U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 12 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997.
[X] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____ TO ____.
Commission file number 21143
WIRELESS CABLE & COMMUNICATIONS, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 87-0545056
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
102 West 500 South, Suite 320
Salt Lake City, Utah 84101
(Address of Principal Executive Offices) (Zip Code)
(801) 328-5618
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if
changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No ____
As of October 31, 1997, 6,023,138 shares of registrant's Common Stock, par value
$.01 per share, 2,924,063 shares of the registrant's Series A Preferred Shares,
par value $.01 per share, and 354,825 shares of the registrant's Series B
Preferred Shares, par value $10.00 per share, were outstanding.
<PAGE>
PART I : FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS REQUIRED BY FORM 10-QSB
The accompanying unaudited consolidated financial statements have been
prepared by Wireless Cable & Communications, Inc. ("WCCI") pursuant to the rules
and regulations of the Securities and Exchange Commission. They do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. The consolidated financial
statements have been prepared using a reverse acquisition accounting treatment
due to a transaction where Telecom Investment Corporation ("TIC") merged with a
wholly owned subsidiary of WCCI and the financial statements presented for the
period from September 27, 1994 (date of TIC inception) through September 30,
1997 are the financial statements of TIC and differ from the consolidated
financial statements of WCCI and its subsidiaries as previously reported (see
Note 1). The financial statements presented include the operations of TIC for
the period from September 27, 1994 (date of TIC inception) through September 30,
1997 and for the full nine months, and of WCCI and its subsidiaries for the
period February 4, 1997 (effective date of the acquisition) to September 30,
1997. These financial statements should be read in conjunction with Note 1
herein and the consolidated financial statements and notes thereto included in
the WCCI annual report on form 10-KSB, as amended, for the year ended December
31, 1996, which are incorporated herein by reference. The accompanying financial
statements have not been examined by independent accountants in accordance with
generally accepted auditing standards, but in the opinion of management, all
adjustments (consisting of normal recurring entries) necessary for the fair
presentation of the Company's results of operations, financial position and
changes therein for the periods presented have been included. The results of
operations for the three and nine months ended September 30, 1997 may not be
indicative of the results that may be expected for the year ending December 31,
1997.
[THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE>
<TABLE>
<CAPTION>
WIRELESS CABLE & COMMUNICATIONS, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS (Unaudited)
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
<S> <C> <C>
September 30, December 31,
1997 1996
ASSETS
CURRENT ASSETS:
Cash .......................................................... $ 8,247,003 $ 8,902
Accounts Receivable, net ...................................... 14,411 --
Prepaid license lease fees, other ............................. 205,002 14,778
------------- -------------
Total current assets .................................. 8,466,416 23,680
INVESTMENT IN AFFILIATES ....................................... 1,808,455 --
EQUIPMENT - Net ................................................ 406,506 --
LICENSE RIGHTS - Net ........................................... 836,167 --
DUE FROM AFFILIATES ............................................ 64,855 --
INTANGIBLE ASSETS & GOODWILL - Net ............................. 7,422,110 --
OTHER ASSETS ................................................... 35,063 --
------------- -------------
TOTAL ASSETS ................................................... $ 19,039,572 $ 23,680
============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable & other accrued liabilities ................. $ 473,034 $ 438,557
Accrued license lease fees ................................... 121,621 --
Accrued consulting fees - related party ...................... 100,000 --
Due to affiliates ............................................ 746,579 --
Customer Deposits ............................................ 40,671 --
------------- -------------
Total current liabilities ............................. 1,481,905 438,557
LONG-TERM LIABILITIES:
Long-term debt - related parties ............................ 1,341,631 231,570
Note payable ................................................ 732,383 --
MINORITY INTEREST IN SUBSIDIARY ................................ 22,413 --
------------- -------------
Total liabilities ..................................... 3,578,332 670,127
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Series A Preferred stock; $0.01 par value; 4,250,000 shares
authorized and 2,924,063 and 0 shares issued and outstanding
in 1997 and 1996, respectively ............................. 29,241 --
Series B Preferred stock; $10.00 par value; 750,000 shares
authorized: 354,825 and 0 issued and outstanding in 1997
and 1996, respectively ..................................... 3,548 --
Common stock; $0.01 par value; 15,000,000 shares authorized:
6,023,138 and 1,500,000 shares issued and outstanding
in 1997 and 1996 respectively .............................. 60,231 15,000
Additional paid-in capital .................................... 17,105,471 --
Deficit accumulated during the development stage .............. (1,737,251) (661,447)
------------- -------------
Total stockholders' deficit ........................... 15,461,240 (646,447)
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..................... $ 19,039,572 $ 23,680
============= =============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WIRELESS CABLE & COMMUNICATIONS, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
AND FROM SEPTEMBER 27, 1994 (DATE OF INCEPTION) TO SEPTEMBER 30, 1997
<S> <C> <C> <C>
Three Three September 27,
Months Months 1994 (Date of
Ended Ended Inception) To
September 30, September 30, September 30,
1997 1996 1997
--------------- --------------- -------------
REVENUES ................................................... $ 38,648 NONE $ 38,648
COST OF SERVICES ........................................... 24,106 24,106
------------ ------------ ------------
GROSS PROFIT ............................................... 14,542 NONE 14,542
EXPENSES:
Professional fees ........................................ 138,919 $ 43,124 453,714
Depreciation and amortization ............................ 187,353 -- 235,903
Lease expense ............................................ 28,884 -- 61,370
Consulting ............................................... 56,862 35,000 396,140
Payroll expenses ......................................... 139,721 -- 139,721
General and administrative ............................... 110,243 82,633 356,445
------------ ------------ ------------
Total ................................................. 661,982 160,757 1,643,293
------------ ------------ ------------
OPERATING LOSS ............................................. (647,440) (160,757) (1,628,751)
------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest income ......................................... 34,839 -- 34,839
Interest expense ........................................ (47,348) (10,892) (152,004)
------------ ------------ ------------
NET LOSS BEFORE MINORITY INTEREST .......................... (659,949) (171,649) (1,745,916)
MINORITY INTEREST IN LOSS OF
SUBSIDIARIES ............................................... 3,237 -- 8,665
------------ ------------ ------------
NET LOSS ................................................... $ (656,712) $ (171,649) $(1,737,251)
============ ============ ============
Net loss per Common Shares and
Common Share equivalent .................................. $ (.024) $ (0.07)
============ ============
Weighted average Common Shares and
Common Share equivalent .................................. 2,769,174 2,511,196
============ ============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WIRELESS CABLE & COMMUNICATIONS, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
AND FROM SEPTEMBER 27, 1994 (DATE OF INCEPTION) TO SEPTEMBER 30, 1997
<S> <C> <C> <C>
Nine Nine September 27,
Months Months 1994 (Date of
Ended Ended Inception) To
September 30, September 30, September 30,
1997 1996 1997
--------------- --------------- -------------
REVENUES ................................................... $ 38,648 NONE $ 38,648
COST OF SERVICES ........................................... 24,106 -- 24,106
------------ ----------- -------------
GROSS PROFIT ............................................... 14,542 NONE 14,542
EXPENSES:
Professional fees ........................................ 229,571 $ 72,788 453,714
Depreciation and amortization ............................ 235,903 -- 235,903
Lease expense ............................................ 61,370 -- 61,370
Consulting ............................................... 103,260 101,000 396,140
Payroll expenses ......................................... 139,721 -- 139,721
General and administrative ............................... 247,164 117,522 356,445
------------ ------------ ------------
Total ................................................. 1,016,989 291,310 1,643,293
OPERATING LOSS ............................................. (1,002,447) (291,310) (1,628,751)
------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest income ......................................... 34,839 -- 34,839
Interest expense ........................................ (116,861) (16,320) (152,004)
------------ ------------ ------------
NET LOSS BEFORE MINORITY INTEREST .......................... (1,084,469) (307,630) (1,745,916)
MINORITY INTEREST IN LOSS OF
SUBSIDIARIES ............................................... 8,665 -- 8,665
------------ ------------ ------------
NET LOSS ................................................... $(1,075,804) $ (307,630) $(1,737,251)
============ ============ ============
Net loss per Common Shares and
Common Share equivalent .................................. $ (0.40) $ (0.12)
============ ============
Weighted average Common Shares and
Common Share equivalent .................................. 2,720,120 2,502,438
============ ============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WIRELESS CABLE & COMMUNICATIONS, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (Unaudited)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997,
THE YEAR ENDED DECEMBER 31, 1996,
AND FROM SEPTEMBER 27, 1994 (DATE OF INCEPTION) TO SEPTEMBER 30, 1997
<S> <C> <C> <C> <C> <C>
Deficit
Series A Series B Accumulated
Preferred Stock Preferred Stock Common Stock Additional During the
----------------- ----------------- ----------------- Paid-in Development
Shares Amount Shares Amount Shares Amount Capital Stage
Issuance of TIC stock to TIC
shareholders in October 1994...... 1,500,000 $15,000
Net loss for the period from
September 27, 1995 (date of
inception) to December 31, 1994..... $ (59,108)
-------- -------- -------- -------- --------- -------- ---------- -------------
BALANCE, DECEMBER 31, 1994 1,500,000 15,000 (59,108)
Net loss for the year ended
December 31, 1995................ (179,771)
-------- -------- -------- -------- --------- -------- ---------- -------------
BALANCE, DECEMBER 31, 1995.......... 1,500,000 15,000 (238,879)
Net loss for the year ended
December 31, 1996................ (422,568)
-------- -------- -------- -------- --------- -------- ---------- -------------
BALANCE, DECEMBER 31, 1996.......... 1,500,000 15,000 (661,447)
Reverse acquisition of TIC:
Exchange of TIC common stock for WCCI
Series A Preferred Shares........... 2,397,732 $ 23,977 (1,500,000) (15,000) $ (8,977)
Addition of WCCI common stock....... 3,645,833 36,458 50,532
Exchange of CVV common stock for
WCCI common stock and Series B
Preferred Stock.................... 354,825 3,548 1,577,000 15,770 7,077,182
Issuance of WCCI common stock and
Series A Preferred shares
for cash......................... 526,331 5,264 800,305 8,003 9,986,734
Net loss for the nine month
Period edn September 30, 1997..... (1,075,804)
-------- --------- -------- -------- --------- -------- ---------- -------------
BALANCE, SEPTEMBER 30, 1997......... 2,924,063 $ 29,241 354,825 $ 3,548 6,023,138 $ 60,231 $17,105,471 $ (1,737,251)
======== ========= ======== ======== ========= ======== ========== =============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WIRELESS CABLE & COMMUNICATIONS, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
AND FROM SEPTEMBER 27, 1994 (DATE OF INCEPTION) TO SEPTEMBER 30, 1997
<S> <C> <C> <C>
Nine Nine September 27,
Months Months 1994 (Date of
Ended Ended Inception) To
September 30, September 30, September 30,
1997 1996 1997
CASH FLOWS FROM DEVELOPMENT ACTIVITIES:
Net loss ............................................................. $ (1,075,804) $ (307,630) $ (1,737,251)
Adjustments to reconcile net loss to net cash used in
development activities:
Depreciation and amortization ...................................... 235,903 -- 235,903
Minority interest in loss of subsidiary ............................ (8,665) -- (8,665)
Change in assets and liabilities:
Prepaid license lease fees ....................................... (44,567) -- (44,567)
Due from affiliates .............................................. (40,127) -- (44,804)
Other assets ..................................................... 585,396 233,108 575,294
Accounts payable and other liabilities ........................... (459,807) -- (175,963)
Accrued license lease fees ....................................... 121,621 -- 121,621
Accrued consulting fees .......................................... 100,000 100,000
------------- ------------- -------------
Net cash generated (used) in development activities...... (586,050) (74,522) (978,432)
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in affiliates .............................................. (1,648,455) -- (1,648,455)
Reverse acquisition of WCCI ........................................... 56,582 -- 56,582
Acquisition of CVV, net of cash acquired .............................. (200,000) (200,000)
------------- ------------- -------------
Net cash used in investing activities ................... (1,791,873) -- (1,791,873)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock ............................... 1,800,686 -- 1,815,686
Proceeds from issuance of preferred stock ............................ 8,199,314 -- 8,199,314
Proceeds from related party borrowings ............................... 58,960 68,526 445,244
Payments on related parties borrowings ............................... (175,319) -- (175,319)
Payments on a promissory note ........................................ (2,253,217) (2,253,217)
Borrowings through a promissory note ................................. 2,985,600 2,985,600
------------- ------------- -------------
Net cash generated by financing activities .............. 10,616,024 68,526 11,017,308
------------- ------------- -------------
NET INCREASE IN CASH ................................................... 8,238,101 (5,996) 8,247,003
CASH AT BEGINNING OF PERIOD ............................................ 8,902 15,009 --
CASH AT END OF PERIOD .................................................. $ 8,247,003 $ 9,013 $ 8,247,003
============= ============= =============
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
Acquisition of CVV:
Fair value of assets acquired, including intangible
contract rights and equipment........................................ $ 8,375,492
Fair value of liabilities assumed ................................... (878,992)
Common stock issued ................................................. (3,548,250)
Preferred stock issued .............................................. (3,548,250)
Future payments on acquisition ...................................... (200,000)
-------------
Net cash paid ........................................... $ (200,000)
=============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
WIRELESS CABLE & COMMUNICATIONS, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
1. Presentation
On January 31, 1997, Wireless Cable & Communications, Inc.
("WCCI") entered into a transaction with Telecom Investment
Corporation ("TIC"), pursuant to which TIC merged with a newly
formed wholly-owned subsidiary of WCCI, NewWCCI, Inc. (the
"Merged Companies" or the "Company"). The merger was effective
February 4, 1997. Under the terms of the merger, the former
shareholders of TIC received 2,397,732 shares of WCCI's newly
designated Series "A" Preferred Shares and legally TIC became a
wholly-owned subsidiary of WCCI. Also, the former option holders
of TIC received options to purchase 199,811 shares of WCCI's
Series "A" Preferred Shares. As a result of the merger, the
former shareholders and option holders of TIC held approximately
87.7% of the voting power of the Merged Companies on a common
share equivalent basis at the time of the merger. Generally
accepted accounting principles typically require that the company
whose shareholders retain the majority voting interest in the
combined business be treated as the acquiror for accounting
purposes. Accordingly, the merger was accounted for as a "reverse
acquisition" whereby TIC was deemed to have acquired an 87.7%
interest on a common share equivalent basis in WCCI using the
purchase method. However, WCCI remained the legal entity and the
Registrant for Securities and Exchange Commission reporting
purposes.
Consistent with the reverse acquisition accounting treatment, the
financial statements presented for the period from September 27,
1994 (date of TIC inception) through September 30, 1997 are the
financial statements of TIC and differ from the consolidated
financial statements of WCCI and its subsidiaries as previously
reported. The financial statements presented include the
operations of TIC for the period from September 27, 1994 (date of
TIC inception) through September 30, 1997 and for the full nine
months and of WCCI and its subsidiaries for the period February
4, 1997 (effective date of the acquisition) to September 30,
1997.
The consolidated financial statements also include the accounts
of WCCI and its subsidiaries, including Auckland Independent
Television Services, Ltd. ("AITS"), Transworld Wireless
Television, Inc. ("TWTI"), and Caracas Viva Vision T.V., S.A.
("CVV"). All significant intercompany accounts and transactions
have been eliminated in consolidation.
2. Net loss per common share and common share equivalent
Net loss per common share and common share equivalent is
calculated by dividing net loss by the weighted average number of
common shares and the common stock equivalent for the Series A
preferred stock outstanding during the period. Series A Preferred
shares are included in the calculation because of the ten-to-one
voting rights, dividend and liquidation attributes of the
preferred shares as compared to the common shareholders.
<PAGE>
3. Use of Estimates in Preparing Financial Statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities 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.
4. Description of Purchase
On August 15, 1997, the Company completed the acquisition of
68.14% of CVV, a Venezuelan company which operates a
multi-channel television service (see Item 5(A) for a more
detailed description of the transaction). Based on the terms of
the acquisition, the transaction has been accounted for as a
purchase of CVV by the Company for financial reporting and
accounting purposes. Accordingly, the consolidated statements of
operation include CVV's results since the date of the
acquisition. The Company revalued the basis of CVV's acquired
assets and assumed liabilities to fair value at the date of
purchase. The intangible contract rights will be amortized over a
seven year period.
The allocation of the $7,496,500 purchase price for the purchase
of 68.14% of CVV was as follows:
Fair value of assets acquired............ $ 8,375,492
Fair value of liabilities assumed........ (878,992)
-------------
$ 7,496,500
=============
The following unaudited proforma information reflects the results
of the Company's operations as if the acquisition had occurred at
the beginning of the period presented adjusted for the effect of
recurring changes related to the acquisition, primarily the
amortization of intangible contract rights and a reduction of
depreciation expense due to the write-down to fair value of fixed
assets.
Nine Months Ended September
Pro forma results 1997 1996
------------- -------------
Revenue............. $ 218,595 $ --
Net loss............ $ (1,377,931) $ (307,630)
Net loss per common
share and common
share equivalent.... $ (0.46) $ (0.12)
These pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of what
operating results would have been had the acquisition actually
taken place at the beginning of the periods presented nor do they
purport to represent results of future operations of the merged
companies.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
A. MATERIAL CHANGES IN FINANCIAL CONDITION
At September 30, 1997, the Company had current assets of
$8,466,416, compared to $23,680 at December 31, 1996, for an increase of
$8,442,736. Cash increased by $8,238,101 from $8,902 to $8,247,003 during the
nine month period, primarily as a result of the Company selling common stock and
Series A Preferred stock to a third party investor (see Item 5(B) for a more
detailed description of this transaction) (the "Petrolera Transaction") and the
receipt of $775,000 of proceeds from the sale of secured promissory notes (the
"Notes"), which are more particularly described in the Company's report on Form
10-KSB for the fiscal year ended December 31, 1996, which description is hereby
incorporated by reference. The increase in cash was offset by a decrease due to
the payment of outstanding accounts payable. Current liabilities as of September
30, 1997, were $1,481,905, compared to $438,557 as of December 31, 1996, for an
increase of $1,043,348, primarily as a result of assuming liabilities in a
transaction where the Company purchased 68.14% of a Venezuelan company which
operates a multi-channel video system (see Item 5(A) for a more detailed
description of the purchase) (the "CVV Transaction").
At September 30, 1997, total assets were $19,039,572, compared to
$23,680 as of December 31, 1996, for an increase of $19,015,892. The increase in
total assets was due primarily to the assets acquired in the CVV Transaction,
the proceeds from the sale of equity in the Petrolera Transaction and the sale
of additional Notes. Total liabilities increased $2,908,205 from $670,127 as of
December 31, 1996 to $3,578,332 as of September 30, 1997. The increase in total
liabilities is a result of the additional current liabilities, long-term debt
and minority interest in subsidiary associated with the liabilities assumed in
the CVV Transaction and from the additional sale of the Notes. Total
stockholders' equity increased by $16,107,687 from $(646,447) at December 31,
1996, to $15,461,240 at September 30, 1997.
B. MATERIAL CHANGES IN RESULTS OF OPERATIONS
The Company had revenues of $38,648 for the nine months ended
September 30, 1997 and generated $14,542 of gross profit on these revenues.
Prior to 1997, the Company did not have revenues. During the nine months ending
September 30, 1997, total operating expenses were $1,016,989, compared to
$291,310 for the same nine-month period a year earlier, for an increase of
$725,679. The increase was due primarily to administrative expenses incurred for
the CVV Transaction and the Petrolera Transaction, additional depreciation,
amortization and lease expense associated with the Company's license and
intangible rights and the expenses of the CVV operations.
During the nine months ending September 30, 1997, the Company had
a net loss of $1,075,804, compared to a net loss of $307,630 for the same period
a year earlier, for an increase of $768,174. The increase in net loss is
primarily a result of the addition of depreciation and amortization, lease and
interest expenses, increase in administrative costs from the CVV Transaction and
the Petrolera Transaction and the losses from the CVV operation. For the nine
months ended September 30, 1997, there was a net loss per common share and
common share equivalent of $(0.40), compared to a net loss per common share and
common share equivalent of $(0.12) for the same period a year earlier.
C. LIQUIDITY AND CAPITAL RESOURCES
Prior to September 30, 1997, the Company funded its operating
losses primarily through private equity and debt financings. As of September 30,
1997, the Company had cash totaling approximately $8.2 million. Cash in excess
of immediate requirements is invested in a manner which is intended to maximize
liquidity and return while minimizing investment risk.
During the nine month period ended September 30, 1997, the
Company generated $8,238,101 compared to a use of approximately $5,996 during
the same period a year earlier. This increase is cash is primarily due to the
proceeds from the Petrolera Transaction and the Notes.
Historically, the Company's operations have not been capital
intensive and, therefore, its investment in property, plant and equipment during
the periods presented has not been significant. The Company anticipates however,
that its investment in facilities and equipment will increase in the future, due
to the Company's desire to build-out wireless telecommunications systems in its
market area.
The Company expects to continue to incur substantial costs
associated with the build-out of the wireless telecommunications systems. The
Company anticipates that its existing cash balances will be sufficient to fund
the operations of the Company for approximately the next two years. However, the
Company may be required or elect to raise additional capital before that time.
The Company's actual capital requirements will depend on many factors, some of
which are outside the Company's control.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MATTERS SUBMITTED TO A VOTE OF THE COMPANY'S SHAREHOLDERS
None.
ITEM 5. OTHER INFORMATION
A. CVV Purchase.
On August 15, 1997, the Company purchased 68.14% of a
Venezuelan company which operates a multichannel video system in
Caracas, Venezuela. For a more detailed description of this
transaction, see the Company's report on Form 10-KSB which is
hereby incorporated by reference.
B. Equity Investment.
Effective August 1, 1997, the Company entered into a
Stock Purchase Agreement with Petrolera Argentina San Jorge, S.A.
("Petrolera"), an Argentinean sociedad anonima (the "Petrolera
Agreement"). A copy of the Petrolera Agreement is attached to this
report as an exhibit. Under the terms of the Petrolera Agreement,
Petrolera acquired 800,305 common shares and 526,331 Series A
preferred shares from the Company in exchange for an investment of
US $10 million. Of the purchase price, US $7.9 million was paid in
cash, and the balance ($2.1 million) was paid through the
contribution by Petrolera of the $2.1 million promissory note
delivered to it by the Company on August 4, 1997. The terms of
that promissory note are more particularly described in the
Company's report on Form 10-QSB for the period ended June 30,
1997.
Under the terms of the Petrolera Agreement, the
Company made certain affirmative covenants, including an agreement
that it will not take certain actions unless those actions are
approved by two-thirds of the Company's board of directors. These
actions include certain future issuances of securities, increases
in benefits and other remunerations payable to the Company's board
of directors and executive officers, the incurrence of certain
indebtedness, or the consummation of certain other transactions,
including mergers, consolidations or liquidations of the Company,
or its sale of all or substantially all of its assets or
properties. In addition, the Company granted Petrolera certain
preemptive rights to acquire additional shares of the Company in
the future and agreed to issue future equity securities to
Petrolera in the event the Company acquires equity investments
from parties specified in the Stock Purchase Agreement.
ITEM 6. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
A. EXHIBITS.
1. Stock Purchase Agreement among the Company and Petrolera
Argentina San Jorge, S.A. dated August 1, 1997.
B. REPORTS ON FORM 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WIRELESS CABLE & COMMUNICATIONS, INC.
Date: August 19, 1997 BY /s/ ANTHONY SANSONE
Anthony Sansone
Chief Accounting Officer
EXHIBIT INDEX
Sequential
Exhibit Page
Number Exhibit Description Number
1 Stock Purchase Agreement --
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is entered into as of August 1, 1997, by
and between WIRELESS CABLE & COMMUNICATIONS, INC., a Nevada corporation (the
"Company"), and PETROLERA ARGENTINA SAN JORGE S.A., an Argentinean sociedad
anonima (the "Investor"). The Company and the Investor are referred to
collectively herein as the "Parties" and singularly as a "Party."
WHEREAS, the Company desires to sell the Shares, as set forth on
Exhibit "A" to the Investor, and the Investor desires to purchase such Shares
from the Company, on the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Definitions. When used in this Agreement, the following terms
shall have the meanings set forth in this Section 1:
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, restraining
orders, judgments, orders, decrees, rulings, damages, dues, penalties, fines,
costs, amounts paid in settlement, Liabilities, obligations, Taxes, liens,
losses, expenses, and fees, including court costs and attorneys' fees and
expenses.
"Affiliate" of a Person shall mean any other Person that, directly or
indirectly, Controls or is Controlled by that Person, or is Under Common Control
With that Person or any such other Person, or succeeds to all or substantially
all of the business or assets of such Person. The term "Control" (including,
with correlative meaning, the terms "Controlled by" or "Under Common Control
With"), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person through the ownership of voting securities, by contract
or otherwise.
"Agreement" means this Stock Purchase Agreement, as amended,
supplemented or otherwise modified from time to time.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the reason or
catalyst for any specified consequence.
"Best Efforts" means the taking by a Party of such action as would be
in accordance with reasonable commercial practices as applied to the particular
matter in question to achieve the result as expeditiously as practicable;
provided, however, that such actions shall not include the incurrence of
unreasonable expense.
"Business" means the business and operations of the Company and its
Subsidiaries, as described in the Company's annual report on Form 10-KSB for
1996, as filed with the Securities and Exchange Commission.
<PAGE>
"Channel License" shall mean any license granted by any Local Authority
to operate a Channel with respect to the Business. The Channel Licenses are
identified on Section 4(e) of Annex I.
"Channels" means the classes of microwave frequencies licensed by any
Local Authority pursuant to the Channel Licenses used for the transmission or
delivery of instructional, cultural, educational and/or commercial audio, video
or data programming or transmission (including, without limitation, MDS, MVDS,
LMDS, Private Cable Channels and/or MMDS services), which Channels are set forth
on Section 4(e) of Annex I. "LMDS" means local multi-point distribution service,
a transmission service licensed by Local Authority typically using the
frequencies of 26 through 31 GHz and rendered on microwave frequencies from a
fixed transmitter location simultaneously to multiple receiving facilities or in
connection with a low-earth orbiting satellite distribution system for
commercial data and/or video and/or audio programming, or any equivalent Local
Law domestic transmission service. "MDS" means multi-point distribution service,
a transmission service licensed by Local Authority typically using the
frequencies of 2.15 through 2.165 GHz and rendered on microwave frequencies from
a primary fixed transmitter location simultaneously to multiple receiving
facilities and used primarily for the distribution of commercial data, and/or
video and/or audio programming, or any equivalent Local Law domestic
transmission service. "MMDS" means multi-channel multi-point distribution
service, a transmission service licensed by Local Authority typically using the
frequencies of 2.5 through 2.7 GHz and rendered on microwave frequencies from a
fixed transmitter location simultaneously to multiple receiving facilities, used
primarily for the distribution of commercial data, and/or video and/or audio
programming and any equivalent Local Law transmission service. "MVDS" means
multi-point video distribution service, a transmission service licensed by Local
Authority typically using the frequencies of 37.5 through 42.5 GHz and rendered
on microwave frequencies from a fixed transmitter location simultaneously to
multiple receiving facilities, used primarily for the distribution of commercial
data, and/or video and/or audio programming, or any equivalent Local Law
domestic transmission service. "Private Cable Channels" means multi-point video
distribution services, a transmission service licensed by Local Authority
typically using the frequencies of approximately 17.9 through 18.64 GHz and
rendered on microwave frequencies from a fixed transmitter location
simultaneously to multiple receiving facilities, used primarily for the
distribution of commercial data, and/or video and/or audio programming, or any
equivalent Local Law transmission service.
"Closing" has the meaning set forth in Section 2(c).
"Closing Date" has the meaning set forth in Section 2(c).
"Common Share Equivalent Basis" has the meaning set forth in Section
6(c)
"Confidential Information" means any information concerning the
businesses and affairs of a Party that is not already known by or generally
available to the public.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an employee pension
benefit plan, (b) qualified defined contribution retirement plan or arrangement
within the meaning of '3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or any similar Local Law (including any
Multiemployer Plan), or (c) any benefit plan within the meaning of ERISA '3(1),
and any equivalent provision of Local Law, or material fringe benefit plan or
program.
"Environmental, Health, and Safety Laws" means all Local Laws
concerning pollution or protection of the environment, public health and safety,
or employee and/or workplace health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
"Financial Statements" has the meaning set forth in Section 4(g).
"GAAP" means United States generally accepted accounting principles, as
in effect from time to time.
"Indemnified Party" has the meaning set forth in Section 9(d).
"Indemnifying Party" has the meaning set forth in Section 9(d).
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), and all patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, revisions, extensions, and reexaminations thereof, (b) all
trademarks, service marks, logos, trade names, and corporate names, together
with all translations, adaptations, including all goodwill associated therewith,
and all applications, registrations, and renewals in connection therewith, (c)
all copyrightable works, all copyrights, and all applications in connection
therewith, (d) all trade secrets and confidential business information
(including ideas, research and development, know-how, technical data, designs,
customer and supplier lists, pricing and cost information, and business and
marketing plans), (e) all other proprietary rights, and (f) all copies and
tangible embodiments thereof.
"Knowledge" means actual knowledge after reasonable investigation. With
respect to an entity, "Knowledge" means actual knowledge after reasonable
investigation by the entity's executive officers and directors, partners or
control persons.
"Liability" means any liability (whether known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, and whether due or to become due), whether based on contract, tort
or Local Law, including any liability for Taxes.
"License Conditions" means, with respect to any Channel License, that
(a) such license is in full force and effect under Local Law, (b) there are no
expired authorizations where the licensee is seeking reinstatement, nor are
there any pending term extension requests, (c) where required, the licensee has
built facilities pursuant to the licensee's initial authorization, and (d) there
are no violations of any Local Law with respect to such Channel License which
would have an Adverse Consequence upon the right or ability of the Company or
its Subsidiaries to operate thereunder.
"Local Authority" means any governmental agency, authority, division,
or service having authority, control or jurisdiction over a particular matter or
event.
"Local Law" means all applicable statutes, rules, regulations, orders,
decrees, codes, rulings, charges, injunctions, codes, judgments and laws of a
Local Authority.
"Material Contracts" means all Channel Licenses, Permits, Leases,
agreements, contracts, understandings, instruments, licenses, written or oral,
which are related to the continuing conduct and operation of the Business and
which, if not available to the Company or its Subsidiaries, would have a
material adverse effect upon the ability of the Company to operate the Business
in substantially the same manner as it is now conducted.
"Most Recent Financial Statements" has the meaning set forth in Section
4(g).
"Most Recent Fiscal Month End" has the meaning set forth in Section
4(g).
"Most Recent Fiscal Year End" has the meaning set forth in Section
4(g).
"Non-Dilutive Transactions" means (a) the investment of an aggregate
maximum of $10,000,000 on or before September 30, 1997 (including transactions
that close before November 1, 1997, which were the subject of serious
negotiations on September 30, 1997) in equity securities of the Company by any
one or more of (i) Leucadia National Corporation, (ii) Motorola, Inc., or (iii)
FondElec Group, Inc. or their respective Affiliates or assigns, and (b) the
consummation by the Company of the transactions described in that certain Option
and Stock Purchase Agreement dated November 8, 1996 among Caracas Viva Vision
T.V., S.A., its shareholders and the Company, as amended or supplemented.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Permits" means all rights, franchises, permits, authorities, licenses,
certificates of approval or authorizations (including licenses) issuable by
Local Authority, including Channel Licenses, and which, pursuant to Local Law,
authorize a Person lawfully to conduct and operate its business as currently
conducted and to own, and/or lease and use its assets.
"Person" means an individual, corporation, partnership, joint venture,
trust, association, unincorporated organization or any other entity or
governmental body or subdivision, agency, commission or authority thereof, or
any equivalent entity under Local law;
"Preemptive Right Exemptions" has the meaning set forth in Section
12(a).
"Purchase Price" has the meaning set forth in Section 2(b).
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable or for Taxes that
the taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Shares" means 800,305 of the authorized but unissued shares of the
common stock of the Company, par value $.01, and 526,331 of the authorized but
unissued shares of the Series A Preferred Stock of the Company, par value $.01,
to be acquired by Investor hereunder, as set forth on Exhibit "A", as such
Shares are adjusted pursuant to the provisions of Section 6(c).
"Subsidiary" or "Subsidiaries" means the entities described in Section
4(f) of Annex I.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not, and any Local Law equivalent thereof.
"Third Party Claim" has the meaning set forth in Section 9(d).
"Updated Financial Statements" has the meaning set forth in Section
8(a)(v).
2. Purchase and Sale of Shares
(a) Basic Transaction. On and subject to the terms and
conditions of this Agreement, Investor agrees to purchase from the Company, and
the Company agrees to sell to the Investor, the Shares for the consideration
specified in Section 2(b).
(b) Purchase Price. Investor agrees to pay and contribute to
the Company, at the Closing, U.S. $10,000,000 (the "Purchase Price") by delivery
of cash payable by wire transfer or delivery of other immediately available
funds.
(c) The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Parsons
Behle & Latimer in Salt Lake City, Utah, or at such other location as the
Parties determine, commencing at 10:00 a.m. local time on the third business day
following the satisfaction or waiver of all conditions to the obligations of the
Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective Parties will take at the
Closing itself) or such other date as the Company and Investor may mutually
determine (the "Closing Date"); provided, however, that the Closing Date shall
be no later than August 30, 1997.
(d) Deliveries at the Closing At the Closing, (i) the Company
will deliver to the Investor one or more certificates representing the Shares
and the various certificates, instruments, and documents referred to in Section
8(a) below, and (ii) the Investor will deliver to the Company the Purchase Price
and the various certificates, instruments, and documents referred to in Section
8(b).
3. Representations and Warranties of Investor. Investor represents and
warrants to the Company that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3).
(a) Organization of the Investor. Investor is a sociedad
anonima duly organized, validly existing, and in good standing under the laws of
the Republic of Argentina.
(b) Authorization of Transaction. Investor has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement has been
duly authorized and executed by Investor and constitutes the valid and legally
binding obligation of Investor, enforceable in accordance with its terms and
conditions. Investor need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any Local Authority in order
to consummate the transactions contemplated by this Agreement.
(c) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Investor is subject or any provision of
its charter or other organization documents or bylaws or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license, instrument,
or other arrangement to which Investor is a party or by which it is bound or to
which any of its assets is subject and which, if conflicted with, breached,
defaulted, accelerated, terminated, modified or canceled, would have a material
adverse effect on the ability of Investor to perform hereunder.
(d) Brokers' Fees. Investor has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Company could become
liable or obligated.
(e) Investment Intent. Investor understands that the Shares
have not been registered under the Securities Act. Investor is acquiring the
Shares without a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act. The Shares will constitute "restricted
securities" under the Securities Act, and may not be resold without registration
under, or the availability of an exemption from, the registration requirements
of the Securities Act and similar Local Laws. The Investor represents that it is
familiar with Securities and Exchange Commission Rule 144, as presently in
effect, and understands the resell limitations imposed thereby and by the
Securities Act. Without limiting the representations set forth in this
paragraph, the Investor will make no disposition of all or any portion of the
Shares unless and until (i) there is then in effect a registration statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or (ii) such Investor
shall have notified the Company of the proposed disposition and shall have
furnished the Company with a statement of the circumstances surrounding the
proposed disposition and, if requested by the Company, the Investor shall have
furnished the Company with an opinion of counsel, reasonably satisfactory to the
Company, that such disposition does not require registration under the
Securities Act.
(f) Restrictive Legend. The certificate or certificates
evidencing the Shares may bear a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD, PLEDGED OR TRANSFERRED UNLESS THE SAME
ARE REGISTERED UNDER THE SECURITIES ACT OF
1933, OR THE COMPANY RECEIVES AN OPINION FROM
COUNSEL SATISFACTORY TO IT THAT SUCH
REGISTRATION IS NOT REQUIRED FOR SALE OR
TRANSFER OR THAT THE SHARES HAVE BEEN LEGALLY
SOLD IN BROKER TRANSACTIONS PURSUANT TO RULE
144 OF THE RULES AND REGULATIONS OF THE
SECURITIES AND EXCHANGE COMMISSION PROMULGATED
UNDER THE SECURITIES ACT OF 1933.
(g) Information. The Investor has had the opportunity to
review the Company's Form 10-KSB for the year ended December 31, 1996 as filed
with the Securities and Exchange Commission pursuant to the Securities Act and
to ask questions of and receive answers from the Company regarding the Business.
(h) Accredited Investor. The Investor is an "accredited
investor," as that term is defined in Regulation D promulgated under the
Securities Act, can bear the risk of its investment in the Shares, and has such
knowledge and experience in financial and/or business matters that it is capable
of evaluating the merits and risks of an investment in the Shares.
4. Representations and Warranties Concerning the Company and its
Subsidiaries The Company represents and warrants to Investor that the statements
contained in this Section 4 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 4), except as set forth in Annex I attached.
(a) Organization, Qualification, and Corporate Power. Each of
the Company and its Subsidiaries is a corporation duly organized, validly
existing, and in good standing under the laws of the place of its incorporation.
Each of the Company and its Subsidiaries is duly authorized to conduct business
and is in good standing under the laws of each jurisdiction where such
qualification is required, except where the failure to be so qualified (i) would
not have a material adverse effect on the Company and its Subsidiaries on a
consolidated basis, (ii) can be remedied without material expense, and (iii)
will not render any Material Contract unenforceable.
(b) Authorization of Transaction. The Company has full power
and authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This Agreement
has been duly authorized and executed by the Company and constitutes the valid
and legally binding obligation of the Company, enforceable in accordance with
its terms and conditions. The Company need not give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any Local
Authority in order to consummate the transactions contemplated by this
Agreement.
(c) Capitalization. The entire authorized capital stock of the
Company consists of 15,000,000 shares of common stock, par value $.01, and
5,000,000 shares of preferred stock, par value $.01, of which 4,000,000 shares
have been designated as Series A Preferred Shares. Prior to the issuance of the
Shares as contemplated hereby (i) 3,645,833 shares of common stock will be
issued and outstanding, and (ii) 2,397,732 Series A Preferred Shares will be
issued and outstanding. At Closing, the authorized capital of the Company shall
consist of 15,000,000 shares of common stock, par value $.01, and 5,000,000
shares of preferred stock, par value $.01, of which 4,250,000 shall have been
designated Series A Preferred Shares and 750,000 shall have been designated
Series B Preferred Shares. All of the issued and outstanding shares of common
stock and Series A Preferred Stock of the Company have been duly authorized, are
validly issued, fully paid, and are nonassessable. There are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
the Company or any of its Subsidiaries to issue, sell, or otherwise cause to
become outstanding any additional or other capital stock. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Company or any of its
Subsidiaries. Except for the Voting Agreement attached as Exhibit "B" hereto, to
the Knowledge of the Company, there are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of the capital stock of
the Company or any of its Subsidiaries. The Shares, when issued, sold and
delivered by the Company in accordance with the terms of this Agreement, will be
duly and validly issued, fully paid and non-assessable shares of the capital
stock of the Company.
(d) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Company or any of its Subsidiaries is
subject or any provision of the charter or organizational deed of the Company,
or (ii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any Material Contract.
(e) Title to Assets. The Company and its Subsidiaries have
good and marketable title to, or a valid leasehold or license interest in, the
properties and assets used by them or shown on the balance sheet included in the
Most Recent Financial Statements or acquired after the date thereof, free and
clear of all Security Interests, except for Security Interests set forth on
Section 4(e) of Annex I and except for properties and assets disposed of in the
Ordinary Course of Business since the date of the balance sheet included as part
of the Most Recent Financial Statements. The Channel Licenses held by the
Company and its Subsidiaries and those under which it intends to conduct the
Business are described on Section 4(e) of Annex I. Those Channel Licenses meet
the License Conditions in all material respects. The Company and its
Subsidiaries are in substantial compliance with all of their respective material
obligations with respect to the Channel Licenses held by them and, to the
Knowledge of the Company, no action is pending, threatened or has been
recommended by any Local Authority to revoke, suspend, withdraw or terminate any
Channel Licenses, and no event has occurred which, upon the giving of notice or
lapse of time or otherwise would allow, or could be expected to cause, the
revocation, withdrawal, suspension or termination of any Channel Licenses.
(f) Subsidiaries. Section 4(f) of Annex I sets forth for each
Subsidiary (i) its name, jurisdiction of formation and where qualified, and (ii)
its authorized capitalization, the number of outstanding equity securities, the
names of the holders thereof, and the number of equity securities held by each
such holder.
(g) Financial Statements. Attached at Section 4(g) of Annex II
are the following financial statements (collectively the "Financial
Statements"): (i) audited consolidated and audited consolidating balance sheets
and statements of income, changes in stockholders' equity, and cash flow as of
and for the fiscal year ended December 31, 1996 (the "Most Recent Fiscal Year
End") for the Company and, (ii) unaudited consolidated and consolidating balance
sheets and statements of income, changes in stockholders' equity, and cash flow
(the "Most Recent Financial Statements") as of and for the six months ended June
30, 1997 (the "Most Recent Fiscal Month End") for the Company. The Financial
Statements (including the notes thereto) have been prepared in accordance with
GAAP applied on a consistent basis (except for the absence of footnotes),
present fairly the financial condition of the Company as of such dates and the
results of operations for such periods, and are correct and complete in all
material respects (except, in the case of the Most Recent Financial Statements,
for normal year-end adjustments). The Company is not aware of any material
modifications to the Financial Statements necessary to make those statements not
false or misleading. The Most Recent Financial Statements reflect, as of the
Most Recent Fiscal Month End, all debts, liabilities and obligations of any
nature of the Company, contingent or otherwise, and whether due or to become
due, including, but not limited to debts, liabilities or obligations on account
of Taxes or other governmental charges (or penalties, interest, or fines thereon
or with respect thereto) to the extent such items are required to be reflected
on such statements under GAAP.
(h) Events Subsequent to Dates of Most Recent Financial
Statements. Except as set forth at Section 4(h) of Annex I, since the date of
the Most Recent Financial Statements, there has not been any material adverse
change in the business, financial condition, operations, results of operations,
or future prospects of the Company or any of its Subsidiaries. Without limiting
the generality of the foregoing, since that date:
(i) neither the Company nor any of its Subsidiaries has
sold, leased, transferred, or assigned any of its respective assets, except for
transactions involving less than $25,000 in the aggregate.
(ii) neither the Company nor any of its Subsidiaries has
entered into any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) either involving more than U.S.
$100,000 or outside the Ordinary Course of Business;
(iii) neither the Company nor any of its Subsidiaries has
canceled, compromised, or released any right or claim (or series of related
rights and claims) either involving more than U.S. $50,000 or outside the
Ordinary Course of Business;
(iv) neither the Company nor any of its Subsidiaries has
experienced any material damage, destruction, or loss (whether or not covered by
insurance);
(v) neither the Company nor any of its Subsidiaries has
entered into any employment contract or collective bargaining agreement, written
or oral, or modified the terms of any existing such employment contract or
agreement (oral or written) by which it is, respectively, bound or granted any
increase in the base compensation of any of its respective directors, officers,
and employees outside the Ordinary Course of Business, or adopted, amended,
modified, or terminated any bonus, profit-sharing, incentive, severance, or
other plan, contract, or commitment for the benefit of any of its respective
directors, officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
(vi) neither the Company nor any of its Subsidiaries has
paid, discharged or satisfied any liability other than the payment, discharge or
satisfaction of liabilities incurred in the Ordinary Course of Business;
(vii) neither the Company nor any of its Subsidiaries has
mortgaged, pledged, or subjected (or agreed to subject) any of its assets,
tangible or intangible, to any lien, claim, Security Interest or other
encumbrance, except for liens for current personal and real property taxes not
yet due and payable; and
(viii) neither the Company nor any of its Subsidiaries has
committed to any of the foregoing.
(i) Undisclosed Financial Liabilities. Neither the Company nor
any of its Subsidiaries has any financial Liability (and, to the Knowledge of
the Company there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any financial Liability), except for (i) financial
Liabilities set forth on the face of the balance sheet included as part of the
Most Recent Financial Statements (rather than in any notes thereto) or set forth
on Section 4(i) of Annex I and (ii) financial Liabilities which have arisen
after the Most Recent Fiscal Month End in the Ordinary Course of Business.
(j) Legal Compliance. Each of the Company and its Subsidiaries
has complied in all material respects with all Local Law and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against any of them alleging any failure so to
comply. The Company has adopted a strict policy that mandates compliance with
the U.S. Foreign Corrupt Practices Act and has no Knowledge of any violations
thereof by the Company, its Subsidiaries or their Affiliates or any Person
employed by, representing or acting for any of the foregoing.
(k) Tax Matters.
(i) All Taxes owed by the Company or any of its
Subsidiaries have been paid or reserved for on its Most Recent Financial
Statement. There are no Security Interests on any of the assets of the Company
or any of its Subsidiaries that arose in connection with any failure (or alleged
failure) to pay any Tax.
(ii) The Company and each of its Subsidiaries has withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(iii) There is no dispute or claim concerning any Tax
Liability of the Company or any of its Subsidiaries either (A) claimed or raised
by any authority in writing or (B) as to which the Company has Knowledge based
upon personal contact with any agent of such authority.
(iv) The unpaid Taxes of the Company and its Subsidiaries
(A) did not, as of the Most Recent Fiscal Month End, exceed the reserve for Tax
Liability (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the face of the
balance sheet included as part of the Most Recent Financial Statements (rather
than in any notes thereto) and (B) do not exceed that reserve as adjusted for
the passage of time through the Closing Date in accordance with the past custom
and practice of the Company and its Subsidiaries in filing their Tax Returns.
(l) Leases and Property Interests. Section 4(l) of Annex I
identifies each lease, sublease, material easement, grant or similar instrument,
including site leases for transmission and receiving equipment (showing the
annual rental, expiration date, renewal and purchase options, if any, and the
location of the real property covered by such lease or other agreement) under
which the Company or any of its Subsidiaries has the right to use, hold or
operate any real property owned by a third party (collectively, the "Leases")
(the property covered by the agreements described in this Section 4(l) being
referred herein as the "Leased Property"). The Leases: (a) are each in full
force and effect and are each legal, valid and binding obligations of the
Company or its Subsidiaries, as the case may be; and (b) will continue in effect
after the Closing without the consent, approval or act of, or the making of any
filing with, any other party. Neither the Company nor any of its Subsidiaries
under any such Lease is in default in any material respect thereof or has
received a notice of default thereunder which has not been cured.
(m) Intellectual Property. The Company and its Subsidiaries
comply in all material respects with all Local Laws and regulations governing or
relating to the Intellectual Property. Each item of Intellectual Property owned
or used by the Company or any of its Subsidiaries immediately prior to the
Closing hereunder will be owned or available for use by the Company or its
Subsidiaries on substantially identical terms and conditions immediately
subsequent to the Closing hereunder.
(n) Material Contracts. Section 4(n) of Annex I lists the
following Material Contracts and other agreements to which the Company or any of
its Subsidiaries is a party:
(i) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease payments in
excess of U.S. $50,000 per annum;
(ii) any agreement (or group of related agreements) for
the purchase or sale of products, or personal property, or for the furnishing or
receipt of services, the performance of which will extend over a period of more
than one year, result in a material loss to either of the Company or any of its
Subsidiaries, or involves consideration in excess of U.S. $50,000;
(iii) any agreement (or group of related agreements) under
which the Company or any of its Subsidiaries has created, incurred, assumed, or
guaranteed any indebtedness for borrowed money, or any capitalized lease
obligation, in excess of U.S. $100,000 or under which any such party has imposed
a Security Interest on any of its assets, tangible or intangible;
(iv) any profit sharing, stock option, stock purchase,
stock appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of its current or former directors, officers, and
employees;
(v) any agreement for the employment of any individual on
a full-time, part-time, consulting, or other basis providing annual compensation
in excess of U.S. $100,000 or providing severance benefits;
(vi) any agreement under which it has advanced or loaned
any amount to any of its directors, officers, and employees; or
(vii) any agreement not otherwise disclosed on Annex I
under which the consequences of a default or termination could have a material
adverse effect on the business, financial condition, operations, results of
operations, or future prospects of the Company or its Subsidiaries or any other
agreement (or group of related agreements) the performance of which involves
consideration in excess of U.S. $100,000, and all agreements relating to the
Channels, Permits, and Channel Licenses.
The Company has delivered (or will deliver prior to Closing) to Investor a
correct and complete copy of each written agreement listed in Section 4(n) of
Annex I (as amended to date). With respect to each Material Contract (including,
but not limited to, those listed in Sections 4(n) of Annex I): (A) the agreement
is legal, valid, binding, enforceable, and in full force and effect with respect
to the Company or its respective Subsidiary; and will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby; (B) to the
Knowledge of the Company, no event has occurred which with notice or lapse of
time would constitute a breach or default, or permit termination, modification,
or acceleration, under the agreement; and (C) no party has repudiated any
provision of the agreement.
(o) Notes and Accounts Receivable. All notes and accounts
receivable of the Company and its Subsidiaries are reflected properly on their
books and records, are valid receivables subject to no setoffs or counterclaims,
are current and collectible, and will be collected in accordance with their
terms at their recorded amounts, subject only to the reserve for bad debts set
forth on the face of the balance sheet included as part of the Most Recent
Financial Statements (rather than in any notes thereto) as adjusted for the
passage of time through the Closing Date in accordance with the past custom and
practice of the Company and its Subsidiaries.
(p) Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of the Company or any of its Subsidiaries.
(q) Litigation. Section 4(q) of Annex I sets forth each
instance in which the Company or any of its Subsidiaries (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a
party to any action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator. None of the
actions, suits, proceedings, hearings, and investigations set forth in Section
4(q) of Annex I could result in any material adverse change in the business,
financial condition, operations, results of operations, or future prospects of
either of the Company or any of its Subsidiaries.
(r) Employees. To the Knowledge of the Company, no executive,
key employee, or group of employees of either the Company or any of its
Subsidiaries has any plans to terminate employment with the Company or any of
its Subsidiaries. Neither the Company nor any of its Subsidiaries is a party to
or bound by any collective bargaining agreement, nor has any of them experienced
any strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes.
(s) Employee Benefits. Section 4(s) of Annex I lists each
Employee Benefit Plan that the Company or any of its Subsidiaries maintains or
to which the Company or any of its Subsidiaries contributes. Each such Employee
Benefit Plan (and each related trust, insurance contract, or fund) complies in
form and in operation in all material respects with the applicable requirements
of Local Law, and has filed or distributed all required reports and descriptions
with respect to each such Employee Benefit Plan. All contributions (including
all employer contributions and employee salary reduction contributions) which
are due have been paid to each such Employee Benefit Plan which is an employee
pension benefit plan and all contributions for any period ending on or before
the Closing Date which are not yet due have been paid to each such Employee
Pension Benefit Plan or accrued in accordance with the past custom and practice
of the Company and its Subsidiaries.
(t) Guaranties. Neither the Company nor any of its
Subsidiaries is a guarantor or otherwise is liable for any Liability or
obligation (including indebtedness) of any other Person.
(u) Environment, Health, and Safety. Each of the Company and
its Subsidiaries has complied in all material respects with all Environmental,
Health, and Safety Laws, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed or
commenced against any of them alleging any failure so to comply. Without
limiting the generality of the preceding sentence, each of the Company and its
Subsidiaries has obtained and been in compliance in all material respects with
all of the terms and conditions of all permits, licenses, and other
authorizations which are required under, and has complied in all material
respects with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and timetables which are
contained in, all Environmental, Health, and Safety Laws.
(v) Brokers' Fees. Neither the Company nor any of its
Subsidiaries has any Liability or obligation to pay any fees or commissions to
any broker, finder, or agent with respect to the transactions contemplated by
this Agreement.
(w) Insurance. The Company has insurance coverages that it
believes are adequate to protect its assets and Business. All such policies are
listed on Section 4(w) of Annex I and are in full force and effect.
(x) Governmental Filings. To the Knowledge of the Company, all
material governmental reports required by Local Law to be filed by the Company
and its Subsidiaries or which include or should include the Company and/or its
Subsidiaries have been filed.
(y) Securities Filings. Attached as part of Section 4(y) to
Annex I is the Company's report on Form 10-KSB for the fiscal year ended
December 31, 1996, as filed with the Securities and Exchange Commission. Prior
to the Closing all other documents required to be filed with the U.S. Securities
and Exchange Commission pursuant to the Securities Act and the Securities
Exchange Act of 1934, as amended, will have been filed, and no such filings will
contain a material misstatement or omit to state a material fact required to
make the statements therein not misleading.
(z) Annexes. The Annexes attached to this Agreement are true
and correct in all material respects as of the date of their preparation and,
after being updated, if necessary, will be true and correct in all material
respects as of the Closing Date.
5. Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its Best Efforts to
take all action and to do all things necessary in order to make effective the
transactions contemplated by this Agreement (including the satisfaction, but not
waiver, of the closing conditions set forth in Section 8 below).
(b) Notices and Consents. Each of the Parties will give any
notices to, make any filings with, and use its Best Efforts to obtain any
authorizations, consents, and approvals of Local Authority in connection with
the matters referred to in Section 3 and Section 4 above.
(c) Operation of Business. Neither the Company nor or any of
its Subsidiaries will engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business. Without limiting the
generality of the foregoing, the Company or any of its Subsidiaries will not
engage in any practice, take any action, or enter into any transaction of the
sort described in Section 4(h) above.
(d) Preservation and Conduct of Business. The Company and each
of its Subsidiaries will keep its respective business and properties
substantially intact, including its respective present operations, physical
facilities, working conditions, and relationships with lessors, licensors,
suppliers, customers, and employees. Notwithstanding the generality of the
foregoing, the Company and each of its Subsidiaries shall operate and carry on
their businesses in the Ordinary Course of Business except as contemplated
herein.
(e) Full Access. The Company and its Subsidiaries will permit
representatives of Investor to have full and complete access at all reasonable
times, and in a manner so as not to interfere with the normal business
operations of the Company and its Subsidiaries, to all premises, properties,
personnel, books, records (including Tax records), contracts, and documents of
or pertaining to each of the Company and its Subsidiaries for the purpose of
enabling the Investor or its representatives to verify the accuracy of the
representations and warranties contained herein, to verify that the covenants of
the Company in this Agreement have been complied with and to determine whether
the conditions to Investor's performance set forth herein have been satisfied.
(f) Notice of Developments. Each Party will give prompt
written notice to the others of any material adverse development causing a
breach of any of its own representations and warranties in Section 3 and Section
4 above. No disclosure by any Party pursuant to this Section 5(f), however,
shall be deemed to amend or supplement any Annex hereto or prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further
action is necessary to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
additional instruments and documents) as the other Party may request, all at the
sole cost and expense of the requesting Party (unless the requesting Party is
entitled to indemnification therefor under Section 9 below).
(b) Litigation Support. If and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Company or any of its Subsidiaries, the other
Party will cooperate with it or its counsel in the contest or defense, make
available their personnel, and provide such testimony and access to their books
and records as shall be necessary in connection with the contest or defense, all
at the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under
Section 9 below).
(c) Non-Dilution. The Investor's percentage ownership (which
shall initially constitute an 18% interest in the voting rights of the Company,
on a Common Share Equivalent Basis), shall not be diluted or reduced by reason
of any issuance of additional shares of the Company's equity securities
(including both common stock and preferred stock) pursuant to the Non-Dilutive
Transactions. Accordingly, in recognition of the substantial value of the
Investor's commitment to the Company, the Company shall deliver at closing an
agreement in the form of Exhibit C that obligates the Company to issue
additional shares to the Investor so as to avoid dilution as provided herein.
For purposes of this Agreement, the ownership by any Person of the Company's
outstanding securities shall be determined based on and assuming the conversion
of all securities of the Company other than common stock based on the conversion
rights of such shares or, if none, based on the voting rights of such shares in
relation to the Company's common shares (a "Common Share Equivalent Basis").
7. Confidentiality. Each Party will treat as confidential and hold as
such all of the Confidential Information of the other Party, and refrain from
using any of the Confidential Information except in connection with this
Agreement and the ongoing operations of the Company and its Subsidiaries. If any
Party is requested or required (by oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil investigative
demand, or similar process) to disclose any Confidential Information of the
other Party, that Party will notify the other Party promptly of the request or
requirement so that such other Party (on its own behalf by or through the action
of the Company or its Subsidiaries) may seek an appropriate protective order or
waive compliance with the provisions of this Section 7. If, in the absence of a
protective order or the receipt of a waiver hereunder, any Party is, on the
advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, that Party may disclose the
Confidential Information to the tribunal; provided, however, that the disclosing
Party shall use its Best Efforts to obtain, at the request of the other Party
(on its own behalf by or through the action of the Company or its Subsidiaries,
or otherwise), an order or other assurance that confidential treatment will be
accorded to such portion of the Confidential Information required to be
disclosed as such other Party shall designate. The foregoing provisions shall
not apply to any Confidential Information which is generally available to the
public immediately prior to the time of disclosure.
8. Conditions to Obligation to Close.
(a) Conditions to Obligation of Investor. The obligation of
Investor to consummate the transactions to be performed by it in connection with
the Closing is subject to the satisfaction or waiver of the following
conditions:
(i) the representations and warranties set forth in
Section 4 above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) The Company shall have performed and complied with
all of its covenants hereunder in all material respects through the Closing
Date;
(iii) The Company and its Subsidiaries shall have procured
any third party consents specified in Section 5(b) above and shall deliver to
the Investor the following documents, each of which shall be appropriately
executed other than by the Investor: (A) a Voting Agreement in the form of
Exhibit "B" hereto, (B) a Certificate of Contingent Interest as described in
Section 6(c) in the form of Exhibit "C" hereto; (C) Employment Agreements in the
form of Exhibit "D" hereto from each of the Company's executive officers, and
(D) an opinion of the Company's legal counsel, Parsons Behle & Latimer, in the
form of Exhibit "E" hereto;
(iv) no action, suit, or proceeding shall have been
instituted before any court or quasi-judicial or administrative agency of any
national, federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling,
or charge would (A) prevent consummation of any of the transactions contemplated
by this Agreement, or (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation;
(v) The Company shall have delivered to Investor audited
consolidated and audited consolidating balance sheets and statements of income,
changes in stockholders' equity, and cash flows as of and for the seven (7)
months ending July 31, 1997 for the Company (the "Updated Financial
Statements").
(vi) The Company shall have delivered to Investor a
certificate to the effect that (A) each of the conditions specified above in
Section 8(a)(i)-(iv) (other than the deliveries under Section 8(a)(iii)) are
satisfied in all respects, and (B) the Company is not aware of any material
modifications to the Updated Financial Statements necessary to make those
statements not false or misleading; and
(vii) all applicable waiting periods (and any extensions
thereof) under applicable law shall have expired or otherwise been terminated
and the Company and its Subsidiaries shall have received all other
authorizations, consents, and approvals of governments and governmental agencies
referred to in Section 5(b) relating to the Company and its Subsidiaries.
The Investor may waive any condition specified in this Section 8(a) if it
executes a writing so stating at or prior to the Closing. At the Closing,
assuming the satisfaction, or waiver by the Investor, of the conditions set
forth in this Section 8(a), the Investor shall deliver to the Company the
Purchase Price.
(b) Conditions to Obligation of the Company. The obligation of
the Company to consummate the transactions to be performed by it in connection
with the Closing is subject to the satisfaction or waiver of the following
conditions:
(i) the representations and warranties set forth in
Section 3 above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) the Investor shall have performed and complied with
all of its covenants hereunder in all material respects through the Closing
Date;
(iii) no action, suit, or proceeding shall have been
instituted before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement
or (B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation;
(iv) Investor shall have delivered to the Company a
certificate to the effect that each of the conditions specified in Section
8(b)(i)-(iii) are satisfied in all respects, and deliver an opinion of counsel
for the Investor, in the form of Exhibit "F"; and
(v) all applicable waiting periods (and any extensions
thereof) under applicable law shall have expired or otherwise been terminated
and the Investor shall have received all other authorizations, consents, and
approvals of governments and governmental agencies referred to in Sections 5(b)
relating to the Investor.
The Company may waive any condition specified in this Section 8(b) if it
executes a writing so stating at or prior to the Closing. At the Closing,
assuming the satisfaction, or waiver by the Company, of the Conditions set forth
in this Section 8(b), the Company shall deliver to the Investor one or more
certificates representing the Shares.
9. Indemnification.
(a) Survival of Representations and Warranties. All of the
representations and warranties of the Parties shall survive the Closing
hereunder and continue in full force and effect for three years, subject to
earlier termination by applicable statute of limitations.
(b) Indemnification Provisions for Benefit of Investor. If the
Company breaches (or if any third party alleges facts that, if true, would mean
the Company has breached) any of its representations, warranties, agreements and
covenants contained herein and, if there is an applicable survival period
pursuant to Section 9(a) above, provided that Investor makes a written claim for
indemnification against the Company within 30 days of the expiration of such
survival period, then the Company agrees to indemnify Investor from and against
the entirety of any Adverse Consequences Investor may suffer through and after
the date of the claim for indemnification (including any Adverse Consequences
Investor may suffer after the end of any applicable survival period) resulting
from, arising out of, relating to, in the nature of, or caused by the breach (or
the alleged breach); provided, however, that the Company shall not have any
obligation to indemnify Investor from and against any Adverse Consequences
resulting from, arising out of, relating to, in the nature of, or caused by the
breach (or alleged breach) of any representation, warranty, agreement or
covenant of the Company contained herein until Investor has suffered Adverse
Consequences by reason of all such breaches (or alleged breaches) in excess of a
$175,000 aggregate threshold, provided, further, that the Company's obligation
to indemnify Investor shall not exceed the Purchase Price.
(c) Indemnification Provisions for Benefit of the Company. If
Investor breaches (or if any third party alleges facts that, if true, would mean
Investor has breached) any of its representations, warranties, agreements and
covenants contained herein, and, if there is an applicable survival period
pursuant to Section 9(a) above, provided that the Company makes a written claim
for indemnification against Investor within 30 days of the expiration of such
survival period, then Investor agrees to indemnify the Company from and against
the entirety of any Adverse Consequences the Company may suffer through and
after the date of the claim for indemnification (including any Adverse
Consequences the Company may suffer after the end of any applicable survival
period) resulting from, arising out of, relating to, in the nature of, or caused
by the breach (or the alleged breach); provided, however, that the Investor
shall not have any obligation to indemnify the Company from and against any
Adverse Consequences resulting from, or arising out of, relating to, in the
nature of, or caused by the breach (or alleged breach) of any representation,
warranty, agreement or covenant of the Investor contained herein until the
Company has suffered Adverse Consequences by reason of all such breaches (or
alleged breaches) in excess of a $175,000 aggregate threshold.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 9, then the Indemnified Party shall
promptly notify the Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying the Indemnifying
Party shall relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party is thereby prejudiced.
(ii) Any Indemnifying Party will have the right to defend
the Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (A) the Indemnifying
Party notifies the Indemnified Party in writing within 15 days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim, (B) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third Party Claim
and fulfill its indemnification obligations hereunder, (C) the Third Party Claim
involves only money damages and does not seek an injunction or other equitable
relief, (D) settlement of, or an adverse judgment with respect to, the Third
Party Claim is not, in the good faith judgment of the Indemnified Party, likely
to establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (E) the Indemnifying
Party conducts the defense of the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 9(d)(ii) above, (A)
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (B) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and (C) the
Indemnifying Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party (not to be withheld unreasonably).
(iv) In the event any of the conditions in Section
9(d)(ii) above is or becomes unsatisfied, however, (A) the Indemnified Party may
defend against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, the Indemnifying Party in connection therewith), (B) the
Indemnifying Party will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
attorneys' fees and expenses), and (C) the Indemnifying Party will remain
responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Section 9.
(v) A claim by a Party for indemnification is the Party's
only right to recover damages for breach of any provision of this Agreement.
10. Tax Matters. The following provisions shall govern the allocation
of responsibility for certain tax matters following the Closing Date: (i) the
parties agree to use their Best Efforts to obtain any certificate or other
document from any governmental authority or any other Person as may be necessary
to mitigate, reduce or eliminate any Tax that could be imposed (including, but
not limited to, with respect to the transactions contemplated hereby); (ii) each
of the parties will provide the other party with all tax information that either
party may be required to report pursuant to applicable law; (iii) all transfer,
documentary, sales, use, stamp, registration and other such Taxes and fees
(including any penalties and interest) incurred in connection with this
Agreement (including any gains tax, transfer tax and any similar tax imposed by
state, local or municipal governments or their subdivisions), shall be paid by
Investor when due, and Investor will, at its own expense, file all necessary Tax
Returns and other documentation with respect to all such transfer, documentary,
sales, use, stamp, registration and other Taxes and fees, and, if required by
applicable law (but only if so required), Investor will, and will cause its
affiliates to, join in the execution of any such Tax Returns and other
documentation.
11. Termination.
(a) Termination of Agreement. The Parties may terminate this
Agreement as provided below:
(i) Investor and the Company may terminate this Agreement
by mutual written consent at any time prior to the Closing;
(ii) Investor may terminate this Agreement by giving
written notice to the Company at any time prior to the Closing (A) if the
Company has breached any material representation, warranty, or covenant
contained in this Agreement applicable to it in any material respect, Investor
has notified the Company of the breach, and the breach has continued without
cure for a period of 10 days after the notice of breach or (B) if the Closing
shall not have occurred on or before August 30, 1997, by reason of the failure
of any condition precedent under Section 8(a) hereof (unless the failure results
primarily from Investor itself breaching any representation, warranty, or
covenant contained in this Agreement); and
(iii) The Company may terminate this Agreement by giving
written notice to Investor at any time prior to the Closing (A) if Investor has
breached any material representation, warranty, or covenant contained in this
Agreement in any material respect, the Company has notified Investor of the
breach, and the breach has continued without cure for a period of 10 days after
the notice of breach or (B) if the Closing shall not have occurred on or before
August 30, 1997, by reason of the failure of any condition precedent under
Section 8(b) hereof (unless the failure results primarily from the Company
itself breaching any representation, warranty, or covenant contained in this
Agreement).
(b) Effect of Termination. If any Party terminates this
Agreement pursuant to Section 11(a) above, all rights and obligations of the
Parties hereunder (other than their obligations under Section 7) shall terminate
without any Liability of any Party to any other Party, except for any Liability
of any Party resulting from a breach that occurs prior to the termination.
(c) Specific Performance. Nothing in this Agreement shall be
interpreted to preclude either Party's right to seek and obtain specific
performance of the terms of this Agreement.
(d) Other Remedy. In lieu of pursuing any other remedy set
forth herein, if either Party shall have satisfied each of the conditions to
Closing required of it under the provisions of Section 8 above and the other
Party shall fail or refuse to proceed to Closing, then, in addition to its right
to terminate this Agreement, the non-breaching Party shall be entitled to elect
to recover from the breaching Party, and the breaching Party shall pay and
reimburse the non-breaching Party upon written demand therefor as liquidated
damages, for the costs and expenses incurred by the non-breaching Party
(including, but not limited to, the expenses of travel and lodging, attorney
fees and the fees and expenses of accountants and auditors) in negotiating the
terms of this Agreement and its related and ancillary agreements, not to exceed,
in the aggregate, $100,000.
12. Affirmative Covenants. Unless waived in writing by the Investor,
the Company covenants and agrees with the Investor that the Company will do and
perform as provided in the following subsections. These covenants will expire on
the earlier of the third anniversary of the Closing Date or immediately
preceding the closing of the first firm commitment underwritten public offering
pursuant to an effective registration statement on Form S-1 (or its small
business issuer equivalent or their successors forms) filed with the Securities
and Exchange Commission under the Securities Act, pursuant to which the net
proceeds to the Company are at least $15 million.
(a) Future Issuances of Securities. Unless approved by
two-thirds of the members of the Company's Board of Directors, the Company shall
not issue any of its securities (other than securities with no equity feature)
except for securities issued (i) as a stock dividend or upon any subdivision of
shares of the Company's equity securities; provided that the securities issued
pursuant to such stock dividend or subdivision are limited to additional shares
of such equity security, (ii) pursuant to subscriptions, warrants, options,
convertible securities or other rights which are listed on Annex II as being
outstanding on the Closing Date, or (iii) pursuant to the exercise of options to
purchase equity securities of the Company granted to employees of the Company,
not to exceed in the aggregate 10% of the issued and outstanding securities of
the Company on a Common Share Equivalent Basis assuming the exercise of all
outstanding options and warrants, the issuance of the Shares contemplated
hereunder and the issuances of the Company's securities under the Non-Dilutive
Transactions, or (iv) pursuant to the Non-Dilutive Transactions (such exempt
securities and transactions hereafter being referred to as "Preemptive Right
Exemptions"). In the event of any approved issuance of securities, the Investor
shall have a preemptive right (for a period of 20 calendar days after notice by
the Company of a proposed transaction that would trigger such rights) to acquire
the number of shares of such equity securities proposed to be issued in an
amount proportional to its then percentage ownership of the Company's
outstanding securities. Except as provided in the Certificate of Contingent
Interest, the Investor shall have no preemptive right with respect to the
Preemptive Right Exemptions, with respect to shares sold by the Company
otherwise than for cash, or with respect to issuances for which preemptive
rights are not afforded under the corporate law of the State of Nevada. The
Investor's preemptive right shall be voluntary, not mandatory, and is waivable
in writing. Any waiver evidenced by a writing shall be irrevocable, even though
it is not supported by consideration.
(b) Use of Proceeds. Prior to June 30, 1998, the Company shall
use and expend the proceeds from the sale of the Shares hereunder only for such
purposes as shall be set forth on the proposed budget attached hereto as Annex
III, or in the event of any modification thereto approved by two-thirds or more
of the Company's Board of Directors, in accordance with such modified budget.
(c) Restrictions. Unless approved by two-thirds or more of the
members of the Company's Board of Directors, the Company shall not: (i) declare
or set aside any portion of the Company's funds or securities for a distribution
as dividends, (ii) set, determine or establish fees payable to members of the
Company's Board of Directors for services rendered to the Company in that
capacity, (iii) materially change remunerations in money and/or benefits for its
executive officers, (iv) modify, in any material respect, the Business, (v)
incur or enter into any financial indebtedness in excess of $500,000 in any
single instance, or pledge a substantial portion of its assets or shares, (vi)
merge, consolidate or liquidate the Company, (vii) sell all or substantially all
of the Company's assets or properties, or (viii) vote to amend the Company's
articles of incorporation or its bylaws.
(d) Holding Company Board Membership. In the event of the
formation by the Company and/or its shareholders of a corporation which is held
100% by the Company and/or its shareholders (a "Holding Company"), the Company
shall vote its interest in the Holding Company at any meeting relating to the
election of a Board of Directors for the Holding Company in such a manner as to
insure that the Holding Company does not have a different board member
constitution than the Company and in a manner which will require the same voting
requirements and other business limitations to be applicable to the operation
and conduct of the business of the Holding Company as are set forth in Section
12(c).
(e) Interested Party Transactions. No contract or transaction
between the Company and any one or more of its directors or officers (or any
corporation, firm or entity in which one or more of its directors or officers
are employees or directors or are financially interested) shall be authorized by
the Company's Board of Directors unless a majority of the disinterested
directors authorize, approve or ratify that contract or transaction.
13. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written approval
of Investor and Sellers; provided, however, that any Party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in which
case the disclosing Party will use its Best Efforts to advise the other Party
and afford such Party an opportunity to comment prior to making the disclosure).
(b) No Third Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral (including, specifically, any letter of intent or
letter or understanding between the Parties), to the extent they related in any
way to the subject matter hereof.
(d) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of Investor and Sellers; provided, however, that Investor may
(i) assign any or all of its rights and interests hereunder to one or more of
its Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases Investor nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
(e) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. For purposes of this
Agreement, the delivery of a counterpart signature by telephonic facsimile
transmission shall be deemed the equivalent of the delivery of an original
counterpart signature.
(f) Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given when actually
received, if personally delivered or sent by reputable air courier (such as
Federal Express or DHL) and addressed to the intended recipient as set forth
below:
If to the Company:
Lance D'Ambrosio
Wireless Cable & Communications, Inc.
102 West 500 South, Suite 320
Salt Lake City, Utah
Fax: (801) 532-6060
Copy to:
J. Gordon Hansen, Esq. or
Scott R. Carpenter, Esq.
Parsons Behle & Latimer
201 South Main Street, Suite 1800
Salt Lake City, Utah 84111
Fax: (801) 536-6111
If to Investor:
Ing. Peter Schiller
Petrolera Argentina San Jorge S.A.
Peron 925 Piso 5E (1038)
Buenos Aires, Argentina
Fax: 011 541-326-8671
Copy to:
Harlan B. Naylor, III, Esq.
Greenberg, Peden, Seigmeyer & Oshman
10th Floor, 12 Greenway Plaza
Houston, Texas 77046
Fax: (713) 627-7057
Jaime Sanchez de la - Puente
Bazan - Cambre & Orts
Florida 234 - 4 Piso
1334 Buenos Aires, Argentina
Fax: 011-541-325-3564
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, messenger service, telecopy, telex,
ordinary mail, or electronic mail), but no such notice, request, demand, claim,
or other communication shall be deemed to have been duly given unless and until
it actually is received by the intended recipient. Any Party may change the
address to which notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other Parties notice in the manner
herein set forth.
(h) Governing Law. EXCEPT FOR ISSUES AND DISPUTES RELATING TO
THE INTELLECTUAL PROPERTY, WHICH SHALL BE GOVERNED BY LOCAL LAW, THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE
STATE OF UTAH, UNITED STATES OF AMERICA, WITHOUT GIVING EFFECT TO ANY CHOICE OR
CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF UTAH OR ANY OTHER
JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION
OTHER THAN THE STATE OF UTAH.
(i) Amendments and Waivers. This Agreement may be amended,
extended or modified by a writing signed by Investor and the Company. No waiver
by any Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
(j) Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
(k) Expenses. Each of the Parties will bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. The Parties intend that each representation,
warranty, and covenant contained herein shall have independent significance. If
any Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the Party has not breached shall not
detract from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
(m) Incorporation of Exhibits and Annexes. The Exhibits and
Annexes identified in this Agreement are incorporated herein by reference and
made a part hereof.
(n) Disputes.
(i) The provisions of this Section 13(n) shall be the sole
and exclusive remedy for any default under or breach by any Party of any term or
provision of this Agreement, and no claim may be brought under this Agreement
except in accordance with and pursuant to these terms. In the event there is a
dispute under this Agreement, the Parties shall meet with one another and
diligently attempt to resolve their disagreements. If they are unable to do so,
then upon request of either Party to the dispute, they will mediate the dispute,
utilizing an impartial mediator pursuant to the rules of the American
Arbitration Association ("AAA") or any other reputable organization that
sponsors mediation upon which the Parties shall mutually agree. If, after 30
days, the mediation is not successful, then either Party to the dispute may
bring arbitration to resolve the dispute as contemplated in this Section 13(n).
(ii) Assuming negotiations and mediation are unsuccessful,
any Party to the dispute may submit the disagreement to binding arbitration by
making a written demand for arbitration. The arbitration shall occur before a
single arbitrator in Miami, Florida and shall be governed by the commercial
arbitration rules of the AAA. To assure predictability, the arbitrator shall be
an attorney at law selected by the Parties (with the assistance of the AAA if
necessary) with experience in telecommunication issues and commercial
transactions. The arbitrator shall base the decision on applicable principles of
law and equity and judicial precedent and, on request of a Party, will include
in the award findings of fact and conclusions of law upon which the award is
based. The arbitrator may grant such legal or equitable relief as he or she
deems to be appropriate, including money damages, specific performance and
injunctive relief.
(iii) Questions of whether the dispute is subject to
arbitration shall also be decided by the arbitrator. Within 10 days after the
appointment of the arbitrator, each Party to the dispute shall present to the
arbitrator a written statement of the issues in dispute. Within 5 days
thereafter, the arbitrator shall give notice to the Parties of a preliminary
hearing to discuss the issues, which hearing will occur approximately 10 days
thereafter. The final arbitration hearing will occur within 90 days after the
arbitration is initiated. Prior thereto, there will be limited discovery as
approved by the arbitrator at the preliminary hearing, including no more than
two depositions per Party.
(iv) Any Party may request and obtain from a court of
competent jurisdiction provisional or ancillary remedies for relief such as an
injunction or the appointment of a receiver, but the institution of a judicial
proceeding will not constitute a waiver of the right of a Party to submit a
dispute to arbitration. Judgment upon an arbitration award may be entered in any
court having jurisdiction. Subject to the award of the arbitrator, each Party
shall pay an equal share of the arbitrator's fees, except the arbitrator shall
have the power to award all expenses (including attorney's fees and costs) to
the prevailing Party, as determined by the arbitrator. All matters relative to
the arbitration, including the result thereof, shall be maintained as
confidential by all Parties to this Agreement.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
COMPANY:
Wireless Cable & Communications, Inc.
By: /s/Lance D'Ambrosio
Its: CEO
INVESTOR:
Petrolera Argentina San Jorge S.A.
By: /s/Jorge Ricardo Priu
Its: Attorney-in-fact
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<PERIOD-START> JUL-01-1997
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