date (as defined in the Indenture) or (B) notwithstanding that the
Company has consummated or will consummate an Exchange Offer, the Company is
required to file a Shelf Registration Statement and such Shelf Registration
Statement is not filed on or prior to the Filing Date, then commencing on
the day after either such required filing date, Additional Interest shall
accrue on the Accreted Value (if prior to March 1, 2001) or principal amount
(if on or after March 1, 2001) of the Old Notes at a rate of .50% per annum
(which shall be in addition to the stated interest per annum for such events
on or after March 1, 2001) for the first 90 days immediately following each
such filing date, such Additional Interest rate increasing by an additional
.50% per annum at the beginning of each subsequent 90-day period; or

(ii) if (A) neither the Exchange Registration Statement nor a Shelf
Registration Statement is declared effective by the Commission on or prior
to 75 days after the applicable filing date or (B) notwithstanding that the
Company has consummated or will consummate an Exchange Offer, the

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Company is required to file a Shelf Registration Statement and such Shelf
Registration Statement is not declared effective by the Commission on or
prior to the 75th day following the date such Shelf Registration Statement
was filed, then, commencing on the day after 75 days following the
applicable filing date, Additional Interest shall accrue on the Accreted
Value (if prior to March 1, 2001) or principal amount (if on or after March
1, 2001) of the Old Notes at a rate of .50% per annum (which shall be in
addition to the stated interest per annum for such events on or after March
1, 2001) for the first 90 days immediately following such date, such
Additional Interest rate increasing by an additional .50% per annum at the
beginning of each subsequent 90-day period; or

(iii) if (A) the Company has not exchanged New Notes for all Old Notes
validly tendered in accordance with the terms of the Exchange Offer on or
prior to the 30th day after the date on which the Exchange Offer
Registration Statement was declared effective or (B) if applicable, the
Shelf Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time prior to the third
anniversary of its effective date (other than after such time as all Old
Notes have been disposed of thereunder), then Additional Interest shall
accrue on the Accreted Value (if prior to March 1, 2001) or principal amount
(if on or after March 1, 2001) of the Old Notes over and above the accrued
interest at a rate of .50% per annum (which shall be in addition to the
stated interest per annum for such event, on or after March 1, 2001) for the
first 90 days commencing on (x) the 31st day after such effective date, in
the case of (A) above, or (y) the day such Shelf Registration Statement
ceases to be effective in the case of (B) above, such Additional Interest
rate increasing by an additional .50% per annum at the beginning of each
subsequent 90-day period;

provided, however, that the Additional Interest rate on the Old Notes may not
exceed in the aggregate 2.0% per annum, and provided, further, that (1) upon the
filing of the Exchange Offer Registration Statement or a Shelf Registration
Statement (in the case of clause (i) above), (2) upon the effectiveness of the
Exchange Offer Registration Statement or a Shelf Registration (in the case of
clause (ii) above), or (3) upon the exchange of New Notes for all Old Notes
tendered (in the case of clause (iii) (A) above), or upon the effectiveness of
the Shelf Registration Statement which had ceased to remain effective (in the
case of clause (iii) (B) above), Additional Interest on the Old Notes as a
result of such clause (or the relevant subclause thereof), as the case may be,
shall cease to accrue.

Any amounts of Additional Interest due pursuant to clause (i), (ii) or (iii)
above will be payable in cash on March 1 and September 1 of each year to the
holders of record on the preceding February 15 or August 15, respectively. The
amount of Additional Interest will be determined by multiplying the applicable
Additional Interest rate by the Accreted Value (if prior to March 1, 2001) or
the principal amount (if on or after March 1, 2001) of the Old Notes, multiplied
by a fraction, the numerator of which is the number of days such Additional
Interest rate was applicable during such period (determined on the basis of a
360-day year comprised of twelve 30-day months, and, in the case of a partial
month, the actual number of days elapsed), and the denominator of which is 360.

As of March 31, 1996, the Company's registration statement had not yet been
declared effective by the Commission. Subsequent to June 24, 1996, the Company
will be required to pay additional interest on the outstanding Senior Notes. The
amount of additional interest will increase by an additional 0.50% per annum for
each subsequent 90-day period until such obligations are complied with, up to a
maximum amount of additional interest of 2.00% per annum.

The summary herein of certain provisions of the Notes Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all provisions of the Notes Registration Rights Agreement, a
copy of which will be available upon request to the Company.

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REGISTRATION RIGHTS OF COMMON SHARE HOLDERS AND BANX AFFILIATES

The Company and the Initial Purchasers entered into an agreement dated as of
February 15, 1996 for the registration of the Common Shares (the "Common Share
Registration Rights Agreement") pursuant to which the Company has agreed to
provide the holders of the Common Shares (the "Common Share Holders") certain
registration rights for the Common Shares. Under the Common Share Registration
Rights Agreement, after an initial public offering of Common Stock solely for
cash, the holders of at least 50% of the Common Shares at any time outstanding
are entitled to initiate one separate demand registration subject to certain
conditions and limitations. The Company shall not be required to effect a demand
registration for the period set forth in the Common Share Registration Rights
Agreement immediately following the effective date of a registered offering of
securities for its own account.

If the Company proposes to register any of its securities for its own
account or for other holders of its equity securities (including an initial
public offering, but excluding a registration of securities by the Company on
Form S-4 or S-8 or a registration in connection with an offer of securities
solely to existing security holders), the Common Share Holders will be entitled
to notice of such proposed registration and the opportunity to include Common
Shares in such proposed registration; provided, however, that in the event an
underwriter's cut-back is necessary (i) in the case of a registration only for
the Company's account, the Company shall receive priority, and the holders of
the Company's common equity on the date of issuance of the Common Shares,
including the holders of the BANX Shares (the "Existing Holders"), and Common
Share Holders may participate together such that the amount to be included for
the holders of the Common Shares and the Existing Holders shall be allocated
among them on a pro rata basis (provided that the holders of the Common Shares
and the Existing Holders shall be entitled to include their securities in
priority over all other holders of equity securities of the Company), (ii) in
cases not involving registration of securities solely for the Company's own
account or for the account of the Existing Holders, securities shall be included
in the following order of priority: (x) first, securities of any person whose
exercise of a demand registration pursuant to a contractual commitment with the
Company is the basis for the registration, and (y) second, securities of Common
Share Holders and other Existing Holders shall be included pro rata, and (iii)
in cases involving registration of securities at the request of the Existing
Holders, no securities of any Person other than the Existing Holders shall be
included unless no securities proposed to be included by the Existing Holders
have been excluded and no securities of any Person other than the Existing
Holders and the holders of the Common Shares shall be included unless no
securities proposed to be included by the holders of the Common Shares have been
excluded. Under the Common Share Registration Rights Agreement, the Company
agrees not to cause or permit the public sale of its Common Stock during the
30-day period prior to and during the 90-day period beginning on the
commencement of any underwritten offering pursuant to a demand by the Common
Share Holders, or a piggyback registration which has been scheduled, prior to
the Company publicly announcing its intention to effect a public offering.
Registration rights will terminate as to any Common Shares on the second
anniversary of the date upon which this Offering is consummated.

The BANX Affiliates have similar registration rights with respect to the
BANX Shares pursuant a registration rights agreement dated as of February 23,
1996 between the Company and the BANX Affiliates.

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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

The following discussion, based on current law, is a general summary of the
anticipated United States federal income tax consequences relevant to the
exchange of Old Notes for New Notes and the ownership and disposition of the New
Notes by holders acquiring New Notes pursuant to the Exchange Offer. The summary
does not address all aspects of taxation that may be relevant to particular
holders in light of their personal circumstances (including the effect of any
foreign, state or local tax laws) or to certain types of holders subject to
special treatment under federal income tax laws (including dealers in
securities, options or currencies, insurance companies, financial institutions,
persons holding Notes as part of a hedging or conversion transaction or
straddle, persons whose functional currency is not the United States dollar and
tax-exempt entities).

The discussion of the federal income tax consequences set forth below is
based upon the Internal Revenue Code of 1986, as amended (the "Code"), and
judicial decisions and administrative interpretations thereunder, as of the date
hereof, and such authorities may be repealed, revoked or modified so as to
result in federal income tax consequences different from those discussed below.
For purposes of the discussion set forth below, the term "Holder" includes a
beneficial owner of a Note. The discussion below is premised upon the assumption
that the Notes are held as capital assets. The discussion below pertains only to
Holders that are citizens or residents of the United States, corporations,
partnerships or other entities created in or under the laws of the United States
or any political subdivision thereof, or estates or trusts the income of which
is subject to United States federal income taxation regardless of its source.

EACH PROSPECTIVE HOLDER OF NOTES IS STRONGLY URGED TO CONSULT ITS OWN TAX
ADVISOR WITH RESPECT TO ITS PARTICULAR TAX SITUATION, INCLUDING THE TAX EFFECTS
OF ANY STATE, LOCAL, FOREIGN, OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX
LAWS.

EXCHANGE OF NOTES

The exchange of Old Notes for New Notes pursuant to the Exchange Offer
should not be treated as an exchange or other taxable event for federal income
tax purposes because, under regulations proposed by the United States Treasury
Department, the New Notes should not be considered to significantly modify the
Old Notes and thus should not differ materially in kind or extent from the Old
Notes. Rather, the New Notes received by a Holder should be treated as a
continuation of the Old Notes in the hands of such Holder. As a result, there
should be no federal income tax consequences to Holders exchanging Old Notes for
New Notes pursuant to the Exchange Offer and a Holder should have the same
adjusted basis and holding period in the New Notes as it had in the Old Notes
immediately before the exchange.

ORIGINAL ISSUE DISCOUNT

The Notes were issued with original issue discount ("OID") for federal
income tax purposes. Because the New Notes will be treated as a continuation of
the Old Notes, which were issued with OID, the New Notes will have the same OID
as the Old Notes for federal income tax purposes. Accordingly, Holders will be
required to include OID in gross income as described below.

OID on each Note will equal the excess of its stated redemption price at
maturity over its issue price. A Holder of a Note must include OID in income as
ordinary interest income as it accrues on the basis of a constant yield to
maturity regardless of such Holder's method of accounting. Generally, OID must
be included in income in advance of the receipt of cash representing such
income.

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Because the original purchasers of Old Notes purchased Units from the
Company which included Common Shares, the "issue price" of each Note is
determined by allocating the "issue price" of the Units between the Notes and
the Common Shares comprising such Units based on their relative fair market
values. For this purpose, the "issue price" of a Unit was the first price at
which a substantial amount of Units were sold (excluding sales to bond houses,
brokers or similar persons or organizations acting in the capacity of
underwriters, placement agents or wholesalers). For each Unit issued, the
Company allocated $2,286.84 to the Notes ($571.71 per Note) and $8.00 to the
Common Shares. The Company's allocation reflects its best judgment as to the
relative values of each of those instruments at the time of issuance, but will
not be binding on the Internal Revenue Service. The Company's allocation will be
binding on each Holder of a Unit that does not explicitly disclose that its
allocation of the issue price of the Unit is different than the Company's
allocation. Such disclosure must be made on a statement attached to such
Holder's timely filed federal income tax return for its taxable year that
includes the acquisition date of the Unit.

The stated redemption price at maturity of a Note will equal the sum of all
payments on the Note other than any "qualified stated interest" payments.
Qualified stated interest is stated interest that is unconditionally payable in
cash or in property (other than debt instruments of the issuer) at least
annually at a single fixed rate. Because interest on the Notes will not be paid
prior to September 1, 2001, none of the payments on the Notes will constitute
qualified stated interest. Accordingly, all payments on the Notes will be
treated as part of their stated redemption price at maturity and the Notes will
have significant OID.

The Holder of a Note must include in gross income, for all days during its
taxable year in which it holds such Note, the sum of the "daily portions" of
OID. The "daily portions" of OID are determined by allocating to each day in an
"accrual period" a pro rata portion of the OID that is allocable to such accrual
period. The amount of OID that is allocable to an accrual period is the product
of the "adjusted issue price" of the Note at the beginning of the accrual period
and its yield to maturity (determined on the basis of compounding at the end of
each accrual period and properly adjusted for the length of the particular
accrual period). The adjusted issue price of a Note is its issue price,
increased by prior accruals of OID and reduced by the total payments made with
respect to such Note in all prior accrual periods and on the first day of the
current accrual period. Accrual periods may be of any length and may vary in
length over the term of the Note, provided that each accrual period is no longer
than six months and each scheduled payment of principal or interest occurs
either on the final day of an accrual period or on the first day of an accrual
period. Each payment on a Note will be treated as a payment of OID to the extent
that OID has accrued as of the date such payment is due and has not been
allocated to prior payments, and any excess will be treated as a payment of
principal.

If the Company fails to register the New Notes or the Exchange Offer is not
consummated within the required period of time (and in certain other
circumstances), the Company may be required to pay Additional Interest to
Holders as liquidated damages. See "Registration Rights--Registration Rights of
Note Holders." Although the characterization of these amounts is uncertain, such
Additional Interest probably constitutes contingent interest, which is generally
not includable in income before fixed or paid.

ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT

Each Holder, subject to certain limitations, may elect to treat all
"interest" on any Note as OID and calculate the amount includable in gross
income under the method described above. For this purpose, "interest" includes
stated and unstated interest, OID and de minimis OID, acquisition discount,
market discount and de minimis market discount, as adjusted by any acquisition
premium. Such election, if made in respect of a market discount obligation, will
constitute an election to include market discount in income currently on all
market discount obligations acquired by such Holder on or after the first
taxable year to which the election applies. See "Market Discount" below. The
election is to be made for the taxable year in which the Holder acquires the
Note and may not be revoked without the consent of the Internal Revenue Service.

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ACQUISITION PREMIUM

Each Holder (including an original purchaser) that purchases a Note at a
purchase price greater than the adjusted issue price but less than the stated
redemption price at maturity will be considered to have purchased the Note at an
"acquisition premium" equal to such excess. In such a case, the Holder will
reduce the OID otherwise includable for each accrual period by an amount equal
to the product of (i) the amount of such OID otherwise includable for such
period, and (ii) a fraction, the numerator of which is the acquisition premium
and the denominator of which is the excess of the amounts payable on the Note
after the purchase date over the adjusted issue price.

MARKET DISCOUNT

Each Holder that purchases a Note at a purchase price less than the adjusted
issue price will be considered to have purchased the Note at a "market discount"
equal to such difference. Market discount, however, will be considered to be
zero if less than 0.25% of the stated redemption price at maturity of a Note
multiplied by the number of complete years to maturity remaining after the date
of its purchase.

Any gain realized by a Holder on disposition, retirement or partial payment
of a Note will be treated as ordinary income to the extent that there is accrued
market discount on the Note. Unless a Holder elects to accrue market discount
under a constant-interest method, accrued market discount is the total market
discount multiplied by a fraction, the numerator of which is the number of days
the Holder has held the Note and the denominator of which is the number of days
from the date the Holder acquired the Note until its maturity. Each Holder may
be required to defer a portion of its interest deductions for the taxable year
attributable to any indebtedness incurred or continued to purchase or carry a
Note purchased with market discount. Any such deferred interest expense would
not exceed the market discount that accrues during such taxable year and is, in
general, allowed as a deduction not later than the year in which such market
discount is includable in income. If the Holder elects to include market
discount in income currently as it accrues on all market discount instruments
acquired by the Holder in that taxable year or thereafter, the interest deferral
rule described above will not apply.

SALE OR RETIREMENT OF NOTES

Upon the sale, exchange or retirement of a Note, the Holder generally will
recognize gain or loss equal to the difference between the amount realized on
the sale, exchange or retirement and the Holder's adjusted tax basis in the
Note. A Holder's adjusted tax basis in the Note will equal the portion of the
Holder's cost for a Unit that is properly allocable to the Note (See
"Description of the Notes-- Original Issue Discount") increased by any OID or
market discount previously included in income by such Holder with respect to
such Note and decreased by any payments received thereon.

Gain or loss realized on the sale, exchange or retirement of a Note will be
capital (subject to the market discount rules, discussed above), and will be
long-term if at the time of sale, exchange or retirement the Note has been held
for more than one year. The deductibility of capital losses is subject to
limitations.

APPLICABLE HIGH-YIELD DISCOUNT OBLIGATIONS

The Notes will be subject to the "applicable high yield discount obligation"
provisions of the Code. Because the yield of the Notes is at least five
percentage points above the applicable federal rate for the month in which the
Notes are issued (6% for February 1996), the Company will not be able to deduct
any OID accruing thereon until such interest is actually paid. In addition, if
the yield of the Notes is more than six percentage points above the applicable
federal rate, then (i) a portion of such interest corresponding to the yield in
excess of six percentage points above the applicable federal rate will not be
deductible by the Company at any time, and (ii) a corporate Holder may be
entitled to treat the portion of the interest that is not deductible by the
Company as a dividend, which may then qualify for the

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dividends received deduction provided for by the Code. In such event, corporate
Holders of Notes should consult with their own tax advisors as to the
applicability of the dividends received deduction.

INFORMATION REPORTING AND BACKUP WITHHOLDING

Under current United States federal income tax law, (i) information
reporting requirements apply to "reportable payments," which include interest,
principal payments and dividends made to, OID accruing to and the proceeds of
sales by, certain noncorporate Holders of Notes or Common Shares and (ii) a
Holder of Notes or Common Shares may be subject to backup withholding at the
rate of 31% with respect to reportable payments in respect of Notes or Common
Shares. Backup withholding will not apply to payments to corporations and
certain other exempt recipients, such as tax-exempt organizations, which
demonstrate their entitlement to exemption when required. The payor will be
required to deduct and withhold (at the rate of 31%) if (i) the payee fails to
furnish a taxpayer identification number ("TIN") to the payor in the manner
required by the Code and applicable Treasury regulations, (ii) the Internal
Revenue Service notifies the payor that the TIN furnished by the payee is
incorrect, (iii) there has been a "notified payee underreporting" described in
Section 3406(c) of the Code or (iv) there has been a failure of the payee to
certify under penalty of perjury that the payee is not subject to withholding
under Section 3406(a)(1)(C) of the Code. Amounts withheld under these rules do
not constitute an additional tax and will be credited against the Holder's
federal income tax liability, so long as the required information is provided to
the Internal Revenue Service. The Company will report to the Holders of Notes or
Common Shares and to the Internal Revenue Service the amount of any "reportable
payments" for each calendar year and the amount of tax withheld, if any, with
respect to such payments.

PLAN OF DISTRIBUTION

Any broker-dealer who holds Old Notes that are restricted securities and
that were acquired for its own account as a result of market-making activities
or other trading activities (other than restricted securities acquired directly
from the Company) may exchange such Old Notes for New Notes pursuant to the
Exchange Offer. Each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes where such Old Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed that for a period
of 180 days after consummation of the Exchange Offer (or such longer period as
may be required under the Securities Act) the Company will make available a
prospectus meeting the requirements of Securities Act to Participating
Broker-Dealers and other persons, if any, with similar prospectus delivery
requirements for use in connection with any resale of such New Notes. In
addition, until , 1996, all dealers effecting transactions in the New
Notes may be required to deliver a prospectus.

The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchases to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the

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Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.

For a period of 180 days after consummation of the Exchange Offer, or such
longer period as may be required under the Securities Act, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents.
The Company has agreed to pay all expenses incident to the Exchange Offer other
than commissions or concessions of any brokers or dealers and will indemnify the
holders of the Notes (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.

BOOK-ENTRY; DELIVERY AND FORM

Except as set forth in the next paragraph, the Old Notes that were resold as
set forth herein were comprised of two global notes (the "Original Global
Notes"). The Original Global Notes were deposited on the date of the
Contribution Closing with, or on behalf of, The Depository Trust Company ("DTC")
and registered in the name of Cede & Co., as original nominee of the DTC. If all
of the participants (as defined) having an interest in the Original Global Notes
elect to exchange Old Notes for New Notes, such New Notes will also initially be
issued in the form of two Global Notes ("Global Notes"). The Global Notes will
be subject to certain restrictions on transfer set forth therein and will bear
the legend regarding such restrictions set forth under the heading "Transfer
Restrictions" herein.

Old Notes that (i) were originally purchased by or transferred to "foreign
purchasers" or Institutional Accredited Investors who are not qualified
institutional buyers (in each case, as defined in "Transfer Restrictions"), or
held by qualified institutional buyers who elected to take physical delivery of
their certificates instead of holding their interest through the Original Global
Notes (and which are thus ineligible to trade through DTC) (collectively
referred to herein as the "Non-Global Purchasers") and (ii) are exchanged for
New Notes will be issued, in registered form, without interest coupons (the
"Certificated Notes"). Upon a permitted transfer to a qualified institutional
buyer of such Certificated Notes initially issued to a Non-Global Purchaser,
such Certificated Notes will, unless the transferee requests otherwise or the
Global Notes have previously been exchanged in whole for such Certificated
Notes, be exchanged for an interest in the applicable Global Notes.

The Global Certificates. The Company expects that pursuant to procedures
established by DTC (i) upon deposit of the Global Notes, DTC or its custodian
will credit, on its internal system, the accounts of persons who have accounts
with such depositary who previously had interests in the Original Global Notes
with the equivalent portions of the principal amount of the Global Notes and
(ii) ownership of the Global Notes will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by DTC or
its nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons other than participants).
Ownership of beneficial interests in the Global Notes will be limited to persons
who have accounts with DTC ("participants") or persons who hold interests
through participants. Qualified institutional buyers may hold their interests in
the Global Certificates directly through DTC if they are participants in such
system, or indirectly through organizations which are participants in such
system.

So long as DTC, or its nominee, is the registered owner or holder of the
Notes, DTC or such nominee will be considered the sole owner or holder of the
Notes represented by the applicable Global Note for all purposes under the
Indenture. No beneficial owner of an interest in the Global Notes will be able
to transfer such interest except in accordance with DTC's applicable procedures
in addition to those provided for under the Indenture with respect to the Notes.

Payments of the principal of, premium (if any) and interest (including
Additional Interest) on, the Global Notes will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of the Company, the
Trustee or any paying agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the

103
<PAGE>
Global Notes or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interest.

The Company expects that DTC or its nominee, upon receipt of any payment of
the principal of, premium (if any) and interest (including Additional Interest)
on the Global Notes will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such Global Note, as shown on the records of DTC or its nominee. The Company
also expects that payments by participants to owners of beneficial interests in
any such Global Notes held through such participants will be governed by
standing instructions and customary practice, as is now the case with securities
held for the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.

Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in clearinghouse funds. If a
holder requires physical delivery of a Certificated Note for any reason,
including to sell New Notes to persons in states which require physical delivery
of such securities or to pledge such securities, such holder must transfer its
interest in the applicable Global Note in accordance with the normal procedures
of DTC and including with respect to the Notes, with the procedures set forth in
the Indenture.

DTC has advised the Company that DTC will take any action permitted to be
taken by a holder of New Notes (including the presentation of New Notes for
exchange as described below) only at the direction of one or more participants
to whose account the DTC interests in the applicable Global Note is credited and
only in respect of such portion of the aggregate principal amount of New Notes
as to which such participant or participants has or have given such direction.
However, if there is an Event of Default under the Indenture, DTC will exchange
the applicable Global Notes for Certificated Notes, which it will distribute to
its participants.

DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is 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
("indirect participants").

Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Notes among participants of DTC, it is
under no obligation to perform such procedures, and such procedures may be
discontinued at any time. None of the Company, the Trustee or the Transfer Agent
will have any responsibility for the performance by DTC or its participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.

Certificated Securities. If DTC is at any time unwilling or unable to
continue as a depositary for any Global Notes and a successor depositary is not
appointed by the Company within 90 days, the Company will issue Certificated
Notes in exchange for the Global Notes.

LEGAL MATTERS

The validity of the New Notes offered hereby will be passed upon for the
Company by Day, Berry & Howard, Hartford, Connecticut.

104
<PAGE>
EXPERTS

The financial statements of Dayton System (A Division of Technivision, Inc.)
as of May 31, 1995 and 1994 and for the years then ended have been included
herein and in the registration statement in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing. The report of KPMG Peat Marwick LLP covering Dayton System's financial
statements contains an explanatory paragraph stating that Dayton System's
recurring losses from operations and excess of current liabilities over current
assets raise substantial doubt about the entity's ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of that uncertainty.

The financial statements of Metropolitan Cablevision, Inc. for the period
from March 1, 1993 to June 3, 1993 have been included herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
authority of said firm as experts in accounting and auditing. The report of KPMG
Peat Marwick LLP covering Cablevision's financial statements contains an
emphasis paragraph stating that subsequent to period end, Cablevision's
creditors foreclosed on and sold the assets of Cablevision. As a result,
Cablevision recorded a write-down in the year ended February 28, 1993 to reflect
the permanent impairment of its assets.

The financial statements of American Wireless Systems, Inc. included in this
Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in accounting and
auditing. Reference is made to said report which includes an explanatory
paragraph that describes factors raising substantial doubt about the Company's
ability to continue as a going concern.

The financial statements of Fort Worth Wireless Cable T.V. Associates
included in this Prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing. Reference is made to said report which
includes an explanatory paragraph that describes factors raising substantial
doubt about the Company's ability to continue as a going concern.

The financial statements of Wireless Cable T.V. Associates #38 included in
this Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in accounting and
auditing. Reference is made to said report which includes an explanatory
paragraph that describes factors raising substantial doubt about the Company's
ability to continue as a going concern.

The statements of net assets of CableMaxx, Inc.--San Antonio Division as of
June 30, 1994 and 1995 and December 31, 1995 and the related statements of
revenues and expenses, changes in net assets and cash flows for the period from
December 18, 1992 to June 30, 1993, and for the years ended June 30, 1994 and
1995, and for the six month period ended December 31, 1995 included in this
Prospectus have been audited by Coopers & Lybrand L.L.P., independent certified
public accountants, as indicated in their report with respect thereto, which
includes an explanatory paragraph which states that specified circumstances
raise substantial doubt about CableMaxx, Inc.'s and therefore, its San Antonio
Division's ability to continue as going concerns, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing.

The statements of net assets of CableMaxx, Inc.--Utah Division as of June
30, 1995 and December 31, 1995 and the related statements of revenues and
expenses, changes in net assets and cash flows for the period from February 28,
1995 ("acquisition") to June 30, 1995 and for the six month period ended
December 31, 1995, included in this Prospectus have been audited by Coopers &
Lybrand

105
<PAGE>
L.L.P., independent certified public accountants, as indicated in their report
with respect thereto, which includes an explanatory paragraph which states that
specified circumstances raise substantial doubt about CableMaxx, Inc.'s and
therefore, its Utah Division's ability to continue as going concerns, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing.

The combined financial statements of CS Wireless Systems, Inc. (formerly ACS
Ohio, Inc.) and certain assets of Atlantic Microsystems, Inc. at December 31,
1995 and for the period from September 30, 1995 to December 31, 1995 and the
consolidated financial statements of ACS Ohio, Inc. at September 29, 1995 and
for the period from January 1, 1995 to September 29, 1995 and at December 31,
1994 and for the period from March 9, 1994 through December 31, 1994, appearing
in this Prospectus and Registration Statement have been audited by Ernst & Young
LLP independent auditors, as set forth in their reports thereon appearing
elsewhere herein and in the Registration Statement, and are included in reliance
upon such reports given upon the authority of such firm as experts in accounting
and auditing.

The financial statements of MetroCable, Inc. and Metropolitan Satellite
Corp. as of February 28, 1994 and 1993 and for each of the years in the
three-year period ended February 28, 1994 have been included herein and in this
Registration Statement in reliance upon the reports of Lewandowski Zalick &
Company, independent certified public accountants, appearing elsewhere herein,
and upon the authority of said firm as experts in accounting and auditing.

106
<PAGE>
CS WIRELESS SYSTEMS, INC.
INDEX TO PRO FORMA FINANCIAL INFORMATION AND FINANCIAL STATEMENTS

PRO FORMA FINANCIAL INFORMATION

CS Wireless Systems, Inc.:

Introduction to Unaudited Pro Forma Condensed
Combined Financial Information.................................................. F-5

Unaudited Pro Forma Condensed Combined
Statement of Operations for the three months ended March 31, 1996............... F-6

Unaudited Pro Forma Condensed Combined
Statement of Operations--CAI Systems for the period from January 1, 1996 to
February 23, 1996.............................................................. F-7

Unaudited Pro Forma Condensed Combined
Statement of Operations--Heartland Systems for the period from January 1, 1996
to February 23, 1996............................................................ F-8

Notes to Unaudited Pro Forma Condensed
Combined Statement of Operations for the three months ended March 31, 1996...... F-9

Unaudited Pro Forma Condensed Combined
Statement of Operations for the year ended
December 31, 1995............................................................... F-11

Unaudited Pro Forma Condensed Combined
Statement of Operations--CAI Systems for
the year ended December 31, 1995................................................ F-12

Unaudited Pro Forma Condensed Combined
Statement of Operations--Heartland Systems
for the year ended December 31, 1995............................................ F-13

Notes to Unaudited Pro Forma Condensed
Combined Statement of Operations for the year ended December 31, 1995........... F-14

FINANCIAL STATEMENTS

CS Wireless Systems, Inc. and Subsidiaries:

Condensed Consolidated Balance Sheet as of March 31, 1996 (unaudited)............. F-16

Condensed Consolidated Statement of Operations for the three months ended March
31, 1996 (unaudited)............................................................ F-17

Condensed Consolidated Statement of Stockholders' Equity for the three months
ended March 31, 1996 (unaudited)................................................ F-18

Condensed Consolidated Statement of Cash Flows for the three months ended March
31, 1996 (unaudited)............................................................ F-19

Notes to Condensed Consolidated Financial Statements (unaudited).................. F-20

CS Wireless Systems, Inc. and Subsidiaries (formerly ACS Ohio, Inc.) and certain
assets of Atlantic Microsystems, Inc.:

Report of Independent Auditors.................................................... F-23

Combined Balance Sheet as of December 31, 1995.................................... F-24

Combined Statement of Operations and Accumulated Deficit for the period from
September 30, 1995 to December 31, 1995......................................... F-25

Combined Statement of Cash Flows for the period from September 30, 1995 to
December 31, 1995............................................................... F-26

Notes to Combined Financial Statements............................................ F-27
</TABLE>

F-1
<PAGE>

<TABLE>
<CAPTION>
PAGE
------
<S> <C>
ACS Ohio, Inc. and Subsidiaries:

Report of Independent Auditors.................................................... F-33

Consolidated Balance Sheets as of December 31, 1994 and September 29, 1995........ F-34

Consolidated Statements of Operations and Accumulated Deficit for the period from
March 9, 1994 (date of inception) to December 31, 1994, for the period from
January 1, 1995 to September 29, 1995 and for the period from January 1, 1995 to
March 31, 1995 (unaudited)..................................................... F-35

Consolidated Statements of Cash Flows for the period from March 9, 1994 (date of
inception) to December 31, 1994, for the period from January 1, 1995 to
September 29, 1995 and for the period from January 1, 1995 to March 31, 1995
(unaudited).................................................................... F-36

Notes to Consolidated Financial Statements........................................ F-37

MetroCable, Inc.:

Report of Independent Certified Public Accountants................................ F-43

Balance Sheet as of February 28, 1994............................................. F-44

Statement of Operations and Deficit for the period June 4, 1993 (date of
commencement of operations) through February 28, 1994........................... F-45

Statement of Shareholders' Equity for the period June 4, 1993 (date of
commencement of operations) through February 28, 1994........................... F-46

Statement of Cash Flows for the period June 4, 1993 (date of commencement of
operations) through February 28, 1994........................................... F-47

Notes to Financial Statements..................................................... F-48

Metropolitan Cablevision, Inc.

Independent Auditors' Report...................................................... F-53

Statement of Operations for period from March 1, 1993 to June 3, 1993............. F-54

Statement of Stockholders' Deficit for the period from March 1, 1993 to June 3,
1993............................................................................ F-55

Statement of Cash Flows for the period from March 1, 1993 to June 3, 1993......... F-56

Notes to Financial Statements..................................................... F-57

Metropolitan Satellite Corp.:

Report of Independent Certified Public Accountants................................ F-60

Balance Sheet as of February 28, 1994............................................. F-61

Statements of Operations and Deficit for the year ended February 28, 1994......... F-62

Statements of Cash Flows for the year ended February 28, 1994..................... F-63

Notes to Financial Statements..................................................... F-64

ACS California, Inc. and Subsidiary:

Report of Independent Auditors.................................................... F-69

Consolidated Balance Sheet as of December 31, 1995................................ F-70

Consolidated Statements of Operations and Accumulated Deficit for the period from
September 30, 1995 to December 31, 1995 and for the period from January 1, 1996
to February 23, 1996 (unaudited)................................................ F-71

Consolidated Statements of Cash Flows for the period from September 30, 1995 to
December 31, 1995 and for the period from January 1, 1996 to February 23, 1996
(unaudited)..................................................................... F-72

Notes to Consolidated Financial Statements........................................ F-73
</TABLE>

F-2
<PAGE>

<TABLE>
<CAPTION>
PAGE
------
<S> <C>
ACS California, Inc. and Subsidiary:

Report of Independent Auditors.................................................... F-79

Consolidated Balance Sheets as of September 29, 1995 and December 31, 1994........ F-80

Consolidated Statements of Operations and Accumulated Deficit for the period from
January 1, 1995 to September 29, 1995 and for the period from March 11, 1994
(date of inception) to December 31, 1994........................................ F-81

Consolidated Statements of Cash Flows for the period from January 1, 1995 to
September 29, 1995 and the period from March 11, 1994 (date of inception) to
December 31, 1994............................................................... F-82

Notes to Consolidated Financial Statements........................................ F-83

American Wireless Systems, Inc.:

Report of Independent Public Accountants.......................................... F-89

Balance Sheets as of December 31, 1994 and 1995................................... F-90

Statements of Operations for the years ended December 31, 1993, 1994 and 1995 and
for the period from January 1, 1996 to February 23, 1996 (unaudited)............. F-91

Statements of Stockholders' Equity for the years ended December 31, 1993, 1994 and
1995 and for the period from January 1, 1996 to February 23, 1996 (unaudited).... F-92

Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995 and
for the period from January 1, 1996 to February 23, 1996 (unaudited)............. F-93

Notes to Financial Statements..................................................... F-94

Fort Worth Wireless Cable T.V. Associates:

Report of Independent Public Accountants.......................................... F-107

Consolidated Balance Sheets as of December 31, 1994 and 1995...................... F-108

Consolidated Statements of Operations for the years ended December 31, 1993, 1994,
and 1995 and for the period from January 1, 1996 to February 23, 1996 (unaudited) F-109

Consolidated Statements of Partners' Equity for the years ended December 31, 1993,
1994, and 1995 and for the period from January 1, 1996 to February 23, 1996
(unaudited)..................................................................... F-110

Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994,
and 1995 and for the period from January 1, 1996 to February 23, 1996 (unaudited) F-111

Notes to the Consolidated Financial Statements.................................... F-112

Wireless Cable T.V. Associates #38:

Report of Independent Public Accountants.......................................... F-118

Consolidated Balance Sheets as of December 31, 1994 and 1995...................... F-119

Consolidated Statements of Operations for the years ended December 31, 1993, 1994
and 1995 and for the period from January 1, 1996 to February 23, 1996 (unaudited) F-120

Consolidated Statements of Partners' Equity for the years ended December 31, 1993,
1994 and 1995 and for the period from January 1, 1996 to February 23, 1996
(unaudited)..................................................................... F-121

Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994
and 1995 and for the period from January 1, 1996 to February 23, 1996 (unaudited) F-122

Notes to the Consolidated Financial Statements.................................... F-123

CableMaxx, Inc.--San Antonio Division:

Report of Independent Accountants................................................. F-129

Statements of Net Assets as of June 30, 1994 and 1995, and December 31, 1995...... F-130
</TABLE>

F-3
<PAGE>

<TABLE><CAPTION>
PAGE
------
<S> <C>
Statements of Revenues and Expenses from December 18, 1992 to June 30, 1993, the
years ended June 30, 1994 and 1995, the six month periods ended December 31,
1994 (unaudited) and 1995 and for the period from January 1, 1996 to February
23, 1996 (unaudited)............................................................ F-131

Statements of Changes in Net Assets for the period from December 18, 1992 to June
30, 1993, the years ended June 30, 1994 and 1995, the six month period ended
December 31, 1995 and for the period from January 1, 1996 to February 23, 1996
(unaudited)..................................................................... F-132

Statements of Cash Flows for the period from December 18, 1992 to June 30, 1993,
the years ended June 30, 1994 and 1995, the six month periods ended December 31,
1994 (unaudited) and 1995 and for the period from January 1, 1996 to February
23, 1996 (unaudited)............................................................ F-133

Notes to Financial Statements..................................................... F-134

CableMaxx, Inc.--Utah Division:

Report of Independent Accountants................................................. F-141

Statements of Net Assets as of June 30, 1995 and December 31, 1995................ F-142

Statements of Revenues and Expenses from February 28, 1995 (acquisition) to June
30, 1995, the six month period ended December 31, 1995 and for the period from
January 1, 1996 to February 23, 1996 (unaudited)................................ F-143

Statements of Changes in Net Assets for the period from February 28, 1995
(acquisition) to June 30, 1995, the six month period ended
December 31, 1995 and for the period from January 1, 1996 to February 23, 1996
(unaudited)..................................................................... F-144

Statements of Cash Flows for the period from February 28, 1995 (acquisition) to
June 30, 1995, the six month period ended December 31, 1995 and for the period
from January 1, 1996 to February 23, 1996 (unaudited)........................... F-145

Notes to Financial Statements..................................................... F-146

Dayton System (A Division of Technivision, Inc.):

Independent Auditors' Report...................................................... F-150

Balance Sheets as of May 31, 1994 and 1995 and November 30, 1995 (unaudited)...... F-151

Statements of Operations and System Equity for the years ended May 31, 1994 and
1995, the six months ended November 30, 1994 (unaudited) and the period from
June 1, 1995 to February 23, 1996 (unaudited)................................... F-152

Statements of Cash Flows for years ended May 31, 1994 and 1995, the six months
ended November 30, 1994 (unaudited) and the period from June 1, 1995 to February
23, 1996 (unaudited)............................................................ F-153

Notes to Financial Statements..................................................... F-154
</TABLE>

F-4
<PAGE>
PRO FORMA FINANCIAL INFORMATION

INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION

The following Unaudited Pro Forma Condensed Combined Financial Information
consists of Unaudited Pro Forma Condensed Combined Statements of Operations for
the three months ended March 31, 1996 and the year ended December 31, 1995
(collectively, the "Pro Forma Statements"). With respect to the Pro Forma
Condensed Combined Statement of Operations presentation, the Pro Forma
Statements include a summary pro forma financial statement of CS Wireless
Systems, Inc. and the CAI and Heartland Systems combined followed by separate
pro forma financial statements for the CAI Systems and Heartland Systems. The
Pro Forma Statements of Operations give effect to (i) the consummation of
Heartland's Acquisitions, (ii) the consummation of the Contributions, (iii) the
exclusion of historical operating results related to the Sale Assets, (iv) the
issuance of the Heartland Notes and the prepayment of the Heartland Short-Term
Note, and (v) the issuance of the Units, as if such events had occurred on
January 1, 1995.

The consummation of the Contributions has been accounted for at CAI's and
Heartland's historical cost bases from the assumed effective date of such
transaction. With respect to the historical cost bases, the substantial majority
of the assets and liabilities comprising the Contributions were recently
acquired by CAI and Heartland in transactions accounted for under the purchase
method of accounting. As a result, management believes that such costs are
representative of current values.

The Unaudited Pro Forma Condensed Combined Statement of Operations for the
year ended December 31, 1995 has been determined utilizing the historical
unaudited statement of operations of Dayton System (A Division of Technivision,
Inc.) for the year ended November 30, 1995. The Dayton System historical
statement of operations for the year ended November 30, 1995 has been derived
utilizing Dayton System's historical audited statement of operations for the
year ended May 31, 1995 and historical unaudited statements of operations for
the six months ended November 30, 1994 and 1995. The CableMaxx, Inc.-San Antonio
Division historical statement of operations for the year ended December 31, 1995
has been derived utilizing CableMaxx, Inc. San Antonio Division's historical
audited statements of operations for the year ended June 30, 1995 and for the
six months ended December 31, 1995, and the historical unaudited statement of
operations for the six months ended December 31, 1994. The CableMaxx, Inc.-Utah
Division historical statement of operations for the year ended December 31, 1995
has been derived utilizing CableMaxx, Inc.-Utah Division's historical audited
statements of operations for the six months ended June 30, 1995 and the period
from February 28, 1995 (acquisition) to June 30, 1995. No material adjustments
were recorded in determining such amounts.

The Pro Forma Statements and accompanying notes should be read in
conjunction with the historical financial statements of CS Wireless Systems,
Inc. and Subsidiaries; CS Wireless Systems, Inc. and Subsidiaries and certain
assets of Atlantic Microsystems, Inc.; ACS Ohio, Inc. and Subsidiaries; ACS
California, Inc. and Subsidiary; American Wireless Systems, Inc.; Fort Worth
Wireless Cable T.V. Associates; Wireless Cable T.V. Associates #38; CableMaxx,
Inc. San Antonio Division; CableMaxx, Inc. Utah Division; and Dayton System (A
Division of Technivision, Inc.), 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 would actually have been
if the aforementioned transactions or events occurred on the date specified or
to project the Company's results of operations for any future periods. The pro
forma adjustments are based upon available information and certain adjustments
that management believes are reasonable. In the opinion of management, all
adjustments have been made that are necessary to present fairly the Pro Forma
Statements.

F-5
<PAGE>

CS WIRELESS SYSTEMS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
(IN 000'S)

<TABLE>
<CAPTION>
FOR THE THREE FOR THE PERIOD JANUARY 1,
MONTHS ENDED 1996 TO FEBRUARY 23, 1996
MARCH 31, 1996 --------------------------- PRO FORMA
----------------- PRO FORMA PRO FORMA ADJUSTMENTS PRO FORMA
CS WIRELESS CAI HEARTLAND PRO FORMA ------------------- COMBINED
SYSTEMS, INC. (A) SYSTEMS (A) SYSTEMS (A) COMBINED OFFERING OTHER AS ADJUSTED
----------------- ----------- ----------- --------- -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues........... $ 3,856 $ -- $ 1,485 $ 5,341 $ -- $ -- $ 5,341
------- ----------- ----------- --------- -------- ------- -----------
Operating expenses:
Systems operations...... 2,301 -- 1,201 3,502 3,502
Selling, general and
administrative........... 1,427 -- 1,227 2,654 2,654
Depreciation and
amortization............. 2,506 -- 2,162 4,668 4,668
------- ----------- ----------- --------- -------- ------- -----------
Total operating
expenses................. 6,234 -- 4,590 10,824 -- -- 10,824
------- ----------- ----------- --------- -------- ------- -----------
Operating loss.... (2,378) -- (3,105) (5,483) -- -- (5,483)
Interest expense......... (3,023) -- (5) (3,028) (4,679)(B) (368)(C) (8,075)
Interest income and
other.................... 899 -- (2) 897 897
------- ----------- ----------- --------- -------- ------- -----------
Loss before income
taxes.................... (4,502) -- (3,112) (7,614) (4,679) (368) (12,661)
Income tax benefit....... 1,439 -- 1,151 2,590 1,867(D) 4,457
------- ----------- ----------- --------- -------- ------- -----------
Net loss............ $(3,063) $ -- $(1,961) $(5,024) $ (4,679) $ 1,499 $ (8,204)
------- ----------- ----------- --------- -------- ------- -----------
------- ----------- ----------- --------- -------- ------- -----------
</TABLE>

See accompanying notes to Pro Forma Statements

F-6
<PAGE>

CS WIRELESS SYSTEMS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS--CAI SYSTEMS
PERIOD FROM JANUARY 1, 1996 TO FEBRUARY 23, 1996
(IN 000'S)

<TABLE>
<CAPTION>
CAI
------------------------------------------------------------
ACS
CALIFORNIA, PRO FORMA
INC. AND CAI PRO FORMA CAI
SUBSIDIARY (A) DIVISION (A) ADJUSTMENTS SYSTEMS
-------------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Total revenues.............................. $ 540 -- $ (540)(E) $--
------ ----- ----------- ---------
Operating expenses:
Systems operations........................ 428 -- (428)(E) --
Selling, general and administrative....... 97 -- (97)(E) --
Depreciation and amortization............. 459 51 (510)(E) --
------ ----- ----------- ---------
Total operating expenses.............. 984 51 (1,035) --
------ ----- ----------- ---------
Operating loss...................... (444) (51) 495 --
Interest expense............................ (1) -- 1(E) --
------ ----- ----------- ---------
Loss before income taxes.............. (445) (51) 496 --
Income tax benefit.......................... 145 -- (145)(E) --
------ ----- ----------- ---------
Net loss.............................. $ (300) $(51) $ (351) $--
------ ----- ----------- ---------
------ ----- ----------- ---------
</TABLE>

See accompanying notes to Pro Forma Statements

F-7
<PAGE>

CS WIRELESS SYSTEMS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS--HEARTLAND SYSTEMS
PERIOD FROM JANUARY 1, 1996 TO FEBRUARY 23, 1996
(IN 000'S)

<TABLE>
<CAPTION>
HEARTLAND
------------------------------------------------------------------------------------------
AMERICAN FORT WORTH
CABLEMAXX, INC. CABLEMAXX, INC. WIRELESS WIRELESS WIRELESS
SAN ANTONIO UTAH SYSTEMS, CABLE T.V. CABLE T.V. DAYTON
DIVISION (A) DIVISION (A) INC. (A) ASSOCIATES (A) ASSOCIATES #38 (A) SYSTEM (A)
--------------- --------------- -------- -------------- ------------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Total revenues............... $ 814 -$- $ 15 $ 85 $ 148 $ 244
----- ----- -------- ----- ----- -----
Operating expenses:
Systems operations.......... 377 -- -- 86 480 192
Selling, general and
administrative............. 282 17 317 96 218 171
Depreciation and
amortization............... 495 112 21 117 172 102
----- ----- -------- ----- ----- -----
Total operating expenses.. 1,154 129 338 299 870 465
----- ----- -------- ----- ----- -----
Operating loss.......... (340) (129) (323) (214) (722) (221)
Interest expense............. (28) (83) (12) -- -- (5)
Equity in losses of investees -- -- (38) -- --
Interest income and other.... -- -- (2) 8 30 --
----- ----- -------- ----- ----- -----
Loss before income taxes.. (368) (212) (375) (206) (692) (226)
Income tax benefit........... -- -- -- -- -- --
----- ----- -------- ----- ----- -----
Net loss.................. $(368) $(212) $ (375) $ (206) $ (692) $ (226)
----- ----- -------- ----- ----- -----
----- ----- -------- ----- ----- -----

PRO FORMA ADJUSTMENTS
---------------------- PRO FORMA
HEARTLAND PURCHASE HEARTLAND
DIVISION (A) ACCOUNTING OTHER SYSTEMS
------------ ---------- ------- ---------
<S> <C> <C> <C> <C>
Total revenues............... $ 194 $ $ (15)(H) $ 1,485
----- ---------- ------- ---------
Operating expenses:
Systems operations.......... 66 1,201
Selling, general and
administrative............... 141 (15)(H) 1,227
Depreciation and
amortization.............. 98 1,045(F) 2,162
----- ---------- ------- ---------
Total operating expenses.. 305 1,045 (15) 4,590
----- ---------- ------- ---------
Operating loss.......... (111) (1,045) -- (3,105)
Interest expense............. -- 123(I) (5)
Equity in losses of investees -- (158)(G) 196(J) --
Interest income and other.... -- 158(G) (196)(J) (2)
----- ---------- ------- ---------
Loss before income taxes.. (111) (1,045) 123 (3,112)
Income tax benefit........... -- 1,151(D) 1,151
----- ---------- ------- ---------
Net loss.................. $ (111) $ (1,045) $ 1,274 $(1,961)
----- ---------- ------- ---------
----- ---------- ------- ---------
</TABLE>

See accompanying notes to Pro Forma Statements

F-8
<PAGE>

CS WIRELESS SYSTEMS, INC.

NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996

<TABLE>
<C> <S>
(A) The following table provides a reconciliation between the historical financial
information included in the Unaudited Pro Forma Condensed Combined Statement of
Operations for the three months ended March 31, 1996 and the Company's markets:
</TABLE>

<TABLE>
<CAPTION>
ENTITY MARKET
------------------------------------- ----------------------------------------
<S> <C>
CS Wireless Systems, Inc.:
CS Wireless Systems, Inc. and
Subsidiaries....................... Cleveland, Ohio and, subsequent to the
Contributions, all markets

CAI Systems:
ACS California, Inc. and Bakersfield, California
Subsidiary........................
CAI Division....................... Stockton/Modesto, California and
Charlotte, North Carolina

Heartland Systems:
CableMaxx, Inc. San Antonio San Antonio, Texas
Division...........................
CableMaxx, Inc. Utah Division...... Salt Lake City, Utah
American Wireless Systems, Inc. ... Dallas, Texas
Fort Worth Wireless Cable T.V. Fort Worth, Texas
Associates........................
Wireless Cable T.V. Associates Minneapolis, Minnesota
#38...............................
Dayton System (A Division of Dayton, Ohio
Technivision, Inc.)..................
Heartland Division................. Grand Rapids, Michigan and Kansas City
(Suburbs), Missouri
</TABLE>

<TABLE>
<C> <S>
(B) Reflects additional interest expense at a rate of 11 3/8%, amortization of debt
issuance costs of $9.7 million associated with the Notes and amortization of debt
discount resulting from the issue price allocated to the Common Shares.
(C) Reflects additional interest expense at a rate of 10% during the first year and 15%
thereafter, with interest accruing and added to the balance annually, on the Heartland
Long-Term Note.
(D) Reflects the adjustment of deferred income tax benefit at an assumed rate of 37%.
Income tax benefit reflects the recognition of deferred tax assets to the extent such
assets can be realized through future reversals of existing taxable temporary
differences.
(E) Reflects the elimination from the Unaudited Pro Forma Condensed Combined Statement of
Operations of historical operating results relating to certain assets classified as net
assets held for sale and interest on debt not assumed by the Company.
(F) Reflects the adjustment of amortization of license and leased license investment and
goodwill associated with Heartland's acquisitions as follows (in 000's):
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARKET MARCH 31, 1996
------ ------------------
<S> <C>
San Antonio.......................................... $ 316
Salt Lake City....................................... (110)
Dallas............................................... --
Fort Worth........................................... 283
Minneapolis.......................................... 396
Dayton............................................... 160
-------
$1,045
-------
-------
</TABLE>

F-9
<PAGE>

<TABLE>
<C> <S>
Amortization of license and leased license investment is calculated beginning with
inception of service in each respective market over 15 years. The Dallas and Salt Lake
City markets are nonoperating and, accordingly, no amortization of license and leased
license investment has been reflected in the Unaudited Pro Forma Condensed Combined
Statement of Operations. Goodwill is amortized over 15 years.

(G) Reflects the adjustment of minority interest and equity in losses of investees
attributable to additional losses in Fort Worth Wireless Cable T.V. Associates and
Wireless Cable T.V. Associates #38.

(H) Reflects the elimination of AWS management fee charged to Wireless Cable T.V.
Associates #38.

(I) Reflects the elimination of interest expense associated with debt not assumed by the
Company.

(J) Reflects the elimination of equity in losses of investees and minority interest
relating to the AWS investment in Fort Worth Wireless Cable T.V. Associates and
Wireless Cable T.V. Associates #38, since the Company, subsequent to the Contributions,
owns 100% of the Fort Worth and Minneapolis markets.
</TABLE>

F-10
<PAGE>
CS WIRELESS SYSTEMS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 1995
(IN 000'S)

<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA PRO FORMA ADJUSTMENTS
CAI HEARTLAND PRO FORMA -----------------------
SYSTEMS (A) SYSTEMS (A) COMBINED OFFERING OTHER PRO FORMA
----------- ----------- --------- -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total revenues................ $ 8,471 $ 8,147 $ 16,618 $ -- $ -- $ 16,618
----------- ----------- --------- -------- ------- -----------
Operating expenses:
Systems operations.......... 2,902 5,331 8,233 8,233
Selling, general and
administrative............ 4,642 6,187 10,829 10,829
Depreciation and
amortization.............. 7,475 11,051 18,526 18,526
----------- ----------- --------- -------- ------- -----------
Total operating
expenses.............. 15,019 22,569 37,588 -- -- 37,588
----------- ----------- --------- -------- ------- -----------
Operating loss........ (6,548) (14,422) (20,970) -- -- (20,970)
Interest expense.............. -- (33) (33) (27,786)(B) (1,500)(C) (29,319)
Interest income and other..... -- 765 765 765
----------- ----------- --------- -------- ------- -----------
Loss before income
taxes................. (6,548) (13,690) (20,238) (27,786) (1,500) (49,524)
Income tax benefit............ 1,585 4,622 6,208 8,348(D) 14,556
----------- ----------- --------- -------- ------- -----------
Net loss................ $(4,963) $ (9,068) $(14,030) $(27,786) $ 6,848 $ (34,968)
----------- ----------- --------- -------- ------- -----------
----------- ----------- --------- -------- ------- -----------
</TABLE>

See accompanying notes to Pro Forma Statements

F-11
<PAGE>
CS WIRELESS SYSTEMS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS--CAI SYSTEMS

YEAR ENDED DECEMBER 31, 1995
(IN 000'S)
<TABLE>
<CAPTION>
CAI
-----------------------------------------------------------------------------------------------------------
ACS ACS
ACS CALIFORNIA, CALIFORNIA,
OHIO, INC. AND CS WIRELESS INC. AND INC. AND
SUBSIDIARIES SYSTEMS, INC. SUBSIDIARY (A) SUBSIDIARY
JANUARY 1, 1995 TO SEPTEMBER 30, 1995 TO JANUARY 1, 1995 TO SEPTEMBER 30, 1995 TO
SEPTEMBER 29, 1995 (A) DECEMBER 31, 1995 (A) SEPTEMBER 29, 1995 (A) DECEMBER 31, 1995 (A)
------------------------ ------------------------- ------------------------ -------------------------
<S> <C> <C> <C> <C>
Total revenues...... $ 6,170 $ 2,301 $ 2,600 $ 975
----- ----- ----- -----
Operating expenses:
Systems operations. 2,107 795 1,385 480
Selling, general and
administrative.... 3,334 1,308 1,396 679
Depreciation and
amortization..... 3,020 1,796 2,043 737
----- ----- ----- -----
Total operating
expenses...... 8,461 3,899 4,824 1,896
----- ----- ----- -----
Operating loss (2,291) (1,598) (2,224) (921)
Interest expense.... (233) (2) (436) (2)
----- ----- ----- -----
Loss before income
taxes.......... (2,524) (1,600) (2,660) (923)
Income tax
benefit........... 649 393 -- 307
----- ----- ----- -----
Net loss........ $ (1,875) $(1,207) $ (2,660) $ (616)
----- ----- ----- -----
----- ----- ----- -----

PRO FORMA
ADJUSTMENTS
-------------------- PRO FORMA
CAI PURCHASE CAI
DIVISION (A) ACCOUNTING OTHER SYSTEMS
------------ ---------- ------- ---------
<S> <C> <C> <C> <C>
Total revenues...... $-- $ -- $(3,575 $ 8,471
--- ----- ------- ---------
Operating expenses:
Systems operations. -- (1,865)(F) 2,902
Selling, general and
administrative... -- (2,075 4,642
Depreciation and
amortization..... 84 3,048(E) (3,253 7,475
--- ----- ------- ---------
Total operating
expenses...... 84 3,048 (7,193) 15,019
--- ----- ------- ---------
Operating loss (84) (3,048) 3,618 (6,548)
Interest expense.... -- 673(F) --
--- ----- ------- ---------
Loss before
income taxes.. (84) (3,048) 4,291 (6,548)
Income tax benefit.. -- 236(D) 1,585
--- ----- ------- ---------
Net loss........ $ (84) $ (3,048) $ 4,527 $(4,963)
--- ----- ------- ---------
--- ----- ------- ---------
</TABLE>

See accompanying notes to Pro Forma Statements

F-12
<PAGE>
CS WIRELESS SYSTEMS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS--HEARTLAND SYSTEMS

YEAR ENDED DECEMBER 31, 1995
(IN 000'S)
<TABLE>
<CAPTION>
HEARTLAND
---------------------------------------------------------------------------------------------------
AMERICAN FORT WORTH WIRELESS
CABLEMAXX, INC. CABLEMAXX, INC. WIRELESS WIRELESS CABLE T.V.
SAN ANTONIO UTAH SYSTEMS, CABLE T.V. ASSOCIATES DAYTON HEARTLAND
DIVISION (A) DIVISION (A) INC. (A) ASSOCIATES (A) #38 (A) SYSTEM (A) DIVISION (A)
--------------- --------------- -------- -------------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues....... $ 5,266 $-- $ 100 $ 597 $ 982 $ 1,188 $ 114
------- ------- -------- ------- ---------- ------------- ------
Operating expenses:
Systems
operations........... 2,434 -- -- 526 1,435 866 70
Selling, general
and
administrative....... 1,724 93 2,123 768 735 633 211
Depreciation and
amortization......... 3,314 618 83 779 1,072 682 99
------- ------- -------- ------- ---------- ------------- ------
Total operating
expenses............. 7,472 711 2,206 2,073 3,242 2,181 380
------- ------- -------- ------- ---------- ------------- ------
Operating
loss................. (2,206) (711) (2,106) (1,476) (2,260) (993) (266)
Interest expense..... (260) (515) (161) -- -- (33) --
Equity in losses of
investees............ -- -- (188) -- -- -- --
Interest income and
other................ -- -- 763 59 131 -- --
------- ------- -------- ------- ---------- ------------- ------
Loss before
income taxes......... (2,466) (1,226) (1,692) (1,417) (2,129) (1,026) (266)
Income tax benefit... -- -- -- -- -- -- --
------- ------- -------- ------- ---------- ------------- ------
Net loss....... $(2,466) $(1,226) $(1,692) $ (1,417) $ (2,129) $(1,026) $ (266)
------- ------- -------- ------- ---------- ------------- ------
------- ------- -------- ------- ---------- ------------- ------

PRO FORMA ADJUSTMENTS
--------------------- PRO FORMA
PURCHASE HEARTLAND
ACCOUNTING OTHER SYSTEMS
---------- ------ ---------
<S> <C> <C> <C>
Total revenues....... $ -- $ (100)(I) $ 8,147
---------- ------ ---------
Operating expenses:
Systems
operations........... 5,331
Selling, general
and
administrative....... (100)(I) 6,187
Depreciation and
amortization......... 4,404(G) 11,051
---------- ------ ---------
Total operating
expenses............. 4,404 (100) 22,569
---------- ------ ---------
Operating
loss................. (4,404) -- (14,422)
Interest expense..... 936 (J) (33)
Equity in losses of
investees............ (538)(H) 726 (K) --
Interest income and
other................ 538(H) (726)(K) 765
---------- ------ ---------
Loss before
income taxes......... (4,404) 936 (13,690)
Income tax benefit... 4,622(D) 4,622
---------- ------ ---------
Net loss....... $ (4,404) $5,558 $ (9,068)
---------- ------ ---------
---------- ------ ---------
</TABLE>

See accompanying notes to Pro Forma Statements

F-13
<PAGE>
CS WIRELESS SYSTEMS, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 1995

<TABLE>
<C> <S>
(A) The following table provides a reconciliation between the historical financial
information included in the Unaudited Pro Forma Condensed Combined Statement of
Operations for the year ended December 31, 1995 and the Company's markets:
</TABLE>

<TABLE>
<CAPTION>
ENTITY MARKET
------------------------------------- ----------------------------------------
<S> <C>
CAI Systems:
CS Wireless Systems, Inc. and
Subsidiaries and certain assets
of Atlantic Microsystems......... Cleveland, Ohio
ACS Ohio, Inc. and Subsidiaries.... Cleveland, Ohio
ACS California, Inc. and
Subsidiary........................... Bakersfield, California
CAI Division....................... Stockton/Modesto, California and
Charlotte, North Carolina
Heartland Systems:
CableMaxx, Inc. San Antonio
Division............................. San Antonio, Texas
CableMaxx, Inc. Utah Division...... Salt Lake City, Utah
American Wireless Systems, Inc..... Dallas, Texas
Fort Worth Wireless Cable T.V.
Associates........................... Fort Worth, Texas
Wireless Cable T.V. Associates
#38.................................. Minneapolis, Minnesota
Dayton System (A Division of
Technivision, Inc.).................. Dayton, Ohio
Heartland Division................. Grand Rapids, Michigan and Kansas City
(Suburbs), Missouri
</TABLE>

<TABLE>
<C> <S>
(C) Reflects additional interest expense at a rate of 10% during the first year and 15%
thereafter, with interest accruing and added to the balance annually, on the Heartland
Long-Term Note.
</TABLE>

<TABLE>
<C> <S>
(D) Reflects the adjustment of deferred income tax benefit at an assumed rate of 37%.
Income tax benefit reflects the recognition of deferred tax assets to the extent such
assets can be realized through future reversals of existing taxable temporary
differences.
</TABLE>

<TABLE>
<C> <S>
(E) Reflects incremental amortization of license and leased license investment and goodwill
associated with CAI's September 1995 acquisition of certain operating systems and
wireless cable channel rights contributed to the Company as follows (in 000's):
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED
MARKET DECEMBER 31, 1995
- ---------------------------------------------------------- -----------------
<S> <C>
Cleveland................................................. $ 2,658
Bakersfield............................................... 124
Stockton/Modesto.......................................... 266
-------
$ 3,048
-------
-------
</TABLE>

<TABLE>
<C> <S>
Amortization of license and leased license investment is calculated beginning with
inception of service in each respective market over a useful life of 15 years. The
Stockton/Modesto and Charlotte markets are nonoperating and, accordingly, no
amortization of license and leased license investment has been reflected in the
Unaudited Pro Forma Condensed Combined Statement of Operations. Goodwill is amortized
over 15 years.
</TABLE>

F-14
<PAGE>

<TABLE>
<C> <S>
(F) Reflects the elimination from the Unaudited Pro Forma Condensed Combined Statement of
Operations of historical operating results relating to certain assets classified as net
assets held for sale and interest on debt not assumed by the Company.
</TABLE>

<TABLE>
<C> <S>
(G) Reflects the adjustment of amortization of license and leased license investment and
goodwill associated with Heartland's acquisitions as follows (in 000's):
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED
MARKET DECEMBER 31, 1995
- ---------------------------------------------------------- -----------------
<S> <C>
San Antonio............................................... $ 1,347
Salt Lake City............................................ (535)
Dallas.................................................... 548
Fort Worth................................................ 960
Minneapolis............................................... 1,382
Dayton.................................................... 702
-------
$ 4,404
-------
-------
</TABLE>

<TABLE>
<C> <S>
(H) Reflects the adjustment of minority interest and equity in losses of investees
attributable to additional losses in Fort Worth Wireless Cable T.V. Associates and
Wireless Cable T.V. Associates #38.
</TABLE>

<TABLE>
<C> <S>
(I) Reflects the elimination of AWS management fee charged to Wireless Cable T.V.
Associates #38.
</TABLE>

<TABLE>
<C> <S>
(J) Reflects the elimination of interest expense associated with debt not assumed by the
Company.
</TABLE>

<TABLE>
<C> <S>
(K) Reflects the elimination of equity in losses of investees and minority interest
relating to the AWS investment in Fort Worth Wireless Cable T.V. Associates and
Wireless Cable T.V. Associates #38, since the Company, subsequent to the Contributions,
owns 100% of the Fort Worth and Minneapolis markets.
</TABLE>

F-15
<PAGE>

CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................................... $165,072
Subscriber receivables, net.................................................... 902
Prepaid expenses and other..................................................... 545
--------
Total current assets....................................................... 166,519
--------
Plant and equipment, net......................................................... 31,196
Net assets held for sale (note 2)................................................ 27,290
License and leased license investment, net of accumulated amortization of
$1,574........................................................................... 142,237
Goodwill, net of accumulated amortization of $1,190.............................. 39,883
Debt issuance costs and other assets, net........................................ 9,635
--------
$416,760
--------
--------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses.......................................... $ 5,954
Current portion of long-term debt.............................................. 186
Other current liabilities...................................................... 655
--------
Total current liabilities.................................................. 9,795
--------
Long-term debt, less current portion (notes 2 and 3)............................. 246,690
Deferred income taxes............................................................ 16,435
Stockholders' equity:
Preferred stock, $.01 par value; authorized 5,000,000 shares, no shares issued
and outstanding.............................................................. --
Common stock, $.001 par value; authorized 40,000,000 shares, 10,110,000 shares
issued and outstanding........................................................... 10
Additional paid-in capital..................................................... 151,100
Accumulated deficit............................................................ (4,270)
--------
Total stockholders' equity................................................. 146,840
--------
$416,760
--------
--------
</TABLE>

See accompanying notes to condensed consolidated financial statements

F-16
<PAGE>

CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<S> <C>
Revenues.......................................................................... $ 3,856
-------
Operating expenses:
Systems operations.............................................................. 2,301
Selling, general and administrative............................................. 1,427
Depreciation and amortization................................................... 2,506
-------
Total operating expenses.................................................... 6,234
-------
Operating loss.............................................................. (2,378)
-------
Other income (expense):
Interest income................................................................. 899
Interest expense................................................................ (3,023)
-------
Total other income (expense), net........................................... (2,124)
-------
Loss before income taxes.................................................... (4,502)
Income tax benefit................................................................ 1,439
-------
Net loss.................................................................... $(3,063)
-------
-------
Net loss per common share......................................................... $ (0.51)
-------
</TABLE>

See accompanying notes to condensed consolidated financial statements

F-17
<PAGE>

CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
-------------------- PAID-IN DIVISION ACCUMULATED
SHARES AMOUNT CAPITAL EQUITY DEFICIT TOTAL
---------- ------ ---------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995..... 1,000 $ 1 15,950 45,572 (1,207) 60,316
Contributions to Company (note 2) 9,999,000 9 134,530 (45,752) -- 88,787
Issuance of common stock
pursuant to Unit Offering
(note 3)....................... 110,000 -- 800 -- -- 800
Net loss....................... -- -- -- -- (3,063) (3,063)
---------- ------ ---------- -------- ----------- -------
Balance, March 31, 1996........ 10,110,000 $ 10 151,100 -- (4,270) 146,840
---------- ------ ---------- -------- ----------- -------
---------- ------ ---------- -------- ----------- -------
</TABLE>

See accompanying notes to condensed consolidated financial statements

F-18
<PAGE>

CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss....................................................................... $ (3,063)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Depreciation and amortization................................................ 2,506
Deferred income taxes........................................................ (1,439)
Accretion on discount notes and amortization of debt issuance costs.......... 2,873
Changes in assets and liabilities, net of effects of contributions:
Subscriber receivables..................................................... (79)
Prepaid expenses and other................................................. (233)
Accounts payable, accrued expenses and other liabilities................... 1,877
--------
Net cash provided by operating activities................................ 2,442
--------
Cash flows from investing activities:
Purchases of plant and equipment............................................... (905)
Additions to license and leased license investment............................. (16)
Other.......................................................................... 258
--------
Net cash used in investing activities.................................... (663)
--------
Cash flows from financing activities:
Payments on notes payable...................................................... (25,024)
Proceeds from Unit Offering.................................................... 229,484
Debt issuance costs............................................................ (9,703)
Cash distributed to stockholders............................................... (31,648)
--------
Net cash provided by financing activities................................ 163,109
--------
Net increase in cash and cash equivalents........................................ 164,888
Cash at beginning of period...................................................... 184
--------
Cash and cash equivalents at end of period....................................... $165,072
--------
--------
</TABLE>

See accompanying notes to condensed consolidated financial statements

F-19
<PAGE>

CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)

(1) GENERAL

(a) Description of Business

CS Wireless Systems, Inc. and subsidiaries (the "Company") develops, owns
and operates a network of wireless cable television systems providing
subscription television services. The Company has a portfolio of wireless cable
channel rights in various markets in the United States. As of March 31, 1996,
the Company had systems in operations in eight markets. Systems in other markets
are currently under construction and development by the Company.

(b) Basis of Presentation

The condensed consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.

For the period January 1, 1996 through February 23, 1996, the Company's
financial statements reflect the combined results of operations for the wireless
cable television system in Cleveland, Ohio. The combined financial statements
for such period include the accounts of the Company and certain assets of
Atlantic Microsystems, Inc. For the period subsequent to February 23, 1996, the
Company's consolidated financial statements include the results of operations of
the entities contributed to the Company on February 23, 1996 (see note 2).

In the opinion of management, the accompanying unaudited condensed
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
operations and cash flows for the three months then ended. These results are not
necessarily indicative of the results to be expected for the full fiscal year.

Net loss per common share is based on the net loss applicable to the
weighted average number of common shares outstanding of 6,042,000 in the
three-month period ended March 31, 1996. For purposes of computing the weighted
average number of common shares outstanding, the Company has retroactively
adjusted the number of outstanding shares prior to February 23, 1996 to reflect
the number of shares issued on February 23, 1996 (see note 2) related to the
wireless cable television system in Cleveland, Ohio. Fully-diluted loss per
common share is not presented as it would not materially differ from primary
loss per common share.

(2) CONTRIBUTIONS TO COMPANY

On February 23, 1996, CAI Wireless Systems, Inc. ("CAI") and Heartland
Wireless Communications, Inc. ("Heartland") contributed to the Company (the
"Contributions") certain wireless cable television assets comprising various
markets in the United States. In connection with the Contributions, CAI and
Heartland received approximately 5.4 million and 3.6 million shares,
respectively, of the Company's newly-issued common stock. In addition, CAI
received approximately $750,000 in cash and Heartland received approximately
$30.9 million in cash, a nine-month note for $25 million (the "Heartland
Short-Term Note") and a 10-year note for $15 million (the "Heartland Long-Term
Note"). The Heartland Short-Term Note was repaid on March 1, 1996 with a portion
of the net proceeds from the Unit Offering (see note 3). The interest rate on
the Heartland Long-Term Note increases from 10% to 15% if the Heartland
Long-Term Note is not repaid within one year of issuance, with interest accruing
and added to the balance annually. No cash interest will be paid on the
Heartland Long-Term Note until after the Senior Notes (see note 3) have been
paid in full.

F-20
<PAGE>

CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

(2) CONTRIBUTIONS TO COMPANY--(CONTINUED)

Additionally, in connection with the Contributions, MMDS Holdings II, Inc.,
an affiliate of Bell Atlantic, and NYNEX MMDS Holding Company, an affiliate of
NYNEX, each received 500,000 shares of common stock of the Company for certain
non-cash consideration.

The consummation of the Contributions has been accounted for at CAI's and
Heartland's historical cost basis, reduced by the amount of cash and notes
distributed to CAI and Heartland in connection with the Contributions. A
substantial portion of the net assets contributed by Heartland were purchased by
Heartland on February 23, 1996. Accordingly, Heartland's cost basis with respect
to such net assets was determined based on preliminary estimates of the fair
value of such net assets. In addition, subsequent to the Contributions, the
Company, CAI and Heartland will complete certain post-closing adjustments that
could result in an adjustment to the net assets contributed to the Company. The
net assets contributed to the Company consist primarily of plant and equipment
and various wireless cable channel rights. The following is a summary of the net
assets contributed to the Company on February 23, 1996 (in thousands):

<TABLE>
<S> <C>
Working capital................................................. $ 377
Plant and equipment, net........................................ 18,952
Net assets held for sale........................................ 27,487
License and leased license investment and goodwill.............. 120,913
Deferred income taxes........................................... 7,129
Other liabilities............................................... (165)
--------
160,435
Cash and notes distributed to CAI and Heartland................. 71,648
--------
Net assets contributed........................................ $ 88,787
--------
--------
</TABLE>

Net assets held for sale consist of an operating wireless cable system in
Bakersfield, California and wireless cable channel rights in Stockton/Modesto,
California, which the Company expects to sell by the end of 1996. For financial
reporting purposes, the net assets held for sale are recorded at the lower of
the carrying amount or fair value less cost to sell. In addition, the Company is
not depreciating or amortizing such net assets while they are held for sale.

The condensed consolidated financial statements of the Company for the three
months ended March 31, 1996 include the results of operations from February 23,
1996 of the net assets acquired in the Contributions. Summarized below is
unaudited pro forma financial information as if the Contributions and Unit
Offering (see note 3) had been consummated as of the beginning of 1996. The pro
forma financial information does not purport to represent what the Company's
results of operations actually would have been had such transactions occurred on
January 1, 1996, or to project the Company's results of operations for any
future period.

<TABLE>
<CAPTION>
(IN THOUSANDS,
EXCEPT PER
SHARE DATA)
<S> <C>
Revenues....................................................... $ 5,881
Net loss....................................................... (8,555)
Net loss per common share...................................... (.85)
</TABLE>

F-21
<PAGE>

CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

(3) UNIT OFFERING

On February 23, 1996, the Company consummated a private placement of 100,000
units (the "Units") consisting of $400 million aggregate principal amount of 11
3/8% Senior Discount Notes due 2006 ("Senior Notes") and 110,000 shares of
common stock of the Company. The Senior Notes will mature on March 1, 2006. The
issue price of the Senior Notes represents a yield to maturity of 11 3/8% per
annum computed on a semi-annual bond equivalent basis. Cash interest on the
Senior Notes will not be payable prior to March 1, 2001. Commencing September 1,
2001, cash interest on the Senior Notes will be payable on March 1 and September
1 of each year at a rate of 11 3/8% per annum. The issuance of the Units
resulted in net proceeds to the Company of approximately $219.8 million,
including amounts attributable to the common stock and after underwriting
discounts and other debt issuance costs aggregating approximately $9.7 million.
For financial reporting purposes, the shares of common stock were valued at
$800,000.

The Senior Notes were issued pursuant to an Indenture which contains certain
restrictive covenants and limitations. Among other things, the Indenture limits
the incurrence of additional indebtedness, limits the making of restricted
payments (as defined) including the declaration and/or payment of dividends,
places limitations on dividends and other payments by the Company's
subsidiaries, prohibits the Company and its subsidiaries from engaging in any
business other than the transmission of video, voice and data and related
businesses and services, and places limitations on liens, certain asset
dispositions and merger/sale of assets activity.

In connection with the issuance of the Senior Notes, the Company agreed,
among other things, to file within 45 days of the issue date a registration
statement with the Securities and Exchange Commission (the "Commission") with
respect to an offer to exchange new notes registered under the Securities Act of
1933 for the Senior Notes, which new notes will be identical in all respects to
the Senior Notes, except that the new notes will not contain terms with respect
to transfer restrictions and to cause such registration statement to become
effective within 120 days of the issue date. As of March 31, 1996, the Company's
registration statement had not yet been declared effective by the Commission.
Subsequent to June 24, 1996, the Company will be required to pay additional
interest on the outstanding Senior Notes. The amount of additional interest will
increase by an additional 0.50% per annum for each subsequent 90-day period
until such obligations are complied with, up to a maximum amount of additional
interest of 2.00% per annum.

(4) BTA AUCTION

On March 28, 1996, the Federal Communications Commission (the "FCC")
concluded auctions for the award of initial commercial wireless cable licenses
for "Basic Trading Areas" or "BTAs" (the "BTA Auction"). Pursuant to an
agreement with CAI and Heartland, the Company will reimburse CAI and Heartland
for all amounts paid in the BTA Auction related to BTAs to be conveyed to the
Company. CAI and Heartland were the winning bidders in the amount of
approximately $17.9 million with respect to 19 BTAs that will be conveyed to the
Company.

(5) SUBSEQUENT EVENT

On May 9, 1996, the Company and Heartland jointly announced an agreement in
principle for the Company to purchase from Heartland certain non-operating
wireless cable markets in Georgia for total consideration of approximately $7.2
million, comprised of cash and notes. Consummation of the transaction is subject
to customary closing conditions, including the execution of a definitive
agreement.

F-22
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors
CAI WIRELESS SYSTEMS, INC.

We have audited the accompanying combined balance sheet of CS Wireless
Systems, Inc. and subsidiaries (formerly ACS Ohio, Inc.) and certain assets of
Atlantic Microsystems, Inc. as of December 31, 1995 and the related combined
statements of operations and accumulated deficit and cash flows for the period
from September 30, 1995 to December 31, 1995. 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of CS Wireless
Systems, Inc. and subsidiaries (formerly ACS Ohio, Inc.) and certain assets of
Atlantic Microsystems, Inc. at December 31, 1995, and the combined results of
their operations and their cash flows for the period from September 30, 1995 to
December 31, 1995, in conformity with generally accepted accounting principles.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
April 1, 1996

F-23
<PAGE>
CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES
(FORMERLY ACS OHIO, INC.)
AND CERTAIN ASSETS OF ATLANTIC MICROSYSTEMS, INC.

COMBINED BALANCE SHEET
DECEMBER 31, 1995
(000S, EXCEPT SHARE DATA)

<TABLE>
<S> <C>
ASSETS
Current assets:
Cash............................................................................ $ 184
Accounts receivable,
less allowance for doubtful accounts of $138.................................. 370
Other current assets............................................................ 35
-------
Total current assets.............................................................. 589
Plant and equipment, net.......................................................... 12,220
Wireless channel rights, net...................................................... 29,500
Goodwill, net..................................................................... 33,379
-------
$75,688
-------
-------
LIABILITIES AND EQUITY
Current liabilities:
Capital lease obligations....................................................... $ 52
Accounts payable and accrued expenses........................................... 2,286
Customer deposits and billings received in advance.............................. 398
-------
Total current liabilities......................................................... 2,736
Capital lease obligations......................................................... 60
Due to CAI Wireless Systems, Inc.................................................. 1,831
Deferred income taxes............................................................. 10,745
Equity:
Preferred Stock--par value $.01 per share, authorized 5,000,000, none issued.... --
Common stock--par value $.001 per share, authorized 40,000,000, issued 1,000
shares............................................................................ 1
Additional paid-in capital...................................................... 15,950
Divisional equity............................................................... 45,572
Accumulated deficit............................................................. (1,207)
-------
Total equity...................................................................... 60,316
-------
$75,688
-------
-------
</TABLE>

See accompanying notes.

F-24
<PAGE>
CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES
(FORMERLY ACS OHIO, INC.)
AND CERTAIN ASSETS OF ATLANTIC MICROSYSTEMS, INC.

COMBINED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE PERIOD FROM SEPTEMBER 30, 1995 TO DECEMBER 31, 1995
(000S, EXCEPT PER SHARE DATA)

<TABLE>
<S> <C>
Revenues:
Pay television revenues...................................................... $ 2,301
Expenses:
Programming and license fees................................................. 795
Marketing.................................................................... 222
General and administrative, including $151,000 to CAI Wireless Systems, Inc.. 1,086
Depreciation and amortization................................................ 1,796
------------
3,899
------------
(1,598)
Interest expense, net.......................................................... (2)
------------
Loss before tax benefit........................................................ (1,600)
Benefit from income taxes...................................................... 393
------------
Net loss....................................................................... $ (1,207)
Accumulated deficit:
Beginning of period.......................................................... --
------------
End of period................................................................ $ (1,207)
------------
------------
Per share data:
Net loss per common share...................................................... $ (1,207)
------------
------------
Weighted average common shares outstanding..................................... 1,000
------------
------------
</TABLE>

See accompanying notes.

F-25
<PAGE>
CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES
(FORMERLY ACS OHIO, INC.)
AND CERTAIN ASSETS OF ATLANTIC MICROSYSTEMS, INC.

COMBINED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM SEPTEMBER 30, 1995 TO DECEMBER 31, 1995

<TABLE>
<CAPTION>
(000S)
------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss....................................................................... $ (1,207)
Adjustments to reconcile net loss to net cash used in operating activities:
Deferred income taxes...................................................... (393)
Depreciation and amortization.............................................. 1,796
Changes in assets and liabilities:
Accounts receivable...................................................... (24)
Other operating assets................................................... 14
Accounts payable and accrued expenses.................................... (887)
Other operating liabilities.............................................. (37)
------------
Net cash used in operating activities.......................................... (738)
------------

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures........................................................... (1,037)
------------
Net cash used in investing activities.......................................... (1,037)
------------

CASH FLOWS FROM FINANCING ACTIVITIES
Payments of capital lease obligations.......................................... (2)
Advances from CAI Wireless Systems, Inc........................................ 1,831
------------
Net cash provided by financing activities...................................... 1,829
------------
Net increase in cash........................................................... 54
Cash, beginning of period...................................................... 130
------------
Cash, end of period............................................................ $ 184
------------
------------
</TABLE>

See accompanying notes.

F-26
<PAGE>
CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES
(FORMERLY ACS OHIO, INC.)
AND CERTAIN ASSETS OF ATLANTIC MICROSYSTEMS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

CS Wireless Systems, Inc. (CS) (formerly ACS Ohio, Inc.), a wholly-owned
subsidiary of CAI Wireless Systems, Inc. (CAI), operates a wireless subscription
television system in Cleveland, Ohio through its two subsidiaries (MetroCable,
Inc. and Metropolitan Satellite Corporation). CS was incorporated in December
1993 and remained dormant until March 1994 when CS, through its parent, ACS
Enterprises, Inc. (ACS) acquired its two subsidiaries. CAI acquired ACS on
September 29, 1995 (see Note 7). The wireless channel rights and goodwill
associated with the Cleveland system were transferred to Atlantic Microsystems,
Inc. (AMI), a wholly owned subsidiary of CAI, upon CAI's acquisition of ACS
Ohio, Inc. and have been included in the accompanying combined financial
statements. The assets presented herein have been contributed by CAI into a
joint venture with Heartland Wireless Communications, Inc. (Heartland) in
accordance with a Participation Agreement which closed on February 23, 1996 (see
note 8).

Principles of Combination

The combined financial statements include the accounts of CS and its two
subsidiaries and certain assets of AMI (the Company). All material intercompany
accounts and transactions have been eliminated in combination.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Revenue Recognition

Subscriber revenue is recognized at the time payments are due. Customer
payments received in advance of the due date are classified as deferred income.
Bad debt expense was approximately $108,000 for the period from September 30,
1995 to December 31, 1995 (1995).

Plant and Equipment

Plant and equipment are carried at historical cost if purchased or
constructed by the Company, or allocated cost if acquired as part of a business
acquisition. Depreciation is calculated on the straight-line method for
financial and tax reporting purposes. Costs of maintenance and repairs are
charged to income as incurred; significant renewals and betterments are
capitalized. The Company capitalizes subcontractor and internal labor and
overhead incurred to construct and install its television reception and
transmission equipment.

Materials and supplies are used to provide service to new customers, and to
ensure continuity of service to existing customers. Materials and supplies are
carried at the lower of cost, determined on the weighted average method (which
approximates the first-in, first-out method), or market.

F-27
<PAGE>
CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES
(FORMERLY ACS OHIO, INC.)
AND CERTAIN ASSETS OF ATLANTIC MICROSYSTEMS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

Equity

The common stock and additional paid-in capital represent the equity
contribution of CAI into CS Wireless Systems, Inc. The Divisional equity
represents the Company's permanent investment in AMI.

Authorized Shares

In December 1995, the Company increased its authorized shares of common
stock from 1,000 to 40,000,000 and changed the par value per share from $1 to
$.001. The Company also authorized 5,000,000 shares of Preferred Stock with a
par value of $.01 per share.

Goodwill and Wireless Channel Rights

Goodwill consists of costs of acquired businesses in excess of fair market
value allocated to specific assets. Goodwill is amortized on a straight-line
basis over its estimated useful life of fifteen years. Wireless channel rights
are being amortized over fifteen years.

The carrying value of the goodwill and wireless channel rights are reviewed
on an ongoing basis. If the review indicates that these assets are not
recoverable, as determined based on undiscounted future cash flows, the
Company's carrying value of these assets is reduced to its estimated fair value.
No such reduction to these assets was made in 1995.

Loss Per Share

Loss per share is based on the average number of common shares outstanding
during the period.

Recently Issued Accounting Pronouncement

Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" is
effective for fiscal years beginning after December 15, 1995. The Company will
adopt the standard, as required on January 1, 1996. Management believes that the
adoption will not have a material effect on the Company's financial position or
results of operations.

2. PLANT AND EQUIPMENT

Plant and equipment consisted of the following (000s):

<TABLE>
<CAPTION>
DECEMBER 31, LIFE
CLASSIFICATION 1995 (YEARS)
-------------- ------------ -------
<S> <C> <C>
Vehicles.............................................. $ 12 3
Office and computer................................... 530 5
Transmission equipment................................ 806 10
Television and other equipment........................ 10,794 2 to 7
Materials and Supplies 976 2 to 10
------------
13,118
Less accumulated depreciation......................... (898)
------------
$ 12,220
------------
------------
</TABLE>

Capitalized overhead costs were approximately $164,000 in 1995. Depreciation
expense was approximately $727,000 in 1995.

F-28
<PAGE>
CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES
(FORMERLY ACS OHIO, INC.)
AND CERTAIN ASSETS OF ATLANTIC MICROSYSTEMS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

3. GOODWILL AND WIRELESS CHANNEL RIGHTS

Goodwill consisted of the following (000s):

<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Costs of acquired businesses in excess of fair
market values allocated to specific assets................... $ 33,945
Less accumulated amortization.................................. (566)
------------
$ 33,379
------------
------------
</TABLE>

Wireless channel rights consisted of the following (000s):

<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Wireless channel rights........................................ $ 30,000
Less accumulated amortization.................................. (500)
------------
$ 29,500
------------
------------
</TABLE>

4. DUE TO CAI WIRELESS SYSTEMS, INC.

The Due to CAI Wireless Systems, Inc. amount included in the balance sheet
represents a balance as the result of various transactions between the Company
and CAI. The $1,831,000 balance at December 31, 1995 is classified as a
long-term liability in the accompanying Combined balance sheet because it is not
expected to be repaid within the upcoming twelve months (see Note 8).

The Company utilizes various CAI personnel such as accounting staff and
certain officers as well as administrative functions including professional
services. For these services, the Company was charged $151,000 in 1995.

5. LEASES

The Company is the licensee of one of the Federal Communications Commission
("FCC") licensed channels available in the Cleveland area, and leases
twenty-four of the remaining thirty-two FCC licenses.

Generally, channel leases provide for monthly rentals based on subscriber
revenue, or the number of subscribers served by the channels being leased. These
amounts were between $0.025 to $0.04 per subscriber per channel per month.
Additionally, certain leases provide for minimum lease payments which do not
significantly increase the total channel license fees payable under the leases
at the present level of subscribers being served. Pursuant to FCC rules, leases
for channel usage cannot extend beyond ten years. Each lease generally provides
for renewal options, or for the parties to negotiate renewals in good faith.

F-29
<PAGE>
CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES
(FORMERLY ACS OHIO, INC.)
AND CERTAIN ASSETS OF ATLANTIC MICROSYSTEMS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

5. LEASES--(CONTINUED)

A summary of channel lease terms at December 31, 1995 is as follows:

<TABLE>
<CAPTION>
LEASE EXTENSION
CHANNELS LESSOR EXPIRATION TERMS
- -------- ------ ---------- ---------
<S> <C> <C> <C>
A1 Parma Board of Education January 2005 CAI 10-year option
A2-C4 ETAMC April 2002 Auto 5-year option
D1-D4 Rockne Educ. Telev. March 2005 CAI 10-year option
E1-E4 Lawrence Brandt August 2012 Unspecified
F1-F4 Krisar, Inc. August 1998 CAI 10-year option
H2 Via./Net Cos. December 1995 Auto 5-year option
</TABLE>

Expense incurred under channel lease agreements aggregated approximately
$57,000 in 1995. The Company leases its transmitter tower. This lease expires in
June 2005 and provides for monthly lease payments of $5,500.

All of the above leases are accounted for as operating leases.

The Company leases office space, automobiles, trucks, and office equipment.
The office space, trucks, and certain office equipment leases have also been
classified as operating leases. The leases covering the remaining office
equipment are classified as capital leases.

Plant and equipment includes the following capitalized values and
accumulated amortization for property under capital leases (000s):

<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Office and computer............................................ $ 142
Less accumulated amortization.................................. (6)
------------
$ 136
------------
------------
</TABLE>

The following is a schedule of the present value of future minimum capital
lease payments and the future minimum operating lease payments with initial or
remaining terms in excess of one year.

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1996...................................................... $ 64 $ 382
1997...................................................... 63 336
1998...................................................... 9 296
1999...................................................... -- 296
2000...................................................... -- 296
2001 and beyond........................................... -- 960
------- ---------
Total minimum lease payments.............................. 136 $ 2,566
---------
---------
Less amount representing interest......................... (24)
-------
Present value of minimum lease payments................... $ 112
-------
-------
</TABLE>

Expense incurred under non-channel operating leases approximated $48,000 in
1995.

F-30
<PAGE>
CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES
(FORMERLY ACS OHIO, INC.)
AND CERTAIN ASSETS OF ATLANTIC MICROSYSTEMS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

6. INCOME TAXES

The Company and its wholly-owned subsidiaries are included in the
consolidated federal tax return of CAI. The Company had no current state or
federal income tax expenses for the period from September 30, 1995 to December
31, 1995.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as calculated on a stand-alone
basis were as follows (000s):

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1995
------------- ------------
<S> <C> <C>
Deferred tax liabilities:
Basis difference on property and equipment...... $ 577 $ 527
Gain on transfer of wireless channel rights..... 11,519 11,335
------------- ------------
Total deferred tax liabilities.................... 12,096 11,862
Deferred tax assets:
Net operating loss carryforwards................ 855 1,106
Other........................................... 103 11
------------- ------------
Total deferred tax assets......................... 958 1,117
------------- ------------
Net deferred tax liabilities...................... $11,138 $ 10,745
------------- ------------
------------- ------------
</TABLE>

The Company has available net operating loss carryforwards of approximately
$2,764,000 for tax reporting purposes to offset future taxable income, the
primary difference from financial reporting losses being the difference in the
basis of wireless channel rights and in depreciation methods for financial and
tax reporting purposes. The net operating loss carryforwards expire through
2010.

7. SYSTEM ACQUISITION

Effective September 30, 1995, CAI consummated the acquisition of 100% of the
outstanding common stock of ACS Enterprises, Inc. (ACS) for $232,000,000 of CAI
common stock and cash.

CAI allocated the purchase price, based upon estimated fair values of assets
and liabilities at the date of acquisition to each of the markets acquired in
the acquisition. The purchase price allocation to the Cleveland market was as
follows (000s):

<TABLE>
<S> <C>
Operating assets.................................................................. $ 525
Plant and equipment............................................................... 12,024
Goodwill.......................................................................... 33,945
Wireless channel rights........................................................... 30,000
Liabilities....................................................................... (14,971)
-------
Net assets acquired............................................................... $61,523
-------
-------
</TABLE>

F-31
<PAGE>
CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES
(FORMERLY ACS OHIO, INC.)
AND CERTAIN ASSETS OF ATLANTIC MICROSYSTEMS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

7. SYSTEM ACQUISITION--(CONTINUED)

Plant and equipment from the acquisition consist primarily of customer
acquisition costs (material, installation labor and overhead). These costs are
being depreciated over their estimated useful lives of two to seven years.

Goodwill and wireless channel rights acquired in the acquisition are being
amortized on a straight-line basis over fifteen years.

8. SUBSEQUENT EVENT

On February 23, 1996, CAI and Heartland contributed the assets and
liabilities of certain wireless subscription television systems to the Company
in for certain consideration. CAI's ownership of the Company, which operates the
subscriber television system in Cleveland, OH, was diluted from 100% to
approximately 54%. Additionally, CAI contributed the Charlotte, NC, Bakersfield,
CA and Stockton/Modesto, CA systems for 5,421,166 shares of common stock of the
Company. Heartland contributed the Minneapolis, MN, Dayton, OH, San Antonio, TX,
Fort Worth, TX, Grand Rapids, MI, Kansas City (suburbs), MO, Dallas, TX, and
Salt Lake City, UT systems for $28.3 million in cash, $25 million in the form of
a short term note, $15 million in the form of a long term note and 3,578,834
shares of common stock of the Company.

In order to attract and retain highly qualified persons, the Company adopted
the 1996 CS Wireless Systems, Inc. Incentive Plan (the "Plan") to be effective
as of February 23, 1996, subject to shareholder approval within twelve months of
the effective date. The Board of Directors of the Company designated a committee
to administer the Plan. The Plan provides for the grant of incentive stock
options (qualifying under Section 422 of the Internal Revenue Code),
non-qualfied stock options, stock appreciation rights, performance shares and
restricted stock or any combination of the foregoing, as the committee may
determine. Terms and conditions, including vesting provisions, exercise periods
and forms of award, are determined by the committee at the grant date. Shares
available for the Plan is limited to 752,688. The Plan will terminate on
February 22, 2006. In March 1996, options were granted to four persons,
aggregating 645,161 shares subject to those options with a $9.40 per share
exercise price. The options vest monthly over 24 to 36 months and the exercise
periods end on December 31, 2005 or February 22, 2006.

Additionally, MMDS Holdings II, Inc., an affiliate of Bell Atlantic, and
NYNEX MMDS Holding Company, an affiliate of NYNEX, each received 500,000 shares
of common stock of the Company, for non-cash consideration.

Concurrent with the contributions of the wireless subscription television
systems and issuance of common stock to CAI, Heartland, MMDS Holdings II, Inc.
and NYNEX MMDS Holdings Company, the Company completed the issuance of 100,000
units consisting of $400,000,000 11 3/8% Senior Discount Notes due 2006 and
110,000 shares of common stock. The net proceeds of the issuance of the units
was approximately $221,000,000, net of discounts and expenses of approximately
$9,000,000. These notes contain covenants restricting the incurrence of
additional debt and limit the ability of the Company to pay dividends or redeem
capital stock. The Company cannot declare or pay dividends.

F-32
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors
CAI Wireless Systems, Inc.

We have audited the accompanying consolidated balance sheets of ACS Ohio,
Inc. and subsidiaries as of December 31, 1994 and September 29, 1995 and the
related consolidated statements of operations and accumulated deficit and cash
flows for the period from March 9, 1994 (date of inception) to December 31, 1994
and for the period from January 1, 1995 to September 29, 1995. 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 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 consolidated financial position of
ACS Ohio, Inc. and subsidiaries at December 31, 1994 and September 29, 1995, and
the consolidated results of their operations and their cash flows for the period
from March 9, 1994 (date of inception) to December 31, 1994 and for the period
from January 1, 1995 to September 29, 1995, in conformity with generally
accepted accounting principles.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
April 1, 1996

F-33
<PAGE>

ACS OHIO, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(000'S, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 29,
1994 1995
------------ -------------
<S> <C> <C>
ASSETS
Current assets:
Cash........................................................... $ 710 $ 130
Accounts receivable,
less allowance for doubtful accounts of $113 and $9 in 1995
and 1994, respectively............................................. 177 346
Other current assets........................................... 56 49
------------ -------------
Total current assets............................................... 943 525
Plant and equipment, net........................................... 10,015 12,275
Channel acquisition costs, net..................................... 1,299 1,203
Goodwill, net...................................................... 7,484 7,092
------------ -------------
$ 19,741 $21,095
------------ -------------
------------ -------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of capital lease obligations................ $ 81 $ 81
Accounts payable and accrued expenses.......................... 810 3,344
Customer deposits and billings received in advance............. 436 435
------------ -------------
Total current liabilities.......................................... 1,327 3,860
Capital lease obligations.......................................... 164 144
Due to ACS Enterprises, Inc........................................ 2,226 3,591
Deferred income taxes.............................................. 649 --
Stockholder's equity:
Common stock--par value $1 per share, authorized and issued 1,000
shares............................................................. 1 1
Additional paid-in capital......................................... 15,950 15,950
Accumulated deficit................................................ (576) (2,451)
------------ -------------
Total stockholder's equity......................................... 15,375 13,500
------------ -------------
$ 19,741 $21,095
------------ -------------
------------ -------------
</TABLE>

See accompanying notes.

F-34
<PAGE>
ACS OHIO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(000'S, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PERIOD FROM
MARCH 9, 1994 PERIOD FROM
(DATE OF INCEPTION) JANUARY 1, 1995 THREE MONTHS
TO DECEMBER 31, TO SEPTEMBER 29, ENDED
1994 1995 MARCH 31, 1995
-------------------- ---------------- --------------
<S> <C> <C> <C>
(UNAUDITED)
Revenues:
Pay television revenues...................... $4,332 $ 6,170 $1,729
Expenses:
Programming and license fees................. 1,239 2,107 576
Marketing.................................... 221 471 150
General and administrative................... 1,994 2,863 811
Depreciation and amortization................ 1,571 3,020 548
------- ------- -------
5,025 8,461 2,085
------- ------- -------
(693) (2,291) (356)
Interest expense, net.......................... (62) (233) (6)
------- ------- -------
Loss before income taxes....................... (755) (2,524) (362)
Benefit from income taxes...................... 179 649 88
------- ------- -------
Net loss....................................... $ (576) $ (1,875) $ (274)
Accumulated deficit:
Beginning of period.......................... -- (576) (576)
------- ------- -------
End of period................................ $ (576) $ (2,451) $ (850)
------- ------- -------
------- ------- -------
Per share data:
Net loss per common share...................... $ (576) $ (1,875) `$(850)
------- ------- -------
------- ------- -------
Weighted average common shares outstanding..... 1,000 1,000 1,000
------- ------- -------
------- ------- -------
</TABLE>

See accompanying notes.

F-35
<PAGE>
ACS OHIO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(000'S)

Cash flows from investing activities
Capital expenditures........................... (2,608) (4,792) (1,753)
Purchase of Channel rights..................... (519) -- (32)
------- ------- -------
Net cash used in investing activities.......... (3,127) (4,792) (1,785)
------- ------- -------

Cash flows from financing activities
Payments of capital lease obligations.......... (32) (20) (22)
Advances from ACS Enterprises, Inc............. 2,226 1,365 28
------- ------- -------
Net cash provided by financing activities...... 2,194 1,345 6
------- ------- -------
Net (decrease) increase in cash................ 314 (580) (588)
Cash, beginning of period...................... 396 710 710
------- ------- -------
Cash, end of period............................ $ 710 $ 130 $ 122
------- ------- -------
------- ------- -------
</TABLE>

See accompanying notes.

F-36
<PAGE>
ACS OHIO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

ACS Ohio, Inc. (the "Company") was formed on March 9, 1994 upon the purchase
of two related companies that together comprise the wireless cable system
serving the Cleveland, Ohio metropolitan area and is a wholly owned subsidiary
of ACS Enterprises, Inc. ("ACS"). ACS is a wholly owned subsidiary of CAI
Wireless Systems, Inc. (see Note 8). The consolidated financial statements
include the accounts of ACS Ohio, Inc. and its wholly owned subsidiaries,
MetroCable, Inc. ("MetroCable") and Metropolitan Satellite, Inc. ("Metro
Satellite"). All material intercompany balances and transactions within ACS
Ohio, Inc. have been eliminated in consolidation.

Use of Estimates

Revenue Recognition

Subscriber revenue is recognized at the time payments are due. Customer
payments received in advance of the due date are classified as deferred income.
Bad debt expense was approximately $263,000 and $85,000 for the period from
January 1, 1995 to September 29, 1995 (1995) and for the period from March 9,
1994 to December 31, 1994 (1994), respectively.

Plant and Equipment

Plant and equipment are carried at historical cost if purchased or
constructed by the Company, or at allocated cost if acquired as part of a
business acquisition. Depreciation is calculated on the straight-line method for
financial and tax reporting purposes. Costs of maintenance and repairs are
charged to income as incurred; significant renewals and betterments are
capitalized. The Company capitalizes subcontractor and internal labor and
overhead incurred to construct and install its television reception and
transmission equipment.

Goodwill and Channel Acquisition Costs

Goodwill consists of costs of acquired businesses in excess of fair market
value allocated to specific assets. Goodwill is amortized on a straight-line
basis over its estimated useful life of fifteen years. Channel acquisition costs
are being amortized over ten years.

The carrying value of the goodwill and channel acquisition costs is reviewed
on an ongoing basis. If the review indicates that these assets are not
recoverable, as determined based on undiscounted future cash flows, the
Company's carrying value of these assets is reduced to its estimated fair value.
No such reduction was made in 1995 or 1994.

F-37
<PAGE>
ACS OHIO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

Loss Per Share

Loss per share is based on the average number of common shares outstanding
during the period.

Reclassification

Certain prior year amounts have been reclassified to conform to the 1995
presentation.

Recently Issued Accounting Pronouncement

Interim Financial Information

In the opinion of management, the accompanying unaudited financial
information of the Company contains all adjustments, consisting only of those of
a recurring nature, necessary to present the results of its operations and cash
flows for the three months ended March 31, 1995. These results are not
necessarily indicative of the results to be expected for the full fiscal year.

2. PLANT AND EQUIPMENT

Plant and equipment consisted of the following (000s):

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 29, LIFE
CLASSIFICATION 1994 1995 (YEARS)
-------------- ------------ ------------- --------
<S> <C> <C> <C>
Vehicles................................. $ 172 $ 185 3
Office and computer...................... 558 682 5
Transmission equipment................... 748 846 10
Television and other equipment........... 8,792 13,167 2 to 7
Materials and supplies................... 839 727 2 to 10
------------ -------------
11,109 15,607
Less accumulated depreciation............ (1,094) (3,332)
------------ -------------
$ 10,015 $12,275
------------ -------------
------------ -------------
</TABLE>

Capitalized overhead costs were approximately $266,000 and $447,000 in 1994
and 1995, respectively. Depreciation expense was approximately $1,063,000 and
$2,482,000 in 1994 and 1995.

F-38
<PAGE>
ACS OHIO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

3. GOODWILL AND CHANNEL ACQUISITION COSTS

Goodwill consisted of the following (000s):

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 29,
1994 1995
------------ -------------
<S> <C> <C>
Costs of acquired businesses in excess of fair
market values allocated to specific assets...... $7,472 $ 7,472
Organization and other costs...................... 408 411
------------ -------------
7,880 7,883
Less accumulated amortization..................... (396) (791)
------------ -------------
$7,484 $ 7,092
------------ -------------
------------ -------------
</TABLE>

Channel acquisition costs consisted of the following (000s):

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 29,
1994 1995
------------ -------------
<S> <C> <C>
Licenses.......................................... $1,000 $ 1,000
Channel rights.................................... 397 406
------------ -------------
1,397 1,406
Less accumulated amortization..................... (98) (203)
------------ -------------
$1,299 $ 1,203
------------ -------------
------------ -------------
</TABLE>

4. DUE TO ACS ENTERPRISES, INC.

The Due to ACS Enterprises, Inc. amount included in the balance sheet
represents a balance as the result of various transactions between the Company
and ACS. The balance is primarily the result of the Company's participation in
ACS' cash management system, wherein cash infusions needed to meet current
operating requirements and for capital expenditures accrue interest at rates
established by ACS, which approximates ACS' external borrowing costs. Interest
charged on this balance was approximately $51,000 and $212,000 in 1994 and 1995,
respectively. The balances at December 31, 1994 and September 29, 1995 of
$2,226,000 and $3,591,000 are classified as long-term liabilities in the
accompanying consolidated balance sheet because the balances are not expected to
be repaid within the upcoming twelve months (see Note 8).

The Company utilizes various ACS personnel such as accounting staff and
certain officers as well as administrative functions including professional
services. It is ACS' policy to charge these expenses and all other central
operating costs, first on the basis of direct usage when identifiable, with the
remainder allocated among ACS' subsidiaries based on the average of respective
percentages of revenues, payroll costs, and average assets. For these services,
the Company was charged $38,000 and $76,000 in 1994 and 1995, respectively.

5. LEASES

The Company is the licensee of one of the Federal Communications Commission
("FCC") licensed channels available in the Cleveland area, and leases
twenty-four of the remaining thirty-two FCC licenses.

F-39
<PAGE>
ACS OHIO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

5. LEASES--(CONTINUED)

A summary of channel lease terms at September 29, 1995 is as follows:

<TABLE>
<CAPTION>
LEASE EXTENSION
CHANNELS LESSOR EXPIRATION TERMS
- -------- ------ ---------- ---------
<S> <C> <C> <C>
A1 Parma Board of Education January 2005 ACS 10-year option
A2--C4 ETAMC April 2002 Auto 5-year option
D1--D4 Rockne Educ. Telev. March 2005 ACS 10-year option
E1--E4 Lawrence Brandt August 2012 Unspecified
F1--F4 Krisar, Inc. August 1998 ACS 10-year option
H2 Via./Net Cos. December 1995 Auto 5-year option
</TABLE>

Expense incurred under channel lease agreements aggregated approximately
$153,000 and $85,000 in 1995 and 1994, respectively. The Company leases its
transmitter tower. This lease expires in June 2005, and provides for monthly
lease payments of $5,500.

All of the above leases are accounted for as operating leases.

The Company leases office space, automobiles, trucks, and office equipment.
The office space, and certain office equipment leases have also been classified
as operating leases. The leases covering trucks and the remaining office
equipment are classified as capital leases.

Plant and equipment includes the following capitalized values and
accumulated amortization for property under capital leases (000s):

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 29,
1994 1995
------------ -------------
<S> <C> <C>
Office and computer............................... $105 $ 159
Vehicles.......................................... 172 172
----- -----
277 331
Less accumulated amortization..................... (24) (82)
----- -----
$253 $ 249
----- -----
----- -----
</TABLE>

F-40
<PAGE>
ACS OHIO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

5. LEASES--(CONTINUED)

The following is a schedule of the present value of future minimum capital
lease payments and the future minimum operating lease payments with initial or
remaining terms in excess of one year.

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1996...................................................... $ 127 $ 316
1997...................................................... 111 300
1998...................................................... 22 296
1999...................................................... -- 296
2000...................................................... -- 296
2001 and beyond........................................... -- 1,033
------- ---------
Total minimum lease payments.............................. 260 $ 2,537
Less amount representing interest......................... (35)
-------
Present value of minimum lease payments................... $ 225
-------
-------
</TABLE>

Expense incurred under non-channel operating leases approximated $172,000
and $143,000 in 1994 and 1995, respectively.

6. INCOME TAXES

The Company and its wholly-owned subsidiaries are included in the
consolidated federal tax return of ACS. The Company had no current state or
federal income tax expenses for 1995 and 1994.

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 29,
1994 1995
------------ -------------
<S> <C> <C>
Deferred tax liabilities--
Basis difference on property and equipment........ $726 $ 577
----- -----
Deferred tax assets:
Net operating loss carryforwards................ 60 855
Other........................................... 17 103
----- -----
Total deferred tax assets......................... 77 958
----- -----
Valuation allowance for deferred tax assets....... -- (381)
----- -----
Net deferred tax liabilities...................... $649 $ --
----- -----
----- -----
</TABLE>

The Company has available net operating loss carryforwards of approximately
$2,138,000 for tax reporting purposes to offset future taxable income, the
primary difference from financial reporting losses being the difference in
depreciation methods for financial and tax reporting purposes. The net operating
loss carryforwards expire in 2010.

F-41
<PAGE>
ACS OHIO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

7. SYSTEM ACQUISITION

On March 9, 1994, ACS purchased the two related companies that together
comprised the wireless cable system serving the Cleveland, Ohio metropolitan
area for a total of $16,000,000. ACS formed ACS Ohio, Inc. to purchase 100% of
MetroCable, an Ohio corporation, for approximately $8,600,000 cash, and 100% of
MetroSatellite, an Ohio corporation, for approximately $7,400,000 cash.

The above acquisitions have been accounted for by the purchase method of
accounting and, accordingly, the results of these entities have been
consolidated with ACS since March 9, 1994.

The Company allocated the purchase price, based upon estimated fair values
of assets and liabilities at the date of acquisition, as follows (000s):

<TABLE>
<S> <C>
Operating assets................................................. $ 806
Plant and equipment.............................................. 8,206
Goodwill......................................................... 7,472
Other intangibles................................................ 1,287
Liabilities...................................................... (1,820)
-------
Net assets acquired.............................................. $15,951
-------
-------
</TABLE>

Plant and equipment from the acquisition consist primarily of customer
acquisition costs (material, installation labor, and purchase price premium).
These costs are being depreciated over their estimated useful lives of two to
seven years.

Goodwill acquired in the acquisitions is being amortized on a straight-line
basis over fifteen years.

8. SUBSEQUENT EVENTS

Effective at the close of business on September 29, 1995, a definitive
merger agreement between ACS and CAI Wireless Systems, Inc. ("CAI") was
consummated wherein CAI acquired 100% of the outstanding common stock of ACS for
$232,000,000 of CAI common stock and cash.

On February 23, 1996, CAI and Heartland contributed the assets and
liabilities of certain wireless subscription television systems to CS Wireless
Systems, Inc. ("CS Wireless") in for certain consideration. CAI's ownership of
CS Wireless, which operates the subscriber television system in Cleveland, OH,
was diluted from 100% to approximately 54%. Additionally, CAI contributed the
Charlotte, NC, Bakersfield, CA and Stockton/Modesto, CA systems for 5,420,166
shares of common stock of the Company. Heartland contributed the Minneapolis,
MN, Dayton, OH, San Antonio, TX, Fort Worth, TX, Grand Rapids, MI, Kansas City
(suburbs), MO, Dallas, TX and Salt Lake City, UT systems for $28.3 million in
cash, $25 million in the form of a short term note, $15 million in the form of a
long term note and 3,578,834 shares of common stock of CS Wireless.

Additionally, MMDS Holdings II, Inc., an affiliate of Bell Atlantic, and
NYNEX MMDS Holding, an affiliate of NYNEX, each received 500,000 shares of
common stock of CS Wireless, for non-cash consideration.

Concurrent with the contributions of the wireless subscription television
systems and issuance of common stock to CAI, Heartland, MMDS Holdings II, Inc.
and NYNEX MMDS Holdings Company, CS Wireless completed the issuance of 100,000
units consisting of $400,000,000 11 3/8% Senior Discount Notes due 2006 and
110,000 shares of common stock. The net proceeds of the issuance of the units
was approximately $221,000,000, net of discounts and expenses of approximately
$9,000,000.

F-42
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

METROCABLE, INC.
Cleveland, Ohio

We have audited the accompanying balance sheet of MetroCable, Inc. as of
February 28, 1994, and the related statements of operations and deficit,
shareholders' equity, and cash flows for the period from June 4, 1993 (date of
commencement of operations) to February 28, 1994. 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of February
28, 1994 and the results of its operations and its cash flows for the period
from June 4, 1993 (date of commencement of operations) to February 28, 1994, in
conformity with generally accepted accounting principles.

As discussed in Note 8, in March 1994, a wholly-owned subsidiary of ACS
Enterprises, Inc. acquired 100% of the outstanding common stock of MetroCable,
Inc.

LEWANDOWSKI ZALICK & COMPANY

May 4, 1994
Cleveland, Ohio

F-43
<PAGE>
METROCABLE, INC.

BALANCE SHEET

FEBRUARY 28, 1994

<TABLE>
<S> <C>
ASSETS

CURRENT ASSETS
Cash........................................................................... $ 127,081
Certificates of deposit........................................................ 50,000
Accounts receivable, trade..................................................... 164,563
Other current assets........................................................... 7,691
Installation materials......................................................... 80,333
----------
TOTAL CURRENT ASSETS................................................... 429,668

PROPERTY AND EQUIPMENT, NET.................................................... 856,808

OTHER ASSETS
Deferred charges, net of accumulated amortization of $1,688.................. 39,645
----------
$1,326,121
----------
----------
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Shareholder notes............................................................ $ 800,000
Accrued liabilities
Interest................................................................... 59,333
Programming costs.......................................................... 38,670
Professional fees.......................................................... 15,105
Property taxes............................................................. 14,000
Workers' compensation...................................................... 12,750
Other...................................................................... 21,039
Accounts payable
Trade...................................................................... 47,654
Affiliate.................................................................. 17,135
Customer deposits and deferred revenue......................................... 178,085
----------
TOTAL CURRENT LIABILITIES.............................................. 1,203,771

SHAREHOLDERS' EQUITY
Common stock, no par value, 750 shares authorized, 100 shares issued and
outstanding.................................................................... 200,000
Accumulated deficit.......................................................... (77,650)
----------
122,350
----------
$1,326,121
----------
----------
</TABLE>

See accompanying notes.

F-44
<PAGE>
METROCABLE, INC.

STATEMENT OF OPERATIONS AND DEFICIT

FOR THE PERIOD JUNE 4, 1993 (DATE OF COMMENCEMENT OF OPERATIONS)

THROUGH FEBRUARY 28, 1994

<TABLE>
<S> <C>
REVENUES
Pay television revenues...................................................... $1,360,636
Rental of equipment, affiliate............................................... 75,858
Other........................................................................ 66,539
----------
1,503,033
EXPENSES
Programming and license fees................................................. 512,897
Commissions.................................................................. 41,117
Depreciation and amortization................................................ 67,787
Selling, general and administrative.......................................... 900,756
----------
1,522,557
----------
OPERATING LOSS BEFORE OTHER INCOME (EXPENSE)............................. (19,524)
OTHER INCOME (EXPENSE)
Interest expense, including $59,333 to shareholders.......................... (60,143)
Interest income.............................................................. 2,017
----------
(58,126)
----------
NET LOSS AND ACCUMULATED DEFICIT AT END OF PERIOD........................ $ (77,650)
----------
----------
NET LOSS PER COMMON SHARE OUTSTANDING.......................................... $ (777)
----------
----------
</TABLE>

See accompanying notes.

F-45
<PAGE>
METROCABLE, INC.

STATEMENT OF SHAREHOLDERS' EQUITY

FOR THE PERIOD JUNE 4, 1993 (DATE OF COMMENCEMENT OF OPERATIONS)

THROUGH FEBRUARY 28, 1994

<TABLE>
<CAPTION>
COMMON ACCUMULATED SHAREHOLDERS'
STOCK DEFICIT EQUITY--NET
-------- ----------- -------------
<S> <C> <C> <C>
Issuance of common stock in exchange for
net assets acquired.................................... $200,000 $ -- $ 200,000
Net loss for the period.................................. -- (77,650) (77,650)
-------- ----------- -------------
Balances at February 28, 1994............................ $200,000 $ (77,650) $ 122,350
-------- ----------- -------------
-------- ----------- -------------
</TABLE>

See accompanying notes.

F-46
<PAGE>
METROCABLE, INC.

STATEMENT OF CASH FLOWS

FOR THE PERIOD JUNE 4, 1993 (DATE OF COMMENCEMENT OF OPERATIONS)

THROUGH FEBRUARY 28, 1994

<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss...................................................................... $ (77,650)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation and amortization............................................... 67,787
(Increase) decrease in assets...............................................
Accounts receivable......................................................... (81,745)
Other current assets........................................................ (7,691)
Installation materials...................................................... (14,806)
Increase (decrease) in liabilities
Accrued liabilities......................................................... 160,897
Trade accounts payable...................................................... 47,654
Accounts payable--affiliate................................................. 17,135
Customer deposits and deferred revenue...................................... 43,435
---------
NET CASH PROVIDED BY OPERATING ACTIVITIES................................. 155,016

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures.......................................................... (170,932)
Proceeds from disposal of property and equipment.............................. 44,500
Channel rights acquired....................................................... (9,581)
Cash acquired with the purchase of the assets of Metropolitan Cablevision,
Inc............................................................................. 108,078
---------
NET CASH USED BY INVESTING ACTIVITIES..................................... (27,935)
---------
INCREASE IN CASH AND CASH AT END OF PERIOD................................ $ 127,081
---------
---------
</TABLE>

NON-CASH INVESTING AND FINANCING ACTIVITY

On June 4, 1993, the Company acquired the net assets of Metropolitan
Cablevision, Inc. in exchange for $800,000 of shareholder notes and $200,000 of
common stock.

See accompanying notes.

F-47
<PAGE>
METROCABLE, INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE PERIOD JUNE 4, 1993 (DATE OF COMMENCEMENT OF OPERATIONS)

THROUGH FEBRUARY 28, 1994

NOTE 1--ORGANIZATION AND BASIS OF PRESENTATION

MetroCable, Inc. was incorporated in the State of Ohio in May 1993. After
the acquisition of the assets of Metropolitan Cablevision, Inc., the Company
began providing Multi-channel, Multipoint Distribution Services ("MMDS") to
private residences and multi-unit housing complexes, in the City of Cleveland,
Ohio and surrounding suburbs.

On June 4, 1993, MetroCable, Inc. ("MetroCable") acquired all of the assets
of Metropolitan Cablevision, Inc., from the shareholders of Metropolitan
Cablevision, Inc. for $1,000,000. The acquisition was financed through the
issuance of $800,000 of demand shareholder notes and $200,000 of common stock.
This transaction was accounted for as a reorganization of entities under common
control; accordingly, the consideration was allocated to the assets acquired
based on their respective historical values as of the acquisition date. Both
MetroCable and Metropolitan Cablevision, Inc. operate on March to February
fiscal years.

The net assets acquired were as follows:

<TABLE>
<S> <C>
Cash........................................................... $ 108,078
Certificate of deposit......................................... 50,000
Accounts receivable............................................ 82,818
Installation materials......................................... 65,527
Property and equipment......................................... 796,475
Deferred charges............................................... 31,752
----------
Gross assets acquired.......................................... 1,134,650
Liabilities assumed--customer deposits and deferred revenue.... (134,650)
----------
Net assets acquired............................................ $1,000,000
----------
----------
</TABLE>

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Financial Instruments

Trade accounts receivable principally represent amounts due for services
from approximately 5,000 subscribers, and they are substantially secured by
service deposits held by the Company.

Inventories

Inventories of installation materials are carried at the lower of cost,
determined on the weighted average method, which approximates the first-in,
first-out method, or market.

F-48
<PAGE>
METROCABLE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

FOR THE PERIOD JUNE 4, 1993 (DATE OF COMMENCEMENT OF OPERATIONS)

THROUGH FEBRUARY 28, 1994

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

Property and Equipment

Property and equipment are stated at allocated cost and are depreciated on
the straight-line method over the useful lives of the assets as follows:

<TABLE>
<S> <C>
Reception and transmission facilities.......................... 12.5 years
Installation hookups........................................... 5 years
Computerized equipment......................................... 5 years
Leasehold improvements and office equipment.................... 5 years
</TABLE>

Maintenance and repair costs are expensed as incurred; significant renewals
and betterments are capitalized. For disposals of property and equipment, the
gross carrying value and the related accumulated depreciation are removed from
the accounts and are included in determining gain or loss on such disposal.

Depreciation expense was $66,099 for the period from June 4, 1993 through
February 28, 1994.

Deferred Charges

Deferred charges consist of costs incurred in the acquisition of channel
rights. The deferred charges are amortized over 15 years (the life of the
channel rights leases), using the straight-line method. Amortization expense was
$1,688 for the period from June 4, 1993 through February 28, 1994.

Income Taxes

Income taxes are accounted for under Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes", which requires
recognition of deferred tax assets and liabilities on temporary differences
between the tax and financial statement bases for assets and liabilities,
measured at the current tax rates.

Cash and Cash Equivalents

For purposes of the Statement of Cash Flows, the Company considers all
investments purchased with original maturities of three months or less to be
cash equivalents.

Net Loss For Common Share Outstanding

The net loss per common share outstanding is based on the weighted average
number of common shares outstanding of 100 for the period from June 4, 1993 to
February 28, 1994.

NOTE 3--RELATED PARTY TRANSACTIONS

The Company has an operating lease for installation hookup equipment with an
affiliated company, Metropolitan Satellite Corp. Rental income was $75,858 for
the period from June 4, 1993 to February 28, 1994. The operating lease is a
month-to-month lease with variable fees based on subscriber

F-49
<PAGE>
METROCABLE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

FOR THE PERIOD JUNE 4, 1993 (DATE OF COMMENCEMENT OF OPERATIONS)

THROUGH FEBRUARY 28, 1994

NOTE 3--RELATED PARTY TRANSACTIONS--(CONTINUED)

levels. The Company also shares various administrative costs with the affiliate
which resulted in a payable of $17,135 at February 28, 1994.

The $800,000 shareholders' loans, plus accrued interest at 10% per annum,
are due on demand. The shareholders' loans are collateralized by substantially
all assets of the Company. Interest expense on the shareholders' loans totalled
$59,333 for the period from June 4, 1993 to February 28, 1994. These notes were
repaid in full, together with accrued interest thereon, in March 1994 upon
acquisition of the Company by ACS Ohio, Inc. (see Note 8).

NOTE 4--PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at February 28, 1994:

<TABLE>
<CAPTION>
DESCRIPTION
- ----------------------------------------------------------------
<S> <C>
Reception and transmission facilities........................... $653,113
Installation hookups............................................ 191,454
Computerized equipment.......................................... 11,083
Leasehold improvements and office equipment..................... 67,257
--------
922,907
Less accumulated depreciation................................... (66,099)
--------
Property and equipment, net..................................... $856,808
--------
--------
</TABLE>

NOTE 5--INCOME TAXES

For the period from June 4, 1993 to February 28, 1994, the Company incurred
a net operating loss for tax return and financial reporting purposes. No tax
benefit from the net operating loss has been recognized in 1994 due to the
uncertainty of future utilization of the net operating loss carryforward.

At February 28, 1994, the Company had a net operating loss carryforward for
federal income tax purposes of approximately $75,000 which, if not used, will
expire in 2009.

NOTE 6--COMMITMENTS AND CONTINGENCIES

The Company is a party to numerous leases for programming, broadcast
channels, towers, and vehicles. All leases will expire within five years;
however, many include automatic extensions. Future

F-50
<PAGE>
METROCABLE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

FOR THE PERIOD JUNE 4, 1993 (DATE OF COMMENCEMENT OF OPERATIONS)

THROUGH FEBRUARY 28, 1994

NOTE 6--COMMITMENTS AND CONTINGENCIES--(CONTINUED)

minimum annual rental commitments for noncancelable operating leases with fixed
lease payments are as follows:

<TABLE>
<CAPTION>
CHANNELS TOWER VEHICLES TOTAL
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1995.............................. $ 66,000 $ 78,600 $ 12,133 $156,733
1996.............................. 66,000 25,200 12,133 103,333
1997.............................. 66,000 -- 3,861 69,861
1998.............................. 66,000 -- -- 66,000
1999.............................. 66,000 -- -- 66,000
-------- -------- -------- --------
$330,000 $103,800 $ 28,127 $461,927
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>

In addition, the Company is a party to certain channel leases and
programming agreements which include variable fees based on subscriber levels.

Expense incurred under operating leases and programming agreements
approximated $583,500 for the period from June 4, 1993 to February 28, 1994.

As required by certain of these lease agreements, the Company has obtained a
letter of credit for $50,000 which expires March 2, 1994 and is secured by the
certificate of deposit of $50,000.

NOTE 7--CONCENTRATION OF CREDIT RISK

The Company's cash balances periodically exceed federally insured limits.

NOTE 8--SUBSEQUENT EVENT

On March 9, 1994, ACS Ohio, Inc., a wholly-owned subsidiary of ACS
Enterprises, Inc., acquired 100% of the outstanding common shares of MetroCable
for an aggregate purchase price of approximately $8,600,000 cash, including an
$861,111 contribution to capital, which was used to repay the $800,000
shareholder notes, together with accrued interest thereon, through March 9,
1994.

F-51
<PAGE>
METROCABLE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

FOR THE PERIOD JUNE 4, 1993 (DATE OF COMMENCEMENT OF OPERATIONS)

THROUGH FEBRUARY 28, 1994

NOTE 8--SUBSEQUENT EVENT--(CONTINUED)

The following is condensed operating and cash flow information for the
period March 1 to March 8, 1994:

METROCABLE, INC.

CONDENSED STATEMENT OF OPERATIONS

FOR THE PERIOD MARCH 1 TO MARCH 8, 1994

<TABLE>
<S> <C> <C>
Revenues................................................................. $43,978
Expenses:
Programming and license fees........................................... $14,148
Selling, general, and administrative................................... 20,557
Depreciation and amortization.......................................... 2,750
-------
Total expenses........................................................... 37,455
-------
Operating income......................................................... 6,523
Interest expense......................................................... (1,778)
-------
Net income............................................................... $ 4,745
-------
-------
</TABLE>

METROCABLE, INC.

CONDENSED STATEMENT OF CASH FLOWS

FOR THE PERIOD MARCH 1 TO MARCH 8, 1994

<TABLE>
<S> <C> <C>
Cash Flows from Operating Activities:
Net income........................................................... $ 4,745
Adjustments to reconcile net income to net cash used by operating
activities:
Depreciation and amortization........................................ $ 2,750
Increase in operating assets......................................... 28,815
Increase in operating liabilities.................................... (47,191)
--------
Total Adjustments...................................................... (15,626)
--------
Net Cash Used by Operating Activities.................................. (10,881)
--------
Net decrease in cash................................................... (10,881)
Cash at beginning of period............................................ 177,081
--------
Cash at end of period.................................................. $166,200
--------
--------
Supplemental Disclosure of Cash Flow Information:
Cash Paid for Interest............................................... $ --
--------
--------
</TABLE>

F-52
<PAGE>
INDEPENDENT AUDITORS' REPORT

THE BOARD OF DIRECTORS
CS Wireless Systems, Inc.:

We have audited the accompanying statement of operations, stockholders'
deficit and cash flows of Metropolitan Cablevision, Inc. for the period from
March 1, 1993 to June 3, 1993. 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.

As discussed in note 2 to the financial statements, the Company suffered
significant recurring losses from operations and was unable to meet its
obligations. In June 1993, based on the Company's inability to repay its
obligations, the Company's creditors foreclosed on the assets of the Company and
subsequently sold the assets to MetroCable, Inc. for $1 million. As a result,
the Company recorded a write-down of $1.7 million in the year ended February 28,
1993 to reflect the permanent impairment of its assets.

In our opinion, the financial statements referred to above present fairly,
in all material respects the results of operations and cash flows of
Metropolitan Cablevision, Inc., from March 1, 1993 to June 3, 1993 in conformity
with generally accepted accounting principles.

KPMG PEAT MARWICK LLP

Dallas, Texas
March 22, 1996

F-53
<PAGE>
METROPOLITAN CABLEVISION, INC.

STATEMENT OF OPERATIONS

PERIOD FROM MARCH 1, 1993 TO JUNE 3, 1993

<TABLE>
<S> <C>
REVENUES:
Pay television revenues...................................................... $ 454,155
Rental of equipment - affiliate.............................................. 25,550
Other........................................................................ 44,839
-----------
524,444
-----------

EXPENSES:
Programming and license fees................................................. 173,765
Commissions.................................................................. 11,222
Depreciation................................................................. 198,802
Selling, general and administrative.......................................... 309,980
-----------
693,769
Operating loss........................................................... (169,325)
-----------
Interest expense (note 3)...................................................... 1,283,417
-----------
NET LOSS................................................................. $(1,452,742)
-----------
-----------
</TABLE>

See accompanying notes to financial statements.

F-54
<PAGE>
METROPOLITAN CABLEVISION, INC.

STATEMENT OF STOCKHOLDERS' DEFICIT
PERIOD FROM MARCH 1, 1993 TO JUNE 3, 1993

<TABLE>
<CAPTION>
COMMON STOCK
CLASS A TREASURY STOCK TOTAL
----------------- ACCUMULATED ---------------- STOCKHOLDERS'
SHARES AMOUNT DEFICIT SHARES AMOUNT DEFICIT
------ ------- ------------ ------ ------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balances, February 28, 1993.......... 400 $53,100 $(48,087,217) (87) $(44) $ (48,034,161)
Net loss............................ -- -- (1,452,742) -- -- (1,452,742)
-- ------- ------------ -- ------ -------------

Balances, June 3, 1993............... 400 $53,100 $(49,539,959) (87) $(44) $ (49,486,903)
-- ------- ------------ -- ------ -------------
-- ------- ------------ -- ------ -------------

</TABLE>

See accompanying notes to financial statements.

F-55
<PAGE>
METROPOLITAN CABLEVISION, INC.

STATEMENT OF CASH FLOWS
PERIOD FROM MARCH 1, 1993 TO JUNE 3, 1993

<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss..................................................................... $(1,452,742)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation............................................................... 198,802
Accrued interest on stockholders' loans.................................... 1,283,417
Changes in operating assets and liabilities:
Accounts receivable...................................................... 13,607
Inventories.............................................................. 27,589
Other current assets..................................................... (26,161)
Accounts payable and accrued expenses.................................... (32,489)
Customer deposits and deferred billings.................................. (21,056)
-----------
Cash flows used in operating activities........................................ (9,033)
-----------
Cash flows from investing activities--capital expenditures..................... (5,070)
-----------
Net decrease in cash........................................................... (14,103)
Cash at beginning of period.................................................... 228,801
-----------
Cash at end of period.......................................................... $ 214,698
-----------
-----------
</TABLE>

See accompanying notes to financial statements.

F-56
<PAGE>
METROPOLITAN CABLEVISION, INC.

NOTES TO FINANCIAL STATEMENTS
PERIOD FROM MARCH 1, 1993 TO JUNE 3, 1993

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) General

Metropolitan Cablevision, Inc. (the "Company") was incorporated in the State
of Ohio in November 1984 and commenced operations in March 1985. In January
1986, the Company began providing Multi-Channel, Multi-Point Distribution
Television Services ("MMDS") to private residences and multi-unit housing
complexes, primarily in the City of Cleveland, Ohio and surrounding suburbs.

(b) Financial Instruments

The Company has no financial instruments with significant off-balance sheet
or concentration of credit risk. Trade accounts receivable principally represent
amounts due for service from in excess of 5,000 subscribers and they were
substantially secured by service deposits held by the Company.

Inventories were carried at the lower of cost, determined on the weighted
average method, which approximated the first-in, first-out method, or market.

(d) Plant and Equipment

Plant and equipment was stated at cost and was depreciated on the
straight-line method over the useful lives of the assets as follows:

<TABLE>
<S> <C>
Reception and transmission facilities......................... 12.5 years
Installation hookups.......................................... 5 to 8 years
Computerized equipment........................................ 5 years
Leasehold improvements and office equipment................... 5 years
Tools and test equipment...................................... 10 years
</TABLE>

Maintenance and repairs, subcontractor, employee labor and overhead costs
incurred in connection with the construction and installation of the Company's
television reception and transmission equipment were expensed as incurred;
significant renewals and betterments were capitalized. For disposals of plant
and equipment, the gross carrying value and the related accumulated depreciation
were removed from the accounts and included in determining gain or loss on such
disposals.

(e) Deferred Charges

Deferred charges consisted of costs incurred in the acquisition of channel
rights. The deferred charges were amortized over 20 years (the life of the
channel rights leases), using the straight-line method.

(f) Income Taxes

The Company provides for deferred taxes under the asset and liability method
of Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for
Income Taxes. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the

F-57
<PAGE>
METROPOLITAN CABLEVISION, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

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.

(g) Loss per Share of Common Stock

Loss per share of common stock was calculated using net loss divided by the
average number of shares of common stock outstanding of 313 in 1993.

(h) Cash and Cash Equivalents

For the purposes of the statement of cash flows, the Company considered all
investments purchased with original maturities of three months or less to be
cash equivalents.

(2) FORECLOSURE ON ASSETS

The Company suffered significant recurring losses and was unable to meet its
obligations. The stockholders requested repayment of the stockholders' loans to
the Company and accrued interest during fiscal 1993. In June 1993, based on the
Company's inability to repay the loans, the stockholders foreclosed on the
assets of the Company. On June 4, 1993, the stockholders sold the assets of the
Company to MetroCable, Inc. for $1,000,000. As a result, the Company recorded a
write-down of $1.7 million in the year ended February 28, 1993 to reflect the
permanent impairment of its assets.

MetroCable, Inc. was incorporated in the State of Ohio on May 27, 1993 and
the stockholders of MetroCable, Inc. are primarily the former stockholders of
the Company.

(3) RELATED PARTY TRANSACTIONS

The Company had an operating lease for installation hookup equipment with an
affiliated company. Rental income from the converter boxes recognized was
$25,550 for the period from March 1, 1993 to June 3, 1993. This operating lease
was a month-to-month lease with variable fees based on subscriber levels.

Interest expense on the loans outstanding to stockholders at June 3, 1993
amounted to $1,283,417 for the period from March 1, 1993 to June 3, 1993.

(4) INCOME TAXES

For the period from March 1, 1993 to June 3, 1993, the Company incurred net
operating losses for tax return and financial reporting purposes. No tax benefit
from such net operating losses has been recognized in the statement of
operations due to the uncertainty of future utilization of the net operating
loss carryforwards. As a result of the foreclosure of assets discussed in note
2, the Company has no remaining net operating loss carryforwards. In addition,
there were no deferred taxes at June 3, 1993.

Effective March 1, 1993, the Company adopted SFAS No. 109, "Accounting for
Income Taxes." The standard did not have a material effect on the financial
position or result of operations of the Company.

F-58
<PAGE>
METROPOLITAN CABLEVISION, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(5) COMMITMENTS AND CONTINGENCIES

The Company was a party to numerous leases for broadcast channels, building
and equipment. All leases expired within five years, however, many included
automatic extensions. Future minimum annual rental commitments for
noncancellable operating leases in effect at June 3, 1993 were approximated as
follows:

<TABLE>
<CAPTION>
CHANNEL RIGHTS LEASE OTHER OPERATING LEASES
-------------------- ----------------------
<S> <C> <C>
June 4, 1993 to February 28, 1994...... $ 42,375 $ 15,900
1995................................... 49,000 14,600
1996................................... 24,000 10,400
1997................................... 24,000 1,300
1998................................... 24,000 --
1999................................... 24,000 --
---------- --------
$187,375 $ 42,200
---------- --------
---------- --------
</TABLE>

Expense incurred under operating leases approximated $201,000 for the period
from March 1, 1993 to June 3, 1993.

As required by certain of these lease agreements, the Company obtained a
letter of credit for $50,000, which was to expire on March 2, 1994, and was
secured by a certificate of deposit for $50,000.

The Company had a lawsuit outstanding at June 3, 1993 with former employees.
However, management believes that any resulting liability not recorded as of
June 3, 1993 would not materially affect the financial position or results of
operations of the Company.

F-59
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

METROPOLITAN SATELLITE CORP.
Cleveland, Ohio

We have audited the accompanying balance sheets of Metropolitan Satellite
Corp. as of February 28, 1994, and the related statements of operations and
deficit, 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of February
28, 1994 and the results of its operations and its cash flows for the year then
ended, in conformity with generally accepted accounting principles.

As discussed in Note 13, the Company merged with a wholly-owned subsidiary
of ACS Enterprises, Inc. in March 1994.

LEWANDOWSKI ZALICK & COMPANY

May 4, 1994
Cleveland, Ohio

F-60
<PAGE>
METROPOLITAN SATELLITE CORP.

BALANCE SHEET

FEBRUARY 28, 1994

<TABLE>
<CAPTION>
1994
------------
<S> <C>
ASSETS

Cash.......................................................................... $ 611,699
Subscriber receivables........................................................ 56,033
Other receivables............................................................. 3,499
Prepaid expenses.............................................................. 19,567
Advances to affiliated company................................................ 17,135
Reception and distribution facilities, less accumulated depreciation of
$4,566,204.................................................................... 545,995
Equipment and fixtures, less accumulated depreciation of $184,478............. 99,833
Installation materials........................................................ 109,996
Purchased license agreements, less accumulated amortization of $1,241,085..... 1,013,915
Miscellaneous................................................................. 10,748
------------
$ 2,488,420
------------
------------

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)

LIABILITIES
Demand note payable to bank................................................. $ 234,500
Subordinated notes payable to related party................................. 8,782,078
Other notes payable and installment obligations............................. 300,000
Trade accounts payable...................................................... 156,218
Accrued liabilities
Interest.................................................................. 3,581,759
Other..................................................................... 99,741
Subscriber deposits and advance payments.................................... 301,963
------------
13,456,259

SHAREHOLDERS' EQUITY (DEFICIENCY)
Common shares at stated value of $266.67 a share--500 shares authorized;
213.75 shares issued, 34.5 shares in treasury, and 179.25 shares
outstanding................................................................... 47,800
Additional paid-in capital.................................................. 183,200
Deficit..................................................................... (11,198,839)
------------
(10,967,839)
------------
$ 2,488,420
------------
------------
</TABLE>

See accompanying notes.

F-61
<PAGE>
METROPOLITAN SATELLITE CORP.

STATEMENT OF OPERATIONS AND DEFICIT

FOR THE YEAR

ENDED FEBRUARY 28, 1994

<TABLE>
<CAPTION>
1994
------------
<S> <C>
OPERATING REVENUES
Basic channels.............................................................. $ 2,016,747
Bulk........................................................................ 342,085
Pay-TV...................................................................... 683,813
Installation................................................................ 73,130
Converter charges........................................................... 204,922
Other....................................................................... 62,472
Less refunds and service credits............................................ (43,042)
------------
3,340,127

OPERATING EXPENSES
Programming, including $100,381 to affiliated company....................... 889,276
Selling, general and administrative......................................... 1,516,293
Depreciation and amortization............................................... 569,313
------------
2,974,882
------------
OPERATING INCOME BEFORE OTHER (INCOME) EXPENSE.......................... 365,245

OTHER (INCOME) EXPENSE
Interest
Current...................................................................
Related party........................................................... 394,084
Bank and other.......................................................... 101,432
Deferred--related party................................................... 1,007,410
Other income................................................................ (1,577)
Gain on sale of fixed assets.................................................. (505,566)
------------
995,783
------------
NET LOSS................................................................ (630,538)
DEFICIT AT BEGINNING OF PERIOD................................................ (10,568,301)
------------
DEFICIT AT END OF PERIOD................................................ $(11,198,839)
------------
------------
NET LOSS PER COMMON SHARE OUTSTANDING......................................... $ (3,518)
------------
------------
</TABLE>

See accompanying notes.

F-62
<PAGE>
METROPOLITAN SATELLITE CORP.

STATEMENT OF CASH FLOWS

FOR THE YEAR

ENDED FEBRUARY 28, 1994

<TABLE>
<CAPTION>
1994
-----------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss..................................................................... $ (630,538)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization............................................ 569,313
Deferred interest expense................................................ 1,007,410
Gain on disposal of fixed assets......................................... (505,566)
(Increase) decrease in assets:
Subscriber and other receivables......................................... 84,523
Prepaid expenses and miscellaneous....................................... 14,718
Advances to affiliated company........................................... 25,649
Increase (decrease) in liabilities:
Trade accounts payable................................................... 134,025
Accrued liabilities
Interest............................................................... 431,385
Other.................................................................. (11,846)
Subscriber deposits and advance payments................................. (80,083)
-----------
NET CASH PROVIDED BY OPERATING ACTIVITIES............................ 1,038,990
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures......................................................... (68,882)
Proceeds from disposal of fixed assets....................................... 560,223
-----------
NET CASH PROVIDED BY INVESTING ACTIVITIES............................ 491,341
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of Demand note payable to bank...................................... (1,643,000)
Other notes payable.......................................................... --
-----------
NET CASH USED BY FINANCING ACTIVITIES................................ (1,643,000)
-----------
(DECREASE) IN CASH................................................... (112,669)
CASH AT BEGINNING OF YEAR...................................................... 724,368
-----------
CASH AT END OF YEAR.................................................. $ 611,699
-----------
-----------
</TABLE>

See accompanying notes.

F-63
<PAGE>
METROPOLITAN SATELLITE CORP.

NOTES TO FINANCIAL STATEMENTS

FOR THE YEAR

ENDED FEBRUARY 28, 1994

NOTE 1--ORGANIZATION AND OPERATIONS

Metropolitan Satellite Corp. was incorporated in the State of Ohio in
September 1981. The Company provides television service using various
distribution methods to multi-unit housing complexes, primarily in Northeastern
Ohio.

The Company shares facilities and leases converters from an affiliated
company, MetroCable, Inc. and its predecessor, Metropolitan Cablevision, Inc.
Management believes that the allocation of expenses between companies is
reasonable and is based upon actual expenses incurred.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Property

Property is stated at cost. Maintenance and repair costs are charged to
expense in the year incurred. Depreciation is computed using the straight-line
method over estimated useful lives as follows:

<TABLE>
<S> <C>
Reception and distribution facilities.......................... 5-10 years
Equipment and fixtures......................................... 5 years
</TABLE>

Reception and distribution facilities include in-wall wiring installed by
and used by the Company at certain housing complexes. The license agreements
state that the owner of these housing complexes is the owner of this wiring and
will have the right to use the in-wall wiring after termination of the license
agreement.

Depreciation expense was $455,498 for the year ended February 28, 1994.

Purchased License Agreement

Purchase license agreements are recorded at cost and are being amortized
over the lives of the license agreements of 18 to 20 years.

Amortization expense was $112,740 for the year ended February 28, 1994.

Statement of Cash Flows

Interest paid was $64,131 for the year ended February 28, 1994.

Income Taxes

Income taxes were provided under the provisions of Accounting Principles
Board Opinion No. 11, "Accounting for Income Taxes" in 1993. Effective for the
fiscal year ended February 28, 1994, the Company has adopted the provisions of
Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for
Income Taxes." Adoption of SFAS 109 has no effect on the financial statements,
due to the uncertainty of realizing the benefits of the net operating loss
carryforward.

Net Loss Per Common Share Outstanding

The net loss per common share outstanding is based on the weighted number of
common shares outstanding of 179.25 for the year ended February 28, 1994.

F-64
<PAGE>
METROPOLITAN SATELLITE CORP.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEAR

ENDED FEBRUARY 28, 1994

NOTE 3--DEMAND NOTE PAYABLE TO BANK

The demand note payable to bank is a term loan that was converted to a
demand note in 1988. It provides for interest payable monthly at the bank's
prime rate (6% at February 28, 1994) plus 2.25%.

The note is collateralized by a first priority security interest in all
tangible and intangible personal property and by all other assets of the Company
and the rights under a license agreement owned by the affiliated company. Owners
of the common shares of the Company have also assigned their shares as
collateral. The note and accrued interest was paid off in connection with the
merger of the Company in March 1994 with a wholly-owned subsidiary of ACS
Enterprises, Inc. (Note (13).

NOTE 4--SUBORDINATED NOTES PAYABLE

The Subordinated notes payable are due to the majority shareholders of the
Company and consist of the following at February 28:

<TABLE>
<CAPTION>
1994
----------
<S> <C>
Subordinated notes............................................. $2,850,000
Subordinated Demand notes...................................... 425,000
Deferred Interest notes........................................ 5,257,078
Variable Interest notes........................................ 250,000
----------
TOTAL.................................................... $8,782,078
----------
----------
</TABLE>

Subordinated notes with a balance of $2,400,000 were due in January 1994 and
provide for interest at 17.5% of which 12% is payable monthly and 5.5% is added
to the principal balance of the Deferred Interest notes. Other Subordinated
notes with a balance of $450,000 provide for interest at 16.625%. This interest
is added to the principal balance of the Deferred Interest notes.

Subordinated Demand notes with a balance of $325,000 provide for interest at
14%, payable quarterly. Subordinated Demand notes with a balance of $100,000
provide for interest at 16.5%.

The Deferred Interest notes were due in January 1994. Interest at 17.5% is
also added quarterly to the outstanding principal balance of these notes.

The Variable Interest notes were due in January 1994 and provide for
interest at 17.375%, payable quarterly.

All subordinated notes are collateralized by a security interest in
substantially all assets of the Company, subordinated to the demand note payable
to bank (Note 3) had the note payable to a former shareholder (Note 5).

As further discussed at Note 13, the shareholders forgave $5,607,716 of
notes payable and accrued interest as a contribution to capital in March 1994.
The remainder of the notes payable and accrued interest was repaid in March
1994, in conjunction with the merger with a wholly-owned subsidiary of ACS
Enterprises, Inc.

F-65
<PAGE>
METROPOLITAN SATELLITE CORP.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEAR

ENDED FEBRUARY 28, 1994

NOTE 5--OTHER NOTES PAYABLE AND INSTALLMENT OBLIGATIONS

Other notes payable and installment obligations consists of a note payable
to a former shareholder with a balance of $300,000 which was issued in
conjunction with the purchase of 30 shares of the Company's common stock. The
note provides for interest at 10%, compounded annually. The note is
collateralized by substantially all assets of the Company, subordinated to the
demand note payable to bank (Note 3).

The note and accrued interest are due in October 1995; however, the note,
together with accrued interest, totalling $415,163 were repaid in conjunction
with the merger of the Company in March 1994 with a wholly-owned subsidiary of
ACS Enterprises, Inc.

NOTE 6--LICENSE AGREEMENTS

The Company has license agreements covering 27 multi-unit housing complexes.
Each license agreement requires a royalty of 5% of net revenues, as defined, to
be paid to the owner of the complex. The royalty can be increased if certain
cash flow measurements are attained related to the operating results of the
individual complex. The owners of 10 of the complexes have provisions in their
agreements that in the event of a sale of the Company, they will receive 15% of
the sale price attributed to the complex. The merger of the Company with a
wholly-owned subsidiary of ACS Enterprises, Inc. in March 1994 requires that
agreement be reached with these complex owners within a year of closing of the
merger. As of May 4, 1994, five owners have waived their right to equity
participation and will continue to receive royalty payments. Three owners
received a settlement of equity participation in March 1994 totalling $20,380
and will no longer receive royalty payments. Agreement has not yet been reached
with the remaining two complex owners. The terms of each license agreement is 15
years from the date the service commences. Royalty expense under these license
agreements was $44,269 for the year ended February 28 1994.

NOTE 7--INCOME TAXES

At February 28, 1994, the Company had tax net operating losses of
$11,500,000 and investment tax credits for $300,000 available as carryforwards
to reduce future taxable income and tax liabilities. These carryforwards expire
in varying accounts through the year 2005.

NOTE 8--LEASE AGREEMENTS

The Company leases its office facility for $4,800 per month under a lease
agreement that is accounted for as an operating lease. The lease commenced in
December 1990 and expires in December 1995. A portion of the cost of this lease
is charged to the affiliated company.

F-66
<PAGE>
METROPOLITAN SATELLITE CORP.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEAR

ENDED FEBRUARY 28, 1994

NOTE 8--LEASE AGREEMENTS--(CONTINUED)

Future annual minimum required rental payments for the office lease and
other property leased under operating lease agreements are as follows:

<TABLE>
<CAPTION>
FISCAL YEAR ENDING IN: AMOUNT
---------------------- --------
<S> <C>
1995............................................................ $111,400
1996............................................................ 79,300
1997............................................................ 9,700
1998............................................................ 400
--------
TOTAL......................................................... $200,800
--------
--------
</TABLE>

Rent expense, net of the portion ($28,000 for the year ended February 28,
1994) charged to the affiliated company, was $66,000 for the year ended February
28, 1994.

NOTE 9--RELATED PARTY TRANSACTIONS

The Company paid or accrued expenses of $100,381 for the year ended February
28, 1994, to the affiliated company for converter rentals. The lease is a
month-to-month lease with fees based on subscriber levels.

NOTE 10--CONCENTRATION OF CREDIT RISK

The Company's cash balances periodically exceed federally insured limits.

NOTE 11--LITIGATION SETTLEMENT

In November 1993, the Company paid $150,000 to a company in settlement of
litigation brought against the Company in November 1993 by a potential buyer as
a result of a failed attempt to purchase the Company in October 1993. This
expense was recognized in fiscal 1994.

NOTE 12--SALE OF FIXED ASSETS

In March 1993, the Company sold a reception and distribution facility and
related equipment to an unrelated third party in exchange for cash of $560,223.
The gain on sale was $505,566.

NOTE 13--SUBSEQUENT EVENT

On March 9, 1994, ACS Cleveland, Inc., a Delaware Corporation and a
wholly-owned subsidiary of ACS Ohio, Inc., merged with and into Metropolitan
Satellite Corp. As a result of the merger, the shareholders of Metropolitan
Satellite Corp. received an agreement of approximately $7,400,000 cash,
primarily as repayment of the balance due on subordinated notes and accrued
interest, and ACS Ohio, Inc. became the sole shareholder of Metropolitan
Satellite Corp. ACS Ohio, Inc. is a wholly-owned subsidiary of ACS Enterprise,
Inc.

Also, the shareholders of the Company forgave $5,607,716 of balances due on
subordinated notes payable and accrued interest thereon, in conjunction with
this transaction.

F-67
<PAGE>
METROPOLITAN SATELLITE CORP.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEAR

ENDED FEBRUARY 28, 1994

NOTE 13--SUBSEQUENT EVENT--(CONTINUED)
The following is condensed operating and cash flow information for the
period March 1 to March 8, 1994:

METROPOLITAN SATELLITE CORP.
CONDENSED STATEMENT OF OPERATIONS
FOR THE PERIOD MARCH 1 TO MARCH 8, 1994

<TABLE>
<S> <C> <C>
Revenues................................................................ $ 72,054
Expenses:
Programming and license fees.......................................... $19,678
Selling, general, and administrative.................................. 21,538
Depreciation and amortization......................................... 7,452
-------
Total expenses.......................................................... 48,668
--------
Operating income........................................................ 23,386
Interest expense........................................................ (37,192)
--------
Net loss................................................................ $(13,806)
--------
--------
</TABLE>

METROPOLITAN SATELLITE CORP.
CONDENSED STATEMENT OF CASH FLOWS
FOR THE PERIOD MARCH 1 TO MARCH 8, 1994

<TABLE>
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss............................................................. $(13,806)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization........................................ $ 7,452
Increase in operating assets......................................... (78,196)
Increase in operating liabilities.................................... 69,026
--------
Total Adjustments...................................................... (2,018)
--------
Net Cash Used by Operating Activities.................................. (15,824)
Cash Flows from Investing Activities:
Deferred charges related to merger with ACS Enterprises, Inc......... (276,660)
--------
Net decrease in cash................................................... (292,484)
Cash at beginning of period............................................ 611,699
--------
Cash at end of period.................................................. $319,215
--------
--------
Supplemental Disclosure of Cash Flow Information:
Cash Paid for Interest............................................... $ --
--------
--------
Supplemental Disclosure of Non-Cash Financing Activity:
Prior to the sale of assets to ACS Enterprises, Inc., TA Associates,
the subordinated lender, forgave debt totaling $5,607,716 as a
contribution to capital.
</TABLE>

F-68
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors
CAI WIRELESS SYSTEMS, INC.

We have audited the accompanying consolidated balance sheet of ACS
California, Inc. and subsidiary as of December 31, 1995 and the related
consolidated statements of operations and accumulated deficit and cash flows for
the period from September 30, 1995 to December 31, 1995. 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.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
ACS California, Inc. and subsidiary at December 31, 1995, and the consolidated
results of their operations and their cash flows for the period from September
30, 1995 to December 31, 1995, in conformity with generally accepted accounting
principles.

Philadelphia, Pennsylvania
/s/ Ernst & Young LLP
April 1, 1996

F-69
<PAGE>
ACS CALIFORNIA, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

DECEMBER 31, 1995

(000S, EXCEPT SHARE DATA)

<TABLE>
<S> <C>
ASSETS
Current assets:
Cash............................................................................ $ 112
Accounts receivable:
Trade, less allowance for doubtful accounts of $135........................... 134
Other current assets............................................................ 39
-------
Total current assets.............................................................. 285

Plant and equipment, net.......................................................... 6,577
Wireless channel rights, net...................................................... 4,917
Goodwill, net..................................................................... 8,692
-------
$20,471
-------
-------

LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of notes payable and capital lease obligations............... $ 42
Accounts payable and accrued expenses........................................... 1,070
Customer deposits and billings received in advance.............................. 116
-------
Total current liabilities......................................................... 1,228

Notes payable and capital lease obligations....................................... 57
Due to CAI Wireless Systems, Inc. ................................................ 1,625
Deferred income taxes............................................................. 381

Stockholder's equity:
Common stock--par value $1 per share, authorized and issued 1,000 shares........ 1
Additional paid-in capital...................................................... 17,795
Accumulated deficit............................................................. (616)
-------
Total stockholder's equity........................................................ 17,180
-------
$20,471
-------
-------
</TABLE>

See accompanying notes.

F-70
<PAGE>

ACS CALIFORNIA, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT

(000S, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
SEPTEMBER 30, 1995 JANUARY 1, 1996,
TO DECEMBER 31, 1995 TO FEBRUARY 23,1996
-------------------- --------------------
<S> <C> <C>
(UNAUDITED)
Revenues:
Pay television revenues............. $ 975 $ 540
Expenses:
Programming and license fees...... 480 260
Marketing......................... 60 23
General and administrative........ 619 242
Depreciation and Amortization..... 737 459
------- -------
1,896 984
------- -------
(921) (444)
Interest expense, net................. (2) (1)
------- -------
Loss before tax benefit............... (923) (445)
Benefit from income taxes............. 307 145
------- -------
Net loss.............................. $ (616) (300)
Accumulated deficit:
Beginning of period............... -- (616)
------- -------
End of period..................... $ (616) $ (916)
------- -------
------- -------
Per share data:
Net loss per common share............. $ (616) $ (300)
------- -------
------- -------
Weighted average common shares
outstanding........................... 1,000 1,000
------- -------
------- -------
</TABLE>

See accompanying notes.

F-71

<PAGE>

ACS CALIFORNIA, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(000S)

<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
SEPTEMBER 30, 1995 JANUARY 1, 1996
TO DECEMBER 31, 1995 TO FEBRUARY 23, 1996
-------------------- --------------------
<S> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss............................................... $ (616) $ (300)
Adjustments to reconcile net loss to net cash used in
operating activities:
Deferred income taxes................................ (307) (145)
Depreciation and amortization........................ 737 459
Changes in assets and liabilities:
Accounts receivable................................ 20 21
Other operating assets............................. 9 (11)
Accounts payable and accrued expenses.............. (1,063) (170)
Other operating liabilities........................ (5) (9)
------- ------
Net cash used in operating activities.................. (1,225) (155)

Cash flows from investing activities
Capital expenditures................................... (448) (158)
------- ------
Net cash used in investing activities.................. (448) (158)

CASH FLOWS FROM FINANCING ACTIVITIES
Payments of notes payable and capital lease
obligations............................................ (9) (8)
Advances from CAI Wireless Systems, Inc. .............. 1,625 229
------- ------
Net cash provided by financing activities.............. 1,616 221
------- ------
Net decrease in cash................................... (57) (92)
Cash, beginning of period.............................. 169 112
------- ------
Cash, end of period.................................... $ 112 $ 20
------- ------
------- ------
</TABLE>

See accompanying notes.

F-72
<PAGE>
ACS CALIFORNIA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

ACS California, Inc. (the "Company") was formed on March 11, 1994 upon the
purchase of a company that operates the wireless cable system serving
Bakersfield, California and the surrounding area and is a wholly owned
subsidiary of ACS Enterprises, Inc. ("ACS"). On September 29, 1995, ACS became a
wholly owned subsidiary of CAI Wireless System, Inc. (see Note 8). The
consolidated financial statements include the accounts of ACS California, Inc.
and its wholly owned subsidiary, Valley Wireless Cable, Inc. ("Valley
Wireless"). All material intercompany balances and transactions within the
Company have been eliminated in consolidation.

Use of Estimates

Revenue Recognition

Subscriber revenue is recognized at the time payments are due. Customer
payments received in advance of the due date are classified as deferred income.
Bad debt expense was approximately $91,000 for the period September 30, 1995 to
December 31, 1995 (1995).

Plant and Equipment

Goodwill and Wireless Channel Rights

Goodwill consists of costs of acquired businesses in excess of fair market
value allocated to specific assets. Goodwill is amortized on a straight-line
basis over its estimated useful life of fifteen years. Channel acquisition costs
are being amortized over fifteen years.

The carrying value of the goodwill and wireless channel rights costs is
reviewed on an ongoing basis. If the review indicates that these assets are not
recoverable, as determined based on undiscounted future cash flows, the
Company's carrying value of these assets is reduced to its estimated fair value.
No such reduction to these assets was made in 1995.

F-73
<PAGE>
ACS CALIFORNIA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

Loss Per Share

Loss per share is based on the average number of common shares outstanding
during the period.

Recently Issued Accounting Pronouncement

Interim Financial Information

In the opinion of management, the accompanying unaudited financial
information of the Company contains all adjustments, consisting only of those of
a recurring nature, necessary to present the results of its operations and cash
flows for the period January 1, 1996 to February 23, 1996. These results are not
necessarily indicative of the results to be expected for the full fiscal year.

2. PLANT AND EQUIPMENT

Plant and equipment consisted of the following (000s):

<TABLE>
<CAPTION>
DECEMBER 31, LIFE
CLASSIFICATION 1995 (YEARS)
- ------------------------------------------------------- ------------ -------
<S> <C> <C>
Vehicles............................................... $ 76 3
Office and computer.................................... 169 5
Transmission equipment................................. 1,418 5
Television and other equipment......................... 4,790 2 to 5
Materials and supplies................................. 707 2 to 5
------------
7,160
Less accumulated depreciation.......................... (583)
------------
$6,577
------------
------------
</TABLE>

Capitalized overhead costs were approximately $38,000 in 1995. Depreciation
expense approximated accumulated depreciation in 1995.

3. GOODWILL AND WIRELESS CHANNEL RIGHTS

Goodwill consisted of the following (000s):

<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Costs of acquired businesses in excess of fair market values
allocated to specific assets................................... $8,840
Less accumulated amortization.................................. (148)
------------
$8,692
------------
------------
</TABLE>

F-74
<PAGE>
ACS CALIFORNIA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

4. DUE TO CAI WIRELESS SYSTEMS, INC.

The Due to CAI Wireless Systems, Inc. ("CAI") amount included in the balance
sheet represents a balance as the result of various transactions between the
Company and CAI. The $1,625,000 balance at December 31, 1995 is classified as a
long-term liability in the accompanying consolidated balance sheet because it is
not expected to be repaid within the upcoming twelve months (see Note 9).

5. DEBT

Debt consisted of the following (000s):

<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Notes payable--vehicles........................................ $ 57
Less current maturities........................................ (24)
-----
$ 34
-----
-----
</TABLE>

The notes payable at December 31, 1995 is due to Ford Motor Credit Corp. for
the purchase of five vehicles used for servicing and installing customers. These
notes are due in monthly installments through March 15, 1998 and bears interest
at 8.6%.

6. LEASES

The Company is the licensee of nine of the Federal Communications Commission
("FCC") licensed channels available in the Bakersfield area, and leases the
twenty-four remaining FCC licenses.

Generally, channel leases provide for monthly rentals based on the number of
subscribers served by the channels being leased, in amounts ranging from $0.025
to $0.05 per subscriber per channel per month. Additionally, certain leases
provide for minimum lease payments which do not significantly increase the total
channel license fees payable under the leases at the present level of
subscribers being served. Pursuant to FCC rules, leases for channel usage cannot
extend beyond ten years. Each lease generally provides for renewal options, or
for the parties to negotiate renewals in good faith.

A summary of channel lease terms at December 31, 1995 is as follows:

<TABLE>
<CAPTION>
LEASE EXTENSION
CHANNELS LESSOR EXPIRATION TERMS
- -------- ------ ---------- ---------
<S> <C> <C> <C>
A1--A4 Cal State Bakersfield December 2001 Good Faith
B1--B4 Kern CC September 2001 Good Faith
C1--C4 Kern HS Distr.--Bakersfield October 2001 Good Faith
D1--D4 Panama-Buena Vista Union
School Distr. April 2002 Good Faith
E1--E4 Haddonfield Wireless Co. July 2001 CAI 5-year option
G1--G4 Kern Cty. Super. of Schools November 2001 Good Faith
</TABLE>

F-75
<PAGE>
ACS CALIFORNIA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

6. LEASES--(CONTINUED)

Expense incurred under channel lease agreements aggregated approximately
$47,000 in 1995.

The Bakersfield transmitter tower is owned by the Company and is situated on
a site leased from the City of Bakersfield under a twenty-year lease expiring in
December 2010. The annual lease payment is currently $3,500, and is subject to a
5% annual inflation increase.

All of the above leases are accounted for as operating leases.

The Company leases office space, automobiles, trucks, and office equipment.
The office space, automobiles, trucks, and certain office equipment leases have
also been classified as operating leases. The leases covering the remaining
office equipment are classified as capital leases.

Plant and equipment includes the following capitalized values and
accumulated amortization for property under capital leases (000s):

<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Office and computer............................................ $ 51
Less accumulated amortization.................................. (4)
---
$ 47
---
---
</TABLE>

The following is a schedule of the present value of future minimum capital
lease payments and the future minimum operating lease payments with initial or
remaining terms in excess of one year.

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1996....................................................................... $24 $ 114
1997....................................................................... 21 113
1998....................................................................... 1 111
1999....................................................................... -- 111
2000....................................................................... -- 111
2001 and beyond............................................................ -- 283
---------
Total minimum lease payments............................................... 46 $ 843
---------
---------
Less amount representing interest.......................................... (5)
-------
Present value of minimum lease payments.................................... $41
-------
-------
</TABLE>

Expense incurred under non-channel operating lease approximated $11,000 in
1995.

F-76
<PAGE>
ACS CALIFORNIA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

7. INCOME TAXES

The Company and its wholly-owned subsidiary are included in the consolidated
federal tax return of CAI. The Company had no current state or federal income
tax expenses for 1995.

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1995
------------- ------------
<S> <C> <C>
Deferred tax liabilities:
Basis difference................................ $ 1,820 $1,787
Tax over book depreciation...................... 113 80
------------- ------------
Total deferred tax liabilities.................... 1,933 1,867
Deferred tax assets:
Net operating loss carryforwards................ 1,133 1,477
Other........................................... 112 9
------------- ------------
Total deferred tax assets......................... 1,245 1,486
------------- ------------
Net deferred tax liabilities...................... $ 688 $ 381
------------- ------------
------------- ------------
</TABLE>

The Company has available net operating loss carryforwards of approximately
$3,693,000 for tax reporting purposes to offset future taxable income, the
primary difference from financial reporting losses being the difference in the
basis of wireless channel rights and in depreciation methods for financial and
tax reporting purposes. The net operating loss carryforwards expire through
2010.

8. SYSTEM ACQUISITION

Effective September 30, 1995, CAI consummated the acquisition of 100% of the
outstanding common stock of ACS Enterprises, Inc. ("ACS") for $232,000,000 of
CAI common stock and cash.

<TABLE>
<S> <C>
Operating assets................................................. $ 370
Plant and equipment.............................................. 6,636
Goodwill......................................................... 8,840
Wireless channel rights.......................................... 5,000
Liabilities...................................................... (3,050)
-------
Net assets acquired.............................................. $17,796
-------
-------
</TABLE>

F-77
<PAGE>
ACS CALIFORNIA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

8. SYSTEM ACQUISITION--(CONTINUED)

Goodwill and wireless channel rights acquired in the acquisition are being
amortized on a straight-line basis over fifteen years.

9. SUBSEQUENT EVENT

On February 23, 1996, CAI Wireless Systems Inc. contributed the Company and
certain other markets owned by CAI to CS Wireless Systems, Inc. (CS) in exchange
for approximately 54% of the outstanding common stock of CS.

F-78
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors
CAI WIRELESS SYSTEMS, INC.

We have audited the accompanying consolidated balance sheets of ACS
California, Inc. and subsidiary as of September 29, 1995 and December 31, 1994
and the related consolidated statements of operations and accumulated deficit
and cash flows for the period from January 1, 1995 to September 29, 1995 and for
the period from March 11, 1994 (date of inception) to December 31, 1994. 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.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
ACS California, Inc. and subsidiary at September 29, 1995 and December 31, 1994,
and the consolidated results of their operations and their cash flows for the
period from January 1, 1995 to September 29, 1995 and for the period from March
11, 1994 (date of inception) to December 31, 1994, in conformity with generally
accepted accounting principles.

/S/ Ernst & Young LLP

Philadelphia, Pennsylvania
April 1, 1996

F-79
<PAGE>
ACS CALIFORNIA, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(000S, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
SEPTEMBER 29, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash............................................................. $ 169 $ 83
Accounts Receivable:
Trade, less allowance for doubtful accounts of $238
and $12 in 1995 and 1994, respectively....................... 154 116
Other current assets............................................. 48 39
------------- ------------
Total current assets............................................... 371 238
Plant and equipment, net........................................... 6,856 5,993
Channel acquisition costs, net..................................... 450 486
Goodwill, net...................................................... 8,862 9,400
------------- ------------
$16,539 $ 16,117
------------- ------------
------------- ------------

LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of notes payable and capital lease
obligations........................................................ $ 42 $ 44
Accounts payable and accrued expenses............................ 2,486 1,402
Customer deposits and billings received in advance............... 121 59
------------- ------------
Total current liabilities.......................................... 2,649 1,505

Notes payable and capital lease obligations........................ 66 94
Due to ACS Enterprises, Inc. ...................................... 5,570 3,604

Stockholder's equity:
Common stock--par value $1 per share, authorized and issued 1,000
shares............................................................. 1 1
Additional paid-in capital......................................... 12,305 12,305
Accumulated deficit................................................ (4,052) (1,392)
------------- ------------
Total stockholder's equity......................................... 8,254 10,914
------------- ------------
$16,539 $ 16,117
------------- ------------
------------- ------------
</TABLE>

See accompanying notes.

F-80
<PAGE>
ACS CALIFORNIA, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT

FOR THE PERIOD FROM JANUARY 1, 1995 TO SEPTEMBER 29, 1995 AND FOR THE PERIOD
FROM
MARCH 11, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
(000'S, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Revenues:
Pay television revenues................................................ $ 2,600 $ 1,584
Expenses:
Programming and license fees........................................... 1,385 724
General and administrative............................................. 1,239 747
Selling................................................................ 157 78
Depreciation and amortization.......................................... 2,043 1,201
------- -------
4,824 2,750
------- -------
(2,224) (1,166)
Interest expense, net.................................................... (436) (226)
------- -------
Net loss................................................................. $(2,660) $(1,392)
Accumulated deficit:
Beginning of period.................................................... (1,392) --
------- -------
End of period.......................................................... $(4,052) $(1,392)
------- -------
------- -------
Per share data:
Net loss per common share................................................ $(2,660) $(1,392)
------- -------
------- -------
Weighted average common shares outstanding............................... 1,000 1,000
------- -------
------- -------
</TABLE>

See accompanying notes.

F-81
<PAGE>
ACS CALIFORNIA, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1995 TO SEPTEMBER 29, 1995 AND FOR THE PERIOD
FROM
MARCH 11, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
(000S)

<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss................................................................. $(2,660) $(1,392)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization.......................................... 2,043 1,201
Changes in assets and liabilities:
Accounts receivable.................................................. (38) (51)
Other operating assets............................................... (9) 17
Accounts payable and accrued expenses................................ 1,084 335
Other operating liabilities.......................................... 62 59
------- -------
Net cash provided by operating activities................................ 482 169

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures..................................................... (2,332) (2,934)
Purchase of channel rights............................................... -- (338)
------- -------
Net cash used in investing activities.................................... (2,332) (3,272)

CASH FLOWS FROM FINANCING ACTIVITIES
Payments of notes payable and capital lease obligations.................. (30) (554)
Advances from ACS Enterprises, Inc....................................... 1,966 3,604
Proceeds from note payable............................................... -- 94
------- -------
Net cash provided by financing activities................................ 1,936 3,144
------- -------
Net increase in cash..................................................... 86 41
Cash, beginning of period................................................ 83 42
------- -------
Cash, end of period...................................................... $ 169 $ 83
------- -------
------- -------
</TABLE>

See accompanying notes.

F-82
<PAGE>
ACS CALIFORNIA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

ACS California, Inc. (the "Company") was formed on March 11, 1994 upon the
purchase of a company that operates the wireless cable system serving
Bakersfield, California and the surrounding area and is a wholly owned
subsidiary of ACS Enterprises, Inc. ("ACS"). On September 29, 1995, ACS became a
wholly owned subsidiary of CAI Wireless Systems, Inc. (see Note 9). The
consolidated financial statements include the accounts of ACS California, Inc.
and its wholly owned subsidiary, Valley Wireless Cable, Inc. ("Valley
Wireless"). All material intercompany balances and transactions within ACS
California, Inc. have been eliminated in consolidation.

Use of Estimates

Revenue Recognition

Subscriber revenue is recognized at the time payments are due. Customer
payments received in advance of the due date are classified as deferred income.
Bad debt expense was approximately $165,000 and $76,000 for the period from
January 1, 1995 to September 29, 1995 (1995) and for the period from March 11,
1994 to December 31, 1994 (1994), respectively.

Plant and Equipment

Goodwill and Channel Acquisition Costs

Goodwill consists of costs of acquired businesses in excess of fair market
value allocated to specific assets. Goodwill is amortized on a straight-line
basis over its estimated useful life of fifteen years. Channel acquisition costs
are being amortized over ten years.

F-83
<PAGE>
ACS CALIFORNIA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

Loss Per Share

Loss per share is based on the average number of common shares outstanding
during the period.

Reclassification

Certain prior year amounts have been reclassified to conform to the 1995
presentation.

Recently Issued Accounting Pronouncement

2. PLANT AND EQUIPMENT

Plant and equipment consisted of the following (000s):

<TABLE>
<CAPTION>
SEPTEMBER 29, DECEMBER 31, LIFE
CLASSIFICATION 1995 1994 (YEARS)
-------------- ------------- ------------ --------
<S> <C> <C> <C>
Vehicles.............................. $ 141 $ 141 3
Office and computer................... 167 95 5
Transmission equipment................ 1,596 1,568 10
Television and other equipment........ 6,248 3,571 2 to 7
Materials and supplies................ 796 1,247 2 to 10
------------- ------------
8,948 6,622
Less accumulated depreciation......... (2,092) (629)
------------- ------------
$ 6,856 $5,993
------------- ------------
------------- ------------
</TABLE>

Capitalized overhead costs were approximately $267,000 and $227,000 in 1995
and 1994 respectively. Depreciation expense was approximately $1,466,000 and
$602,000 in 1995 and 1994.

3. GOODWILL AND CHANNEL ACQUISITION COSTS

Goodwill consisted of the following (000s):

<TABLE>
<CAPTION>
SEPTEMBER 29, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
Costs of acquired businesses in excess of fair
market values allocated to specific assets...... $ 9,621 $9,621
Organization costs................................ 334 334
------------- ------------
9,955 9,955
Less accumulated amortization..................... (1,093) (555)
------------- ------------
$ 8,862 $9,400
------------- ------------
------------- ------------
</TABLE>

F-84
<PAGE>
ACS CALIFORNIA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

3. GOODWILL AND CHANNEL ACQUISITION COSTS--(CONTINUED)

Channel acquisition costs consisted of the following (000s):

<TABLE>
<CAPTION>
SEPTEMBER 29, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
Channel rights.................................... $ 532 $529
Less accumulated amortization..................... (82) (43)
----- -----
$ 450 $486
----- -----
----- -----
</TABLE>

4. DUE TO ACS ENTERPRISES, INC.

The Due to ACS Enterprises, Inc. amount included in the balance sheet
represents a balance as the result of various transactions between the Company
and ACS. The balance is primarily the result of the Company's participation in
ACS' cash management system, wherein cash infusions needed to meet current
operating requirements and for capital expenditures accrue interest at rates
established by ACS, which approximates ACS' external borrowing costs. Interest
charged on this balance was approximately $428,000 and $222,000 in 1995 and
1994, respectively. The balances at September 29, 1995 and December 31, 1994 of
$5,570,000 and $3,604,000 are classified as a long-term liabilities in the
accompanying consolidated balance sheet because the balances are not expected to
be repaid within the upcoming twelve months.

5. DEBT

Debt consisted of the following (000s):

<TABLE>
<CAPTION>
SEPTEMBER 29, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
Notes payable--vehicles........................... $ 63 $ 79
Less: current maturities.......................... (24) (22)
----- -----
$ 39 $ 57
----- -----
----- -----
</TABLE>

The notes payable at September 29, 1995 and December 31, 1994 are due to
Ford Motor Credit Corp. for the purchase of five vehicles used for servicing and
installing customers. These notes are due in monthly installments through March
15, 1998 and bear interest at 8.6%.

F-85
<PAGE>
ACS CALIFORNIA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

6. LEASES

The Company is the licensee of nine of the Federal Communications Commission
("FCC") licensed channels available in the Bakersfield area, and leases the
twenty-four remaining FCC licenses.

A summary of channel lease terms at September 29, 1995 is as follows:

<TABLE>
<CAPTION>
LEASE EXTENSION
CHANNELS LESSOR EXPIRATION TERMS
- -------- ------ ---------- ---------
<S> <C> <C> <C>
A1--A4 Cal State Bakersfield December 2001 Good Faith
B1--B4 Kern CC September 2001 Good Faith
C1--C4 Kern HS Distr.--Bakersfield October 2001 Good Faith
D1--D4 Panama-Buena Vista Union April 2002 Good Faith
School Distr.
E1--E4 Haddonfield Wireless Co. July 2001 ACS 5-year option
G1--G4 Kern Cty. Super. of Schools November 2001 Good Faith
</TABLE>

Expense incurred under channel lease agreements aggregated approximately
$93,000 and $48,000 in 1995 and 1994, respectively.

All of the above leases are accounted for as operating leases.

Plant and equipment includes the following capitalized values and
accumulated amortization for property under capital leases (000s):

<TABLE>
<CAPTION>
SEPTEMBER 29, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
Office and computer............................... $63 $ 63
Less accumulated amortization..................... (12) (2)
--- ---
$51 $ 61
--- ---
--- ---
</TABLE>

F-86
<PAGE>
ACS CALIFORNIA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

6. LEASES--(CONTINUED)

The following is a schedule of the present value of future minimum capital
lease payments and the future minimum operating lease payments with initial or
remaining terms in excess of one year.

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1996....................................................................... 25 114
1997....................................................................... 21 113
1998....................................................................... 4 111
1999....................................................................... -- 111
2000....................................................................... -- 111
2001 and beyond............................................................ -- 308
------- ---------
Total minimum lease payments............................................... 50 $ 868
---------
---------
Less amount representing interest.......................................... (5)
-------
Present value of minimum lease payments.................................... $45
-------
-------
</TABLE>

Expense incurred under non-channel operating leases approximated $33,000 and
$26,000 in 1995 and 1994, respectively.

7. INCOME TAXES

The Company and its wholly-owned subsidiary are included in the consolidated
federal tax return of ACS Enterprises, Inc. The Company had no current state or
federal income tax expenses for 1995 and 1994.

<TABLE>
<CAPTION>
SEPTEMBER 29, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation...................... $ 113 $ 50
------------- -----
Deferred tax assets:
Net operating loss carryforwards................ 1,133 312
Other........................................... 112 58
------------- -----
Total deferred tax assets......................... 1,245 370
Valuation allowance for deferred tax assets....... (1,132) (320)
------------- -----
Net deferred tax liabilities...................... $-- -$-
------------- -----
------------- -----
</TABLE>

F-87
<PAGE>
ACS CALIFORNIA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

7. INCOME TAXES--(CONTINUED)

The Company has available net operating loss carryforwards of approximately
$2,833,000 for tax reporting purposes to offset future taxable income, the
primary difference from financial reporting losses being the basis difference
for goodwill for financial and tax reporting purposes. The net operating loss
carryforwards expire through 2010.

8. SYSTEM ACQUISITION

On March 11, 1994, ACS purchased all of the outstanding shares of Valley
Wireless, a California corporation that operates the wireless cable system
serving Bakersfield, California and the surrounding area for approximately
$12,300,000 cash. Concurrently, ACS formed ACS California, Inc. as the holding
company of Valley Wireless. The above acquisition has been accounted for using
the purchase method of accounting and, accordingly, the results of this entity
have been consolidated with ACS since March 11, 1994.

The Company allocated the purchase price based upon estimated fair values of
assets and liabilities at the date of acquisition, as follows (000s):

<TABLE>
<CAPTION>
<S> <C>
Operating assets................................................. $ 163
Plant and equipment.............................................. 3,584
Goodwill......................................................... 9,621
Other intangibles................................................ 525
Operating liabilities............................................ (1,067)
Notes payables................................................... (520)
-------
Net assets acquired.............................................. $12,306
-------
-------
</TABLE>

Goodwill acquired in the acquisitions is being amortized on a straight-line
basis over fifteen years.

9. SUBSEQUENT EVENTS

On February 23, 1996, CAI Wireless Systems Inc. contributed the Company and
certain other markets owned by CAI to CS Wireless Systems, Inc. (CS) for
approximately 54% of the outstanding common stock of CS.

F-88
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
AMERICAN WIRELESS SYSTEMS, INC.:

We have audited the accompanying balance sheets of AMERICAN WIRELESS
SYSTEMS, INC. (a Delaware corporation) as of December 31, 1994 and 1995, and the
related statements of operations, stockholders' equity and cash flows for the
years ended December 31, 1993, 1994 and 1995. 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Wireless Systems,
Inc. as of December 31, 1994 and 1995, and the results of its operations and its
cash flows for the years ended December 31, 1993, 1994 and 1995, in conformity
with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred losses since inception and
expects to incur additional losses until it is able to generate sufficient
income to cover operating expenses. The Company currently does not have
sufficient cash reserves to cover such anticipated losses. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
The Company's current plans are also discussed in Note 1. The accompanying
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

Arthur Andersen LLP

Phoenix, Arizona
February 23, 1996

F-89
<PAGE>

AMERICAN WIRELESS SYSTEMS, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1994 1995
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents (Note 2)............................. $ 376,621 $ 342,329
Prepaid expenses and other current assets...................... 186,242 71,230
------------ ------------
Total current assets................................... 562,863 413,559
PROPERTY AND EQUIPMENT, at cost, net (Note 2).................. 431,790 205,920
INVESTMENT IN AND ADVANCES TO JOINT VENTURES (Notes 1, 2 and
4)............................................................. 3,436,048 2,985,654
INVESTMENT IN WIRELESS CABLE SYSTEMS (Notes 1, 2 and 4)........ 2,430,866 3,179,852
LICENSE DEPOSITS AND OTHER ASSETS (Note 2)..................... 88,333 165,350
------------ ------------
$ 6,949,900 $ 6,950,335
------------ ------------
------------ ------------

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................................. $ 482,342 $ 412,266
Accrued liabilities.......................................... 170,237 242,621
Severance liability, current (Note 6)........................ 174,826 354,636
Note payable, current........................................ -- 35,000
------------ ------------
Total current liabilities.............................. 827,405 1,044,523
Severance liability, long-term (Note 6)...................... 354,636 --
Note payable, long-term...................................... -- 1,830,695
------------ ------------
Total liabilities...................................... 1,182,041 2,875,218
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY (Notes 1, 3, 7, 8, 9 and 10): Common
stock, $.01 par value, 40,000,000 shares authorized,
5,709,187 shares outstanding in 1994 and 1995.................. 57,092 57,092
Additional paid-in capital................................... 20,239,069 20,239,069
Accumulated deficit.......................................... (14,528,302) (16,221,044)
------------ ------------
Total stockholders' equity............................. 5,767,859 4,075,117
------------ ------------
$ 6,949,900 $ 6,950,335
------------ ------------
------------ ------------
</TABLE>

The accompanying notes are an integral part of these balance sheets.

F-90
<PAGE>

AMERICAN WIRELESS SYSTEMS, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
PERIOD FROM
YEARS ENDED DECEMBER 31, JANUARY 1, 1996
----------------------------------------- TO FEBRUARY 23,
1993 1994 1995 1996
----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C>
(UNAUDITED)
REVENUE:
Management fees..................... $ -- $ 83,333 $ 100,000 $ 15,000
----------- ----------- ----------- ---------------
GENERAL AND ADMINISTRATIVE EXPENSES:
Compensation........................ 1,502,006 1,920,002 767,889 130,810
Outside services.................... 476,008 1,111,104 552,449 104,218
Other............................... 780,920 1,127,356 885,472 102,666
----------- ----------- ----------- ---------------
Total expenses................ 2,758,934 4,158,462 2,205,810 337,694
----------- ----------- ----------- ---------------
LOSS FROM OPERATIONS.................. (2,758,934) (4,075,129) (2,105,810) (322,694)
----------- ----------- ----------- ---------------
LOSS FROM OPERATIONS OF JOINT
VENTURES............................ (184,906) (200,436) (188,381) (38,516)
----------- ----------- ----------- ---------------
OTHER INCOME (EXPENSE), net
Interest expense.................... (775,525) (976,867) (161,324) (12,101)
Exclusivity fees (Notes 1 and 9).... -- -- 210,000 --
Gain on sale of wireless cable
television assets
(Notes 1 and 4)................... -- -- 748,851 --
Other (Note 7)...................... 69,205 (474,348) (196,078) (1,693)
----------- ----------- ----------- ---------------
(706,320) (1,451,215) 601,449 (13,794)
----------- ----------- ----------- ---------------
NET LOSS.............................. $(3,650,160) $(5,726,780) $(1,692,742) $(375,004)
----------- ----------- ----------- ---------------
----------- ----------- ----------- ---------------
NET LOSS PER SHARE.................... $ (1.16) $ (1.26) $ (.30) $ (.07)
----------- ----------- ----------- ---------------
----------- ----------- ----------- ---------------
WEIGHTED AVERAGE SHARES OUTSTANDING... 3,159,397 4,540,362 5,709,187 5,709,187
----------- ----------- ----------- ---------------
----------- ----------- ----------- ---------------
</TABLE>

The accompanying notes are an integral part of these statements.

F-91
<PAGE>

AMERICAN WIRELESS SYSTEMS, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND
THE PERIOD FROM JANUARY 1, 1996 TO FEBRUARY 23, 1996 (UNAUDITED)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------------- PAID-IN ACCUMULATED
SHARES PAR VALUE CAPITAL DEFICIT TOTAL
--------- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1992.......... 3,118,666 $31,187 $ 7,766,470 $ (5,151,362) $ 2,646,295
Private placements of common
stock, net of offering costs of
$361,123 (Note 1)................... 346,666 3,466 2,547,411 -- 2,550,877
Redemption of common stock owned
by Wireless California (Note 3)..... (258,333) (2,583) (2,167,417) -- (2,170,000)
Contribution of income tax
receivable (Note 10)................ -- -- 401,316 -- 401,316
Conversion of notes............... 126,509 1,265 973,982 -- 975,247
Common stock issued............... 13,333 133 149,867 -- 150,000
Net loss.......................... -- -- -- (3,650,160) (3,650,160)
--------- --------- ----------- ------------ -----------
BALANCE, December 31, 1993.......... 3,346,841 33,468 9,671,629 (8,801,522) 903,575
Private placements of common
stock, net of offering costs of
$48,990 (Note 1).................... 240,000 2,400 1,964,610 -- 1,967,010
Conversion of notes............... 2,105,679 21,057 8,542,356 -- 8,563,413
Exercise of common stock warrants
at $3.75............................ 667 7 2,493 -- 2,500
Exercise of common stock warrants
at $3.00............................ 13,333 133 39,867 -- 40,000
Common stock issued............... 2,667 27 29,973 -- 30,000
Contribution of income tax
receivable (Note 10)................ -- -- (11,859) -- (11,859)
Net loss.......................... -- -- -- (5,726,780) (5,726,780)
--------- --------- ----------- ------------ -----------
BALANCE, December 31, 1994.......... 5,709,187 57,092 20,239,069 (14,528,302) 5,767,859
Net loss.......................... -- -- -- (1,692,742) (1,692,742)
--------- --------- ----------- ------------ -----------
BALANCE, December 31, 1995.......... 5,709,187 $57,092 $20,239,069 $(16,221,044) $ 4,075,117
--------- --------- ----------- ------------ -----------
Net loss (unaudited).............. -- -- -- (375,004) (375,004)
--------- --------- ----------- ------------ -----------
BALANCE, February 23, 1996
(unaudited)......................... 5,709,187 $57,092 $20,239,069 $(16,596,048) $ 3,700,113
--------- --------- ----------- ------------ -----------
--------- --------- ----------- ------------ -----------
</TABLE>

The accompanying notes are an integral part of these statements.

F-92
<PAGE>

AMERICAN WIRELESS SYSTEMS, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, JANUARY 1, 1996
--------------------------------------- TO FEBRUARY 23,
1993 1994 1995 1996
----------- ----------- ----------- ----------------
<S> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss..................................... $(3,650,160) $(5,726,780) $(1,692,742) $ (375,004)
Adjustments to reconcile net loss to cash
used for operating activities:
Depreciation and amortization............ 442,933 637,049 83,100 11,364
Loss on disposal of assets............... 16,136 55,043 205,444 --
Gain on sale of wireless cable television
assets................................. -- -- (748,851) --
Loss from operations of joint ventures... 184,906 200,436 188,381 38,516
Repricing of common stock warrants (Note 7) -- 425,000 -- --
Changes in assets and liabilities:
Decrease (increase) in prepaid expenses
and other assets....................... (198,332) 438,793 115,012 36,394
Increase in accounts payable and accrued
liabilities............................ 530,142 232,831 2,308 292,665
Increase(decrease) in severance
liability.............................. -- 529,462 (174,826) --
----------- ----------- ----------- ----------------
Net cash used for operating
activities.......................... (2,674,375) (3,208,166) (2,022,174) 3,935
----------- ----------- ----------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment........ (77,055) (287,291) (43,308) --
Investment in wireless cable systems......... (755,271) (3,820,312) (932,488) (215,726)
Purchases of marketable securities........... (2,318,252) -- -- --
Proceeds from sale of wireless cable
television assets.......................... -- -- 1,250,000 --
Proceeds from sales of marketable
securities.................................... -- 2,438,604 -- --
Deposits made on license acquisitions........ (69,122) -- (77,017) --
----------- ----------- ----------- ----------------
Net cash (used for) provided by
investing activities............... (3,219,700) (1,668,999) 197,187 (215,726)
----------- ----------- ----------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible notes
payable..................................... 8,736,000 -- -- --
Proceeds from issuance of notes payable...... -- -- 2,800,000 --
Proceeds from sale of common stock........... 2,550,877 2,009,511 -- --
Redemption of common stock................... (2,170,000) -- -- --
Deferred debt issuance costs................. (1,083,371) -- -- --
Cash received from affiliates................ 525,000 -- -- --
Payment of notes payable..................... -- -- (1,009,305) (7,148)
----------- ----------- ----------- ----------------
Net cash provided by financing
activities......................... 8,558,506 2,009,511 1,790,695 (7,148)
----------- ----------- ----------- ----------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................. 2,664,431 (2,867,654) (34,292) (218,939)
CASH AND CASH EQUIVALENTS, beginning of
year........................................ 579,844 3,244,275 376,621 342,329
----------- ----------- ----------- ----------------
CASH AND CASH EQUIVALENTS, end of year........ $ 3,244,275 $ 76,621 $ 342,329 $ 123,390
----------- ----------- ----------- ----------------
----------- ----------- ----------- ----------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for interest....... $ -- $ 351,510 $ 186,221 $ --
</TABLE>

SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING TRANSACTIONS: During 1993 and
1994, respectively, 126,509 and 2,105,679 shares of the Company's common stock
were issued pursuant to the conversion of $975,247 and $8,563,413 in principal
amount of convertible notes payable plus accrued interest.

------------

The accompanying notes are an integral part of these statements.

F-93
<PAGE>
AMERICAN WIRELESS SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995

(1) BACKGROUND, ORGANIZATION AND OPERATIONS:

Background and Organization

American Wireless Systems, Inc. (the "Company") was originally incorporated
in Minnesota in 1988 as Short Takes, Inc. The Company ceased its prior business
activities in April 1991, at which time the Company began searching for a
suitable business for acquisition or merger. Its sole asset was cash of $669,000
on December 17, 1992, when it acquired certain operating assets and liabilities
of AWS, Inc. (formerly American Wireless Systems, Inc.), a California
corporation ("Wireless California") in exchange for 2,572,000 shares of common
stock which represented 82.5% of the outstanding common stock of the Company.
For accounting purposes, this transaction has been treated as an issuance of
common stock for cash by Wireless California (the reverse acquisition). See Note
3 for additional discussion of this transaction.

In April 1993, the stockholders approved changing the Company's name from
Short Takes, Inc. to American Wireless Systems, Inc. In addition, the Company
was reincorporated in the State of Delaware and declared a reverse stock split
of 1-for-2.5. On October 18, 1994, the stockholders of the Company approved a
reverse stock split of 1-for-3. The accompanying financial statements have been
retroactively restated to reflect these reverse stock splits.

Operations

The Company currently owns an interest in and manages the operations of
wireless cable television systems in Minneapolis, Minnesota and Fort Worth,
Texas and holds an interest in or owns the rights to certain wireless cable
television channels in Los Angeles, Dallas, Memphis and formerly Pittsburgh.
Wireless cable is an emerging business that provides television programming to
subscribers by transmitting a signal via microwave frequencies licensed by the
Federal Communications Commission ("FCC") to antennae located at the
subscriber's premises.

The Company's wireless cable systems are all in either the initial
development stage or in the early operating stage; therefore, significant
additional investment will be required to develop those systems to a level which
will provide positive cash flow.

During 1993 and 1994, the Company raised an aggregate of approximately
$13,664,000, including $8,736,000 of convertible subordinated notes (the
"Notes") through three private placements of common stock and notes. The Notes
matured July 15, 1994, and have been converted into shares of the Company's
common stock (see Note 7).

In April 1994, the Company filed a Registration Statement on Form SB-2 in
connection with a proposed public offering, which was amended to include the
offer and sale of 2,500,000 units, each unit consisting of two shares of common
stock and one warrant to purchase one share of common stock. For a variety of
reasons, the Company elected not to proceed with the proposed offering.

Since January 1995, the Company has been pursuing various financing options
which culminated in the signing of an Agreement Of Merger with Heartland
Wireless Communications, Inc. ("Heartland") on September 11, 1995 (the "Merger
Agreement"). The Merger Agreement provides for the Company's stockholders to
exchange their stock in the Company for stock in Heartland. The Merger with
Heartland will give the Company's stockholders $34,000,000 in Heartland common
stock, of which $30,750,000 will be distributed immediately and $3,250,000 will
be held in escrow for one year to

F-94
<PAGE>
AMERICAN WIRELESS SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(1) BACKGROUND, ORGANIZATION AND OPERATIONS:--(CONTINUED)

indemnify Heartland for potential liabilities (Note 9). The conversion ratio
into Heartland common stock will be the trading price of Heartland stock based
on the average closing price for the 10 trading days ending on the fifth day
before consummation of the Merger, provided Heartland's trading price is at
least $20 per share and not greater than $26 per share. If Heartland's trading
price is below $20 per share, the exchange price will be $20 per share; if the
trading price is above $26 per share, the exchange price will be $26 per share.

In February and April 1995, the Company obtained loans totaling $1,000,000
from a shareholder of the Company. These loans carried an interest rate of 15%
per annum, were secured by various assets of the Company and were paid off in
September 1995.

In connection with the Merger Agreement, the Company received a $200,000
nonrefundable deposit as consideration for a nonsolicitation covenant contained
in the Merger Agreement ("exclusivity fees") and a loan for $1,800,000 (the "AWS
loan"). The promissory note, dated May 26, 1995 and amended August 17, 1995, is
due 12 months after the Heartland Merger Agreement is consummated or abandoned,
carries an interest rate of 2% above the prime rate with interest payable
quarterly, and is secured by a security interest in the Company's wireless
channel rights in the Dallas market. The Merger Agreement provides that
specified amounts are to be periodically offset against the AWS loan as
additional consideration for the nonsolicitation covenant contained in the
Merger Agreement. As of December 31, 1995, the AWS loan has been reduced by
$800,000 pursuant to the provisions of the Merger Agreement. However, due to
certain contingencies, no amounts have been recognized as income in the
accompanying statement of operations in accordance with Statement of Financial
Accounting Standards No. 5, Accounting for Contingencies, (SFAS No. 5) (Note 9).

On September 29, 1995, the Company sold its assets in the Pittsburgh market
for $1,250,000 in cash.

The Company is currently negotiating to sell its assets in the Memphis
market for $3,900,000. The Company is involved in litigation with the same
company that has offered to purchase this market. According to the proposed
agreement, at the time of closing of this transaction, all litigation between
the two parties will be withdrawn and all claims will be waived (Note 9).

(2) SIGNIFICANT ACCOUNTING POLICIES:

The accompanying financial statements reflect the application of the
following accounting policies:

Cash Equivalents

The Company considers all highly liquid investments and time deposits with
an initial maturity of three months or less to be cash equivalents.

Debt Issuance Costs

The costs associated with the issuance of debt are deferred and amortized
over the life of the respective debt using the effective interest rate method.
Amortization of debt issuance costs for the years ended December 31, 1993 and
1994, was approximately $405,000 and $592,000, respectively.

F-95
<PAGE>
AMERICAN WIRELESS SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(2) SIGNIFICANT ACCOUNTING POLICIES:--(CONTINUED)

Property and Equipment

Property and equipment represent corporate furniture and equipment unrelated
to the wireless cable television systems. Property and equipment are recorded at
cost and are depreciated using the straight-line method over the estimated
useful lives of the related assets.

Property and equipment consists of the following at December 31:

<TABLE>
<CAPTION>
DEPRECIABLE
LIFE
(YEARS) 1994 1995
----------- --------- ---------
<S> <C> <C> <C>
Computer equipment..................... 5 $ 112,083 $ 105,072
Furniture and fixtures................. 7 58,093 26,369
Office and other equipment............. 5-7 384,782 213,507
--------- ---------
554,958 344,948
Less- Accumulated depreciation......... (123,168) (139,028)
--------- ---------
$ 431,790 $ 205,920
--------- ---------
--------- ---------
</TABLE>

Investment in Joint Ventures

The Company accounts for its investments in joint ventures under the equity
method of accounting.

Investment in Wireless Cable Systems

Investment in wireless cable systems consists principally of payments for
channel rights which are amortized over their estimated useful life once placed
in service.

License Deposits

License deposits represent deposits made under agreements to acquire FCC
frequency rights.

Income Taxes

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standard No. 109, Accounting for Income Taxes.

Net Loss Per Share

The calculation of net loss per share is based on the weighted average
number of shares outstanding. Common stock equivalents are not considered as
their effect would be anti-dilutive.

Unaudited Information

The unaudited financial information as of February 23, 1996 and for the
period from January 1, 1996 to February 23, 1996 have been prepared without
audit. The information furnished herein reflects, in the opinion of management,
all adjustments (which include only normal recurring adjustments) necessary to
fairly state the financial position and results of operations for such period.

F-96
<PAGE>
AMERICAN WIRELESS SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(3) THE REVERSE ACQUISITION:

Wireless California, the predecessor to certain of the Company's wireless
cable operations, was incorporated in April 1991 to acquire and subsequently
sell or develop wireless cable systems in various markets in the United States.
In accordance with the terms of the asset purchase agreement between Wireless
California and the Company, only the assets and liabilities related solely to
the Wireless California wireless cable systems development and operations were
acquired by the Company. The transaction specifically excluded any assets or
liabilities related to Wireless California's activities in selling its interests
in the wireless cable systems (see Note 9).

Subsequent to the reverse acquisition, Wireless California began to wind
down its affairs until, on August 30, 1993, its remaining net assets (consisting
primarily of common stock of the Company) were distributed to its shareholders
who then contributed such assets, except for the common stock of the Company, to
a limited liability corporation, AWS Liquidating, L.L.C. ("AWS LLC").

In connection with its private placements in 1993, the Company redeemed
138,333 shares of common stock owned by Wireless California and 120,000 shares
of common stock of the Company owned by the shareholders of Wireless California.
The redemption price of $8.40 per share was equal to the offering price in the
private placements. A substantial amount of the proceeds were used to discharge
the remaining obligations of Wireless California (Note 5).

(4) INVESTMENTS IN AND ADVANCES TO JOINT VENTURES AND WIRELESS CABLE SYSTEMS:

Investments in and advances to joint ventures and wireless cable systems
represent the historical costs incurred to develop the wireless cable systems,
including the acquisition of the FCC frequency rights and the head-end
transmission equipment and consists of the following:

<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Jointly Owned Systems:
Minneapolis/St. Paul, Minnesota.................................. $ 436,446 $ 308,233
Advances to Minneapolis/St. Paul, Minnesota...................... 2,050,882 2,101,203
Ft. Worth, Texas................................................. 243,054 182,888
Advances to Ft. Worth, Texas..................................... 253,177 393,330
Pittsburgh, Pennsylvania......................................... 452,489 --
---------- ----------
$3,436,048 $2,985,654
---------- ----------
---------- ----------
Wholly-Owned Systems:
Los Angeles, California.......................................... $ 972,653 $1,645,274
Memphis, Tennessee............................................... 733,153 819,263
Dallas, Texas.................................................... 725,060 715,315
---------- ----------
$2,430,866 $3,179,852
---------- ----------
---------- ----------
</TABLE>

Jointly Owned Systems

The Company currently owns an equity interest in operating wireless cable
systems in Minneapolis, Minnesota (AWS-Minneapolis) (25% interest) and Ft.
Worth, Texas (AWS-Ft. Worth) (20% interest)

F-97
<PAGE>
AMERICAN WIRELESS SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(4) INVESTMENTS IN AND ADVANCES TO JOINT VENTURES AND WIRELESS CABLE SYSTEMS:
--(CONTINUED)

and formerly owned an equity interest in a wireless cable system under
development in Pittsburgh, Pennsylvania (25% interest).

The Minneapolis system has been in operation since March 1993. The Company's
joint venture partner is a general partnership which was formed to acquire an
interest in and jointly develop and operate the Minneapolis wireless cable
system. In accordance with the terms of the joint venture agreement, losses are
to be allocated in accordance with contributed capital and profits are to be
allocated (i) in accordance with contributed capital to the extent of previously
allocated losses and then (ii) 25% to the Company and 75% to the general
partnership.

In April 1994, the Company loaned the Minneapolis general partnership
$2,000,000 to fund additional development of the system. The loan bears interest
at 8% per annum and was originally payable in full in 18 months. Prior to the
due date, the Company agreed to extend the maturity of the loan until the
earlier of (i) February 28, 1996 or (ii) the abandonment of the Heartland Merger
Agreement. In the event that the loan is not repaid by the due date, the Company
will receive an additional equity interest in the Minneapolis joint venture of
approximately 10%.

AWS-Minneapolis received additional funding in May 1995 of $550,000 from
Tsunami Capital Corporation (Tsunami). The loan was made by Tsunami in
anticipation of a reverse merger between AWS-Minneapolis and Tsunami. The loan
was paid in October 1995.

The Minneapolis system does not have enough subscribers to provide positive
cash flow. Additionally, neither the joint venture nor the Minneapolis
Partnership has sufficient funds to support the installation of additional
subscribers to enable the joint venture to reach positive cash flow.

On October 4, 1995, the Company's joint venture partner signed a contract to
sell its 75% interest in AWS-Minneapolis to Heartland (the "Minneapolis
Agreement") (Note 11). As part of the Minneapolis Agreement, Heartland agreed to
loan AWS-Minneapolis up to $1,575,000, of which $575,000 was used to repay
Tsunami and the remainder can be used to fund subscriber growth.

The Ft. Worth system has been in operation since November 1992. The
Company's joint venture partner is a general partnership which was formed to
acquire an interest in and jointly develop and operate the Ft. Worth wireless
cable system. The Ft. Worth system has been operated through an informal joint
venture agreement. The accompanying financial statements include an estimate of
the Company's pro rata losses in this system.

AWS-Ft. Worth does not have sufficient funds to continue development of the
system. The Company's joint venture partner also does not have funds to
contribute to the joint venture and has expressed its belief that either
Wireless California or the Company is obligated to provide additional funds to
develop the system to a positive cash flow position. Neither Wireless California
nor the Company believes it has such an obligation; however, the Company is
negotiating the terms of additional funding to continue development of the
system in conjunction with definitive joint venture and management agreements.
In order to protect the Company's interest in the assets of AWS-Ft. Worth, the
Company has advanced $393,330 through December 31, 1995, to fund negative cash
flow of the system and maintain the current subscriber base.

On October 4, 1995, the Company's joint venture partner in AWS-Ft. Worth
signed a contract with Heartland to sell its 80% interest in AWS-Ft. Worth (the
Fort Worth Agreement). Pursuant to the Fort

F-98
<PAGE>
AMERICAN WIRELESS SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(4) INVESTMENTS IN AND ADVANCES TO JOINT VENTURES AND WIRELESS CABLE SYSTEMS:
--(CONTINUED)
Worth Agreement, Heartland has agreed to assume up to $570,000 of amounts due to
the Company. Additionally, Heartland has agreed to loan the Ft. Worth
partnership $500,000 secured by its interest in AWS-Ft. Worth (Note 11).

The Pittsburgh system is still in its initial development stage. On
September 29, 1995, the Company sold all of its interest in the assets of the
Pittsburgh market for $1,250,000 in cash.

Selected combined balance sheet data related to the Company's jointly owned
operating systems is as follows as of December 31 (in 000's):

<TABLE>
<CAPTION>
1994 1995
------ ------
<S> <C> <C>
Current assets............................................ $ 402 $ 470
Total assets.............................................. 10,846 9,388
Total liabilities......................................... 790 2,201
Members equity............................................ 10,056 7,187
AWS' interest............................................. 525 335
</TABLE>

Selected combined operating data related to the Company's jointly owned
operating systems is as follows for the years ended December 31 (in 000's):

<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Revenues..................................... $ 1,064 $ 1,187 $ 1,577
Operating expenses........................... (3,814) (4,363) (4,830)
------- ------- -------
Net loss..................................... $(2,750) $(3,176) $(3,253)
------- ------- -------
AWS' interest................................ $ (185) $ (200) $ (188)
------- ------- -------
------- ------- -------
</TABLE>

Wholly-Owned Systems

The Company's investment in wholly owned systems consists primarily of the
costs to acquire the rights to FCC licenses in Dallas (16), Los Angeles (9) and
Memphis (22). The lease agreements provide for the Company to pay for the excess
airtime use, new transmission equipment and all other operating expenses of the
channels including co-location costs.

The Company is currently negotiating a contract to sell its assets in the
Memphis market for $3,900,000 to TruVision Cable, Inc. ("TruVision") (Note 9).

(5) RELATED PARTIES:

Wireless California

Since the reverse acquisition on December 17, 1992, the Company has entered
into certain transactions with Wireless California, including the redemption of
258,333 shares of common stock owned by Wireless California and the shareholders
of Wireless California (see Note 3), certain transactions related to income
taxes (see Note 10), the purchase of additional FCC licenses not covered by the
original acquisition agreement for $80,000 and the payment of certain lease
expenses related to

F-99
<PAGE>
AMERICAN WIRELESS SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(5) RELATED PARTIES:--(CONTINUED)

the Pittsburgh wireless cable system. In 1994, the Company advanced $35,000 to
pay administrative penalties assessed Wireless California by the State of
Arizona (see Note 9). The members of AWS L.L.C. reimbursed the Company $35,000
in February 1996 after the sale of the escrowed shares (see Note 8). All
transactions with Wireless California subsequent to August 1993 have been
approved by a majority of the independent directors of the Company.

AWS-Ft. Worth and AWS-Minneapolis

The Company serves as the manager and operator of the Minneapolis joint
venture. The terms of the Management Agreement which was signed in April 1994,
provide for annual management service fees equal to the greater of 5% of
collected gross revenues or $100,000.

The Company also serves as the manager to the Ft. Worth joint venture
although no formal management agreement exists. No management service fees have
been accrued relative to the Ft. Worth system.

In its capacity as manager, the Company contracted for subscriber
installation services and subscriber equipment on behalf of AWS-Ft. Worth and
AWS-Minneapolis to Wireless Technologies, Inc. ("WTI"), a Texas corporation
engaged in the business of providing subscriber installation services and
distributing subscriber equipment with respect to traditional and wireless cable
systems. WTI is a wholly owned subsidiary of North American Cable Corporation
("NACC"), a Texas corporation engaged in the engineering, construction and
maintenance of cable television systems, local area networks, fiber optic
networks and wireless cable television systems, with operations and business
experience in the United States, England and several other countries around the
world. A former officer and director of the Company beneficially owns 50% of the
stock of North American Cable Corporation.

WTI purchased certain of the subscriber equipment that it sold to AWS-Ft.
Worth and AWS-Minneapolis from Micom Products, Ltd., a Delaware limited
liability company engaged in the distribution of subscriber equipment for
wireless cable systems. Micom is owned by the beneficial owners of approximately
32% of the Company's common stock.

In 1993 and 1994, payments were made by the Company, Wireless California and
the joint ventures to WTI of $924,054 and $74,449, respectively, for
installation services and related subscriber equipment. In 1993 and 1994,
payments were made by WTI to Micom of $114,644 and $2,766, respectively, for
subscriber equipment. No payments were made by the Company or the joint ventures
to WTI during 1995.

American Wireless Systems, Inc.

In connection with the acquisition of the rights to utilize the FCC licenses
in Los Angeles (Note 4), the Company agreed to pay a finder's fee of $75,000 to
the president of NACC as consideration for the introduction of the Company to
the license holder of the eight channels.

In February and April 1995, the Company obtained loans totaling $1,000,000
from a shareholder of the Company who is a principal in the firm which served as
the placement agent for the Company's private offerings in 1993 and 1994 (Note
1). In addition, this individual and certain other related entities are
shareholders of the Company's common stock.

F-100
<PAGE>
AMERICAN WIRELESS SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(6) SEVERANCE LIABILITY:

Effective August 1994, an individual who held the position of Chairman of
the Board, President and Chief Financial Officer resigned. In connection with
such resignation, this individual entered into a severance agreement with the
Company, whereby the Company agreed to pay this individual his annual base
salary, as provided by the terms of his employment agreement, a bonus, if any,
consistent with the bonuses awarded to certain other officers and certain other
expenses for a period of three years. As a result, the Company recognized
approximately $566,000 of expense in the third quarter of 1994. Upon the
consummation of the merger with Heartland (Note 1), the unpaid portion becomes
due and payable in full.

In September 1994, this individual resigned as a director of the Company. In
connection with such resignation, the Company granted this individual a warrant
to acquire 33,333 shares of common stock at $8.40 per share. This warrant was
granted on October 1, 1994, has a ten-year term and became fully exercisable on
April 1, 1994.

(7) CONVERTIBLE SUBORDINATED NOTES PAYABLE:

At December 31, 1993, the Company had $7,707,000 in convertible subordinated
notes ("Notes") outstanding. Through May 1994, $462,000 in principal amount of
the Notes had been converted into shares of the Company's common stock. The
remaining $7,245,000 in Notes were called for prepayment by the Company in May
1994. Holders of $4,232,000 in principal amount of the Notes elected to receive
cash payment for their investment as opposed to converting their Notes into
shares of the Company's common stock. Because the Company did not anticipate the
relatively high level of repayment, the Company did not have adequate funds
available to pay all of the Noteholders who elected repayment. In accordance
with the terms of the Notes, the conversion price of the Notes was adjusted from
$8.40 per share to $3.75 per share. Following the redemption date, the Company
agreed to permit all of the Noteholders, including the Noteholders that had
elected repayment, to elect repayment or to convert their Notes into shares of
the Company's common stock at the adjusted conversion price of $3.75 per share.
Holders of all but $703,500 in principal amount of the Notes agreed to convert
their Notes into shares of the Company's common stock at $3.75 per share. The
placement agent for the Notes arranged for the holders of the remaining $703,500
in principal amount of the Notes to sell their Notes to certain accredited
investors who converted such Notes into shares of common stock at $3.75 per
share by September 30, 1994.

As consideration for services rendered in connection with the conversion of
the Notes, the Company agreed to adjust the exercise price of existing warrants
held by certain affiliates of the placement agent to acquire 169,333 shares of
common stock. As a result, the Company recognized other expense of approximately
$425,000 in the third quarter of 1994.

In connection with the issuance of the Notes in 1993, the Company also
granted contingent warrants (see Note 8).

F-101
<PAGE>
AMERICAN WIRELESS SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(8) STOCKHOLDERS' EQUITY:

Outstanding Warrants

As of December 31, 1995, the Company had outstanding warrants as follows:

<TABLE>
<S> <C>
Warrants to acquire common stock assumed in the reverse acquisition; exercisable
at $10.08 through November 1996................................................. 27,066
Warrants to acquire common stock issued to the placement agent in connection with
the 1993 private placements; exercisable at $3.75 through August and November
1998............................................................................ 138,666
Contingent warrants to acquire common stock issued to the Noteholders in
connection with the 1993 private placements; exercisable at $12.00 through July
1996............................................................................ 330,833
Warrants to acquire common stock issued to a third party for services provided to
the Company; exercisable at $6.75 through August 2004........................... 8,333
Warrants to acquire common stock issued to a private investor; exercisable at
$12.00 through July 1996........................................................ 60,000
Warrants to acquire common stock issued to a former officer and director of the
Company in connection with a severance agreement; exercisable at $8.40 through
September 2004.................................................................... 33,333
</TABLE>

Escrowed Shares

Approximately 1.88 million shares of the Company's outstanding common stock,
which were owned by the former owners of Wireless California, were released from
escrow in February 1995. The shares were pledged by the former shareholders to
secure the indemnification of the Company by Wireless California for potential
losses incurred from claims arising out of the prior offerings of general
partnership interests by Wireless California (see Note 9). In December 1994, the
Company made a $35,000 claim on the escrowed shares for an advance to Wireless
California (see Note 5) which was paid in February 1996. All but 50,000 shares
were released from escrow and distributed to the members of AWS L.L.C. in
February 1995. The remaining 50,000 shares have been retained to potentially
fund a claim made by the Company which is currently being disputed by AWS L.L.C.
The shares will remain in escrow until the dispute is resolved. No other claims
were made on the escrowed shares.

Stock Option Plan

In April 1993, the Company adopted the 1993 Stock Option Plan (the "Plan")
which reserved 416,666 shares of common stock to be issued to officers,
directors, key employees and independent consultants who provide valuable
services to the Company. The terms of the options are to be established by the
Board of Directors on the date of grant.

F-102
<PAGE>
AMERICAN WIRELESS SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(8) STOCKHOLDERS' EQUITY:--(CONTINUED)

Activity in the Plan is as follows:

<TABLE>
<CAPTION>
NUMBER OPTION PRICE
OF SHARES PER SHARE
--------- ------------
<S> <C> <C>
Options outstanding at December 31, 1993......... 151,666 $6.75-$15.75
Granted........................................ 25,000 $ 15.75
Canceled....................................... (13,333) $6.75-$15.75
---------
Options outstanding at December 31, 1994......... 163,333 $6.75-$15.75
Canceled....................................... (48,338) $ 6.75-$8.40
---------
Options outstanding at December 31, 1995......... 114,995 $6.75-$15.75
---------
---------
Options available for grant...................... 301,671
---------
---------
Exercisable at end of year....................... 103,746
---------
---------
</TABLE>

Prior to the completion of the merger with Heartland, the Company intends to
terminate the Plan.

(9) COMMITMENTS AND CONTINGENCIES:

Commitments

The Company leases office space, equipment and licenses under various
operating leases. Future obligations under these leases are as follows for years
ending December 31:

<TABLE>
<CAPTION>
AMOUNT
----------
<S> <C>
1996........................................................... $ 370,000
1997........................................................... 366,000
1998........................................................... 344,000
1999........................................................... 48,000
2000........................................................... 48,000
Thereafter..................................................... 24,000
----------
$1,200,000
----------
----------
</TABLE>

Prior Offerings of General Partnership Interests by Wireless California

Prior to the sale of certain assets by Wireless California to the Company,
approximately $29,000,000 was raised in connection with the offering of general
partnership interests in three general partnerships, each of which was formed
for the purpose of acquiring an interest in the rights to develop and operate a
wireless cable television system in Ft. Worth, Minneapolis and Pittsburgh.
Through an affiliate, Wireless California participated in the offer and sale of
the general partnership interests without registration under any federal or
state securities laws based on the belief that the general partnership interests
did not constitute securities under federal and applicable state laws. Certain
current and former officers and directors of the Company were formerly officers
and directors of Wireless California.

Following an investigation by the Securities and Exchange Commission (the
"Commission") involving the activities of Wireless California in connection with
the offer and sale of the general

F-103
<PAGE>
AMERICAN WIRELESS SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(9) COMMITMENTS AND CONTINGENCIES:--(CONTINUED)

partnership interests as described above, the Company and certain of its current
and former officers, without admitting or denying any wrongdoing, agreed to
consent to an order of the Commission to cease and desist from committing or
causing any violation and any future violations of the securities registration
provisions of the 1933 Act and the broker-dealer registration provisions of the
Exchange Act.

Securities administrators in 22 states also have conducted or are presently
conducting investigations of the activities related to the unregistered sale of
the general partnership interests described above. The actions taken by the
various state securities administrators range from no action taken to the
issuance of 15 cease and desist orders and consent orders pursuant to which
Wireless California, the issuing general partnerships, and certain officers of
Wireless California were required to cease selling general partnership interests
without registration, to offer rescission to individuals who purchased general
partnership interests and, in certain cases, to pay administrative penalties. In
addition, AWS L.L.C. has entered into a consent order with the State of Illinois
pursuant to which AWS L.L.C. agreed to cease and desist from selling general
partnership interests without registration, to pay an administrative penalty,
and to cause a rescission offer to be made to Illinois residents. Following an
investigation by the State of Arizona, AWS L.L.C. and current and former
officers of the Company consented to an order of the Arizona Corporation
Commission to cease and desist from selling securities unless the sale is
registered or exempt from registration and to the imposition of an
administrative penalty against AWS L.L.C. The Company also consented to a
separate order that requires the Company to make an offer of rescission to all
general partners who are Arizona residents or who were offered and sold their
interests from Arizona. To the knowledge of the Company, there are no other
active federal or state regulatory proceedings or investigations.

The Company is currently attempting to amend the Arizona order to provide
for alternatives to rescission, although there can be no assurance that the
Company will be successful in this regard. The Arizona order currently provides
that if the rescission offers are not made, the Company will be required to pay
to the Arizona Corporation Commission an amount equal to the amount of the
investment made by all general partners who are Arizona residents, or
approximately $566,000, plus interest from the time of investment. There can be
no assurance that the Company will be able to satisfy the Arizona rescission
order.

Since October 31, 1992, Wireless California, the general partnerships and
the current and former officers of the Company have ceased all activities
involving the offer and sale of general partnership interests, although one of
the general partnerships continued to raise funds through capital calls to
existing general partners after such date. In addition to the rescission offer
described above, Wireless California and the general partnership issuers
voluntarily elected to offer to purchase the general partnership interests of
certain general partners in exchange for cash in an amount equal to the funds
contributed by such general partners. As of December 31, 1995, approximately
1,170 of the approximately 1,930 purchasers of general partnership interests had
been offered rescission or a return of their investment by Wireless California
or the general partnership issuers and approximately 80 had accepted the offer,
all of which have been paid. None of such offers, however, were necessarily
conducted in accordance with the statutory requirements of the various states.
To the extent such requirements were not met, potential securities liability
arising from the offer and sale of the general partnership interests will not be
statutorily eliminated until the statutes of limitation with respect to such
claims have expired or an offer is made in accordance with the statutory
rescission requirements of any state.

F-104
<PAGE>
AMERICAN WIRELESS SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(9) COMMITMENTS AND CONTINGENCIES:--(CONTINUED)

In September 1995, AWS and the Pittsburgh general partnership sold all of
their wireless cable assets in the Pittsburgh market to a publicly held wireless
cable company. As consideration for the sale of its assets in the Pittsburgh
market, the Pittsburgh general partnership received approximately $11,250,000 in
cash and short-term notes, which amount exceeded the aggregate amount that would
have been required if all Pittsburgh general partners were offered and accepted
rescission.

There can be no assurance that current general partners or any governmental
agency will not institute proceedings against Wireless California or the Company
as the successor to Wireless California based on a failure to register the
general partnership interests in connection with a public offering or for
damages based on alleged omissions or misrepresentations of material information
in connection with the sale of such interests. In connection with the
acquisition of certain assets of Wireless California, the Company expressly
disclaimed any liabilities of Wireless California arising out of the offer and
sale of the general partnership interests described above. There is a
possibility, however, that a successful claim against Wireless California could
be asserted against the Company based on a number of theories involving
successor liability. The institution of legal action against the Company arising
out of the offer and sale of general partnership interests by Wireless
California could result in substantial defense costs to the Company and the
diversion of efforts by the Company's management, and the imposition of
liabilities which could have a material adverse effect on the Company. Based on
its experience to date, however, taking into account the status of
investigations by various state securities administrators, the absence of any
asserted claim for rescission having been instituted by any of the general
partners against any of the general partnerships, Wireless California or the
Company, the Company's assessment of the current value of the general
partnership interests, the relatively small number of general partners who have
accepted previous offers by Wireless California or its shareholders to purchase
general partnership interests, the existence of a number of possible defenses to
any claims asserted against it, the existence and terms of the agreements
between the Fort Worth and Minneapolis general partnerships and Heartland (Note
4) and other factors, the Company does not believe the ultimate resolution of
this matter will have a material impact on its financial condition or its
results of operations.

Gain Contingency

As discussed in Note 1, the Merger Agreement provides that specified amounts
are to be periodically offset against the AWS loan as additional consideration
for the nonsolicitation covenant contained in the Merger Agreement. As of
December 31, 1995, the AWS loan has been reduced by $800,000 pursuant to the
provisions of the Merger Agreement. However, due to certain contingencies, no
amounts have been recognized as income in the accompanying statement of
operations in accordance with SFAS No. 5.

Other Contingencies

On May 16, 1995, William R. Jenkins, the former Chief Executive Officer of
the Company, filed a lawsuit in Arizona state court alleging breach of his
employment contract and requesting as damages all amounts due under the
employment contract, treble damages under the Arizona statute, attorney's fees
and costs. Subsequent to December 31, 1995, the Company paid Mr. Jenkins
$120,000 to settle this lawsuit. This amount is included in accrued liabilities
and other expense in the accompanying financial statements.

On June 21, 1995, TruVision, with whom the Company had entered into a letter
of intent relating to the sale of the Company's Memphis assets, filed a lawsuit,
as amended on June 29, 1995, in the state

F-105
<PAGE>
AMERICAN WIRELESS SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(9) COMMITMENTS AND CONTINGENCIES:--(CONTINUED)

of Mississippi alleging that the Company breached the letter of intent, that the
parties entered into a binding agreement which was breached, and that the
Company committed fraud and negligent misrepresentation. The Company disputes
these claims based on the position that it lawfully terminated the letter of
intent. The Amended Complaint requests damages in the amount of $28,196,642 and
punitive damages in the amount of $20,000,000, together with interest and all
costs of court. The Company believes it has adequate grounds to successfully
defend this lawsuit. The Company is currently negotiating with TruVision to sell
its assets in the Memphis market under a new contract. According to the terms of
the new contract, at the time of closing, each party will sign a release of all
claims against the other.

The Company is also the subject of two threatened lawsuits. American
Telecasting, Inc. ("ATI") has sent letters to the Company claiming that the
Company breached a term sheet and has requested payment of $1,800,000 as the
alleged termination fee owed to ATI under the term sheet, plus expenses. The
Company has responded to ATI and disputes all of ATI's claims. The Company
believes that ATI's claims are without merit and would vigorously defend any
lawsuit filed.

By letter dated January 31, 1995, Laidlaw Holdings, Inc. ("Laidlaw"), the
underwriter of the Company's proposed public offering, claims that the Company
owes Laidlaw $182,165 as accountable expenses under a Letter Agreement between
the parties dated November 20, 1994. A follow-up letter was sent to the Company
on July 13, 1995. By letter dated February 3, 1995, from the Company to Laidlaw,
the Company asserted that Laidlaw terminated the Letter Agreement and believes
that if a claim is filed by Laidlaw, the Company has adequate grounds to
successfully defend the claim.

(10) INCOME TAXES:

In connection with the reverse acquisition, the basis in the assets acquired
and liabilities assumed by the Company were substantially the same for book and
tax purposes.

For income tax reporting purposes, the Company was included in the
consolidated tax returns of Wireless California through August 13, 1993, the
date that Wireless California's ownership interest in the Company dropped below
80%. As a result, the net operating losses generated by the Company from
December 18, 1992 (the date subsequent to the reverse acquisition) through
August 13, 1993, of approximately $1,000,000 were utilized by Wireless
California to reduce its tax obligations and to recapture approximately $310,000
of previously paid taxes. In exchange, Wireless California agreed to contribute
this refund to the capital of the Company. Approximately $517,000 in net
operating losses were utilized to offset taxable income in prior year
consolidated tax returns filed with Wireless California.

As of December 31, 1995, the Company has approximately $7,897,000 in net
operating loss carryforwards available for financial reporting and income tax
purposes which expire in 2010.

In 1995 there were no material temporary differences between financial
reporting and income tax reporting. As a result, at December 31, 1995, the
Company has a net deferred tax asset of approximately $3,159,000 which relates
primarily to its available net operating loss carryforwards. As the
realizability of this tax asset is solely dependent on the Company's ability to
generate future taxable income, this asset has been fully reserved.

(11) SUBSEQUENT EVENT:

Effective February 23, 1996, the Merger Agreement described in Note 1 and
the Minneapolis and Fort Worth Agreements described in Note 4 were consummated.

F-106
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Management Committee and Partners of
FORT WORTH WIRELESS CABLE T.V. ASSOCIATES:

We have audited the accompanying consolidated balance sheets of FORT WORTH
WIRELESS CABLE T.V. ASSOCIATES (WCTVA or the Partnership) as of December 31,
1994 and 1995, and the related consolidated statements of operations, partners'
equity and cash flows for the years ended December 31, 1993, 1994 and 1995.
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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of WCTVA as of December 31,
1994 and 1995, and the results of operations and their cash flows for the years
then ended December 31, 1993, 1994 and 1995, in conformity with generally
accepted accounting principles.

The accompanying consolidated financial statements have been prepared
assuming that the Partnership will continue as a going concern. As discussed in
Note 1 to the financial statements, the Partnership has incurred losses since
inception and expects to incur additional losses until it is able to generate
sufficient income to cover operating expenses. The Partnership currently does
not have sufficient cash reserves to cover such anticipated losses. These
factors raise substantial doubt about the Partnership's ability to continue as a
going concern. The Partnership's current plans are also discussed in Note 1. The
accompanying financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

Arthur Andersen LLP

Phoenix, Arizona
February 23, 1996

F-107
<PAGE>
FORT WORTH WIRELESS CABLE T.V. ASSOCIATES

(A GENERAL PARTNERSHIP)
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1995
----------- -----------
<S> <C> <C>

ASSETS

CURRENT ASSETS:
Cash and cash equivalents (Note 1).............................. $ 21,836 $ 108,527
Accounts receivable............................................. 51,750 10,730
Prepaid expenses and other current assets....................... 23,923 16,602
----------- -----------
Total current assets...................................... 97,509 135,859

INVESTMENT IN WIRELESS SYSTEMS AND EQUIPMENT, at cost, net (Notes
1 and 4).......................................................... 3,763,423 2,986,566
----------- -----------
$ 3,860,932 $ 3,122,425
----------- -----------
----------- -----------

LIABILITIES AND PARTNERS' EQUITY

CURRENT LIABILITIES:
Accounts payable and accrued liabilities........................ $ 300,047 $ 442,473
Advances from affiliates (Note 1)............................... 471,613 710,661
Notes payable (Note 1).......................................... -- 355,657
----------- -----------
Total current liabilities................................. 771,660 1,508,791
----------- -----------

MINORITY INTEREST (Note 1)........................................ 143,792 84,329
----------- -----------

COMMITMENTS AND CONTINGENCIES (Note 6)

PARTNERS' EQUITY (Note 2):
General partners' equity........................................ 6,064,497 4,648,322
Less-syndication costs.......................................... (3,119,017) (3,119,017)
----------- -----------
Total partners' equity.................................... 2,945,480 1,529,305
----------- -----------
$ 3,860,932 $ 3,122,425
----------- -----------
----------- -----------
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.

F-108
<PAGE>

FORT WORTH WIRELESS CABLE T.V. ASSOCIATES
(A GENERAL PARTNERSHIP)

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, JANUARY 1, 1996
----------------------------------------- TO FEBRUARY 23,
1993 1994 1995 1996
----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C>
(UNAUDITED)
REVENUES:
Subscriber.......................... $ 646,745 $ 650,214 $ 581,799 $ 79,336
Installation........................ 84,554 7,517 6,408 3,550
Other............................... 60,578 9,529 9,281 1,678
----------- ----------- ----------- ---------------
Total revenues................ 791,877 667,260 597,488 84,564
----------- ----------- ----------- ---------------
OPERATING EXPENSES:
Operating and installation.......... 594,747 567,461 525,908 86,387
Selling and marketing............... 101,089 3,206 4,501 696
General and administrative.......... 412,652 692,784 764,186 94,844
Depreciation and amortization....... 754,116 786,572 778,532 116,860
----------- ----------- ----------- ---------------
Total operating expenses...... 1,862,604 2,050,023 2,073,127 298,787
----------- ----------- ----------- ---------------
NET LOSS FROM OPERATIONS.............. (1,070,727) (1,382,763) (1,475,639) (214,223)
MINORITY INTEREST IN LOSSES........... 57,689 62,281 59,464 8,497
----------- ----------- ----------- ---------------
NET LOSS.............................. $(1,013,038) $(1,320,482) $(1,416,175) $(205,726)
----------- ----------- ----------- ---------------
----------- ----------- ----------- ---------------
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-109
<PAGE>

FORT WORTH WIRELESS CABLE T.V. ASSOCIATES
(A GENERAL PARTNERSHIP)

CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995, AND
THE PERIOD FROM JANUARY 1, 1996 TO FEBRUARY 23, 1996 (UNAUDITED)

<TABLE>
<CAPTION>
GENERAL TOTAL
PARTNERS' SYNDICATION PARTNER'S
EQUITY COSTS EQUITY
----------- ----------- -----------
<S> <C> <C> <C>
BALANCE, December 31, 1992.......................... $ 8,410,517 $(3,119,017) $ 5,291,500
Return of capital................................. (12,500) -- (12,500)
Net loss.......................................... (1,013,038) -- (1,013,038)
----------- ----------- -----------
BALANCE, December 31, 1993.......................... 7,384,979 (3,119,017) 4,265,962
Net loss.......................................... (1,320,482) -- (1,320,482)
----------- ----------- -----------
BALANCE, December 31, 1994.......................... 6,064,497 (3,119,017) 2,945,480
Net loss.......................................... (1,416,175) -- (1,416,175)
----------- ----------- -----------
BALANCE, December 31, 1995.......................... 4,648,322 (3,119,017) 1,529,305
----------- ----------- -----------
Net loss (unaudited).............................. (205,726) -- (205,726)
----------- ----------- -----------
BALANCE, February 23, 1996 (unaudited).............. $ 4,442,596 $(3,119,017) $ 1,323,579
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-110
<PAGE>

FORT WORTH WIRELESS CABLE T.V. ASSOCIATES
(A GENERAL PARTNERSHIP)

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
YEAR ENDED DECEMBER 31, 1996 TO
--------------------------------------- FEBRUARY 23,
1993 1994 1995 1996
----------- ----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................. $(1,013,038) $(1,320,482) $(1,416,175) $ (205,726)
Adjustments to reconcile net loss to net
cash used for operating activities:
Depreciation and amortization........ 754,116 786,572 778,532 116,860
Gain on sale of equipment............ -- -- (9,049) --
Minority interest in losses.......... (57,689) (62,281) (59,464) (8,497)
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable......................... (42,123) 36,708 41,020 3,990
Decrease (increase) in prepaid
expenses and other current assets.. 5,940 (5,693) 7,321 (2,512)
(Decrease) increase in accounts
payable and accrued liabilities... (155,594) 214,596 142,426 80,965
----------- ----------- ----------- ------------
Net cash used for operating
activities..................... (508,388) (348,580) (515,389) (14,920)
----------- ----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in wireless systems and
equipment.............................. (738,967) (86,365) (23,028) --
Proceeds from sale of equipment.......... -- -- 30,403 --
----------- ----------- ----------- ------------
Net cash (used for) provided by
investing activities........... (738,967) (86,365) 7,375 --
----------- ----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash returned to partners................ (12,500) -- -- --
Proceeds from issuance of notes payable
and accrued interest................... -- -- 355,657 156,932
Net advances from affiliates............. 366,984 361,883 239,048 (378)
----------- ----------- ----------- ------------
Net cash provided by financing
activities..................... 354,484 361,883 594,705 156,554
----------- ----------- ----------- ------------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS.............................. (892,871) (73,062) 86,691 141,634
CASH AND CASH EQUIVALENTS, beginning of
year..................................... 987,769 94,898 21,836 108,527
----------- ----------- ----------- ------------
CASH AND CASH EQUIVALENTS, end of year..... $ 94,898 $ 21,836 $ 108,527 $ 250,161
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-111
<PAGE>
FORT WORTH WIRELESS CABLE T.V. ASSOCIATES
(A GENERAL PARTNERSHIP)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995

(1) ORGANIZATION:

Background, Nature of Organization and Significant Accounting Policies

Fort Worth Wireless Cable T.V. Associates (the Partnership), a California
general partnership, was formed as of July 1, 1992. The Partnership is comprised
of certain partners of Wireless Cable T.V. Associates #34 (WCTVA), a California
general partnership, which was formed in 1991, who exchanged their interest in
WCTVA for an interest in the Partnership, and some new partners who were
admitted to the Partnership upon contributing cash thereto. Upon its formation,
the Partnership acquired the assets and assumed the operations of WCTVA.

Wireless cable television is an emerging business that provides television
programming to subscribers by transmitting a signal via microwave frequencies
licensed by the Federal Communications Commission (FCC) to antennae located at
the subscriber's premises.

Concurrent with its formation, WCTVA entered into a Services and Acquisition
Agreement (the Services Agreement) with American Wireless Systems, Inc., a
California corporation (Wireless California). Under the terms of the Services
Agreement, Wireless California was obligated to provide various services
including assistance with FCC filings, market projections, and engineering
services involving equipment assurances and new market evaluation assistance. In
addition, Wireless California was to coordinate construction of broadcast
facilities (commonly referred to as head-end equipment) and assign to WCTVA a
75% interest in certain FCC licenses.

The development and operations of the system have been conducted through an
informal joint venture relationship between the Partnership and American
Wireless Systems, Inc., a Delaware corporation (AWS-Delaware), which acquired
its interest in the informal joint venture from Wireless California in December
1992. American Wireless Systems of Ft. Worth (AWS-Ft. Worth), a general
partnership, has been established through which the operations of the informal
joint venture have been conducted. AWS-Ft. Worth was initially capitalized
through the contributions of WCTVA and Wireless California of their respective
interests in the FCC licenses and head-end equipment. Subsequent to the
formation of AWS-Ft. Worth, the Partnership acquired an additional 4.99%
interest in AWS-Ft. Worth such that the ownership is now 79.99% for the
Partnership and 20.01% for AWS-Delaware.

Operations

The system had approximately 1,800 and 1,500 subscribers at December 31,
1994 and 1995, respectively, which is not sufficient to provide positive cash
flow. Additionally, neither the joint venture nor the Partnership has sufficient
funds to support the installation of additional subscribers to enable the joint
venture to reach positive cash flow. The Partnership's joint venture partner,
AWS-Delaware, has indicated that it is not required to provide any funding to
support system growth, however, AWS-Delaware has advanced $471,613 from May 1,
1993 to December 31, 1994, and an additional $239,048 during 1995 to fund
negative cash flow. Such advances are included in advances from affiliates in
the accompanying consolidated financial statements.

On September 11, 1995, AWS-Delaware and Heartland Wireless Communications,
Inc. (Heartland) executed an Agreement and Plan of Merger (the Merger
Agreement), pursuant to which a wholly-owned subsidiary of Heartland would be
merged into AWS and AWS would become a wholly-

F-112
<PAGE>
FORT WORTH WIRELESS CABLE T.V. ASSOCIATES
(A GENERAL PARTNERSHIP)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(1) ORGANIZATION:--(CONTINUED)

owned subsidiary of Heartland (Note 7). On October 4, 1995, the Partnership and
Heartland executed an Asset Purchase Agreement (the Fort Worth Agreement or the
Asset Purchase Agreement) pursuant to which Heartland would purchase the
Partnership's 79.99% interest in AWS-Ft. Worth. Pursuant to the Fort Worth
Agreement, Heartland has agreed to assume up to $570,000 of liabilities
associated with its joint venture interest. The consideration to be paid to the
Partnership under the Fort Worth Agreement is $13.3 million payable in Heartland
common stock, based upon an exchange value equal to the average trading price of
Heartland common stock over the ten-day period ending five business days prior
to closing; provided that if such closing average is in excess of $23.00 per
share, then the exchange value will be $23.00 per share. Subject to approval of
two-thirds of the partners, the Partnership has agreed to effectuate the
Agreement and Plan of Liquidation and, in connection therewith, liquidate shares
of Heartland common stock having an aggregate exchange value in an amount
necessary to satisfy certain known and contingent liabilities of the Partnership
(Note 7).

In connection with the Fort Worth Agreement, Heartland has funded an Escrow
Agreement with a third-party escrow agent in the amount of $100,000 and is
obligated to fund an additional $55,000 per month starting November 1, 1995,
until the transaction closes. In addition, Heartland agreed to loan the
Partnership up to $500,000 secured by the Partnership's interest in AWS-Ft.
Worth. The loan carries an interest rate of 10% per annum prior to maturity and
is due in accordance with the terms of the documents evidencing and securing the
loan. As of December 31, 1995, the amount outstanding on the loan, plus accrued
interest, was $355,657.

Consolidation

The accompanying consolidated financial statements include the accounts of
the Partnership and AWS-Ft. Worth. All significant intercompany accounts have
been eliminated in consolidation.

Cash Equivalents

The Partnership considers all highly liquid instruments and time deposits
with an initial maturity of three months or less to be cash equivalents.

Property and Equipment

Property and equipment is stated at historical cost. Depreciation is
computed using the straight-line method over the estimated useful lives of the
assets.

Frequency Rights

Included in investment in wireless systems and equipment is $3,231,364 of
frequency rights as of December 31, 1994 and 1995, which are being amortized
over a ten-year period.

Revenue Recognition

Subscription revenues are recognized in the period of service. Installation
fees are recognized as revenues upon subscriber hook-up.

F-113
<PAGE>
FORT WORTH WIRELESS CABLE T.V. ASSOCIATES
(A GENERAL PARTNERSHIP)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(1) ORGANIZATION:--(CONTINUED)

Income Taxes

No income tax liability or benefit is presented in the accompanying
consolidated financial statements as it will accrue to the partners.

Unaudited Information

(2) PARTNERS' EQUITY:

In 1991, WCTVA sold 800 general partnership units at $6,250 each, which
provided capital of $5,000,000. Subsequent to their initial contribution,
certain partners requested a return of their capital; therefore, $40,483 of the
gross proceeds were returned. The initial offer and sale of WCTVA interests were
made by Wireless California (see Note 6). Approximately $2,424,000 was paid for
costs incurred in connection with the offering. Such costs are reflected as an
offset to equity in the accompanying consolidated financial statements.

As discussed in Note 1, the Partnership was formed in July 1992. The
partners of WCTVA were given the option to either exchange their interest in
WCTVA for an interest in the Partnership or to receive a return of their initial
contribution. The owners of 88 WCTVA partnership units elected to receive a
return of their contribution. An additional 747 units of the Partnership were
sold which provided additional capital of $4,668,750. The offer and sale of the
Partnership units were also made by Wireless California. Approximately $695,000
was paid for costs incurred in connection with this offering. Such costs are
reflected as an offset to equity in the accompanying consolidated financial
statements.

(3) JOINT VENTURE:

As indicated in Note 1, AWS-Ft. Worth has been operated through an informal
joint venture agreement (the Joint Venture Agreement). Key aspects of the Joint
Venture Agreement utilized in the development of the accompanying consolidated
financial statements are as follows.

Initial Capital Contributions

Each member contributed to AWS-Ft. Worth their respective interests in the
wireless cable system assets to the joint venture in exchange for their initial
ownership interests of 79.99% (the Partnership) and 20.01% (AWS-Delaware). The
accompanying consolidated financial statements reflect such contributed assets
at their respective owners' historical cost which does not directly correlate to
the ownership interests.

F-114
<PAGE>
FORT WORTH WIRELESS CABLE T.V. ASSOCIATES
(A GENERAL PARTNERSHIP)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(3) JOINT VENTURE:--(CONTINUED)

Allocations of Profit and Losses

Profits and losses are to be allocated in accordance with the respective
ownership percentages (the initial ownership percentages as adjusted for
additional cash contributions).

Management

Wireless California and its successor, AWS-Delaware, have provided
management services to the joint venture since its inception. These services
have been provided through an informal management agreement. Management services
expense of $100,000 has been recorded as general and administrative expense in
the accompanying consolidated financial statements for the years ended December
31, 1993, 1994 and 1995.

(4) INVESTMENT IN WIRELESS SYSTEMS AND EQUIPMENT:

Investment in wireless systems and equipment consists of the following at
December 31:

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE
IN YEARS 1994 1995
----------- ---------- ----------
<S> <C> <C> <C>
Frequency rights........................... 10 $3,231,364 $3,231,364
Broadcast equipment and inventory.......... 3-7 2,166,958 2,162,017
Vehicles................................... 5 48,689 48,173
Office equipment........................... 5-7 101,582 93,054
Leasehold improvements..................... 7 5,534 8,770
---------- ----------
5,554,127 5,543,378
Less--Accumulated depreciation and
amortization (1,790,704) (2,556,812)
---------- ----------
$3,763,423 $2,986,566
---------- ----------
---------- ----------
</TABLE>

(5) RELATED PARTY TRANSACTIONS:

The Partnership had several transactions with Wireless California including
the original sale of general partnership interests, the transactions
contemplated under the services and acquisition agreement and the informal joint
venture and management agreements. In addition to the Partnership and AWS-Ft.
Worth, AWS-Delaware is the minority owner of a wireless cable system joint
venture with another general partnership in Minneapolis/St. Paul, Minnesota.

AWS-Ft. Worth had contracted subscriber installation services to Wireless
Technologies, Inc. (WTI), a Texas corporation engaged in the business of
providing subscriber installation services and distributing subscriber equipment
with respect to traditional and wireless cable systems. WTI is a wholly-owned
subsidiary of North American Cable Corporation, a Texas corporation engaged in
the engineering, construction and maintenance of cable television systems, local
area networks, fiber optic networks and wireless cable television systems, with
operations in the United States, England and several other countries around the
world. A former Chief Executive Officer and Director of AWS-Delaware
beneficially owns 50% of the stock of North American Cable Corporation.

F-115
<PAGE>
FORT WORTH WIRELESS CABLE T.V. ASSOCIATES
(A GENERAL PARTNERSHIP)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(5) RELATED PARTY TRANSACTIONS:--(CONTINUED)

WTI purchased certain of the subscriber equipment that is sold to AWS-Ft.
Worth from Micom Products, Ltd. (Micom), a Delaware limited liability company
engaged in the distribution of subscriber equipment for traditional and wireless
cable systems. Micom is owned by the beneficial owners of approximately 32% of
AWS-Delaware.

In 1993, payments of $542,521 were made to WTI for installation services and
related subscriber equipment. Effective July 1993, AWS-Ft. Worth ceased
utilizing the services of WTI.

(6) COMMITMENTS AND CONTINGENCIES:

Commitments

AWS-Ft. Worth leases office space under an operating lease. Future
obligations under this lease are as follows for years ending December 31:

Lease expense of $62,347, $55,830 and $57,730 has been recorded for the
years ended December 31, 1993, 1994 and 1995, respectively.

AWS-Ft. Worth holds frequency rights to 14 wireless cable channels in the
Ft. Worth market under several leases. Thirteen local broadcast channels are
also transmitted for a total programming package of 27 channels. The channel
leases have original lease periods from five to ten years with options to renew.
Future minimum lease payments for the FCC licenses are as follows for the years
ending December 31:

<TABLE>
<S> <C>
1996............................................................ $108,300
1997............................................................ 60,500
1998............................................................ 1,200
1999............................................................ 1,200
2000............................................................ 1,200
Thereafter...................................................... 1,700
--------
$174,100
--------
--------
</TABLE>

Lease expense of $93,013, $90,460 and $108,300 has been recorded for the
years ended December 31, 1993, 1994 and 1995, respectively.

Contingencies

The original formation of WCTVA and the subsequent formation of the
Partnership involved the sale of general partnership interests without
registration under any federal or state securities laws based on the belief that
the general partnership interests did not constitute securities under federal
and

F-116
<PAGE>
FORT WORTH WIRELESS CABLE T.V. ASSOCIATES
(A GENERAL PARTNERSHIP)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(6) COMMITMENTS AND CONTINGENCIES:--(CONTINUED)

applicable state laws. As of December 31, 1995, securities administrators in 22
states as well as the Securities and Exchange Commission (SEC) have conducted or
are currently conducting investigations of the activities related to the
unregistered sale of the general partnership interests.

To date, the investigations have focused on Wireless California and its
successor, AWS-Delaware, the Partnership's joint venture partner in AWS-Ft.
Worth, however, there is a possibility that future actions could be taken
against the Partnership. Such actions could involve fines, administrative
penalties and the requirement for the Partnership to file information with the
SEC pursuant to the Securities and Exchange Act of 1934, as amended. Management
believes that any such penalties or fines should be the responsibility of
Wireless California and does not believe that any such actions will have a
material impact on its financial condition or its results of operations.

(7) SUBSEQUENT EVENT:

Effective February 23, 1996, the Asset Purchase and Merger Agreements
discussed in Note 1 were consummated.

F-117
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Management Committee and Partners of
WIRELESS CABLE T.V. ASSOCIATES #38:

We have audited the accompanying consolidated balance sheets of WIRELESS
CABLE T.V. ASSOCIATES #38 (WCTVA or the Partnership) as of December 31, 1994 and
1995, and the related consolidated statements of operations, partners' equity
and cash flows for the years ended December 31, 1993, 1994 and 1995. 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of WCTVA as of December 31,
1994 and 1995, and the results of their operations and their cash flows for the
years ended December 31, 1993, 1994 and 1995, in conformity with generally
accepted accounting principles.

Arthur Andersen LLP

Phoenix, Arizona
February 23, 1996

F-118
<PAGE>

WIRELESS CABLE T.V. ASSOCIATES #38
(A GENERAL PARTNERSHIP)

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1995
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 1).............................. $ 620,058 $ 301,887
Accounts receivable............................................. 111,848 31,677
Prepaid expenses and other current assets....................... 13,840 125,935
----------- -----------
Total current assets...................................... 745,746 459,499

INVESTMENT IN WIRELESS SYSTEMS AND EQUIPMENT, at cost, net (Notes
1 and 5)........................................................ 6,679,478 5,931,061
----------- -----------
$ 7,425,224 $ 6,390,560
----------- -----------
----------- -----------

LIABILITIES AND PARTNERS' EQUITY

CURRENT LIABILITIES:
Accounts payable and accrued liabilities........................ $ 162,033 $ 270,998
Advances from affiliates........................................ 49,112 100,538
Notes payable and obligations under capital lease (Notes 1 and 4) 2,016,692 3,081,432
----------- -----------
Total current liabilities................................. 2,227,837 3,452,968
----------- -----------

MINORITY INTEREST (Note 1)........................................ 380,365 249,451
----------- -----------

COMMITMENTS AND CONTINGENCIES (Note 7)

PARTNERS' EQUITY (Note 2):
General partners' equity........................................ 9,433,022 7,304,141
Less--syndication costs......................................... (4,616,000) (4,616,000)
----------- -----------
Total partners' equity.................................... 4,817,022 2,688,141
----------- -----------
$ 7,425,224 $ 6,390,560
----------- -----------
----------- -----------
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.

F-119
<PAGE>
WIRELESS CABLE T.V. ASSOCIATES #38

(A GENERAL PARTNERSHIP)
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, JANUARY 1, 1996
----------------------------------------- TO FEBRUARY 23,
1993 1994 1995 1996
----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C>
(UNAUDITED)
REVENUES:
Subscriber.......................... $ 220,537 $ 459,215 $ 863,266 $ 135,957
Installation........................ 31,584 11,360 15,635 12,361
Other............................... 20,031 64,471 102,827 --
----------- ----------- ----------- ---------------
Total revenues................ 272,152 535,046 981,728 $ 148,318
----------- ----------- ----------- ---------------
----------- ----------- ----------- ---------------
OPERATING EXPENSES:
Operating and installation.......... 690,835 1,187,795 1,434,557 480,475
Selling and marketing............... 70,881 71,317 15,527 14,583
General and administrative.......... 443,772 391,839 719,850 203,463
Depreciation and amortization....... 738,860 977,471 1,071,589 172,368
----------- ----------- ----------- ---------------
Total operating expenses...... 1,944,348 2,628,422 3,241,523 870,889
----------- ----------- ----------- ---------------

NET LOSS FROM OPERATIONS.............. (1,672,196) (2,093,376) (2,259,795) (722,571)
MINORITY INTEREST IN LOSSES........... 127,217 138,155 130,914 30,019
----------- ----------- ----------- ---------------
NET LOSS.............................. $(1,544,979) $(1,955,221) $(2,128,881) $(692,552)
----------- ----------- ----------- ---------------
----------- ----------- ----------- ---------------
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-120
<PAGE>

WIRELESS CABLE T.V. ASSOCIATES #38
(A GENERAL PARTNERSHIP)

CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND
THE PERIOD FROM JANUARY 1, 1996 TO FEBRUARY 23, 1996 (UNAUDITED)

<TABLE>
<CAPTION>
GENERAL TOTAL
PARTNERS' SYNDICATION PARTNER'S
EQUITY COSTS EQUITY
----------- ----------- -----------
<S> <C> <C> <C>
BALANCE, December 31, 1992.......................... $12,012,646 $(4,616,000) $ 7,396,646
Capital contributions............................. 920,576 -- 920,576
Net loss.......................................... (1,544,979) -- (1,544,979)
----------- ----------- -----------
BALANCE, December 31, 1993.......................... 11,388,243 (4,616,000) 6,772,243
Net loss.......................................... (1,955,221) -- (1,955,221)
----------- ----------- -----------
BALANCE, December 31, 1994.......................... 9,433,022 (4,616,000) 4,817,022
Net loss.......................................... (2,128,881) -- (2,128,881)
----------- ----------- -----------
BALANCE, December 31, 1995.......................... 7,304,141 (4,616,000) 2,688,141
Net loss (unaudited).............................. (692,552) -- (692,552)
----------- ----------- -----------
BALANCE, February 23,1996 (unaudited)............... $ 6,611,589 $(4,616,000) $ 1,995,589
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-121
<PAGE>

WIRELESS CABLE T.V. ASSOCIATES #38
(A GENERAL PARTNERSHIP)

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, JANUARY 1, 1996
----------------------------------------- TO FEBRUARY 23,
1993 1994 1995 1996
----------- ----------- ----------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................ $(1,544,979) $(1,955,221) $(2,128,881) $(692,552)
Adjustments to reconcile net loss to
net cash used for operating
activities:
Depreciation and amortization... 738,860 977,471 1,071,589 172,368
Minority interest in losses..... (127,217) (138,155) (130,914) (30,019)
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable.................... (14,222) (93,986) 80,171 23,411
(Increase) decrease in prepaid
expenses and other current
assets...................... (64,098) 56,159 (112,095) 71,387
(Decrease) increase in accounts
payable and accrued liabilities (103,166) 87,343 108,965 274,554
----------- ----------- ----------- ---------------
Net cash used for operating
activities................ (1,114,822) (1,066,389) (1,111,165) (180,851)
----------- ----------- ----------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in wireless systems and
equipment......................... (1,214,519) (520,967) (323,172) (516,951)
----------- ----------- ----------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributed by partners,
net............................... 920,576 -- -- --
Proceeds from issuance of notes
payable and accrued interest.......... -- 2,000,000 1,624,336 273,836
Payments on notes payable........... -- -- (550,000) --
Net advances from affiliates........ 178,844 49,112 51,426 174,616
Payments on capital lease........... (2,445) (9,595) (9,596) (6,628)
----------- ----------- ----------- ---------------
Net cash provided by
financing activities...... 1,096,975 2,039,517 1,116,166 441,824
----------- ----------- ----------- ---------------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS.................... (1,232,366) 452,161 (318,171) (255,978)
CASH AND CASH EQUIVALENTS, beginning
of year............................. 1,400,263 167,897 620,058 301,887
----------- ----------- ----------- ---------------
CASH AND CASH EQUIVALENTS, end of
year................................ $ 167,897 $ 620,058 $ 301,887 $ 45,909
----------- ----------- ----------- ---------------
----------- ----------- ----------- ---------------
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-122
<PAGE>
WIRELESS CABLE T.V. ASSOCIATES #38
(A GENERAL PARTNERSHIP)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995

(1) ORGANIZATION:

Background, Nature of Organization and Significant Accounting Policies

Wireless Cable T.V. Associates #38 (WCTVA or the Partnership) was formed in
February 1992 to develop and operate a wireless cable television system in
Minneapolis, Minnesota as a joint venture partner with American Wireless
Systems, Inc., a California corporation (Wireless California).

Concurrent with its formation, WCTVA entered into a Services and Acquisition
Agreement (the Services Agreement) with Wireless California. Under the terms of
the Services Agreement, Wireless California provided various services including
assistance with FCC filings, market projections, and engineering services
involving equipment assurances and new market evaluation assistance. In
addition, Wireless California coordinated construction of broadcast facilities
(commonly referred to as head-end equipment) and assigned to WCTVA a 75%
interest in certain FCC licenses previously held by Wireless California.

Subsequent to the construction of the head-end equipment in March 1993, the
development and operations of the system have been conducted through a joint
venture relationship between WCTVA and Wireless California (see Note 3).
American Wireless Systems of Minneapolis L.L.C. (AWS-Minneapolis), a limited
liability company, was established through which the operations of the joint
venture have been conducted. AWS-Minneapolis was initially capitalized through
the contribution by WCTVA and Wireless California of their respective interests
in the FCC licenses and head-end equipment.

In December 1992, the Partnership's joint venture partner, Wireless
California, sold substantially all of its assets, including its remaining 25%
interest in AWS-Minneapolis, to a publicly traded company which also
subsequently assumed the name of American Wireless Systems, Inc. (AWS-Delaware).
The former shareholders of Wireless California beneficially own approximately
32% of AWS-Delaware.

Operations

The system, which was launched in March 1993, had approximately 2,200 and
2,900 subscribers at December 31, 1994 and 1995, respectively, which is not
sufficient to provide positive cash flow. Additionally, neither the joint
venture nor the Partnership has sufficient funds to support the installation of
additional subscribers to enable the joint venture to reach positive cash flow.
As a result of these factors, in April 1994, the Partnership borrowed $2,000,000
from AWS-Delaware to fund additional development of the system. AWS-Minneapolis
received additional funding in May 1995, of $550,000 from Tsunami Capital Corp.
(Tsunami). The loan was made by Tsunami in anticipation of a reverse merger
between AWS-Minneapolis and Tsunami.

On September 11, 1995, AWS-Delaware and Heartland Wireless Communications,
Inc. (Heartland) executed an Agreement and Plan of Merger (the Merger Agreement)
pursuant to which a wholly-

F-123
<PAGE>
WIRELESS CABLE T.V. ASSOCIATES #38
(A GENERAL PARTNERSHIP)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(1) ORGANIZATION:--(CONTINUED)

owned subsidiary of Heartland would be merged into AWS-Delaware and AWS-Delaware
would become a wholly-owned subsidiary of Heartland (Note 8). On October 4,
1995, the Partnership and Heartland executed an Asset Purchase Agreement
pursuant to which the Partnership agreed to sell to Heartland its membership
interest in AWS-Minneapolis (the Asset Purchase Agreement or the Minneapolis
Agreement). In addition, pursuant to the Minneapolis Agreement, Heartland has
agreed to assume the obligation to repay the $2,000,000 note owed by the
Partnership to AWS-Delaware. The consideration to be paid to the Partnership
under the Minneapolis Agreement is $18 million (plus the assumption of
liabilities) plus $500 per subscriber added from October 4, 1995, to the closing
date, payable in Heartland common stock, based upon an exchange value equal to
either (a) the lesser of $23 per share and the average closing price of
Heartland common stock as reported on the NASDAQ Stock Market's National Market
over the ten-trading-day period ending on the fifth business day preceding the
date of the closing of the Minneapolis Agreement or (b) if such closing average
is equal to or in excess of $30 per share, then (i) the product of the closing
average multiplied by $23, divided by (ii) $30. Subject to the approval of
two-thirds of the partners, the Partnership has agreed to effectuate the
Agreement and Plan of Liquidation and, in connection therewith, liquidate shares
of Heartland common stock having an aggregate exchange value in an amount
necessary to satisfy certain contingent liabilities of the Partnership (Note 8).

In connection with the Heartland transaction, AWS-Minneapolis received a
$1,575,000 loan from Heartland of which $575,000 was utilized to pay the Tsunami
note plus interest and the remaining $1,000,000 can be utilized to fund
subscriber growth. The remaining $1,000,000 loan can be drawn down in increments
of not less than $25,000 and not more than $250,000, and carries an interest
rate of prime plus 2%, as defined, and is due on the earlier of (i) the closing
of the Heartland transaction, (ii) the termination of the Heartland transaction,
as defined, or (iii) February 28, 1997.

Consolidation

The accompanying consolidated financial statements include the accounts of
the Partnership and AWS-Minneapolis. All significant intercompany accounts have
been eliminated in consolidation.

Cash Equivalents

The Partnership considers all highly liquid instruments and time deposits
with an initial maturity of three months or less to be cash equivalents. At
December 31, 1994, cash equivalents include a $105,000 restricted deposit
collateralizing the AWS-Minneapolis office lease.

Property and Equipment

Property and equipment are stated at historical cost. Depreciation is
computed using the straight-line method over the estimated useful lives of the
assets.

F-124
<PAGE>
WIRELESS CABLE T.V. ASSOCIATES #38
(A GENERAL PARTNERSHIP)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(1) ORGANIZATION:--(CONTINUED)

Frequency Rights

Included in investment in wireless systems and equipment are $6,204,332 and
$6,214,331 of frequency rights as of December 31, 1994 and 1995, respectively,
which are being amortized over a ten-year period.

Revenue Recognition

Subscription revenues are recognized in the period of service. Installation
fees are recognized as revenue upon subscriber hook-up.

Income Taxes

No income tax liability or benefit is presented in the accompanying
consolidated financial statements as it will accrue to the partners.

Unaudited Information

(2) PARTNERS' EQUITY:

In 1992, WCTVA sold approximately 1,744 general partnership units at $6,250
each, which provided capital of $10,900,000. Additional funds of $1,175,082 (188
units) and $920,576 (147 units) were contributed by existing partners during
1992 and 1993, respectively. The initial offer and sale of WCTVA units were made
by Wireless California. WCTVA reimbursed Wireless California approximately
$4,616,000 for costs incurred in connection with the offering. Such costs are
reflected as an offset to equity in the accompanying consolidated financial
statements.

(3) JOINT VENTURE:

As indicated in Note 1, the Minneapolis wireless cable system has been
operated through a joint venture agreement (the Agreement). A summary of the
provisions of this agreement are as follows.

Initial Capital Contributions

Each member contributed their respective interests in the wireless cable
system assets to AWS-Minneapolis in exchange for their initial ownership
interests of 75% (the Partnership) and 25% (AWS-Delaware). The accompanying
consolidated financial statements reflect such contributed assets at their
respective owners' historical cost which does not directly correlate to the
ownership interests.

Additional Capital Contributions

The Partnership is to make additional cash contributions to develop and
operate the system as it deems necessary. AWS-Delaware is only permitted to make
additional contributions with the consent of the Partnership.

Allocations of Profit and Losses

Profits and losses are to be allocated in accordance with the respective
ownership percentages (the initial ownership percentages as adjusted for
additional cash contributions).

F-125
<PAGE>
WIRELESS CABLE T.V. ASSOCIATES #38
(A GENERAL PARTNERSHIP)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(3) JOINT VENTURE:--(CONTINUED)

Cash Distributions

Distributions of available operating cash flows are to be made in accordance
with the member's existing capital contribution percentages.

Management

AWS-Delaware has provided management services to the joint venture since its
inception under the terms of a management agreement which provides for an annual
fee to AWS-Delaware equal to the greater of 5% of collected gross revenues or
$100,000 annually. The Partnership has the right to terminate the management
agreement upon 30 days' prior notice. Management services expense of $0, $83,333
and $100,000 has been recorded as general and administrative expense in the
accompanying consolidated financial statements for the years ended December 31,
1993, 1994 and 1995, respectively.

(4) NOTES PAYABLE AND OBLIGATIONS UNDER CAPITAL LEASE:

Notes payable, including accrued interest, and obligations under capital
lease consist of the following at December 31:

<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Note payable to AWS-Delaware, interest at 8%, due February 28,
1996, or the abandonment of the Minneapolis Agreement; secured by
a 10% interest in the joint venture, as defined.................. $2,000,000 $2,000,000
Notes payable to Heartland, interest at prime rate plus 2%, due
upon the earlier of the consummation or termination of the
Minneapolis Agreement, or February 28, 1997...................... -- 1,074,336
Obligations under capital lease, aggregate monthly payments of $810
through September 1996............................................. 16,692 7,096
---------- ----------
$2,016,692 $3,081,432
---------- ----------
---------- ----------
</TABLE>

(5) INVESTMENT IN WIRELESS SYSTEMS AND EQUIPMENT:

Investment in wireless systems and equipment consists of the following at
December 31:

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE
IN YEARS 1994 1995
----------- ---------- ----------
<S> <C> <C> <C>
Frequency rights......................................... 10 $6,204,332 $6,214,331
Broadcast equipment and inventory........................ 3-7 2,010,842 2,317,376
Vehicles................................................. 5 77,271 77,271
Office equipment......................................... 5-7 106,834 112,246
Leasehold improvements................................... 7 1,450 1,450
---------- ----------
8,400,729 8,722,674
Less--Accumulated depreciation and amortization.......... (1,721,251) (2,791,613)
---------- ----------
$6,679,478 $5,931,061
---------- ----------
---------- ----------
</TABLE>

F-126
<PAGE>
WIRELESS CABLE T.V. ASSOCIATES #38
(A GENERAL PARTNERSHIP)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(6) RELATED PARTY TRANSACTIONS:

The Partnership had several transactions with Wireless California including
the original sale of general partnership interests and the transactions
contemplated under the services and acquisition agreement. In addition to the
Partnership and AWS-Minneapolis, AWS-Delaware is the minority owner of a
wireless cable system joint venture with another general partnership in Fort
Worth, Texas.

In its capacity as manager of AWS-Minneapolis, AWS-Delaware contracted
subscriber installation services to Wireless Technologies, Inc. (WTI), a Texas
corporation engaged in the business of providing subscriber installation
services and distributing subscriber equipment with respect to traditional and
wireless cable systems. WTI is a wholly-owned subsidiary of North American Cable
Corporation, a Texas corporation engaged in the engineering, construction and
maintenance of cable television systems, local area networks, fiber optic
networks and wireless cable television systems, with operations in the United
States, England and several other countries around the world. A former Chief
Executive Officer and Director of AWS-Delaware beneficially owns 50% of the
stock of North American Cable Corporation.

WTI purchased certain of the subscriber equipment that is sold to
AWS-Minneapolis from Micom Products, Ltd. (Micom), a Delaware limited liability
company engaged in the distribution of subscriber equipment for traditional and
wireless cable systems. Micom is owned by the beneficial owners of approximately
32% of AWS-Delaware.

In 1993, payments of $381,534 were made to WTI for installation services and
related subscriber equipment. In 1993 and 1994, payments of $114,644 and $2,766,
respectively, were made by WTI to Micom. Effective August 1993, AWS-Minneapolis
ceased utilizing the services of WTI.

(7) COMMITMENTS AND CONTINGENCIES:

Commitments

Beginning January 1, 1993, AWS-Minneapolis began leasing office space under
an operating lease. Future obligations under this lease are as follows for years
ending December 31:

Lease expense of $57,269, $43,541 and $89,480 has been recorded for the
years ended December 31, 1993, 1994 and 1995, respectively.

AWS-Minneapolis holds frequency rights to 21 wireless cable channels in the
Minneapolis market under several leases. Eight local broadcast channels are also
transmitted for a total programming package of 29 channels. The channel leases
have original lease periods from five to ten years with

F-127
<PAGE>
WIRELESS CABLE T.V. ASSOCIATES #38
(A GENERAL PARTNERSHIP)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(7) COMMITMENTS AND CONTINGENCIES:--(CONTINUED)

options to renew. Future minimum lease payments for the FCC licenses are as
follows for the years ending December 31:

<TABLE>
<S> <C>
1996........................................................... $ 371,488
1997........................................................... 324,988
1998........................................................... 303,988
1999........................................................... 303,988
2000........................................................... 303,988
Thereafter..................................................... 163,924
----------
$1,772,364
----------
----------
</TABLE>

Lease expense of $248,350, $317,180 and $351,380 has been recorded for the
years ended December 31, 1993, 1994 and 1995, respectively.

Contingencies

The original formation of WCTVA involved the sale of general partnership
interests without registration under any federal or state securities laws based
on the belief that the general partnership interests did not constitute
securities under federal and applicable state laws. Securities administrators in
22 states as well as the Securities and Exchange Commission (SEC) have conducted
or are currently conducting investigations of the activities related to the
unregistered sale of the general partnership interests.

To date, the investigations have focused on Wireless California and its
successor, AWS-Delaware, the Partnership's joint venture partner in
AWS-Minneapolis, however, there is a possibility that future actions could be
taken against the Partnership. Such actions could involve fines, administrative
penalties and the requirement for the Partnership to file required 1934 Act
information with the SEC. Management believes that any such penalties or fines
should be the responsibility of Wireless California and does not believe that
any such actions will have a material impact on its financial condition or its
results of operations.

(8) SUBSEQUENT EVENT:

Effective February 23, 1996, the Asset Purchase and Merger Agreements
described in Note 1 were consummated.

F-128
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
CABLEMAXX, INC.

We have audited the accompanying statements of net assets of CableMaxx,
Inc.--San Antonio Division (the "Division") as of June 30, 1994 and 1995 and
December 31, 1995, and the related statements of revenues and expenses, changes
in net assets, and cash flows for the period December 18, 1992 to June 30, 1993,
for the years ended June 30, 1994 and 1995, and for the six month period ended
December 31, 1995 presented on the basis set forth in Note 2. These financial
statements are the responsibility of CableMaxx, Inc.'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.

The accompanying financial statements are prepared on the basis described in
Note 2, and are not intended to be a complete presentation of the Division's
financial position, results of operations and cash flows.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets of CableMaxx, Inc. - San Antonio
Division as of June 30, 1994 and 1995 and December 31, 1995, and its revenues
and expenses, changes in net assets, and its cash flows for the period from
December 18, 1992 to June 30, 1993, for the years ended June 30, 1994 and 1995
and for the six month period ended December 31, 1995, in conformity with
generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that
CableMaxx, Inc. (the "Company") and therefore, the Division will continue as a
going concern. As discussed in Note 9, the Company has entered into a merger
agreement which is pending approval. However, the Company's inability to
generate through operations or borrow under its revolving credit facility
sufficient cash flows to fund operations, the Company's expectation that it will
not meet certain financial covenant requirements under its revolving credit
facility and the Company's inability to meet the debt service requirements as
currently exist under its revolving credit facility raise substantial doubt
about the Company's and therefore, the Division's ability to continue as a going
concern. The accompanying financial statements do not include any adjustment
relating to the recoverability of asset carrying amounts or the amount of
liabilities that might result should the Division be unable to continue as a
going concern.

COOPERS & LYBRAND L.L.P.

Austin, Texas
February 16, 1996

F-129
<PAGE>

CABLEMAXX, INC.
SAN ANTONIO DIVISION

STATEMENTS OF NET ASSETS

<TABLE>
<CAPTION>
JUNE 30, DECEMBER
-------------------------- 31,
1994 1995 1995
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Cash................................................ $ 10,000 $ 10,400 $ 10,400
Subscriber receivables, net of allowance for
doubtful accounts of approximately $88,000,
$16,000, and $16,000, as of June 30, 1994 and
1995, and December 31, 1995, respectively......... 237,989 143,700 170,668
Prepaids and other.................................. 77,170 97,513 68,372
Systems and equipment, net.......................... 10,094,566 9,801,119 9,007,255
Intangible assets, net.............................. 5,647,385 5,228,339 5,018,763
----------- ----------- -----------
Total assets.................................. 16,067,110 15,281,071 14,275,458
----------- ----------- -----------
----------- ----------- -----------

LIABILITIES
Accounts payable and accrued liabilities............ 1,871,474 641,371 802,245
Subscriber deposits................................. 26,413 21,175 19,450
Deferred revenue.................................... 134,792 136,818 142,632
----------- ----------- -----------
Total liabilities............................. 2,032,679 799,364 964,327
----------- ----------- -----------
Commitments
Net Assets.................................... $14,034,431 $14,481,707 $13,311,131
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

See accompanying notes to financial statements.

F-130
<PAGE>

CABLEMAXX, INC.
SAN ANTONIO DIVISION

STATEMENTS OF REVENUES AND EXPENSES

<TABLE>
<CAPTION>
PERIOD FROM SIX MONTH
DECEMBER 18, PERIOD PERIOD FROM
1992 TO YEAR ENDED JUNE 30, SIX MONTH ENDED JANUARY 1, 1996
JUNE 30, ------------------------- PERIOD ENDED DECEMBER TO FEBRUARY,
1993 1994 1995 DECEMBER 31, 1994 31, 1995 23, 1996
------------ ----------- ----------- ----------------- ----------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenues.......... $ 187,099 $ 2,922,977 $ 5,090,374 $ 2,439,281 $ 2,663,638 $ 814,481
------------ ----------- ----------- ----------------- ----------- ---------------
Operating
expenses:
Systems operations 120,110 1,374,032 2,285,882 1,066,320 1,214,247 377,033
Selling, general and
administrative.. 317,217 2,590,593 2,128,528 1,182,922 947,457 282,174
Depreciation and
amortization.... 364,235 1,542,434 3,047,954 1,470,665 1,611,064 494,793
------------ ----------- ----------- ----------------- ----------- ---------------
Total
operating
expenses..... 801,562 5,507,059 7,462,364 3,719,907 3,772,768 1,154,000
------------ ----------- ----------- ----------------- ----------- ---------------
Operating expenses
in excess of
revenues....... (614,463) (2,584,082) (2,371,990) (1,280,626) (1,109,130) (339,519)
Interest
expense........ (139,000) (239,000) (157,000) (90,090) (98,196) (28,675)
------------ ----------- ----------- ----------------- ----------- ---------------
Expenses in
excess of
revenues.. $ (753,463) $(2,823,082) $(2,528,990) $(1,370,716) $(1,207,326) $ (368,194)
------------ ----------- ----------- ----------------- ----------- ---------------
------------ ----------- ----------- ----------------- ----------- ---------------
</TABLE>

See accompanying notes to financial statements.

F-131
<PAGE>

CABLEMAXX, INC.
SAN ANTONIO DIVISION

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
ADVANCE
FROM ACCUMULATED
COMPANY DEFICIT TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
Balance, December 18, 1992.......................... -- -- --
Expenses in excess of revenues for the period..... $ (753,463) $ (753,463)
Net advance from Company.......................... $ 8,433,395 8,433,395
----------- ----------- -----------
Balance, June 30, 1993.............................. 8,433,395 (753,463) 7,679,932
Expenses in excess of revenues for the year....... (2,823,082) (2,823,082)
Net advance from Company.......................... 9,177,581 9,177,581
----------- ----------- -----------
Balance, June 30, 1994.............................. 17,610,976 (3,576,545) 14,034,431
Expenses in excess of revenues for the year....... (2,528,990) (2,528,990)
Net advance from Company.......................... 2,976,266 2,976,266
----------- ----------- -----------
Balance, June 30, 1995.............................. 20,587,242 (6,105,535) 14,481,707
Expenses in excess of revenues for the period..... (1,207,326) (1,207,326)
Net advance from Company.......................... 36,750 36,750
----------- ----------- -----------
Balance, December 31, 1995.......................... 20,623,992 (7,312,861) 13,311,131
Expenses in excess of revenues for the period
(unaudited)......................................... (368,194) (368,194)
Net advance from Company (unaudited).............. 285,396 285,396
----------- ----------- -----------
Balance, February 23, 1996 (unaudited).............. $20,909,388 $(7,681,055) $13,228,333
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

See accompanying notes to financial statements.

F-132
<PAGE>

CABLEMAXX, INC.
SAN ANTONIO DIVISION

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM SIX MONTH SIX MONTH PERIOD FROM
DECEMBER 18, YEAR ENDED JUNE 30, PERIOD ENDED PERIOD ENDED JANUARY 1, 1996
1992 TO ------------------------- DECEMBER 31, DECEMBER 31, TO FEBRUARY 23
JUNE 30, 1993 1994 1995 1994 1995 1996
------------- ----------- ----------- ------------ ------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Expenses in excess of
revenues............... $ (753,463) $(2,823,082) $(2,528,990) $(1,370,716 ) $(1,207,326) $(368,194)
Adjustments to reconcile
net loss to net cash
provided by (used in)
operating activities:
Depreciation and
amortization...... 364,235 1,542,434 3,047,954 1,470,665 1,611,064 494,793
Changes in assets
and liabilities:
Subscriber receivables 3,872 (241,861) 94,289 31,089 (26,968) (77,879)
Prepaids and other. (24,877) (52,293) (20,343) (155,562 ) 29,141 (35,535)
Accounts payable
and accrued
liabilities..... 884,525 (87,051) (289,103) (314,188 ) 156,608 (144,517)
Subscriber
deposits......... 28,500 (2,087) (5,238) (2,774 ) (1,725) 350
Deferred revenue... 19,159 115,633 2,026 10,144 5,814 83,415
------------- ----------- ----------- ------------ ------------- ---------------
Net cash provided
by (used in)
operating
activities.... 521,951 (1,548,307) 300,595 (331,342 ) 566,608 (47,567)
------------- ----------- ----------- ------------ ------------- ---------------
Cash flows from investing
activities:
Purchases of systems and
equipment.............. (2,668,971) (7,621,722) (3,276,461) (2,689,796 ) (603,358) (237,829)
Purchases of intangible
assets................. (6,283,927)
------------- ----------- ----------- ------------ ------------- ---------------
Net cash used in
investing
activities...... (8,952,898) (7,621,722) (3,276,461) (2,689,796 ) (603,358) (237,829)
------------- ----------- ----------- ------------ ------------- ---------------
Cash flows from financing
activities:
Advances from company... 8,433,395 9,177,581 2,976,266 3,021,538 36,750 285,396
------------- ----------- ----------- ------------ ------------- ---------------
Net cash provided
by financing
activities.... 8,433,395 9,177,581 2,976,266 3,021,538 36,750 285,396
------------- ----------- ----------- ------------ ------------- ---------------
Net increase in cash.... 2,448 7,552 400 400 0 0
Cash, beginning of
period................ 0 2,448 10,000 10,000 10,400 10,400
------------- ----------- ----------- ------------ ------------- ---------------
Cash, end of period..... $ 2,448 $ 10,000 $ 10,400 $ 10,400 $ 10,400 $ 10,400
------------- ----------- ----------- ------------ ------------- ---------------
------------- ----------- ----------- ------------ ------------- ---------------
</TABLE>

See accompanying notes to financial statements.

F-133
<PAGE>
CABLEMAXX, INC.
SAN ANTONIO DIVISION

NOTES TO FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS

CableMaxx, Inc. develops, owns and operates wireless cable television
systems providing wireless cable television service to subscribers in Austin,
San Antonio (the "Division"), Temple/Killeen and Waco, Texas.

On December 18, 1992, Charter Cable Corporation and Charter Cable (San
Antonio), Inc. acquired the Austin and San Antonio wireless cable systems from
certain sellers (collectively, the "Predecessor"). These corporations were
wholly-owned by Charter Wireless Cable Holdings, L.L.C. ("Charter Holdings").
Charter Holdings is owned by an affiliate of Charterhouse Group International,
Inc. ("Charterhouse"), Galaxy Cablevision, L.P. ("Galaxy") and Galaxy
Management, Inc. CableMaxx, Inc. was capitalized with $12,500,000 cash,
$2,000,000 previously deposited with the Predecessor by Galaxy, and an ownership
interest in Charter Holdings valued at $750,000 which was conveyed to the
Predecessor in connection with the acquisition.

In November 1993, CableMaxx, Inc. sold in an initial public offering
("IPO"), 3,500,000 shares of its common stock, par value $.01 per share ("Common
Stock"), at an initial price of $12.00 per share, resulting in net proceeds to
the Company of $38,110,159 after underwriting discounts and costs in connection
with the IPO.

In December, 1994, in order to create a holding company structure to
facilitate CableMaxx, Inc.'s access to sources of financing, CM Newco, Inc., a
wholly-owned subsidiary of CableMaxx Holdings, Inc. ("Holdings"), was merged
with and into CableMaxx, Inc. As a result of such merger, (i) Holdings changed
its name to CableMaxx, Inc. (the "Company"), is now owned by the stockholders of
the former CableMaxx, Inc., immediately prior to such merger, and (ii)
CableMaxx, Inc., which changed its name to CableMaxx (Texas), Inc., is now a
wholly-owned subsidiary of the Company.

2. ACQUISITION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying financial statements include the assets, liabilities,
revenues and expenses that are directly related to the Division presented at the
Company's historical cost. The financial statements do not include general
unallocated corporate assets, liabilities, equity, revenues and expenses of the
Company which are not directly related to the Division or debt financing and
associated interest expense to the extent it is not directly related to the
Division and, therefore, may not necessarily reflect what the financial
position, results of operations and cash flows of the Division would have been
had it been a separate, stand-alone entity during the periods covered by the
financial statements. Company intangible assets are allocated to the Division on
a relative line of sight households basis. Centralized Company selling, general
and administrative expenses attributable to its systems operations are allocated
to the Division on a relative average subscriber basis.

Acquisition

On December 18, 1992, the Company acquired assets and assumed liabilities
related to the Austin and San Antonio, the Division's wireless cable operations
of the Predecessor. The acquisition has been accounted for using the purchase
method of accounting and, accordingly, the total acquisition cost has been
allocated to the net assets acquired based on the fair values of the assets and
liabilities at the date

F-134
<PAGE>
CABLEMAXX, INC.
SAN ANTONIO DIVISION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

2. ACQUISITION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

of acquisition. The results of operations of the Division is included in the
financial statements since the date of acquisition. The acquisition included the
following assets and liabilities (amounts rounded):

<TABLE>
<CAPTION>
DIVISION
ASSETS
ACQUIRED
----------
<S> <C>
Systems and equipment.......................................... $ 200,000
Intangible assets.............................................. 6,283,927
----------
Assets acquired............................................ $6,483,927
----------
----------
</TABLE>

Cash Management

With the exception of a local manager depository account which balances
generally do not exceed FDIC coverage, the Division utilizes the central cash
management systems of the Company to finance its operations. Cash requirements
are satisfied by transactions between the Division and the Company. Such
transactions are included in the changes in assets as net advances from Company
and to the extent such transactions are cash transactions of the Company, they
are included in the Division's statements of cash flows.

Systems and Equipment

Systems and equipment is carried at cost and includes the cost of
transmission equipment as well as subscriber installations. Reception equipment
on subscriber premises and outside contractor costs associated with subscriber
installations including successful and unsuccessful transmission reception
testing are capitalized. The Division has elected to depreciate the full
capitalized installation cost subsequent to disconnect. Capitalized installation
costs are accounted for under the composite method. Cost of maintenance and
repairs is charged to expense as incurred. Upon sale or retirement, the related
cost and accumulated depreciation are removed from their respective accounts,
and any resulting gain or loss is credited or charged to income.

Systems and equipment is depreciated as follows:

<TABLE>
<CAPTION>
METHOD TERM
------------- ---------------
<S> <C> <C>
Wireless cable systems:
Subscriber installations:
Material................................. Straight-line 5.5 to 7 years
Outside contract labor................... Straight-line 3 years
Head-end, tower and transmission
equipment.................................... Straight-line 7 to 10 years
Vehicles, furniture and equipment............ Straight-line 3 to 10 years
Leasehold improvements....................... Straight-line 10 years
</TABLE>

During the fiscal years ended June 30, 1994 and 1995 the Division
transferred ownership of installation materials to independent contractors. As a
result, ownership of materials removed from disconnected homes remains with the
independent contractors. Accordingly, the lives for this equipment are shorter
than estimated in prior years. The Division has changed the useful lives for
installation

F-135
<PAGE>
CABLEMAXX, INC.
SAN ANTONIO DIVISION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

2. ACQUISITION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

materials to 5.5 years, effective July 1, 1994. The effect of this change in
estimate increased depreciation expense and increased net loss in the year ended
June 30, 1995 and in the six month period ended December 31, 1994 by
approximately $230,000 and 115,000 (unaudited), respectively. The effect of this
change was not significant in the year ended June 30, 1994.

Intangible Assets

Intangible assets are amortized as follows:

<TABLE>
<CAPTION>
METHOD TERM
------------- --------
<S> <C> <C>
Channel rights and goodwill........................ Straight-line 15 years
Covenant not to compete............................ Straight-line 15 years
</TABLE>

Channel rights and goodwill include the allocation of the excess of purchase
price over the fair value of tangible assets and liabilities acquired. The
Division reviews channel rights and goodwill for impairment from time to time,
measuring impairment based upon expected future undiscounted cash flows from
operations.

Revenue Recognition

Revenues from subscribers are recognized in the month that the service is
provided. Installation fees are recognized as revenue upon origination of
service to subscribers to the extent of any costs incurred to obtain the
subscriber, which are expensed as incurred.

Income Taxes

Deferred income taxes are recognized for the tax consequences in future
years of differences between tax basis of assets and liabilities and their
financial reporting amounts at each year-end based on enacted tax laws and
statutory 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.
While the Company has a net operating loss carryforward for income tax purposes
of approximately $19,211,000 as of June 30, 1995, which expires beginning in
2007, such losses are not available for the Division's benefit.

The results of operations of the Division have been included in the federal
income tax returns of the Company. Accordingly, net operating losses generated
by the Division are subject to potential utilization only by the Company and
therefore are not reported as Division deferred income taxes. If such net
operating losses totalling approximately $7.3 million and $7.7 million
(unaudited) as of December 31, 1995 and February 23, 1996, respectively, were
allocable to the Division, they would be subject to a full valuation allowance.
Other current and deferred income taxes have been allocated to the Division as
if such taxes were calculated on a separate return basis using the accounting
principles in Statement of Financial Accounting Standards No. 109 and are not
considered significant in the aggregate.

Use of Estimates

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

F-136
<PAGE>
CABLEMAXX, INC.
SAN ANTONIO DIVISION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

2. ACQUISITION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

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.

3. SYSTEMS AND EQUIPMENT

Systems and equipment consisted of the following:

<TABLE>
<CAPTION>
JUNE 30,
-------------------------- DECEMBER 31,
1994 1995 1995
----------- ----------- ------------
<S> <C> <C> <C>
Wireless cable systems............. $10,435,408 $12,711,337 $ 13,289,548
Vehicles, furniture and
equipment.......................... 571,647 607,773 622,881
Building and leasehold
improvements..................... 357,638 381,044 395,349
----------- ----------- ------------
11,364,693 13,700,154 14,307,778
Accumulated depreciation and
amortization....................... (1,270,127) (3,899,035) (5,300,523)
----------- ----------- ------------
$10,094,566 $ 9,801,119 $ 9,007,255
----------- ----------- ------------
----------- ----------- ------------
</TABLE>

4. INTANGIBLE ASSETS

Intangible assets consisted of the following:

<TABLE>
<CAPTION>
JUNE 30,
------------------------ DECEMBER 31,
1994 1995 1995
---------- ---------- ------------
<S> <C> <C> <C>
Channel rights and goodwill........... $5,486,826 $5,486,826 $5,486,826
Covenant not to compete............... 797,101 797,101 797,101
---------- ---------- ------------
6,283,927 6,283,927 6,283,927
Accumulated amortization.............. (636,542) (1,055,588) (1,265,164)
---------- ---------- ------------
$5,647,385 $5,228,339 $5,018,763
---------- ---------- ------------
---------- ---------- ------------
</TABLE>

5. COMMITMENTS AND CONTINGENCIES

F-137
<PAGE>
CABLEMAXX, INC.
SAN ANTONIO DIVISION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

5. COMMITMENTS AND CONTINGENCIES--(CONTINUED)

such event would prevent the Division from delivering programming over the
affected frequencies, which could have a material adverse effect on the
Division. Channel rights lease agreements generally require payments based on
the greater of specified minimums or amounts based upon various factors
including subscriber levels, subscriber revenues, the cost of transmission
equipment and facilities, and facility operating costs as specified in the
agreements.

Payments under the leases 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. Channel rights lease expenses were
approximately $23,000, $208,000, $344,000, 168,000 (unaudited), $177,000, and
$61,000 (unaudited) for the period from December 18, 1992 to June 30, 1993, for
the years ended June 30, 1994 and 1995, for the six month periods ended December
31, 1994 and 1995, and for the period from January 1, 1996 to February 23, 1996,
respectively.

Future minimum lease payments due under channel rights leases are as
follows:

<TABLE>
<CAPTION>
YEAR ENDING
JUNE 30, AMOUNT
- ----------- --------
<S> <C>
1996........................................................ $185,000
1997........................................................ 186,000
1998........................................................ 186,000
1999........................................................ 144,000
2000........................................................ 66,000
</TABLE>

The Division also has operating leases for office space and equipment, land
for head-ends, and transmission facilities. Rental expenses incurred in
connection with these leases approximated $30,000, $76,000, $103,000, $61,000
(unaudited), 53,000, and $17,000 (unaudited) for the period from December 18,
1992 to June 30, 1993, for the years ended June 30, 1994 and 1995, for the six
month periods ended December 31, 1994 and 1995, and for the period from January
1, 1996 to February 23, 1996 respectively.

Future minimum lease payments under such leases are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
JUNE 30, AMOUNT
- ----------- --------
<S> <C>
1996........................................................ $ 99,000
1997........................................................ 96,000
1998........................................................ 95,000
1999........................................................ 106,000
2000........................................................ 141,000
</TABLE>

Wireless cable system equipment, excluding television-top converters which
are provided by the Division, site reception testing and installation are
provided through a third party contractor under three year agreement commencing
in fiscal year 1994, which establish rate structures for such equipment and
services by service area subject to periodic adjustment, specifying minimum
charges aggregating $14,500 per month.

F-138
<PAGE>
CABLEMAXX, INC.
SAN ANTONIO DIVISION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

6. RELATED PARTY TRANSACTIONS

Prior to the Company's IPO, the Company and therefore the Division incurred
management fees and expenses pursuant to the terms of a management agreement
with Galaxy Management, Inc., an affiliate of Galaxy, under which it managed a
significant portion of the Company's business including the Division. In
addition to reimbursing expenses, the Company and Division paid a management fee
based on 3.5% of operating revenues as defined in the management agreement.
Subsequent to the IPO, Galaxy Management, Inc. ceased to manage the Company's
business, but continued to provide certain administrative services for the
Company for which it receives reimbursement for certain of its salaries and
expenses. Management fees incurred and reimbursable expenses allocated in
association with these agreements approximated $14,000 for the period from
December 18, 1992 to June 30, 1993,. $62,000 and $43,000 for the years ended
June 30, 1994 and 1995, respectively, $23,000 (unaudited) and $20,000 for the
six month periods ended December 31, 1994 and 1995, respectively, and $2,000
(unaudited) for the period from January 1, 1996 to February 23, 1996. Subsequent
to the IPO, the Company's president and CEO who is also the principal
stockholder and president of Galaxy Management, Inc. receives an annual salary
under provisions of a two-year employment agreement of $200,000, of which
approximately $25,000, $43,000, $22,000 (unaudited), $20,000, and $6,000
(unaudited) was allocable to the Division for the years ended June 30, 1994 and
1995, the six month periods ended December 31, 1994 and 1995 and for the period
from January 1, 1996 to February 23, 1996. Centralized Company selling, general
and administrative expenses attributable to its systems operations allocated to
the Division totalled $137,000, $296,000, $133,000 (unaudited), $124,000 and
$41,000 (unaudited) for the years ended June 30, 1994 and 1995, the six month
period ended December 31, 1994 and 1995 and for the period from January 1, 1996
to February 23, 1996.

7. SUPPLEMENTAL CASH FLOWS DISCLOSURES

The Division had obligations amounting to approximately $1,074,000,
$133,000, $165,000 (unaudited), $4,000 and $8,000 (unaudited) related to systems
and equipment additions which are included in accounts payable at June 30, 1994
and 1995, December 31, 1994 and 1995, and February 23, 1996, respectively.

8. LIQUIDITY

The growth of the Division's business requires substantial investment on a
continuing basis to finance capital expenditures and related expenses for
subscriber growth and system development. The amount and timing of Division's
future capital requirements will depend upon a number of factors, many of which
are not within Division's control, including programming costs, equipment costs,
marketing expenses, staffing levels, subscriber growth and competitive
conditions. Failure to obtain any required additional financing or advances from
the Company could have a material adverse effect on the growth of Division and
the development of its market. While these activities may be financed in part by
Division cash flows, the Division continues to be dependent upon such advances
to fund these activities. The Company has been unable to secure additional
capitalization or expand its current availability under its existing revolving
credit and term loan, and has violated certain restrictive loan covenants in
fiscal 1995 and during the six month period ended December 31, 1995, for which
waivers have been obtained and expects to continue to violate such covenants in
fiscal 1996 resulting in expected events of default.

F-139
<PAGE>
CABLEMAXX, INC.
SAN ANTONIO DIVISION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

8. LIQUIDITY--(CONTINUED)

The Company's current financing agreement does not provide for any more
advances to the Company. Current cash reserves may not be sufficient to meet
future operating needs and liabilities. In connection with the proposed merger
discussed in Note 9, the Company has sold its channel rights in Sherman,
Lubbock, Amarillo and Athens for approximately $2.4 million to, and has entered
into a loan agreement with Heartland Wireless Communications, Inc.
("Heartland"). The Company expects that these funds will enable the Company and
therefore, the Division to continue operations through the proposed closing date
of the merger. If the merger is not completed, the Company and therefore, the
Division will have to find additional funding for operations. Company management
will continue to negotiate and seek to amend the current revolving credit
facility and also pursue other areas of financing.

9. PROPOSED MERGER

In September 1995, the Company entered into an agreement (the "Merger
Agreement") to merge with a subsidiary of Heartland. The Merger Agreement
provides for the conversion of the common stock of the Company at a value of
$8.50 per share, subject to adjustment, into Heartland common stock, with the
exchange ratio determined by the average price of Heartland stock preceding the
transaction date. The transaction is subject to approval by the shareholders' of
each company and is subject, among other things, to consent by the Heartland
bondholders. Should the Merger Agreement be terminated as a result of a third
party acquisition proposal that is approved by the Board of Directors of the
Company or recommended to the stockholders of the Company by the Board of
Directors, a $2 million fee is payable to Heartland.

In October 1995, the Company sold certain channel rights to Heartland for
approximately $2.4 million subject to adjustment to the appraised value of such
channel rights should the Merger Agreement be terminated for any reason other
than the Company's breach thereof or the Company's acceptance of a third party's
acquisition proposal.

In connection with the Merger Agreement, on December 26, 1995, the Company
entered into a loan agreement ("CMAX Loan") with Heartland for up to $1,000,000
bearing interest at published prime rate plus 2% of which (a) $500,000 was
advanced on or about December 29, 1995 to be used for working capital purposes,
and (b) $500,000 to be used for subscriber growth is funded at a rate of $500
per additional subscriber. The CMAX Loan will not increase the amount of CMAX
Excess Liabilities as set forth in the Merger Agreement. Upon consummation of
the Merger Agreement, it is anticipated that the CMAX Loan will remain as an
inter-company obligation from the Company to Heartland. In the event that the
Merger Agreement is not consummated, the CMAX Loan is payable August 29, 1996;
provided, that if the Merger Agreement is terminated as a result of a competing
acquisition proposal, then the CMAX Loan will be immediately due and payable.

10. SUBSEQUENT EVENTS (UNAUDITED)

The proposed merger as specified in Note 9 was consummated on February 23,
1996.

F-140
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
CABLEMAXX, INC.

We have audited the accompanying statements of net assets of CableMaxx,
Inc.--Utah Division (the "Division") as of June 30, 1995 and December 31, 1995,
and the related statements of revenues and expenses, changes in net assets and
cash flows for the period from February 28, 1995 (acquisition) to June 30, 1995,
and for the six month period ended December 31, 1995, presented on the basis set
forth in Note 2. These financial statements are the responsibility of CableMaxx,
Inc.'s management. Our responsibility is to express an opinion on these
financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets of CableMaxx, Inc. - Utah Division as
of June 30, 1995 and December 31, 1995, and its revenues and expenses, changes
in net assets, and its cash flows for the period from February 28, 1995
(acquisition) to June 30, 1995 and for the six month period ended December 31,
1995, in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that
CableMaxx, Inc. (the "Company") and therefore, the Division will continue as a
going concern. As discussed in Note 6, the Company has entered into a merger
agreement which is pending approval. However, the Company's inability to
generate through operations or borrow under its revolving credit facility
sufficient cash flows to fund operations, the Company's expectation that it will
not meet certain financial covenant requirements under its revolving credit
facility and the Company's inability to meet the debt service requirements as
currently exist under its revolving credit facility raise substantial doubt
about the Company's and therefore, the Division's ability to continue as a going
concern. The accompanying financial statements do not include any adjustment
relating to the recoverability of asset carrying amounts or the amount of
liabilities that might result should the Division be unable to continue as a
going concern.

COOPERS & LYBRAND L.L.P.

Austin, Texas
February 16, 1996

F-141
<PAGE>

CABLEMAXX, INC.
UTAH DIVISION

STATEMENTS OF NET ASSETS

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1995
----------- ------------
<S> <C> <C>
ASSETS
Prepaids and other............................................... $ 2,000 $ 6,150
Systems and equipment, net of accumulated depreciation of $5,311
and $14,786 as of June 30, 1995 and December 31, 1995,
respectively................................................... 127,366 117,891
Intangible assets, net of accumulated amortization of $239,881
and $603,749 as of June 30, 1995 and December 31, 1995,
respectively................................................... 10,625,726 10,384,270
----------- ------------
Total assets............................................... 10,755,092 10,508,311
----------- ------------

LIABILITIES
Accounts payable and accrued liabilities......................... 26,110 77,054
----------- ------------
Total liabilities.......................................... 26,110 77,054
----------- ------------
Commitments
Net Assets................................................. $10,728,982 $ 10,431,257
----------- ------------
----------- ------------
</TABLE>

See accompanying notes to financial statements.

F-142
<PAGE>

CABLEMAXX, INC.
UTAH DIVISION

STATEMENTS OF REVENUES AND EXPENSES

<TABLE>
<CAPTION>
THE PERIOD FROM THE PERIOD FROM
FEBRUARY 28, 1995 SIX MONTH JANUARY 1, 1996
(ACQUISITION) TO PERIOD ENDED TO
JUNE 30, 1995 DECEMBER 31, 1995 FEBRUARY 23, 1996
----------------- ------------------ -----------------
(UNAUDITED)
<S> <C> <C> <C>
Revenues................................... $ -- $ -- $--
----------------- ------------------ -----------------
Operating expenses:
Systems operations....................... -- -- --
Selling, general and administrative...... 37,557 55,448 16,555
Depreciation and amortization............ 245,192 373,343 112,444
----------------- ------------------ -----------------
Total operating expenses............. 282,749 428,791 128,999
----------------- ------------------ -----------------
Operating Expenses in excess of revenues... (282,749) (428,791) (128,999)
Interest expense........................... (210,000) (304,642) (82,747)
----------------- ------------------ -----------------
Expenses in excess of revenues....... $ (492,749) $ (733,433) $(211,746)
----------------- ------------------ -----------------
----------------- ------------------ -----------------
</TABLE>

See accompanying notes to financial statements.

F-143
<PAGE>

CABLEMAXX, INC.
UTAH DIVISION

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
ADVANCE
FROM ACCUMULATED
COMPANY DEFICIT TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
Balance, February 28, 1995 (acquisition)............ -- -- --
Expenses in excess of revenues for period......... $ (492,749) $ (492,749)
Net advance from Company.......................... $11,221,731 11,221,731
----------- ----------- -----------
Balance, June 30, 1995.............................. 11,221,731 (492,749) 10,728,982
Expenses in excess of revenues for period......... (733,433) (733,433)
Net advance from Company.......................... 435,708 435,708
----------- ----------- -----------
Balance, December 31, 1995.......................... 11,657,439 (1,226,182) 10,431,257
Expenses in excess of revenues for period
(unaudited)......................................... (211,746) (211,746)
Net advance from Company (unaudited).............. 173,420 173,420
----------- ----------- -----------
Balance, February 23, 1996 (unaudited).............. $11,830,859 $(1,437,928) $10,392,931
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

See accompanying notes to financial statements.

F-144
<PAGE>

CABLEMAXX, INC.
UTAH DIVISION

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THE PERIOD FROM THE PERIOD FROM
FEBRUARY 28, 1995 SIX MONTH JANUARY 1, 1996
(ACQUISITION) TO PERIOD ENDED TO
JUNE 30, 1995 DECEMBER 31, 1995 FEBRUARY 23, 1996
----------------- ------------------ -----------------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Expenses in excess of revenues........... $ (492,749) $ (733,433) $(211,746)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization........ 245,192 373,343 112,444
Changes in assets and liabilities:
Prepaids and other................. (2,000) (4,150) 448
Accounts payable and accrued
liabilities...................... 26,110 (26,110) 4,481
----------------- ------------------ -----------------
Net cash used in operating
activities....................... (223,447) (390,350) (94,373)
----------------- ------------------ -----------------
Cash flows from investing activities:
Acquisition of wireless cable systems.... (6,459,966) (45,358) (79,047)
Purchases of equipment................... (132,677)
----------------- ------------------ -----------------
Net cash used in investing
activities....................... (6,592,643) (45,358) (79,047)
----------------- ------------------ -----------------
Cash flows from financing activities:
Advances from Company.................... 6,816,090 435,708 173,420
----------------- ------------------ -----------------
Net cash provided by financing
activities....................... 6,816,090 435,708 173,420
----------------- ------------------
Net increase in cash....................... 0 0 0
Cash, beginning of period.................. 0 0 0
----------------- ------------------ -----------------
Cash, end of period........................ $ 0 $ 0 $ 0
----------------- ------------------ -----------------
----------------- ------------------ -----------------
</TABLE>

See accompanying notes to financial statements.

F-145
<PAGE>
CABLEMAXX, INC.
UTAH DIVISION

NOTES TO FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS

CableMaxx, Inc. (the "Company") develops, owns and operates wireless cable
television systems providing wireless cable television service to subscribers in
Austin, San Antonio, Temple/Killeen and Waco, Texas.

On June 30, 1994, the Company entered into an agreement to acquire wireless
cable channel rights in Salt Lake City, Utah (the "Division") for approximately
$10.87 million, making an initial deposit of approximately $1.1 million. On
February 28, 1995 ("Acquisition"), the Company completed the acquisition
consisting of cash in the amount of $6.5 million and the issuance of 907,311
shares of the Company's common stock. These rights do not constitute an existing
operating wireless cable system. Under the Acquisition Agreement, the Company is
obliged to maintain the related licenses and perform all other obligations
imposed under each channel lease. The Division does not constitute an operating
wireless cable system as it has no subscribers nor is it transmitting wireless
cable programming.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying financial statements include the assets, liabilities,
revenues and expenses that are directly related to the Division presented at the
Company's historical cost. The financial statements do not include general
unallocated corporate assets, liabilities, equity, revenues and expenses of the
Company which are not directly related to the Division nor debt financing and
associated interest expense to the extent it is not directly related to the
Division and, therefore, may not necessarily reflect what the financial
position, results of operations and cash flows of the Division would have been
had it been a separate, stand-alone entity during the periods covered by the
financial statements.

Cash Management

The Division utilizes the central cash management systems of the Company to
finance its operations. Cash requirements are satisfied by transactions between
the Division and the Company. Such transactions are included in changes in net
assets as net advances from Company and to the extent such transactions are cash
transactions of the Company, they are included in the Division's statements of
cash flows.

Systems and Equipment

Systems and equipment is carried at cost and includes the cost of
transmission equipment. Cost of maintenance and repairs is charged to expense as
incurred. Upon sale or retirement, if any, the related cost and accumulated
depreciation are removed from their respective accounts, and any resulting gain
or loss would be credited or charged to income.

Systems and equipment consist of head-end, tower and transmission equipment
which is depreciated straight-line over 7 years.

Intangible Assets

Intangible assets consist of acquired channel rights and goodwill which is
amortized straight-line over 15 years. The Division reviews channel rights and
goodwill for impairment from time to time, measuring impairment based upon
expected future undiscounted cash flows from operations.

F-146
<PAGE>
CABLEMAXX, INC.
UTAH DIVISION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

Use of Estimates

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 and
disclosure of contingent assets and liability at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.

Income Taxes

The results of operations of the Division have been included in the federal
income tax returns of the Company. Accordingly, net operating losses generated
by the Division are subject to potential utilization only by the Company and
therefore are not reported as Division deferred income taxes. If such net
operating losses totaling approximately $1,226,000 and $1,438,000 (unaudited) as
of December 31, 1995 and February 23, 1996, respectively, were allocable to the
Division, they would be subject to a full valuation allowance. Other current and
deferred income taxes have been allocated to the Division as if such taxes were
calculated on a separate return basis using the accounting principles in
Statement of Financial Accounting Standards No. 109 and are not considered
significant in the aggregate.

3. COMMITMENTS AND CONTINGENCIES

The Division leases from third parties channel rights licensed by the Federal
Communications Commission ("FCC"). Under FCC rules, the base term of each lease
cannot exceed the term of the underlying FCC license. FCC licenses for wireless
cable frequencies range from five to ten years, and there is no automatic
renewal of such licenses. The use of such frequencies by the third party lessors
is subject to regulation by the FCC, and therefore the Division's ability to
enjoy the benefit of these leases is dependent upon the third party lessors'
continuing compliance with applicable regulations. The remaining terms of the
Division's leases range from approximately one year to seven years. Most of the
Division's leases provide for renewal of their terms upon FCC renewal of the
underlying license or require the parties to negotiate renewal in good faith.
Although the Division has no reason to believe that its leases will not be
renewed or that the underlying FCC licenses will be canceled or not renewed,
such event would prevent the Division from delivering programming over the
affected frequencies, which could have a material adverse effect on the
Division. Channel rights lease agreements generally require payments based on
the greater of specified minimums or amounts based upon various factors
including subscriber levels, subscriber revenues, the cost of transmission
equipment and facilities, and facility operating costs as specified in the
agreements.

F-147
<PAGE>
CABLEMAXX, INC.
UTAH DIVISION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

3. COMMITMENTS AND CONTINGENCIES--(CONTINUED)

period from Acquisition to June 30, 1995, for the six month period ended
December 31, 1995, and for the period from January 1, 1996 to February 23, 1996,
respectively.

Future minimum lease payments due under channel rights leases are as
follows:

<TABLE>
<CAPTION>
YEAR ENDING
JUNE 30, AMOUNT
- ----------- ------
<S> <C>
1996............................................................. $66,000
1997............................................................. 66,000
1998............................................................. 66,000
1999............................................................. 66,000
2000............................................................. 66,000
</TABLE>

The Division also has operating leases for office space and equipment, land
for head-ends, and transmission facilities. Rental expenses incurred in
connection with these leases approximated $25,000, $19,000 and $5,700
(unaudited) for the period from Acquisition to June 30, 1995, for the six month
period ended December 31, 1995, and for the period from January 1, 1996 to
February 23, 1996 respectively.

Future minimum lease payments under such leases are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
JUNE 30, AMOUNT
- ----------- ------
<S> <C>
1996............................................................. $39,000
1997............................................................. 41,000
1998............................................................. 43,000
1999............................................................. 46,000
2000............................................................. 48,000
</TABLE>

4. SUPPLEMENTAL CASH FLOWS DISCLOSURES

The Division had obligations amounting to approximately $77,000 and $39,500
(unaudited) related to intangible asset additions which are included in accounts
payable at December 31, 1995 and February 23, 1996.

5. LIQUIDITY

The growth of the Division's business requires substantial investment on a
continuing basis to finance capital expenditures and related expenses for
subscriber growth and system development. The amount and timing of Division's
future capital requirements will depend upon a number of factors, many of which
are not within Division's control, including programming costs, equipment costs,
marketing expenses, staffing levels, subscriber growth and competitive
conditions. Failure to obtain any required additional financing of advances from
the Company could have a material adverse affect on the growth of Division and
the development of its market. While these activities may be financed in part by
Division cash flows, the Division continues to be dependent upon such advances
to fund these activities. The Company has been unable to secure additional
capitalization or expand its current availability under its existing revolving
credit and term loan, and has violated certain restrictive loan covenants in
fiscal 1995 and during the six month period ended December 31, 1995 for which
waivers have been

F-148
<PAGE>
CABLEMAXX, INC.
UTAH DIVISION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

5. LIQUIDITY--(CONTINUED)

obtained and expects to continue to violate such covenants in fiscal 1996
resulting in expected events of default.

The Company's current financing agreement does not provide for any more
advances to the Company. Current cash reserves may not be sufficient to meet
future operating needs and liabilities. In connection with the proposed merger
discussed in Note 6, the Company has sold its channel rights in Sherman,
Lubbock, Amarillo and Athens for approximately $2.4 million to, and has entered
into a loan agreement with Heartland Wireless Communications Inc. ("Heartland").
The Company expects that these funds will enable the Company and therefore, the
Division to continue operations through the proposed closing date of the merger.
If the merger is not completed, the Company and therefore, the Division will
have to find additional funding for operations. Company management will continue
to negotiate and seek to amend the current revolving credit facility and also
pursue other areas of financing.

6. PROPOSED MERGER

7. SUBSEQUENT EVENTS (UNAUDITED)

The proposed merger as specified in Note 6 was consummated on February 23,
1996.

F-149
<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
TECHNIVISION, INC.:

We have audited the accompanying balance sheet of Dayton System, a division
of Technivision, Inc., as of May 31, 1994 and 1995, and the related statements
of operations and system equity and cash flows for the years 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 audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Dayton System, a division of
Technivision, Inc., as of May 31, 1994 and 1995, and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that
Dayton System will continue as a going concern. As discussed in note 2 to the
financial statements, Dayton System, which is dependent upon contributions from
Technivision, Inc. to fund operating activities, and Technivision, Inc. have
incurred cumulative losses since inception of $2,858,200 and $14,871,000,
respectively, through May 31, 1995, and as of that date current liabilities
exceeded current assets by $372,464 and $15,086,000, respectively. Additional
capital or financing is needed to enable Technivision, Inc. to meet its debt
service requirements in fiscal year 1996. These factors, as more fully discussed
in note 2, raise substantial doubt about Dayton System's ability to continue as
a going concern. Management's plans in regard to these matters are also
described in note 2. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

KPMG PEAT MARWICK LLP

Dallas, Texas
January 15, 1996

F-150
<PAGE>
DAYTON SYSTEM
(A DIVISION OF TECHNIVISION, INC.)

BALANCE SHEETS

<TABLE>
<CAPTION>
MAY 31, MAY 31, NOVEMBER 30,
1994 1995 1995
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash................................................. $ -- $ 22,558 $ 21,827
Subscriber receivables, net of allowance for doubtful
accounts of $5,322 in 1994 and $21,408 in 1995..... 104,756 153,849 96,931
Prepaid expenses and other........................... 19,780 21,425 98,499
---------- ---------- ------------
Total current assets............................... 124,536 197,832 217,257
Systems and equipment, net (note 3).................... 2,779,114 2,898,143 2,849,833
Leased license investment, net of accumulated
amortization of $16,238 in 1994 and $68,003 in
1995................................................. 912,503 889,690 863,617
Other assets, net...................................... 34,956 -- --
---------- ---------- ------------
$3,851,109 $3,985,665 $3,930,707
---------- ---------- ------------
---------- ---------- ------------
LIABILITIES AND SYSTEM EQUITY
Current liabilities:
Accounts payable..................................... $ 200,696 $ 510,862 $ 610,772
Accrued expenses and other liabilities............... 292,210 557,954 140,304
Current portion of long-term debt (note 4)........... 51,187 52,500 94,924
---------- ---------- ------------
Total current liabilities.......................... 544,093 1,121,316 846,000
Long-term debt, less current portion (note 4).......... 176,031 128,680 189,848
System equity.......................................... 3,130,985 2,735,669 2,894,859
Commitments (note 6)...................................
---------- ---------- ------------
$3,851,109 $3,985,665 $3,930,707
---------- ---------- ------------
---------- ---------- ------------
</TABLE>

See accompanying notes to financial statements.

F-151
<PAGE>

DAYTON SYSTEM
(A DIVISION OF TECHNIVISION, INC.)

STATEMENTS OF OPERATIONS AND SYSTEM EQUITY

<TABLE><CAPTION>
SIX MONTHS PERIOD FROM
YEARS ENDED MAY 31 ENDED JUNE 1, 1995
-------------------------- NOVEMBER 30, TO FEBRUARY 23,
1994 1995 1994 1996
----------- ----------- ------------ ---------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Revenues:
Subscription......................... $ 268,836 $ 1,027,389 $ 449,734 $ 913,339
Installation......................... 54,504 57,093 37,186 34,004
----------- ----------- ------------ ---------------
Total revenues................... 323,340 1,084,482 486,920 947,343
----------- ----------- ------------ ---------------
Operating expenses:
System operations.................... 587,741 1,059,838 624,546 717,253
Selling, general and
administrative...................... 799,439 726,288 372,058 535,831
Depreciation and amortization........ 269,182 507,195 152,242 429,771
----------- ----------- ------------ ---------------
Total operating expenses......... 1,656,362 2,293,321 1,148,846 1,682,855
----------- ----------- ------------ ---------------
Operating loss................... (1,333,022) (1,208,839) (661,926) (735,512)
----------- ----------- ------------ ---------------
Other income (expense):
Interest expense..................... (10,225) (18,378) (7,093) (29,429)
Other expense, including $105,000 to
affiliates in 1994.................. (105,000) (1,285) -- --
----------- ----------- ------------ ---------------
Total other income (expense)..... (115,225) (19,663) (7,093) (29,429)
----------- ----------- ------------ ---------------
Net loss......................... (1,448,247) (1,228,502) (669,019) (764,941)
System equity, beginning of period..... 329,668 3,130,985 3,130,985 2,735,669
Net investment by parent............... 4,249,564 833,186 428,140 1,009,644
----------- ----------- ------------ ---------------
System equity, end of period........... $ 3,130,985 $ 2,735,669 $ 2,890,106 $ 2,980,372
----------- ----------- ------------ ---------------
----------- ----------- ------------ ---------------
</TABLE>

See accompanying notes to financial statements.

F-152
<PAGE>

DAYTON SYSTEM
(A DIVISION OF TECHNIVISION, INC.)

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS PERIOD FROM
YEARS ENDED MAY 31 ENDED JUNE 1, 1995
-------------------------- NOVEMBER TO FEBRUARY
1994 1995 30, 1994 23, 1996
----------- ----------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss................................ $(1,448,247) $(1,228,502) $ (669,019) $ (764,941)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization......... 269,182 507,195 152,242 429,771
Changes in assets and liabilities:
Subscriber receivables.............. (104,756) (49,093) (59,195) (10,275)
Prepaid expenses and other.......... (54,736) 33,311 (73,925) 9,357
Accounts payable, accrued expenses
and other liabilities............. 492,906 575,910 375,022 (208,352)
----------- ----------- ---------- ------------
Net cash used in operating
activities...................... (845,651) (161,179) (274,875) (544,440)
----------- ----------- ---------- ------------
Cash flows from investing activities:
Purchases of systems and equipment...... (2,490,011) (574,459) (112,096) (446,389)
Expenditures for leased licenses........ (887,979) (28,952) -- (8,485)
----------- ----------- ---------- ------------
Net cash used in investing
activities...................... (3,377,990) (603,411) (112,096) (454,874)
----------- ----------- ---------- ------------
Cash flows from financing activities:
Net investment by parent................ 4,249,564 833,186 428,140 1,009,644
Payments on notes payable............... (25,923) (46,038) (18,310) (27,844)
----------- ----------- ---------- ------------
Net cash provided by financing
activities...................... 4,223,641 787,148 409,830 981,800
----------- ----------- ---------- ------------
Net increase (decrease) in cash........... -- 22,558 22,859 (17,514)
Cash at beginning of period............... -- -- -- 22,558
----------- ----------- ---------- ------------
Cash at end of period..................... $ -- $ 22,558 $ 22,859 $ 5,044
----------- ----------- ---------- ------------
----------- ----------- ---------- ------------
</TABLE>

See accompanying notes to financial statements.

F-153
<PAGE>
DAYTON SYSTEM
(A DIVISION OF TECHNIVISION, INC.)

NOTES TO FINANCIAL STATEMENTS

(1) GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Description of Business

The accompanying financial statements include the accounts of Dayton System
("Dayton System"), a division of Technivision, Inc. ("Technivision"). Dayton
System has the rights to, and operates a wireless cable television system in,
Dayton, Ohio.

(b) Systems and Equipment

Systems and equipment are stated at cost and include the cost of
transmission equipment as well as subscriber installations. Reception equipment
on subscriber premises and costs associated with initial subscriber
installations are capitalized. Upon subscriber disconnect, Dayton System
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 3 to 10
years. 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.

Leased license investment includes costs incurred to acquire wireless cable
channel rights. Costs incurred to acquire channel rights issued by the Federal
Communications Commission ("FCC") are deferred and amortized ratably over an
estimated useful life of 20 years. Dayton System continually reevaluates the
propriety of the carrying amounts of the leased license investment based on
undiscounted future cash flows as well as the amortization period to determine
whether current events or circumstances warrant adjustments to the carrying
amount or a revised estimate of the useful life.

(d) Revenue Recognition

Revenues from subscribers are recognized in the period that the service is
provided. Installation fees are recognized upon origination of service to a
subscriber to the extent of costs incurred to obtain subscribers. Installation
revenues in excess of such costs will be deferred and amortized over six years.

(e) System Operations

System operations expenses consist principally of programming fees, channel
lease costs, tower rental and other costs of providing services.

(f) Income Taxes

Dayton System is included in the consolidated federal income tax return of
Technivision's parent company, Three Sixty Corp. Total current and deferred tax
expense is allocated to the Company as if such taxes were calculated on a
separate return basis under the asset and liability method prescribed by
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." For the years ended May 31, 1994 and 1995, no tax benefit or expense was
recorded as a result of losses incurred by Dayton System.

F-154
<PAGE>
DAYTON SYSTEM
(A DIVISION OF TECHNIVISION, INC.)

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(1) GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

(g) Statements of Cash Flows

Dayton System considers all highly liquid investments purchased with
original maturities of three months or less to be cash equivalents.

(h) Interim Financial Information

In the opinion of management, the accompanying unaudited condensed financial
information of Dayton System contains all adjustments, consisting only of those
of a recurring nature, necessary to present fairly Dayton System's financial
position as of November 30, 1995, and the results of its operations and its cash
flows for the six-month period ended November 30, 1994 and for the period June
1, 1995 to February 23, 1996. These results are not necessarily indicative of
the results to be expected for the full fiscal year.

(2) REALIZATION OF ASSETS

The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of
Dayton System as a going concern. As shown on the accompanying balance sheet,
Dayton System's current liabilities exceeded its current assets by $372,464 at
May 31, 1995. In addition, Dayton System has sustained losses through May 31,
1995 of $2,858,200. Further, Dayton System is dependent upon contributions from
Technivision until such time as its operating activities provide cash flows
sufficient to fund operating activities. Technivision's current liabilities
exceeded its current assets by $15,086,000 at May 31, 1995 and Technivision has
sustained losses through May 31, 1995 of $14,781,000. In order for Technivision
to meet its debt service requirements in fiscal year 1996, Technivision must
obtain additional capital or debt financing. Given these facts, the ability of
Dayton System to continue as a going concern and the recoverability of a major
portion of its recorded asset amounts is dependent upon Technivision's ability
to meet its financing requirements on a continuing basis.

Technivision and its stockholders have been exploring financing and
capitalization alternatives, including the possibility of a sale of Technivision
or its assets. As a result, in October 1995, Technivision entered into a
definitive agreement with Heartland Wireless Communications, Inc. ("Heartland")
whereby Heartland will acquire substantially all of the assets of Technivision
in exchange for Heartland common stock, less an amount of assumed obligations,
and will simultaneously contribute a portion of the assets (including Dayton
System) to a newly-formed joint venture. This transaction is subject to certain
conditions and there can be no assurance that Technivision will be able to
consummate such transaction. Dayton System's financial statements do not include
any adjustments relating to the recoverability of recorded asset amounts or
amounts of liabilities that might be necessary depending upon the outcome of
these uncertainties.

F-155
<PAGE>
DAYTON SYSTEM
(A DIVISION OF TECHNIVISION, INC.)

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(3) SYSTEMS AND EQUIPMENT

Systems and equipment consists of the following at May 31:

<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Equipment awaiting installation................... $ 118,334 $ 30,836
Subscriber premises equipment and installation
costs........................................... 584,096 909,223
Transmission equipment and system construction
costs........................................... 1,570,145 1,870,341
Office furniture and equipment.................... 449,158 485,792
Buildings and leasehold improvements.............. 281,802 281,802
---------- ----------
3,003,535 3,577,994
Accumulated depreciation and amortization......... (224,421) (679,851)
---------- ----------
$2,779,114 $2,898,143
---------- ----------
---------- ----------
</TABLE>

Equipment awaiting installation is not yet subject to depreciation.

(4) LONG-TERM DEBT

Long-term debt at May 31, 1994 and 1995 consists of the following:

<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
IBM................................................... $ 94,827 $ 80,116
GMAC.................................................. 94,589 80,401
Other................................................. 37,802 20,663
-------- --------
277,218 181,180
Less current portion.................................. 51,187 52,500
-------- --------
$176,031 $128,680
-------- --------
-------- --------
</TABLE>

Long-term debt includes equipment notes payable. The notes, which require
monthly installments of principal and interest, are collateralized by the
equipment and have interest rates ranging from 7.5% to 9.5%. The notes mature at
various dates through November 1999.

Aggregate maturities for long-term debt are as follows: 1996, $52,500; 1997,
$54,000; 1998, $55,500; and 1999, $19,180.

(5) LEASES

Dayton System, through its parent company, leases from third parties channel
rights licensed by the FCC. Under FCC policy, the base term of most of these
leases cannot exceed ten years from the time the lessee begins using the leased
channel rights. FCC licenses for wireless cable channels range from 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,
Dayton System's ability to continue to enjoy the benefits of these leases is
dependent upon the third party lessor's continuing compliance with applicable
regulations. The initial terms of Dayton System's channel leases are generally
10 years, although certain of Dayton System's channel leases have initial terms
expiring in the next several years. Most of Dayton System's leases provide for
automatic renewal of their terms upon FCC renewal of the underlying license
and/or require the parties to negotiate renewal in good faith. Although Dayton

F-156
<PAGE>
DAYTON SYSTEM
(A DIVISION OF TECHNIVISION, INC.)

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(5) LEASES--(CONTINUED)

System does not believe that the termination of or failure to renew a single
channel lease could adversely affect Dayton System, several of such terminations
or failures could have a material adverse effect on Dayton System. 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 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. Channel rights lease
expense was $89,425 and $95,134 for the years ended May 31, 1994 and 1995.

Dayton System also has certain operating leases for office space and
transmission tower space. Rent expense incurred in connection with other
operating leases was $27,500 and $30,000 for the years ended May 31, 1994 and
1995, respectively.

Future minimum lease payments due under channel rights leases and other
noncancellable operating leases in effect at May 31, 1995 are as follows:

<TABLE>
<CAPTION>
CHANNEL OTHER
YEAR ENDING RIGHTS OPERATING
MAY 31, LEASES LEASES
- ----------- -------- ---------
<S> <C> <C>
1996.............................................. $105,974 $ 42,000
1997.............................................. 105,974 66,000
1998.............................................. 105,974 66,000
1999.............................................. 105,974 38,500
2000.............................................. 105,974 36,000
</TABLE>

(6) RELATED PARTY TRANSACTIONS

Dayton System paid $105,000 in 1995 to various affiliates for services
performed in connection with the development of wireless cable television
systems and certain administrative services.

(7) COMMITMENTS

Dayton System has entered into a series of noncancellable agreements to
purchase entertainment programming for retransmission which expire through 1997.
The agreements generally require monthly payments based upon the number of
subscribers, subject to certain minimums.

F-157
<PAGE>
========================================= ====================================
- ----------------------------------------- ------------------------------------

NO DEALER, SALESPERSON, OR ANY OTHER
PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH INFORMATION AND
REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN OFFER FOR ALL OUTSTANDING
AUTHORIZED BY THE COMPANY. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION 11 3/8% SENIOR DISCOUNT NOTES DUE 2006
THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A IN EXCHANGE FOR
SOLICITATION BY ANYONE IN
ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN 11 3/8% SERIES B SENIOR DISCOUNT NOTES
WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS DO SO OR TO ANY PERSON
TO NOT QUALIFIED TO WHOM IT IS UNLAWFUL DUE 2006
TO MAKE SUCH OFFER OR SOLICITATION.

------------------- EACH ISSUED BY

TABLE OF CONTENTS

Available Information............. 3
Prospectus Summary................ 5
Summary Historical and
Pro Forma Financial Data........ 12
Risk Factors...................... 13
Use of Proceeds................... 21
The Contributions................. 21
The Unit Offering................. 23
Capitalization.................... 24
CS WIRELESS SYSTEMS, INC.
Selected Historical Financial
Data............................. 25
The Exchange Offer................ 27
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations...................... 33
Business.......................... 37
Industry Overview................. 46
--------------
Management........................ 54
Stock Ownership................... 58 PROSPECTUS
Certain Relationships and Related
--------------
Transactions.................... 59
Description of the Notes.......... 61
Description of Capital Stock...... 94
Registration Rights............... 95
Certain Federal Income Tax
Considerations.................... 99
Plan of Distribution.............. 102
Book-entry; Delivery and Form..... 103
, 1996
Legal Matters..................... 104
Experts........................... 105
Index to Pro Forma Financial
Information and Financial
Statements........................ F-1

-------------------

UNTIL , 1996, ALL DEALERS
EFFECTING TRANSACTIONS IN THE NEW NOTES,
WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS
TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS OR WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

- ----------------------------------------- ------------------------------------
========================================= ====================================

<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The table below sets forth the expenses expected to be incurred and borne
solely by the Company in connection with the registration of the New Notes
offered hereby. All amounts shown are estimated, except the Commission
Registration Fee.

<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission Registration Fee............ $79,763.35
Accounting Fees and Expenses................................... *
Legal Fees and Expenses........................................ *
Blue Sky Fees and Expenses..................................... *
Printing Expenses.............................................. *
Fees of Exchange Agent......................................... *
Miscellaneous Expenses......................................... *
Total.................................................. *
</TABLE>

- ------------

* To be filed by amendment.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<CAPTION>
<C> <S>
3.1 --Amended and Restated Certificate of Incorporation of the Company.*
3.2 --Bylaws of the Company.*
4.1 --Indenture dated as of February 15, 1996 between the Company and Fleet National Bank
of Connecticut (including the form of 11 3/8% Senior Discount Notes and 11 3/8%
Series B Senior Discount Notes due 2006 as Exhibit A and Exhibit B, respectively,
thereto).*
4.2 --Notes Registration Rights Agreement dated as of February 15, 1996 between the
Company and the Initial Purchasers.*
5.0 --Opinion of Day, Berry & Howard as to the legality of the securities to be
registered.**
10.1 --Purchase Agreement dated February 16, 1995 between the Company and the Initial
Purchasers.*
10.2 --Participation Agreement dated as of December 12, 1995 among the Company, CAI and
Heartland.***
10.3 --Amendment No. 1 to Participation Agreement dated as of February 22, 1996 among the
Company, CAI and Heartland.****
10.4 --Employment Agreement dated as of February 22, 1996 between the Company and Alan
Sonnenberg.*****
10.5 --Employment Agreement dated as of February 22, 1996 between the Company and Lowell
Hussey.*
10.6 --Employment Agreement dated as of February 22, 1996 between the Company and Thomas
W. Dixon.*
10.7 --Stock Option Agreement dated as of March 19, 1996 between the Company and Alan
Sonnenberg.*
10.8 --Stock Option Agreement dated as of March 19, 1996 between the Company and Lowell
Hussey.*
10.9 --Stock Option Agreement dated as of March 19, 1996 between the Company and Thomas W.
Dixon.*
10.10 --Stock Option Agreement dated as of March 19, 1996 between the Company and John R.
Bailey.*
10.11 --Incentive Stock Plan.*
10.12 --Common Share Registration Rights Agreement dated as of February 15, 1996 between
the Company and the Initial Purchasers.*
</TABLE>

II-1
<PAGE>

<TABLE>
<C> <S>
10.13 --Form of Registration Rights Agreement dated as of February 23, 1996 among the Company,
MMDS Holdings II, Inc. and NYNEX MMDS Holding Company.**
10.14 --Stockholders' Agreement dated as of February 23, 1996 among the Company, CAI and
Heartland.*
10.15 --Market Protection Agreement dated as of February 23, 1996 between the Company and
Heartland.*
10.16 --Promissory Note of the Company in the principal amount of $25,000,000 to the order
of Heartland (the "Short-Term Note").*
10.17 --Promissory Note of the Company in the principal amount of $15,000,000 to the order
of Heartland.*
10.18 --Pledge Agreement dated as of February 23, 1996 relating to the Short-Term Note.*
10.19 --Administrative Services Agreement dated as of February 23, 1996 between the Company
and Heartland.*
12.0 --Statement of Computation of Ratio of Earnings to Fixed Charges.**
21 --Subsidiaries of the Company.*
23.1 --Consent of Day, Berry & Howard (included in Exhibit 5).**
23.2 --Consent of KPMG Peat Marwick LLP.**
23.3 --Consent of Coopers & Lybrand LLP.**
23.4 --Consent of Arthur Andersen LLP.**
23.5 --Consent of Lewandowski Zalick & Company.**
23.6 --Consent of Ernst & Young LLP.**
24 --Power of Attorney (included on signature page).**
25 --Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act
of 1939 of Fleet National Bank of Connecticut (separately bound).**
99 --Form of Letter of Transmittal**
</TABLE>

- ------------

<TABLE>
<C> <S>
* Previously filed.
** Filed herewith.
*** Incorporated by reference Exhibit 2.1 to the Current Report on Form 8-K dated December
12, 1995 (0-22888) of CAI Wireless Systems, Inc. ("CAI").
**** Incorporated by reference Exhibit 2.1 to the Current Report on Form 8-K dated March 8,
1996 (0-22888) of CAI.
***** To be filed by amendment.
</TABLE>

(b) Financial Statement Schedules

All schedules are omitted, as required information is inapplicable or the
required information is shown in the consolidated financial statements.

II-2
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Plano, State of Texas, on
July 2, 1996.

CS WIRELESS SYSTEMS, INC.

By: /s/ LOWELL HUSSEY
..................................

Lowell Hussey
President and Chief Executive
Officer

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated. Each person whose signature appears below
hereby constitutes and appoints Sabino Rodriguez, III and M. Louise Turilli, and
each of them (with full power to each of them to act alone), our true and lawful
attorneys-in-fact and agents, with full power to them and each of them to sign
for such person and in such person's name and capacity as indicated below, any
and all amendments (including post-effective amendments) to this Registration
Statement and all documents relating thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming such
person's signature as it may be signed by said attorneys to any and all
amendments.

<TABLE>
<CAPTION>
Name Title Date
- ------------------------------------ -------------------------------------- ---------------
<C> <S> <C>
/s/ JARED E. ABBRUZZESE Chairman of the Board of Directors July 2, 1996
....................................
Jared E. Abbruzzese
/s/ David Webb Directors
.................................... Vice Chairman of the Board of July 2, 1996
David Webb Directors
/s/ LOWELL HUSSEY President, Chief Executive Officer and July 2, 1996
.................................... Director (Principal Executive
Lowell Hussey Officer)
/s/ ALAN SONNENBERG Vice Chairman of the Board of July 3, 1996
.................................... Directors
Alan Sonnenberg
/s/ JOHN R. BAILEY Acting Chief Financial Officer July 2, 1996
.................................... (Principal Financial Officer)
John R. Bailey
/s/ THOMAS W. DIXON Senior Vice President of Operations July 2, 1996
....................................
Thomas W. Dixon
/s/ BRAD R. BRADFORD Controller July 2, 1996
....................................
Brad R. Bradford
/s/ JAMES P. ASHMAN Director July 2, 1996
....................................
James P. Ashman

/s/ Robert D. Happ Director July 2, 1996
....................................
Robert D. Happ
Director July , 1996
....................................
J.R. Holland, Jr.
/s/ D. MICHAEL SITTON Director July 2, 1996
....................................
D. Michael Sitton
Director July , 1996
....................................
William W. Sprague
</TABLE>

II-3
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
3.1 --Amended and Restated Certificate of Incorporation of the Company.*
3.2 --Bylaws of the Company.*
4.1 --Indenture dated as of February 15, 1996 between the Company and Fleet
National Bank of Connecticut (including the form of 11 3/8% Senior Discount
Notes and 11 3/8% Series B Senior Discount Notes due 2006 as Exhibit A and
Exhibit B, respectively, thereto).*
4.2 --Notes Registration Rights Agreement dated as of February 15, 1996 between the
Company and the Initial Purchasers.*
5.0 --Opinion of Day, Berry & Howard as to the legality of the securities to be
registered.**
10.1 --Purchase Agreement dated February 16, 1995 between the Company and the
Initial Purchasers.*
10.2 --Participation Agreement dated as of December 12, 1995 among the Company, CAI
and Heartland.***
10.3 --Amendment No. 1 to Participation Agreement dated as of February 22, 1996
among the Company, CAI and Heartland.****
10.4 --Employment Agreement dated as of February 22, 1996 between the Company and
Alan Sonnenberg.*****
10.5 --Employment Agreement dated as of February 22, 1996 between the Company and
Lowell Hussey.*
10.6 --Employment Agreement dated as of February 22, 1996 between the Company and
Thomas W. Dixon.*
10.7 --Stock Option Agreement dated as of March 19, 1996 between the Company and
Alan Sonnenberg.*
10.8 --Stock Option Agreement dated as of March 19, 1996 between the Company and
Lowell Hussey.*
10.9 --Stock Option Agreement dated as of March 19, 1996 between the Company and
Thomas W. Dixon.*
10.10 --Stock Option Agreement dated as of March 19, 1996 between the Company and
John R. Bailey.*
10.11 --Incentive Stock Plan.*
10.12 --Common Share Registration Rights Agreement dated as of February 15, 1996
between the Company and the Initial Purchasers.*
10.13 --Form of Registration Rights Agreement dated as of February 23, 1996 among the
Company, MMDS Holdings II, Inc. and NYNEX MMDS Holding Company.**
10.14 --Stockholders' Agreement dated as of February 23, 1996 among the Company, CAI
and Heartland.*
10.15 --Market Protection Agreement dated as of February 23, 1996 between the Company
and Heartland.*
10.16 --Promissory Note of the Company in the principal amount of $25,000,000 to the
order of Heartland (the "Short-Term Note").*
10.17 --Promissory Note of the Company in the principal amount of $15,000,000 to the
order of Heartland.*
10.18 --Pledge Agreement dated as of February 23, 1996 relating to the Short-Term
Note.*
10.19 --Administrative Services Agreement dated as of February 23, 1996 between the
Company and Heartland.*
12.0 --Statement of Computation of Ratio of Earnings to Fixed Charges.**
21 --Subsidiaries of the Company.*
23.1 --Consent of Day, Berry & Howard (included in Exhibit 5).**
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
23.2 --Consent of KPMG Peat Marwick LLP.**
23.3 --Consent of Coopers & Lybrand LLP.**
23.4 --Consent of Arthur Andersen LLP.**
23.5 --Consent of Lewandowski Zalick & Company.**
23.6 --Consent of Ernst & Young LLP.**
24 --Power of Attorney (included on signature page).**
25 --Form T-1 Statement of Eligibility and Qualification under the Trust Indenture
Act of 1939 of Fleet National Bank of Connecticut (separately bound).**
99 --Form of Letter of Transmittal**
</TABLE>

- ------------

<TABLE>
<C> <S>
* Previously filed.

** Filed herewith.

*** Incorporated by reference Exhibit 2.1 to the Current Report on Form 8-K dated December
12, 1995 (0-22888) of CAI Wireless Systems, Inc. ("CAI").

**** Incorporated by reference Exhibit 2.1 to the Current Report on Form 8-K dated March 8,
1996 (0-22888) of CAI.

***** To be filed by amendment.
</TABLE>

EXHIBIT 5

June 3, 1996

CS Wireless Systems, Inc.
200 Chisholm Place
Suite 200
Plano, Texas 75075

Re: Registration Statement on Form S-1 (No. 333-3288)

Ladies and Gentlemen:

We have acted as counsel for CS Wireless Systems, Inc., a Delaware
corporation ("the Company"), in connection with the preparation and filing by
the Company with the Securities and Exchange Commission of a Registration
Statement on Form S-1 (No. 333-3288), as amended (the "Registration Statement"),
pursuant to the Securities Act of 1933, as amended (the "Securities Act"), with
respect to up to $400,000,000 aggregate principal amount at maturity of the
Company's 11 3/8% Series B Senior Discount Notes due 2006 (the "Notes") to be
issued in exchange for the Company's 11 3/8% Senior Discount Notes due 2006,
all as described in the Registration Statement.

In rendering this opinion, we have examined and relied upon originals or
copies, certified or otherwise identified to our satisfaction of such records,
documents, certificates and other instruments including, but not limited to, (i)
the Amended and Restated Certificate of Incorporation of the Company, (ii) the
Bylaws of the Company, (iii) certain minutes of the corporate proceedings of the
Board of Directors and shareholders of the Company, and (iv) the Indenture
entered into by the Company and Fleet National Bank of Connecticut and dated
as of February 15, 1995 (the "Indenture"), and have made such investigation of
law as in our judgment is necessary or appropriate to enable us to render the
opinions expressed below.

We have assumed the authenticity of all documents submitted to us as
originals, the genuineness of all signatures, the legal capacity of natural
persons and the conformity to the originals of all documents submitted to us as
copies.

The opinions set forth below are based on, and limited to, the General
Corporation Law of the State of Delaware and no opinion is expressed as to the
laws of any other jurisdiction.

Based on and subject to the foregoing, we are of the opinion that the
Notes, when issued, authenticated and delivered in accordance with the terms of
the Indenture and as contemplated by the Registration Statement, will be the
legally valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium, and similar
laws affecting creditors' rights and remedies generally and subject, as to
enforceability to general principles of equity including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity), and except to the
extent that a waiver of rights under any usury laws may be unenforceable.

We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and the reference to this firm under the caption "Legal
Matters" in the Prospectus included therein. In giving such consent, we do not
hereby admit that we are within the category of persons whose consent is
required by Section 7 of the Securities Act. This opinion is not to be used,
circulated, quoted or otherwise referred to for any other purpose without our
express written consent.

Very truly yours,

DAY, BERRY & HOWARD

MLT/JED/cb

EXHIBIT 10.13
================================================================================

BANX AFFILIATES

REGISTRATION RIGHTS AGREEMENT

Dated as of February 23, 1996

Between

CS WIRELESS SYSTEMS, INC.,

as Issuer

and

MMDS HOLDINGS II, INC.

and

NYNEX MMDS HOLDING COMPANY

================================================================================

<PAGE>
TABLE OF CONTENTS
-----------------

Section Page
- ------- ----

Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1

Section 2. Registration Rights . . . . . . . . . . . . . . . . . . . . . 5

2.1 (a) Demand Registration After Public Equity Offering . . . . . . . 5
(b) Effective Registration . . . . . . . . . . . . . . . . . . . . 6
(c) Restrictions on Sale by Holders . . . . . . . . . . . . . . . 7
(d) Underwritten Registrations . . . . . . . . . . . . . . . . . . 7
(e) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(f) Priority in Demand Registration . . . . . . . . . . . . . . . 8
(g) Termination . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2 (a) Piggy-Back Registration . . . . . . . . . . . . . . . . . . . 8
(b) Priority in Piggy-Back Registration . . . . . . . . . . . . . 9
2.3 Limitations, Conditions and Qualifications to Obligations
Under Registration Covenants . . . . . . . . . . . . . . . . . . . 11
2.4 Restrictions on Sale by the Company and Others . . . . . . . . . . 12
2.5 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Section 3. [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . 13

Section 4. Registration Procedures . . . . . . . . . . . . . . . . . . . 13

Section 5. Indemnification and Contribution . . . . . . . . . . . . . . . 20

Section 6. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 23

(a) No Inconsistent Agreements . . . . . . . . . . . . . . . . . . 23
(b) Amendments and Waivers . . . . . . . . . . . . . . . . . . . . 23
(c) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(d) Successors and Assigns . . . . . . . . . . . . . . . . . . . . 24
(e) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 24
(f) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(g) Governing Law; Jurisdiction . . . . . . . . . . . . . . . . . 25
(h) Severability . . . . . . . . . . . . . . . . . . . . . . . . . 25
(i) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 25
(j) Securities Held by the Company or Its Affiliates . . . . . . . 25
(k) Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

<PAGE>
BANX AFFILIATES

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
---------
entered into as of February 23, 1996, among CS WIRELESS SYSTEMS, INC., a
Delaware corporation (the "Company") and MMDS HOLDINGS II, INC., an affiliate of
-------
Bell Atlantic Corporation, a Delaware corporation ("Bell Atlantic") and NYNEX
-------------
MMDS HOLDING COMPANY, an affiliate of NYNEX Corporation, a Delaware corporation
("NYNEX").
-----

This Agreement is made in connection with (i) the Purchase Agreement
(the "Purchase Agreement"), dated February 15, 1996, among the Company and Smith
------------------
Barney Inc., BT Securities Corporation and Gerard Klauer Mattison & Co., LLC
(the "Initial Purchasers"), relating to, among other things, the sale by the
------------------
Company to the Initial Purchasers of an aggregate of 100,000 Units, each of
which consists of four $1,000 aggregate principal amount at maturity of 11 3/8%
Senior Discount Notes (the "Notes") due 2006 and 1.1 shares of Common Stock,
-----
$.001 par value per share, of the Company and (ii) the Participation Agreement
effective December 12, 1995, as amended by Amendment No. 1 dated as of February
22, 1996 (the "Participation Agreement") among the Company, CAI Wireless
-----------------------
Systems, Inc. and Heartland Wireless Communications, Inc. In order to induce
the BANX Affiliates (as defined herein) to provide its consent to the
transactions contemplated by the Purchase Agreement and the Participation
Agreement, the Company has agreed to issue to the BANX Affiliates an aggregate
of 1,000,000 shares of Common Stock (as defined herein) and to provide to the
BANX Affiliates and the Holders (as defined herein), among other things, the
registration rights for the Banx Shares (as defined herein) set forth in this
Agreement.

In consideration of the foregoing, the parties hereto agree as
follows:

Section 1. Definitions. As used in this Agreement, the following
-----------
defined terms shall have the following meanings:

"Advice" has the meaning ascribed to such term in the last paragraph
------
of Section 4 hereof.

"Affiliate" means, when used with reference to any Person, any other
---------
Person directly or indirectly controlling, controlled by, or under direct
or indirect common control with, the referent Person or such other Person,
as the case may be. For the purposes of this definition, the term
"control" when used with respect to any specified Person means the power to
-------
direct or cause the direction of management or policies of such Person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise; and the terms "affiliated," "controlling" and
---------- -----------
"controlled" have meanings correlative of the foregoing. None of the BANX
----------
Affiliates shall be deemed to be an Affiliate of the Company or of any of
its subsidiaries or Affiliates.

<PAGE>
-2-

"BANX Affiliates" means Bell Atlantic and NYNEX Corporation and their
---------------
respective Affiliates.

"BANX Shares" means the shares of Common Stock owned by the BANX
-----------
Affiliates on the date of the issuance of the Shares.

"Business Day" shall mean a day that is not a Legal Holiday.
------------

"Capital Stock" means any and all shares, interests, participation, or
-------------
other equivalents (however designated) of corporate stock of the Company,
including each class of common stock and preferred stock of the Company,
together with any warrants, rights, or options to purchase or acquire any
of the foregoing.

"Common Stock" shall mean the Common Stock, $.001 par value per share,
------------
of the Company.

"Company" shall have the meaning ascribed to that term in the preamble
-------
of this Agreement and shall also include the Company's permitted successors
and assigns.

"Demand Registration" has the meaning ascribed to such term in Section
-------------------
2.1(a) hereof.

"DTC" has the meaning ascribed to such term in Section 4(i) hereof.
---

"Exchange Act" means the Securities Exchange Act of 1934, as amended
------------
from time to time.

"Existing Holders" means the holders of the Company's common equity on
----------------
the date of issuance of the Shares, including the Initial Purchasers, for
so long as it owns any Shares, and each of its successors, assigns and
direct and indirect transferees who become registered owners of such
Shares.

"Holder" means each of the BANX Affiliates, for so long as it owns any
------
Registrable Securities, each of its successors and any person to whom it
transfers the BANX Shares in accordance with the provisions of Section 6(d)
hereof.

"Included Securities" has the meaning ascribed to such term in Section
-------------------
2.1(a) hereof.

"indemnified party" has the meaning ascribed to such term in Section
-----------------
5(d) hereof.

"indemnifying party" has the meaning ascribed to such term in Section
------------------
5(d) hereof.

<PAGE>
-3-

"Indenture" means the Indenture, of even date herewith, between the
---------
Company and Fleet National Bank of Connecticut, as Trustee, pursuant to
which the Notes are issued.

"Initial Purchasers" has the meaning ascribed to such term in the
------------------
preamble hereof.

"Inspectors" has the meaning ascribed to such term in Section 4(n)
----------
hereof.

"Legal Holiday" shall mean a Saturday, a Sunday or a day on which
-------------
banking institutions in New York, New York are required by law, regulation
or executive order to remain closed.

"Notes" means $400,000,000 aggregate principal amount at maturity of
-----
11 3/8% Senior Discount Notes due 2006, and Series B 11 3/8% Senior
Discount Notes due 2006, of the Company issued or to be issued under the
Indenture.

"Person" shall mean an individual, partnership, corporation, trust or
------
unincorporated organization, or a government or agency or political
subdivision thereof.

"Piggy-Back Registration" has the meaning ascribed to such term in
-----------------------
Section 2.2 hereof.

"Prepricing Prospectus" means the prospectus subject to completion
---------------------
included in any Registration Statement, and as such prospectus shall have
been amended from time to time prior to the date of the Prospectus.

"Prospectus" means the prospectus included in any Registration
----------
Statement (including, without limitation, any prospectus subject to
completion and a prospectus that includes any information previously
omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act),
as amended or supplemented by any prospectus supplement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.

"Public Equity Offering" means an initial public offering of common
----------------------
stock of the Company solely for cash pursuant to an effective registration
statement under the Securities Act.

"Purchase Agreement" has the meaning ascribed to such term in the
------------------
preamble hereof.

"Registrable Securities" means any of (i) the BANX Shares and (ii) any
----------------------
other securities issued or issuable with respect to any Registrable
Securities by way of stock

<PAGE>
-4-

dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or
otherwise, unless, in each case, such securities have been offered and sold
to the Holder pursuant to an effective registration statement under the
Securities Act declared effective. As to any particular Registrable
Securities held by a Holder, such securities shall cease to be Registrable
Securities when (i) a Registration Statement with respect to the offering
of such securities by the Holder thereof shall have been declared effective
under the Securities Act and such securities shall have been disposed of by
such Holder pursuant to such Registration Statement, (ii) such securities
may at the time of determination be sold to the public pursuant to Rule 144
without any restriction on the amount of securities which may be sold by
such Holder or Rule 144(k) (or any similar provision then in force, but not
Rule 144A) promulgated under the Securities Act without the lapse of any
further time or the satisfaction of any condition, (iii) such securities
shall have been otherwise transferred by such Holder and new certificates
for such securities not bearing a legend restricting further transfer shall
have been delivered by the Company or its transfer agent and subsequent
disposition of such securities shall not require registration or
qualification under the Securities Act or any similar state law then in
force or (iv) such securities shall have ceased to be outstanding.

"Registration Expenses" shall mean all expenses incident to the
---------------------
Company's performance of or compliance with this Agreement, including,
without limitation, all SEC and stock exchange or National Association of
Securities Dealers, Inc. registration and filing fees and expenses, fees
and expenses of compliance with securities or blue sky laws (including,
without limitation, reasonable fees and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the Registrable
Securities), printing expenses (including messenger, telephone and
delivery expenses), fees and disbursements of counsel for the Company and
all independent certified public accountants, the fees and disbursements of
underwriters customarily paid by issuers or sellers of securities (but not
including any underwriting discounts or commissions or transfer taxes, if
any, attributable to the sale of Registrable Securities by Selling Holders)
and other reasonable out-of-pocket expenses of Selling Holders (it being
understood that Registration Expenses shall not include, as to the fees and
expenses of counsel, the fees and expenses of more than one counsel for the
Selling Holders).

"Registration Statement" shall mean any appropriate registration
----------------------
statement of the Company filed with the SEC pursuant to the Securities Act
which covers any of the Registrable Securities pursuant to the provisions
of this Agreement and all amendments and supplements to any such
Registration Statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.

<PAGE>
-5-

"Requisite Securities" shall mean a number of Registrable Securities
--------------------
equal to not less than 50% of the Registrable Securities at any time
outstanding.

"Rule 144" shall mean Rule 144 promulgated under the Securities Act,
--------
as such Rule may be amended from time to time, or any similar rule (other
than Rule 144A) or regulation hereafter adopted by the SEC providing for
offers and sales of securities made in compliance therewith resulting in
offers and sales by subsequent holders that are not affiliates of an issuer
of such securities being free of the registration and prospectus delivery
requirements of the Securities Act.

"Rule 144A" shall mean Rule 144A promulgated under the Securities Act,
---------
as such Rule may be amended from time to time, or any similar rule (other
than Rule 144) or regulation hereafter adopted by the SEC.

"SEC" shall mean the Securities and Exchange Commission.
---

"Securities Act" shall mean the Securities Act of 1933, as amended
--------------
from time to time.

"Selling Holder" shall mean a Holder who is selling Registrable
--------------
Securities in accordance with the provisions of Section 2.1 or 2.2.

"Shares" means the shares of Common Stock sold pursuant to the
------
Purchase Agreement.

Section 2. Registration Rights.
-------------------

2.1 (a) Demand Registration After Public Equity Offering. At any
------------------------------------------------
time and from time to time after the occurrence of a Public Equity Offering,
Holders owning, individually or in the aggregate, not less than the Requisite
Securities may make a written request for registration under the Securities Act
of their Registrable Securities (the "Demand Registration"). Within 120 days of
-------------------
the receipt of such written request for a Demand Registration, the Company shall
file with the SEC and use its best efforts to cause to become effective under
the Securities Act a Registration Statement with respect to such Registrable
Securities. Any such request will specify the number of Registrable Securities
proposed to be sold and will also specify the intended method of disposition
thereof. The Company shall give written notice of such registration request to
all other Holders of Registrable Securities within 15 days after the receipt
thereof. Within 20 days after receipt by any Holder of Registrable Securities
of such notice from the Company, such Holder may request in writing that such
Holder's Registrable Securities be included in such Registration Statement and
the Company shall include in such Registration Statement the Registrable
Securities of any such Holder requested to be so included (the "Included
--------
Securities"). Each such request by such other Holders shall specify the
- ----------

<PAGE>
-6-

number of Included Securities proposed to be sold and the intended method of
disposition thereof. Subject to Sections 2.1(b) and 2.1(f) hereof, the Company
shall only be required to register Registrable Securities pursuant to this
Section 2.1(a) once.

Subject to Section 2.1(f) hereof, no other securities of the Company
except (i) Registrable Securities held by any Holder, (ii) equity securities to
be offered and sold for the account of the Company and (iii) any equity
securities of the Company held by the Existing Holders or by any Person having
"piggy-back" registration rights pursuant to any contractual obligation of the
Company shall be included in the Demand Registration; provided, however, that no
-------- -------
such securities for the account of the Company, the Existing Holders or any
other person shall be so included unless, in connection with any underwritten
offering, the managing underwriter or underwriters confirm to the Holders of
Registrable Securities to be included in such Demand Registration that the
inclusion of such other securities will not be likely to effect the price at
which the Registrable Securities may be sold. The inclusion of any such
securities for the account of the Company or any other Person shall be on the
same terms as that of the Registrable Securities.

(b) Effective Registration. A Registration Statement will not be
----------------------
deemed to have been effected as the Demand Registration unless it has been
declared effective by the SEC and the Company has complied in a timely manner
and in all material respects with all of its obligations under this Agreement
with respect thereto; provided, however, that if, after such Registration
-------- -------
Statement has become effective, at any time during the 90 days after the
effective date thereof, the offering of Registrable Securities pursuant to such
Registration Statement is or becomes the subject of any stop order, injunction
or other order or requirement of the SEC or any other governmental or
administrative agency or court that prevents, restrains or otherwise limits the
sale of Registrable Securities pursuant to such Registration Statement for any
reason not attributable to any Holder participating in such registration and
such Registration Statement has not become effective within a reasonable time
period thereafter (not to exceed 30 days), such Registration Statement will be
deemed not to have been effected. If (i) a registration requested pursuant to
this Section 2.1 is deemed not to have been effected or (ii) the Demand
Registration does not remain effective under the Securities Act until at least
the earlier of (A) an aggregate of 90 days after the effective date thereof or
(B) the consummation of the distribution by the Holders of all of the
Registrable Securities covered thereby, then such registration shall not count
towards determining if the Company has satisfied its obligation to effect one
Demand Registration pursuant to this Section 2.1. For purposes of calculating
the 90-day period referred to in the preceding sentence, any period of time
during which such Registration Statement was not in effect shall be excluded.
The Holders of Registrable Securities shall be permitted to withdraw all or any
part of the Registrable Securities from the Demand Registration at any time
prior to the effective date of such Demand Registration.

(c) Restrictions on Sale by Holders. Each Holder of Registrable
-------------------------------
Securities whose Registrable Securities are covered by a Registration Statement
filed pursuant to this Section 2.1 and are to be sold thereunder agrees, if and
to the extent reasonably requested by the managing

<PAGE>
-7-

underwriter or underwriters in an underwritten offering, not to effect any
public sale or distribution of Registrable Securities or of securities of the
Company of the same class as any securities included in such Registration
Statement, including a sale pursuant to Rule 144 (except as part of such
underwritten offering), during the 10-day period prior to, and during the 60-day
period beginning on, the closing date of each underwritten offering made
pursuant to such Registration Statement, to the extent timely notified in
writing by the Company or such managing underwriter or underwriters.

The foregoing provisions of Section 2.1(c) shall not apply to any
Holders of Registrable Securities if such Holder is prevented by applicable
statute or regulation from entering into any such agreement; provided, however,
-------- -------
that any such Holder shall undertake, in its request to participate in any such
underwritten offering, not to effect any public sale or distribution of any
Registrable Securities commencing on the date of sale of such Registrable
Securities unless it has provided 45 days' prior written notice of such sale or
distribution to the underwriter or underwriters.

(d) Underwritten Registrations. If any of the Registrable
--------------------------
Securities covered by the Demand Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will manage the offering will be selected by the Holders of not less than a
majority of the Registrable Securities to be sold thereunder and will be
reasonably acceptable to the Company.

No Holder of Registrable Securities may participate in any
underwritten registration pursuant to a Registration Statement filed under this
Agreement unless such Holder (a) agrees to (i) sell such Holder's Registrable
Securities on the basis provided in and in compliance with any underwriting
arrangements approved by the Holders of not less than a majority of the
Registrable Securities to be sold thereunder and (ii) comply with Rules 10b-6
and 10b-7 under the Exchange Act and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.

(e) Expenses. The Company will pay all Registration Expenses in
--------
connection with the registrations requested pursuant to Section 2.1(a) hereof.
Each Selling Holder shall pay all underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of such Selling
Holder's Registrable Securities pursuant to a Registration Statement requested
pursuant to this Section 2.1.

(f) Priority in Demand Registration. In a registration pursuant to
-------------------------------
Section 2.1 hereof involving an underwritten offering, if the managing
underwriter or underwriters of such underwritten offering have informed, in
writing, the Company and the Selling Holders who have requested such Demand
Registration or who have sought inclusion therein that in such underwriter's or
underwriters' opinion the total number of securities which the Selling Holders
and any other Person desiring to participate in such registration intend to
include in such offering is such as to adversely

<PAGE>
-8-

affect the success of such offering, including the price at which such
securities can be sold, then the Company will be required to include in such
registration only the amount of securities which it is so advised should be
included in such registration. In such event, securities shall be registered in
such registration in the following order of priority: (i) first, the
-----
Registrable Securities of any Holder (pro rata based on the amount of
Registrable Securities sought to be registered by such Holders), (ii) second,
------
provided that no securities of any Holder have been excluded from such
registration, securities which have been requested to be included in such
registration by the Existing Holders, (iii) third, provided that no securities
-----
of the Holders or Existing Holders have been excluded from such registration,
the securities of other Persons entitled to exercise "piggy-back" registration
rights pursuant to contractual commitments of the Company (pro rata based on the
amount of securities sought to be registered by such Persons) and (iv) fourth,
------
provided that no securities of any other Person sought to be included therein
have been excluded from such registration, securities to be offered and sold for
the account of the Company.

If any securities of a Holder have been excluded from a registration
statement pursuant to the provisions of the foregoing paragraph, then such
registration shall not count towards determining whether the Company has
satisfied its obligation to effect one Demand Registration pursuant to Section
2.1 hereof.

(g) Termination. All registration rights provided in this
-----------
Agreement shall terminate on the second anniversary of the date upon which the
Offering made pursuant to the Purchase Agreement shall have been consummated;
provided that any delay or postponement of the Demand Registration not caused by
the Holders shall extend the date of termination for an amount of time equal to
such delay or postponement.

2.2 (a) Piggy-Back Registration. If at any time the Company proposes
-----------------------
to file a Registration Statement under the Securities Act with respect to an
offering by the Company for its own account or for the account of any of its
securityholders of any class of its equity securities (including an initial
public offering, but excluding (i) a Registration Statement on Form S-4 or S-8
(or any substitute form that may be adopted by the SEC) or (ii) a Registration
Statement filed in connection with an exchange offer or offering of securities
solely to the Company's existing securityholders), then the Company shall give
written notice of such proposed filing to the Holders of Registrable Securities
as soon as practicable (but in no event fewer than 15 days before the
anticipated filing date or 10 days if the Company is subject to filing reports
under the Exchange Act and able to use Form S-3 under the Securities Act), and
such notice shall offer such Holders the opportunity to register such number of
shares of Registrable Securities as each such Holder may request in writing
within 15 (or eight days if the Company is subject to filing reports under the
Exchange Act and able to use Form S-3 under the Securities Act) days after
receipt of such written notice from the Company (which request shall specify the
Registrable Securities intended to be disposed of by such Selling Holder and the
intended method of distribution thereof) (a "Piggy-Back Registration"). The
-----------------------
Company shall use its best efforts to keep such Piggy-Back Registration

<PAGE>
-9-

continuously effective under the Securities Act until at least the earlier of
(A) 90 days after the effective date thereof or (B) the consummation of the
distribution by the Selling Holders of all of the Registrable Securities covered
thereby. The Company shall use its best efforts to cause the managing
underwriter or underwriters, if any, of such proposed offering to permit the
Registrable Securities requested to be included in a Piggy-Back Registration to
be included on the same terms and conditions as any similar securities of the
Company or any other securityholder included therein and to permit the sale or
other disposition of such Registrable Securities in accordance with the intended
method of distribution thereof. Any Selling Holder shall have the right to
withdraw its request for inclusion of its Registrable Securities in any
Registration Statement pursuant to this Section 2.2 by giving written notice to
the Company of its request to withdraw. The Company may withdraw a Piggy-Back
Registration at any time prior to the time it becomes effective or the Company
may elect to delay the registration; provided, however, that the Company shall
-------- -------
give prompt written notice thereof to participating Selling Holders. The
Company will pay all Registration Expenses in connection with each registration
of Registrable Securities requested pursuant to this Section 2.2, and each
Selling Holder shall pay all underwriting discounts and commissions and transfer
taxes, if any, relating to the sale or disposition of such Selling Holder's
Registrable Securities pursuant to a Registration Statement effected pursuant to
this Section 2.2.

No registration effected under this Section 2.2, and no failure to
effect a registration under this Section 2.2, shall relieve the Company of its
obligation to effect a registration upon the request of Holders of Registrable
Securities pursuant to Section 2.1 hereof, and no failure to effect a
registration under this Section 2.2 and to complete the sale of securities
registered thereunder in connection therewith shall relieve the Company of any
other obligation under this Agreement.

(b) Priority in Piggy-Back Registration. In a registration
-----------------------------------
pursuant to Section 2.2 hereof involving an underwritten offering, if the
managing underwriter or underwriters of such underwritten offering have
informed, in writing, the Company and the Selling Holders requesting inclusion
in such offering that in such underwriter's or underwriters' opinion the total
number of securities which the Company, the Selling Holders and any other
Persons desiring to participate in such registration intend to include in such
offering is such as to adversely affect the success of such offering, including
the price at which such securities can be sold, then the Company will be
required to include in such registration only the amount of securities which it
is so advised should be included in such registration. In such event: (x) in
cases only involving the registration for sale of securities for the Company's
own account (other than pursuant to the exercise of piggyback rights herein and
in other contractual commitments of the Company), securities shall be registered
in such offering in the following order of priority: (i) first, the securities
-----
which the Company proposes to register, (ii) second, provided that no securities
------
sought to be included by the Company have been excluded from such registration,
the securities which have been requested to be included in such registration by
the Existing Holders and the Holders of Registrable Securities pro rata between
the Holders and the Existing Holders based upon the aggregate amount of
securities sought to be registered by such Persons (such securities for the
account of the Holders to be allocated among the Holders pro rata

<PAGE>
-10-

based on the amount of securities sought to be registered by the Holders) and
(iii) third, provided that no securities sought to be included by the Company or
-----
the Holders or the Existing Holders have been excluded from such registration,
the securities of other Persons entitled to exercise "piggy-back" registration
rights pursuant to contractual commitments of the Company (pro rata based on the
amount of securities sought to be registered by such Persons); (y) in cases not
involving the registration for sale of securities for the Company's own account
only or for the account of any Existing Holder, securities shall be registered
in such offering in the following order of priority: (i) first, the securities
-----
of any Person whose exercise of a "demand" registration right pursuant to a
contractual commitment of the Company is the basis for the registration
(provided that if such Person is a Holder of Registrable Securities, as among
Holders of Registrable Securities there shall be no priority and Registrable
Securities sought to be included by Holders of Registrable Securities shall be
included pro rata based on the amount of securities sought to be registered by
such Holders), (ii) second, provided that no securities of such Person referred
------
to in the immediately preceding clause (i) have been excluded from such
registration, the securities requested to be included in such registration by
the Holders of Registrable Securities pursuant to this Agreement and the
Existing Holders pro rata based on the amount of securities sought to be
registered by such Persons and (iii) third, provided that no securities of such
-----
Person referred to in the immediately preceding clause (i) or of the Holders or
the Existing Holders have been excluded from such registration, securities of
other Persons entitled to exercise "piggy-back" registration rights pursuant to
contractual commitments (pro rata based on the amount of securities sought to be
registered by such Persons) and (iv) fourth, provided that no securities of any
------
other Person have been excluded from such registration, the securities which the
Company proposes to register and (z) in cases involving the registration for
sale of securities of the Existing Holders, securities shall be registered in
such offering in the following order of priority: (i) first, the securities
-----
requested to be included in such registration by the Existing Holders, (ii)
second, provided that no securities of the Existing Holders have been excluded
- ------
from such registration, Registrable Securities of the Holders (pro rata based on
the amount of securities sought to be registered by such Holders), (iii) third,
-----
provided that no securities sought to be registered by the Existing Holders or
Holders have been excluded, the securities of other Persons entitled to exercise
"piggy-back" registration rights pursuant to contractual commitments (pro rata
based on the amount of securities sought to be registered by such Persons) and
(iv) fourth, provided that no securities of any other Person has been excluded
------
from such registration, the securities which the Company proposes to register.

If, as a result of the provisions of this Section 2.2(b), any Selling
Holder shall not be entitled to include all Registrable Securities in a Piggy-
Back Registration that such Selling Holder has requested to be included, such
Selling Holder may elect to withdraw his request to include Registrable
Securities in such registration.

2.3 Limitations, Conditions and Qualifications to Obligations Under
---------------------------------------------------------------
Registration Covenants. The obligations of the Company set forth in Sections
- ----------------------
2.1 and 2.2 hereof are subject to each of the following limitations, conditions
and qualifications:

<PAGE>
-11-

(i) Subject to the next sentence of this paragraph, the Company
shall be entitled to postpone, for a reasonable period of time, the filing
or effectiveness of, or suspend the rights of any Holders to make sales
pursuant to, any Registration Statement otherwise required to be prepared,
filed and made and kept effective by it hereunder; provided, however, that
-------- -------
the duration of such postponement or suspension may not exceed the earlier
to occur of (A) 15 days after the cessation of the circumstances described
in the next sentence of this paragraph on which such postponement or
suspension is based or (B) 90 days after the date of the determination of
the Board of Directors referred to in the next sentence, and the duration
of such postponement or suspension shall be excluded from the calculation
of the 90-day period described in Section 2.1(b) hereof. Such postponement
or suspension may be effected only if the Board of Directors of the Company
determines reasonably and in good faith that the filing or effectiveness
of, or sales pursuant to, such Registration Statement would materially
impede, delay or interfere with any financing, offer or sale of securities,
acquisition, corporate reorganization or other significant transaction
involving the Company or any of its affiliates or require disclosure of
material information which the Company has a bona fide business purpose for
preserving as confidential; provided further, however, that the Company
-------- ------- -------
shall not be entitled to such postponement or suspension more than twice in
any twelve-month period. If the Company shall so postpone the filing of a
Registration Statement it shall, as promptly as possible, deliver a
certificate signed by the Chief Executive Officer of the Company to the
Selling Holders as to such determination, and the Selling Holders shall (y)
have the right, in the case of a postponement of the filing or
effectiveness of a Registration Statement, upon the affirmative vote of the
Holders of not less than a majority of the Registrable Securities to be
included in such Registration Statement, to withdraw the request for
registration by giving written notice to the Company within 10 days after
receipt of such notice or (z) in the case of a suspension of the right to
make sales, receive an extension of the registration period equal to the
number of days of the suspension. Any Demand Registration as to which the
withdrawal election referred to in the preceding sentence has been
effected shall not be counted for purposes of the one Demand Registration
the Company is required to effect pursuant to Section 2.1 hereof.

(ii) The Company shall not be required by this Agreement to effect
a Demand Registration within 90 days immediately following the effective
date of any registration statement pertaining to a firmly underwritten
offering of equity securities of the Company for its own account; provided,
--------
however, that this clause (ii) shall not apply if the underwriter of such
-------
offering consents to the request for such Demand Registration pursuant to
Section 2.1(a).

(iii) The Company shall not be required by this Agreement to effect
a Demand Registration within 60 days immediately following the effective
date of any registration statement pertaining to a firmly underwritten
offering of equity securities of the Company for the account of any
securityholder of the Company; provided, however, that this clause (iii)
-------- -------

<PAGE>
-12-

shall not apply if the underwriter of such offering consents to the request
for such Demand Registration pursuant to Section 2.1(a).

(iv) The Company's obligations shall be subject to the obligations
of the Selling Holders, which the Selling Holders acknowledge, to furnish
all information and materials and to take any and all actions as may be
required under applicable federal and state securities laws and regulations
to permit the Company to comply with all applicable requirements of the SEC
and to obtain any acceleration of the effective date of such Registration
Statement.

(v) The Company shall not be obligated to cause any special audit
to be undertaken in connection with any registration pursuant to this
Agreement unless such audit is required by the SEC or requested by the
underwriters with respect to such registration.

2.4 Restrictions on Sale by the Company and Others. The Company
----------------------------------------------
covenants and agrees that (i) it shall not, and that it shall not cause or
permit any of its subsidiaries to, effect any public sale or distribution of any
securities of the same class as any of the Registrable Securities or any
securities convertible into or exchangeable or exercisable for such securities
(or any option or other right for such securities) during the 30-day period
prior to, and during the 90-day period beginning on, the commencement of any
underwritten offering of Registrable Securities pursuant to the Demand
Registration which has been requested pursuant to this Agreement, or a Piggy-
Back Registration which has been scheduled, prior to the Company or any of its
subsidiaries publicly announcing its intention to effect any such public sale or
distribution; (ii) the Company will not, and the Company will not cause or
permit any subsidiary of the Company to, after the date hereof, enter into any
agreement or contract that conflicts with or limits or prohibits the full and
timely exercise by the Holders of Registrable Securities of the rights herein to
request the Demand Registration or to join in any Piggy-Back Registration
subject to the other terms and provisions hereof; and (iii) that it shall use
its reasonable best efforts to secure the written agreement of each of its
officers and directors to not effect any public sale or distribution of any
securities of the same class as the Registrable Securities (or any securities
convertible into or exchangeable or exercisable for any such securities), or any
option or right for such securities during the period described in clause (i) of
this Section 2.4.

2.5 Reports. The Company covenants that, whether or not it is
-------
required to do so by the Exchange Act or the rules and regulations of the SEC,
for so long as any of the Notes remain outstanding, the Company will furnish to
the holders of the Registrable Securities and file with the SEC (unless the SEC
will not accept such a filing) (i) all quarterly and annual financial
information that would be required to be contained in a filing with the SEC on
Form 10-Q and 10-K if the Company were required to file such forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants and (ii) all reports that
would be

<PAGE>
-13-

required to be filed with the SEC on Form 8-K if the Company were required to
file such reports. In addition, for so long as any of the Registrable
Securities remain outstanding, the Company shall make available to any
prospective purchaser of the Registrable Securities or beneficial owner of the
Registrable Securities in connection with any sale thereof the information
required by Rule 144A(d)(4) under the Securities Act. Upon the request of any
Holder of Registrable Securities, the Company will in a timely manner deliver to
such Holder a written statement as to whether it has complied with such
information requirements.

Section 3. [Intentionally Omitted]

Section 4. Registration Procedures. In connection with the obligations
-----------------------
of the Company with respect to any Registration Statement pursuant to
Sections 2.1 and 2.2 hereof, the Company shall, except as otherwise provided:

(a) Prepare and file with the SEC as soon as practicable each such
Registration Statement (but in any event on or prior to the date of filing
thereof required under this Agreement) and cause such Registration
Statement to become effective and remain effective as provided herein;
provided, however, that before filing any such Registration Statement or
-------- -------
any Prospectus (for registrations pursuant to Sections 2.1 and 2.2 hereof)
or any amendments or supplements thereto (including documents that would be
incorporated or deemed to be incorporated therein by reference, including
such documents filed under the Exchange Act that would be incorporated
therein by reference), the Company shall afford promptly to the Holders of
the Registrable Securities covered by such Registration Statement, their
counsel and the managing underwriter or underwriters, if any, an
opportunity to review copies of all such documents proposed to be filed a
reasonable time prior to the proposed filing thereof. The Company shall
not file any Registration Statement or Prospectus (for registrations
pursuant to Section 2.1 hereof) or any amendments or supplements thereto if
the Holders of a majority of the Registrable Securities covered by such
Registration Statement, their counsel, or the managing underwriter or
underwriters, if any, shall reasonably object in writing unless failure to
file any such amendment or supplement would involve a violation of the
Securities Act or other applicable law, provided, however, that the Company
-------- -------
may do so pursuant to Section 2.2 hereof if a majority of the shares being
registered thereunder are being offered by the Company for its own account,
or if the holders of a majority of each class of equity securities of the
Company being registered thereunder do not so object.

(b) Prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the time periods
prescribed hereby; cause the related Prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed pursuant
to Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; and comply with the provisions of the Securities Act,

<PAGE>
-14-

the Exchange Act and the rules and regulations of the SEC promulgated
thereunder applicable to it with respect to the disposition of all
securities covered by such Registration Statement as so amended or in such
prospectus as so supplemented.

(c) Notify the Selling Holders, their counsel and the managing
underwriter or underwriters, if any, promptly (but in any event within two
(2) Business Days), and confirm such notice in writing, (i) when a
Prospectus or any prospectus supplement or post-effective amendment has
been filed, and, with respect to a Registration Statement or any post-
effective amendment, when the same has become effective (including in such
notice a written statement that any Selling Holder may, upon request,
obtain, without charge, one conformed copy of such Registration Statement
or post-effective amendment including financial statements and schedules
and exhibits), (ii) of the issuance by the SEC of any stop order suspending
the effectiveness of such Registration Statement or of any order preventing
or suspending the use of any preliminary prospectus or the initiation or
threatening of any proceedings for that purpose, (iii) if at any time when
a prospectus is required by the Securities Act to be delivered in
connection with sales of the Registrable Securities the representations and
warranties of the Company contained in any agreement (including any
underwriting agreement) contemplated by Section 4(m) below, to the
knowledge of the Company, cease to be true and correct in any material
respect, (iv) of the receipt by the Company of any notification with
respect to (A) the suspension of the qualification or exemption from
qualification of the Registration Statement or any of the Registrable
Securities covered thereby for offer or sale in any jurisdiction, or
(B) the initiation of any proceeding for such purpose, (v) of the happening
of any event, the existence of any condition or information becoming known
that requires the making of any changes in such Registration Statement,
Prospectus or documents so that, in the case of such Registration
Statement, it will conform in all material respects with the requirements
of the Securities Act and it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and
that in the case of the Prospectus, it will conform in all material
respects with the requirements of the Securities Act and it will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of the Company's reasonable determination
that a post-effective amendment to such Registration Statement would be
appropriate.

(d) Use every reasonable effort to prevent the issuance of any order
suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of any of the Registrable
Securities covered thereby for sale in any jurisdiction, and, if any such
order is issued, to obtain the withdrawal of any such order at the earliest
possible moment.

<PAGE>
-15-

(e) If requested by the managing underwriter or underwriters, if any,
or the Holders of a majority of the Registrable Securities being sold in
connection with an underwriting offering (only for registrations pursuant
to Section 2.1 hereof), (i) promptly incorporate in a prospectus supplement
or post-effective amendment such information as the managing underwriter or
underwriters, if any, or such Selling Holders reasonably request to be
included therein to comply with applicable law, (ii) make all required
filings of such prospectus supplement or such post-effective amendment as
soon as practicable after the Company has received notification of the
matters to be incorporated in such prospectus supplement or post-effective
amendment, and (iii) supplement or make amendments to such Registration
Statement.

(f) Furnish to each Selling Holder who so requests and to counsel for
the Selling Holders and each managing underwriter, if any, without charge,
upon request, one conformed copy of the Registration Statement and each
post-effective amendment thereto, including financial statements and
schedules, and of all documents incorporated or deemed to be incorporated
therein by reference and all exhibits (including exhibits incorporated by
reference).

(g) Deliver to each Selling Holder, their counsel and each
underwriter, if any, without charge, as many copies of each Prospectus
(including each form of prospectus) and each amendment or supplement
thereto as such Persons may reasonably request; and, subject to the last
paragraph of this Section 4, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the Selling
Holders and the underwriter or underwriters or agents, if any, in
connection with the offering and sale of the Registrable Securities covered
by such Prospectus and any amendment or supplement thereto.

(h) Prior to any offering of Registrable Securities, to register or
qualify, and cooperate with the Holders of Registrable Securities, the
underwriter or underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of, such Registrable Securities for offer
and sale under the securities or Blue Sky laws of such jurisdictions within
the United States as the managing underwriter or underwriters reasonably
request in writing, or, in the event of a non-underwritten offering, as the
Holders of a majority of the Registrable Securities may request; provided,
--------
however, that where Registrable Securities are offered other than through
-------
an underwritten offering, the Company agrees to cause its counsel to
perform Blue Sky investigations and file registrations and qualifications
required to be filed pursuant to this Section 4(h); keep each such
registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the securities
covered thereby; provided, however, that the Company will not be required
-------- -------
to (A) qualify generally to do business in any

<PAGE>
-16-

jurisdiction where it is not then so qualified, (B) take any action that
would subject it to general service of process in any such jurisdiction
where it is not then so subject or (C) become subject to taxation in any
jurisdiction where it is not then so subject.

(i) Cooperate with the Selling Holders and the managing underwriter
or underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing Registrable Securities to be sold, which
certificates shall not bear any restrictive legends whatsoever and shall be
in a form eligible for deposit with The Depository Trust Company ("DTC");
---
and enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriter or underwriters, if
any, or Selling Holders may reasonably request at least two business days
prior to any sale of Registrable Securities in a firm commitment
underwritten public offering.

(j) Use its best efforts to cause the Registrable Securities covered
by a Registration Statement to be registered with or approved by such other
governmental agencies or authorities within the United States as may be
necessary to enable the seller or sellers thereof or the underwriter or
underwriters, if any, to consummate the disposition of such Registrable
Securities, except as may be required solely as a consequence of the
nature of such Selling Holder's business, in which case the Company will
cooperate in all reasonable respects with the filing of the Registration
Statement and the granting of such approvals.

(k) Upon the occurrence of any event contemplated by Section 4(c)(v)
or 4(c)(vi) above, as promptly as practicable prepare a supplement or post-
effective amendment to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be
incorporated therein by reference, and, subject to Section 4(a) hereof,
file such with the SEC so that, as thereafter delivered to the purchasers
of Registrable Securities being sold thereunder, such Prospectus will not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.

(l) (i) Prior to the effective date of a Registration Statement,
provide a CUSIP number for such securities and (ii) immediately after the
effective date of a Registration Statement, provide the registrar for the
Registrable Securities with certificates for such securities in a form
eligible for deposit with DTC.

(m) Enter into an underwriting agreement in form, scope and substance
as is customary in underwritten offerings and take all such other actions
as are reasonably requested by the managing underwriter or underwriters in
order to expedite or facilitate the registration or disposition of such
Registrable Securities in any underwritten offering to be made of the
Registrable Securities in accordance with this Agreement, and in such
connection,

<PAGE>
-17-

(i) make such representations and warranties to the underwriter or
underwriters, with respect to the business of the Company and the
subsidiaries of the Company, and the Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated by reference
therein, in each case, in form, substance and scope as are customarily made
by issuers to underwriters in underwritten offerings, and confirm the same
if and when requested; (ii) use reasonable efforts to obtain opinions of
counsel to the Company and updates thereof, addressed to the underwriter or
underwriters covering the matters customarily covered in opinions requested
in underwritten offerings and such other matters as may be reasonably
requested by underwriters; (iii) use reasonable efforts to obtain "cold
comfort" letters and updates thereof from the independent certified public
accountants of the Company (and, if applicable, the subsidiaries of the
Company) and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired by
the Company for which financial statements and financial data are, or are
required to be, included in the Registration Statement, addressed to each
of the underwriters, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings and such other matters as reasonably
requested by the managing underwriter or underwriters and as permitted by
the Statement of Auditing Standards No. 72; and (iv) if an underwriting
agreement is entered into, the same shall contain customary indemnification
provisions and procedures (or such other provisions and procedures
acceptable to Holders of a majority of Registrable Securities covered by
such Registration Statement and the managing underwriter or underwriters or
agents) with respect to all parties to be indemnified pursuant to said
Section. The above shall be done at each closing under such underwriting
agreement, or as and to the extent required thereunder.

(n) Make available for inspection by a representative of the Selling
Holders, any underwriter participating in any such disposition of
Registrable Securities, if any, and any attorney or accountant retained by
such representative of the Selling Holders or underwriter (collectively,
the "Inspectors"), at the offices where normally kept, during reasonable
----------
business hours, all financial and other records, pertinent corporate
documents and properties of the Company and the subsidiaries of the
Company, and cause the officers, directors and employees of the Company and
the subsidiaries of the Company to supply all information in each case
reasonably requested by any such Inspector in connection with such
Registration Statement; provided, however, that all material non-public
-------- -------
information shall be kept confidential by such Inspector, except to the
extent that (i) the disclosure of such information is necessary or
advisable to avoid or correct a misstatement or omission in the
Registration Statement or in any Prospectus; provided, however, that prior
-------- -------
notice is given to the Company, and the Company's legal counsel and such
Selling Holder's legal counsel concur that disclosure is required, (ii) the
release of such information is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction, (iii) disclosure of such
information is necessary or advisable in connection with any action, claim,
suit or proceeding, directly or indirectly, involving or potentially
involving such Inspector and arising out of,

<PAGE>
-18-

based upon, relating to or involving this Agreement or any of the
transactions contemplated hereby or arising hereunder; provided, however,
-------- -------
that prior notice shall be provided as soon as practicable to the Company
of the potential disclosure of any information by such Inspector pursuant
to clauses (ii) or (iii) of this sentence to permit the Company to obtain a
protective order (or waive the provisions of this paragraph (n)) and that
such Inspector shall take all actions as are reasonably necessary to
protect the confidentiality of such information (if practicable) to the
extent such action is otherwise not inconsistent with, an impairment of or
in derogation of the rights and interests of the Holder or any Inspector,
or (iv) such information has been made generally available to the public.

(o) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder (or any similar rule promulgated under the Securities Act)
no later than forty-five (45) days after the end of any 12-month period (or
ninety (90) days after the end of any 12-month period if such period is a
fiscal year) (i) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to an underwriter or to underwriters in a
firm commitment or best efforts underwritten offering and (ii) if not sold
to an underwriter or to underwriters in such an offering, commencing on the
first day of the first fiscal quarter of the Company after the effective
date of the relevant Registration Statement, which statements shall cover
said 12-month periods.

(p) Use its best efforts to cause all Registrable Securities relating
to such Registration Statement to be listed on each securities exchange, if
any, on which similar securities issued by the Company are then listed.

(q) Cooperate with the Selling Holders of Registrable Securities to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any restrictive legends
and registered in such names as the Selling Holders may reasonably request
at least two business days prior to the closing of any sale of Registrable
Securities.

Each seller of Registrable Securities as to which any registration is
being effected agrees, as a condition to the registration obligations with
respect to such Holder provided herein, to furnish to the Company such
information regarding such seller and the distribution of such Registrable
Securities as the Company may, from time to time, reasonably request in writing
to comply with the Securities Act and other applicable law. The Company may
exclude from such registration the Registrable Securities of any seller for so
long as such seller fails to furnish such information within a reasonable time
after receiving such request. If the identity of a seller of Registrable
Securities is to be disclosed in the Registration Statement, such seller shall
be permitted to include all information regarding such seller as it shall
reasonably request.

<PAGE>
-19-

Each Holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 4(c)(ii), 4(c)(iv),
4(c)(v), or 4(c)(vi) hereof, such Holder will forthwith discontinue disposition
of such Registrable Securities covered by the Registration Statement or
Prospectus until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 4(k) hereof), or until it is advised
in writing (the "Advice") by the Company that the use of the applicable
------
prospectus may be resumed, and has received copies of any amendments or
supplements thereto, and, if so directed by the Company, such Holder will, at
the Company's expense, deliver to the Company all copies, other than permanent
file copies, then in such Holder's actual possession of the Prospectus covering
such Registrable Securities current at the time of receipt of such notice;
provided, however, that nothing herein shall create any obligation on the part
- -------- -------
of any Holder to undertake to retrieve or return any such Prospectus not within
the actual possession of such Holder. In the event the Company shall give any
such notice, the period of time for which a Registration Statement is required
hereunder to be effective shall be extended by the number of days during such
periods from and including the date of the giving of such notice to and
including the date when each seller of Registrable Securities covered by such
Registration Statement shall have received (x) the copies of the supplemented or
amended Prospectus contemplated by Section 4(k) hereof or (y) the Advice.

Section 5. Indemnification and Contribution. (a) The Company agrees
--------------------------------
to indemnify and hold harmless each Holder and each Person, if any, who
controls such Holder within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages, liabilities and expenses (including reasonable costs of investigation)
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in any Prepricing Prospectus or in the Registration
Statement or the Prospectus or in any amendment or supplement thereto, pursuant
to which Registrable Securities were registered under the Securities Act, or
arising out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus, in light of the circumstances under
which such statements were made) not misleading, except insofar as such losses,
claims, damages, liabilities or expenses arise out of or are based upon any
untrue statement or omission which has been made therein or omitted therefrom in
reliance upon and in conformity with the information relating to any Holder
furnished to the Company in writing by or on behalf of such Holder expressly for
use in connection therewith; provided, however, that the indemnification
-------- -------
contained in this paragraph (a) with respect to any Prepricing Prospectus shall
not inure to the benefit of any Holder (or to the benefit of any person
controlling such Holder) on account of any such loss, claim, damage, liability
or expense arising from the sale of the Registrable Securities by such Holder to
any person if a copy of the Prospectus shall not have been delivered or sent to
such person by the Holder within the time required by the Securities Act and
each untrue statement or alleged untrue statement of a material fact contained
in, and each omission or alleged omission of material fact from, such Prepricing
Prospectus was corrected in the Prospectus; provided, however, that the Company
-------- -------
has delivered the Prospectus to the several Holders in requisite quantity on a
timely

<PAGE>
-20-

basis to permit such delivery or sending. The foregoing indemnity agreement
shall be in addition to any liability which the Company may otherwise have.

(b) If any action, suit or proceeding shall be brought against any
Holder or any person controlling any Holder in respect of which indemnity may be
sought against the Company, such Holder or such controlling person shall
promptly notify the Company (but the failure to so notify the Company shall not
relieve the Company from any liability under Section 5(a) hereof unless the
Company is prejudiced in any material respect by such failure to notify) and the
Company shall promptly assume the defense thereof, including the employment of
counsel acceptable to the indemnified parties and payment of all fees and
expenses. Such Holder or any such controlling person shall have the right to
employ separate counsel in any such action, suit or proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Holder or such controlling person unless (i) the
Company has agreed to pay such fees and expenses, (ii) the Company has failed
promptly to assume the defense and employ counsel acceptable to the indemnified
parties, or (iii) the named parties to any such action, suit or proceeding
(including any impleaded parties) include both such Holder or such controlling
person, and such Holder or such controlling person shall have been advised by
counsel that there may be one or more legal defenses available to it which are
different from or additional to those available to the Company, in which case
the Company shall not have the right to assume the defense of such action, suit
or proceeding on behalf of such Holder or such controlling person. It is
understood, however, that the Company shall, in connection with any one such
action, suit or proceeding or separate but substantially similar or related
actions, suits or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
only one separate firm of attorneys (in addition to those of any local counsel)
at any time for all such Holders and controlling persons not having actual or
potential differing interests (as advised by counsel) with the Company or among
themselves, which firm shall be designated in writing by Holders who sold a
majority in interest of Registrable Securities sold by all such Holders and
reasonably acceptable to the Company, and that all such fees and expenses shall
be reimbursed as they are incurred. The Company shall not be liable for any
settlement of any such action, suit or proceeding effected without its consent
(which shall not be unreasonably withheld or delayed), but if settled with such
consent, or if there be a final judgment for the plaintiff in any such action,
suit or proceeding, the Company agrees to indemnify and hold harmless any
Holder, to the extent provided in the preceding paragraph, and any such
controlling person from and against any loss, claim, damage, liability or
expense by reason of such settlement or judgment.

(c) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors and officers who sign the Registration
Statement, and any person who controls the Company within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, to the same extent
as the foregoing indemnity from the Company to each Holder, but only with
respect to information furnished in writing by or on behalf of such Holder with
respect to such Holder expressly for use in the Registration Statement, the
Prospectus or any Prepricing

<PAGE>
-21-

Prospectus, or any amendment or supplement thereto. If any action, suit or
proceeding shall be brought against the Company, any of its directors or
officers, or any such controlling person, based on the Registration Statement,
the Prospectus or any Prepricing Prospectus, or any amendment or supplement
thereto, and in respect of which indemnity may be sought against any Holder
pursuant to this paragraph (c), such Holder shall have the rights and duties
given to the Company by paragraph (b) above (except that if the Company shall
have assumed the defense thereof such Holder shall not be required to do so, but
may employ separate counsel therein and participate in the defense thereof, but
the fees and expenses of such counsel shall be at such Holders' expense), and
the Company, its directors, any such officer, and any such controlling person,
shall have the rights and duties given to the Holders by paragraph (b) above.
The foregoing indemnity agreement shall be in addition to any liability which
the Holders may otherwise have.

(d) If the indemnification provided for in this Section 5 is for any
reason or to any extent unavailable to an indemnified party under paragraphs (a)
or (c) hereof (other than for failure to notify the indemnifying party, such
failures resulting in prejudice in any material respect to the indemnifying
party) in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then an indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, on the one hand, and the Holders, on the other
hand, from the offering of the Registrable Securities, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company, on the one
hand, and the Holders, on the other hand, in connection with the statements or
omissions that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company, on the one hand, and the Holders, on the other
hand, shall be deemed to be in the same proportion as the total proceeds from
the issuance (net of discounts and commissions but before deducting expenses) of
the BANX Shares received by the Company bears to the total proceeds (net of
discounts and commissions but before deducting expenses) received by such
Holders from the sale of Registrable Securities, as the case may be. For
purposes of this paragraph (d), the parties agree that the total proceeds from
the issuance of the BANX Shares received by the Company is $3,636,363.64. The
relative fault of the Company, on the one hand, and the Holders, on the other
hand, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company, on the one hand, or by the Holders, on the other hand, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.

(e) The Company and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 5 were determined by a pro
---
rata allocation (even if the Holders were treated as one entity for such
- ----
purpose) or by any other method of allocation that does not take

<PAGE>
-22-

account of the equitable considerations referred to in paragraph (d) above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in paragraph (d) above
shall be deemed to include, subject to the limitations set forth in clauses (a),
(b) and (c) above, legal or other expenses reasonably incurred by such
indemnified party in connection with investigating any claim or defending any
such action, suit or proceeding. Notwithstanding the provisions of this
Section 5, no Holder shall be required to contribute any amount in excess of the
amount by which proceeds received by such Holder from sales of Registrable
Securities exceeds the amount of any damages which such Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute pursuant to this
Section 5 are several and not joint.

(f) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional written
release of such indemnified party, from all liability on claims that are the
subject matter of such action, suit or proceeding.

(g) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 5 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. A successor
to any Holder or any person controlling any Holder, or to the Company, its
directors or officers, or any person controlling the Company, shall be entitled
to the benefits of the indemnity, contribution and reimbursement agreements
contained in this Section 5. The indemnity and contribution agreements contained
in this Section 5 and the representations and warranties of the Company set
forth in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Initial
Purchaser or any person who controls an Initial Purchaser, the Company, their
respective directors or officers or any person controlling the Company and
(ii) any termination of this Agreement.

Section 6. Miscellaneous.
-------------

(a) No Inconsistent Agreements. The Company has not entered into nor
--------------------------
will the Company on or after the date of this Agreement enter into, or cause or
permit any of its subsidiaries to enter into, any agreement which is
inconsistent with the rights granted to the Holders of Registrable Securities in
this Agreement or otherwise conflicts with the provisions hereof. The rights
granted to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's other
issued and outstanding securities, if any, under any such agreements.

<PAGE>
-23-

(b) Amendments and Waivers. The provisions of this Agreement may not
----------------------
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given unless the Company has obtained the prior
written consent of Holders of not less than a majority of the outstanding
Registrable Securities affected by such amendment, modification, supplement,
waiver or consent; provided, however, that Section 5 hereof and this Section
-------- -------
6(b) may not be amended, modified or supplemented without the prior written
consent of each Holder (including any Person who was a Holder of Registrable
Securities disposed of pursuant to any Registration Statement affected by such
amendment, modification or supplement. Notwithstanding the foregoing, a waiver
or consent to departure from the provisions hereof that relates exclusively to
the rights of Holders of Registrable Securities whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect, impair, limit or compromise the rights of other Holders of Registrable
Securities may be given by the Holders of not less than a majority of the
Registrable Securities proposed to be sold by such Holders pursuant to such
Registration Statement; provided, however, that Section 5 hereof and this
-------- -------
Section 6(b) may not be amended, modified or supplemented without the prior
written consent of each Holder (including any Person who was a Holder of
Registrable Securities disposed of pursuant to any Registration Statement or a
Common Share Registration Statement) affected by such amendment, modification or
supplement.

(c) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address of Holder as set forth
in the register for the Shares, which address initially is, with respect to MMDS
Holdings II, Inc. and NYNEX MMDS Holding Company, the addresses set forth below
their respective names on the signature page hereto; and (ii) if to the Company,
initially at the address set forth below the Company's name on the signature
pages hereto and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 6(c), with a copy to Day, Berry &
Howard, CityPlace 1, Hartford, CT 06103-3499, Attention: Michael F. Halloran,
Esq., and thereafter at such other address notice of which is given in
accordance with the provisions of this Section 6(c).

All such notices and communications 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 is acknowledged, if telecopied; and on
the next Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.

(d) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors, assigns and transferees of each
of the parties; provided, however, that the rights granted to the BANX
Affiliates pursuant to this Agreement shall only be transferable to a purchaser
of all but not less than all of the shares of Common Stock held by either MMDS
Holdings, II, Inc. and its Affiliates or NYNEX MMDS Holding Company and its
Affiliates, and without the

<PAGE>
-24-

need for an express assignment, subsequent Holders. If any transferee of any
Holder shall acquire BANX Shares and/or Registrable Securities, in accordance
with the terms hereof, whether by operation of law or otherwise, such BANX
Shares and/or Registrable Securities shall be held subject to all of the terms
of this Agreement, and by taking and holding such BANX Shares and/or Registrable
Securities such Person shall be conclusively deemed to have agreed to be bound
by and to perform all of the terms and provisions of this Agreement and such
Person shall be entitled to receive the benefits hereof.

(e) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

(f) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.

(g) Governing Law; Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED BY
---------------------------
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED
TO CONTRACTS MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

(h) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.

(i) Entire Agreement. This Agreement, together with the Purchase
----------------
Agreement, 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. This Agreement and the Purchase Agreement supersede all
prior agreements and understandings between the parties with respect to such
subject matter.

(j) Securities Held by the Company or Its Affiliates. Whenever the
------------------------------------------------
consent or approval of Holders of a specified percentage of Registrable
Securities or BANX Shares is required hereunder, Registrable Securities or BANX
Shares held by the Company or by any of its affiliates (as such term is defined
in Rule 405 under the Securities Act) shall not be counted (in either the

<PAGE>
-25-

numerator or the denominator) in determining whether such consent or approval
was given by the Holders of such required percentage.

(k) Remedies. In the event of a breach by the Company of any of its
--------
obligations under this Agreement, each Holder, in addition to being entitled to
exercise all rights provided herein, in the Purchase Agreement or granted by
law, including recovery of damages, will be entitled to specific performance of
its rights under this Agreement. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of any of the provisions of this Agreement.

[Remainder of Page Intentionally Left Blank]

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

CS WIRELESS SYSTEMS, INC.

By:
---------------------------------------------------
Name:
Title:

Address for Notices:

903 North Bowser, Suite 140
Richardson, Texas 75081
Facsimile No.: (214) 479-1023
Telephone No.: (214) 479-9244

MMDS HOLDINGS II, INC.

By:
---------------------------------------------------
Name:
Title:

Address for Notices:

3900 Washington Street
Wilmington, Delaware 19802
Facsimile No.: ( )
Telephone No.: ( )
Attention:

NYNEX MMDS HOLDING COMPANY

By:
---------------------------------------------------
Name:
Title:

Address for Notices:

c/o NYNEX Corporation
1111 Westchester Avenue
White Plains, New York 10604
Facsimile No.: ( )
Telephone No.: ( )
Attention:

EXHIBIT 12.0

CS WIRELESS SYSTEMS, INC.

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)

<TABLE>
<CAPTION>
MARCH 9, JANUARY 1,
YEAR ENDED FEBRUARY 28, MARCH 1, 1994 1994 TO 1995 TO
------------------------ TO DECEMBER 31, SEPTEMBER 29,
1992 1993 1994 MARCH 8, 1994 1994 1995
------ ------ ------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Net loss.................................. (7,039) (8,137) (2,162) (9) (576) (1,875)
Add:
Provision for income tax benefit........ -- -- -- -- (179) (649)
Fixed charges................................. 6,302 6,653 3,130 39 148 332
------ ------ ------ -- ----- ------
Earnings as adjusted (A)...................... (737) (1,484) 968 30 607 (2,192)
------ ------ ------ -- ----- ------
------ ------ ------ -- ----- ------
Fixed charges:
Interest expense.......................... 5,923 6,356 2,846 39 62 233
Rents under leases representative of an
interest factor (1)........................... 379 297 284 86 99
------ ------ ------ -- ----- ------
Fixed charges as adjusted (B)................. 6,302 6,653 3,130 39 148 332
------ ------ ------ -- ----- ------
------ ------ ------ -- ----- ------

Ratio of earnings to fixed charges (A) divided
by (B)...................................... -- (2) -- (2) -- (2) -- (2) -- (2) -- (2)
------ ------ ------ -- ----- ------
------ ------ ------ -- ----- ------

<CAPTION>
SEPTEMBER 30, THREE MONTHS
1995 TO ENDED
DECEMBER 31, MARCH 31,
1995 1996
------------- -------------
<S> <C> <C>
Earnings:
Net loss.................................. (1,207) (3,063)
Add:
Provision for income tax benefit........ (393) (1,439)
Fixed charges................................. 37 3,132
------ ------
Earnings as adjusted (A)...................... (1,563) (1,370)
------ ------
------ ------
Fixed charges:
Interest expense.......................... 2 3,023
Rents under leases representative of an
interest factor (1)........................... 35 109
------ ------
Fixed charges as adjusted (B)................. 37 3,132
------ ------
------ ------
Ratio of earnings to fixed charges (A) divided
by (B)...................................... -- (2) -- (2)
------ ------
------ ------
</TABLE>

- ------------

(1) Management of CS Wireless Systems, Inc. believes approximately one-third of
rental and lease expense is representative of the interest component of rent
expense.

(2) For the years ended February 28, 1992, 1993 and 1994, the period March 1,
1994 to March 8, 1994, the period March 9, 1994 to December 31, 1994, the
period January 1, 1995 to September 29, 1995 the period September 30, 1995
to December 31, 1995 and the three months ended March 31, 1996, earnings
were inadequate to cover fixed charges by $7,039, $8,137, $2,162, $9, $755,
$2,524, and $1,600 and $4,502 respectively.

EXHIBIT 23.2

INDEPENDENT AUDITORS' CONSENT

THE BOARD OF DIRECTORS
CS Wireless Systems, Inc.:

We consent to the use of our report dated March 22, 1996, on the statements
of operations, stockholders' deficit, and cash flows of Metropolitan
Cablevision, Inc. for the period from March 1, 1993 to June 3, 1993, included
herein, and to the reference to our firm under the heading "Experts" in the
prospectus.

Our report contains an emphasis paragraph that states that subsequent to
period end, Metropolitan Cablevision, Inc.'s ("Cablevision") creditors
foreclosed on and sold the assets of Cablevision. As a result, Cablevision
recorded a write-down in the year ended February 28, 1993 to reflect the
permanent impairment of its assets.

KPMG PEAT MARWICK LLP

Dallas, Texas
July 2, 1996

<PAGE>

INDEPENDENT AUDITORS' CONSENT

THE BOARD OF DIRECTORS
CS Wireless Systems, Inc.:

We consent to the use of our report dated January 15, 1996, on the balance
sheets of Dayton System (A Division of TechniVision, Inc.) as of May 31, 1995
and 1994, and the related statements of operations, system equity, and cash
flows for the years then ended, included herein, and to the reference to our
firm under the heading "Experts" in the prospectus.

Our report contains an explanatory paragraph that states that Dayton
System's recurring losses from operations and excess of current liabilities over
current assets raise substantial doubt about the entity's ability to continue as
a going concern. The financial statements do not include any adjustments that
might result from the outcome of that uncertainty.

KPMG PEAT MARWICK LLP

Dallas, Texas
July 2, 1996

EXHIBIT 23.3

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this First Amendment to Form S-1
(Registration No. 333-3288) to be filed by CS Wireless Systems, Inc., of our
reports, which include explanatory paragraphs which state that specified
circumstances raise substantial doubt about CableMaxx, Inc. and therefore, its
San Antonio and Utah Divisions' ability to continue as a going concerns, dated
February 16, 1996, on our audits of the statements of net assets of CableMaxx,
Inc.--San Antonio Division as of June 30, 1994 and 1995 and December 31, 1995
and the related statements of revenues and expenses, changes in net assets, and
cash flows for the period December 18, 1992 to June 30, 1993, for the years
ended June 30, 1994 and 1995, and for the six months ended December 31, 1995,
and the statements of net assets of CableMaxx, Inc.--Utah Division as of June
30, 1995 and December 31, 1995 and the related statements of revenues and
expenses, changes in net assets and cash flows for the period from February 28,
1995 (acquisition) to June 30, 1995 and for the six month period ended December
31, 1995. We also consent to the reference to our firm under the caption
"Experts."

COOPERS & LYBRAND L.L.P.

Austin, Texas
July 3, 1996

EXHIBIT 23.4

ARTHUR ANDERSEN LLP

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
reports and to all references to our firm included in or made part of this
registration statement.

Phoenix, Arizona,
July 1, 1996

EXHIBIT 23.5

(FORMERLY LEWANDOWSKI ZALICK & COMPANY

CONSENT OF INDEPENDENT AUDITORS

We consent to the use in this Registration Statement on Form S-1 of our
reports dated May 4, 1994, appearing in the Prospectus, which is part of the
Registration Statement.

We also consent to the reference to us under the heading "Experts" in such
Prospectus.

ZALICK, TOROK, KIRGESNER, COOK & CO.

Cleveland, Ohio
July 2, 1996

EXHIBIT 23.6

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated April 1, 1996, with respect to the financial
statements of CS Wireless Systems, Inc. and subsidiaries (formerly ACS Ohio,
Inc.) and certain assets of Atlantic Microsystems, Inc., ACS Ohio, Inc. and
subsidiaries and ACS California, Inc. and subsidiary included in Amendment No. 1
to the Registration Statement (Form S-1 Registration No. 333-3288) and related
Prospectus of CS Wireless Systems, Inc. for the registration of $400,000,000 of
11 3/8% Series B Senior Discount Notes due 2006.

Ernst & Young LLP

Philadelphia, Pennsylvania
July 5, 1996

EXHIBIT 25

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

----------

FORM T-1

----------

STATEMENT OF ELIGIBILITY AND QUALIFICATION 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)

FLEET NATIONAL BANK
---------------------------------------------------------
(Exact name of trustee as specified in its charter)

Not applicable 04-317415
- ------------------------------- -----------------------------
(State of incorporation (I.R.S. Employer
if not a national bank) Identification No.)

One Monarch Place, Springfield, MA 01102
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)

Pat Beaudry, 777 Main Street, Hartford, CT 06115 (203) 728-2065
--------------------------------------------------------------
(Name, address and telephone number of agent for service)

CS WIRELESS SYSTEMS, INC.
---------------------------------------------------
(Exact name of obligor as specified in its charter)

Delaware 23-2751747
- ------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

903 North Bowser, Suite 140
Richardson, Texas 75081
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)

11 3/8% Series B Senior Discount Notes Due 2006
------------------------------------------------------------------
(Title of the indenture securities)

<PAGE>

Item 1. General Information.

Furnish the following information as to the trustee:

(a) Name and address of each examining or supervising authority to
which it is subject,

The Comptroller of the Currency,
Washington, D.C.

Federal Reserve Bank of Boston
Boston, Massachusetts

Federal Deposit Insurance Corporation
Washington, D.C.

(b) Whether it is authorized to exercise
corporate trust powers:

The trustee is so authorized.

Item 2. Affiliations with obligor and underwriter. If the obligor or
any underwriter for the obligor is an affiliate of the trustee,
describe each such affiliation.

None with respect to the trustee.

Item 16. List of exhibits.

List below all exhibits filed as a part of this statement of
eligibility and qualification.

(1) A copy of the Articles of Association of the trustee as
now in effect.

(2) A copy of the Certificate of Authority of the trustee
to do business.

(3) A copy of the Certification of Fiduciary Powers of the
trustee.

(4) A copy of the By-Laws of the trustee as now in effect.

(5) Consent of the trustee required by Section 321(b)
of the Act.

(6) A copy of the latest Consolidated Reports of Condition
and Income of the trustee published pursuant to law or
the requirements of its supervising or examining authority.

NOTES

In as much as this Form T-1 is filed prior to the ascertainment by the trustee
of all facts on which to base answers to Item 2, the answers to said Items are
based upon imcomplete information. Said Items may, however, be considered
correct unless amended by an amendment to this Form T-1.

<PAGE>

SIGNATURE

Pursuant to the requirements of the Trust Indenture Act of 1939,
the trustee, Fleet National Bank, a national banking association organized and
existing under the laws of the United States, has duly caused this statement of
of eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Hartford, and State of
Connecticut, on the 2nd day of July, 1996.

FLEET NATIONAL BANK,
AS TRUSTEE

By: /s/
-------------------------
Susan T. Keller
Its Vice President

<PAGE>

EXHIBIT 1

ARTICLES OF ASSOCIATION
OF
FLEET NATIONAL BANK

FIRST. The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be "Fleet National Bank."

SECOND. The main office of the Association shall be in Springfield, Hampden
County Commonwealth of Massachusetts. The general business of the Association
shall be conducted at its main office and its branches.

THIRD. The board of directors of this Association shall consist of not less
than five (5) nor more than twenty-five (25) shareholders, the exact number of
directors within such minimum and maximum limits to be fixed and determined
from time to time by resolution of a majority of the full board of directors or
by resolution of the shareholders at any annual or special meeting thereof.
Unless otherwise provided by the laws of the United States, any vacancy in the
board of directors for any reason, including an increase in the number thereof,
may be filled by action of the board of directors.

FOURTH. The annual meeting of the shareholders for the election of directors
and the transaction of whatever other business may be brought before said
meeting shall be held at the main office or such other place as the board of
directors may designate, on the day of each year specified therefore in the
bylaws, but if no election is held on that day, it may be held on any
subsequent day according to the provisions of law; and all elections shall be
held according to such lawful regulations as may be prescribed by the board of
directors.

FIFTH. The authorized amount of capital stock of this Association shall be
eight million five hundred thousand (8,500,000) shares of which three million
five hundred thousand (3,500,000) shares shall be common stock with a
par value of six and 25/100 dollars ($6.25) each, and of which five million
(5,000,000) shares without par value shall be preferred stock. The capital
stock may be increased or decreased from time to time, in accordance with
the provisions of the laws of the United States.

No holder of shares of the capital stock of any class of the Association shall
have any pre-emptive or preferential right of subscription to any shares of any
class of stock of the Association, whether now or hereafter authorized, or to
any obligations convertible into stock of the Association, issued or sold, nor
any right of subscription to any thereof other than such, if any, as the board
of directors, in its discretion, may from time to time determine and at such
price as the board of directors may from time to time fix.

<PAGE>

The board of directors of the Association is authorized, subject to limitations
prescribed by law and the provisions of this Article, to provide for the
issuance from time to time in one or more series of any number of the preferred
shares, and to establish the number of shares be included in each series, and
to fix the designation, relative rights, preferences, qualifications and
limitations of the shares of each such series. The authority of the board of
directors with respect to each series shall include, but not be limited to,
determination of the following:

a. The number of shares constituting that series and the distinctive
designation of that series;

b. The dividend rate on the shares of that series, whether dividends shall be
cumulative, and, if so, from which date or dates, and whether they shall be
payable in preference to, or in another relation to, the dividends payable
to any other class or classes or series of stock;

c. Whether that series shall have voting rights, in addition to the voting
rights provided by law, and, if so, the terms of such voting rights;

d. Whether that series shall have conversion or exchange privileges, and,
if so, the terms and conditions of such conversion or exchange, including
provision for the adjustment of the conversion or exchange rate in such
events as the board of directors shall determine;

e. Whether or not the shares of that series shall be redeemable, and, if so,
the terms and conditions of such redemption, including the manner of
selecting shares for redemption if less than all shares are to be redeemed,
the date or dates upon or after which they shall be redeemable, and the
amount per share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;

f. Whether that series shall be entitled to the benefit of a sinking fund to
be applied to the purchase or redemption of shares of that series, and, if
so, the terms and amounts of such sinking fund;

g. The right of the shares of that series to the benefit of conditions and
restrictions upon the creation of indebtedness of the Association or any
subsidiary, upon the issue of any additional stock (including additional
shares of such series or of any other series) and upon the payment of
dividends or the making of other distributions on, and the purchase,
redemption or other acquisition by the Association or any subsidiary of
any outstanding stock of the Association;

h. The right of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Association and
whether such rights shall be in preference to, or in another relation to,
the comparable rights of any other class or classes or series of stock; and

i. Any other relative, participating, optional or other special rights,
qualifications, limitations or restrictions of that series.

Shares of any series of preferred stock which have been redeemed (whether
through the operation of a sinking fund or otherwise) or which, if convertible
or exchangeable, have been converted into or exchanged for shares of stock of
any other class or classes shall have the status of authorized and unissued
shares of preferred stock of the same series and may be reissued as a part of
the series of which they were originally a part or may be reclassified and
reissued as part of a new series of preferred stock to be created by resolution
or resolutions of the board of directors or as part of any other series or
preferred stock, all subject to the conditions and the restrictions adopted by
the board of directors providing for the issue of any series of preferred
stock and by the provisions of any applicable law.

Subject to the provisions of any applicable law, or except as otherwise
provided by the resolution or resolutions providing for the issue of any series
of preferred stock, the holders of outstanding shares of common stock shall
exclusively possess voting power for the election of directors and for all
purposes, each holder of record of shares of common stock being entitled to one
vote for each share of common stock standing in his name on the books of the
Association.

Except as otherwise provided by the resolution or resolutions providing for the
issue of any series of preferred stock, after payment shall have been made to
the holders of preferred stock of the full amount of dividends to which they
shall be entitled pursuant to the resolution or resolutions providing for the
issue of any other series of preferred stock, the holders of common stock shall
be entitled, to the exclusion of the holders of preferred stock of any and all
series, to receive such dividends as from time to time may be declared by the
board of directors.

Except as otherwise provided by the resolution or resolutions for the issue
of any series of preferred stock, in the event of any liquidation, dissolution
or winding up of the Association, whether voluntary or involuntary, after
payment shall have been made to the holders of preferred stock of the full
amount to which they shall be entitled pursuant to the resolution or
resolutions providing for the issue of any series of preferred stock the
holders of common stock shall be entitled, to the exclusion of the holders of
preferred stock of any and all series, to share, ratable according to the
number of shares of common stock held by them, in all remaining assets of the
Association available for distribution to its shareholders.

The number of authorized shares of any class may be increased or decreased by
the affirmative vote of the holders of a majority of the stock of the
Association entitled to vote.

<PAGE>

SIXTH. The board of directors shall appoint one of its members president of
this Association, who shall be chairman of the board, unless the board appoints
another director to be the chairman. The board of directors shall have the
power to appoint one or more vice presidents; and to appoint a secretary and
such other officers and employees as may be required to transact the business
of this Association.

The board of directors shall have the power to define the duties of the
officers and employees of the Association; to fix the salaries to be paid to
them; to dismiss them; to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase of the capital of the
Association shall be made; to manage and administer the business and affairs of
the Association; to make all bylaws that it may be lawful for them to make; and
generally to do and perform all acts that it may be legal for a board of
directors to do and perform.

SEVENTH. The board of directors shall have the power to change the location of
the main office to any other place within the limits of the City of Hartford,
Connecticut, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches of the Association
to any other location, without the approval of the shareholders but subject to
the approval of the Comptroller of the Currency.

EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.

NINTH. The board of directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than ten percent (10%) of the
stock of this Association, may call a special meeting of shareholders at any
time. Unless otherwise provided by the laws of the United States, a notice of
the time, place and purpose of every annual and special meeting of the
shareholders shall be given by first class mail, postage prepaid, mailed at
least ten (10) days prior to the date of such meeting to each shareholder of
record at his address as shown upon the books of this Association.

TENTH. (a) Right to Indemnification. Each person who was or is made a party
or is threatened to be made a party to any threatened, pending or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she is or was a director, officer or employee of the Association or is or was
serving at the request of the Association as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, limited
liability company, trust, or other enterprise, including service with respect
to an employee benefit plan, shall be indemnified and held harmless by the
Association to the fullest extent authorized by the law of the state in which
the Association's ultimate parent company is incorporated, except as provided
in subsection (b). The aforesaid indemnity shall protect the indemnified
person against all expense, liability and loss (including attorney's fees,
judgements, fines ERISA excise taxes or penalties, and amounts paid in
settlement) reasonably incurred by such person in connection with such a
proceeding. Such indemnification shall continue as to a person who has ceased
to be a director, officer or employee and shall inure to the benefit of his or
her heirs, executors, and administrators, but shall only cover such person's
period of service with the Association. The Association may, by action of its
Board of Directors, grant rights to indemnification to agents of the
Association and to any director, officer, employee or agent of any of its
subsidiaries with the same scope and effect as the foregoing indemnification
of directors and officers.

(b) Restrictions on Indemnification. Notwithstanding the foregoing, (i) no
person shall be indemnified hereunder by the Association against expenses,
penalties, or other payments incurred in an administrative proceeding or action
instituted by a federal bank regulatory agency which proceeding or action
results in a final order assessing civil money penalties against that person,
requiring affirmative action by that person in the form of payments to the
Association, or removing or prohibiting that person from service with the
Association, and any advancement of expenses to that person in that proceeding
must be repaid; and (ii) no person shall be indemnified hereunder by the
Association and no advancement of expenses shall be made to any person
hereunder to the extent such indemnification or advancement of expenses would
violate or conflict with any applicable federal statute now or hereafter in
force or any applicable final regulation or interpretation now or hereafter
adopted by the Office of the Comptroller of the Currency ("OCC") or the Federal
Deposit Insurance Corporation ("FDIC"). The Association shall comply with any
requirements imposed on it by any such statue or regulation in connection with
any indemnification or advancement of expenses hereunder by the Association.
With respect to proceedings to enforce a claimant's rights to indemnification,
the Association shall indemnify any such claimant in connection with such a
proceeding only as provided in subsection (d) hereof.

(c) Advancement of Expenses. The conditional right to indemnification
conferred in this section shall be a contract right and shall include the
right to be paid by the Association the reasonable expenses (including
attorney's fees) incurred in defending a proceeding in advance of its final
disposition (an "advancement of expenses"); provided, however, that an
advancement of expenses shall be made only upon (i) delivery to the Association
of a binding written undertaking by or on behalf of the person receiving the
advancement to repay all amounts so advanced if it is ultimately determined
that such person is not entitled to be indemnified in such proceeding,
including if such proceeding results in a final order assessing civil money
penalties against that person, requiring affirmative action by that person
in the form of payments to the Association, or removing or prohibiting that
person from service with the Association, and (ii) compliance with any other
actions or determinations required by applicable law, regulation or OCC or FDIC
interpretation to be taken or made by the Board of Directors of the Association
or other persons prior to an advancement of expenses. The Association shall
cease advancing expenses at any time its Board of Directors believes that any
of the prerequisites for advancement of expenses are no longer being met.

(d) Right of Claimant to Bring Suit. If a claim under subsection (a) of the
section is not paid in full by the Association within thirty (30) days after
written claim has been received by the Association, the claimant may at any time
thereafter bring suit against the Association to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a
suit brought by the Association to recover an advancement of expenses pursuant
to the terms of an undertaking, the claimant shall be entitled to be paid also
the expense of prosecuting or defending such claim. It shall be a defense to
any such action brought by the claimant to enforce a right to indemnification
hereunder (other than an action brought to enforce a claim for an advancement
of expenses where the required undertaking, if any, has been tendered to the
Association) that the claimant has not met any applicable standard for
indemnification under the law of the state in which the Association's ultimate
parent company is incorporated. In any suit brought by the Association to
recover an advancement of expenses pursuant to the terms of an undertaking, the
Association shall be entitled to recover such expenses upon a final
adjudication that the claimant has not met any applicable standard for
indemnification standard for indemnification under the law of the state in
which the Association's ultimate parent company is incorporated.

(e) Non-Exclusivity of Rights. The rights to indemnification and the
advancement of expenses conferred in this section shall not be exclusive of any
other right which any person may have or hereafter acquired under any statute,
agreement, vote of stockholders or disinterested directors or otherwise.

(f) Insurance. The Association may purchase, maintain, and make payment or
reimbursement for reasonable premiums on, insurance to protect itself and any
director, officer, employee or agent of the Association or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Association would have the power to
indemnify such person against such expense, liability or loss under the law of
the state in which the Association's ultimate parent company is incorporated;
provided however, that such insurance shall explicitly exclude insurance
coverage for a final order of a federal bank regulatory agency assessing civil
money penalties against an Association director, officer, employee or agent.

ELEVENTH. These articles of association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount. The notice of any shareholders' meeting at
which an amendment to the articles of association of this Association is to be
considered shall be given as hereinabove set forth.

I hereby certify that the articles of association of this Association, in their
entirety, are listed above in items first through eleventh.

Secretary/Assistant Secretary
- --------------------------------------------------

Dated at , as of .
--------------------------------------- --------------------

Revision of February 15, 1996

<PAGE>

EXHIBIT 2

[LOGO]

- --------------------------------------------------------------------------------
COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS
- --------------------------------------------------------------------------------

Washington, D.C. 20219

CERTIFICATE

I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify
that:

(1) The Comptroller of the Currency, pursuant to Revised Statutes
324, et seq., as amended, 12 U.S.C. 1, et seq., as amended, has possession,
custody and control of all records pertaining to the chartering, regulation and
supervision of all National Banking Associations.

(2) "Fleet National Bank of Connecticut", Hartford, Connecticut,
(Charter No. 1338), is a National Banking Association formed under the
laws of the United States and is authorized thereunder to transact the
business of banking on the date of this Certificate.

IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
office to be affixed to these presents at
the Treasury Department, in the City of
Washington and District of Columbia, this
4th day of April, 1996.

/s/ EUGENE A. LUDWIG
----------------------------------
Comptroller of the Currency

<PAGE>
EXHIBIT 2

[LOGO]

Washington, D.C. 20219

Certification of Fiduciary Powers

I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify
the records in this Office evidence "Fleet National Bank of Connecticut",
Hartford, Connecticut, (Charter No. 1338), was granted, under the hand
and seal of the Comptroller, the right to act in all fiduciary capacities
authorized under the provisions of The Act of Congress approved
September 28, 1962, 76 Stat. 668, 12 U.S.C. 92a. I further certify the
authority so granted remains in full force and effect.

IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
Office of the Comptroller of the Currency
to be affixed to these presents at the
Treasury Department, in the City of
Washington and District of Columbia, this
4th day of April, 1996.

/s/ EUGENE A. LUDWIG
----------------------------------
Comptroller of the Currency

<PAGE>

EXHIBIT 4

AMENDED AND RESTATED BY-LAWS OF

FLEET NATIONAL BANK

ARTICLE I

MEETINGS OF SHAREHOLDERS

Section 1. Annual Meeting. The regular annual meeting of the shareholders for
the election of Directors and the transaction of any other business that may
properly come before the meeting shall be held at the Main Office of the
Association, or such other place as the Board of Directors may designate, on
the fourth Thursday of April in each year at 1:15 o'clock in the afternoon
unless some other hour of such day is fixed by the Board of Directors.

If, from any cause, an election of Directors is not made on such day, the Board
of Directors shall order the election to be held on some subsequent day, of
which special notice shall be given in accordance with the provisions of law,
and of these bylaws.

Section 2. Special Meetings. Special meetings of the shareholders may be called
at any time by the Board of Directors, the President, or any shareholders
owning not less than twenty-five percent (25%) of the stock of the Association.

Section 3. Notice of Meetings of Shareholders. Except as otherwise provided
by law, notice of the time and place of annual or special meetings of the
shareholders shall be mailed, postage prepaid, at least ten (10) days before
the date of the meeting to each shareholder of record entitled to vote thereat
at his address as shown upon the books of the Association; but any failure to
mail such notice to any shareholder or any irregularity therein, shall not
affect the validity of such meeting or of any of the proceedings thereat.
Notice of a special meeting shall also state the purpose of the meeting.

Section 4. Quorum; Adjourned Meetings. Unless otherwise provided by law, a
quorum for the transaction of business at every meeting of the shareholders
shall consist of not less than two-fifths (2/5) of the outstanding capital
stock represented in person or by proxy; less than such quorum may adjourn the
meeting to a future time. No notice need be given of an adjourned annual or
special meeting of the shareholders if the adjournment be to a definite place
and time.

Section 5. Votes and Proxies. At every meeting of the shareholders, each
share of the capital stock shall be entitled to one vote except as otherwise
provided by law. A majority of the votes cast shall decide every question
or matter submitted to the shareholder at any meeting, unless otherwise
provided by law or by the Articles of Association or these By-laws. Share-
holders may vote by proxies duly authorized in writing and filed with the
Cashier, but no officer, clerk, teller or bookeeper of the Association may act
as a proxy.

<PAGE>

Section 6. Nominations to Board of Directors. At any meeting of shareholders
held for the election of Directors, nominations for election to the Board of
Directors may be made, subject to the provisions of this section, by any share-
holder of record of any outstanding class of stock of the Association entitled
to vote for the election of Directors. No person other than those whose names
are stated as proposed nominees in the proxy statement accompanying the notice
of the meeting may be nominated as such meeting unless a shareholder shall have
given to the President of the Association and to the Comptroller of the
Currency, Washington, DC written notice of intention to nominate such other
person mailed by certified mail or delivered not less than fourteen (14) days
nor more than fifty (50) days prior to the meeting of shareholders at which
such nomination is to be made; provided, however, that if less than twenty-one
(21) days' notice of such meeting is given to shareholders, such notice of
intention to nominate shall be mailed by certified mail or delivered to said
President and said Comptroller on or before the seventh day following the day
on which the notice of such meeting was mailed. Such notice of intention to
nominate shall contain the following information to the extent known to the
notifying shareholder: (a) the name and address of each proposed nominee; (b)
the principal occupation of each proposed nominee; (c) the total number of
shares of capital stock of the Association that will be voted for each proposed
nominee; (d) the name and residence address of the notifying shareholder; and
(e) the number of shares of capital stock of the Association owned by the
notifying shareholder. In the event such notice is given, the proposed nominee
may be nominated either by the shareholder giving such notice or by any other
shareholder present at the meeting at which such nomination is to be made.
Such notice may contain the names of more than one proposed nominee, and if
more than one is named, any one or more of those named may be nominated.

Section 7. Action Taken Without a Shareholder Meeting. Any action requiring
shareholder approval or consent may be taken without a meeting and without
notice of such meeting by written consent of the shareholders.

ARTICLE II

DIRECTORS

Section 1. Number. The Board of Directors shall consist of such number of
shareholders, not less than five (5) nor more than twenty-five (25), as from
time to time shall be determined by a majority of the votes to which all of its
shareholders are at the time entitled, or by the Board of Directors as
hereinafter provided.

Section 2. Mandatory Retirement for Directors. No person shall be elected a
director who has attained the age of 68 and no person shall continue to serve
as a director after the date of the first meeting of the stockholders of the
Association held on or after the date on which such person attains the age of
68; provided, however, that any director serving on the Board as of December
15, 1995 who has attained the age of 65 on or prior to such date shall be
permitted to continue to serve as a director until the date of the first
meeting of the stockholders of the Association held on or after the date on
which such person attains the age of 70.

-2-

<PAGE>

Section 3. General Powers. The Board of Directors shall exercise all the
coporate powers of the Association, except as expressly limited by law, and
shall have the control, management, direction and dispositon of all its
property and affairs.

Section 4. Annual Meeting. Immediately following a meeting of shareholders
held for the election of Directors, the Cashier shall notify the directors-
elect who may be present of their election and they shall then hold a meeting
at the Main Office of the Association, or such other place as the Board of
Directors may designate, for the purpose of taking their oaths, organizing the
new Board, electing officers and transacting any other business that may come
before such meeting.

Section 5. Regular Meeting. Regular meetings of the Board of Directors shall
be held without notice at the Main Office of the Association, or such other
place as the Board of Directors may designate, at such dates and times as the
Board shall determine. If the day designated for a regular meeting falls on a
legal holiday, the meeting shall be held on the next business day.

Section 6. Special Meetings. A special meeting of the Board of Directors may
be called at anytime upon the written request of the Chairman of the Board, the
President, or of two Directors, stating the purpose of the meeting. Notice of
the time and place shall be given not later than the day before the date of the
meeting, by mailing a notice to each Director at his last known address, by
delivering such notice to him personally, or by telephoning.

Section 7. Quorum; Votes. A majority of the Board of Directors at the time
holding office shall constitute a quorum for the transaction of all business,
except when otherwise provided by law, but less than a quorum may adjourn
a meeting from time to time, and the meeting may be held, as adjourned, without
further notice. If a quorum is present when a vote is taken, the affirmative
vote of a majority of Directors present is the act of the Board of Directors.

Section 8. Action by Directors Without a Meeting. Any action requiring
Director approval or consent may be taken without a meeting and without notice
of such meeting by written consent of all the Directors.

Section 9. Telephonic Participation in Directors' Meetings. A Director or
member of a Committee of the Board of Directors may participate in a meeting of
the Board or of such Committee may participate in a meeting of the Board or of
such Committee by means of a conference telephone or similar communications
equipment enabling all Directors participating in the meeting to hear one
another, and participation in such a meeting shall constitute presence in person
at such a meeting.

Section 10. Vacancies. Vacancies in the Board of Directors may be filled by
the remaining members of the Board at any regular or special meeting of the
Board.

Section 11. Interim Appointments. The Board of Directors shall, if the share-
holders at any meeting for the election of Directors have determined a number
of Directors less than twenty-five (25), have the power, by affirmative vote of
the majority of all the Directors, to increase such number of Directors to not
more than twenty-five (25) and to elect Directors to fill the resulting
vacancies and to serve until the next annual meeting of shareholders or the
next election of Directors; provided, however, that the number of Directors
shall not be so increased by more than two (2) if the number last determined
by shareholders was fifteen (15) or less, or increased by more than four (4) if
the number last determined by shareholders was sixteen (16) or more.

Section 12. Fees. The Board of Directors shall fix the amount and direct the
payment of fees which shall be paid to each Director for attendance at any
meeting of the Board of Directors or of any Committees of the Board.

ARTICLE III

COMMITTEES OF THE BOARD

Section 1. Executive Committee. The Board of Directors shall appoint from its
members an Executive Committee which shall consist of such number of persons as
the Board of Directors shall determine; the Chairman of the Board and the
President shall be members ex-officio of the Executive Committee with full
voting power. The Chairman of the Board or the President may from time to time
appoint from the Board of Directors as temporary additional members of the
Executive Committee, with full voting powers, not more than two members to serve
for such periods as the Chairman of the Board or the President may determine.
The Board of Directors shall designate a member of the Executive Committee to
serve as Chairman thereof. A meeting of the Executive Committee may be called
at any time upon the written request of the Chairman of the Board, the President
or the Chairman of the Executive Committee, stating the purpose of the meeting.
Not less than twenty four hours' notice of said meeting shall be given to each
member of the Committee personally, by telephoning, or by mail. The Chairman of
the Executive Committee or, in his absence, a member of the Committee chosen by
a majority of the members present shall preside at meetings of the Executive
Committee.

-3-

<PAGE>
The Executive Committee shall possess and may exercise all the powers of the
Board when the Board is not in session except such as the Board, only, by law,
is authorized to exercise; it shall keep minutes of its acts and proceedings
and cause same to be presented and reported at every regular meeting and at any
special meeting of the Board including specifically, all its actions relating
to loans and discounts.

All acts done and powers and authority conferred by the Executive Committee,
from time to time, within the scope of its authority, shall be deemed to be,
and may be certified as being, the acts of and under the authority of the
Board.

Section 2. Risk Management Committee. The Board shall appoint from its
members a Risk Management Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Risk
Management Committee to serve as Chairman thereof. It shall be the duty of the
Risk Management Committee to (a) serve as the channel of communication with
management and the Board of Directors of Fleet Financial Group, Inc. to assure
that formal processes supported by management information systems are in place
for the identification, evaluation and management of significant risks inherent
in or associated with lending activities, the loan portfolio, asset-liablity
management, the investment portfolio, trust and investment advisory activities,
the sale of nondeposit investment products and new products and services and
such additional activities or functions as the Board may determine from time
to time; (b) assure the formulation and adoption of policies approved by the
Risk Management Committee or Board governing lending activities, management of
the loan portfolio, the maintenance of an adequate allowance for loan and lease
losses, asset-liability management, the investment portfolio, the retail
sale of non-deposit investment products, new products and services and such
additional activities or functions as the Board may determine from time to time
(c) assure that a comprehensive independent loan review program is in place for
the early detection of problem loans and review significant reports of the loan
review department, management's responses to those reports and the risk
attributed to unresolved issues; (d) subject to control of the Board, exercise
general supervision over trust activities, the investment of trust funds, the
disposition of trust investments and the acceptance of new trusts and the terms
of such acceptance, and (e) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.

Section 3. Audit Committee. The Board shall appoint from its members and
Audit Committee which shall consist of such number as the Board shall determine
no one of whom shall be an active officer or employee of the Association or
Fleet Financial Group, Inc. or any of its affiliates. In addition, members of
the Audit Committee must not (i) have served as an officer or employee of the
Association or any of its affiliates at any time during the year prior to their
appointment; or (ii) own, control, or have owned or controlled at any time
during the year prior to appointment, ten percent (10%) or more of any
outstanding class of voting securities of the Association. At least two (2)
members of the Audit Committee must have significant executive, professional,
educational or regulatory experience in financial, auditing, accounting,
or banking matters. No member of the Audit Commitee may have significant
direct or indirect credit or other relationships with the Association, the
termination of which would materially adversely affect the Association's
financial condition or results of operations.

The Board shall designate a member of the Audit Committee to serve as Chairman
thereof. It shall be the duty of the Audit Committee to (a) cause a continuous
audit and examination to be made on its behalf into the affairs of the
Association and to review the results of such examination; (b) review
significant reports of the internal auditing department, management's responses
to those reports and the risk attributed to unresolved issues; (c) review the
basis for the reports issued under Section 112 of The Federal Deposit Insurance
Corporation Improvement Act of 1991; (d) consider, in consultation with the
independent auditor and an internal auditing executive, the adequacy of the
Association's internal controls, including the resolution of identified material
weakness and reportable conditions; (e) review regulatory communications
received from any federal or state agency with supervisory jurisdiction or
other examining authority and monitor any needed corrective action by
management; (f) ensure that a formal system of internal controls is in place
for maintaining compliance with laws and regulations; (g) cause an audit of the
Trust Department at least once during each calendar year and within 15 months
of the last such audit or, in liew thereof, adopt a continuous audit system and
report to the Board each calendar year and within 15 months of the previous
report on the performance of such audit function; and (h) perform such
additional duties and exercise such additional powers of the Board as the Board
may determine from time to time.

The Audit Committee may consult with internal counsel and retain its own
outside counsel without approval (prior or otherwise) from the Board or
management and obligate the Association to pay the fees of such counsel.

-4-

<PAGE>

Section 4. Community Affairs Committee. The Board shall appoint from its
members a Community Affairs Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Community
Affairs Committee to serve as Chairman thereof. It shall be the duty of the
Commmunity Affairs Committee to (a) oversee compliance by the Association with
the Community Reinvestment Act of 1977, as amended, and the regulations
promulgated thereunder; and (b) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.

Section 5. Regular Meetings. Except for the Executive Committee which shall
meet on an ad hoc basis as set forth in Section 1 of this Article, regular
meetings of the Committees of the Board of Directors shall be held, without
notice, at such time and place as the Committee or the Board of Directors may
appoint and as often as the business of the Association may require.

Section 6. Special Meetings. A Special Meeting of any of the Committees of
the Board of Directors may be called upon the written request of the Chairman
of the Board or the President, or of any two members of the respective
Committee, stating the purpose of the meeting. Not less than twenty-four
hours' notice of such special meeting shall be given to each member of the
Committee personally, by telephoning, or by mail.

Section 7. Emergency Meetings. An Emergency Meeting of any of the Committees
of the Board of Directors may be called at the request of the Chairman of the
Board or the President, who shall state that an emergency exists, upon not
less than one hour's notice to each member of the Committee personally or by
telephoning.

Section 8. Action Taken Without a Committee Meeting. Any Committee of the
Board of Directors may take action without a meeting and without notice of such
meeting by resolution assented to in writing by all members of such Committee.

Section 9. Quorum. A majority of a Committee of the Board of Directors shall
constitute a quorum for the transaction of any business at any meeting of such
Committee. If a quorum is not available, the Chairman of the Board or the
President shall have power to make temporary appointments to a Committee of-
members of the Board of Directors, to act in the place and stead of members who
temporarily cannot attend any such meeting; provided, however, that any
temporary appointment to the Audit Committee must meet the requirements for
members of that Committee set forth in Section 3 of this Article.

Section 10. Record. The committees of the Board of Directors shall keep a
record of their respective meetings and proceedings which shall be presented
at the regular meeting of the Board of Directors held in the calendar month
next following the meetings of the Committees. If there is no regular Board
of Directors meeting held in the calendar month next following the meeting of
a Committee, then such Committee's records shall be presented at the next
regular Board of Directors meeting held in a month subsequent to such Committee
meeting.

Section 11. Changes and Vacancies. The Board of Directors shall have power
to change the members of any Committee at any time and to fill vacancies on any
Committee; provided, however, that any newly appointed member of the Audit
Committee must meet the requirements for members of that Committee set forth in
Section 3 of this Article.

Section 12. Other Committees. The Board of Directors may appoint, from time
to time, other committees of one or more persons, for such purposes and with
such powers as the Board may determine.

ARTICLE IV

WAIVER OF NOTICE OF MEETINGS

Section 1. Waiver. Whenever notice is required to be given to any shareholder,
Director, or member of a Committee of the Board of Directors, such notice may
be waived in writing either before or after such meeting by any shareholder,
Director or Committee member respectively, as the case may be, who may be
entitled to such notice; and such notice will be deemed to be waived by
attendance at any such meeting.

-5-

<PAGE>

ARTICLE V

OFFICERS AND AGENTS

Section 1. Officers. The Board shall appoint a Chairman of the Board and a
President, and shall have the power to appoint one or more Executive Vice
Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a
Cashier, a Secretary, an Auditor, a Controller, one or more Trust Officers and-
such other officers as are deemed necessary or desirable for the proper
transaction of business of the Association. The Chairman of the Board and the
President shall be appointed from members of the Board of Directors. Any two
or more offices, except those of President and Cashier, or Secretary, may be
held by the same person. The Board may, from time to time, by resolution
passed by a majority of the entire Board, designate one or more officers of the
Association or of an affiliate or of Fleet Financial Group, Inc. with power to
appoint one or more Vice Presidents and such other officers of the Association
below the level of Vice President as the officer or officers designated in such
resolution deem necessary or desirable for the proper transaction of the
business of the Association.

Section 2. Chairman of the Board. The chairman of the Board shall preside at
all meetings of the Board of Directors. Subject to definition by the Board of
Directors, he shall have general executive powers and such specific powers and
duties as from time to time may be conferred upon or assigned to him by the
Board of Directors.

Section 3. President. The President shall preside at all meetings of the
Board of Directors if there be no Chairman or if the Chairman be absent.
Subject to definition by the Board of Directors, he shall have general
executive powers and such specific powers and duties as from time to time may
be conferred upon or assigned to him by the Board of Directors.

-6-

<PAGE>

Section 4. Cashier and Secretary. The Cashier shall be the Secretary of the
Board and of the Executive Committee, and shall keep accurate minutes of their
meetings and of all meetings of the shareholders. He shall attend to the
giving of all notices required by these By-laws. He shall be custodian of the
corporate seal, records, documents and papers of the Association. He shall
have such powers and perform such duties as pertain by law or regulation to the
office of Cashier, or as are imposed by these By-laws, or as may be delegated
to him from time to time by the Board of Directors, the Chairman of the Board
or the President.

Section 5. Auditor. The Auditor shall be the chief auditing officer of the
Association. He shall continuously examine the affairs of the Association and
from time to time shall report to the Board of Directors. He shall have such
powers and perform such duties as are conferred upon, or assigned to him by
these By-laws, or as may be delegated to him from time to time by the Board
of Directors.

Section 6. Officers Seriatim. The Board of Directors shall designate from
time to time not less than two officers who shall in the absence or disability
of the Chairman or President or both, succeed seriatim to the duties and
responsibilities of the Chairman and President respectively.

Section 7. Clerks and Agents. The Board of Directors may appoint, from time
to time, such clerks, agents and employees as it may deem advisable for the
prompt and orderly transaction of the business of the Association, define
their duties, fix the salaries to be paid them and dismiss them. Subject to
the authority of the Board of Directors, the Chairman of the Board or the
President, or any other officer of the Association authorized by either of them
may appoint and dismiss all or any clerks, agents and employees and prescribe
their duties and the conditions of their employment, and from time to time
fix their compensation.

Section 8. Tenure. The Chairman of the Board of Directors and the President
shall, except in the case of death, resignation, retirement or disqualification
under these By-laws, or unless removed by the affirmative vote of at least two-
thirds of all of the members of the Board of Directors, hold office for the
term of one year or until their respective successors are appointed. Either
of such officers appointed to fill a vacancy occurring in an unexpired term
shall serve for such unexpired term of such vacancy. All other officers,
clerks, agents, attorneys-in-fact and employees of the Association shall hold
office during the pleasure of the Board of Directors or of the officer or
committee appointing them respectively.

ARTICLE VI

TRUST DEPARTMENT

Section 1. General Powers and Duties. All fiduciary powers of the Association
shall be exercised through the Trust Department, subject to such regulations as
the Comptroller of the Currency shall from time to time establish. The Trust
Department shall be to placed under the management and immediate supervision
of an officer or officers appointed by the Board of Directors. The duties of
all officers of the Trust Department shall be to cause the policies and
instructions of the Board and the Risk Management Committee with respect to the
trusts under their supervision to be carried out, and to supervise the due
performance of the trusts and agencies entrusted to the Association and under
their supervision, in accordance with law and in accordance with the terms of
such trusts and agencies.

-7-

<PAGE>

ARTICLE VII

BRANCH OFFICES

Section 1. Establishment. The Board of Directors shall have full power to
establish, to discontinue, or, from time to time, to change the location of any
branch office, subject to such limitations as may be provided by law.

Section 2. Supervision and Control. Subject to the general supervision and
control of the Board of Directors, the affairs of branch offices shall be
under the immediate supervision and control of the President or of such other
officer or officers, employee or employees, or other individuals as the Board
of Directors may from time to time determine, with such powers and duties as
the Board of Directors may confer upon or assign to him or them.

ARTICLE VIII

SIGNATURE POWERS

Section 1. Authorization. The power of officers, employees, agents and
attorneys to sign on behalf of and to affix the seal of the Association shall
be prescribed by the Board of Directors or by the Executive Committee or by
both; provided that the President is authorized to restrict such power of any
officer, employee, agent or attorney to the business of a specific department
or departments, or to a specific branch office or branch offices. Facsimile
signatures may be authorized.

-8-

<PAGE>

ARTICLE IX

STOCK CERTIFICATES AND TRANSFERS

Section 1. Stock Records. The Trust Department shall have custody of the
stock certificate books and stock ledgers of the Association, and shall make
all transfers of stock, issue certificates thereof and disburse dividends
declared thereon.

Section 2. Form of Certificate. Every shareholder shall be entitled to a
certificate conforming to the requirements of law and otherwise in such form
as the Board of Directors may approve. The certificates shall state on the
face thereof that the stock is transferable only on the books of the
Association and shall be signed by such officers as may be prescribed from time
to time by the Board of Directors or Executive Committee. Facsimile signatures
may be authorized.

Section 3. Transfers of Stock. Transfers of stock shall be made only on the
books of the Association by the holder in person, or by attorney duly
authorized in writing, upon surrender of the certificate therefor properly
endorsed, or upon the surrender of such certificate accompanied by a properly
executed written assignment of the same, or a written power of attorney to
sell, assign or transfer the same or the shares represented thereby.

Section 4. Lost Certificate. The Board of Directors or Executive Committee
may order a new certificate to be issued in place of a certificate lost or
destroyed, upon proof of such loss or destruction and upon tender to the
Association by the shareholder, of a bond in such amount and with or without
surety, as may be ordered, indemnifying the Association against all liability,
loss, cost and damage by reason of such loss or destruction and the issuance
of a new certificate.

Section 5. Closing Transfer Books. The Board of Directors may close the
transfer books for a period not exceeding thirty days preceding any regular
or special meeting of the shareholders, or the day designated for the payment
of a dividend or the allotment of rights. In lieu of closing the transfer
books the Board of Directors may fix a day and hour not more than thirty days
prior to the day of holding any meeting of the shareholders, or the day
designated for the payment of a dividend, or the day designated for the
allotment of rights, or the day when any change of conversion or exchange of
capital stock is to go into effect, as the day as of which shareholders
entitled to notice of and to vote at such meetings or entitled to such dividend
or to such allotment of rights or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, shall be determined, and
only such shareholders as shall be shareholders of record on the day and hour
so fixed shall be entitled to notice of and to vote at such meeting or to
receive payment of such dividend or to receive such allotment of rights or to
exercise such rights, as the case may be.

ARTICLE X

THE CORPORATE SEAL

Section 1. Seal. The following is an impression of the seal of the
Association adopted by the Board of Directors.

ARTICLE XI

BUSINESS HOURS

Section 1. Business Hours. The main office of this Association and each
branch office thereof shall be open for business on such days, and for such
hours as the Chairman, or the President, or any Executive Vice President, or
such other officer as the Board of Directors shall from time to time
designate, may determine as to each office to conform to local custom and
convenience, provided that any one or more of the main and branch offices or
certain departments thereof may be open for such hours as the President, or
such other officer as the Board of Directors shall from time to time designate,
may determine as to each office or department on any legal holiday on which
work is not prohibited by law, and provided further that any one or more of
the main and branch offices or certain departments thereof may be ordered
closed or open on any day for such hours as to each office or department as
the President, or such other officer as the Board of Directors shall from time
to time designate, subject to applicable laws regulations, may determine when
such action may be required by reason of disaster or other emergency condition.

ARTICLE IX

CHANGES IN BY-LAWS

Section 1. Amendments. These By-laws may be amended upon vote of a majority
of the entire Board of Directors at any meeting of the Board, provided ten (10)
day's notice of the proposed amendment has been given to each member of the
Board of Directors. No amendment may be made unless the By-law, as amended, is
consistent with the requirements of law and of the Articles of Association.
These By-laws may also be amended by the Association's shareholders.

A true copy

Attest:

Secretary/Assistant Secretary
- ---------------------------------------

Dated at , as of .
--------------------------------------- ----------------------

Revision of January 11, 1993

-9-

<PAGE>

EXHIBIT 5

CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(b)
OF THE TRUST INDENTURE ACT OF 1939

The undersigned, as Trustee under the Indenture to be entered into between
CS Wireless Systems, Inc. and Fleet National Bank, as Trustee,
does hereby consent that, pursuant to Section 321(b) of the Trust Indenture
Act of 1939, reports of examinations with respect to the undersigned by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.

FLEET NATIONAL BANK,
AS TRUSTEE

By /s/
-------------------------------
Susan T. Keller
Its: Vice President

Dated:

<PAGE>

EXHIBIT 6

<TABLE>
<S> <C>
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036

Federal Deposit Insurance Corporation
OMB Number: 3064-0052

Office of the Comptroller of the Currency
OMB Number: 1557-0081

FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL Expires March 31, 1999
- -----------------------------------------------------------------------------------------------------------------------------

Please refer to page i, / 1 /
[LOGO] Table of Contents, for
the required disclosure
of estimated burden.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES--FFIEC 031
(960331)
REPORT AT THE CLOSE OF BUSINESS March 31, 1996 -----------
(RCRI 9999)

This report is required by law: 12 U.S.C. Section 324 (State member banks);
12 U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161
(National banks).

This report form is to be filed by banks with branches and consolidation
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.

- --------------------------------------------------------------------------------

NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.

I, Giro S. DeRosa, Vice President and Controller
-----------------------------------------------------------------------------
Name and Title of Officer Authorized to Sign Report

of the named bank do hereby declare that these Reports of Condition and
Income (including the supporting schedules) have been prepared in conformance
with the instructions issued by the appropriate Federal regulatory authority
and are true to the best of my knowledge and belief.

/s/ GIRO DEROSA
- --------------------------------------------------------------------------------
Signature of Officer Authorized to Sign Report

April 25, 1996
- --------------------------------------------------------------------------------
Date of Signature

The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in
some cases differ from generally accepted accounting principles.

We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it has
been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.

/s/
- --------------------------------------------------------------------------------
Director (Trustee)

- --------------------------------------------------------------------------------

<PAGE>

FOR BANKS SUBMITTING HARD COPY REPORT FORMS:

STATE MEMBER BANKS: Return the original and one copy to the appropriate Federal
Feserve District Bank.

STATE NONMEMBER BANKS: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.

NATIONAL BANKS: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.

<TABLE><CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
___
FDIC Certificate Number | 1 | 0 | 5 | 8 | 2 | |
______________________ CALL NO. 190 31 03-31-96
(RCRI 9050)
CERT: 02499 10582 STBK 09-0590

FLEET NATIONAL BANK OF CONNECTICUT
777 MAIN STREET
HARTFORD, CT 06115
| |
___ ___
<FN>
Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency
</TABLE>

<PAGE>
FFIEC 031
Page i
/2/
Consolidated Reports of Condition and Income for
A Bank With Domestic and Foreign Offices
________________________________________________________________________________

TABLE OF CONTENTS

SIGNATURE PAGE Cover

REPORT OF INCOME

Schedule RI--Income Statement...........................................RI-1,2,3
Schedule RI-A--Changes in Equity Capital....................................RI-3
Schedule RI-B--Charge-offs and Recoveries and
Changes in Allowance for Loan and Lease
Losses..................................................................RI-4,5
Schedule RI-C--Applicable Income Taxes by
Taxing Authority..........................................................RI-5
Schedule RI-D--Income from
International Operations..................................................RI-6
Schedule RI-E--Explanations...............................................RI-7,8

REPORT OF CONDITION

Schedule RC--Balance Sheet................................................RC-1,2
Schedule RC-A--Cash and Balances Due
From Depository Institutions..............................................RC-3
Schedule RC-B--Securities...............................................RC-3,4,5
Schedule RC-C--Loans and Lease Fianancing
Receivables:
Part I. Loans and Leases..............................................RC-6,7
Part II. Loans to Small Businesses and
Small Farms (included in the forms for
June 30 only).....................................................RC-7a,7b
Schedule RC-D--Trading Assets and Liabilities
(to be completed only by selected banks)..................................RC-8
Schedule RC-E--Deposit Liabilities....................................RC-9,10,11
Schedule RC-F--Only Assets.................................................RC-11
Schedule RC-G--Other Liabilities...........................................RC-11
Schedule RC-H--Selected Balance Sheet Items for
Domestic Offices.........................................................RC-12
Schedule RC-I--Selected Assets and Liabilities
of IBF's.................................................................RC-13
Schedule RC-K--Quarterly Averages..........................................RC-13
Schedule RC-L--Off-Balance Sheet Items...............................RC-14,15,16
Schedule RC-M--Memoranda................................................RC-17,18
Schedule RC-N--Past Due and Nonaccrual Loans,
Leases, and Other Assets..............................................RC-19,20
Schedule RC-O--Other Data for Deposit
Insurance Assessments.................................................RC-21,22
Schedule RC-R--Risk-Based Captial.......................................RC-23,24
Optional Narrative Statement Concerning the
Amounts Reported in the Reports of
Conditions and Income....................................................RC-25
Special Report (TO BE COMPLETED BY ALL BANKS)
Schedule RC-J--Repricing Opportunities (sent only to
and to be completed only by savings banks)

<PAGE>

DISCLOSURE OF ESTIMATED BURDEN

The estimated average burden associated with this information collection is
32.2 hours per respondent and is estimated to vary from 15 to 230 hours per
response, depending on individual circumstances. Burden estimates include the
time for reviewing instructions, gathering and maintaining data in the required
form, and completing the information collection, but exclude the time for
compiling and maintaining business records in the normal course of a
respondent's activities. Comments concerning the accuracy of this burden
estimate and suggestions for reducing this burden should be directed to the
Office of Information and Regulatory Affairs. Office of Management and Budget,
Washington, D.C. 20503, and to one of the following:

Secretary
Board of Governors of the Federal Reserve System
Washington, D.C. 20551

Legislative and Regulatory Analysis Division
Office of the Comptroller of the Currency
Washington, D.C. 20219

Assistant Executive Secretary
Federal Deposit Insurance Corporation
Washington, D.C. 20429

For information or assistance, national and state nonmember banks should
contact the FDIC's Call Reports Analysis Unit, 550 17th Street, NW, Washington,
D.C. 20429, toll free on (800)688-FDIC (3342), Monday through Friday between
8:00 a.m. and 5:00 p.m., Eastern time. State member banks should contact their
Federal Reserve District Bank.

___________

<PAGE>

<TABLE>
<CAPTION>
<C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-1
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|

Consolidated Report of Income
for the period January 1, 1996 - March 31, 1996

All Report of Income schedules are to be reported on a calendar year-to-date basis in thousands of dollars.
file
Schedule RI--Income Statement ________
| I480 |
Dollar Amounts in Thousands RIAD Bil Mil Thou__|
_______________________________________________________________________________________________ ___________|________|
<S> <C> <C>
1. Interest income: | ////////////////// |
a. Interest and fee income on loans: | ////////////////// |
(1) In domestic offices: | ////////////////// |
(a) Loans secured by real estate ................................................... | 4011 68,007 | 1.a.(1)(a)
(b) Loans to depository institutions ............................................... | 4019 0 | 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers ............ | 4024 42 | 1.a.(1)(c)
(d) Commercial and industrial loans ................................................ | 4012 119,467 | 1.a.(1)(d)
(e) Acceptances of other banks ..................................................... | 4026 22 | 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal expenditures: | ////////////////// |
(1) Credit cards and related plans ............................................. | 4054 1,870 | 1.a.(1)(f)(1)
(2) Other ...................................................................... | 4055 11,553 | 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions ......................... | 4056 0 | 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and political | ////////////////// |
subdivisions in the U.S.: | ////////////////// |
(1) Taxable obligations ........................................................ | 4503 0 | 1.a.(1)(h)(1)
(2) Tax-exempt obligations ..................................................... | 4504 469 | 1.a.(1)(h)(2)
(i) All other loans in domestic offices ............................................ | 4058 14,004 | 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs ...................... | 4059 0 | 1.a.(2)
b. Income from lease financing receivables: | ////////////////// |
(1) Taxable leases ..................................................................... | 4505 192 | 1.b.(1)
(2) Tax-exempt leases .................................................................. | 4307 0 | 1.b.(2)
c. Interest income on balances due from depository institutions:(1) | ////////////////// |
(1) In domestic offices ................................................................ | 4105 0 | 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs ...................... | 4106 26 | 1.c.(2)
d. Interest and dividend income on securities: | ////////////////// |
(1) U.S. Treasury securities and U.S. Government agency and corporation obligations .... | 4027 33,725 | 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.: | ////////////////// |
(a) Taxable securities ............................................................. | 4506 0 | 1.d.(2)(a)
(b) Tax-exempt securities .......................................................... | 4507 1 | 1.d.(2)(b)
(3) Other domestic debt securities ..................................................... | 3657 7,306 | 1.d.(3)
(4) Foreign debt securities ............................................................ | 3658 49 | 1.d.(4)
(5) Equity securities (including investments in mutual funds) .......................... | 3659 1,888 | 1.d.(5)
e. Interest income from trading assets..................................................... | 4069 0 | 1.e.
______________________
<FN>
____________
(1) Includes interest income on time certificates of deposit not held for trading.
</TABLE>

<PAGE>

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-2
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI--Continued
________________
Dollar Amounts in Thousands | Year-to-date |
___________________________________________________________________________________ ______________
<S> <C> <C>
1. Interest income (continued) | RIAD Bil Mil Thou |
f. Interest income on federal funds sold and securities purchased | ////////////////// |
under agreements to resell in domestic offices of the bank and of | ////////////////// |
its Edge and Agreement subsidiaries, and in IBFs .................... | 4020 292 | 1.f.
g. Total interest income (sum of items 1.a through 1.f) ................ | 4107 258,913 | 1.g.
2. Interest expense: | ////////////////// |
a. Interest on deposits: | ////////////////// |
(1) Interest on deposits in domestic offices: | ////////////////// |
(a) Transaction accounts (NOW accounts, ATS accounts, and | ////////////////// |
telephone and preauthorized transfer accounts) .............. | 4508 519 | 2.a.(1)(a)
(b) Nontransaction accounts: | ////////////////// |
(1) Money market deposit accounts (MMDAs) ................... | 4509 6,345 | 2.a.(1)(b)(1)
(2) Other savings deposits .................................. | 4511 11,368 | 2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or more ........ | 4174 21,500 | 2.a.(1)(b)(3)
(4) All other time deposits ................................. | 4512 31,522 | 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement | ////////////////// |
subsidiaries, and IBFs .......................................... | 4172 4,742 | 2.a.(2)
b. Expense of federal funds purchased and securities sold under | ////////////////// |
agreements to repurchase in domestic offices of the bank and of | ////////////////// |
its Edge and Agreement subsidiaries, and in IBFs .................... | 4180 35,405 | 2.b.
c. Interest on demand notes issued to the U.S. Treasury, trading | ////////////////// |
liabilities, and other money borrowed ............................... | 4185 29,123 | 2.c.
d. Interest on mortgage indebtedness and obligations under | ////////////////// |
capitalized leases .................................................. | 4072 106 | 2.d.
e. Interest on subordinated notes and debentures ....................... | 4200 2,993 | 2.e.
f. Total interest expense (sum of items 2.a through 2.e) ............... | 4073 143,623 | 2.f.
___________________________
3. Net interest income (item 1.g minus 2.f) ............................... | ////////////////// | RIAD 4074 | 115,290 | 3.
___________________________
4. Provisions: | ////////////////// |
___________________________
a. Provision for loan and lease losses ................................. | ////////////////// | RIAD 4230 | 1,911 | 4.a.
b. Provision for allocated transfer risk ............................... | ////////////////// | RIAD 4243 | 0 | 4.b.
___________________________
5. Noninterest income: | ////////////////// |
a. Income from fiduciary activities .................................... | 4070 21,652 | 5.a.
b. Service charges on deposit accounts in domestic offices ............. | 4080 15,687 | 5.b.
c. Trading revenue (must equal Schedule RI, sum of Memorandum | ////////////////// |
items 8.a through 8.d)............................................... A220 78 5.c.
d. Other foreign transaction gains (losses) ............................ | 4076 6 | 5.d.
e. Not applicable....................................................... | ////////////////// |
f. Other noninterest income: | ////////////////// |
(1) Other fee income ................................................ | 5407 13,425 | 5.f.(1)
(2) All other noninterest income* ................................... | 5408 43,419 | 5.f.(2)
___________________________
g. Total noninterest income (sum of items 5.a through 5.f) ............. | ////////////////// | RIAD 4079 | 94,267 | 5.g.
6. a. Realized gains (losses) on held-to-maturity securities .............. | ////////////////// | RIAD 3521 | 1 | 6.a.
b. Realized gains (losses) on available-for-sale securities ............ | ////////////////// | RIAD 3196 | 11,352 | 6.b.
| ////////////////// |___________________________
7. Noninterest expense: | ////////////////// |
a. Salaries and employee benefits ...................................... | 4135 36,676 | 7.a.
b. Expenses of premises and fixed assets (net of rental income) | ////////////////// |
(excluding salaries and employee benefits and mortgage interest) .... | 4217 14,846 | 7.b.
c. Other noninterest expense* .......................................... | 4092 57,219 | 7.c.
___________________________
d. Total noninterest expense (sum of items 7.a through 7.c) ............ | ////////////////// | RIAD 4093 | 108,741 | 7.d.
___________________________
8. Income (loss) before income taxes and extraordinary items and other | ////////////////// |
___________________________
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d)| ////////////////// | RIAD 4301 | 110,258 | 8.
9. Applicable income taxes (on item 8) .................................... | ////////////////// | RIAD 4302 | 51,617 | 9.
___________________________
10. Income (loss) before extraordinary items and other adjustments | ////////////////// |
___________________________
(item 8 minus 9) ....................................................... | ////////////////// | RIAD 4300 | 58,641 | 10.
_________________________________________________
<FN>
____________
*Describe on Schedule RI-E--Explanations.
</TABLE>

<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-3
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>

<TABLE><CAPTION> __________
______|__I481__|
Memoranda | Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after | ////////////////// |
August 7, 1986, that is not deductible for federal income tax purposes .......................... | 4513 0 | M.1.
2. Income from the sale and servicing of mutual funds and annuities in domestic offices | ////////////////// |
(included in Schedule RI, item 8) ............................................................... | 8431 0 | M.2.
3.-4. Not applicable | ////////////////// |
5. Number of full-time equivalent employees on payroll at end of current period (round to | //// Number |
nearest whole number) ........................................................................... | 4150 1,831 | M.5.
6. Not applicable | ////////////////// |
7. If the reporting bank has restated its balance sheet as a result of applying push down | //// MM DD YY |
accounting this calendar year, report the date of the bank's acquisition ........................ | 9106 00/00/00 | M.7.
8. Trading revenue (from cash instruments and off-balance sheet derivative instruments) | ////////////////// |
(sum of Memorandum items 8.a through 8.d must equal Schedule RI, item 5.c): | //// Bil Mil Thou |
a. Interest rate exposures ...................................................................... | 8757 11 | M.8.a.
b. Foreign exchange exposures ................................................................... | 8758 67 | M.8.b.
c. Equity security and index exposures .......................................................... | 8759 0 | M.8.c.
d. Commodity and other exposures ................................................................ | 8760 0 | M.8.d.
9. Impact on income of off-balance sheet derivatives held for purposes other than trading: | ////////////////// |
a. Net increase (decrease) to interest income.....................................................| 8761 (2,618)| M.9.a.
b. Net (increase) decrease to interest expense ...................................................| 8762 (2,834)| M.9.b.
c. Other (noninterest) allocations ...............................................................| 8763 0 | M.9.c.
10. Credit losses on off-balance sheet derivatives (see instructions).................................| A251 0 | M.10.

____________
*Describe on Schedule RI-E--Explanations.

</TABLE>

<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-4
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>

<TABLE><CAPTION>
Schedule RI-A--Changes in Equity Capital

Indicate decreases and losses in parentheses. _________
| I483 |
_____________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________________|____________________|
<S> <C> <C>
1. Total equity capital originally reported in the December 31, 1995, Reports of Condition | ////////////////// |
and Income ...................................................................................... | 3215 1,342,473 | 1.
2. Equity capital adjustments from amended Reports of Income, net* ................................. | 3216 0 | 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2) ............................ | 3217 1,342,473 | 3.
4. Net income (loss) (must equal Schedule RI, item 12) ............................................. | 4340 58,641 | 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net .............................. | 4346 0 | 5.
6. Changes incident to business combinations, net .................................................. | 4356 0 | 6.
7. LESS: Cash dividends declared on preferred stock ................................................ | 4470 0 | 7.
8. LESS: Cash dividends declared on common stock ................................................... | 4460 10,922 | 8.
9. Cumulative effect of changes in accounting principles from prior years* (see instructions | ////////////////// |
for this schedule) .............................................................................. | 4411 0 | 9.
10. Corrections of material accounting errors from prior years* (see instructions for this schedule) | 4412 0 | 10.
11. Change in net unrealized holding gains (losses) on available-for-sale securities ................ | 8433 (10,978)| 11.
12. Foreign currency translation adjustments ........................................................ | 4414 0 | 12.
13. Other transactions with parent holding company* (not included in items 5, 7, or 8 above) ........ | 4415 0 | 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must equal Schedule RC, | ////////////////// |
item 28) ........................................................................................ | 3210 1,379,214 | 14.
______________________
<FN>
____________
*Describe on Schedule RI-E--Explanations.
</TABLE>

<TABLE><CAPTION>
Schedule RI-B--Charge-offs and Recoveries and Changes
in Allowance for Loan and Lease Losses

Part I. Charge-offs and Recoveries on Loans and Leases

Part I excludes charge-offs and recoveries through
the allocated transfer risk reserve.
__________
| I486 | <-
_________________________________ ________
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
____________________ ____________________
| Calendar year-to-date |
_________________________________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Loans secured by real estate: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ......................................... | 4651 6,328 | 4661 3,137 | 1.a.
b. To non-U.S. addressees (domicile) ..................................... | 4652 0 | 4662 0 | 1.b.
2. Loans to depository institutions and acceptances of other banks: | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository institutions .................. | 4653 0 | 4663 0 | 2.a.
b. To foreign banks ...................................................... | 4654 0 | 4664 0 | 2.b.
3. Loans to finance agricultural production and other loans to farmers ...... | 4655 2 | 4665 21 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ......................................... | 4645 5,700 | 4617 1,564 | 4.a.
b. To non-U.S. addressees (domicile) ..................................... | 4646 0 | 4618 0 | 4.b.
5. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// |
expenditures: | ////////////////// | ////////////////// |
a. Credit cards and related plans ........................................ | 4656 290 | 4666 10 | 5.a.
b. Other (includes single payment, installment, and all student loans) ... | 4657 2,187 | 4667 702 | 5.b.
6. Loans to foreign governments and official institutions ................... | 4643 0 | 4627 0 | 6.
7. All other loans .......................................................... | 4644 0 | 4628 298 | 7.
8. Lease financing receivables: | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile) ......................................... | 4658 0 | 4668 0 | 8.a.
b. Of non-U.S. addressees (domicile) ..................................... | 4659 0 | 4669 0 | 8.b.
9. Total (sum of items 1 through 8) ......................................... | 4635 14,507 | 4605 5,732 | 9.
___________________________________________
</TABLE>

<PAGE>

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-5
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE><CAPTION>
Schedule RI-B--Continued

Part I. Continued

Memoranda

_________________________________ ________
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
____________________ ____________________
| Calendar year-to-date |
_________________________________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1-3. Not applicable | ////////////////// | ////////////////// |
4. Loans to finance commercial real estate, construction, and land | ////////////////// | ////////////////// |
development activities (not secured by real estate) included in | ////////////////// | ////////////////// |
Schedule RI-B, part I, items 4 and 7, above .............................. | 5409 71 | 5410 667 | M.4.
5. Loans secured by real estate in domestic offices (included in | ////////////////// | ////////////////// |
Schedule RI-B, part I, item1, above): | ////////////////// | ////////////////// |
a. Construction and land development ..................................... | 3582 102 | 3583 142 | M.5.a.
b. Secured by farmLand ................................................... | 3584 75 | 3585 4 | M.5.b.
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit ..................... | 5411 963 | 5412 0 | M.5.c.(1)
(2) All other loans secured by 1-4 family residential properties ...... | 5413 2,574 | 5414 642 | M.5.c.(2)
d. Secured by multifamily (5 or more) residential properties ............. | 3588 78 | 3589 211 | M.5.d.
e. Secured by nonfarm nonresidential properties .......................... | 3590 2,536 | 3591 2,138 | M.5.e.
|_________________________________________|

Part II. Changes in Allowance for Loan and Lease Losses
_____________________

Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
1. Balance originally reported in the December 31, 1995, Reports of Condition and Income.......... | 3124 266,943 | 1.
2. Recoveries (must equal part I, item 9, column B above) ........................................ | 4605 5,732 | 2.
3. LESS: Charge-offs (must equal part I, item 9, column A above) ................................. | 4635 14,507 | 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a)......................... | 4230 1,911 | 4.
5. Adjustments* (see instructions for this schedule) ................................ ............ | 4815 0 | 5.
6. Balance end of current period (sum of items 1 through 5) (must equal Schedule RC, | ////////////////// |
item 4.b) ..................................................................................... | 3123 260,079 | 6.
|____________________|
____________
*Describe on Schedule RI-E--Explanations.

Schedule RI-C--Applicable Income Taxes by Taxing Authority

Schedule RI-C is to be reported with the December Report of Income.

<CAPTION>
| I489 | <-
____________ ________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Federal ....................................................................................... | 4780 N/A | 1.
2. State and local................................................................................ | 4790 N/A | 2.
3. Foreign ....................................................................................... | 4795 N/A | 3.
4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items 9 and 11.b) ............ | 4770 N/A | 4.
____________________________| |
5. Deferred portion of item 4 ........................................ | RIAD 4772 | N/A | ////////////////// | 5.
__________________________________________________

</TABLE>

<PAGE>

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-6
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE><CAPTION>
Schedule RI-D--Income from International Operations

For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs where international operations
account for more than 10 percent of total revenues, total assets, or net income.

Part I. Estimated Income from International Operations

__________
| I492 | <-
______ ________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries, | ////////////////// |
and IBFs: | ////////////////// |
a. Interest income booked ................................................................... | 4837 N/A | 1.a.
b. Interest expense booked .................................................................. | 4838 N/A | 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and IBFs | ////////////////// |
(item 1.a minus 1.b) ..................................................................... | 4839 N/A | 1.c.
2. Adjustments for booking location of international operations: | ////////////////// |
a. Net interest income attributable to international operations booked at domestic offices .. | 4840 N/A | 2.a.
b. Net interest income attributable to domestic business booked at foreign offices .......... | 4841 N/A | 2.b.
c. Net booking location adjustment (item 2.a minus 2.b) ..................................... | 4842 N/A | 2.c.
3. Noninterest income and expense attributable to international operations: | ////////////////// |
a. Noninterest income attributable to international operations .............................. | 4097 N/A | 3.a.
b. Provision for loan and lease losses attributable to international operations ............. | 4235 N/A | 3.b.
c. Other noninterest expense attributable to international operations ....................... | 4239 N/A | 3.c.
d. Net noninterest income (expense) attributable to international operations (item 3.a | ////////////////// |
minus 3.b and 3.c) ....................................................................... | 4843 N/A | 3.d.
4. Estimated pretax income attributable to international operations before capital allocation | ////////////////// |
adjustment (sum of items 1.c, 2.c, and 3.d) ................................................. | 4844 N/A | 4.
5. Adjustment to pretax income for internal allocations to international operations to reflect | ////////////////// |
the effects of equity capital on overall bank funding costs ................................. | 4845 N/A | 5.
6. Estimated pretax income attributable to international operations after capital allocation | ////////////////// |
adjustment (sum of items 4 and 5) ........................................................... | 4846 N/A | 6.
7. Income taxes attributable to income from international operations as estimated in item 6 .... | 4797 N/A | 7.
8. Estimated net income attributable to international operations (item 6 minus 7) .............. | 4341 N/A | 8.
______________________
<CAPTION>
Memoranda ______________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Intracompany interest income included in item 1.a above ..................................... | 4847 N/A | M.1.
2. Intracompany interest expense included in item 1.b above .................................... | 4848 N/A | M.2.
______________________
</TABLE>

<TABLE><CAPTION>
Part II. Supplementary Details on Income from International Operations Required
by the Departments of Commerce and Treasury for Purposes of the U.S.
International Accounts and the U.S. National Income and Product Accounts
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest income booked at IBFs .............................................................. | 4849 N/A | 1.
2. Interest expense booked at IBFs ............................................................. | 4850 N/A | 2.
3. Noninterest income attributable to international operations booked at domestic offices | ////////////////// |
(excluding IBFs): | ////////////////// |
a. Gains (losses) and extraordinary items ................................................... | 5491 N/A | 3.a.
b. Fees and other noninterest income ........................................................ | 5492 N/A | 3.b.
4. Provision for loan and lease losses attributable to international operations booked at | ////////////////// |
domestic offices (excluding IBFs) ........................................................... | 4852 N/A | 4.
5. Other noninterest expense attributable to international operations booked at domestic offices | ////////////////// |
(excluding IBFs) ............................................................................ | 4853 N/A | 5.
______________________
</TABLE>

<PAGE>

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-7
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>

<TABLE><CAPTION>
Schedule RI-E--Explanations

Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.

Detail all adjustments in Schedules RI-A and RI-B, all extraordinary items and other adjustments in Schedule RI, and all
significant items of other noninterest income and other noninterest expense in Schedule RI. (See instructions for details.)
__________
| I495 | <-
______ ________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2)) | ////////////////// |
Report amounts that exceed 10% of Schedule RI, item 5.f.(2): | ////////////////// |
a. Net gains on other real estate owned ..................................................... | 5415 0 | 1.a.
b. Net gains on sales of loans .............................................................. | 5416 0 | 1.b.
c. Net gains on sales of premises and fixed assets .......................................... | 5417 0 | 1.c.
Itemize and describe the three largest other amounts that exceed 10% of | ////////////////// |
Schedule RI, item 5.f.(2): | ////////////////// |
_____________
d. | TEXT 4461 |______________________________________________________________________________| |
___________ Gain on Sale of Branches 4461 27,961 1.d.
e. | TEXT 4462 |______________________________________________________________________________| 4462 | 1.e.
___________ 4463 1.f.
f. | TEXT 4463 |______________________________________________________________________________| |
_____________
2. Other noninterest expense (from Schedule RI, item 7.c): | ////////////////// |
a. Amortization expense of intangible assets ................................................ | 4531 5,424 | 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c: | ////////////////// |
b. Net losses on other real estate owned .................................................... | 5418 0 | 2.b.
c. Net losses on sales of loans ............................................................. | 5419 0 | 2.c.
d. Net losses on sales of premises and fixed assets ......................................... | 5420 0 | 2.d.
Itemize and describe the three largest other amounts that exceed 10% of | ////////////////// |
Schedule RI, item 7.c: | ////////////////// |
_____________
e. | TEXT 4464 |______________________________________________________________________________| |
___________ Intercompany Data Processing & Programming Charges 4464 19,616 2.e.
f. | TEXT 4467 |______________________________________________________________________________| 4467 11,457 | 2.f.
___________ Intercompany Corporate Support Function Charges 4468 2.g.
g. | TEXT 4468 |______________________________________________________________________________| |
_____________
3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and | ////////////////// |
applicable income tax effect (from Schedule RI, item 11.b) (itemize and describe | ////////////////// |
all extraordinary items and other adjustments): | ////////////////// |
_____________
a. (1) | TEXT 4469 |__________________________________________________________________________| 4469 | 3.a.(1)
_____________
(2) Applicable income tax effect | RIAD 4486 | | ////////////////// | 3.a.(2)
_____________ ____________________________
b. (1) | TEXT 4487 |__________________________________________________________________________| 4487 | 3.b.(1)
_____________
(2) Applicable income tax effect | RIAD 4488 | | ////////////////// | 3.b.(2)
_____________ ____________________________
c. (1) | TEXT 4489 |__________________________________________________________________________| 4489 | 3.c.(1)
_____________
(2) Applicable income tax effect | RIAD 4491 | | ////////////////// | 3.c.(2)
____________________________
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A, | ////////////////// |
item 2) (itemize and describe all adjustments): | ////////////////// |
_____________
a. | TEXT 4492 |______________________________________________________________________________| 4492 | 4.a.
___________
b. | TEXT 4493 |______________________________________________________________________________| 4493 | 4.b.
_____________
5. Cumulative effect of changes in accounting principles from prior years (from | ////////////////// |
Schedule RI-A, item 9) (itemize and describe all changes in accounting principles): | ////////////////// |
_____________
a. | TEXT 4494 |______________________________________________________________________________| 4494 | 5.a.
___________
b. | TEXT 4495 |______________________________________________________________________________| 4495 | 5.b.
_____________
6. Corrections of material accounting errors from prior years (from Schedule RI-A, | ////////////////// |
item 10) (itemize and describe all corrections): | ////////////////// |
_____________
a. | TEXT 4496 |______________________________________________________________________________| 4496 | 6.a.
___________
b. | TEXT 4497 |______________________________________________________________________________| 4497 | 6.b.
_____________
______________________
</TABLE>

<PAGE>

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-8
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>

<TABLE><CAPTION>
Schedule RI-E--Continued
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
7. Other transactions with parent holding company (from Schedule RI-A, item 13) | ////////////////// |
(itemize and describe all such transactions): | ////////////////// |
_____________
a. | TEXT 4498 |______________________________________________________________________________| 4498 | 7.a.
___________
b. | TEXT 4499 |______________________________________________________________________________| 4499 | 7.b.
_____________
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II, | ////////////////// |
item 5) (itemize and describe all adjustments): | ////////////////// |
_____________
a. | TEXT 4521 |
|______________________________________________________________________________| 4521 | 8.a.
_____________
b. | TEXT 4522 |______________________________________________________________________________| 4522 | 8.b.
_____________
____________________
9. Other explanations (the space below is provided for the bank to briefly describe, | I498 | I499 | <-
______________________
at its option, any other significant items affecting the Report of Income):
___
No comment |X| (RIAD 4769)
___
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>

<PAGE>

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-1
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for March 31, 1996

All schedules are to be reported in thousands of dollars. Unless otherwise indicated,
report the amount outstanding as of the last business day of the quarter.

Schedule RC--Balance Sheet
__________
| C400 | <-
____________ ________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
ASSETS | ////////////////// |
1. Cash and balances due from depository institutions (from Schedule RC-A): | ////////////////// |
a. Noninterest-bearing balances and currency and coin(1) ................................... | 0081 644,422 | 1.a.
b. Interest-bearing balances(2) ............................................................ | 0071 175 | 1.b.
2. Securities: | ////////////////// |
a. Held-to-maturity securities (from Schedule RC-B, column A) .............................. | 1754 3,192 | 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) ............................ | 1773 1,806,430 | 2.b.
3. Federal funds sold and securities purchased under agreements to resell in domestic offices | ////////////////// |
of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | ////////////////// |
a. Federal funds sold ...................................................................... | 0276 0 | 3.a.
b. Securities purchased under agreements to resell ......................................... | 0277 0 | 3.b.
4. Loans and lease financing receivables: ____________________________| ////////////////// |
a. Loans and leases, net of unearned income (from Schedule RC-C) | RCFD 2122 | 10,679,728 | ////////////////// | 4.a.
b. LESS: Allowance for loan and lease losses ................... | RCFD 3123 | 260,079 | ////////////////// | 4.b.
c. LESS: Allocated transfer risk reserve ....................... | RCFD 3128 | 0 | ////////////////// | 4.c.
____________________________
d. Loans and leases, net of unearned income, | ////////////////// |
allowance, and reserve (item 4.a minus 4.b and 4.c) ..................................... | 2125 10,419,649 | 4.d.
5. Trading assets (from schedule RC-D )........................................................ | 3545 484 | 5.
6. Premises and fixed assets (including capitalized leases) ................................... | 2145 146,450 | 6.
7. Other real estate owned (from Schedule RC-M) ............................................... | 2150 871 | 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) ... | 2130 0 | 8.
9. Customers' liability to this bank on acceptances outstanding ............................... | 2155 6,513 | 9.
10. Intangible assets (from Schedule RC-M) ..................................................... | 2143 283,894 | 10.
11. Other assets (from Schedule RC-F) .......................................................... | 2160 615,485 | 11.
12. Total assets (sum of items 1 through 11) ................................................... | 2170 13,927,565 | 12.
______________________
<FN>
____________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
</TABLE>

<PAGE>

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-2
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC--Continued
___________________________
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
_______________________________________________________________________________________________ _________________________
<S> <C> <C>
LIABILITIES | /////////////////////// |
13. Deposits: | /////////////////////// |
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) ..... | RCON 2200 8,134,739 | 13.a.
____________________________
(1) Noninterest-bearing(1) ................................ | RCON 6631 2,366,568 | /////////////////////// | 13.a.(1)
(2) Interest-bearing ...................................... | RCON 6636 5,768,171 | /////////////////////// | 13.a.(2)
____________________________
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, | /////////////////////// |
part II) .............................................................................. | RCFN 2200 261,352 | 13.b.
____________________________
(1) Noninterest-bearing ................................... | RCFN 6631 0 | /////////////////////// | 13.b.(1)
(2) Interest-bearing ...................................... | RCFN 6636 261,352 | /////////////////////// | 13.b.(2)
____________________________
14. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | /////////////////////// |
a. Federal funds purchased ............................................................... | RCFD 0278 2,009,304 | 14.a.
b. Securities sold under agreements to repurchase ........................................ | RCFD 0279 55,853 | 14.b.
15. a. Demand notes issued to the U.S. Treasury .............................................. | RCON 2840 170,257 | 15.a.
b. Trading liabilities (from Schedule RC-D) .............................................. | RCFD 3548 460 | 15.b.
16. Other borrowed money: | /////////////////////// |
a. With a remaining maturity of one year or less.......................................... | RCFD 2332 954,145 | 16.a.
b. With a remaining maturity of more than one year........................................ | RCFD 2333 143,887 | 16.b.
17. Mortgage indebtedness and obligations under capitalized leases ........................... | RCFD 2910 8,762 | 17.
18. Bank's liability on acceptances executed and outstanding ................................. | RCFD 2920 6,513 | 18.
19. Subordinated notes and debentures ........................................................ | RCFD 3200 440,000 | 19.
20. Other liabilities (from Schedule RC-G) ................................................... | RCFD 2930 363,079 | 20.
21. Total liabilities (sum of items 13 through 20) ........................................... | RCFD 2948 12,548,351 | 21.
| /////////////////////// |
22. Limited-life preferred stock and related surplus ......................................... | RCFD 3282 0 | 22.
EQUITY CAPITAL | /////////////////////// |
23. Perpetual preferred stock and related surplus ............................................ | RCFD 3838 125,000 | 23.
24. Common stock ............................................................................. | RCFD 3230 19,487 | 24.
25. Surplus (exclude all surplus related to preferred stock).................................. | RCFD 3839 955,984 | 25.
26. a. Undivided profits and capital reserves ................................................ | RCFD 3632 286,513 | 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities ................ | RCFD 8434 (7,770)| 26.b.
27. Cumulative foreign currency translation adjustments ...................................... | RCFD 3284 0 | 27.
28. Total equity capital (sum of items 23 through 27) ........................................ | RCFD 3210 1,379,214 | 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, | /////////////////////// |
and 28) .................................................................................. | RCFD 3300 13,927,565 | 29.
___________________________
</TABLE>
<TABLE>
<CAPTION>
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the Number
most comprehensive level of auditing work performed for the bank by independent external __________________
auditors as of any date during 1995 ............................................................... | RCFD 6724 2 | M.1.
__________________
<S> <C>
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)
<FN>
____________
(1) Includes total demand deposits and noninterest-bearing time and savings deposits.
</TABLE>

<PAGE>

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-3
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-A--Cash and Balances Due From Depository Institutions
Exclude assets held for trading.
__________
| C405 | <-
_________________________________ ________
| (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Cash items in process of collection, unposted debits, and currency and | ////////////////// | ////////////////// |
coin .................................................................... | 0022 553,818 | ////////////////// | 1.
a. Cash items in process of collection and unposted debits .............. | ////////////////// | 0020 418,841 | 1.a.
b. Currency and coin .................................................... | ////////////////// | 0080 134,977 | 1.b.
2. Balances due from depository institutions in the U.S. ................... | ////////////////// | 0082 89,741 | 2.
a. U.S. branches and agencies of foreign banks (including their IBFs) ... | 0083 0 | ////////////////// | 2.a.
b. Other commercial banks in the U.S. and other depository institutions | ////////////////// | ////////////////// |
in the U.S. (including their IBFs) ................................... | 0085 89,741 | ////////////////// | 2.b.
3. Balances due from banks in foreign countries and foreign central banks .. | ////////////////// | 0070 1,038 | 3.
a. Foreign branches of other U.S. banks ................................. | 0073 0 | ////////////////// | 3.a.
b. Other banks in foreign countries and foreign central banks ........... | 0074 1,038 | ////////////////// | 3.b.
4. Balances due from Federal Reserve Banks ................................. | 0090 0 | 0090 0 | 4.
5. Total (sum of items 1 through 4) (total of column A must equal | ////////////////// | ////////////////// |
Schedule RC, sum of items 1.a and 1.b) .................................. | 0010 644,597 | 0010 644,597 | 5.
___________________________________________
<CAPTION>
______________________
Memorandum Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Noninterest-bearing balances due from commercial banks in the U.S. (included in item 2, | ////////////////// |
column B above) .............................................................................. | 0050 89,566 | M.1.
______________________
</TABLE>

Schedule RC-B--Securities
Exclude assets held in trading accounts.
<TABLE>
_______
| C410 |

___________________________________________________________________________ ________
| Held-to-maturity | Available-for-sale |
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
____________________ ____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________ ____________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C> <C>
1. U.S. Treasury securities ......... | 0211 250 | 0213 250 | 1286 843,487 | 1287 829,503 | 1.
2. U.S. Government agency | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and corporation obligations | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(exclude mortgage-backed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities): | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Issued by U.S. Govern- | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
ment agencies(2) .............. | 1289 0 | 1290 0 | 1291 0 | 1293 0 | 2.a.
b. Issued by U.S. | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
Government-sponsored | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
agencies(3) ................... | 1294 0 | 1295 0 | 1297 0 | 1298 0 | 2.b.
_____________________________________________________________________________________
<FN>
_____________
(1) Includes equity securities without readily determinable fair values at historical cost in item 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates," U.S. Maritime Administration obligations, and
Export-Import Bank participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the Farm Credit System, the Federal Home
Loan Bank System, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Financing
Corporation, Resolution Funding Corporation, the Student Loan Marketing Association, and the Tennessee Valley Authority.
</TABLE>

<PAGE>

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-4
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-B--Continued

_____________________________________________________________________________________
| Held-to-maturity | Available-for-sale |
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
____________________ ____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________________________ ____________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
3. Securities issued by states | ////////////////// |/ //////////////// | ////////////////// | ///////////////// |
and political subdivisions | ////////////////// |////////////////// | ////////////////// | ///////////////// |
in the U.S.: | ////////////////// |////////////////// | ////////////////// | ////////// ////// |
a. General obligations ......... | 1676 0 |1677 0 | 1678 0 | 1679 0 | 3.a.
b. Revenue obligations ......... | 1681 42 |1686 45 | 1690 0 | 1691 0 | 3.b.
c. Industrial development ...... | ////////////////// |////////////////// | ////////////////// | ///////////////// |
and similiar obligations ........| 1694 0 |1695 0 | 1696 0 | 1697 0 | 3.c.
4. Mortgage-backed: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (MBS): | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Pass-through securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(1) Guaranteed by | ////////////////// |////////////////// | ////////////////// | ///////////////// |
GNMA ....................... | 1698 0 |1699 0 | 1701 849 | 1702 849 | 4.a.(1)
(2) Issued by FNMA | ////////////////// |////////////////// | ////////////////// | ///////////////// |
and FHLMC ................. | 1703 0 |1705 0 | 1706 847,095 | 1707 849,756 | 4.a.(2)
(3) Other pass-through | ////////////////// |////////////////// | ///////////////////| ///////////////// |
secruities ................. | 1709 0 |1710 0 | 1711 0 | 1713 0 | 4.a.(3)
b. Other mortgage-backed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (include CMO's, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
REMICs, and stripped | ////////////////// |////////////////// | ////////////////// | ///////////////// |
MBS): | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(1) Issued or guaranteed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
by FNMA, FHLMC, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
or GNMA ............... | 1714 0 |1715 0 | 1716 0 | 1717 0 | 4.b.(1)
(2) Collateralized | ////////////////// |////////////////// | ////////////////// | ///////////////// |
by MBS issued or | ////////////////// |////////////////// | ////////////////// | ///////////////// |
guaranteed by FNMA | ////////////////// |////////////////// | ////////////////// | ///////////////// |
FHLMC, or GNMA ........ | 1718 0 |1719 0 | 1731 0 | 1732 0 | 4.b.(2)
(3) All other mortgage- | ////////////////// |////////////////// | ////////////////// | //////////////// |
backed securities ..... | 1733 0 |1734 0 | 1735 0 | 1736 0 | 4.b.(3)
5. Other debt securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Other domestic debt | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities | 1737 0 |1738 0 | 1739 478 | 1741 475 | 5.a.
b. Foreign debt | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities ................. | 1742 2,900 |1743 2,900 | 1744 0 | 1746 0 | 5.b.
6. Equity securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Investments in mutual | ////////////////// |////////////////// | ////////////////// | ///////////////// |
funds ...................... | ////////////////// |////////////////// | 1747 9,427 | 1748 9,427 | 6.a.
b. Other equity securities | ////////////////// |////////////////// | ////////////////// | ///////////////// |
with readily determin- | ////////////////// |////////////////// | ////////////////// | ///////////////// |
able fair values ........... | ////////////////// |////////////////// | 1749 0 | 1751 0 | 6.b.
c. All other equity | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (1) ............. | ////////////////// |////////////////// | 1752 116,420 | 1753 116,420 | 6.c.
7. Total (sum of items 1 | ////////////////// |////////////////// | ////////////////// | ///////////////// |
through 6) (total of | ////////////////// |////////////////// | ////////////////// | ///////////////// |
column A must equal | ////////////////// |////////////////// | ////////////////// | ///////////////// |
Schedule RC, item 2.a) | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(total of column D must | ////////////////// |////////////////// | ////////////////// | ///////////////// |
equal Schedule RC, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
item 2.b) ..................... | 1754 3,192 | 1771 3,195 | 1772 1,817,756 | 1773 1,806,430 | 7.
____________ |__________________________________________________________________________________|
1) Includes equity securities without readily determinable fair values at historical cost in item 6.c, column D.

</TABLE>
14

<PAGE>

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-5
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-B--Continued

<CAPTION>
___________
Memoranda | C412 | <-
___________ _________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Pledged securities(2) ......................................................................... | 0416 934,681 | M.1.
2. Maturity and repricing data for debt securities(2)(3)(4) (excluding those in nonaccrual status):| ////////////////// |
a. Fixed rate debt securities with a remaining maturity of: | ////////////////// |
(1) Three months or less ................................................................... | 0343 5,621 | M.2.a.(1)
(2) Over three months through 12 months .................................................... | 0344 0 | M.2.a.(2)
(3) Over one year through five years ....................................................... | 0345 1,548,431 | M.2.a.(3)
(4) Over five years ........................................................................ | 0346 27,232 | M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1) through 2.a.(4)) ..... | 0347 1,581,284 | M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently ........................................................... | 4544 99,741 | M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ | 4545 2,750 | M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. | 4551 0 | M.2.b.(3)
(4) Less frequently than every five years .................................................. | 4552 0 | M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum items 2.b.(1) through 2.b.(4)) .. | 4553 102,491 | M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must equal total debt | ////////////////// |
securities from Schedule RC-B, sum of items 1 through 5, columns A and D, minus nonaccrual | ////////////////// |
debt securities included in Schedule RC-N, item 9, column C) ............................... | 0393 1,683,775 | M.2.c.
3. Not applicable | ////////////////// |
4. Held-to-maturity debt securities restructured and in compliance with modified terms (included | ////////////////// |
in Schedule RC-B, items 3 through 5, column A, above) ......................................... | 5365 0 | M.4.
5. Not applicable | ////////////////// |
6. Floating rate debt securities with a remaining maturity of one year or less(2)(4) (included in | ////////////////// |
Memorandum items 2.b(1) through 2.b.(4) above)................................................. | 5519 1,000 | M.6.
7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale or | ////////////////// |
trading securities during the calendar year-to-date (report the amortized cost at date of sale. | ////////////////// |
or transfer ................................................................................... | 1778 0 | m.7.
8. High-Risk mortgage securities (included in the held-to-maturity and available-for-sale | ////////////////// |
accounts in Schedule RC-B, item 4.b): | ////////////////// |
a. Amortized cost ............................................................................. | 8780 0 | M.8.a.
b. Fair Value ................................................................................. | 8781 0 | M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-sale accounts in | ////////////////// |
Schedule RC-B, items.2, 3, and 5): | ////////////////// |
a. Amortized cost ............................................................................. | 8782 0 | M.9.a.
b. Fair Value ................................................................................. | 8783 0 | M.9.b.
----------------------
____________
(2) Includes held-to-maturity securities at amortized cost and available-for-sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual funds, Federal Reserve stock, common stock, and preferred stock.
(4) Memorandum items 2 and 6 are not applicable to savings banks that must complete supplemental Schedule RC-J.

</TABLE>

Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT
Address: 777 MAIN STREET Call Date: 3/31/96 ST-BK: 09-0590 FFIEC 031
City, State Zip: HARTFORD, CT 06115 Page RC-6

<CAPTION>
Schedule RC-C--Loans and Lease Financing Receivables

Part I. Loans and Leases

Do not deduct the allowance for loan and lease losses from amounts __________
reported in this schedule. Report total loans and leases, net of unearned _________________________________| C415 | <-
income. Exclude assets held for trading. | (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Loans secured by real estate ........................................... | 1410 3,574,653 | ////////////////// | 1.
a. Construction and land development ................................... | ////////////////// | 1415 51,282 | 1.a.
b. Secured by farmland (including farm residential and other | ////////////////// | ////////////////// |
improvements) ....................................................... | ////////////////// | 1420 307 | 1.b.
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit ................... | ////////////////// | 1797 325,605 | 1.c.(1)
(2) All other loans secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(a) Secured by first liens ...................................... | ////////////////// | 5367 2,073,517 | 1.c.(2)(a)
(b) Secured by junior liens ..................................... | ////////////////// | 5368 172,054 | 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties ........... | ////////////////// | 1460 65,430 | 1.d.
e. Secured by nonfarm nonresidential properties ........................ | ////////////////// | 1480 886,458 | 1.e.
2. Loans to depository institutions: | ////////////////// | ////////////////// |
a. To commercial banks in the U.S. ..................................... | ////////////////// | 1505 204,042 | 2.a.
(1) To U.S. branches and agencies of foreign banks .................. | 1506 0 | ////////////////// | 2.a.(1)
(2) To other commercial banks in the U.S. ........................... | 1507 204,042 | ////////////////// | 2.a.(2)
b. To other depository institutions in the U.S. ........................ | 1517 0 | 1517 0 | 2.b.
c. To banks in foreign countries ....................................... | ////////////////// | 1510 0 | 2.c.
(1) To foreign branches of other U.S. banks ......................... | 1513 0 | ////////////////// | 2.c.(1)
(2) To other banks in foreign countries ............................. | 1516 0 | ////////////////// | 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers .... | 1590 1,568 | 1590 1,568 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ....................................... | 1763 5,397,715 | 1763 5,397,715 | 4.a.
b. To non-U.S. addressees (domicile) ................................... | 1764 0 | 1764 0 | 4.b.
5. Acceptances of other banks: | ////////////////// | ////////////////// |
a. Of U.S. banks ....................................................... | 1756 1,538 | 1756 1,538 | 5.a.
b. Of foreign banks .................................................... | 1757 0 | 1757 0 | 5.b.
6. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// |
expenditures (i.e., consumer loans) (includes purchased paper) ......... | ////////////////// | 1975 548,048 | 6.
a. Credit cards and related plans (includes check credit and other | ////////////////// | ////////////////// |
revolving credit plans) ............................................. | 2008 25,114 | ////////////////// | 6.a.
b. Other (includes single payment, installment, and all student loans) . | 2011 522,934 | ////////////////// | 6.b.
7. Loans to foreign governments and official institutions (including | ////////////////// | ////////////////// |
foreign central banks) ................................................. | 2081 0 | 2081 0 | 7.
8. Obligations (other than securities and leases) of states and political | ////////////////// | ////////////////// |
subdivisions in the U.S. (includes nonrated industrial development | ////////////////// | ////////////////// |
obligations) ........................................................... | 2107 27,864 | 2107 27,864 | 8.
9. Other loans ............................................................ | 1563 934,616 | ////////////////// | 9.
a. Loans for purchasing or carrying securities (secured and unsecured) . | ////////////////// | 1545 155,278 | 9.a.
b. All other loans (exclude consumer loans) ............................ | ////////////////// | 1564 779,338 | 9.b.
10. Lease financing receivables (net of unearned income) ................... | ////////////////// | 2165 7,297 | 10.
a. Of U.S. addressees (domicile) ....................................... | 2182 7,297 | ////////////////// | 10.a.
b. Of non-U.S. addressees (domicile) ................................... | 2183 0 | ////////////////// | 10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above ........ | 2123 17,613 | 2123 17,613 | 11.
12. Total loans and leases, net of unearned income (sum of items 1 through | ////////////////// | ////////////////// |
10 minus item 11) (total of column A must equal Schedule RC, item 4.a) . | 2122 10,679,728 | 2122 10,679,728 | 12.
___________________________________________
</TABLE>

<PAGE>

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC031
Address: 777 MAIN STREET Page: RC-7
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-C--Continued

Part I. Continued
___________________________________________
| (Column A) | (Column B) |
| Consolidated | Domestic |
Memoranda | Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Commercial paper included in Schedule RC-C, part I, above .............. | 1496 0 | 1496 0 | M.1.
2. Loans and leases restructured and in compliance with modified terms | ////////////////// | ////////////////// |
(included in Schedule RC-C, part I, above and not reported as past due | ////////////////// | ////////////////// |
or nonaccrual in Schedule RC-N, Memorandum item 1): | ////////////////// | ////////////////// |
a. Loans secured by real estate: | ////////////////// | ////////////////// |
(1) To U.S. addressees (domicile) ................................... | 1687 19,431 | M.2.a.(1)
(2) To non-U.S. addressees (domicile) ............................... | 1689 0 | M.2.a.(2)
b. All other loans and all lease financing receivables (exclude loans | ////////////////// |
to individuals for household, family, and other personal expenditures)| 8691 0 | M.2.b.
c. Commercial and industrial loans to and lease financing receivables | ////////////////// |
of non-U.S. addressees (domicile) included in Memorandum item 2.b | ////////////////// |
above ............................................................... | 8692 0 | M.2.c.
3. Maturity and repricing data for loans and leases(1) (excluding those | ////////////////// |
in nonaccrual status): | ////////////////// |
a. Fixed rate loans and leases with a remaining maturity of: | ////////////////// |
(1) Three months or less ............................................ | 0348 4,174,641 | M.3.a.(1)
(2) Over three months through 12 months ............................. | 0349 85,961 | M.3.a.(2)
(3) Over one year through five years ................................ | 0356 965,740 | M.3.a.(3)
(4) Over five years ................................................. | 0357 1,877,648 | M.3.a.(4)
(5) Total fixed rate loans and leases (sum of | ////////////////// |
Memorandum items 3.a.(1) through 3.a.(4)) ....................... | 0358 7,103,990 | M.3.a.(5)
b. Floating rate loans with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently .................................... | 4554 2,937,472 | M.3.b.(1)
(2) Annually or more frequently, but less frequently than quarterly . | 4555 547,425 | M.3.b.(2)
(3) Every five years or more frequently, but less frequently than | ////////////////// |
annually ........................................................ | 4561 20,958 | M.3.b.(3)
(4) Less frequently than every five years ........................... | 4564 0 | M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items 3.b.(1) | ////////////////// |
through 3.b.(4)) ................................................ | 4567 3,505,855 | M.3.b.(5)
c. Total loans and leases (sum of Memorandum items 3.a.(5) and 3.b.(5)) | ////////////////// |
(must equal the sum of total loans and leases, net, from | ////////////////// |
Schedule RC-C, part I, item 12, plus unearned income from | ////////////////// |
Schedule RC-C, part I, item 11, minus total nonaccrual loans and | ////////////////// |
leases from Schedule RC-N, sum of items 1 through 8, column C) ...... | 1479 10,609,845 | M.3.c.
d. Floating rate loans with a remaining maturity of one year or less | ////////////////// |
(included in Memorandum items 3.b.(1) through 3.b.(4) above)......... | A246 277,721 | M.3.d.
4. Loans to finance commercial real estate, construction, and land | ////////////////// |
development activities (not secured by real estate) included in | ////////////////// |
Schedule RC-C, part I, items 4 and 9, column A, page RC-6(2) ........... | 2746 47,652 | M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, | ////////////////// |
above .................................................................. | 5369 0 | M.5.
6. Adjustable rate closed-end loans secured by first liens on 1-4 family | ////////////////// |_____________________
residential properties (included in Schedule RC-C, part I, item | ////////////////// | RCON Bil Mil Thou |
| ////////////////// |____________________
1.c.(2)(a), column B, page RC-6) ....................................... | ////////////////// | 5370 425,358 | M.6.
___________________________________________
<FN>
_____________________________
(1) Memorandum item 3 is not applicable to savings banks that must complete supplememtal Schedule RC-J.
(2) Exclude loans secured by real estate that are included in Schedule RC-C, part I, item 1, column A.

Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-8
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________

Schedule RC-D--Trading Assets and Liabilities _________

Schedule RC-D is to be completed only by banks with $1 billion or more intotal assets or with $2 billion or more in par/notional
amount of off-balance sheet derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e, columns A through D).

| C420 |
Dollar Amounts in Thousands ////////// Bil Mil Thou
__________________________________________________________________________________________________ _______________|________|
<S> <C> <C>
ASSETS | /////////////////////// |
1. U.S. Treasury securities in domestic offices ................................................ | RCON 3531 0 | 1.
2. U.S. Government agency and corporation obligations in domestic offices (exclude mortgage- | /////////////////////// |
backed securities) .......................................................................... | RCON 3532 0 | 2.
3. Securities issued by states and political subdivisions in the U.S. in domestic offices ...... | RCON 3533 0 | 3.
4. Mortgage-backed securities (MBS) in domestic offices ........................................ | /////////////////////// |
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA ..................... | RCON 3534 0 | 4.a.
b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA | /////////////////////// |
(include CMOs, REMICs, and stripped MBS) ................................................. | RCON 3535 0 | 4.b.
c. All other mortgage-backed securities ......................................................| RCON 3536 0 | 4.c.
5. Other debt securities in domestic offices ................................................... | RCON 3537 0 | 5.
6. Certificates of deposit in domestic offices ................................................. | RCON 3538 0 | 6.
7. Commercial paper in domestic offices ........................................................ | RCON 3539 0 | 7.
8. Bankers acceptances in domestic offices ..................................................... | RCON 3540 0 | 8.
9. Other trading assets in domestic offices .................................................... | RCON 3541 0 | 9.
10. Trading assets in foreign offices ........................................................... | RCFN 3542 0 | 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other commodity and equity | /////////////////////// |
contracts: | /////////////////////// |
a. In domestic offices ...................................................................... | RCON 3543 484 | 11.a.
b. In foreign offices ....................................................................... | RCFN 3544 0 | 11.b.
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5) ........... | RCFD 3545 484 | 12.
<CAPTION>
___________________________
___________________________
| ///////// Bil Mil Thou |
LIABILITIES _________________________
<S> <C> <C>
13. Liability for short positions ............................................................... | RCFD 3546 0 | 13.
14. Revaluation losses on interest rate, foreign exchange rate, and other commodity and equity | /////////////////////// |
contracts ................................................................................... | RCFD 3547 460 | 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, item 15.b) ...... | RCFD 3548 460 | 15.
___________________________
</TABLE>

<PAGE>

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-9
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-E--Deposit Liabilities

Part I. Deposits in Domestic Offices
__________
| C425 | <-
______________________________________________________ ________
| | Nontransaction |
| Transaction Accounts | Accounts |
_________________________________________ ____________________
| (Column A) | (Column B) | (Column C) |
| Total transaction | Memo: Total | Total |
| accounts (including| demand deposits | nontransaction |
| total demand | (included in | accounts |
| deposits) | column A) | (including MMDAs) |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCON Bil Mil Thou | RCON Bil Mil Thou | RCON Bil Mil Thou |
__________________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
Deposits of: | ////////////////// | ////////////////// | ////////////////// |
1. Individuals, partnerships, and corporations .......... | 2201 1,870,879 | 2240 1,790,783 | 2346 5,557,638 | 1.
2. U.S. Government ...................................... | 2202 32,574 | 2280 32,277 | 2520 0 | 2.
3. States and political subdivisions in the U.S. ........ | 2203 150,578 | 2290 127,109 | 2530 106,071 | 3.
4. Commercial banks in the U.S. ......................... | 2206 202,546 | 2310 202,546 | 2550 100 | 4.
5. Other depository institutions in the U.S. ............ | 2207 174,699 | 2312 174,699 | 2349 500 | 5.
6. Banks in foreign countries ........................... | 2213 318 | 2320 318 | 2236 0 | 6.
7. Foreign governments and official institutions | ////////////////// | ////////////////// | ////////////////// |
(including foreign central banks) .................... | 2216 0 | 2300 0 | 2377 0 | 7.
8. Certified and official checks ........................ | 2330 38,836 | 2330 38,836 | ////////////////// | 8.
9. Total (sum of items 1 through 8) (sum of | ////////////////// | ////////////////// | ////////////////// |
columns A and C must equal Schedule RC, | ////////////////// | ////////////////// | ////////////////// |
item 13.a) ........................................... | 2215 2,470,430 | 2210 2,366,568 | 2385 5,664,309 | 9.
________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
______________________
Memoranda Dollar Amounts in Thousands | RCON Bil Mil Thou |
____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Selected components of total deposits (i.e., sum of item 9, columns A and C): | ////////////////// |
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts ......................... | 6835 698,350 | M.1.a.
b. Total brokered deposits ..................................................................... | 2365 974,688 | M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above): | ////////////////// |
(1) Issued in denominations of less than $100,000 ........................................... | 2343 60 | M.1.c.(1)
(2) Issued either in denominations of $100,000 or in denominations greater than $100,000 | ////////////////// |
and participated out by the broker in shares of $100,000 or less ........................ | 2344 974,628 | M.1.c.(2)
d. Maturity data for brokered deposits: | ////////////////// |
(1) Brokered deposits issued in denominations of less than $100,000 with a remaining | ////////////////// |
maturity of one year or less (included in Memorandum item 1.c.(1) above)................. | A243 40 | M.1.d.(1)
(2) Brokered deposits issued in denominations of $100,000 or more with a remaining | ////////////////// |
maturity of one year or less (included in memorandum item 1.b above)..................... | A244 348,862 | M.1.d.(2)
e. Preferred deposits (uninsured deposits of states and political subdivisions in the U.S. | ////////////////// |
reported in item 3 above which are secured or collateralized as required under state law) ... | 5590 250,556 | M.1.e.
2. Components of total nontransaction accounts (sum of Memoranda items 2.a through 2.d must | ////////////////// |
equal item 9, column C above): | ////////////////// |
a. Savings deposits: | ////////////////// |
(1) Money market deposit accounts (MMDAs) ................................................... | 6810 2,070,204 | M.2.a.(1)
(2) Other savings deposits (excludes MMDAs) ................................................. | 0352 607,255 | M.2.a.(2)
b. Total time deposits of less than $100,000 ................................................... | 6648 1,723,479 | M.2.b.
c. Time certificates of deposit of $100,000 or more ............................................ | 6645 1,263,371 | M.2.c.
d. Open-account time deposits of $100,000 or more .............................................. | 6646 0 | M.2.d.
3. All NOW accounts (included in column A above) .................................................. | 2398 103,862 | M.3.
4. Not applicable.
______________________
</TABLE>

<PAGE>

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-10
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
<CAPTION>
Schedule RC-E--Continued

Part I. Continued

Memoranda (continued)
_________________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
______________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
5. Maturity and repricing data for time deposits of less than $100,000 (sum of | ////////////////// |
Memorandum items 5.a.(1) through 5.b.(3) must equal Memorandum item 2.b above):(1) | ////////////////// |
a. Fixed rate time deposits of less than $100,000 with a remaining maturity of: | ////////////////// |
(1) Three months or less.................................................................... | A225 606,686 | M.5.a.(1)
(2) Over three months through 12 months..................................................... | A226 797,678 | M.5.a.(2)
(3) Over one year........................................................................... | A227 271,853 | M.5.a.(3)
b. Floating rate time deposits of less than $100,000 with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently............................................................ | A228 47,262 | M.5.b.(1)
(2) Annually or more frequently, but less frequently than quarterly......................... | A229 0 | M.5.b.(2)
(3) Less frequently than annually........................................................... | A230 0 | M.5.b.(3)
c. Floating rate time deposits of less than $100,000 with a remaining maturity of | ////////////////// |
one year or less (included in Memorandum items 5.b.(1) through 5.b.(3) above)............... | A231 28,168 | M.5.c.
6. Maturity and repricing data for time deposits of $100,000 or more (i.e., time certificates | ////////////////// |
of deposits of $100,000 or more and open-account time deposits of $100,000 or more) | ////////////////// |
(sum of Memorandum items 6.a.(1) through 6.b.(4) must equal the sum of Memorandum | ////////////////// |
items 2.c and 2.d above):(1) | ////////////////// |
a. Fixed rate time deposits of $100,000 or more with a remaining maturity of: | ////////////////// |
(1) Three months or less ................................................................... | A232 270,543 | M.6.a.(1)
(2) Over three months through 12 months .................................................... | A233 297.457 | M.6.a.(2)
(3) Over one year through five years ....................................................... | A234 695,371 | M.6.a.(3)
(4) Over five years ........................................................................ | A235 0 | M.6.a.(4)
b. Floating rate time deposits of $100,000 or more with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently ........................................................... | A236 0 | M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ | A237 0 | M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. | A238 0 | M.6.b.(3)
(4) Less frequently than every five years .................................................. | A239 0 | M.6.b.(4)
c. Floating rate time deposits of $100,000 or more with a remaining maturity of | ////////////////// |
one year or less (included in Memorandum items 6.b.(1) through 6.b.(4) above)............... | A240 0 | M.6.c.
______________________
<FN>
_____________
(1) Memorandum items 5 and 6 are not applicable to savings banks that must complete supplemental Schedule RC-J.
</TABLE>

<PAGE>

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-11
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-E--Continued

Part II. Deposits in Foreign Offices (including Edge and
Agreement subsidiaries and IBFs)

______________________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
Deposits of: | ////////////////// |
1. Individuals, partnerships, and corporations ................................................... | 2621 256,352 | 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks) ................................ | 2623 0 | 2.
3. Foreign banks (including U.S. branches and agencies of foreign banks, including their IBFs).... | 2625 5,000 | 3.
4. Foreign governments and official institutions (including foreign central banks) ............... | 2650 0 | 4.
5. Certified and official checks ................................................................. | 2330 0 | 5.
6. All other deposits ............................................................................ | 2668 0 | 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b) .......................... | 2200 261,352 | 7.

Memorandum
Dollar Amounts in Thousands |RCFN Bil Mil Thou |
1. Time deposits with a remaining maturity of one year or less (included in Part II, item 7 above) |A245 261,352 | M.1.
______________________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-F--Other Assets
__________
| C430 | <-
_________________ ________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. Income earned, not collected on loans ........................................................ | RCFD 2164 51,988 | 1.
2. Net deferred tax assets(1) ................................................................... | RCFD 2148 166,839 | 2.
3. Excess residential mortgage servicing fees receivable ........................................ | RCFD 5371 17,484 | 3.
4. Other (itemize and describe amounts that exceed 25% of this item)............................. | RCFD 2168 379,174 | 4.
_____________ ___________________________
a. | TEXT 3549 |____________________________________________________| RCFD 3549 | | /////////////////////// | 4.a.
___________
b. | TEXT 3550 |____________________________________________________| RCFD 3550 | | /////////////////////// | 4.b.
___________
c. | TEXT 3551 |____________________________________________________| RCFD 3551 | | /////////////////////// | 4.c.
_____________
___________________________
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11) ........................... | RCFD 2160 615,485 | 5.
___________________________
<CAPTION>
Memorandum ___________________________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. Deferred tax assets disallowed for regulatory capital purposes ............................... | RCFD 5610 0 | M.1.
___________________________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-G--Other Liabilities
__________
| C435 | <-
_________________ ________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. a. Interest accrued and unpaid on deposits in domestic offices(2) ............................ | RCON 3645 24,670 | 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable) ................. | RCFD 3646 305,857 | 1.b.
2. Net deferred tax liabilities(1) .............................................................. | RCFD 3049 0 | 2.
3. Minority interest in consolidated subsidiaries ............................................... | RCFD 3000 0 | 3.
4. Other (itemize and describe amounts that exceed 25% of this item)............................. | RCFD 2938 32,552 | 4.
_____________ ___________________________
a. | TEXT 3552 |____________________________________________________| RCFD 3552 | | /////////////////////// | 4.a.
___________
b. | TEXT 3553 |____________________________________________________| RCFD 3553 | | /////////////////////// | 4.b.
___________
c. | TEXT 3554 |____________________________________________________| RCFD 3554 | | /////////////////////// | 4.c.
_____________
___________________________
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20) ........................... | RCFD 2930 363,079 | 5.
___________________________
<FN>
____________
(1) See discussion of deferred income taxes in Glossary entry on "income taxes."
(2) For savings banks, include "dividends" accrued and unpaid on deposits.
</TABLE>

<PAGE>

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-12
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-H--Selected Balance Sheet Items for Domestic Offices
__________
| C440 | <-
____________ ________
| Domestic Offices |
____________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
_____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Customers' liability to this bank on acceptances outstanding .................................... | 2155 6,513 | 1.
2. Bank's liability on acceptances executed and outstanding ........................................ | 2920 6,513 | 2.
3. Federal funds sold and securities purchased under agreements to resell .......................... | 1350 0 | 3.
4. Federal funds purchased and securities sold under agreements to repurchase ...................... | 2800 2,065,157 | 4.
5. Other borrowed money ............................................................................ | 3190 1,098,032 | 5.
EITHER | ////////////////// |
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... | 2163 N/A | 6.
OR | ////////////////// |
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs ....................... | 2941 261,771 | 7.
8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, and IBFs) . | 2192 13,927,565 | 8.
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement subsidiaries, and IBFs)| 3129 12,286,580 | 9.
______________________

</TABLE>
<TABLE>
<CAPTION>
Items 10-17 include held-to-maturity and available-for-sale securities in domestic offices. ______________________
| RCON Bil Mil Thou |
____________________
<S> <C> <C>
10. U.S. Treasury securities ....................................................................... | 1779 829,753 | 10.
11. U.S. Government agency and corporation obligations (exclude mortgage-backed | ////////////////// |
securities) .................................................................................... | 1785 0 | 11.
12. Securities issued by states and political subdivisions in the U.S. ............................. | 1786 42 | 12.
13. Mortgage-backed securities (MBS): | ////////////////// |
a. Pass-through securities: | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ............................................ | 1787 850,605 | 13.a.(1)
(2) Other pass-through securities ........................................................... | 1869 0 | 13.a.(2)
b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS): | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ............................................ | 1877 0 | 13.b.(1)
(2) All other mortgage-backed securities..................................................... | 2253 0 | 13.b.(2)
14. Other domestic debt securities ................................................................. | 3159 475 | 14.
15. Foreign debt securities ........................................................................ | 3160 2,900 | 15.
16. Equity securities: | ////////////////// |
a. Investments in mutual funds ................................................................. | 3161 9,427 | 16.a.
b. Other equity securities with readily determinable fair values ............................... | 3162 0 | 16.b.
c. All other equity securities ................................................................. | 3169 116,420 | 16.c.
17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16) .......... | 3170 1,809,622 | 17.
______________________

</TABLE>
<TABLE>
<CAPTION>
Memorandum (to be completed only by banks with IBFs and other "foreign" offices)

______________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
_____________________________________________________________________________________________________ ____________________
<S> <C> <C>
EITHER | ////////////////// |
1. Net due from the IBF of the domestic offices of the reporting bank .............................. | 3051 N/A | M.1.
OR | ////////////////// |
2. Net due to the IBF of the domestic offices of the reporting bank ................................ | 3059 N/A | M.2.
______________________
</TABLE>

<PAGE>

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-13
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-I--Selected Assets and Liabilities of IBFs

To be completed only by banks with IBFs and other "foreign" offices. __________
| C445 | <-
____________ ________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
_____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12) .................. | 2133 N/A | 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, item 12, | ////////////////// |
column A) ...................................................................................... | 2076 N/A | 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4, column A) ..... | 2077 N/A | 3.
4. Total IBF liabilities (component of Schedule RC, item 21) ...................................... | 2898 N/A | 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule RC-E, | ////////////////// |
part II, items 2 and 3) ........................................................................ | 2379 N/A | 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1, 4, 5, and 6) ...... | 2381 N/A | 6.
______________________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-K--Quarterly Averages (1)
__________
| C455 | <-
_________________ ________
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
_______________________________________________________________________________________________ _________________________
<S> <C> <C>
ASSETS | /////////////////////// |
1. Interest-bearing balances due from depository institutions ............................... | RCFD 3381 1,841 | 1.
2. U.S. Treasury securities and U.S. Government agency and corporation obligations(2) ....... | RCFD 3382 2,327,287 | 2.
3. Securities issued by states and political subdivisions in the U.S.(2) .................... | RCFD 3383 42 | 3.
4. a. Other debt securities(2) .............................................................. | RCFD 3647 537,639 | 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal Reserve stock) . | RCFD 3648 124,253 | 4.b.
5. Federal funds sold and securities purchased under agreements to resell in domestic offices | /////////////////////// |
of the bank and of its Edge and Agreement subsidiaries, and in IBFs ...................... | RCFD 3365 24,049 | 5.
6. Loans: | /////////////////////// |
a. Loans in domestic offices: | /////////////////////// |
(1) Total loans ....................................................................... | RCON 3360 11,036,031 | 6.a.(1)
(2) Loans secured by real estate ...................................................... | RCON 3385 3,924,553 | 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers ............... | RCON 3386 1,787 | 6.a.(3)
(4) Commercial and industrial loans ................................................... | RCON 3387 5,456,987 | 6.a.(4)
(5) Loans to individuals for household, family, and other personal expenditures ....... | RCON 3388 620,136 | 6.a.(5)
| /////////////////////// |
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs ............. | RCFN 3360 0 | 6.b.
7. Trading assets ........................................................................... | RCFD 3401 658 | 7.
8. Lease financing receivables (net of unearned income) ..................................... | RCFD 3484 9,155 | 8.
9. Total assets (4) ......................................................................... | RCFD 3368 15,745,746 | 9.
LIABILITIES | /////////////////////// |
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS accounts, | /////////////////////// |
and telephone and preauthorized transfer accounts) (exclude demand deposits) ............. | RCON 3485 145,491 | 10.
11. Nontransaction accounts in domestic offices: | /////////////////////// |
a. Money market deposit accounts (MMDAs) ................................................. | RCON 3486 1,367,351 | 11.a.
b. Other savings deposits ................................................................ | RCON 3487 1,715,719 | 11.b.
c. Time certificates of deposit of $100,000 or more ...................................... | RCON 3345 1,290,422 | 11.c.
d. All other time deposits ............................................................... | RCON 3469 2,270,162 | 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs .. | RCFN 3404 357,799 | 12.
13. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs .............. | RCFD 3353 2,634,782 | 13.
14. Other borrowed money ..................................................................... | RCFD 3355 1,058,218 | 14.
___________________________
<FN>
_____________
(1) For all items, banks have the option of reporting either (1) an average of daily figures for the quarter, or
(2) an average of weekly figures (i.e., the Wednesday of each week of the quarter).
(2) Quarterly averages for all debt securities should be based on amortized cost.
(3) Quarterly averages for all equity securities should be based on historical cost.
(4) The quarterly average for total assets should reflect all debt securities (not held for trading) at amortized
cost, equity securities with readily determinable fair values at the lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost.
</TABLE>

<PAGE>

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-14
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-L--Off-Balance Sheet Items

Please read carefully the instructions for the preparation of Schedule RC-L. Some of the amounts
reported in Schedule RC-L are regarded as volume indicators and not necessarily as measures of risk. __________
| C460 | <-
____________ ________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Unused commitments: | ////////////////// |
a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home | ////////////////// |
equity lines ............................................................................... | 3814 404,731 | 1.a.
b. Credit card lines .......................................................................... | 3815 0 | 1.b.
c. Commercial real estate, construction, and land development: | ////////////////// |
(1) Commitments to fund loans secured by real estate ....................................... | 3816 112,242 | 1.c.(1)
(2) Commitments to fund loans not secured by real estate ................................... | 6550 4,610 | 1.c.(2)
d. Securities underwriting .................................................................... | 3817 0 | 1.d.
e. Other unused commitments ................................................................... | 3818 5,996,651 | 1.e.
2. Financial standby letters of credit and foreign office guarantees ............................. | 3819 1,038,270 | 2.
___________________________
a. Amount of financial standby letters of credit conveyed to others | RCFD 3820 | 1,075 | ////////////////// | 2.a.
___________________________
3. Performance standby letters of credit and foreign office guarantees ........................... | 3821 48,181 | 3.
a. Amount of performance standby letters of credit conveyed to | ////////////////// |
___________________________
others .......................................................... | RCFD 3822 | 0 | ////////////////// | 3.a.
___________________________
4. Commercial and similar letters of credit ...................................................... | 3411 129,940 | 4.
5. Participations in acceptances (as described in the instructions) conveyed to others by | ////////////////// |
the reporting bank ............................................................................ | 3428 0 | 5.
6. Participations in acceptances (as described in the instructions) acquired by the reporting | ////////////////// |
(nonaccepting) bank ........................................................................... | 3429 0 | 6.
7. Securities borrowed ........................................................................... | 3432 0 | 7.
8. Securities lent (including customers' securities lent where the customer is indemnified | ////////////////// |
against loss by the reporting bank) ........................................................... | 3433 0 | 8.
9. Loans transferred (i.e., sold or swapped) with recourse that have been treated as sold for | ////////////////// |
Call Report purposes: | ////////////////// |
a. FNMA and FHLMC residential mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3650 60,259 | 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3651 54,182 | 9.a.(2)
b. Private (nongovernment-issued or -guaranteed) residential mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3652 0 | 9.b.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3653 0 | 9.b.(2)
c. Farmer Mac agricultural mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3654 0 | 9.c.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3655 0 | 9.c.(2)
d. Small business obligations transferred with recourse under Section 208 of the | ////////////////// |
Riegle Community Development and Regulatory Improvement Act of 1994: | ////////////////// |
(1) Outstanding principal balance of small business obligations transferred | ////////////////// |
as of the report date................................................................... | A249 0 | 9.d.(1)
(2) Amount of retained recourse on these obligations as of the report date.................. | A250 0 | 9.d.(2)
10. When-issued securities: | ////////////////// |
a. Gross commitments to purchase .............................................................. | 3434 0 | 10.a.
b. Gross commitments to sell .................................................................. | 3435 0 | 10.b.
11. Spot foreign exchange contracts ............................................................... | 8765 0 | 11.
12. All other off-balance sheet liabilities (exclude off-balance sheet derivatives ) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") | 3430 0 | 12.
a. | TEXT 3555 |______________________________________________________| RCFD 3555 | | ////////////////// | 12.a.

b. | TEXT 3556 |______________________________________________________| RCFD 3556 | | ////////////////// | 12.b.
___________
c. | TEXT 3557 |______________________________________________________| RCFD 3557 | | ////////////////// | 12.c.
_____________
d. | TEXT 3558 |______________________________________________________| RCFD 3558 | | ////////////////// | 12.d.
_____________

Dollar Amounts in Thousands RCFD Bil Mil Thou
13. All other off-balance sheet assets (exclude off-balance sheet derivatives) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC,item 28,"Total equity capital") | 5591 0 | 13.

_____________ __________________________
a. | TEXT 5592 |______________________________________________________| RCFD 5592 | | ////////////////// | 13.a.
___________
b. | TEXT 5593 |______________________________________________________| RCFD 5593 | | ////////////////// | 13.b.
___________
c. | TEXT 5594 |______________________________________________________| RCFD 5594 | | ////////////////// | 13.c.
_____________
d. | TEXT 5595 |______________________________________________________| RCFD 5595 | | ////////////////// | 13.d.
_____________
________________________________________________

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-15
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|

Schedule RC-L -- Continued

_____________
| C461 | <-
_________________________________________ ____________________________|___________|
| (Column A) | (Column B) | (Column C) | (Column D) |
| Interest Rate | Foreign Exchange | Equity Derivative | Commodity and other|
| Contracts | Contracts | Contracts | Contracts |
|___________________|____________________|____________________|____________________|
Dollar Amounts in Thousands |Tril Bil Mil Thou | Tril Bil Mil Thou | Tril Bil Mil Thou | Tril Bil Mil Thou |
______________________________________________________________________________________________________________________|
<S> <C> <C> <C> <C> <C>
| Off-balance Sheet Derivatives | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
| Position Indicators | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
___________________________________| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
14. Gross amounts (e.g., notional | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
amounts) (for each column, sum of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
items 14.a through 14.e must equal| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
sum of items 15, 16.a, and 16.b): |___________________|____________________|___________________ |____________________|
a. Future contracts .............. | 0 | 0 | 0 | 0 | 14.a.
| RCFD 8693 | RCFD 8694 | RCFD 8695 | RCFD 8696 |
b. Forward contracts ............. | 0 | 0 | 0 | 0 | 14.b.
| RCFD 8697 | RCFD 8698 | RCFD 8699 | RCFD 8700 |
c. Exchange-traded option contracts| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Written options .......... | 0 | 0 | 0 | 0 | 14.c.(1)
| RCFD 8701 | RCFD 8702 | RCFD 8703 | RCFD 8704 |
(2) Purchased options ........ | 0 | 0 | 0 | 0 | 14.c.(2)
| RCFD 8705 | RCFD 8706 | RCFD 8707 | RCFD 8708 |
d. Over-the-counter option contracts: | //////////////////| ///////////////// | ///////////////// | //////////////// |
(1) Written options .......... | 68,500 | 0 | 0 | 0 | 14.d.(1)
| RCFD 8709 | RCFD 8710 | RCFD 8711 | RCFD 8712 |
(2) Purchased options ........ | 368,500 | 0 | 0 | 0 | 14.d.(2)
| RCFD 8713 | RCFD 8714 | RCFD 8715 | RCFD 8716 |
e. Swaps ............................ | 4,553,328 | 0 | 0 | 0 | 14.e.
| RCFD 3450 | RCFD 3826 | RCFD 8719 | RCFD 8720 |
15. Total gross notional amount of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
derivative contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading ......................... | 160,000 | 0 | 0 | 0 | 15.
| RCFD A126 | RFD A127 | RCFD 8723 | RCFD 8724 |
16. Total gross notional amount of | ///////////////// | //////////////// | ///////////////// | ////////////////// |
derivative contracts held for | ///////////////// | ///////////////// | ///////////////// | ////////////////// |
purposes other than trading: | ///////////////// | ///////////////// | ///////////////// | ////////////////// |
a. Contracts marked to market ... | 0 | 0 | 0 | 0 | 16.a.
| RCFD 8725 | RCFD 8726 | RCF 8727 | RCFD 8728 |
b. Contracts not marked to market | 4,830,328 | 0 | 0 | 0 | 16.b.
| RCFD 8729 | RCFD 8730 | RFD 8731 | RCFD 8732 |
___________________________________________________________________________________|
</TABLE>

<PAGE>
25

Schedule RC-L -- Continued

<CAPTION>
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
| Interest Rate | Foreign Exchange | Equity Derivative | Commodity and other|
| Contracts | Contracts | Contracts | Contracts |
|___________________|____________________|____________________|____________________|
Dollar Amounts in thousands |RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________________________________________________________________________|
<S> <C> <C> <C> <C> <C>
| Off-balance Sheet Derivatives | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
| Position Indicators | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
___________________________________| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
17. Gross fair values of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
derivative contracts: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8733 484 | 8734 0 | 8735 0 | 8736 0 | 17.a.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8737 460 | 8738 0 | 8739 0 | 8740 0 | 17.a.(2)
b. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
purposes other than | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading that are marked | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
to market: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8741 0 | 8742 0 | 8743 0 | 8744 0 | 17.b.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8745 0 | 8746 0 | 8747 0 | 8748 0 | 17.b.(2)
c. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
purposes other than | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading that are not | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
marked to market: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value .................. | 8749 5,594 | 8750 0 | 8751 0 | 8752 0 | 17.c.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8753 44,514 | 8754 0 | 8755 0 | 8756 0 | 17.c.(2)
|__________________________________________________________________________________|

______________________
Memoranda Dollar Amounts in Thousands | RCFD Bil Mil Thou |
_________________________________________________________________________________________________________________________
1. -2. Not applicable | ////////////////// |
3. Unused commitments with an original maturity exceeding one year that are reported in | ////////////////// |
Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of commitments | ////////////////// |
that are fee paid or otherwise legally binding) ................................................ | 3833 4,493,867 | M.3.
a. Participations in commitments with an original maturity | ////////////////// |
exceeding one year conveyed to others ................................|RCFD 3834 | 93,830 | ////////////////// | M.3.a.
________________________
4. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Standby letters of credit and foreign office guarantees (both financial and performance) issued | ////////////////// |
to non-U.S. addressees (domicile) included in Schedule RC-L, items 2 and 3, above .............. | 3377 317,126 | M.4.
5. Installment loans to individuals for household, family, and other personal expenditures that | ////////////////// |
have been securitized and sold without recourse (with servicing retained), amounts outstanding | ////////////////// |
by type of loan: | ////////////////// |
a. Loans to purchase private passenger automobiles (to be completed for the | ////////////////// |
September report only)....................................................................... | 2741 N/A | M.5.a.
b. Credit cards and related plans (TO BE COMPLETED QUARTERLY)................................... | 2742 0 | M.5.b.
c. All other consumer installment credit (including mobile home loans)(to be completed for the | ////////////////// |
September report only........................................................................ | 2743 N/A | M.5.c
<PAGE>
</TABLE>

<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-17
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9| _____________
| C465 |
_________|___________|
Schedule RC-M--Memoranda | |
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
______________________________________________________________________________________________________|____________________|
<S> <C> <C>
1. Extensions of credit by the reporting bank to its executive officers, directors, principal | ////////////////// |
shareholders, and their related interests as of the report date: | ////////////////// |
a. Aggregate amount of all extensions of credit to all executive officers, directors, principal | ////////////////// |
shareholders and their related interests ..................................................... | 6164 159,583 | 1.a.
b. Number of executive officers, directors, and principal shareholders to whom the amount of all | ////////////////// |
extensions of credit by the reporting bank (including extensions of credit to | ////////////////// |
related interests) equals or exceeds the lesser of $500,000 or 5 percent Number | ////////////////// |
___________________________| ////////////////// |
of total capital as defined for this purpose in agency regulations. | RCFD 6165 | 7 | ////////////////// |
___________________________| ////////////////// | 1.b.
2. Federal funds sold and securities purchased under agreements to resell with U.S. branches | ////////////////// |
and agencies of foreign banks(1) (included in Schedule RC, items 3.a and 3.b) .................... | 3405 0 | 2.
3. Not applicable. | ////////////////// |
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others | ////////////////// |
(include both retained servicing and purchased servicing): | ////////////////// |
a. Mortgages serviced under a GNMA contract ...................................................... | 5500 20,866 | 4.a.
b. Mortgages serviced under a FHLMC contract: | ////////////////// |
(1) Serviced with recourse to servicer ........................................................ | 5501 11,305 | 4.b.(1)
(2) Serviced without recourse to servicer ..................................................... | 5502 1,163,045 | 4.b.(2)
c. Mortgages serviced under a FNMA contract: | ////////////////// |
(1) Serviced under a regular option contract .................................................. | 5503 48,954 | 4.c.(1)
(2) Serviced under a special option contract .................................................. | 5504 2,112,518 | 4.c.(2)
d. Mortgages serviced under other servicing contracts ............................................ | 5505 3,306,908 | 4.d.
5. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b must | ////////////////// |
equal Schedule RC, item 9): | ////////////////// |
a. U.S. addressees (domicile) .................................................................... | 2103 6,513 | 5.a.
b. Non-U.S. addressees (domicile) ................................................................ | 2104 0 | 5.b.
6. Intangible assets: | ////////////////// |
a. Mortgage servicing rights ..................................................................... | 3164 28,816 | 6.a.
b. Other identifiable intangible assets: | ////////////////// |
(1) Purchased credit card relationships ....................................................... | 5506 0 | 6.b.(1)
(2) All other identifiable intangible assets .................................................. | 5507 0 | 6.b.(2)
c. Goodwill ...................................................................................... | 3163 255,078 | 6.c.
d. Total (sum of items 6.a through 6.c) (must equal Schedule RC, item 10) ........................ | 2143 283,894 | 6.d.
e. Amount of intangible assets (included in item 6.b.(2) above) that have been grandfathered or | ////////////////// |
are otherwise qualifying for regulatory capital purposes ...................................... | 6442 0 | 6.e.
7. Mandatory convertible debt, net of common or perpetual preferred stock dedicated to | ////////////////// |
redeem the debt ...................................................................................| 3295 0 | 7.
______________________

- ------------
(1) Do not report federal funds sold and securities purchased under agreements to resell with other
commercial banks in the U.S. in this item.

</TABLE>
27

<PAGE>

<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATINAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-18
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|

Schedule RC-M--Continued ________________________
Dollar Amounts in Thousands | Bil Mil Thou|
_____________________________________________________________________________________________ |_______________________|
<S> <C> C>
8. a. Other real estate owned: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures ......................... | RCFD 5372 0 | 8.a.(1)
(2) All other real estate owned: | /////////////////////// |
(a) Construction and land development in domestic offices ....................... | RCON 5508 74 | 8.a.(2)(a)
(b) Farmland in domestic offices ................................................ | RCON 5509 0 | 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices ....................... | RCON 5510 596 | 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices .......... | RCON 5511 192 | 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices ....................... | RCON 5512 9 | 8.a.(2)(e)
(f) In foreign offices .......................................................... | RCFN 5513 0 | 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7) ....... | RCFD 2150 871 | 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures ......................... | RCFD 5374 0 | 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated companies ... | RCFD 5375 0 | 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8) ....... | RCFD 2130 0 | 8.b.(3)
c. Total assets of unconsolidated subsidiaries and associated companies ................ | RCFD 5376 0 | 8.c.
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC, | /////////////////////// |
item 23, "Perpetual preferred stock and related surplus" ............................... | RCFD 3778 0 | 9.
10. Mutual fund and annuity sales in domestic offices during the quarter (include | /////////////////////// |
proprietary, private label, and third party products): | /////////////////////// |
a. Money market funds .................................................................. | RCON 6441 0 | 10.a.
b. Equity securities funds ............................................................. | RCON 8427 0 | 10.b.
c. Debt securities funds ............................................................... | RCON 8428 0 | 10.c.
d. Other mutual funds .................................................................. | RCON 8429 0 | 10.d.
e. Annuities ........................................................................... | RCON 8430 0 | 10.e.
f. Sales of proprietary mutual funds and annuities (included in itmes 10.a through | /////////////////////// |
10.e. above) ........................................................................... | RCON 8784 0 | 10.f.
_________________________
</TABLE>
<TABLE>
<CAPTION>
_________________________________________________________________________________________________________________________________
| |
______________________
|Memorandum Dollar Amounts in Thousands | RCFD Bil Mil Thou | |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
|1. Interbank holdings of capital instruments (to be completed for the December report only): | ////////////////// | |
| a. Reciprocal holdings of banking organizations' capital instruments ........................ | 3836 N/A | M.1.a. |
| b. Nonreciprocal holdings of banking organizations' capital instruments ..................... | 3837 N/A | M.1.b. |
______________________
| |
_________________________________________________________________________________________________________________________________
</TABLE>

<PAGE>

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-19
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-N--Past Due and Nonaccrual Loans, Leases,
and Other Assets

The FFIEC regards the information reported in __________
all of Memorandum item 1, in items 1 through 10, | C470 | <-
column A, and in Memorandum items 2 through 4, ______________________________________________________ ________
column A, as confidential. | (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
| accruing | accruing | |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
1. Loans secured by real estate: | ////////////////// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ................ | 1245 | 1246 18,232 | 1247 53,840 | 1.a.
b. To non-U.S. addressees (domicile) ............ | 1248 | 1249 0 | 1250 0 | 1.b.
2. Loans to depository institutions and | ////////////////// | ////////////////// | ////////////////// |
acceptances of other banks: | ////////////////// | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository | ////////////////// | ////////////////// | ////////////////// |
institutions ................................. | 5377 | 5378 0 | 5379 0 | 2.a.
b. To foreign banks ............................. | 5380 | 5381 0 | 5382 0 | 2.b.
3. Loans to finance agricultural production and | ////////////////// | ////////////////// | ////////////////// |
other loans to farmers .......................... | 1594 | 1597 0 | 1583 100 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ................ | 1251 | 1252 1,756 | 1253 31,162 | 4.a.
b. To non-U.S. addressees (domicile) ............ | 1254 | 1255 0 | 1256 0 | 4.b.
5. Loans to individuals for household, family, and | ////////////////// | ////////////////// | ////////////////// |
other personal expenditures: | ////////////////// | ////////////////// | ///////////////// |
a. Credit cards and related plans ............... | 5383 | 5384 183 | 5385 184 | 5.a.
b. Other (includes single payment, installment, | ////////////////// | ////////////////// | ////////////////// |
and all student loans) ....................... | 5386 | 5387 1,542 | 5388 2,138 | 5.b.
6. Loans to foreign governments and official | ////////////////// | ////////////////// | ////////////////// |
institutions .................................... | 5389 | 5390 0 | 5391 0 | 6.
7. All other loans ................................. | 5459 | 5460 253 | 5461 72 | 7.
8. Lease financing receivables: | ////////////////// | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile) ................ | 1257 | 1258 0 | 1259 0 | 8.a.
b. Of non-U.S. addressees (domicile) ............ | 1271 | 1272 0 | 1791 0 | 8.b.
9. Debt securities and other assets (exclude other | ////////////////// | ////////////////// | ////////////////// |
real estate owned and other repossessed assets) . | 3505 | 3506 0 | 3507 0 | 9.
________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================

Amounts reported in items 1 through 8 above include guaranteed and unguaranteed portions of past due and nonaccrual loans and
leases. Report in item 10 below certain guaranteed loans and leases that have already been included in the amounts reported in
items 1 through 8.

________________________________________________________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
10. Loans and leases reported in items 1 | | | |
through 8 above which are wholly or partially | ////////////////// | ////////////////// | ////////////////// |
guaranteed by the U.S. Government ............... | 5612 | 5613 324 | 5614 317 | 10.
a. Guaranteed portion of loans and leases | ////////////////// | ////////////////// | ////////////////// |
included in item 10 above .................... | 5615 | 5616 256 | 5617 263 | 10.a.
________________________________________________________________
</TABLE>

<PAGE>

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-20
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-N--Continued
__________
| C473 | <-
______________________________________________________ ________
| (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
Memoranda | accruing | accruing | |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
1. Restructured loans and leases included in | ////////////////// | /////////////////// | ///////////////// |
Schedule RC-N, items 1 through 8, above (and not | ////////////////// | /////////////////// | ///////////////// |
reported in Schedule RC-C, part I, Memorandum | ////////////////// | /////////////////// | ///////////////// |
item 2) ......................................... | 1658 | | | M.1.
2. Loans to finance commercial real estate, | ////////////////// | /////////////////// | ///////////////// |
construction, and land development activities | ////////////////// | /////////////////// | ///////////////// |
(not secured by real estate) included in | ////////////////// | /////////////////// | ///////////////// |
Schedule RC-N, items 4 and 7, above ............. | 6558 | 6559 593 | 6560 26 | M.2.
|____________________|____________________ |___________________
3. Loans secured by real estate in domestic offices | RCON Bil Mil Thou | RCON Bil Mil Thou | RCON Bil Mil Thou|
|___________________ |____________________ ____________________
(included in Schedule RC-N, item 1, above): | ////////////////// | ////////////////// | ////////////////// |
a. Construction and land development ............ | 2759 | 2769 0 | 3492 1,108 | M.3.a.
b. Secured by farmland .......................... | 3493 | 3494 0 | 3495 0 | M.3.b.
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by | ////////////////// | ////////////////// | ////////////////// |
1-4 family residential properties and | ////////////////// | ////////////////// | ////////////////// |
extended under lines of credit ........... | 5398 | 5399 1,772 | 5400 2,746 | M.3.c.(1)
(2) All other loans secured by 1-4 family | ////////////////// | ////////////////// | ////////////////// |
residential properties ................... | 5401 | 5402 12,822 | 5403 13,798 | M.3.c.(2)
d. Secured by multifamily (5 or more) | ////////////////// | ////////////////// | ////////////////// |
residential properties ....................... | 3499 | 3500 1,426 | 3501 1,352 | M.3.d.
e. Secured by nonfarm nonresidential properties . | 3502 | 3503 2,212 | 3504 34,836 | M.3.e.
________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
| Past due 30 | Past due 90 |
| through 89 days | days or more |
____________________ ____________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________
<S> <C> <C> <C>
4. Interest rate, foreign exchange rate, and other | ////////////////// | ////////////////// |
commodity and equity contracts: | ////////////////// | ////////////////// |
a. Book value of amounts carried as assets ...... | 3522 | 3528 0 | M.4.a.
b. Replacement cost of contracts with a | ////////////////// | ////////////////// |
positive replacement cost .................... | 3529 | 3530 0 | M.4.b.
___________________________________________
</TABLE>

<PAGE>

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-21
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION> ______________________
Schedule RC-O--Other Data for Deposit Insurance Assessments | C475 |
|____________________|
Dollar Amounts in Thousands | RCON Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Unposted debits (see instructions): | ////////////////// |
a. Actual amount of all unposted debits ...................................................... | 0030 0 | 1.a.
OR | ////////////////// |
b. Separate amount of unposted debits: | ////////////////// |
(1) Actual amount of unposted debits to demand deposits ................................... | 0031 N/A | 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1) ...................... | 0032 N/A | 1.b.(2)
2. Unposted credits (see instructions): | ////////////////// |
a. Actual amount of all unposted credits ..................................................... | 3510 0 | 2.a.
OR | ////////////////// |
b. Separate amount of unposted credits: | ////////////////// |
(1) Actual amount of unposted credits to demand deposits .................................. | 3512 N/A | 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1) ..................... | 3514 N/A | 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in total | ////////////////// |
deposits in domestic offices) ................................................................ | 3520 28,655 | 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in | ////////////////// |
Puerto Rico and U.S. territories and possessions (not included in total deposits): | ////////////////// |
a. Demand deposits of consolidated subsidiaries .............................................. | 2211 3,266 | 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries ................................. | 2351 5,000 | 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries ...................... | 5514 2 | 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions: | ////////////////// |
a. Demand deposits in insured branches (included in Schedule RC-E, Part II) .................. | 2229 0 | 5.a.
b. Time and savings deposits(1) in insured branches (included in Schedule RC-E, Part II) ..... | 2383 0 | 5.b.
c. Interest accrued and unpaid on deposits in insured branches | ////////////////// |
(included in Schedule RC-G, item 1.b) ..................................................... | 5515 0 | 5.c.
______________________
______________________
Item 6 is not applicable to state nonmember banks that have not been authorized by the | ////////////////// |
Federal Reserve to act as pass-through correspondents. | ////////////////// |
6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on | ////////////////// |
behalf of its respondent depository institutions that are also reflected as deposit liabilities| ////////////////// |
of the reporting bank: | ////////////////// |
a. Amount reflected in demand deposits (included in Schedule RC-E, item 4 or 5, column B)..... | 2314 0 | 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, | ////////////////// |
item 4 or 5, column A or C, but not column B).............................................. | 2315 0 | 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1) | ////////////////// |
a. Unamortized premiums ...................................................................... | 5516 0 | 7.a.
b. Unamortized discounts ..................................................................... | 5517 0 | 7.b.
______________________

_______________________________________________________________________________________________________________________________
| |
|8. To be completed by banks with "Oakar deposits." |
______________________
| Total "Adjusted Attributable Deposits" of all institutions acquired under Section 5(d)(3) of | ////////////////// | |
| the Federal Deposit Insurance Act (from most recent FDIC Oakar Transaction Worksheet(s)) .... | 5518 864,186 | 8. |
______________________
| |
_______________________________________________________________________________________________________________________________
______________________
9. Deposits in lifeline accounts ................................................................ | 5596 ///////////// | 9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included in total | ////////////////// |
deposits in domestic offices) ................................................................ | 8432 0 | 10.
______________________
<FN>
______________
(1) For FDIC insurance assessment purposes, "time and savings deposits" consists of nontransaction
accounts and all transaction accounts other than demand deposits.
</TABLE>

<PAGE>

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-22
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-O--Continued

Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
11. Adjustments to demand deposits in domestic offices reported in Schedule RC-E for | ////////////////// |
certain reciprocal demand balances: | ////////////////// |
a. Amount by which demand deposits would be reduced if reciprocal demand balances | ////////////////// |
between the reporting bank and savings associations were reported on a net basis | ////////////////// |
rather than a gross basis in Schedule RC-E .................................................. | 8785 0 | 11.a.
b. Amount by which demand deposits would be increased if reciprocal demand balances | ////////////////// |
between the reporting bank and U.S. branches and agencies of foreign banks were | ////////////////// |
reported on a gross basis rather than a net basis in Schedule RC-E .......................... | A181 0 | 11.b.
c. Amount by which demand deposits would be reduced if cash items in process of | ////////////////// |
collections were included in the calculation of net reciprocal demand balances between | ////////////////// |
the reporting bank and the domestic offices of U.S. banks and savings associations | ////////////////// |
in Schedule RC-E ............................................................................ | A182 0 | 11.c.
____________________

Memoranda (to be completed each quarter except as noted) Dollar Amounts in Thousands | RCON Bil Mil Thou |
________________________________________________________________________________________________|____________________|
1. Total deposits in domestic offices of the bank (sum of Memorandum items 1.a. (1) and | ////////////////// |
1.b.(1) must equal Schedule RC, item 13.a): | ////////////////// |
a. Deposits accounts of $100,000 or less: | ////////////////// |
(1) amount of deposit accounts of $100,000 or less .................................... | 2702 4,389,311 | M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less (to be Number | ////////////////// |
completed for the June report only) ..........................|RCON 3779________N/A | ////////////////// | M.1.a.(2)
b. Deposit accounts of more than $100,000: | ////////////////// |
(1) Amount of deposit accounts of more than $100,000 .................................. | 2710 3,745,428 | M.1.b.(1)
Number | ////////////////// |
(2) Number of deposit accounts of more than $100,000 .............|RCON 2722______6,366 | ////////////////// | M.1.b.(2)
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by mutiplying the
number of deposit accounts of more than $100,000 reported in Memorandum item 1.b.(2)
above by $100,000 and subtracting the result from the amount of deposit accounts of
more than $100,000 reported in Memorandum item 1.b.(1) above.

Indicate in the appropriate box at the right whether your bank has a method or
procedure for determining a better estimate of uninsured deposits that the ____________YES_______NO__
estimated described above ............................................................... |RCON 6861| |///| x | M.2.a.

____________________
b. If the box marked YES has been checked, report the estimate of uninsured deposits |RCON Bil Mil Thou|
determined by using your bank's method or procedure .................................... | 5597 N/A | M.2.b.

<S>

_____________________________________________________________________________________________________________________________
| C477 | <-
Person to whom questions about the Reports of Condition and Income should be directed: __________

PAMELA S. FLYNN, VICE PRESIDENT (401) 278-5194
___________________________________________________________________________________ ______________________________________
Name and Title (TEXT 8901) Area code and phone number (TEXT 8902)

</TABLE>

<PAGE>

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-23
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-R--Regulatory Capital

This schedule must be completed by all banks as follows: Banks that reported total assets of $1 billion or more in Schedule RC,
item 12, for June 30, 1995, must complete items 2 through 9 and Memoranda items 1 and 2. Banks with assets of less than
$1 billion must complete items 1 through 3 below or Schedule RC-R in its entirety, depending on their response to item 1 below.
<S> <C>
____________
| C480 | <-
1. Test for determining the extent to which Schedule RC-R must be completed. To be completed _____|__________|
only by banks with total assets of less than $1 billion. Indicate in the appropriate | YES NO |
box at the right whether the bank has total capital greater than or equal to eight percent___________ _______________
of adjusted total assets ............................................................... | RCFD 6056 | |////| | 1.
_____________________________
For purposes of this test, adjusted total assets equals total assets less cash, U.S. Treasuries, U.S. Government
agency obligations, and 80 percent of U.S. Government-sponsored agency obligations plus the allowance for loan
and lease losses and selected off-balance sheet items as reported on Schedule RC-L (see instructions).
If the box marked YES has been checked, then the bank only has to complete items 2 and 3 below. If the box marked
NO has been checked, the bank must complete the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's actual risk-based capital ratio is less than eight
percent or that the bank is not in compliance with the risk-based capital guidelines.
</TABLE>
<TABLE>
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
|Subordinated Debt(1)| Other |
| and Intermediate | Limited- |
Items 2 and 3 are to be completed by all banks. | Term Preferred | Life Capital |
| Stock | Instruments |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
2. Subordinated debt(1) and other limited-life capital instruments (original | ////////////////// | ////////////////// |
weighted average maturity of at least five years) with a remaining | ////////////////// | ////////////////// |
maturity of: | ////////////////// | ////////////////// |
a. One year or less ...................................................... | 3780 0 | 3786 0 | 2.a.
b. Over one year through two years ....................................... | 3781 0 | 3787 0 | 2.b.
c. Over two years through three years .................................... | 3782 0 | 3788 0 | 2.c.
d. Over three years through four years ................................... | 3783 0 | 3789 0 | 2.d.
e. Over four years through five years .................................... | 3784 0 | 3790 0 | 2.e.
f. Over five years ....................................................... | 3785 440,000 | 3791 0 | 2.f.
3. Amounts used in calculating regulatory capital ratios (report amounts | ////////////////// | ////////////////// |
determined by the bank for its own internal regulatory capital analyses): | ////////////////// | RCFD Bil Mil Thou |
a. Tier 1 capital......................................................... | ////////////////// | 8274 1,131,906 | 3.a.
b. Tier 2 capital......................................................... | ////////////////// | 8275 614,539 | 3.b.
c. Total risk-based capital............................................... | ////////////////// | 3792 1,746,445 | 3.c.
d. Excess allowance for loan and lease losses............................. | ////////////////// | A222 85,540 | 3.d.
e. Risk-weighted assets................................................... | ////////////////// | A223 13,877,543 | 3.e.
f. "Average total assets"................................................. | ////////////////// | A224 15,490,668 | 3.f.
___________________________________________
| (Column A) | (Column B) |
Items 4-9 and Memoranda items 1 and 2 are to be completed | Assets | Credit Equiv- |
by banks that answered NO to item 1 above and | Recorded | alent Amount |
by banks with total assets of $1 billion or more. | on the | of Off-Balance |
| Balance Sheet | Sheet Items(2) |
____________________ ____________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________
<S> <C> <C> <C>
4. Assets and credit equivalent amounts of off-balance sheet items assigned | | |
to the Zero percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet: | ////////////////// | ////////////////// |
(1) Securities issued by, other claims on, and claims unconditionally | ////////////////// | ////////////////// |
guaranteed by, the U.S. Government and its agencies and other | ////////////////// | ////////////////// |
OECD central governments .......................................... | 3794 848,861 | ////////////////// | 4.a.(1)
(2) All other ......................................................... | 3795 168,507 | ////////////////// | 4.a.(2)
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3796 0 | 4.b.
___________________________________________
<FN>
______________
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not report in column B the risk-weighted amount of assets reported in column A.
</TABLE>

<PAGE>

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-24
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-R--Continued
___________________________________________
| (Column A) | (Column B) |
| Assets | Credit Equiv- |
| Recorded | alent Amount |
| on the | of Off-Balance |
| Balance Sheet | Sheet Items(1) |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
5. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 20 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet: | ////////////////// | ////////////////// |
(1) Claims conditionally guaranteed by the U.S. Government and its | ////////////////// | ////////////////// |
agencies and other OECD central governments ....................... | 3798 21,083 | ////////////////// | 5.a.(1)
(2) Claims collateralized by securities issued by the U.S. Govern- | ////////////////// | ////////////////// |
ment and its agencies and other OECD central governments; by | ////////////////// | ////////////////// |
securities issued by U.S. Government-sponsored agencies; and | ////////////////// | ////////////////// |
by cash on deposit ................................................ | 3799 0 | ////////////////// | 5.a.(2)
(3) All other ......................................................... | 3800 1,567,242 | ////////////////// | 5.a.(3)
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3801 67,114 | 5.b.
6. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 50 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................. | 3802 2,037,765 | ////////////////// | 6.a.
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3803 116,963 | 6.b.
7. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 100 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................. | 3804 9,551,472 | ////////////////// | 7.a.
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3805 3,288,367 | 7.b.
8. On-balance sheet asset values excluded from the calculation of the | ////////////////// | ////////////////// |
risk-based capital ratio(2) .............................................. | 3806 (7,286)| ////////////////// | 8.
9. Total assets recorded on the balance sheet (sum of | ////////////////// | ////////////////// |
items 4.a, 5.a, 6.a, 7.a, and 8, column A)(must equal Schedule RC, | ////////////////// | ////////////////// |
item 12 plus items 4.b and 4.c) .......................................... | 3807 14,187,644 | ////////////////// | 9.
___________________________________________

Memoranda
______________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
1.Current credit exposure across all off-balance sheet derivative contracts covered by the | ///////////////// |
risked-based capital standards ...................................................................| 8764 6,077| M.1.
|___________________|

________________________________________________________________
| With a remaining maturity of |
|______________________________________________________________|
| (Column A) | (Column B) | (Column C) |
| | | |
| One year or less | Over one year | Over five years |
| | through five years | |
|______________________________________________________________|
|RCFD Tril Bil Mil Th|RCFD Tril Bil Mil Th|RCFD Tril Bil Mil Th|
|____________________|____________________|____________________|
2. Notional principal amounts of <C> <C> <C> <C>
off-balance sheet derivative contracts(3):| | | |
a. Interest rate contracts ................. | 3809 1,308,203 | 8766 3,328,625 | 8767 0 | M.2.a.
b. Foreign exchange contracts .............. | 3812 0 | 8769 0 | 8770 0 | M.2.b.
c. Gold contracts .......................... | 8771 0 | 8772 0 | 8773 0 | M.2.c.
d. Other precious metals contracts ......... | 8774 0 | 8775 0 | 8776 0 | M.2.d.
e. Other commodity contracts ............... | 8777 0 | 8778 0 | 8779 0 | M.2.e.
f. Equity derivative contracts ............. | A000 0 | A001 0 | A002 0 | M.2.f.
|______________________________________________________________|

_________________
1) Do not report in column B the risk-weighted amount of assets reported in column A.
2) Include the difference between the fair value and the amortized cost of available-for-sale securities in item 8 and report
the amortized cost of these securities in items 4 through 7 above. Item 8 also includes on-balance sheet asset values (or
portions thereof) of off-balance sheet interest rate, foreign exchange rate, and commodity contracts and those contracts (e.g.,
futures contracts) not subject to risk-based capital. Exclude from item 8 margin accounts and accrued receivables as well as
any portion of the allowance for loan and lease losses in excess of the amount that may be included in Tier 2 capital.
3) Exclude foreign exchange contracts with an original maturity of 14 days or less and all futures contracts.

</TABLE>

<PAGE>

<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|

THIS PAGE IS TO BE COMPLETED BY ALL BANKS
- -------------------------------------------------------------------------------------------------------------------------------
| OMB No. For OCC: 1557-0081
Name and address of Bank | OMB No. For FDIC: 3064-0052
| OMB No. For Federal Reserve: 7100-0036
| Expiration Date: 3/31/96
|
PLACE LABEL HERE |
| SPECIAL REPORT
| (Dollar Amounts in Thousands)
|
|___________________________________________________________________
| CLOSE OF BUSINESS| FDIC Certificate Number | |
| DATE | | C-700 | <-
| 12/31/95 | |0|2|4|9|9 | |
__________________________________________________________________________________________________________________________________
LOANS TO EXECUTIVE OFFICERS (Complete as of each Call Report Date)
- ----------------------------------------------------------------------------------------------------------------------------------
The following information is required by Public Laws 90-44 and 102-242, but does not constitute a part of the Report of Condition.
With each Report of Condition, these Laws require all banks to furnish a report of all loans or other extensions of credit to
their executive officers made since the date of the previous Report of Condition. Data regarding individual loans or other
extensions of credit are not required. If no such loans or other extensions of credit were made during the period, insert "none"
against subitem (a). (Exclude the first $15,000 of indebtedness of each executive officer under bank credit card plan.) See
Sections 215.2 and 215.3 of Title 12 of the Code of Federal Regulations (Federal Reserve Board Regulation 0) for the definitions
of "executive officer" and "extension of credit," respectively. Exclude loans and other extensions of credit to directors and
principal shareholders who are not executive officers.
________________________________________________________________________________________________________________________________

________________________________________________________________________________________________________________________________

________________________________________________________________________________________________________________________________
SIGNATURE OF TITLE OF OFFICER AUTHORIZED TO SIGN REPORT | DATE (Month, Day, Year)
|
|
________________________________________________________________________________________________________________________________
NAME AND TITLE OF PERSON TO WHOM INQUIRIES MAY BE DIRECTED (TEXT 8903) | AREA CODE/PHONE NUMBER/EXTENSION
| (TEXT 8904)
|
ROBERT P. DUFF VICE PRESIDENT | (203) 986-2474
|
________________________________________________________________________________________________________________________________
FDIC 8040/53 (6-95)

</TABLE>

Exhibit 99

LETTER OF TRANSMITTAL
CS WIRELESS SYSTEMS, INC.

OFFER FOR ALL OUTSTANDING

11 3/8% SENIOR DISCOUNT NOTES DUE 2006
IN EXCHANGE FOR
11 3/8% SERIES B SENIOR DISCOUNT NOTES DUE 2006

---------------------
PURSUANT TO THE PROSPECTUS DATED JULY , 1996

THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JULY ,
1996 UNLESS THE EXCHANGE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF
OLD NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME,
ON THE EXPIRATION DATE.

TO: FLEET NATIONAL BANK, AS EXCHANGE AGENT

<TABLE>
<S> <C>
BY MAIL: BY HAND OR EXPRESS DELIVERY:
Fleet National Bank Fleet National Bank
Corporate Trust Operations Corporate Trust Operations
P.O. Box 1440 777 Main Street, Lower Level
CTMO 0224 Hartford, Connecticut 06115
Hartford, Connecticut 06143 Attention: Patricia Williams
Attention: Patricia Williams
</TABLE>

DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.

The undersigned acknowledges that he or she has received and reviewed the
Prospectus, dated July , 1996 (the "Prospectus"), of CS Wireless Systems,
Inc., a Delaware corporation ("CS Wireless"), and this Letter of Transmittal and
the accompanying instructions (the "Letter of Transmittal"), which together
constitute CS Wireless' offer (the "Exchange Offer") to exchange an aggregate
principal amount at maturity of up to $400,000,000 of 11 3/8% Series B Senior
Discount Notes due 2006 (the "New Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
registration statement of which the Prospectus constitutes a part, for a like
principal amount of its outstanding 11 3/8% Senior Discount Notes due 2006 (the
"Old Notes"), upon the terms and subject to the conditions set forth in the
Prospectus.

If this Letter of Transmittal is signed by the registered holder(s) of the
Old Notes tendered hereby, the signature must correspond with the name(s) as
written on the face of the Old Notes without alteration, enlargement or any
change whatsoever. If any tendered Old Notes are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal. If any
tendered Old Notes are registered in different names on several certificates, it
will be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal as there are different registrations or certificates.

This Letter of Transmittal is to be used by Holders (as defined below) if
certificates representing Old Notes are to be physically delivered to the
Exchange Agent herewith by Holders. If a Holder's tender of Old Notes is to be
made by book-entry transfer to the Exchange Agent's account at The Depository
Trust Company ("DTC") pursuant to the procedures set forth in the Prospectus
under "The Exchange Offer--Procedures for Tendering Old Notes" by any financial
institution that is a participant in DTC and whose name appears on a security
position listing as the owner of Old Notes (such participants, acting on behalf
of Holders are referred to herein, together with such Holders, as "Acting
Holders"); or tender of Old Notes is to be made according to the guaranteed
delivery procedures set forth in the Prospectus under "The Exchange
Offer-Guaranteed Delivery Procedures," then, in each case, instructions will be
transmitted through the DTC Automated Tender Offer Program ("ATOP"). Delivery of
documents to DTC does not constitute delivery to the Exchange Agent.

The term "Holder" with respect to the Exchange Offer means any person: (i)
in whose name Old Notes are registered on the books of CS Wireless or any other
person who has obtained a properly completed bond power from the registered
Holder; or (ii) whose Old Notes are held of record by DTC and who desires to
deliver such Old Notes by book-entry transfer at DTC.
<PAGE>
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer.

All capitalized terms used herein and not defined shall have the meaning
ascribed to them in the Prospectus.

The instructions included with this Letter of Transmittal must be followed.
Questions and requests for assistance or for additional copies of the
Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Exchange Agent. See Instruction 8 herein.

HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR OLD NOTES
MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY.

List below the Old Notes to which this Letter of Transmittal relates. If the
space provided below is inadequate, list the certificate numbers and principal
amounts on a separately executed schedule and affix the schedule to this Letter
of Transmittal. Partial tenders of Old Notes will be accepted only in principal
amounts equal to $1,000 or integral multiples thereof.

<TABLE>
DESCRIPTION OF OLD NOTES

CERTIFICATE
NUMBER(S)* AGGREGATE PRINCIPAL
NAME(S) AND ADDRESS(ES) OF HOLDER(S) (ATTACH SIGNED LIST AMOUNT TENDERED
(PLEASE FILL IN IF BLANK) IF NECESSARY) (IF LESS THAN ALL)**
<S> <C> <C>
TOTAL PRINCIPAL AMOUNT OF OLD NOTES TENDERED
</TABLE>

* Need not be completed by Holders tendering by book-entry transfer.

** Need not be completed by Holders who wish to tender with respect to all Old
Notes listed. See
Instruction 2.
<PAGE>
/ /CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY DTC TO THE EXCHANGE
AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING:

Name of Tendering Institution:_________________________________________

DTC Book-Entry Account No.:____________________________________________

Transaction Code No.:__________________________________________________

If Holders desire to tender Old Notes pursuant to the Exchange Offer and (i)
certificates representing such Old Notes are not lost but are not immediately
available, (ii) time will not permit this Letter of Transmittal, certificates
representing such Old Notes or other required documents to reach the Exchange
Agent prior to the Expiration Date or (iii) the procedures for book-entry
transfer cannot be completed prior to the Expiration Date, such Holders may
effect a tender of such Old Notes in accordance with the guaranteed delivery
procedures set forth in the Prospectus under "The Exchange Offer-Guaranteed
Delivery Procedures." OTC participants may also accept the Offer by submitting
the notice of guaranteed delivery through ATOP.

/ /CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:

Name(s) of Holder(s) of Old Notes:________________________________________

Window Ticket No. (if any):_______________________________________________

Date of Execution of Notice of Guaranteed Delivery:_______________________

Name of Eligible Institution that Guaranteed Delivery: ___________________

If Delivered by Book-Entry Transfer:
Name of Tendering Institution:______________________________________________

DTC Book-Entry Account No.:_______________________________________________

Transaction Code No.:_____________________________________________________

/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.

Name:___________________________________________________________________________

Address:________________________________________________________________________

________________________________________________________________________________

/ / CHECK HERE IF TENDERED NOTES ARE ENCLOSED HEREWITH.
<PAGE>
Ladies and Gentlemen:

Subject to the terms of the Exchange Offer, the undersigned hereby tenders
to CS Wireless the principal amount of Old Notes indicated above. Subject to and
effective upon the acceptance for exchange of the principal amount of Old Notes
tendered in accordance with this Letter of Transmittal, the undersigned sells,
assigns and transfers to, or upon the order of, CS Wireless all right, title and
interest in and to the Old Notes tendered hereby. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent its agent and
attorney-in-fact (with full knowledge that the Exchange Agent also acts as the
agent of CS Wireless and as Trustee under the Indenture for the Old Notes and
the New Notes) with respect to the tendered Old Notes with full power of
substitution to (i) deliver certificates for such Old Notes to CS Wireless, or
transfer ownership of such Old Notes on the account books maintained by DTC
together, in either such case, with all accompanying evidences of transfer and
authenticity to, or upon the order of, CS Wireless and (ii) present such Old
Notes for transfer on the books of CS Wireless and receive all benefits and
otherwise exercise all rights of beneficial ownership of such old Notes, all in
accordance with the terms of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed irrevocable and coupled with an interest.

The undersigned hereby represents and warrants that he or she has full power
and authority to tender, sell, assign and transfer the Old Notes tendered hereby
and that CS Wireless will acquire good and unencumbered title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim, when the same are acquired by CS Wireless. The undersigned
also acknowledges that this Exchange Offer is being made in reliance upon an
interpretation by the staff of the Securities and Exchange Commission issued to
other issuers in similar contexts that the New Notes issued in exchange for the
Old Notes pursuant to the Exchange Offer may be offered for sale, resold and
otherwise transferred by any holder thereof (other than (i) a broker-dealer who
purchased such Old Notes directly from CS Wireless to resell pursuant to Rule
144A or any other available exemption under the Securities Act or (ii) a person
that is an "affiliate" of CS Wireless within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that the holder is acquiring the New
Notes in its ordinary course of business and is not participating, and has no
arrangement or understanding with any person to participate, in the distribution
of the New Notes.

The undersigned hereby further represents to CS Wireless that (i) the New
Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary
course of such holder's business, (ii) such holder has no arrangements or
understandings with any person to participate in the distribution of such New
Notes and (iii) such holder is not an "affiliate", as defined under Rule 405 of
the Securities Act, of CS Wireless or, if such holder is an affiliate, that such
holder will comply with the registration and prospectus delivery requirements of
the Securities Act to the extent applicable. The undersigned acknowledges and
agrees that any person participating in the Exchange Offer for the purpose of
distributing the New Notes must comply with the registration and prospectus
delivery requirements of the Securities Act of 1933, as amended (the "Securities
Act"), in connection with a secondary resale or transaction of the New Notes
acquired by such person. The undersigned understands that such secondary resale
transaction should be covered by an effective registration statement containing
the selling security holder information required by Item 507 or 508, as
applicable, of Regulation S-K of the Securities and Exchange Commission. If the
undersigned is not a broker-dealer, the undersigned represents that it is not
engaged in, and does not intend to engage in, a distribution of New Notes. If
the undersigned is a broker-dealer that will receive New Notes for its own
account in exchange for Old Notes that were acquired as a result of
market-making or other trading activities, it acknowledges that it will deliver
a prospectus in connection with any resale of such New Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.

The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or CS Wireless to be necessary or
desirable to complete the assignment and transfer of the Old Notes tendered
hereby.
<PAGE>
For purposes of the Exchange Offer, CS Wireless shall be deemed to have
accepted validly tendered Old Notes when CS Wireless has given oral or written
notice thereof to the Exchange Agent. If any tendered Old Notes are not accepted
for exchange pursuant to the Exchange Offer for any reason, certificates for any
such unaccepted Old Notes will be returned (except as noted below with respect
to tenders through DTC), without expense, to the undersigned at the address
shown below or at a different address as may be indicated under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.

All authority conferred or agreed to be conferred by this Letter of
Transmittal and every obligation of the undersigned hereby shall survive the
death, incapacity or dissolution of the undersigned and every obligation under
this Letter of Transmittal shall be binding upon the undersigned's heirs,
executors, administrators, legal representatives, trustees in bankruptcy,
successors and assigns.

The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer--Procedures for
Tendering Old Notes" in the Prospectus and in the instructions hereto will
constitute a binding agreement between the undersigned and CS Wireless upon the
terms and subject to the conditions of the Exchange Offer. The tender may be
withdrawn only in accordance with the procedures set forth in "The Exchange
Offer-Withdrawal Rights" section of the Prospectus.
<PAGE>
The undersigned understands that delivery and tender of the Old Notes is not
effective and risk of loss of the Old Notes does not pass to the Exchange Agent
until receipt by the Exchange Agent of this Letter of Transmittal, properly
completed and duly executed with all accompanying evidences of authority and
other documents in a form satisfactory to CS Wireless.

Unless otherwise indicated under "Special Issuance Instructions," please
issue the certificates representing the New Notes issued in exchange for the Old
Notes accepted for exchange and return any Old Notes not tendered or not
exchanged in the name(s) of the undersigned (or in either such event, in the
case of Old Notes tendered by DTC, by credit to the account at DTC). Similarly,
unless otherwise indicated under "Special Delivery Instructions," please send
the certificates representing the New Notes issued in exchange for the Old Notes
accepted for exchange and any certificates for Old Notes not tendered or not
exchanged (and accompanying documents, as appropriate) to the undersigned at the
address shown below the undersigned's signature, unless, in either event, tender
is being made through DTC. In the event that both "Special Issuance
Instructions" and "Special Delivery Instructions" are completed, please issue
the certificates representing the New Notes issued in exchange for the Old Notes
accepted for exchange and return any Old Notes not tendered or not exchanged in
the name(s) of, and send said certificates to, the person(s) so indicated. The
undersigned recognizes that CS Wireless has no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to transfer
any Old Notes from the name of the registered holder(s) thereof if CS Wireless
does not accept for exchange any of the Old Notes so tendered.

PLEASE SIGN HERE

(TO BE COMPLETED BY ALL TENDERING HOLDERS OF
OLD NOTES REGARDLESS OF WHETHER OLD NOTES ARE BEING PHYSICALLY
DELIVERED HEREWITH)

This Letter of Transmittal must be signed by the Holder(s) of Old Notes
exactly as their name(s) appear(s) on certificate(s) for Old Notes or, if
tendered by a participant in DTC, exactly as such participant's name appears on
a security position listing as the owner of Old Notes, or by person(s)
authorized to become registered Holder(s) by endorsements and documents
transmitted with this Letter of Transmittal. If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact, officer or other person
acting in a fiduciary or representative capacity, such person must set forth his
or her full title below under "Capacity" and submit evidence satisfactory to CS
Wireless of such person's authority to so act. See Instruction 3.

<TABLE>
<S> <C>
X Date:
- ------------------------------------ -------------------------------
X Date:
- ------------------------------------ -------------------------------
Signature(s) of Holder(s) or Authorized Signatory

Name(s): Address
--------------------------- -----------------------------

--------------------------- -----------------------------
(Please Print) (Including Zip Code)

Capacity: Area Code and Telephone No.:
--------------------------- --------
Social Security No.:
---------------

</TABLE>

MEDALLION SIGNATURE GUARANTEE
(If Required by Instruction 3)

________________________________________________________________________________
(Name of Eligible Institution Guaranteeing Signatures)

________________________________________________________________________________
(Address (including zip code) and Telephone Number (including area code) of
Firm)

________________________________________________________________________________
(Authorized Signature)

________________________________________________________________________________
(Printed Name)

________________________________________________________________________________
(Title)

Date:____________________________, 1996
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 3 AND 4)

To be completed ONLY if certificates for Old Notes not exchanged and/or New
Notes are to be issued in the name of someone other than the person or persons
whose signature(s) appear(s) on this Letter of Transmittal above, or if Old
Notes delivered by book-entry transfer which are not accepted for exchange are
to be returned by credit to an account maintained at the Book-Entry Transfer
Facility other than the account indicated above.

Issue: New Notes and/or Old Notes to:
Name(s):__________________________________

(Please Type or Print)
___________________________________________

(Please Type or Print)
Address:___________________________________
___________________________________________

(Zip Code)

(COMPLETE SUBSTITUTE FORM W-9)

/ / CREDIT UNEXCHANGED OLD NOTES DELIVERED BY BOOK-ENTRY TRANSFER TO THE
BOOK-ENTRY TRANSFER FACILITY ACCOUNT SET FORTH BELOW.
___________________________________________

(Book-entry Transfer Facility Account Number, if applicable)

SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 3 AND 4)

To be completed ONLY if certificates for Old Notes not exchanged and/or New
Notes are to be sent to someone other than the person or persons whose
signature(s) appear(s) on this Letter of Transmittal above or to such person or
persons at an address other than shown in the box entitled "Description of Old
Notes" on this Letter of Transmittal above.

Mail: New Notes and/or Old Notes to:

Name(s):__________________________________
(Please Type or Print)

___________________________________________
(Please Type or Print)

Address:___________________________________

___________________________________________
(Zip Code)

IMPORTANT: THIS LETTER OF TRANSMITTAL (TOGETHER WITH THE CERTIFICATES FOR
OLD NOTES OR A BOOK ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE
NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO
5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.

PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE
<PAGE>
INSTRUCTIONS

FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER FOR ALL OUTSTANDING
11 3/8 SENIOR DISCOUNT NOTES DUE 2006
IN EXCHANGE FOR
11 3/8% SERIES B SENIOR DISCOUNT NOTES DUE 2006

1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES; GUARANTEED DELIVERY
PROCEDURE. The certificates for the tendered Old Notes (or a confirmation of a
book-entry transfer into the Exchange Agent's account at DTC of all Old Notes
delivered electronically), as well as a properly completed and duly executed
copy of this Letter of Transmittal and any other documents required by this
Letter of Transmittal must be received by the Exchange Agent at its address set
forth herein prior to 5:00 p.m., New York City time, on the Expiration Date. The
method of delivery of the tendered Old Notes, this Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the Holder and, except as otherwise provided below, the delivery will be deemed
made only when actually received by the Exchange Agent. Instead of delivery by
mail, it is recommended that the Holder use an overnight or hand delivery
service. In all cases, sufficient time should be allowed to assure timely
delivery. No Letter of Transmittal or Old Notes should be sent to CS Wireless.

Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, this Letter of
Transmittal or any other documents required hereby to the Exchange Agent prior
to the Expiration Date must tender their Old Notes and follow the guaranteed
delivery procedures set forth in the Prospectus. Pursuant to such procedures:
(i) such tender must be made by or through an Eligible Institution; (ii) prior
to the Expiration Date, the Exchange Agent must have received from the Eligible
Institution a properly completed and duly executed Notice of Guaranteed Delivery
(by mail or hand delivery) setting forth the name and address of the Holder of
the Old Notes, the certificate number or numbers of such Old Notes and the
principal amount of Old Notes tendered, stating that the tender is being made
thereby and guaranteeing that, within five business days after the Expiration
Date, this Letter of Transmittal together with the certificate(s) representing
the Old Notes (or a confirmation of electronic mail delivery of book-entry
delivery into the Exchange Agent's account at DTC) and any of the required
documents will be deposited by the Eligible Institution with the Exchange Agent;
and (iii) such properly completed and executed Letter of Transmittal, as well as
all other documents required by this Letter of Transmittal and the
certificate(s) representing all tendered Old Notes in proper form for transfer
(or a confirmation of electronic mail delivery of book-entry delivery into the
Exchange Agent's account at DTC), must be received by the Exchange Agent within
five business days after the Expiration Date, all as provided in the Prospectus
under the Caption "The Exchange Offer--Guaranteed Delivery Procedures." Any
Holder of Old Notes who wishes to tender his Old Notes pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York
City time, on the Expiration Date.

All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
CS Wireless in its sole discretion, which determination will be final and
binding. CS Wireless reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes CS Wireless's acceptance of which would,
in the opinion of counsel for CS Wireless, be unlawful. CS Wireless also
reserves the absolute right to waive any defects, irregularities or conditions
of tender as to particular Old Notes. CS Wireless's interpretation of the terms
and conditions of the Exchange Offer (including the instructions in this Letter
of Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as CS Wireless shall determine. Neither CS Wireless, the
Exchange Agent nor any other person shall be under any duty to give notification
of defects or irregularities with respect to tenders of Old Notes, nor shall any
of them incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the Exchange
Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost by
the Exchange Agent to the tendering holders of Old Notes, unless otherwise
provided in this Letter of Transmittal, as soon as practicable following the
Expiration Date.
<PAGE>
See "The Exchange Offer" section of the Prospectus.

2. PARTIAL TENDERS. If less than the entire principal amount of any Old
Notes is tendered, the tendering Holder should fill in the principal amount
tendered in the third column of the chart entitled "Description of Old Notes."
Partial tenders of Old Notes will be accepted in all denominations of $1,000 and
integral multiples in excess thereof. THE ENTIRE PRINCIPAL AMOUNT OF OLD NOTES
DELIVERED TO THE EXCHANGE AGENT WILL BE DEEMED TO HAVE BEEN TENDERED UNLESS
OTHERWISE INDICATED. If the entire principal amount of all Old Notes is not
tendered, Old Notes for the principal amount of Old Notes not tendered and a
certificate or certificates representing New Notes issued in exchange for any
Old Notes accepted will be sent to the Holder at his or her registered address,
unless a different address is provided in the appropriate box on this Letter of
Transmittal or unless tender is made through DTC, promptly after the Old Notes
are accepted for exchange.

3. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEES OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the Old Notes tendered hereby, the signature must
correspond with the name(s) as written on the face of the Old Notes without
alteration, enlargement or any change whatsoever. If any tendered Old Notes are
owned of record by two or more joint owners, all such owners must sign this
Letter of Transmittal. If any tendered Old Notes are registered in different
names on several certificates, it will be necessary to complete, sign and submit
as many separate copies of this Letter of Transmittal as there are different
registrations or certificates.

If this Letter of Transmittal is signed by the registered Holder(s) of Old
Notes tendered hereby and the certificate(s) for New Notes issued in exchange
therefor is to be issued (or any untendered principal amount of Old Notes is to
be reissued) to the registered Holder, such Holder need not and should not
endorse any tendered Old Notes, nor provide a separate bond power. In any other
case, such holder must either properly endorse the Old Notes tendered or
transmit a properly completed separate bond power with this Letter of
Transmittal, with the signatures on the endorsement or bond power guaranteed by
a recognized member of a Medallion Signature Guarantee Program.

If this Letter of Transmittal is signed by a person other than the
registered Holder(s) of any Old Notes listed, such Old Notes must be endorsed or
accompanied by appropriate bond powers signed as the name of the registered
Holder(s) appears on the Old Notes.

If this Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, or officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by CS Wireless,
evidence satisfactory to CS Wireless of their authority so to act must be
submitted with this Letter of Transmittal.

ENDORSEMENTS ON OLD NOTES OR SIGNATURES ON BOND POWERS REQUIRED BY THIS
INSTRUCTION 3 MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION WHICH IS A
MEMBER OF ONE OF THE FOLLOWING RECOGNIZED MEDALLION SIGNATURE GUARANTEE
PROGRAMS: THE SECURITIES TRANSFER AGENTS MEDALLION PROGRAM; THE NEW YORK STOCK
EXCHANGE MEDALLION SIGNATURE PROGRAM; OR THE STOCK EXCHANGE MEDALLION PROGRAM.

Signatures on this Letter of Transmittal must be guaranteed by a recognized
member of a Medallion Signature Guarantee Program unless the Old Notes tendered
pursuant thereto are tendered (i) by a registered Holder (including any
participant in DTC whose name appears on a security position listing as the
owner of Old Notes) who has not completed the box set forth herein entitled
"Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" or (ii) for the account of a member of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc. or a commercial bank or trust company having an office or correspondent in
the United States (each of the foregoing being referred to as an "Eligible
Institution").

4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering Holders should
indicate, in the applicable spaces, the name and address to which New Notes or
substitute Old Notes for principal amounts not tendered or not accepted for
exchange are to be issued or sent, if different from the name and address of the
person signing this Letter of Transmittal (or in the case of tender of the Old
Notes through DTC, if different from DTC). In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated.
<PAGE>
5. TRANSFER TAXES. CS Wireless will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes or Old Notes for principal amounts
not tendered or accepted for exchange are to be delivered to, or are to be
registered in the name of any person other than the person signing this Letter
of Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Old Notes pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered Holder or any other
person) will be payable by the tendering Holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with this Letter
of Transmittal, the amount of such transfer taxes will be billed directly to
such tendering Holder.

EXCEPT AS PROVIDED IN THIS INSTRUCTION 5, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES LISTED IN THIS LETTER OF
TRANSMITTAL.

6. WAIVER OF CONDITIONS. CS Wireless reserves the absolute right to amend,
waive or modify specified conditions in the Exchange Offer in the case of any
Old Notes tendered.

7. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any tendering Holder
whose Old Notes have been mutilated, lost, stolen or destroyed should contact
the Exchange Agent at the address indicated herein for further instruction.

8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance and requests for additional copies of the Prospectus or this Letter
of Transmittal may be directed to the Exchange Agent at the address specified in
the Prospectus. Holders may also contract their broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Exchange Offer.

9. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering Holders of Old Notes, by
execution of this Letter of Transmittal, shall waive any right to receive notice
of the acceptance of their Old Notes for exchange. Neither CS Wireless, the
Exchange Agent nor any other person is obligated to give notice of any defect or
irregularity with respect to any tender of Old Notes, nor shall any of them
incur any liability for failure to give any such notice.
<PAGE>
(DO NOT WRITE IN SPACE BELOW)

<TABLE>
<CAPTION>
<S> <C> <C>
Certificate Surrendered Old Notes Tendered Old Notes Accepted
- ---------------------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------------------

Delivery Prepared by Checked by Date
</TABLE>

IMPORTANT TAX INFORMATION

Under federal income tax laws, a Holder whose tendered Old Notes are
accepted for payment is required to provide the Exchange Agent (as payer) with
such Holder's correct TIN on Substitute Form W-9 below or otherwise establish a
basis for exemption from backup withholding. If such Holder is an individual,
the TIN is his social security number. If the Exchange Agent is not provided
with the correct TIN, a $50 penalty may be imposed by the Internal Revenue
Service, and payments made with respect to New Notes purchased pursuant to the
Exchange Offer may be subject to backup withholding.

Certain Holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt Holders should indicate their exempt status on Substitute
Form W-9. A foreign person may qualify as an exempt recipient by submitting to
the Exchange Agent a properly completed Internal Revenue Service Form W-8,
signed under penalties of perjury, attesting to that Holder's exempt status. A
Form W-8 can be obtained from the Exchange Agent. See the enclosed "Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.

If backup withholding applies, the Exchange Agent is required to withhold
31% of any payments made to the Holder or other payee. Backup withholding is not
an additional federal income tax. Rather, the federal income tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.

PURPOSE OF SUBSTITUTE FORM W-9

To prevent backup withholding on payments made with respect to the Exchange
Offer, the Holder is required to provide the Exchange Agent with either: (i) the
Holder's correct TIN by completing the form below, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such Holder is awaiting a
TIN) and that (A) the Holder has not been notified by the Internal Revenue
Service that the Holder is subject to backup withholding as a result of failure
to report all interest or dividends or (B) the Internal Revenue Service has
notified the Holder that the Holder is no longer subject to backup withholding;
or (ii) an adequate basis for exemption.

WHAT NUMBER TO GIVE THE EXCHANGE AGENT

The Holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered Holder of
the Old Notes. If the Old Notes are held in more than one name or are held not
in the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report.
<PAGE>

<TABLE>
<S> <C> <C>
PAYER'S NAME:

SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT
FORM W-9 RIGHT AND CERTIFY BY SIGNING AND DATING BELOW SOCIAL SECURITY NUMBER
OR
EMPLOYER IDENTIFICATION
NUMBER
PART 2--Certification--Under Penalties of
Perjury, I certify
DEPARTMENT OF THE that:
TREASURY
INTERNAL REVENUE SERVICE
PAYER'S REQUEST FOR (1) The number shown in this form is my correct PART 3--
TAXPAYER Taxpayer Identification Number (or I am Awaiting TIN
IDENTIFICATION NUMBER waiting for a number to be issued to me) and / /
(TIN) (2) I am not subject to backup withholding
AND CERTIFICATION either because I have not been notified by
the Internal Revenue Service ("IRS") that I
am subject to backup withholding as a result
of failure to report all interest or
dividends, or the IRS has notified me that I
am no longer subject to backup withholding.
Certificate Instructions--You must cross out item (2) in Part 2 above if
you have been notified by the IRS that you are subject to backup
withholding because of under reporting interest or dividends on your tax
return. However, if after being notified by the IRS that you were subject
to backup withholding you received another notification from the IRS
stating that you are no longer subject to backup withholding, do not cross
out item (2).

SIGNATURE Date
</TABLE>

NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO HOLDERS OF NEW NOTES PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.

YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART
3 OF SUBSTITUTE FORM W-9.

CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER

I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number within 60 days, 31 percent of all
reportable payments made to me thereafter will be withheld until I provide a
number.
Signature__________________________________ Date______________

<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
11 3/8% SENIOR DISCOUNT NOTES DUE 2006
OF
CS WIRELESS SYSTEMS, INC.

As set forth in the Prospectus, dated July , 1996 (the "Prospectus"), of
CS Wireless Systems, Inc. (the "Company") and in the accompanying Letter of
Transmittal and instructions thereto (the "Letter of Transmittal"), this form or
one substantially equivalent hereto must be used to accept CS Wireless's
exchange offer (the "Exchange Offer") to purchase all of its outstanding 11 3/8%
Senior Discount Notes due 2006 (the "Old Notes") if (i) certificates
representing the Old Notes to be tendered for purchase and payment are not lost
but are not immediately available, (ii) time will not permit the Letter of
Transmittal, certificates representing such Old Notes or other required
documents to reach the Exchange Agent prior to the Expiration Date or (iii) the
procedures for book-entry transfer cannot be completed prior to the Expiration
Date. This form may be delivered by an Eligible Institution by mail or hand
delivery to the Exchange Agent at its address set forth below not later than
5:00 p.m., New York City Time, on July , 1996, unless the Offer is extended.
All capitalized terms used herein but not defined herein shall have the meanings
ascribed to them in the Prospectus.

The Exchange Agent is:
Fleet National Bank

<TABLE>
<S> <C>
By Mail: By Hand or Express Delivery:
Fleet National Bank Fleet National Bank
Corporation Trust Corporate Trust Operations
Operations 777 Main Street, Lower Level
P.O. Box 1440 Hartford, Connecticut 06115
CTMO 0224 Attention: Patricia Williams
Hartford, Connecticut 06143
Attention: Patricia
Williams
</TABLE>

DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL
NOT CONSTITUTE A VALID DELIVERY.

LADIES AND GENTLEMEN:

The undersigned hereby tender(s) to CS Wireless, upon the terms and subject
to the conditions set forth in the Exchange Offer and the Letter of Transmittal,
receipt of which is hereby acknowledged, the aggregate principal amount of Old
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus under the caption "The Exchange Offer-Guaranteed Delivery
Procedures."

The undersigned understands that partial tenders of Old Notes will be
accepted only in principal amounts equal to $1,000 or integral multiples
thereof. The undersigned understands that tenders of Old Notes pursuant to the
Exchange Offer may not be withdrawn after 5:00 p.m., New York City time, on the
Expiration Date. Tenders of Old Notes may also be withdrawn if the Exchange
Offer is terminated without any such Old Notes being purchased thereunder or as
otherwise provided in the Prospectus under the caption "The Exchange
Offer-Withdrawal Rights."

All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned,
and every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
<PAGE>
PLEASE COMPLETE AND SIGN

<TABLE>
<S> <C>
Signature(s) of Registered Owner(s) or Name(s) of Registered
Authorized Signatory: Holder(s)
------------------------- ----------------------

- ---------------------------------------------- ----------------------------------------------

Address:
Principal Amount of Old Notes Tendered: Area Code and Telephone No.:

If Old Notes will be delivered by book-entry
Certificate No(s). of Old Notes (if available): transfer at The Depository Trust Company, insert
Depository Account No.:
- ----------------------------------------------

- ---------------------------------------------- ----------------------------------------------
Date:
-----------------------------------------
Taxpayer Identification or
Social Security No.
---------------------------
</TABLE>

This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Old Notes exactly as its (their) name(s) appear on certificates
for Old Notes or on a security position listing as the owner(s) of Old Notes,
or by person(s) authorized to become registered holder(s) by endorsement and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person
must provide the following information.

Please print name(s) and address(es)

<TABLE>
<S> <C>
Name(s):
---------------------------------------------------------------

---------------------------------------------------------------
Capacity:
--------------------------------------------------------------
Address(es):
-----------------------------------------------------------

-----------------------------------------------------------

-----------------------------------------------------------
</TABLE>

The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. lor a
commercial bank or trust company having an office or a correspondent in the
United States, hereby (a) represents that each holder of Old Notes on whose
behalf this tender is being made "own(s)" the Old Notes covered hereby within
the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as
amended, (b) represents that such tender of Old Notes complies with such Rule
14e-4, and (c) guarantees that, within five New York Stock Exchange trading
days from the date of this Notice of Guaranteed Delivery, a properly completed
and duly executed Letter of Transmittal, together with certificates
representing the Old Notes covered hereby in proper form for transfer (or
confirmation of the book-entry transfer of such Old Notes into the Exchange
Agent's account at The Depository Trust Company, pursuant to the procedure for
book-entry transfer set forth in the Prospectus) and required documents will
be deposited by the undersigned with the Exchange Agent.

The undersigned acknowledges that it must deliver the Letter of
Transmittal and Old Notes tendered hereby to the Exchange Agent within the
time period set forth above and that failure to do so could result in
financial loss to the undersigned.

<TABLE>
<S> <C>
Name of Firm:
---------------------------- ----------------------------------------
Address: Authorized Signature
---------------------------------
Name:
-----------------------------------
- -----------------------------------------
Area Code and Telephone No.: Title:
----------------------------------
Date:
-----------------------------------
</TABLE>

NOTE: DO NOT SEND OLD NOTES WITH THIS FORM. OLD NOTES SHOULD BE SENT TO THE
EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED
LETTER OF TRANSMITTAL.

<PAGE>
CS WIRELESS SYSTEMS, INC.

OFFER FOR ALL OUTSTANDING
11 3/8 SENIOR DISCOUNT NOTES DUE 2006
IN EXCHANGE FOR
11 3/8% SERIES B SENIOR DISCOUNT NOTES DUE 2006

TO OUR CLIENTS:

Enclosed for your consideration is a Prospectus, dated July , 1996 (the
"Prospectus"), and the related Letter of Transmittal and instructions thereto
(the "Letter of Transmittal"), relating to the offer (the "Exchange Offer") of
CS Wireless Systems, Inc. ("CS Wireless") to exchange its 11 3/8% Series B
Senior Discount Notes due 2006 (the "New Notes") for its outstanding 11 3/8%
Senior Discount Notes due 2006 (the "Old Notes"), upon the terms and subject to
the conditions described in the Prospectus. The Exchange Offer is being made in
order to satisfy certain obligations of CS Wireless contained in the Notes
Registration Rights Agreement dated as of February 15, 1996.

This material is being forwarded to you as the beneficial owner of the Old
Notes carried by us in your account but not registered in your name. A TENDER OF
SUCH OLD NOTES MAY ONLY BE MADE BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. Therefore, CS Wireless urges beneficial owners of Old Notes
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee to contact such Holder promptly if they wish to exchange Old Notes
in the Exchange Offer.

Accordingly, we request instructions as to whether you wish us to tender on
your behalf any or all of the Old Notes held by us for your account, pursuant to
the terms and conditions set forth in the enclosed Prospectus and Letter of
Transmittal.

Your instructions should be forwarded to us as promptly as possible in order
to permit us to tender the Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , unless extended by CS Wireless. Any Old Notes
tendered pursuant to the Exchange Offer may be withdrawn at any time prior to
5:00 p.m. on the Expiration Date.

Your attention is directed to the following:

1. The Exchange Offer is for any and all Old Notes.

2. The Exchange Offer is subject to certain conditions set forth in the
Prospectus in the section captioned "The Exchange Offer--Certain Conditions to
the Exchange Offer."

3. Any transfer taxes incident to the transfer of Old Notes from the holder
to CS Wireless will be paid by CS Wireless, except as otherwise provided in the
Instructions in the Letter of Transmittal.

4. The Exchange Offer expires at 5:00 p.m., New York City time, on ,
1996, unless extended by CS Wireless.

If you wish to have us tender your Old Notes, please so instruct us by
completing, executing and returning to us the instruction form on the back of
this Letter of Transmittal. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR
YOUR INFORMATION ONLY AND MAY NOT BE USED DIRECTLY BY YOU TO TENDER OLD NOTES.
<PAGE>
INSTRUCTIONS WITH RESPECT TO
THE EXCHANGE OFFER

The undersigned acknowledge(s) receipt of your Letter of Transmittal and the
enclosed material referred to therein relating to the Exchange Offer made by CS
Wireless with respect to its Old Notes.

This will instruct you to tender the Old Notes held by you for the account
of the undersigned, upon and subject to the terms and conditions set forth in
the Prospectus and the related Letter of Transmittal.

Please tender the Old Notes held by you for my account as indicated below:

----------------------------------------

AGGREGATE PRINCIPAL AMOUNT OF OLD NOTES

----------------------------------------

11 3/8% Senior Discount
Notes due 2006

/ / Please do not tender any Old Notes
held by you for my account.

Dated: , 1996

--------------------------------------------

Signature(s)

--------------------------------------------

--------------------------------------------
Please print name(s) here

--------------------------------------------

--------------------------------------------
Address(es)
--------------------------------------------
Area Code and Telephone Number(s)

--------------------------------------------
Tax Identification or Social Security No(s).

NONE OF THE OLD NOTES HELD BY US FOR YOUR ACCOUNT WILL BE TENDERED UNLESS WE
RECEIVE WRITTEN INSTRUCTIONS FROM YOU TO DO SO. UNLESS A SPECIFIC CONTRARY
INSTRUCTION IS GIVEN IN THE SPACE PROVIDED, YOUR SIGNATURE(S) HEREON SHALL
CONSTITUTE AN INSTRUCTION TO US TO TENDER ALL THE OLD NOTES HELD BY US FOR YOUR
ACCOUNT.

<PAGE>
CS WIRELESS SYSTEMS, INC.
OFFER FOR ALL OUTSTANDING
11 3/8% SENIOR DISCOUNT NOTES DUE 2006
IN EXCHANGE FOR
11 3/8% SERIES B SENIOR DISCOUNT NOTES DUE 2006

TO: BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES AND OTHER
NOMINEES: , 1996

CS Wireless Systems, Inc. ("CS Wireless") is offering, upon and subject to
the terms and conditions set forth in the Prospectus, dated July , 1996 (the
"Prospectus"), to exchange (the "Exchange Offer") its 11 3/8% Series B Senior
Discount Notes due 2006 for its outstanding 11 3/8% Senior Discount Notes due
2006 (the "Old Notes"). The Exchange Offer is being made in order to satisfy
certain obligations of the Company contained in the Notes Registration Rights
Agreement dated as of February 15, 1996.

We are requesting that you contact your clients for whom you hold Old Notes
regarding the Exchange Offer. For your information and for forwarding to your
clients for whom you hold Old Notes registered in your name or in the name of
your nominee, or who hold Old Notes registered in their names, we are enclosing
the following documents:

1. Prospectus dated July , 1996;

2. The Letter of Transmittal for your use and for the information of your
clients;

3. A Notice of Guaranteed Delivery to be used to accept the Exchange Offer
if certificates for Old Notes are not immediately available or time will not
permit all required documents to reach the Exchange Agent prior to the
Expiration Date (as defined below) or if the procedure for book-entry transfer
cannot be completed on a timely basis;

4. A form of letter which may be sent to your clients for whose account you
hold Old Notes registered in your name or the name of your nominee, with space
provided for obtaining such clients' instructions with regard to the Exchange
Offer;

5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and

6. Return envelopes addressed to Fleet National Bank, Exchange Agent for the
Old Notes;

YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , UNLESS EXTENDED BY CS WIRELESS (THE "EXPIRATION DATE"). THE OLD
NOTES TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR
TO 5:00 P.M. ON THE EXPIRATION DATE. THE EXCHANGE OFFER IS NOT CONDITIONED ON
ANY MINIMUM PRINCIPAL AMOUNT OF OLD NOTES BEING TENDERED.

To participate in the Exchange Offer, a duly executed and properly completed
Letter of Transmittal, with any required signature guarantees and any other
required documents, should be sent to the Exchange Agent, all in accordance with
the instructions set forth in the Letter of Transmittal and the Prospectus.

If holders of Old Notes wish to tender, but it is impracticable for them to
forward their certificates for Old Notes prior to the expiration of the Exchange
Offer or to comply with the book-entry transfer procedures on a timely basis, a
tender may be effected by following the guaranteed delivery procedures described
in the Prospectus under "The Exchange Offer--Guaranteed Delivery Procedures."

CS Wireless will, upon request, reimburse brokers, dealers, commercial banks
and trust companies for reasonable and necessary costs and expenses incurred by
them in forwarding the Prospectus and the related documents to the beneficial
owners of Old Notes held by them as nominee or in a fiduciary capacity. CS
Wireless will pay or cause to be paid all stock transfer taxes applicable to the
exchange of
<PAGE>
Old Notes pursuant to the Exchange Offer, except as set forth in Instruction 5
of the Letter of Transmittal.

Any inquiries you may have with respect to the Exchange Offer, or requests
for additional copies of the enclosed materials, should be directed to Fleet
National Bank, Exchange Agent for the Old Notes, at its address and telephone
number set forth on the front of the Letter of Transmittal.

Very truly yours,

CS Wireless Systems, Inc.

NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF CS WIRELESS OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF
THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN
THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.

Enclosures