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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13D
(RULE 13D-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO 13D-1(A) AND AMENDMENTS THERETO FILED PURSUANT TO
13D-2(a)
CAI WIRELESS SYSTEMS, INC.
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(Name of Issuer)
COMMON STOCK
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(Title of Class of Securities)
12476P 20 3
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(CUSIP Number)
CHARLES T. CANNADA
Senior Vice President, Corporate Development
MCI WORLDCOM, Inc.
500 Clinton Center Drive
Clinton, Mississippi 39056
(601) 460-5600
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
with copies to:
P. Bruce Borghardt
MCI WORLDCOM, Inc.
10777 Sunset Office Drive
Suite 330
St. Louis, Missouri 63127
(314) 909-4100
MAY 30, 1999 (SEE ITEMS 4 AND 5 HEREIN)
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule13G to
report the acquisition that is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box: [ ]
(Continued on following pages)
(Page 1 of 38 Pages)
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CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 2 OF 38 PAGES
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
MCI WORLDCOM, INC. 58-1521612
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC & BK
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT [ ]
TO ITEM 2(d) OR 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
GEORGIA
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NUMBER OF 7 SOLE VOTING POWER
SHARES 8,284,425 (SEE ITEM 5)
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BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 0
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EACH 9 SOLE DISPOSITIVE POWER
REPORTING 8,284,425 (SEE ITEM 5)
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PERSON WITH 10 SHARED DISPOSITIVE POWER
0
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
8,284,425 SHARES OF COMMON STOCK (SEE ITEM 5)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN [ ]
SHARES*
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48.0%
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14 TYPE OF REPORTING PERSON*
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
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CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 3 OF 38 PAGES
ITEM 1. SECURITY AND ISSUER
This Statement on Schedule 13D (the "Schedule 13D") relates to shares of
common stock, par value $0.01 per share (the "Shares"), of CAI Wireless Systems,
Inc. ("CAI"), a Connecticut corporation. The principal executive offices of CAI
are located at 18 Corporate Woods Boulevard, Albany, New York 12211.
ITEM 2. IDENTITY AND BACKGROUND
(a)-(c), (f) The name, state of incorporation and business address of
the person filing this statement is
MCI WORLDCOM, Inc., a Georgia corporation
500 Clinton Center Drive, Clinton, MS 39056, U.S.A.
MCI WORLDCOM, Inc., a Georgia corporation ("MCI WorldCom" or the
"Purchaser"), is one of the largest telecommunications companies in the United
States, serving local, long distance and Internet customers domestically and
internationally. MCI WorldCom provides telecommunications services to business,
government, telecommunications companies and consumer customers through its
networks of primarily fiber optic cables, digital microwave, and fixed and
transportable satellite earth stations.
The Purchaser is one of the first major facilities-based telecommunications
companies with the capability to provide consumers and businesses with high
quality local, long distance, Internet, data and international communications
services over its global networks. With service to points throughout the nation
and the world, the Purchaser provides telecommunications products and services
including: switched and dedicated long distance and local products, dedicated
and dial-up Internet access, wireless services, 800 services, calling cards,
private lines, broadband data services, debit cards, conference calling,
messaging and mobility services, advanced billing systems, enhanced fax and data
connections, high speed data communications, facilities management, local access
to long distance companies, local access to asynchronous transfer mode-based
backbone service, Web server hosting and integration services, dial-up
networking services and interconnection via Network Access Points to Internet
service providers.
Information relating to the directors and executive officers of the
Purchaser is contained in Appendix A attached hereto and is incorporated herein
by reference.
(d) and (e) Neither the Purchaser nor, to the best knowledge of the
Purchaser, any of the persons listed in Appendix A has, during the last five
years, (i) been convicted in a criminal proceeding (excluding traffic violations
or similar misdemeanors) or (ii) been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction which has resulted in
a judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, Federal or State securities laws or finding
any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The Purchaser obtained and will obtain the funds for the purchase of the
Shares of CAI described herein from its cash on hand and from borrowings under
its commercial paper program and a related credit facility. A description of the
terms and conditions of the agreements to acquire such Shares is contained in
Items 4 and 6 hereof, which descriptions are incorporated herein by reference.
The credit facility was not established specifically to fund the acquisition of
the Shares. The facility is a $7 billion 364-Day Revolving Credit Agreement and
Term Loan Agreement (the "Facility C Loans") (the "Credit Facility"). There are
no unusual or material conditions to be satisfied prior to drawdown under the
Credit Facility. The parties to the Credit Facility are the Purchaser and
NationsBank, N.A. (Arranging
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CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 4 OF 38 PAGES
Agent and Administrative Agent), NationsBanc Montgomery Securities LLC (Lead
Arranger), Bank of America NT & SA, Barclays Bank PLC, The Chase Manhattan Bank,
Citibank, N.A., Morgan Guaranty Trust Company of New York, and Royal Bank of
Canada (Co-Syndication Agents) and the lenders named in the 364-Day Revolving
Credit and Term Loan Agreement dated August 6, 1998. The Credit Facility
provides liquidity support for the Purchaser's commercial paper program and is
used for other general corporate purposes. The Facility C Loans have a 364-day
term, which may be extended for up to two successive 364-day terms thereafter to
the extent of the committed amounts from those lenders consenting thereto, with
a requirement that lenders holding at least 51% of the committed amounts
consent. Additionally, effective as of the end of such 364-day term, the
Purchaser may elect to convert up to $4 billion of the principal debt
outstanding under the Facility C Loans from revolving loans to term loans with a
maturity date no later than one year after the conversion.
The Credit Facility bears interest payable in varying periods, depending on
the interest period, not to exceed six months, or, with respect to any
Eurodollar Rate borrowing, 12 months if available to all lenders, at rates
selected by the Purchaser under the terms of the Credit Facility, including a
Base Rate or Eurodollar Rate, plus the applicable margin. The applicable margin
for the Eurodollar Rate borrowing varies from 0.225% to 0.450% as to Facility C
Loans based upon the better of certain debt ratings. The Credit Facility is
unsecured but includes a negative pledge of the assets of the Purchaser and its
subsidiaries (subject to certain exceptions). The Credit Facility requires
compliance with a financial covenant based on the ratio of total debt to total
capitalization, calculated on a consolidated basis. The Credit Facility requires
compliance with certain operating covenants which limit, among other things, the
incurrence of additional indebtedness by the Purchaser and its subsidiaries,
sales of assets and mergers and dissolutions, which covenants are generally less
restrictive than those contained in the prior credit facilities and which do not
restrict distributions to shareholders, provided the Purchaser is not in default
under the Credit Facility. The Facility C Loans are subject to annual commitment
fees not to exceed 0.12% of any unborrowed portion of the facility.
This description of the Credit Facility is a summary only and is not
intended to be a complete description of the all of the terms thereof. Reference
is made to the full text thereof, copies of which are filed as exhibits hereto
and incorporated by reference herein.
The Purchaser currently plans to repay borrowings under the Credit Facility
out of operating cash flow and future financings, although the Purchaser has no
current specific plan with respect thereto. Such decisions when made will be
based on the Purchaser's review from time to time of the advisability of
particular actions, as well as on prevailing interest rates and financial and
other economic conditions.
ITEM 4. PURPOSE OF TRANSACTION
The Purchaser entered into two separate purchase and sale agreements with
respect to the Shares. One purchase and sale agreement is between the Purchaser
and certain sellers (the "First Agreement Parties"), dated as of March 23, 1999
(the "First Agreement"). Under the First Agreement, on June 4, 1999, following
expiration of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 on May 30, 1999, the Purchaser acquired from the First
Agreement Parties, among other securities already purchased under the First
Agreement, 8,284,425 Shares. The other purchase and sale agreement is between
Purchaser and certain sellers (the "Second Agreement Parties"), dated as of
March 23, 1999 (the "Second Agreement"). Under the Second Agreement, the
Purchaser has agreed, subject to certain material conditions, to purchase from
the Second Agreement Parties, among other securities, 2,270,715 Shares. The
purchase price for the shares under these agreements is less than the $28 price
per share in the merger, described below. See Item 6 for a description of the
terms of these agreements. Copies of the First Agreement and Second Agreement
are attached hereto as Exhibits to this Schedule 13D and are incorporated herein
by reference.
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CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 5 OF 38 PAGES
On April 26, 1999, CAI and the Purchaser and Cardinal Acquisition
Subsidiary, Inc., a Connecticut corporation and wholly-owned subsidiary of the
Purchaser ("Acquisition"), entered into an Agreement and Plan of Merger (the
"Merger Agreement"), a copy of which is attached as an exhibit hereto and hereby
expressly incorporated herein by reference. The Purchaser entered into the
Merger Agreement with the intent of acquiring control of, and the entire equity
interest in, CAI and replacing the Board of Directors of CAI. The Merger
Agreement provides for the merger of a wholly-owned subsidiary of Purchaser with
and into CAI, with CAI becoming a wholly-owned subsidiary of Purchaser. The
affirmative vote of at least two-thirds (2/3) of the outstanding CAI common
shares is required to approve the Merger Agreement. As a result of the merger,
each CAI common share issued and outstanding when the merger becomes effective
(other than shares held by CAI, Purchaser, Acquisition and shareholders, if any,
who properly exercise their dissenters' rights under Connecticut law) will be
converted into the right to receive $28.00 in cash, without interest. CAI has
advised the Purchaser that, as of April 26, 1999, there were 17,241,379 shares
of CAI common stock outstanding, including the 8,284,425 shares subsequently
acquired by the Purchaser, as described herein, and the 2,270,715 shares subject
to agreement to be acquired, as described herein. Accordingly, if the 2,270,715
shares are acquired as contemplated thereby, the Purchaser would pay
$187,214,692 for the remaining 6,686,239 shares. Additionally, as described in
Appendix B attached hereto ("Summary of the Merger Agreement - Treatment of
Stock Options"), CAI has agreed to cause outstanding options to become payable
for cash, subject to any applicable withholding tax, equal to the difference
between $28 and the per share exercise price of such options to the extent such
difference is a positive number. CAI has advised the Purchaser that the
aggregate amount to be paid for outstanding stock options, if not exercised
prior to closing, is $42,755,438. CAI has also advised the Purchaser that the
aggregate amount to be paid for outstanding warrants, if not exercised earlier,
is $2,374,802.
On the same date, Purchaser, CAI and Acquisition entered into a Stock
Option Agreement (the "Stock Option Agreement") providing Purchaser the option
to purchase, under certain circumstances, 6,090,481 authorized but unissued
shares of CAI Common Stock at a price of $28 per share, subject to certain
adjustments, a copy of which agreement is attached as an exhibit hereto and
hereby expressly incorporated herein by reference. The Purchaser entered into
the Stock Option Agreement with the purpose of facilitating its efforts to
consummate the merger. If the Option were exercised, the Purchaser would pay
$170,533,468 to CAI in exchange for the shares.
Summaries of the Merger Agreement and Stock Option Agreement are contained
in Appendix B and Appendix C, respectively, attached hereto and are incorporated
herein by reference.
In connection with the execution of a letter of intent on April 16, 1999,
CAI adopted a Shareholders' Rights Plan and declared a dividend of a right to
buy one one-hundredth of a share of a new Series A Preferred Stock distributed
to holders of each share of CAI's common stock. Under the Rights Plan, if a
person (other than certain exempted persons, including MCI WorldCom), without
first obtaining the prior approval of the CAI Board of Directors, becomes the
beneficial owner of more than 15% of the CAI common stock (an "Acquiring
Person"), then the rights distributed to holders of CAI's common stock would be
exercisable for shares of CAI's common stock at a price that is 50% of the then
current price of the CAI common stock. If, after a person becomes an Acquiring
Person, CAI is acquired in a merger or other business combination or 50% or more
of its consolidated assets or earning power are sold, then each right would be
exercisable for shares of the acquiring party's common stock at a price that is
50% of the then current market price of such common stock. CAI may, in certain
circumstances, exchange each right for a share of CAI common stock or redeem the
rights for $0.001 per right.
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CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 6 OF 38 PAGES
Upon consummation of the transactions contemplated by the Merger Agreement,
CAI's shares of common stock will cease to be authorized to be traded on the
over the counter market. MCI WorldCom understands that on April 29, 1999, CAI
filed a Form 15 to terminate the registration of CAI's shares of common stock to
under Section 12(g) of the Securities Exchange Act of 1934, which will become
effective within 90 days thereafter unless withdrawn or denied.
MCI WorldCom expects that the business and operations of CAI will be
continued substantially as they are currently being conducted, although it
plans to evaluate and review their businesses, operations and properties and
make such changes as are deemed appropriate in light of the increasing demand
for high speed Internet access and additional phone line services and other
circumstances as they arise. After the merger, MCI WorldCom expects to explore
the possibility of taking steps that would be required to cause CS Wireless
Systems, Inc., a 94% owned subsidiary of CAI, to become a wholly owned
subsidiary of CAI or MCI WorldCom. Additionally, after the merger, MCI WorldCom
expects to take appropriate steps to review and possibly reduce or restructure
the outstanding indebtedness of CAI and CS.
Except as described above or as referred to in Appendix B or Appendix C
attached hereto, MCI WorldCom has no present plans or proposals that would
relate to or result in an extraordinary corporate transaction such as a merger,
reorganization or liquidation involving CAI or any of its subsidiaries or a sale
or other transfer of a material amount of assets of CAI or any of its
subsidiaries, any material change in the capitalization or dividend policy of
CAI or any other material change in CAI's corporate structure or business or the
composition of CAI's Board of Directors or management.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) and (b). Under the definition of "beneficial ownership" as set forth in
Rule 13d-3 under the Exchange Act, the Purchaser currently has beneficial
ownership of 8,284,425 Shares of CAI to be issued pursuant to the First
Agreement, constituting approximately 48.0% of the outstanding Shares, based on
the number of shares outstanding as of April 26, 1999, as advised by CAI.
The Purchaser has sole voting and investment power over such Shares,
provided that Purchaser has agreed in the Merger Agreement to vote its shares in
favor of the Merger. See Item 6 herein with respect to Shares covered by the
Second Agreement, which is incorporated herein by reference.
(c) Except as set forth in this Item 5 or Items 4 and 6, to the best
knowledge of Purchaser, it has, and no directors or executive officers of
Purchaser and no other person described in Item 2 hereof has, beneficial
ownership of, or has engaged in any transaction during the past 60 days in, any
Shares.
(d) Unless and until the closing under the Second Agreement occurs and
Purchaser receives the Shares covered thereby, the Second Agreement Parties will
have the right to receive or the power to direct the receipt of dividends from
the Shares owned by them, and neither Purchaser nor any of its designees, if
any, will have any right to receive or the power to direct the receipt of
dividends from, or proceeds from the sale of any of those Shares.
(e) Not applicable.
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CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 7 OF 38 PAGES
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER
The Purchaser does not have any contract, arrangement, understanding, or
relationship (legal or otherwise) with any person with respect to any securities
of the Company other than as indicated below and elsewhere herein. See Item 4
and Appendices B and C hereto for descriptions of the Merger Agreement and the
Stock Option Agreement, which descriptions are incorporated by reference herein.
COMMON STOCK
General
On March 23, 1999, MCI WorldCom entered into certain separate agreements to
acquire, among other things, 8,284,425 shares and 2,270,715 shares of CAI common
stock, together constituting approximately 61.2% of the outstanding shares of
CAI common stock as of April 26, 1999. The purchase price for such shares of
common stock under the agreements is less than the purchase price of $28 per
share to be paid to CAI shareholders in connection with the Merger described
herein. On June 4, 1999, following expiration of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 on May 30, 1999, MCI
WorldCom acquired the 8,284,425 shares.
The following description of such agreements does not purport to be
complete and is qualified in its entirety by reference to such agreements.
Representations and Warranties of the Sellers and MCI WorldCom
The agreements contain various representations and warranties of the
sellers relating to, among other things: (i) the ownership by the sellers of the
shares of CAI common stock, (ii) their organization, existence, good standing,
corporate power and authority and similar matters, (iii) the authorization,
execution and delivery of the agreement, (iv) the absence of any required
consents or approvals of or filings with certain governmental entities, except
as provided therein, (v) the absence of any other written contracts or
agreements relating to the shares; and (vi) the sophistication of and adequacy
of information possessed by the sellers relating to the decision to sell the
shares.
The agreements contain various representations and warranties of MCI
WorldCom relating to, among other things: (i) MCI WorldCom's organization,
existence, good standing, corporate power and authority and similar matters,
(ii) the authorization, execution and delivery of the agreement, (iii) the
absence of any required consents or approvals of or filings with certain
governmental entities, except as provided therein, (iv) the sophistication of
and adequacy of information possessed by MCI WorldCom relating to the decision
to purchase the shares, (v) the status of MCI WorldCom as an accredited investor
and the shares as unregistered securities, (vi) brokers or finders fees, and
(vii) filings under the HSR Act (as hereinafter defined) and with the FCC.
Certain Covenants of the Sellers and MCI WorldCom
Under the agreements, the sellers and MCI WorldCom agreed to perform
certain covenants, including, without limitation, the following:
Prior to the closing of the purchase of the CAI common stock under the
agreements, the sellers are required to consult with MCI WorldCom with respect
to the exercise of any material right under or relating to such CAI common
stock; provided, that in the case of the agreement relating to the 8,284,425
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CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 8 OF 38 PAGES
shares of CAI common stock, the agreement expressly provided that any
investment, voting or other decision relating to the shares remained with and in
the sole discretion of the sellers of such shares. In addition, the sellers have
agreed not to knowingly exercise any rights or take any action under or relating
to the CAI common stock that would adversely affect the ability to consummate
the transactions contemplated thereby, or that would materially lessen the
benefits or rights that MCI WorldCom would otherwise receive in connection with
the transactions contemplated by the agreements.
The agreements provide that, subject to certain limitations, the sellers
are to promptly notify MCI WorldCom of any notices they receive with respect to
the CAI common stock, and forward such notices to MCI WorldCom upon request.
Furthermore, the sellers are required to pay to MCI WorldCom any distribution
received that accrued for the period following the closing date. The agreements
also provide that references to the CAI common stock to be sold under the
agreements include any securities received by the sellers (i) in exchange
therefor pursuant to any bankruptcy proceeding, (ii) pursuant to any stock split
or dividend, or (iii) or otherwise in connection such securities, following the
execution of the respective agreements and prior to the applicable closing
dates.
The agreements generally prohibit the parties from disclosing any
Confidential Information (as defined therein) to any third party without the
prior written consent of the other party, other than (a) to certain specified
representatives, (b) as and only to the extent required by applicable law, rule,
regulation or judicial process, (c) as and only to the extent requested or
required by any state, federal or foreign authority or examiner regulating any
of the sellers or MCI WorldCom, (d) information that, at the time of disclosure
or thereafter, is generally available to the public (other than as a result of a
disclosure in violation of the agreement), and (e) in the case of the agreement
relating to the 2,270,715 shares, disclosure required to effect the transfers
contemplated by the agreement; provided, that prior to any disclosure under
certain provisions, such party promptly advises the other party when requested
or required to make a disclosure thereunder.
The sellers, including the employees, officers, directors and agents of the
sellers, under both agreements are prohibited from making, soliciting, assisting
or initiating any inquiry or proposal, or providing any information to or
participating in any negotiations with any third parties other than MCI WorldCom
for the purpose of consummating any sale, transfer or other disposition of any
CAI common stock. Under the agreement covering the sale of the 2,270,715 shares,
however, such restriction does not apply in the event the FCC denies its consent
to the transfer of such shares.
Conditions to Closing; Closing
The agreements generally provide, among other things, that MCI WorldCom's
obligation to purchase such securities is subject to certain conditions,
including, without limitation, conditions relating to: (i) the delivery of such
securities, (ii) the accuracy in all material respects of the representations
and warranties of the sellers, (iii) the performance in all material respects of
the covenants by the sellers, (iv) the expiration or early termination of any
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended ("HSR Act") (provided that such condition cannot be waived), (v) in
the case of the agreement to purchase 2,270,715 of such shares, the receipt of
the consent of the FCC (provided that such condition cannot be waived), (vi) the
absence of any orders or decrees entered in any action or proceeding before any
court, agency or body enjoining the consummation of the agreement or, in the
case of the agreement to purchase 8,284,425 of such shares, the absence of any
action or proceeding for purposes of enjoining the agreement, and (vii) in the
case of the agreement to purchase 2,270,715 of such shares, the failure to
terminate the agreement.
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CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 9 OF 38 PAGES
The agreements provide, among other things, that the sellers' obligations
to sell such securities are subject to certain conditions, including, without
limitation, relating to: (i) payment for the securities, (ii) the accuracy in
all material respects of the representations and warranties of MCI WorldCom,
(iii) the performance in all material respects of the covenants by MCI WorldCom,
(iv) the absence of any orders or decrees entered in any action or proceeding
before any court, agency or body enjoining the consummation of the agreement or,
in the case of the agreement to purchase 8,284,425 of such shares, the absence
of any action or proceeding for purposes of enjoining the agreement, and (v) in
the case of the agreement to purchase 2,270,715 of such shares, the failure to
terminate the agreement.
The closing of the sale and purchase of 8,284,425 shares of the CAI common
stock was scheduled to occur three days after the expiration or early
termination of any waiting period under the HSR Act, or at such other time as
the parties mutually agree in writing. The closing of the sale and purchase of
2,270,715 shares of the CAI common stock is scheduled to occur three days after
the satisfaction or waiver of the conditions to closing, including, without
limitation, expiration or early termination of any waiting period under the HSR
Act and receipt of any required FCC approvals, or at such other time as the
parties mutually agree in writing.
Put Right
Under one of the agreements, MCI WorldCom has been granted the right to
sell no less than all of the 8,284,425 shares of CAI common stock, as well as
the Senior Secured Notes (as hereinafter defined), $83,994,512 aggregate
principal amount of Unsecured Notes (as hereinafter defined) and $129,000,000
aggregate principal amount of CS Senior Notes (as hereinafter defined), and
certain other securities, purchased under the agreement back to the sellers for
the purchase price paid. Such right becomes exerciseable upon the earlier of (i)
June 21, 1999 if, among other things, the FCC has not consented to the transfer
of more than 50% of the common stock of CAI to MCI WorldCom (or to the transfer
of a controlling interest in CS to MCI WorldCom) or the applicable waiting
period under the HSR Act applicable to the purchase of more than 50% of the
capital stock of CAI has not expired or been terminated, or (ii) if the FCC has
denied its consent to the transfer of more than 50% of the outstanding common
stock of CAI to MCI WorldCom (or to the transfer of a controlling interest in CS
to MCI WorldCom), upon such denial. MCI WorldCom will have three business days
following the occurrence of the event making such right exercisable to give
notice of its intent to exercise its put right. The rights and obligations of
the parties relating to the closing of the put right are subject to customary
conditions.
Termination Rights
The agreement covering 2,270,715 shares of CAI common stock provides that,
subject to certain conditions, MCI WorldCom has the right terminate the
agreement if, among other things, the FCC has notified MCI WorldCom that the FCC
has denied any application required for the acquisition of the CAI common stock
from the sellers, including the interest in CS represented thereby. In addition,
subject to certain conditions, the sellers have the right to terminate the
agreement if, among other things, the FCC has notified MCI WorldCom that the FCC
has denied by final order any application required for the acquisition of
sellers' CAI common stock, including the interest in CS represented thereby, and
MCI WorldCom shall not have either terminated the agreement or acquired the
remaining securities subject to such agreement within five business days after
notice by the sellers to MCI WorldCom of the sellers' intention to terminate the
agreement. In addition, either party may terminate the agreement if, among other
things, the applicable closing under such agreement has not been completed by
the final termination date, initially set as the 90th day after the date of the
agreement (or, if not a business day, the next business day). From time to time,
MCI WorldCom may elect to extend the final termination date to a date no later
than 180 days after the date of the agreement by providing notice to the
sellers. MCI
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CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 10 OF 38 PAGES
WorldCom may not elect to extend the final termination date unless certain
conditions are satisfied or waived, and the purpose of the extension is to await
expiration or early termination of the applicable waiting period under the HSR
Act or receipt of any required FCC consents, orders or approvals. MCI WorldCom
plans to exercise its election to extend the final termination date.
Senior Secured Notes due 2000
MCI WorldCom holds the $80,000,000 aggregate principal amount of
outstanding Senior Secured Notes of CAI due 2000 ("Senior Secured Notes"). The
Senior Secured Notes were issued under that certain Note Purchase Agreement
dated as of October 14, 1998 ("Note Purchase Agreement"). The closing of the
acquisition of the Senior Secured Notes occurred on March 26, 1999, at which
time MCI WorldCom was assigned all right, title and interest in and to the
Senior Secured Notes, and assumed all of the sellers' obligations under the
Senior Secured Notes and the Note Purchase Agreement.
13% Senior Notes due 2004
MCI WorldCom holds $119,412,609 aggregate principal amount of unsecured 13%
Senior Notes of CAI due October 14, 2004 ("Unsecured Notes"), issued pursuant to
the Indenture dated October 14, 1998 ("Indenture") between CAI and State Street
Bank and Trust Company, as trustee. The closings of the acquisitions of the
Unsecured Notes occurred on March 26, 1999 and April 29, 1999, at which time MCI
WorldCom was assigned all of the sellers' right, title and interest in and to
the Unsecured Notes.
11.375% Senior Notes of CS
MCI WorldCom also holds $215,750,000 aggregate principal amount of
unsecured 11.375% Senior Notes of CS due 2006 ("CS Senior Notes"), issued
pursuant to an Indenture dated February 15, 1996 ("CS Indenture") between CS
Wireless and State Street Bank and Trust Company, as trustee. The closing on the
acquisition of the CS Senior Notes occurred on March 26, 1999 and April 29,
1999, at which time MCI WorldCom was assigned all of the sellers' right, title
and interest in and to the CS Senior Notes.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
*(a) Purchase and Sale Agreement, dated March 23, 1999, between the
Purchaser and the First Agreement Parties.
*(b) Purchase and Sale Agreement, dated March 23, 1999, between the
Purchaser and the Second Agreement Parties.
(c) Agreement and Plan of Merger dated as of April 26, 1999, by and among
Purchaser, CAI and Acquisition.
(d) Stock Option Agreement dated as of April 26, 1999, by and among
Purchaser, CAI and Acquisition.
(e) 364-day Revolving Credit and Term Loan Agreement, dated as of August 6,
1998, among the Purchaser (borrower), NationsBank, N.A. (Arranging Agent and
Administrative Agent), NationsBanc Montgomery Securities LLC (Lead Arranger),
Bank of America NT & SA, Barclays Bank PLC, The Chase Manhattan Bank, Citibank,
N.A., Morgan Guaranty Trust Company of New York, and Royal Bank of Canada
(Co-Syndication Agents) and the lenders named therein dated August 6, 1998
(incorporated herein by reference to Exhibit 10.3 to the Purchaser's Current
Report on Form 8-K dated August 6, 1998 (filed August 7, 1998) (File No.
0-11258)).
<PAGE> 11
CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 11 OF 38 PAGES
* CERTAIN TERMS OF THESE AGREEMENTS HAVE BEEN OMITTED PURSUANT TO A CONFIDENTIAL
TREATMENT REQUEST AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
<PAGE> 12
CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 12 OF 38 PAGES
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: June 9, 1999
MCI WORLDCOM, INC.
By: /s/ SCOTT D. SULLIVAN
---------------------------------
Name: Scott D. Sullivan
Title: Chief Financial Officer
<PAGE> 13
CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 13 OF 38 PAGES
APPENDIX A
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE
OFFICERS OF MCI WORLDCOM, INC.
Directors and Executive Officers of the Purchaser. Set forth below are the
name, current business address, citizenship and the present principal occupation
or employment and material occupations, positions, offices or employments for
the past five years of each director and executive officer of MCI WORLDCOM, Inc.
The principal address of MCI WORLDCOM, Inc. and, unless otherwise indicated
below, the current business address for each individual listed below is 500
Clinton Center Drive, Clinton, Mississippi 39056, U.S.A. Unless otherwise
indicated, each such person is a citizen of the United States. Unless otherwise
indicated, each occupation set forth opposite the individual's name refers to
employment with MCI WORLDCOM, Inc. References to service with the Purchaser
prior to September 1993 includes service with LDDS Communications, Inc., a
Tennessee corporation, which was the accounting, but not the legal, survivor of
a three-way merger with Metromedia Communications Corporation and Resurgens
Communications Group, Inc.
<TABLE>
<CAPTION>
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---------------- --------------------------------------------------
<S> <C>
CLIFFORD L. ALEXANDER, JR. Mr. Alexander has been a director of the Purchaser since its merger
Alexander & Associates, Inc. with MCI Communications Corporation ("MCI") in September 1998 (the
400 C. Street, N.E. "MCI Merger"). He has been President of Alexander & Associates,
Washington, D.C. 20002 Inc., management consultants, since 1981. Mr. Alexander is also a
U.S.A. director of Dreyfus 3rd Century Fund, Dreyfus General Family of
Funds, Mutual of America Life Insurance Company, Dun & Bradstreet
Corporation, American Home Products Corporation and IMS Health
Incorporated.
James C. Allen Mr. Allen has been a director of the Purchaser since March 1998.
3023 Club Drive Mr. Allen is currently an investment director and member of the
Destin, FL 32541 general partner of Meritage Private Equity Fund, a venture capital
U.S.A. fund specializing in the telecommunications industry. He is the
former Vice Chairman and Chief Executive Officer and a former
director of Brooks Fiber Properties, Inc. ("BFP"), where he served in
such capacities from 1993 until its merger with the Purchaser in
January 1998. Mr. Allen served as President and Chief Operating
Officer of Brooks Telecommunications Corporation, a founder of BFP,
from April 1993 until it was merged with BFP in January 1996. Mr.
Allen serves as a director of Metronet Communications Corp., Verio
Inc., Completel LLC, and David Lipscomb University.
JUDITH AREEN Ms. Areen has been a director of the Purchaser since the MCI Merger.
Georgetown University Law Center She was a director of MCI until the MCI Merger. She has been
600 New Jersey Avenue, N.W. Executive Vice President for Law Center Affairs and Dean of the Law
Washington, D.C. 20001 Center, Georgetown University since 1989. She has been a Professor
U.S.A. of Law, Georgetown University, since 1976.
</TABLE>
<PAGE> 14
CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 14 OF 38 PAGES
<TABLE>
<CAPTION>
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---------------- --------------------------------------------------
<S> <C>
CARL J. AYCOCK Mr. Aycock has been a director of the Purchaser since 1983. Mr.
123 South Railroad Avenue Aycock served as Secretary of the Purchaser from 1987 to 1995 and
Brookhaven, MS 39601 was the Secretary and Chief Financial Officer of Master Corporation,
U.S.A. a motel management and ownership company, from 1989 until 1992.
Subsequent to 1992, Mr. Aycock has been self employed as a financial
administrator.
MAX E. BOBBITT Mr. Bobbitt has been a director of the Purchaser since 1992. Mr.
62 Carmel Drive Bobbitt was a director of Advanced Telecommunications Corporation
Little Rock, AR 72112 ("ATC") until its merger with the Purchaser in December 1992 (the
U.S.A. "ATC Merger"). He is currently a director of Metromedia China
Corporation, a telecommunications company. From March 1997 until June
1998, Mr. Bobbitt served as President and Chief Executive Officer of
Metromedia China Corporation. From 1996 until February 1997, Mr.
Bobbitt was President and Chief Executive Officer of Asian American
Telecommunications Corporation. Prior to 1996, Mr. Bobbitt held
various positions including President and Chief Operating Officer and
director of ALLTEL Corporation, a telecommunications company, from
1970 until January 1995.
BERNARD J. EBBERS Mr. Ebbers has been President and Chief Executive Officer of the
Purchaser since April 1985. Mr. Ebbers has served as a director of
the Purchaser since 1983.
FRANCESCO GALESI Mr. Galesi has been a director of the Purchaser since 1992. Mr.
The Galesi Group Galesi was a director of ATC until the ATC Merger. Mr. Galesi is the
435 East 52nd Street Chairman and Chief Executive Officer of the Galesi Group, which
New York, NY 10022 includes companies engaged in distribution, manufacturing, real
U.S.A. estate and telecommunications. Mr. Galesi serves as a director of
Amnex, Inc., Walden Residential Properties, Inc. and American Real
Estate Investment Corporation.
</TABLE>
<PAGE> 15
CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 15 OF 38 PAGES
<TABLE>
<CAPTION>
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---------------- --------------------------------------------------
<S> <C>
STILES A. KELLETT, JR. Mr. Kellett has served as a director of the Purchaser since 1981. Mr.
Kellett Investment Corporation Kellett has been Chairman of Kellett Investment Corporation since
200 Galleria Parkway, Suite 1800 1995. From 1978 to 1995, Mr. Kellett served as Chairman of the Board
Atlanta, GA 30339 of Directors of Convalescent Services, Inc., a long-term health care
U.S.A. company in Atlanta, Georgia. Mr. Kellett serves as a director of
Frederica Bank & Trust Company, St. Simons Island, Georgia and
Mariner Health Group, Inc., New London, Connecticut.
GORDON S. MACKLIN Mr. Macklin has been a director of the Purchaser since the MCI
8212 Burning Tree Road Merger. He was a director of MCI until the MCI Merger. Mr. Macklin is
Bethesda, MD 20817 currently a corporate financial advisor. From 1993 until 1998, Mr.
U.S.A. Macklin served as Chairman, White River Corporation, an information
services company. Mr. Macklin is also a director of Fund American
Enterprises Holdings, Inc.; Martek Biosciences Corporation;
MedImmune, Inc.; Spacehab, Inc.; Real 3-D; and director, trustee or
managing general partner, as the case may be, of 49 of the investment
companies in the Franklin Templeton Group of Funds. Mr. Macklin was
formerly Chairman, Hambrecht and Quist Group; director, H&Q
Healthcare Investors; and President, National Association of
Securities Dealers, Inc.
JOHN A. PORTER Mr. Porter has been a director of the Purchaser since 1988. Mr.
Integra Funding Porter served as Vice Chairman of the Board of the Purchaser from
295 Bay Street, Suite 2 September 1993 until the Purchaser's merger with MFS Communications
Easton, MD 21601 Company, Inc. ("MFS") in December 1996 (the "MFS Merger") and served
U.S.A. as Chairman of the Board of Directors of the Purchaser from 1988
until September 1993. From May 1995 to the present, Mr. Porter has
served as Chairman of the Board of Directors and Chief Executive
Officer of Industrial Electric Manufacturing, Inc., a manufacturer of
electrical power distribution products. Mr. Porter also serves as
Chairman of Phillips & Brooks/Gladwin, Inc., a manufacturer of pay
telephone enclosures and equipment. Mr. Porter was previously
President and sole shareholder of P.M. Restaurant Group, Inc. which
filed for protection under Chapter 11 of the United States Bankruptcy
Code in March 1995. Subsequent to March 1995, Mr. Porter sold all of
his shares in P.M. Restaurant Group, Inc. Mr. Porter is also a
director of Uniroyal Technology Corporation, XL Connect, Inc. and
Inktomi, Inc.
</TABLE>
<PAGE> 16
CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 16 OF 38 PAGES
<TABLE>
<CAPTION>
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---------------- --------------------------------------------------
<S> <C>
TIMOTHY F. PRICE Mr. Price serves as President and Chief Executive Officer of MCI
MCI WORLDCOM, Inc. WorldCom Communications, a business unit of the Purchaser. He has
1801 Pennsylvania Avenue, N.W. served as a director since the MCI Merger. Mr. Price served as a
Washington, D.C. 20006 director of MCI until the MCI Merger. Mr. Price served as President
U.S.A. and Chief Operating Officer of MCI from November 1996 until the MCI
Merger. He has been President and Chief Operating officer of MCI
Telecommunications Corporation, a subsidiary of MCI, ("MCIT"), since
July 1995. He was an Executive Vice President and Group President of
MCIT, serving as Group President, Communication Services, from
December 1994 to July 1995. He was an Executive Vice President of
MCIT, serving as President, Business Markets, from June 1993 to
December 1994. He was a Senior Vice President of MCIT from November
1990 to June 1993, serving as President, Business Services, from July
1992 to June 1993 and as Senior Vice President, Consumer Markets,
from November 1990 to July 1992.
BERT C. ROBERTS, JR. Mr. Roberts serves as Chairman of the Board of the Purchaser. Mr.
MCI WORLDCOM, Inc. Roberts served as a director of the Purchaser since the MCI Merger.
1801 Pennsylvania Avenue, N.W. He was a director of MCI until the MCI Merger. From 1992 until the
Washington, D.C. 20006 MCI Merger, Mr. Roberts served as Chairman of the Board of MCI. Mr.
U.S.A. Roberts was Chief Executive Officer of MCI from December 1991 to
November 1996. He was President and Chief Operating Officer of MCI
from October 1985 to June 1992 and President of MCIT from May 1982 to
June 1998. Mr. Roberts is a director of The News Corporation Limited,
Telefonica de Espana, S.A. ("Telefonica") and Valence Technology,
Inc..
JOHN W. SIDGMORE Mr. Sidgmore serves as Vice Chairman of the Board of the Purchaser.
MCI WORLDCOM, Inc. Mr. Sidgmore has been a director of the Purchaser since the MFS
3060 Williams Drive Merger and has served as a director of MFS since August 1996. From
Fairfax, VA 22301 the MFS Merger until the MCI Merger, Mr. Sidgmore served as Vice
U.S.A. Chairman of the Board and Chief Operations Officer of the Purchaser.
Mr. Sidgmore was President and Chief Operating Officer of MFS from
August 1996 until the MFS Merger. He was Chief Executive Officer of
UUNET Technologies, Inc. ("UUNET") from June 1994 to October 1998,
and President of UUNET from June 1994 to August 1996 and from January
1997 to September 1997. Mr. Sidgmore has been a director of UUNET
since June 1994. From 1989 to 1994, he was President and Chief
Executive Officer of CSC Intelicom, a telecommunications software
company. Mr. Sidgmore is a director of Saville Systems PLC.
SCOTT D. SULLIVAN Mr. Sullivan has been a director of the Purchaser since 1996. Mr.
Sullivan serves as Chief Financial Officer and Secretary of the
Purchaser. From the ATC Merger until December 1994, Mr. Sullivan
served as Vice President and Assistant Treasurer of the Purchaser.
From 1989 until 1992, Mr. Sullivan served as an executive officer of
two long-distance companies, including ATC. From 1983 to 1989, Mr.
Sullivan served in various capacities with KPMG LLP.
</TABLE>
<PAGE> 17
CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 17 OF 38 PAGES
<TABLE>
<CAPTION>
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---------------- --------------------------------------------------
<S> <C>
LAWRENCE C. TUCKER Mr. Tucker has been a general partner of Brown Brothers Harriman &
Brown Brothers Harriman & Co. Co., a private banking firm, since 1979. Mr. Taylor is also a
59 Wall Street director of Riverwood International Corporation, National Healthcare
New York, NY 10005 Corporation and VAALCO Energy, Inc. Mr. Taylor has served as a
U.S.A. director of the Purchaser since May 1995, and previously served as a
director of the Purchaser from May 28, 1992 until the ATC Merger.
JUAN VILLALONGA Mr. Villalonga has served as the Chairman and Chief Executive Officer
(citizen of Spain) of Telefonica, a provider of telecommunications services in Spain,
Telefonica de Espana, S.A since 1996. He has been a director of the Purchaser since November
Gran Via 28, 9th floor 1998 pursuant to a Strategic Alliance Agreement among Telefonica, MCI
28013 Madrid and the Purchaser. Mr. Villalonga was previously the CEO of Bankers
Spain Trust Spain and Portugal, the Chief Executive Officer of CS First
Boston in Spain and a partner at Kinsey & Co., a consulting firm, for
nine years.
</TABLE>
<PAGE> 18
CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 18 OF 38 PAGES
APPENDIX B
SUMMARY OF THE MERGER AGREEMENT
GENERAL
Pursuant to the merger agreement, at the effective time of the merger, MCI
WorldCom will acquire CAI through the merger of Cardinal Acquisition Subsidiary
with and into CAI. At the effective time of the merger, Cardinal Acquisition
Subsidiary will cease to exist, and CAI will be the surviving corporation and a
wholly-owned subsidiary of MCI WorldCom.
MERGER CONSIDERATION
At the effective time of the merger, by virtue of the merger and without
any action on the part of any shareholder, each issued and outstanding CAI
common share held by CAI shareholders will be converted into the right to
receive $28.00 in cash, without interest, except for shares canceled as
described below and shares as to which dissenters' rights are exercised by a
dissenting shareholder.
All CAI common shares held as treasury shares will automatically be
canceled and retired at the effective time of the merger and will cease to
exist. No consideration will be delivered in exchange for these shares. Each CAI
common share issued and outstanding immediately prior to the effective time of
the merger that is owned by MCI WorldCom, Cardinal Acquisition Subsidiary, CAI
or a subsidiary of CAI will be canceled as of the effective time of the merger,
and no merger consideration will be payable with respect to such shares.
As of the effective time of the merger, certificates representing all CAI
common shares issued and outstanding immediately prior to the effective time
(except for shares as to which dissenters? rights are exercised by a dissenting
shareholder) will cease to have any rights with respect to those shares, except
the right to receive the merger consideration in accordance with the terms of
the merger agreement.
As of the effective time of the merger, all shares of Cardinal Acquisition
Subsidiary issued and outstanding immediately prior to the effective time of the
merger will be converted into one share of common stock of CAI and will
represent all of the issued and outstanding shares of CAI common stock after the
merger.
No dissenting shareholder will be entitled to any portion of the merger
consideration or other distributions unless and until the dissenting shareholder
fails to exercise or otherwise effectively withdraws or loses his or her rights
to payment under Connecticut law. CAI common shares as to which dissenters'
rights have been exercised will be treated in accordance with Sections 33-855
through 33-868 of the Connecticut Business Corporation Act. If any person, who
otherwise would be deemed a dissenting shareholder, fails to properly exercise
or effectively loses dissenters? rights with respect to any CAI common shares,
those shares will be treated as though they had been converted as of the
effective date of the merger into the right to receive the merger consideration,
without interest. See "The Merger--Dissenters' Rights."
EXCHANGE OF SHARES
<PAGE> 19
CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 19 OF 38 PAGES
Prior to the effective time of the merger, MCI WorldCom will appoint an
exchange agent. Immediately prior to the effective time of the merger, MCI
WorldCom will deposit with the exchange agent funds in an amount sufficient to
make the payments contemplated by the merger agreement. Soon after the
completion of the merger, MCI WorldCom or the exchange agent will send a letter
to each person who was a CAI shareholder as of the date the merger became
effective. The letter will contain instructions on how to surrender CAI stock
certificates to the exchange agent and receive the merger consideration. CAI
shareholders have no right to any interest on the cash payable upon the
surrender of CAI stock certificates.
Any time following the sixth month after the effective time of the merger,
CAI, as the surviving corporation, may require the exchange agent to deliver to
it any portion of the funds deposited by MCI WorldCom with the exchange agent
not already disbursed to CAI shareholders. In the event CAI requires the
exchange agent to deliver such funds, CAI shareholders must thereafter look to
CAI, as the surviving corporation, for payment of any merger consideration that
may be payable to them upon surrender of their stock certificates. Any such
shareholders will be deemed general creditors of CAI, as the surviving
corporation, for such purpose.
MCI WorldCom, CAI, as the surviving corporation, and the exchange agent
will be entitled to withhold, from the merger consideration payable to any CAI
shareholder, those amounts required to be deducted under tax law. All amounts so
withheld will be deemed to have been paid to the applicable CAI shareholder.
TREATMENT OF STOCK OPTIONS
Prior to the effective time of the merger, each outstanding and unexpired
option to purchase CAI common shares issued pursuant to its 1998 Stock Option
Plan or its 1998 Outside Directors' Stock Option Plan that will be exercisable
on the effective date of the merger in accordance with its terms, will be
converted into the right to receive for each share subject to such option an
amount in cash, subject to any applicable withholding tax, equal to the
difference between $28 and the per share exercise price of such option to the
extent such difference is a positive number. At the effective time of the
merger, the CAI options will be canceled. The payment of these amounts will be
made by the surviving corporation promptly following the effective time of the
merger, provided that MCI WorldCom verifies the options and the optionee
delivers a written instrument setting forth:
o his or her number of options, their respective issue dates and
exercise prices;
o certain representations by the optionee; and
o a confirmation of and consent to the conversion of the options as
provided in the merger agreement.
CAI agrees to cause all outstanding options to be amended to provide for
and give effect to the transactions contemplated by the merger agreement.
REPRESENTATIONS AND WARRANTIES
In the merger agreement, CAI makes representations and warranties to MCI
WorldCom and Cardinal Acquisition Subsidiary with respect to, among other
things:
o due organization and good standing of CAI and its subsidiaries;
<PAGE> 20
CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 20 OF 38 PAGES
o capitalization, ownership of subsidiaries and other investments;
o corporate authorization;
o the vote required by the shareholders of CAI in connection with the
merger agreement;
o governmental approvals;
o the opinion of BT Alex. Brown;
o absence of any breach of organizational documents or material
agreements or applicable law as a result of the contemplated
transactions;
o required, third-party consents under material contracts or any other
obligation of CAI or any of its subsidiaries;
o absence of any lien or encumbrance upon any asset of CAI or any of its
subsidiaries;
o accuracy of its filings with the Securities and Exchange Commission
and other regulatory entities;
o litigation, investigations or proceedings regarding violations of law;
o accuracy of financial statements;
o the absence of specified changes or events;
o compliance with applicable law;
o required licenses, permits and related FCC regulatory matters;
o engagement of and payments to brokers, investment bankers, finders and
financial advisors in connection with the merger agreement;
o material contracts;
o matters relating to compliance with the Employee Retirement Income
Security Act of 1974, as amended, and other employee benefit matters;
o tax matters;
o liabilities;
o environmental matters affecting CAI;
o intellectual property matters;
o owned and leased real property;
<PAGE> 21
CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 21 OF 38 PAGES
o corporate records;
o title to and condition of CAI's personal property;
o absence of adverse actions against CAI and its subsidiaries or
challenging the merger agreement;
o labor and employee relations matters;
o change of control agreements;
o insurance;
o satisfaction of Connecticut takeover statutes;
o CAI's shareholder rights plan;
o efforts to resolve any "Year 2000" computer problems;
o outstanding CAI options;
o transactions with affiliates;
o absence of existing discussions by CAI with any third party relating
to an alternative transaction;
o various matters relating to CAI's investment in TelQuest Satellite
Services LLC;
o the accuracy of other information supplied by CAI; and
o the preparation of the proxy statement.
In the merger agreement, MCI WorldCom makes representations and warranties
to CAI with respect to, among other things:
o due organization and good standing of MCI WorldCom and Cardinal
Acquisition Subsidiary;
o corporate authorization;
o governmental approvals;
o absence of any breach of organizational documents or material
agreements or applicable law as a result of the contemplated
transactions;
o required, third-party consents under any material contracts or any
other obligation of MCI WorldCom or Cardinal Acquisition Subsidiary;
o absence of any lien or encumbrance upon any asset of MCI WorldCom or
Cardinal Acquisition Subsidiary;
<PAGE> 22
CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 22 OF 38 PAGES
o engagement of and payments to brokers, investment bankers, finders and
financial advisors in connection with the merger agreements;
o MCI WorldCom's ownership of CAI debt and equity securities; and
o the accuracy of information regarding MCI WorldCom and Cardinal
Acquisition Subsidiary contained in the proxy statement, and the
preparation of the proxy statement.
CONDITIONS TO CLOSING
CAI's and MCI WorldCom's obligation to effect the merger is subject to the
satisfaction or waiver on or prior to the closing date of the merger of the
following customary closing conditions:
o the requisite approval by CAI shareholders of the merger agreement;
o no order, statute, rule, regulation, executive order, stay, decree,
judgment or injunction enacted, entered, promulgated, or enforced by
any court or other governmental authority being in effect prohibiting
or preventing the consummation of the merger or the other transactions
contemplated under the merger agreement (CAI and MCI WorldCom being
required to use their reasonable best efforts to have any of the
foregoing vacated, dismissed or withdrawn by the effective time of the
merger);
o the waiting period, including any extensions, applicable to the
consummation of the merger under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 having expired or been terminated;
o the opinion of BT Alex. Brown not being withdrawn; and
o all consents, approvals and actions of, filings with and notices to
any governmental authority required to consummate the merger and the
other transactions contemplated by the merger agreement having been
obtained by final order (other than those consents the failure of
which to obtain, in MCI WorldCom's judgment, would not have a material
adverse effect on the surviving corporation); the agreement providing
that any approval relating to any FCC license must be obtained; and
this condition may be waived by MCI WorldCom, in its sole judgment.
In addition, MCI WorldCom's and Cardinal Acquisition Subsidiary's
obligation to effect the merger is subject to the satisfaction or waiver of the
following conditions:
o the representations and warranties of CAI which are modified by
materiality or material adverse effect being true and correct in all
respects, and those not so modified by materiality or material adverse
effect being true and correct in all material respects, as of the date
of the merger agreement and as of the closing date, except for such
changes not prohibited under the merger agreement and none of CAI's
representations and warranties being untrue or incorrect to the extent
that such untrue or incorrect, disregarding any materiality
qualifications, representations and warranties, when taken as a whole,
have had or would have a material adverse effect on CAI;
<PAGE> 23
CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 23 OF 38 PAGES
o CAI having performed and complied with all covenants and agreements in
all material respects and having satisfied in all material respects
all conditions required to be performed or complied with or satisfied
by it under the merger agreement at or prior to the effective time of
the merger;
o there having been no event that has or reasonably could be expected to
have a material adverse effect on CAI or the surviving corporation,
except as specified in the merger agreement;
o no action, investigation or proceeding having been instituted, pending
or threatened by any governmental authority, and there not being
instituted, pending or threatened any action or proceeding by any
other person, before any governmental authority, which is reasonably
likely to be determined adversely to MCI WorldCom or Cardinal
Acquisition Subsidiary:
-- challenging or seeking to make illegal, delay materially or
restrain or prohibit the consummation of the merger or seeking to
obtain material damages or imposing any material adverse
conditions in connection therewith or otherwise directly or
indirectly relating to the transactions contemplated by the
merger,
-- seeking to restrain, prohibit or delay the exercise of full
rights of ownership or operation by MCI WorldCom or Cardinal
Acquisition Subsidiary or their affiliates of all or any portion
of the business or assets of CAI and its subsidiaries, taken as a
whole, or of MCI WorldCom or Cardinal Acquisition Subsidiary or
any of their affiliates to dispose of or hold separate all or any
material portion of the business or assets of CAI and its
subsidiaries, taken as a whole, or of MCI WorldCom or Cardinal
Acquisition Subsidiary or any of their affiliates,
-- seeking to impose or confirm material limitations on the ability
of MCI WorldCom or Cardinal Acquisition Subsidiary or any of
their affiliates to exercise full rights of ownership of the CAI
common shares,
-- seeking to require divestiture by MCI WorldCom or Cardinal
Acquisition Subsidiary or any of their affiliates of the CAI
common shares, or
-- that otherwise would reasonably be expected to have a material
adverse effect on CAI;
o at the effective time of the merger, holders of no more than 10% of
the outstanding CAI common shares having taken actions to assert
dissenters' rights under Connecticut law;
o CAI having obtained or made the consents, approvals, waivers,
authorizations or filings required in connection with the merger under
all agreements or instruments to which it or any of its subsidiaries
is a party, on terms and conditions reasonably acceptable to MCI
WorldCom and such consents and approvals being in full force and
effect, except those for which failure to obtain such consents and
approvals would not in the judgment of MCI WorldCom have a material
adverse effect prior to or after the effective time of the merger;
provided that any consents relating to channel or tower site leases
the failure
<PAGE> 24
CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 24 OF 38 PAGES
of which to obtain in the aggregate are or would be material to CAI
and its subsidiaries or are or would be material to the future plans
or objectives of MCI WorldCom or the failure of which to obtain would
otherwise have a material adverse effect, must have been obtained by
CAI; and
o CAI having furnished MCI WorldCom and Cardinal Acquisition Subsidiary
with:
-- a certificate dated the closing date signed on its behalf by an
executive officer to the effect that certain specified conditions
regarding accuracy of its representations and warranties and
performance of its obligations have been satisfied,
-- certificates of good standing,
-- duly adopted Board and shareholder resolutions,
-- copies of charter documents and by-laws,
-- certain Noncompete and Confidentiality Agreements with specified
executives of CAI,
-- certain resignations,
-- a list of shareholders of record,
-- comfort letters,
-- an opinion of counsel, and
-- such other documents and instruments as MCI WorldCom reasonably
may request.
In addition, CAI's obligation to effect the merger is subject to the
satisfaction or waiver of the following conditions:
o the representations and warranties of MCI WorldCom which are modified
by materiality or material adverse effect being true and correct in
all respects, and those not so modified by materiality or material
adverse effect being true and correct in all material respects, as of
the date of the merger agreement and as of the closing date, except
for such changes not prohibited under the merger agreement, and none
of the representations and warranties of MCI WorldCom being untrue or
incorrect, disregarding any materiality qualifications, to the extent
that such untrue or incorrect representations or warranties, when
taken as a whole, have had or would have a material adverse effect on
MCI WorldCom;
o MCI WorldCom having performed and complied with all covenants and
agreements in all material respects and having satisfied in all
material respects all conditions required to be performed or complied
with or satisfied by it under the merger agreement at or prior to the
effective time of the merger; and
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CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 25 OF 38 PAGES
o MCI WorldCom having furnished CAI with a certificate dated the closing
date signed on its behalf by an authorized officer to the effect that
certain specified conditions have been satisfied.
COVENANTS
The merger agreement provides that, until the merger is completed, CAI will
conduct its business in the ordinary course and consistent with past practice.
CAI has agreed to use its reasonable business efforts to:
o preserve its business organizations;
o maintain and protect its FCC assets and channel leases;
o maintain its insurance;
o pay its accounts payable when due;
o comply with all laws;
o retain the services of its officers, agents and employees; and
o maintain satisfactory existing business relationships.
During the interim period between signing the merger agreement and the
completion of the merger, CAI has agreed that it will not take certain actions
without the consent of MCI WorldCom. More specifically, it has agreed not to:
o amend its organizational documents or shareholder rights plan or merge
with any person;
o issue, sell, dispose of or encumber any shares of capital stock,
options or warrants to acquire any shares of such capital stock;
o declare or pay dividends or recapitalize or redeem capital shares;
o incur any indebtedness, except for debt set forth in certain approved
budgets;
o assume or guarantee any obligations of another person;
o make any capital expenditures or loans, advances or investments in
another person, except as provided in the merger agreement;
o acquire the stock or assets of, or merge or consolidate with, any
other person or business;
o voluntarily incur any material liability or obligation;
o sell, lease or encumber property or assets;
<PAGE> 26
CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 26 OF 38 PAGES
o increase any compensation or benefits payable, except for changes that
are required under certain material contracts and increases in the
ordinary course consistent with past practice of the lesser of 8% of
the current compensation or $10,000 per annum, or increase in any
manner the compensation of any director;
o approve, enter into or otherwise increase, reprice or accelerate the
payment or vesting of amounts, benefits or other rights payable or
accrued under any employee benefit plan or terminate any employment,
consulting or related arrangement;
o enter into any employment agreement;
o make certain elections with respect to taxes;
o compromise, settle, forgive, cancel, grant any waiver or release
relating to or otherwise adjust any debts, claims, rights or
litigation owed to or involving CAI or its subsidiaries, other than in
the ordinary course of business consistent with past practice, subject
to certain limitations;
o enter into or amend any lease as to real property;
o enter into or amend certain agreements;
o terminate any channel lease;
o enter into, amend, modify or waive any rights under any channel lease
other than in the ordinary course of business and subject to certain
limitations and requirements;
o enter into, amend, modify, terminate or waive any rights under any
material contract, other than channel leases and FCC licenses, any
material agreement or material obligation that restricts in any
material respect, its activities or the activities of its
subsidiaries, or any agreement or obligation that restricts in any
material respect any other person;
o enter into any leasing or licensing arrangements, take-or-pay
arrangements or other affiliations, arrangements or agreements with
respect to any channel lease, subject to certain limitations;
o take any action with respect to indemnification of any person;
o change accounting practices or policies; and
o take any action that would reasonably be expected to result in a
breach of any of its covenants, representations or warranties or to
have a material adverse effect.
No Solicitation. CAI has agreed (1) to immediately terminate any
discussions or negotiations with any parties with respect to a Takeover Proposal
(as described below) and (2) that neither CAI nor any of its officers,
directors, employees, subsidiaries or advisors will, directly or indirectly
through another person:
<PAGE> 27
CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 27 OF 38 PAGES
o solicit, initiate or encourage or take any other action designed to
facilitate any Takeover Proposal; or
o participate in any discussions or negotiations regarding any Takeover
Proposal.
A "Takeover Proposal" means any inquiry, proposal or offer relating to
any direct or indirect acquisition or purchase of:
o 15% or more of the assets of CAI or any of its subsidiaries or 5% or
more of any class of equity securities of CAI or any of its
subsidiaries;
o any tender offer or exchange offer that could result in any person
owning 15% or more of any class of equity securities of CAI or any of
its subsidiaries; or
o any merger, consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution or similar transaction
involving CAI or any of its subsidiaries (other than the merger
described in this proxy statement); or
o any other transaction reasonably expected to impede, interfere with,
prevent or materially delay the merger or which could reasonably be
expected to dilute materially the benefits to MCI WorldCom of the
transactions contemplated by the merger agreement.
The merger agreement requires CAI to recommend to its shareholders that
they approve the merger agreement and the transactions contemplated by the
merger agreement. The CAI board and its committees are prohibited from:
o withdrawing or modifying, or proposing publicly to withdraw or modify,
the approval of the CAI board or its recommendation to its
shareholders;
o approving or recommending, or proposing publicly to approve or
recommend, any Takeover Proposal; and
o causing CAI to enter into any letter of intent, agreement in
principal, acquisition agreement or other agreement related to any
Takeover Proposal.
In addition, CAI is required to immediately advise MCI WorldCom of any
request for information or of any Takeover Proposal, the material terms and
conditions of any such request or Takeover Proposal and the identity of the
person making such request or Takeover Proposal. CAI is required to keep MCI
WorldCom fully informed of the status and details of any such request or
Takeover Proposal.
The merger agreement does not prohibit CAI from (1) taking and disclosing
to its shareholders a position consistent with its obligations under the merger
agreement with respect to a tender offer required by law or (2) making any
disclosure consistent with its obligations under the merger agreement to its
shareholders if, in the good faith judgment of the board of directors, after
receipt of advice from outside counsel, failure to disclose would be
inconsistent with applicable law. The board of directors, however, cannot
withdraw or modify its position or recommendation of the merger contemplated by
the merger agreement.
<PAGE> 28
CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 28 OF 38 PAGES
ADDITIONAL AGREEMENTS
Shareholders Meeting. CAI has agreed to hold a meeting of its shareholders
to vote on the merger and to use its reasonable best efforts to obtain the
shareholders' approval. The board of directors has unanimously recommended the
merger and the merger agreement.
Notification of Certain Matters. CAI is required to notify MCI WorldCom
promptly if:
o CAI receives any notice of, or other communication relating to, a
default or an event which, with notice or lapse of time or both, would
become a default under any material contract of CAI;
o CAI receives any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by the merger agreement;
o CAI receives any material notice or other communication from any
governmental authority in connection with the transactions
contemplated by the merger agreement;
o an event occurs which would have a material adverse effect on CAI;
o any litigation commences or is threatened involving or affecting CAI
or any of its subsidiaries or affiliates, or any of their respective
properties or assets, or, to its knowledge, any employee, agent,
director or officer of CAI or any of its subsidiaries, in his or her
capacity as such or as a fiduciary under a benefit plan of CAI, which,
if pending on the date of the merger agreement, would have been
required to have been disclosed or which relates to the consummation
of the merger or any material development occurs in connection with
any litigation previously disclosed by CAI; and
o any event occurs that would cause a breach by CAI of any provision of
the merger agreement or a related agreement, including any such breach
that would occur if such event had taken place on or prior to the date
of the merger agreement.
Access to Information; Confidentiality. CAI has agreed to give MCI WorldCom
and its officers, employees, accountants, counsel, financial advisors and other
representatives, full access during normal business hours, upon reasonable
notice, during the period prior to the effective time of the merger, to all of
CAI's properties, books, contracts, commitments, personnel and records and all
other information concerning its business, properties and personnel as MCI
WorldCom reasonably requests.
Efforts; Cooperation. Subject to the terms and conditions provided in the
merger agreement, CAI has agreed to cooperate and use reasonable efforts to
make, or cause to be made, all filings necessary or proper under applicable laws
and regulations to consummate and make effective the transactions contemplated
by the merger agreement, including cooperation in the preparation and filing of
this proxy statement, any required filings under the Hart-Scott-Rodino Act or
other filings and any amendments. CAI has also agreed that if, at any time after
the effective time of the merger, any further action is necessary or desirable
to carry out the purposes of the merger agreement, including the execution of
additional instruments, CAI will take all such necessary action.
<PAGE> 29
CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 29 OF 38 PAGES
CAI has agreed to use reasonable efforts to obtain as promptly as
practicable all required consents and approvals of any governmental entity or
any other person required in connection with, the consummation of the
transactions contemplated by the merger agreement. In addition, CAI has agreed
to coordinate with MCI WorldCom in advance of sending any communications to or
scheduling any meetings with any governmental entity relating to the merger
agreement or the merger and agreed to promptly share all correspondences or
other communications received from any governmental entity relating to the
merger agreement or the merger.
Year 2000 Plan. CAI is required to use all commercially reasonable efforts
to ensure that its "Year 2000" plan is completed in a timely manner. CAI must:
o allow MCI WorldCom to monitor CAI's Year 2000 compliance issues and
its Year 2000 plan;
o notify MCI WorldCom if CAI does not achieve, or if it reasonably
expects that it will not achieve, milestones and objectives identified
in its Year 2000 plan; and
o cooperate in good faith with MCI WorldCom's efforts to cause CAI to be
Year 2000 compliant.
Purchase of CAI Common Shares. CAI may not prohibit MCI WorldCom or any of
its affiliates or associates from purchasing CAI common shares or entering into
option, lock-up, voting or proxy agreements or any other similar agreements with
respect to CAI common shares at any time prior to the consummation of the
merger.
Conversion of Options. Subject to certain limitations and requirements, CAI
must:
o modify each outstanding option exercisable on or prior to the
effective time of the merger, and cause each such option either to be
exercised (if otherwise exercisable) prior to the effective time of
the merger, or to be canceled as of the effective time of the merger,
in exchange for the option consideration described in the proxy
statement; and
o modify each outstanding option not exercisable on or prior to the
effective time of the merger to be converted, as of the effective time
of the merger, to the right to receive solely the option consideration
described in the proxy statement, with such option otherwise becoming
exercisable following the effective time of the merger, in accordance
with its terms.
Indemnification and Insurance. The merger agreement provides that the
certificate of incorporation and by-laws of the surviving corporation must
contain similar provisions with respect to indemnification and exculpation from
liability set forth in the Certificate of Incorporation and By-Laws of CAI. MCI
WorldCom may not, and shall cause the surviving corporation not to, amend,
repeal or otherwise modify these provisions for a period of six years from the
effective time of the merger in any manner that would materially and adversely
affect the rights of individuals who at the effective time of the merger were
directors, officers, employees or agents of CAI, unless such modification is
required by law.
MCI WorldCom has agreed to indemnify and hold each director and officer of
CAI (determined as of the effective time of the merger) harmless against any
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities incurred in connection with any
<PAGE> 30
CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 30 OF 38 PAGES
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to matters
existing or occurring at or prior to the effective time of the merger, whether
asserted or claimed prior to, at or after such time, to the fullest extent that
CAI would have been permitted under Connecticut law and CAI's certificate of
incorporation or by-laws in effect on April 26, 1999 to indemnify such person.
The merger agreement also provides that for six years after the effective
time of the merger, and to the extent available, the surviving corporation or
MCI WorldCom will maintain officers' and directors' liability insurance with
respect to those persons who were covered by CAI's directors' and officers'
liability insurance policy on terms and amounts no less favorable than those in
effect on the date of the merger agreement. MCI WorldCom, however, is not
required to expend in any one year an amount in excess of 175% of the annual
premiums currently paid by CAI for the insurance.
If MCI WorldCom, the surviving corporation or any of its successors or
assigns (1) consolidates with or merges into any other corporation or entity and
is not the continuing or surviving corporation or entity of such consolidation
or merger, or (2) transfers all or substantially all of its properties and
assets to any person, corporation or entity, then, and in each case, proper
provisions will be made so that the successors and assigns of MCI WorldCom or
the surviving corporation, as the case may be, assume the indemnification and
insurance obligations set forth in the merger agreement.
Fees and Expenses. Except as described below under "Termination, Fees,
Amendment and Waiver," whether or not the merger is completed, all fees and
expenses incurred in connection with the merger, the merger agreement and the
transactions contemplated thereby will be paid by the party incurring these fees
or expenses.
Amendment. To the extent permitted by law, the merger agreement may be
amended by the parties at any time before or after the approval of the merger
agreement by the CAI shareholders. After approval, however, the parties may not
make any amendment that by law requires further approval by the CAI
shareholders.
Extension; Waiver. At any time prior to the effective time of the merger, a
party may (a) extend the time for the performance of any of the obligations or
other acts of the other party, (b) waive any inaccuracies in the representations
and warranties of the other party contained in the merger agreement or in any
document delivered pursuant to the merger agreement or (c) subject to the second
sentence of the immediately preceding paragraph, waive compliance by the other
party with any of the agreements or conditions contained in the merger
agreement. Any agreement on the part of a party to any extension or waiver will
be valid only if set forth in writing signed on behalf of the party extending or
waiving the condition or agreement. The failure of any party to the merger
agreement to assert its rights under the merger agreement or otherwise will not
constitute a waiver of these rights.
TERMINATION, FEES, AMENDMENT AND WAIVER
The merger agreement may be terminated at any time prior to the effective
time of the merger, whether before or after shareholder approval:
o by mutual written consent of MCI WorldCom and CAI;
o by either MCI WorldCom or CAI;:
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CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 31 OF 38 PAGES
-- if the merger has not been completed by February 1, 2000;
provided, however, that either party may extend such date to a
date no later than May 1, 2000, if such party determines that
additional time is necessary in connection with obtaining certain
specified consents from governmental authorities; and provided,
further, that the right to terminate the merger agreement will
not be available to any party whose failure to perform any of its
obligations under the merger agreement results in the failure of
the merger to be completed by such time;
-- if the special meeting has concluded and the approval of the
shareholders of CAI has not been obtained; or
-- if any court of competent jurisdiction or other governmental
authority shall have issued an order, decree or ruling or taken
any other action permanently enjoining, restraining or otherwise
prohibiting the consummation of the merger and such order, decree
or ruling or other action shall have become final and
nonappealable;
o by MCI WorldCom, if CAI:
-- breaches any of its representations modified by materiality or
material adverse effect,
-- materially breaches any of its representations not modified by
materiality or material adverse effect, or
-- breaches or fails to perform any material covenant or agreement
contained in the merger agreement about which MCI WorldCom
notifies CAI, if CAI fails to cure or otherwise resolve such
breach or failure to perform to the reasonable satisfaction of
MCI WorldCom within 20 days after CAI receives MCI WorldCom's
notice;
o by CAI, if MCI WorldCom:
-- breaches any of its representations modified by materiality or
material adverse effect,
-- materially breaches any of its representations not modified by
materiality or material adverse effect, or
-- breaches or fails to perform any material covenant or agreement
contained in the merger agreement about which CAI notifies MCI
WorldCom, if MCI WorldCom fails to cure or otherwise resolve such
breach or failure to perform to the reasonable satisfaction of
CAI within 20 days after MCI WorldCom receives CAI's notice; or
o by MCI WorldCom, if CAI breaches the no solicitation and shareholder
recommendation provisions of the merger agreement.
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CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 32 OF 38 PAGES
If either CAI or MCI WorldCom terminates the merger agreement, the merger
agreement will become void and have no effect, without any liability or
obligation on the part of CAI, MCI WorldCom or Cardinal Acquisition Subsidiary,
other than the following provisions, which survive termination:
o the obligation of CAI and MCI WorldCom to keep all non-public
information connected with the merger confidential;
o the agreement between CAI and MCI WorldCom to each pay their own fees
and expenses, and CAI's obligation to pay MCI WorldCom a termination
fee in certain circumstances;
o the agreement among CAI, MCI WorldCom and Cardinal Acquisition
Subsidiary to consult with each other before issuing press releases or
other public statements and to only issue press releases or other
public statements if required by law or a national securities
exchange; and
o the effects of termination as described under this ?Termination, Fees,
Amendment and Waiver? section.
CAI is obligated to pay to MCI WorldCom a termination fee of $18,000,000 if the
merger agreement:
o is terminated after a Takeover Proposal (or an announced intention to
make a Takeover Proposal) has been made known to CAI, its shareholders
or announced publicly; or
o is terminated by MCI WorldCom as a result of a breach by CAI of the
prohibitions against soliciting a Takeover Proposal.
DISSENTERS' RIGHTS
If the CAI merger is consummated, holders of CAI common shares will be
entitled to relief as dissenting shareholders under Sections 33-855 through
33-868 of the Connecticut Business Corporation Act (the "CBCA"). Such holders
will be entitled to such relief, however, only if they comply strictly with all
of the procedural and other requirements of Sections 33-855 through 33-868. The
following summary is qualified in its entirety by reference to Sections 33-855
through 33-868.
In accordance with the provisions of Sections 33-855 to 33-872 of the CBCA,
if the CAI merger is consummated, holders are entitled to dissent from, and
shall have the right to be paid the fair value of all shares of CAI Common Stock
they own in the event of consummation of the merger. As provided in CBCA Section
33-861(a), any CAI shareholder who wishes to assert dissenters' rights:
o must deliver to CAI before the vote is taken on the merger written
notice of such shareholder's intent to demand payment for such
shareholder's shares if the merger is consummated; and
o must not vote such shares in favor of the merger.
That notice may be addressed to CAI's registered agent at its registered office
or to CAI or its secretary at the following address: 18 Corporate Woods
Boulevard, Third Floor, Albany, New York 12211. The rights of holders to be paid
the value of their shares pursuant to Sections 33-855 to 33-872 of the CBCA
<PAGE> 33
CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 33 OF 38 PAGES
are their exclusive remedy as a holder of such shares with respect to the
merger, whether or not they proceed as provided in the statute.
As provided in CBCA Section 33-862, if the merger is approved and the
merger is consummated, CAI must deliver a written dissenters' notice to all
shareholders who have satisfied the above described requirements of CBCA Section
33-861(a) no later than ten days after such consummation. That dissenters'
notice would be required to:
o state where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
o inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
o supply a form for demanding payment that both includes the date of the
first announcement to news media or to shareholders of the terms of
the merger agreement and requires that each shareholder asserting
dissenters' rights certify whether or not such shareholder acquired
beneficial ownership of the shares before that date;
o set a date by which CAI must receive the payment demand, which date
may not be fewer than 30 nor more than 60 days after the date CAI
delivers the written dissenters' notice; and
o be accompanied by a copy of CBCA Sections 33-855 to 33-872.
As provided in CBCA Section 33-863(a), a shareholder receiving a
dissenters' notice would be required to:
o demand payment;
o certify whether such shareholder acquired beneficial ownership of his
or her shares before the date of the first announcement to news media
or to shareholders of the terms of the merger agreement as set forth
in the dissenters' notice; and
o deposit the certificate or certificates representing such
shareholder's shares in accordance with the terms of the dissenters'
notice. A shareholder who does not demand payment or deposit his or
her share certificates, each by the date set forth in the dissenters'
notice, will not be entitled to payment for his or her shares under
CBCA Sections 33-855 to 33-872.
Except as provided below, upon receipt of a payment demand, CAI would be
required to pay each shareholder who makes a proper demand for payment pursuant
to CBCA Section 33-863(a) the amount CAI estimates to be the fair value of such
shareholder's shares, plus accrued interest, as provided in CBCA Section
33-865(a). That payment would be required to be accompanied by:
o CAI's balance sheet as of the end of a fiscal year ending not more
than sixteen months before the date of payment, an income statement
for that year and a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if
any;
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CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 34 OF 38 PAGES
o a statement of CAI's estimate of the fair value of the shares;
o an explanation of how the interest was calculated;
o a statement of the shareholder's right to demand payment under CBCA
Section 33-868; and
o a copy of CBCA Sections 33-855 to 33-872.
Pursuant to CBCA Section 33-868, a dissenting shareholder would be
permitted to notify CAI in writing of such shareholder's own estimate of the
fair value of his or her shares and the amount of interest due, and demand
payment of his or her estimate, less any payment CAI makes under CBCA Section
33-865, if:
o such shareholder believes that the amount paid under CBCA Section
33-865 is less than the fair value of such shareholder's shares or
that the interest due is incorrectly calculated;
o CAI fails to make payment under CBCA Section 33-865 within 60 days
after the date set for such shareholder's demand payment; or
o CAI fails to close the merger and does not return the deposited
certificates or release the transfer restrictions imposed on
uncertificated shares within 60 days after the date set for demanding
payment.
A dissenting shareholder will waive his or her right to demand payment
under CBCA Section 33-868 if such shareholder does not notify CAI of his or her
demand in writing within 30 days after CAI makes payment for such shareholder's
shares.
Pursuant to CBCA Section 33-871(a) and (b), if a dissenting shareholder's
demand for payment under CBCA Section 33-868 remains unsettled, CAI must
commence a proceeding within 60 days after receipt of such shareholder's demand
for payment and petition the superior court for the judicial district where
CAI's registered office in the State of Connecticut is located to determine the
fair value of such shareholder's shares and accrued interest. If CAI fails to
timely commence such proceeding, CAI must pay each dissenting shareholder whose
demand remains unsettled the amount demanded. All dissenting shareholders making
such demand for payment as described above, whose demands remain unsettled,
shall be made parties to the proceeding, and all parties must be served with a
copy of the petition. Dissenting shareholders not resident in Connecticut may be
served by registered or certified mail or by publication as provided by law. The
jurisdiction of the court is plenary and exclusive. The court may, but need not,
appoint one or more appraisers to receive evidence and recommend a decision on
the question of fair value. If appointed, the appraiser will have the powers
described in the order appointing them, or in any amendment to it. The
dissenting shareholders will be entitled to the same discovery rights as parties
in other civil proceedings. Each CAI shareholder made a party to the proceeding
will be entitled to judgment for the amount, if any, by which the court finds
the fair value of such shareholder's shares, plus interest, exceeds the amount
paid by CAI.
The costs and expenses, including the reasonable compensation and expenses
of court-appointed appraisers, of any such proceeding will be determined by the
court and will be assessed against CAI, except that the court may assess costs
against all or some dissenting shareholders, in amounts the court finds
equitable, to the extent the court finds that they acted arbitrarily,
vexatiously or not in good faith in
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CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 35 OF 38 PAGES
demanding payment under CBCA Section 33-868. The court may also assess the fees
and expenses of counsel and experts employed by any party, in amounts the court
finds equitable:
o against CAI in favor of any or all dissenting shareholders if the
court finds that CAI failed to substantially comply with the
requirements of CBCA Sections 33-860 to 33-868, inclusive, or
o against either CAI or a dissenting shareholder, in favor of any other
party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously or not in good
faith with respect to rights provided by CBCA Sections 33-855 to
33-872, inclusive.
If the court finds that the services of counsel for any dissenting
shareholder were of substantial benefit to other dissenting shareholders
similarly situated, and that such fees should not be assessed against CAI, the
court may award to those counsel reasonable fees to be paid out of the amounts
awarded to the dissenting shareholders who were benefitted.
The foregoing is only a summary of the dissenters' rights of holders of CAI
common shares, in the event the CAI merger is consummated. Any CAI shareholder
who intends to exercise dissenters' rights should carefully review the text of
the applicable provisions of the CBCA. The failure of a holder of CAI common
shares to follow precisely the procedures summarized above and set forth in the
CBCA may result in loss of dissenters' rights.
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CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 36 OF 38 PAGES
APPENDIX C
SUMMARY OF STOCK OPTION AGREEMENT
On April 26, 1999, CAI entered into a stock option agreement granting to
MCI WorldCom an option to acquire up to 6,090,481 CAI common shares, at a price
of $28.00 per share. The number of CAI common shares subject to the option
represents all of the authorized but unissued CAI common shares available to CAI
to be issued and is subject to adjustment in particular instances. The remaining
terms of the stock option agreement are summarized below.
MCI WorldCom may exercise its option only upon the occurrence of any of the
following "purchase events":
o if CAI recommends to its shareholders, or it or any person other than
MCI WorldCom or its affiliates publicly proposes or publicly announces
a Takeover Proposal (as defined above) that is not withdrawn at the
time of the option exercise;
o if any person other than MCI WorldCom or its affiliates acquires
beneficial ownership of 15% or more of the voting securities of CAI;
or
o if the CAI board withdraws or modifies in any adverse manner its
recommendation with respect to the merger agreement and the merger.
The option terminates:
o if the merger is consummated, upon the completion of the merger;
o if the merger agreement is terminated for any reason and a purchase
event (described above) has occurred prior to such termination, 18
months after the occurrence of such purchase event;
o if the merger agreement is terminated:
-- by mutual consent of the parties,
-- because the merger has not occurred within the time frame
contemplated by the merger agreement,
-- as a result of a final, non-appealable order, decree or ruling
enjoining or otherwise prohibiting the consummation of the
merger,
-- as a result of breach by MCI WorldCom of any of its
representations modified by materiality or material adverse
effect,
-- as a result of material breach by MCI WorldCom of any of its
representations not modified by materiality or material adverse
effect, or
-- as a result of breach or failure to perform by MCI WorldCom of
any material covenant or agreement contained in the merger
agreement about which CAI
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CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 37 OF 38 PAGES
notifies MCI WorldCom, if MCI WorldCom fails to cure or otherwise
resolve such breach or failure to perform to the reasonable
satisfaction of CAI within 20 days after MCI WorldCom receives CAI's
notice;
o if the merger agreement is terminated for any reason other than those
specified in the immediately preceding bullet point, 18 months after
such termination; and
o 30 months from the date of the stock option agreement.
CAI is required to notify MCI WorldCom if:
o CAI recommends to Shareholders, or CAI or any person (other than MCI
WorldCom or any affiliate or associate of MCI WorldCom) publicly
proposes or publicly announces, a bona fide Takeover Proposal that is
not withdrawn at the time of the exercise of the option;
o any person (other than MCI WorldCom or any affiliate or associate of
MCI WorldCom) acquires beneficial ownership (as such term is defined
in Rule 13d-3 promulgated under the Securities Exchange Act of 1934)
of or has the right to acquire beneficial ownership of, or any "group"
(as such term is defined in Section 13(d)(3) of the Securities
Exchange Act), other than a group of which MCI WorldCom or any
affiliate or associate of MCI WorldCom is a member, is formed which
beneficially owns, or has the right to acquire beneficial ownership
of, 15% or more of the voting power of CAI; or
o the CAI board withdraws or modifies in a manner adverse to MCI
WorldCom its recommendation with respect to the merger agreement and
the merger.
MCI WorldCom's right to exercise the option will not be affected if
CAI fails to notify MCI WorldCom of any such event.
MCI WorldCom will send CAI notice if it wishes to exercise the option. If
prior notification to or approval of any governmental authority is required in
connection with MCI WorldCom's purchase of its common shares, CAI must cooperate
in the filing of the required notice or application for approval and the
obtaining of such approval. MCI WorldCom's purchase of its common shares will
close immediately after such regulatory approvals (and any mandatory waiting
periods).
MCI WorldCom granted CAI, or a nominee of CAI, a power of attorney to vote,
at any meeting of its shareholders called to consider the merger agreement, any
option shares acquired by it on or prior to the record date. The power of
attorney and proxy granted by MCI WorldCom lasts from the date of the stock
option agreement to the earlier to occur of the termination of the merger
agreement or the effective time of the merger and includes the right to sign its
name (as shareholder) to any consent, certificate or other document relating to
CAI that the law of the State of Connecticut may permit or require:
o in favor of the merger agreement and the merger; and
o against any proposal for any recapitalization, merger (other than the
merger described in this proxy statement), sale of assets or other
business combination between CAI and any person or entity (other than
MCI WorldCom or Cardinal Acquisition Subsidiary or other permitted
assignee thereof under the merger agreement) or any other action or
agreement
<PAGE> 38
CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 38 OF 38 PAGES
that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of MCI WorldCom under
the merger agreement or which could result in any of the conditions to
the merger agreement not being fulfilled.
The stock option agreement contains representations and warranties of CAI,
including:
o corporate authority;
o beneficial ownership;
o capitalization and shares reserved for issuance upon exercise of the
option; and
o absence of any breach of organizational documents or material
agreements as a result of the contemplated transactions.
The stock option agreement also contains representations and warranties of
MCI WorldCom, including corporate authority and investment representations.
The stock option agreement also contains standard demand and piggyback
registration rights relating to the CAI common stock underlying the option
represented by the stock option agreement, as well as certain other customary
terms.
<PAGE> 39
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
*(a) Purchase and Sale Agreement, dated March 23, 1999, between the
Purchaser and the First Agreement Parties.
*(b) Purchase and Sale Agreement, dated March 23, 1999, between the
Purchaser and the Second Agreement Parties.
(c) Agreement and Plan of Merger dated as of April 26, 1999, by and among
Purchaser, CAI and Acquisition.
(d) Stock Option Agreement dated as of April 26, 1999, by and among
Purchaser, CAI and Acquisition.
(e) 364-day Revolving Credit and Term Loan Agreement, dated as of August
6, 1998, among the Purchaser (borrower), NationsBank, N.A. (Arranging
Agent and Administrative Agent), NationsBanc Montgomery Securities LLC
(Lead Arranger), Bank of America NT & SA, Barclays Bank PLC, The Chase
Manhattan Bank, Citibank, N.A., Morgan Guaranty Trust Company of New
York, and Royal Bank of Canada (Co-Syndication Agents) and the lenders
named therein dated August 6, 1998 (incorporated herein by reference
to Exhibit 10.3 to the Purchaser's Current Report on Form 8-K dated
August 6, 1998 (filed August 7, 1998) (File No. 0-11258)).
</TABLE>
* CERTAIN TERMS OF THESE AGREEMENTS HAVE BEEN OMITTED PURSUANT TO A CONFIDENTIAL
TREATMENT REQUEST AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
<PAGE> 1
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
EXHIBIT A
PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE AGREEMENT dated as of March __, 1999, between * and *
(each a "Seller" and collectively, "Sellers") and MCI WORLDCOM, Inc.
("Purchaser").
PRELIMINARY STATEMENTS
1. Sellers hold the following securities:
(a) CAI Wireless Systems, Inc.: 2, 270,715 shares of common stock (the
"CAI Equity Securities");
(b) CAI Wireless Systems, Inc.: $35,418,097 face amount of 13% Senior
Notes due 2004 issued pursuant to an Indenture (the "CAI Senior Note Indenture")
(the "CAI Note Securities" and together with the CAI Equity Securities, the "CAI
Securities");
(c) * : $ * face amount of 14.50% Senior Discount Notes due * issued
pursuant to an Indenture (the " * Senior Note Indenture") (" * Securities"); and
(d) CS Wireless Systems, Inc.: $86,750,000 face amount of 11.375%
Senior Discount Notes due 2006 issued pursuant to an Indenture (the "CS Senior
Note Indenture" and together with the CAI Senior Note Indenture and the ATEL
Senior Note Indenture, the "Indentures") ("CS Securities" and collectively with
the CAI Securities and the ATEL Securities, the "Securities").
2. Sellers wish to sell and assign, and Purchaser wishes to purchase, the
Securities, together with all accreted interest thereon as of the applicable
Closing Date, and the Assigned Rights, subject to the terms and conditions
hereof. As used herein, the term "Assigned Rights" shall include all of Sellers
right, title and interest in and to, or derived from, the Securities, including
without limitation all of its rights as a holder of the Securities under the
Indentures.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the Sellers and Purchaser agree as follows.
- ---------------
* Confidential portions omitted pursuant to a confidential treatment request and
filed separately with Securities and Exchange Commission
1
<PAGE> 2
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
ARTICLE I.
PURCHASE AND SALE
SECTION 1.01. Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement, each of the Sellers agrees to sell, assign,
convey, transfer and deliver, and Purchaser agrees to purchase, acquire, accept
and pay for, all of such Seller's right, title and interest in the Securities,
together with all accrued and unpaid interest thereon and fees with respect
thereto and the Assigned Rights with respect to the Securities on the Closing
Date (as defined below).
SECTION 1.02. Purchase Price. As consideration for the sale,
assignment, conveyance, transfer and delivery of the Securities contemplated in
Section 1.01, Purchaser shall pay or cause to be paid an aggregate amount set
forth in the applicable Schedule as the Purchase Price (the "Purchase Price").
The Purchase Price shall be allocated among the Securities in the manner and to
the extent set forth in the attached Schedules.
SECTION 1.03. Closing. Upon the terms and subject to the conditions of
this Agreement, the closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at 10:00 a.m. on the third Business Day (as
defined below) after which each of the conditions set forth in Section 4.01 and
Section 4.02 have been satisfied or duly waived, or, if the Sellers and the
Purchaser agree to a different date, such different date (the "Closing Date").
In the event Purchaser has elected to purchase all (but not less than all) of
the Securities other than the CAI Equity Securities in accordance with Section
4.03, the closing of such purchase (the "Initial Closing") shall take place at
10:00 a.m. on the third Business Day following the date Purchaser gives notice
of such election or, if the Sellers and the Purchaser agree to a different date,
such different date (the "Initial Closing Date"). The Closing and, if
applicable, the Initial Closing, shall take place in the offices of Bryan Cave
LLP, New York, New York. "Business Day" shall mean any day other than a
Saturday, Sunday or legal holiday under the laws of New York or any day on which
banking institutions located in such state are authorized or required by law or
other governmental action to close.
SECTION 1.04. Closing Deliveries by Sellers.
(a) On the Closing Date, if there has not been an Initial Closing Date,
each Seller shall deliver or cause to be delivered to Purchaser all of such
Seller's right, title and interest in and to all of the Securities, and all
documentation related thereto, and whatever documents of conveyance or transfer
may be necessary or desirable to transfer to and confirm in Purchaser, or at
Purchaser's request, Purchaser's nominee, all right, title and interest in and
to the Securities and the related Assigned Rights. Sellers shall also deliver to
Purchaser prior to such Closing Date joint written notice of the wire account
into which the Purchase Price shall be transferred (the
2
<PAGE> 3
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
"Total Payment Instruction"). The Sellers agree that Purchaser shall have no
obligation to allocate the Purchase Price among the Sellers.
(b) On the Closing Date, if there has been an Initial Closing Date,
each Seller shall deliver or cause to be delivered to Purchaser all of such
Seller's right, title and interest in and to the CAI Equity Securities, and all
documentation related thereto, and whatever documents of conveyance or transfer
may be necessary or desirable to transfer to and confirm in Purchaser, or at
Purchaser's request, Purchaser's nominee, all right, title and interest in and
to the CAI Equity Securities. Sellers shall also deliver to Purchaser prior to
such Closing Date joint written notice of the wire account into which the
portion of the Purchase Price allocated to the CAI Equity Securities shall be
transferred. (the "CAI Payment Instruction"). The Sellers agree that Purchaser
shall have no obligation to allocate the Purchase Price among the Sellers.
(c) On the Initial Closing Date, if any, each Seller shall deliver or
cause to be delivered to Purchaser all of such Seller's right, title and
interest in and to all of the Securities other than the CAI Equity Securities,
and all documentation related thereto, and whatever documents of conveyance or
transfer may be necessary or desirable to transfer to and confirm in Purchaser,
or at Purchaser's request, Purchaser's nominee, all right, title and interest in
and to the Securities, other than the CAI Equity Securities, and the related
Assigned Rights. Sellers shall also deliver to Purchaser prior to such Initial
Closing Date joint written notice of the wire account into which the portion of
the Purchase Price allocated to the Securities other than the CAI Equity
Securities shall be transferred (the "Initial Payment Instruction"). The Sellers
agree that Purchaser shall have no obligation to allocate the Purchase Price
among the Sellers.
SECTION 1.05. Closing Deliveries by Purchaser.
(a) On the Closing Date, if there has not been an Initial Closing Date,
Purchaser shall pay the Purchase Price in same day funds by wire transfer in
accordance with the Total Payment Instruction.
(b) On the Closing Date, if there has been an Initial Closing Date,
Purchaser shall pay the Purchase Price allocated to the CAI Equity Securities in
same day funds by wire transfer in accordance with the CAI Payment Instruction.
(c) On the Initial Closing Date, if any, Purchaser shall pay the
Purchase Price allocated to all of the Securities other than the CAI Equity
Securities in same day funds by wire transfer in accordance with the Initial
Payment Instruction.
3
<PAGE> 4
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
SECTION 1.06 Additional Securities.
(a) On April 9, 1999, Sellers shall offer to sell to Purchaser the
following securities issued by * (" * ") at the * Purchase Price, as specified
on Schedule II:
(i) $ * face amount of 13.125% Senior Discount Notes due *
issued pursuant to an Indenture (the " * Senior Note Indenture"); and
(ii) * "Units", each one consisting of $ * face amount of
13.125% Senior Discount Notes due * and one warrant to purchase * shares of
common stock of * governed by a Warrant Agreement (the " * Warrant") (the
securities described in clause (i) and this clause (ii), collectively, the " *
Securities").
(b) Purchaser shall not be obligated to purchase the * Securities. If
Purchaser determines at such time, in its sole and absolute discretion, to
purchase the * Securities at the * Purchase Price, it will confirm its
willingness to accept the offer in writing on or before April 12, 1999.
Immediately upon receipt of such written confirmation, (i) the * Securities
shall be deemed to be, and shall be included, in the definition of, Securities,
(ii) the * Senior Note Indenture shall be deemed to be, and shall be included,
in the definition of, the Indentures, (iii) Seller's rights under the * Senior
Note Indenture and the * Warrant shall be deemed to be, and shall be included,
in the definition of, the Assigned Rights, and (iv) the * Purchase Price shall
be deemed to be, and shall be included in the definition of, Purchase Price, in
each case, for all purposes under this Agreement and, for the purposes of
Article II, relating back to the date of this Agreement.
ARTICLE II.
REPRESENTATIONS AND COVENANTS OF SELLERS
SECTION 2.01. Representations and Warranties and Covenants of Sellers.
Each Seller, severally and not jointly and each solely as to itself, hereby
represents, warrants and covenants to Purchaser:
(a) Such Seller is the sole legal and beneficial owner and beneficial
holder of the Securities (or, in the case of the * Warrants, the beneficial
owner and beneficial holder of the Warrants) to be assigned by it hereunder and
has undivided good title to such Securities, free and clear of any lien,
security interest or other adverse claim;
- -----------------------
* Confidential portions omitted pursuant to a confidential treatment request and
filed separately with Securities and Exchange Commission
4
<PAGE> 5
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
(b) Such Seller is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, and has the
full power and authority to take, and has taken, all action necessary to execute
and deliver this Agreement and any other documents required or permitted to be
executed or delivered by it in connection with this Agreement and to fulfill its
obligations hereunder except that Seller has not yet taken the actions required
to be taken under
normal and customary transfer provisions set forth in the Indentures and the
Warrant, and the execution, delivery and performance by it of this Agreement
does not violate its charter or bylaws or any law, rule, regulation, order or
decree applicable to it and does not conflict with or result in the breach of
any contract or other instrument binding upon it;
(c) This Agreement has been duly executed and delivered by such Seller
and constitutes the legal, valid and binding obligation of such Seller,
enforceable against such Seller in accordance with its terms, subject to
bankruptcy, insolvency, moratorium, reorganization and other laws of general
application relating to or affecting creditors' rights and to general equitable
principles, provided, that such Seller makes no representation by reason of this
paragraph (c) with respect to the collectability or enforceability of any of the
Securities or the Assigned Rights or any portion thereof;
(d) No notice to, registration or filing with, consent or approval of,
or other action by, any person or federal, state or other governmental agency,
authority, administrator or regulatory body, arbitrator, court or other
tribunal, foreign or domestic, is required in connection with the due execution,
delivery and performance of this Agreement by such Seller and the sale by such
Seller of the Securities to be assigned by it hereunder, except that Seller has
not yet taken the actions required to be taken under normal and customary
transfer provisions set forth in the Indentures and the Warrant and as provided
for herein or such consents as shall no longer be necessary on the applicable
Closing Date;
(e) Prior to the closing of the purchase of a Security hereunder,
Seller shall consult with Purchaser with respect to the exercise of any material
right under or relating to, and the taking of any material action with respect
to, the Securities or Assigned Rights, except in each case to the extent it may
be contractually or legally prohibited from doing so. Prior to the closing of
the purchase of a Security hereunder, Seller shall not knowingly exercise any
rights under or relating to, or take any action with respect to, the Securities
or Assigned Rights which Seller knows would have the effect of adversely
affecting the ability to consummate the transactions contemplated hereby or
which Seller knows would materially lessen the benefits or rights that Purchaser
would otherwise receive in connection with the transactions contemplated hereby.
(f) Other than this Agreement and except as may have been previously
discussed with Purchaser, Seller has not entered into any contract, agreement or
written document which conveys
5
<PAGE> 6
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
or purports to convey rights to any person or
entity that relate to, or restricts the sale of, the Securities or the Assigned
Rights.
(g) Seller has not made any filings under Rule 144 under the
Securities Act of 1933 (the "Securities Act"), Section 13(d), Section 13(g) or
Section 16 of the Securities Exchange Act of 1934 (the "Securities Exchange
Act"), or any other statute, rule or regulation under the federal securities
laws relating to the transactions contemplated hereby, or the Securities,
except for the filing made on behalf of Sellers relating to the CAI Equity
Securities on FORM 13G/A (including all related prior FORMs 13G and 13G/A, if
any) and FORM 3. Seller has not made any public disclosure of any kind relating
to this Agreement or the transactions contemplated hereby except that Seller
has made disclosure and may hereafter make disclosure to employees, officers,
directors and advisors or other persons who have a need to know such
information and are subject to appropriate obligations of confidentiality
(whether in writing or otherwise) and Seller may make such other disclosure
which does not violate the provisions of Section 6.11. To the best of Seller's
knowledge, Seller is not required to make any filing with respect to the
Securities or the transactions contemplated hereby under Rule 144 of the
Securities Act, Section 13(d), Section 13(g) or Section 16 of the Securities
Exchange Act, or any other statute, rule or regulation under the federal
securities laws earlier than April 25, 1999 (or, if sooner, the Closing Date);
provided, however, if such Seller determines that any such filing shall be
required prior to April 25, 1999 (or, if sooner, the Closing Date), Seller
shall consult with Purchaser of its determination within a reasonable period
prior to the making of such filing;
(h) Seller does not possess any other right, title or interest of any
kind in any issuer of the Securities other than the Securities and the Assigned
Rights. Except as disclosed to Purchaser prior to the execution of this
Agreement, Seller does not possess any interest of any kind in or have any
representatives on the board of directors of any person or entity whose primary
business, to such Seller's actual knowledge, is in the wireless CATV industry or
the use of the MMDS, MDS, ITFS or H channels and whom Purchaser identifies to
Seller from time to time as being such an entity or person (such persons and
entities, collectively, "Restricted Persons"). Within six months after the
execution of this Agreement, no Seller shall purchase or otherwise acquire any
interest of any kind in or have any representatives on the board of directors of
any Restricted Person;
(i) Seller has not entered into any agreement with respect to the
Securities that contains provisions which, upon consummation of the transactions
contemplated hereby, prohibit Purchaser from exchanging or materially impair
Purchaser's ability to exchange, any of the debt Securities for any type of
securities in any potential case commenced under chapter 11 of the United States
Bankruptcy Code for the issuer of such Securities.
(j) Seller is a sophisticated seller and with respect to the
Securities, has adequate information concerning the business and financial
condition of each issuer of such Securities to
6
<PAGE> 7
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
make an informed decision regarding the Securities, and has independently,
without reliance upon Purchaser and based on such information as it deemed
appropriate, made its own analysis and decision to enter into this Agreement.
Seller acknowledges and agrees that Purchaser may possess material information
with respect to any issuer of such Securities not known to Seller or otherwise
publicly available which may be material to a decision to sell the Securities
(the "Purchaser Non-public Information"), that Seller has determined to sell
the Securities notwithstanding its lack of knowledge of the Purchaser
Non-public Information, that Seller may be at a disadvantage because of the
disparity of information between Purchaser and Seller and that Purchaser is
relying on the provisions of this Section 2.01(j) in engaging in the
transactions contemplated in this Agreement and would not engage in such
transactions in the absence of these provisions. Seller irrevocably and
unconditionally waives and releases Purchaser and its affiliates from all
claims that Seller might have (whether for damages, recision or any other
relief) based on Purchaser's possession or non-disclosure of the Purchaser
Non-public Information to Seller, and Seller agrees not to solicit or
encourage, directly or indirectly, any other person or entity to assert such a
claim; provided that the foregoing shall not operate to lessen any liability
for the breach of a representation, warranty or covenant contained herein. The
provisions of this Section 2.01(j) shall survive the occurrence of the
Termination Date and termination of this Agreement; and
(k) Seller shall cooperate with Purchaser in connection with any
necessary application(s) for the consent of the Federal Communications
Commission ("FCC") required for the transfer of the CAI Equity Securities as
provided in this Agreement as soon as practicable after April 15, 1999,
including, without limitation, supplying as promptly as possible any additional
information and documentary material that may be requested by the FCC in order
to obtain such consent.
ARTICLE III.
REPRESENTATIONS AND COVENANTS OF PURCHASER
SECTION 3.01. Representations, Warranties and Covenants of Purchaser.
Purchaser hereby represents, warrants and covenants to each of the Sellers that:
(a) Purchaser is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its formation, and has the full power and
authority to take, and has taken, all action necessary to execute and deliver
this Agreement, and any other documents required or permitted to be executed or
delivered by it in connection with this Agreement, and to fulfill its
obligations hereunder, and the execution, delivery and performance by it of this
Agreement does not violate its charter or bylaws or any law, rule, regulation,
order or decree applicable to it and does not conflict with or result in the
breach of any contract or other instrument binding upon it;
7
<PAGE> 8
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
(b) No notice to, registration or filing with, consent or approval of,
or other action by, any person or federal, state or other governmental agency,
authority, administrator or regulatory body, arbitrator, court or other
tribunal, foreign or domestic, is required in connection with the due execution,
delivery and performance of this Agreement by Purchaser or the purchase by
Purchaser of the Securities, except as provided for herein, or such consents as
shall no longer be necessary on the applicable Closing Date;
(c) This Agreement has been duly executed and delivered by Purchaser
and constitutes the legal, valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms, subject to
bankruptcy, insolvency, moratorium, reorganization and other laws of general
application relating to or affecting creditors' rights and to general equitable
principles;
(d) Purchaser is a sophisticated buyer and with respect to the
Securities has adequate information concerning the business and financial
condition of each issuer of such Securities to make an informed decision
regarding the Securities, and has independently, without reliance upon Sellers
and based on such information as it deemed appropriate, made its own analysis
and decision to enter into this Agreement. Purchaser acknowledges and agrees
that Sellers may possess material information with respect to any issuer of such
Securities not known to Purchaser or otherwise publicly available which may be
material to a decision to sell the Securities (the "Seller Non-public
Information"), that Purchaser has determined to buy the Securities
notwithstanding its lack of knowledge of the Seller Non-public Information, that
Purchaser may be at a disadvantage because of the disparity of information
between Purchaser and Sellers and that Sellers are relying on the provisions of
this Section 3.01(d) in engaging in the transactions contemplated in this
Agreement and would not engage in such transactions in the absence of these
provisions. Purchaser irrevocably and unconditionally waives and releases each
Seller and its affiliates from all claims that Purchaser might have (whether for
damages, recision or any other relief) based on such Seller's possession or
non-disclosure of the Seller Non-public Information to Purchaser, and Purchaser
agrees not to solicit or encourage, directly or indirectly, any other person or
entity to assert such a claim; provided that the foregoing shall not operate to
lessen any liability for the breach of a representation, warranty or covenant
contained herein. The provisions of this Section 3.01(d) shall survive the
occurrence of the Termination Date and termination of this Agreement.
(e) Purchaser acknowledges that no Seller has made nor makes any
representation or warranty, whether express or implied, except as expressly set
forth in this Agreement. Purchaser acknowledges that the sale of the Securities
to Purchaser by each Seller is irrevocable, and that Purchaser shall have no
recourse to any Seller in that regard, except with respect to breaches of
representations, warranties and covenants expressly set forth in this Agreement.
Purchaser acknowledges that the consideration paid pursuant hereto for the
purchase of the Securities may differ both in kind and amount from any payments
or distributions that ultimately may be received by Purchaser with respect
thereto. Purchaser acknowledges that it is assuming the risk
8
<PAGE> 9
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
of full or partial loss which is inherent with each of the Securities, and all
collectability risks associated therewith, provided that the foregoing shall
not operate to lessen any liability for the breach of a representation,
warranty or covenant contained herein;
(f) Purchaser is an "accredited investor" within the meaning of
Section2(15) of the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder. Purchaser is purchasing the Securities
without a view toward selling or distributing the Securities in a manner that
would violate applicable securities laws and Purchaser has not solicited or
received any offer from any third party to purchase any of the Securities;
provided that Purchaser may exchange the Securities with any issuer of such
Securities for other securities of such issuer or other consideration and
Purchaser may transfer the Securities to one or more of its affiliates.
Purchaser acknowledges that the sale of the Securities was not in any way
solicited by any Seller or any of its affiliates or advisors;
(g) Purchaser hereby acknowledges that except as otherwise provided in
this Agreement no Seller (i) makes any representation or warranty whatsoever
with respect to any statements, warranties or representations made by other
persons or entities in or in connection with the Indentures and the Warrant or
the execution, legality, validity, enforceability, genuineness, sufficiency, or
value of the Indentures or Warrant nor (ii) makes any representation or warranty
nor assumes any responsibility with respect to the financial condition of any
issuer of the Securities or the performance or observance by any party (other
than a Seller) to the Indentures and Warrant of any of its obligations under any
of such documents;
(h) Purchaser has not engaged any third party as broker or finder or
incurred or become obligated to pay any broker's commission or finder's fee in
connection with the transactions contemplated by this Agreement other than
Donaldson, Lufkin and Jenrette Securities Corporation for whose fees and
expenses Purchaser shall be solely responsible;
(i) Purchaser acknowledges that none of the Securities have been
registered under the Securities Act and may be resold only if registered
pursuant to the provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such exemption is required by applicable law, and the issuer
thereof is not required to register such Security;
(j) Purchaser shall make an appropriate filing pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (the "HSR Act") with respect to the
transfer of the CAI Equity Securities contemplated by this Agreement as soon as
practicable after April 15, 1999 and supply as promptly as practicable to the
appropriate governmental authorities any additional information and documentary
material that may be requested pursuant to the HSR Act. Purchaser shall, to the
extent Purchaser deems it reasonable to do so, contest any claim, action, suit,
arbitration, inquiry,
9
<PAGE> 10
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
proceeding or investigation by or before any governmental
authority seeking to restrain, enjoin or alter the transactions contemplated by
this Agreement and attempt to avoid the imposition of such restraint, injunction
or alteration, and if any such order, writ, judgment, injunction, decree,
stipulation or award has been granted by any governmental authority, attempt to
have such order, writ, judgment, injunction, decree, stipulation or award
vacated or lifted;
(k) Purchaser shall file or cause to be filed any necessary
application(s) for the FCC's consent required for the transfer of the CAI
Equity Securities provided for in this Agreement as soon as practicable after
April 15, 1999 and supply as promptly as possible any additional information
and documentary material that may be requested by the FCC in order to obtain
such consent. Purchaser will advise Seller from time to time of the progress of
any such application and will notify Seller promptly of any determination by
the FCC to deny approval of any such application; and
(l) Purchaser or an affiliate of Purchaser is legally qualified under
all relevant laws and regulations to hold the FCC licenses, and to receive any
authorization from any other federal, state or local regulatory or governmental
authority necessary to consummate the transactions contemplated by this
Agreement.
ARTICLE IV.
CONDITIONS TO CLOSING
SECTION 4.01. Conditions to Obligations of Sellers. The obligations of
each Seller to assign, sell, transfer and convey such Seller's right, title and
interest in and to the Securities to Purchaser on either the Initial Closing
Date or the Closing Date, as applicable, shall be subject to the fulfillment of
each of the following conditions on such Closing Date:
(a) On the Closing Date, if there has not been an Initial Closing Date,
Sellers shall have received the payment of the Purchase Price in accordance with
Section 1.05(a);
(b) On the Closing Date, if there has been an Initial Closing Date,
Sellers shall have received payment of the Purchase Price allocable to the CAI
Equity Securities in accordance with Section 1.05(b);
(c) On the Initial Closing Date, if any, Sellers shall have received
payment of the Purchase Price allocable to all the Securities except the CAI
Equity Securities in accordance with Section 1.05(c);
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CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
(d) the representations and warranties of Purchaser contained in this
Agreement shall have been true and correct in all material respects when made
and as of the applicable Closing Date (it being agreed that such representations
and warranties shall be deemed to have been confirmed by Purchaser as of such
Closing Date, without the need for further written certification, unless such
Purchaser shall have notified Seller in writing to the contrary prior to such
Closing Date);
(e) Purchaser shall have complied in all material respects with all
covenants required by this Agreement to be complied with by it on or prior to
such Closing Date;
(f) No order or decree shall have been entered in any action or
proceeding before any court, agency or body of competent jurisdiction enjoining
the consummation of this Agreement; provided that prior to invoking this
condition, Sellers shall have used their respective reasonable best efforts to
have any such order or decree vacated; and
(g) the Termination Date (as defined in Section 5.03) shall not have
occurred.
SECTION 4.02. Conditions to Obligations of Purchaser. The obligations
of Purchaser to purchase and accept assignment of the Securities from any Seller
on the Initial Closing Date or the Closing Date, as applicable, shall be subject
to the fulfillment of each of the following conditions on or prior to such
Closing Date:
(a) On the Closing Date, if there has not been an Initial Closing Date,
Purchaser shall have received the deliveries required by Section 1.04(a);
(b) On the Closing Date, if there has been an Initial Closing Date,
Purchaser shall have received the deliveries required by Section 1.04(b);
(c) On the Initial Closing Date, if any, Purchaser shall have received
the deliveries required by Section 1.04(c);
(d) the representations and warranties of each Seller contained in this
Agreement shall have been true and correct in all material respects when made
and as of such Closing Date (it being agreed that such representations and
warranties shall be deemed to have been confirmed by such Seller as of such
Closing Date, without the need for further written certification, unless such
Seller shall have notified Purchaser in writing to the contrary prior to such
Closing Date);
(e) Each Seller shall have complied in all material respects with all
covenants required by this Agreement to be complied with by it on or prior to
such Closing Date;
(f) With respect to the Closing Date, but not the Initial Closing Date,
any waiting period under the HSR Act applicable to the purchase of the CAI
Equity Securities contemplated
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CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
hereby shall have expired or been terminated; provided that the conditions set
forth in this Section 4.02(f) cannot be waived by Purchaser;
(g) With respect to the Closing Date, but not the Initial Closing Date,
the Purchaser shall have received any consents, orders and approvals from the
FCC which are required for the consummation of the purchase of the CAI Equity
Securities; provided that the conditions set forth in this Section 4.02(g)
cannot be waived by Purchaser;
(h) No order or decree shall have been entered in any action or
proceeding before any court, agency or body of competent jurisdiction enjoining
the consummation of this Agreement; provided that prior to invoking this
condition, Purchaser shall have used its reasonable best efforts to have any
such order or decree vacated; and
(i) The Termination Date (as defined in Section 5.03) shall not have
occurred.
SECTION 4.03. Waiver by Purchaser of Condition of FCC Approval. Sellers
agree that at any time during the term of this Agreement after Purchaser has
confirmed its willingness to accept Sellers' offer to sell the * Securities at
the * Purchase Price in accordance with Section 1.06, if Purchaser has not
received any consents, orders and approvals from the FCC required for the
purchase by Purchaser of the CAI Equity Securities, including the interest
represented thereby in CS Wireless Systems, Inc., Purchaser may elect to
purchase all (but not less than all) of the Securities other than the CAI Equity
Securities at the Purchase Price allocable to such Securities in the Schedules;
provided that no such election may be made unless or until all conditions in
Sections 4.01 and 4.02 (except Section 4.02 (g) and those conditions which by
their terms are applicable solely to a Closing Date for the purchase of the CAI
Equity Securities exclusively) have been satisfied or duly waived. Purchaser may
make this election by delivery of written notice to the Sellers.
ARTICLE V. TERMINATION
SECTION 5.01. Right of Termination.
(a) The Purchaser shall have the right to terminate this Agreement upon
the occurrence of any of the following events:
(i) Sellers shall not have offered to sell the * Securities to
Purchaser at the * Purchase Price on April 9, 1999, as provided in Section 1.06;
or
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* Confidential portions omitted pursuant to a confidential treatment request and
filed separately with Securities and Exchange Commission
12
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CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
(ii) the FCC shall have notified Purchaser that the FCC shall
have denied any application required for the purchase by Purchaser of the CAI
Equity Securities, including the interest represented thereby in CS Wireless
Systems, Inc.
(b) The Sellers shall have the right to terminate this Agreement upon
the occurrence of any of the following events:
(i) Sellers shall have offered to sell Purchaser the *
Securities as provided in Section 1.06 hereof and Purchaser shall not have
elected on or before April 12, 1999 to purchase all of the * Securities, as
provided in Section 1.06; or
(ii) the FCC shall have notified Purchaser that the FCC shall
have denied by final order any application required for the purchase by
Purchaser of the CAI Equity Securities, including the interest represented
thereby in CS Wireless Systems, Inc., and Purchaser shall not have either
terminated this Agreement or purchased all the other Securities within five
Business Days after notice by Seller to Purchaser of Seller's intention to
terminate this Agreement as a result thereof.
(c) The Purchaser and the Sellers shall each have the right to
terminate this Agreement upon the following:
(i) the Closing with respect to all the Securities shall not
have occurred on or before 5:00 p.m. on the Final Termination Date (as
hereinafter defined), which initially is the day which is 90 days after the date
of this Agreement (or, if such day is not a Business Day, the next Business Day
thereafter ( the "Final Termination Date")), unless Purchaser shall have
exercised its election pursuant to Section 5.02, if applicable, in which event
the Final Termination Date shall be the day which is specified by Purchaser in
its then most recent Extension Notice (as defined in Section 5.02) (or if such
day is not a Business Day, the next Business Day); provided that the Final
Termination Date shall not extend beyond the day which is 180 days after the
date of this Agreement (or, if such day is not a Business Day, the next Business
Day thereafter), unless otherwise agreed by each of the Sellers.
SECTION 5.02. Election to Extend Final Termination Date. At any time
prior to termination of this Agreement, Purchaser may from time to time elect to
extend the Final Termination Date to a date which is not beyond the day which is
180 days after the date of this Agreement (or if such day is not a Business Day,
the next Business Day), by delivering notice to such effect to the Sellers (the
"Extension Notice"), which notice shall specify the date to which
- -----------------------
* Confidential portions omitted pursuant to a confidential treatment request and
filed separately with Securities and Exchange Commission
13
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CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
the Final Termination Date shall then be extended; provided that Purchaser may
not elect to extend the Final Termination Date unless all of the conditions in
Sections 4.01 shall have been satisfied (other than the payments required to be
made on the Closing Date by the Purchaser) or duly waived and the purpose for
the extension is to continue to seek satisfaction of the conditions in Sections
4.02 (f) and (g). Purchaser may exercise its election herein one or more times,
in its sole discretion.
SECTION 5.03. Notice of Termination; Termination Date. Any party
exercising its right of termination shall send written notice to each of the
other parties hereto at the addresses set forth herein. Immediately upon
delivery of such notice, this Agreement shall automatically terminate and be of
no further force or effect except as specifically set forth in this Agreement.
"Termination Date" is the date such notice is duly given.
ARTICLE VI.
MISCELLANEOUS
SECTION 6.01. Further Assurances. Each of the Sellers and Purchaser
each hereby agree to execute and deliver, or cause to be executed and delivered,
such other documents, instruments and agreements, and take such other actions,
as either party may reasonably request in connection with the transactions
contemplated by this Agreement.
SECTION 6.02. Receipt of Information. Each of the Sellers shall (a)
promptly notify Purchaser of any notices they receive under the Securities, the
Indentures or Warrant from and after the date hereof, and (b) at Purchaser's
request, promptly forward any such notices that they receive to Purchaser,
except, in the case of both clauses (a) and (b), to the extent such Seller is
legally or contractually prohibited from doing so. Sellers shall promptly pay to
Purchaser any amounts they receive as interest or other distribution that accrue
for the period following the applicable Closing Date.
SECTION 6.03. Amendment; Waiver; Remedies. This Agreement shall not be
amended or otherwise modified unless in writing and signed by the parties
hereto. No failure on the part of either party to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof by such party,
nor shall any single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other right. The rights
and remedies of each party provided herein are cumulative and are in addition
to, and not exclusive of, any rights or remedies provided by law or in equity.
SECTION 6.04. Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given (a) when delivered, if
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<PAGE> 15
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
sent by registered or certified mail (return receipt requested), (b) when
delivered, if delivered personally, (c) when transmitted, if sent by facsimile
if a confirmation of transmission is produced by the sending machine or (d)
when delivered, if sent by overnight mail or overnight courier, in each case to
the parties at the following addresses or facsimile numbers (or at such other
addresses or facsimile numbers as shall be specified by like notice):
If to Sellers, at:
*
with a copy to
*
If to Purchaser, at:
MCI WORLDCOM, Inc.
3060 Williams Drive, Suite 600
Fairfax, VA 22031
Attention: Robert Finch
Vice President - Strategic Development
Fax: (703) 645-4637
with a copy to:
P. Bruce Borghardt
General Counsel - Corporate Development
MCI WORLDCOM, Inc.
10777 Sunset Office Drive, Suite 330
St. Louis, MO 63127
Fax: (314) 909-4101
SECTION 6.05. Costs and Expenses. The Sellers and Purchaser shall each
pay their own respective costs and expenses incurred in connection with the
negotiation, preparation, execution and performance of this Agreement,
including, but not limited to, attorneys' fees.
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* Confidential portions omitted pursuant to a confidential treatment request and
filed separately with Securities and Exchange Commission
15
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CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
SECTION 6.06. Survival. Except as otherwise specified herein, the
covenants, representations and warranties of the parties contained herein shall
survive the consummation of the transactions contemplated hereby but shall not
survive the occurrence of the Termination Date and the termination of this
Agreement (except as otherwise provided herein or to the extent of any rights or
remedies which arose prior to such termination on account of a breach by any
party of any of its representations, warranties or covenants prior to such
termination).
SECTION 6.07. Successors and Assigns. This Agreement shall inure to
the benefit of and be enforceable by the parties hereto and their respective
successors and assigns; provided, however, that no party shall assign its
rights and obligations hereunder without the prior written consent of the other
party, which consent shall not be unreasonably withheld. Any purported
assignment absent such consent shall be void. Notwithstanding the foregoing,
Purchaser may assign this Agreement to an affiliate without consent as long as
it remains liable for any breach of this Agreement, and Sellers may assign this
Agreement to one or more partnerships or other entities managed either by Moore
Capital Management, Inc. or Moore Capital Advisors, L.L.C., as the case may be,
as long as Sellers remain liable for any breach of this Agreement.
SECTION 6.08. Counterparts. This Agreement may be executed in any
number of counterparts and all of such counterparts taken together shall be
deemed to constitute one and the same instrument. This Agreement shall become
effective upon the execution of a counterpart hereof by each of the parties
hereto and the receipt of an original or telecopy executed counterpart by each
party hereto; provided that any party delivering its counterpart by telecopy
will as soon as reasonably practicable after such delivery deliver an original
executed counterpart to each other party hereto.
SECTION 6.09. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York. Each party to
this Agreement hereby irrevocably consents to the jurisdiction of the United
States Court for the Southern District of New York located in the State and City
of New York in any action to enforce, interpret or construe any provision of
this Agreement or of any other agreement or document delivered in connection
herewith and hereby waives any objection to venue, whether by reason of improper
venue, forum non conveniens or lack of personal jurisdiction or otherwise, to
any such action brought in that Court.
SECTION 6.10. Waiver of Trial by Jury. Each Seller and Purchaser each
hereby knowingly, voluntarily and intentionally waive any rights they may have
to a trial by jury in respect of any litigation based hereon, or arising out of,
under, or in connection with this Agreement, the Indentures or Warrant, any
related documents and agreements or any course of conduct, course of dealing, or
statements (whether verbal or written) in connection therewith.
16
<PAGE> 17
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
SECTION 6.11. Confidentiality. No party hereto shall disclose any
Confidential Information (as defined below) to any third party without the
prior written consent of the other parties hereto, other than (a) to the
officers, directors, employees, agents and advisors of such party or its
affiliates who have a need to know such Confidential Information and are
subject to appropriate confidentiality obligations, (b) as and only to the
extent required by applicable law, rule, regulation or judicial process, (c) as
and only to the extent requested or required by any state, federal or foreign
authority or examiner regulating any of Sellers or Purchaser, (d) information
that, at the time of disclosure or thereafter is generally available to the
public (other than as a result of a disclosure in violation of the terms of
this Section) and (e) disclosure required to effect the transfers contemplated
by this Agreement, but only after notifying the other parties hereto and
delaying such disclosure, if requested by Purchaser; provided that prior to any
disclosure under clauses (b) or (c), such party shall promptly advise the other
party when requested or required to make a disclosure thereunder. For purposes
of this Section 6.11, "Confidential Information" means any information related
to or in connection with the identity of the parties hereto or the price or
value of any interest transferred hereunder or the existence or terms of this
Agreement. This Section survives termination of this Agreement.
SECTION 6.12. No-Shop. Prior to the Termination Date, no Seller
including the employees, officers, directors and agents of the Seller shall
make, solicit, assist or initiate any inquiry or proposal, or provide any
information to or participate in any negotiations with, any corporation,
partnership, agent, attorney, financial advisor, person, or other entity or
group (other than Purchaser) ("Third Parties") for the purpose of consummating
any sale, transfer or other disposition of the Securities or Assigned Rights,
except for the CAI Equity Securities and related Assigned Rights in the event
the FCC denies by final order any required application for the transfer thereof
to Purchaser ("Disposition") . Each Seller acknowledges that entering into any
contract or agreement with any Third Party with respect to any Disposition, even
if any such Disposition were conditional upon the termination of this Agreement
or nonconsummation of the transactions contemplated hereby, would violate this
Agreement.
SECTION 6.13. Miscellaneous. (a) This Agreement and any agreement,
document or instrument attached hereto or referred to herein integrate all the
terms and conditions mentioned herein or incidental hereto, constitute the
entire agreement and understanding between the parties hereto and supersede any
and all prior agreements and understandings relating to the subject matter
hereof.
(b) All payments made hereunder shall be made without any set-off or
counterclaim.
(c) If any provision of this Agreement shall be determined to be
unenforceable by any court of law, the remaining provisions shall be severable
and enforceable in accordance with their
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<PAGE> 18
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
terms unless to do so would frustrate the purpose of the parties in entering
into this Agreement, in which case the party whose purpose is frustrated shall
have the right to terminate this Agreement without liability or obligation
hereunder, except for those provisions which provide that they shall survive
termination.
(d) Each Seller and Purchaser agree that no adequate remedy at law may
exist for breach of certain of their respective obligations under this
Agreement, and that therefore in the event any party hereto fails to comply with
its obligations hereunder, the other party hereto shall have the right to obtain
specific performance of the obligations of such defaulting party, injunctive
relief or such other equitable relief as may be available.
(e) The section captions and headings in this Agreement are for
convenience only and are not intended to be full or accurate descriptions of the
contents thereof. They shall not be deemed to be part of this Agreement and in
no way define, limit, extend or describe the scope or intent of any provision
hereof.
(f) Each Seller and Purchaser intend and agree that the transactions
contemplated hereby shall not result in the creation of any trust or fiduciary
relationship between Purchaser and any Seller or in the creation of a joint
venture between such parties.
(g) It is understood that the term "Securities" used in this Agreement
shall include any securities, properties or other consideration received by
Seller (i) in exchange therefor pursuant to any bankruptcy proceeding, (ii)
pursuant to any stock split or stock dividend or (iii) otherwise in connection
with the Securities, in each case following the execution of this Agreement and
prior to the applicable Closing Date.
18
<PAGE> 19
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
SELLERS:
*
BY:
------------------------------------
ITS:
*
BY:
------------------------------------
ITS:
PURCHASER:
MCI WORLDCOM, INC.
BY: /s/ CHARLES T. CANNADA
------------------------------------
ITS: Senior Vice President
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* Confidential portions omitted pursuant to a confidential treatment request and
filed separately with Securities and Exchange Commission
19
<PAGE> 20
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
SCHEDULE I: PURCHASE PRICE
<TABLE>
<CAPTION>
Securities Purchase Price
- ---------- --------------
<S> <C>
A. CAI Securities: A:
CAI Equity Securities: CAI Equity Securities:
2,270,715 shares of Common Stock $ *
Other CAI Securities: Other CAI Securities: See below.
$35,418,097 face amount of 13% Senior Notes
due 2004
B. * Securities: B. See below
$ * face amount of 14.50% Senior Discount
Notes due * .
C. CS Securities: C: See below
$86,750,000 face amount of 11.375% Senior
Discount Notes due 2006
The Purchase Price for the Securities specified
in "A. Other CAI Securities", "B" and "C" is $ * ,
plus interest as described below.
</TABLE>
TOTAL PURCHASE PRICE FOR ALL THE SECURITIES SPECIFIED ABOVE:
$ * , PLUS INTEREST ACCRUING AT THE RATE OF 10% PER ANNUM FROM THE
NINETIETH DAY AFTER THE DATE OF THE AGREEMENT TO AND INCLUDING THE
CLOSING DATE (SUCH AMOUNT, INCLUDING INTEREST, IF ANY, THE "PURCHASE
PRICE").
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* Confidential portions omitted pursuant to a confidential treatment request and
filed separately with Securities and Exchange Commission
20
<PAGE> 21
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
SCHEDULE II: * PURCHASE PRICE
<TABLE>
<CAPTION>
Securities Purchase Price
- ---------- --------------
<S> <C>
(i) $ * face amount of 13.125% Senior Discount FOR THE SECURITIES LISTED IN CLAUSES (i) AND
Notes due * (ii):
(ii) 117,915 "Units", each one consisting of $ * $ * , PLUS INTEREST ACCRUING AT THE
face amount of 13.125% Senior Discount Notes due * RATE OF 10% PER ANNUM FROM THE NINETIETH
and one warrant to purchase * shares of common stock DAY AFTER THE DATE OF THE AGREEMENT TO AND
of * INCLUDING THE CLOSING DATE (SUCH AMOUNT,
INCLUDING INTEREST, IF ANY, THE " *
PURCHASE PRICE").
</TABLE>
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* Confidential portions omitted pursuant to a confidential treatment request and
filed separately with Securities and Exchange Commission
<PAGE> 1
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
EXHIBIT B
PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE AGREEMENT dated as of March 23, 1999,
between * and * (each a "Seller", and collectively "Sellers"), and MCI WORLDCOM,
Inc. ("Purchaser").
PRELIMINARY STATEMENTS
1. Pursuant to the following Securities Documents (as
defined below), Sellers collectively hold the following Securities (as defined
below):
(i) 15% Senior Secured Notes of Wireless One, Inc., a
Delaware corporation and debtor and debtor in possession under a case
pending under Chapter 11 of the Bankruptcy Code ("Wireless One"), due
August 12, 1999, issued pursuant to the Amended and Restated Note
Purchase Agreement dated as of February 12, 1999 (the "Wireless One DIP
Note Purchase Agreement") in an aggregate principal amount of
$18,854,986 (the "Wireless One DIP Note");
(ii) unsecured 13 1/2% Senior Discount Notes Due * of
* , issued pursuant to the Indenture dated as of * (the " *
Indenture"), in the aggregate principal amount of * (the " * Note * ");
(iii) unsecured 13% Senior Notes Due * of * , issued
pursuant to the Indenture dated as of * (the " * Indenture" and
together with the * Indenture, the " * Indentures"), in the aggregate
principal amount of * (the " * Note * " and, together with the * Note
Due 2006, the " * Notes");
(iv) Senior Secured Notes of CAI Wireless Systems,
Inc., a Connecticut corporation ("CAI"), due October 14, 2000, issued
pursuant to the Note Purchase Agreement dated as of October 14, 1998
(the "CAI Note Purchase Agreement") in an aggregate principal amount of
the A Note equal to $30,000,000 (the "CAI A Note") and of the B Note
equal to $50,000,000 (the "CAI B Note");
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* Confidential portions omitted pursuant to a confidential treatment request and
filed separately with Securities and Exchange Commission
<PAGE> 2
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
(v) unsecured 13% Senior Notes of CAI, due October
14, 2004, issued pursuant to the Indenture dated as of October 14, 1998
(the "CAI Senior Note Indenture") in the aggregate principal amount of
$83,994,512 (the "CAI Notes");
(vi) 8,284,425 shares of common stock of CAI (the
"CAI Stock");
(vii) unsecured 13.125% Senior Notes of * , a
[Delaware] corporation, issued pursuant to an Indenture (the "PCTV
Indenture") in an aggregate amount of * (the " * Notes"); and
(viii) unsecured 11.375% Senior Notes of CS Wireless
Systems, Inc., a Delaware corporation ("CS") issued pursuant to the
Indenture dated February 15, 1996 (the "CS Indenture") in an aggregate
principal amount of $129,000,000 (the "CS Notes").
2. Sellers wish to sell and assign, and Purchaser wishes
to purchase and assume, subject to the terms and conditions hereof:
(i) all right, title and interest and, with respect
to the Wireless One DIP Note, the CAI A Note and CAI B Note, all
obligations (other than liabilities for breaches thereof by, or other
obligations thereunder of, such Seller accrued prior to the assignment
to Purchaser hereunder), if any, of Sellers in and to the Wireless One
DIP Note, the * Notes, the CAI A Note, the CAI B Note, the CAI Notes,
the * Notes, the CS Notes and the CAI Stock, together with all accrued
and unpaid interest thereon and fees with respect thereto as of the
applicable Closing Date (the "Securities");
(ii) all right, title and interest and, with respect
to the Wireless One DIP Note Purchase Agreement and the CAI Note
Purchase Agreement, all obligations (other than liabilities for
breaches thereof by, or other ob* ligations thereunder of, such Seller
accrued prior to the assignment to Purchaser hereunder), if any, of
Sellers in and to the Wireless One DIP Note Purchase Agreement, *
Indenture, the * Indenture, the CAI Note Purchase Agreement, the CAI
Senior Note Indenture, the * Indenture and the CS Indenture and any and
all instruments, agreements and other writings executed in connection
with or pursuant thereto, including, without limitation, those
evidencing the securities (collectively, with the * Voting Agreement
(as defined below), the "Securities Documents");
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* Confidential portions omitted pursuant to a confidential treatment request and
filed separately with Securities and Exchange Commission
<PAGE> 3
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
(iii) all right, title and interest of Sellers in and
to any property, whether real or personal, tangible or intangible, of
whatever kind and wherever located, whether now owned or hereafter
acquired or created, in which a lien, encumbrance, security interest,
mortgage, deed of trust, pledge, claim, set-off or charge of any kind
(collectively, "Liens") had been granted or purported to have been
granted pursuant to any of the Securities Documents (the "Collateral")
and all right, title and interest in and to any and all instruments,
agreements and other writings evidencing such a Lien or related to such
Collateral, (collectively, the "Collateral Documents"); and
(iv) any and all rights, remedies, privileges, causes
of action or claims of any Seller (whether known or unknown) against
any person or entity which in any way is based upon, arises out of, or
is related to, any of the foregoing, including, without limitation, any
"claims" within the meaning of section 101(5) of the Bankruptcy Code.
The items described in clauses (ii) through (iv) above, are referred to herein
collectively as the "Assigned Rights".
3. Sellers wish to sell and assign, and Purchaser wishes
to purchase and assume, subject to the terms and conditions hereof, all right,
title and interest and all obligations of Sellers (other than liabilities for
breaches thereof by, or other obligations thereunder of, Sellers accrued prior
to the assignment to Purchaser hereunder) in and to the * Voting Agreement (as
defined below).
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, Sellers and Purchaser agree as follows.
ARTICLE I
PURCHASE AND SALE
SECTION 1.01. Purchase and Sale. Upon the terms and subject to
the conditions of this Agreement,
(a) at the Initial Closing (as hereinafter defined), each
Seller shall sell, assign, transfer and convey to Purchaser (without recourse to
such Seller), and Purchaser shall purchase and accept from each Seller from and
after the Initial Closing Date (as hereinafter defined), all of such Seller's
right, title and interest in and to the * Notes, the CAI Notes, the CAI A Note,
the
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* Confidential portions omitted pursuant to a confidential treatment request and
filed separately with Securities and Exchange Commission
<PAGE> 4
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
CAI B Note, the * Notes and the CS Notes, together with all accrued and unpaid
interest thereon and fees with respect thereto as of the Initial Closing Date
and the Assigned Rights with respect to such Securities (the "Part I
Securities") and Purchaser shall assume all of such Seller's obligations arising
after the Initial Closing Date under the * Voting Agreement, the CAI A Note, the
CAI B Note and the CAI Note Purchase Agreement;
(b) at the April Closing (as hereinafter defined), each Seller
shall sell, assign, transfer and convey to Purchaser (without recourse to such
Seller), and Purchaser shall purchase, accept and assume from Seller from and
after the April Closing Date (as hereinafter defined), all of such Seller's
obligations under and right, title and interest in and to the Wireless One DIP
Note and Wireless One DIP Note Purchase Agreement, together with all accrued and
unpaid interest thereon and fees with respect thereto as of the April Closing
Date and the Assigned Rights with respect to such Securities (the "Part II
Securities"); and
(c) at the Final Closing (as hereinafter defined), each Seller
shall sell, assign, transfer and convey to Purchaser (without recourse to such
Seller), and Purchaser shall purchase and accept from Seller from and after the
Final Closing Date (as hereinafter defined), all of such Seller's right, title
and interest in and to the CAI Stock.
SECTION 1.02. Purchase Price. As consideration for the sale,
assignment, transfer, conveyance and delivery of the Securities and Assigned
Rights contemplated in Section 1.01, Purchaser shall pay or cause to be paid an
aggregate amount of $ * (the "Purchase Price"). The Purchase Price shall be
allocated to each Seller with respect to each Closing Date as set forth in the
attached Schedule I opposite such Closing Date.
SECTION 1.03. Closing. Upon the terms and subject to the
conditions of this Agreement,
(a) the sale and purchase of the Part I Securities
contemplated by this Agreement and the assignment and assumption of the * Voting
Agreement shall take place at the closing (the "Initial Closing") to be held at
the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York at
11:00 a.m., New York time on March 26, 1999 (the "Initial Closing Date") or at
such other place or at such other time as Purchaser and Sellers mutually agree
upon in writing.
(b) the sale and purchase of the Part II Securities
contemplated by this Agreement shall take place at the closing (the "April
Closing") to be held at the offices of
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* Confidential portions omitted pursuant to a confidential treatment request and
filed separately with Securities and Exchange Commission
<PAGE> 5
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
Shearman & Sterling, 599 Lexington Avenue, New York, New York at 11:00 a.m., New
York time on April 15, 1999 (the "April Closing Date") or at such other place or
at such other time as Purchaser and Sellers mutually agree upon in writing.*
(c) the sale and purchase of the CAI Stock contemplated by
this Agreement shall take place at the closing (the "Final Closing") to be held
at the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York
at 11:00 a.m., New York time on the date that is 3 business days after the
expiration or termination of any waiting period under the HSR Act (as
hereinafter defined) applicable to the purchase of the CAI Stock contemplated
hereby (the "Final Closing Date" and together with the Initial Closing Date and
the April Closing Date, the "Closing Dates") or at such other place or at such
other time as Purchaser and Sellers mutually agree upon in writing.
SECTION 1.04. Closing Deliveries by Sellers.
(a) On the Initial Closing Date, each Seller shall deliver or
cause to be delivered to Purchaser all of such Seller's right, title and
interest in and to:
(i) the Part I Securities, and all documentation related
thereto, and whatever documents of conveyance or transfer may be
necessary or desirable to transfer to and confirm in Purchaser, or at
Purchaser's request, Purchaser's nominee, all right, title and interest
in and to the Part I Securities, in each case without recourse or
warranty to any Seller except as set forth in this Agreement, and
Purchaser shall assume such Seller's obligations under the CAI A Note,
the CAI B Note and the CAI Note Purchase Agreement (other than
liabilities for breaches thereof by, or other obligations thereunder
of, Seller accrued prior to the assignment to Purchaser hereunder), and
deliver whatever documents of assumption may be necessary or desirable
to reflect such assumption;
(ii) the * Voting Agreement, all documentation related
thereto, and whatever documents of conveyance or transfer may be
necessary or desirable to transfer to and confirm in Purchaser, or at
Purchaser's request, Purchaser's nominee, all right, title and interest
in and to the * Voting Agreement, without recourse or warranty to any
Seller except as set forth in this Agreement, and Purchaser shall
assume Sellers' obligations under the * Voting Agreement (other than
liabilities for breaches thereof by, or other obligations thereunder
of, Seller accrued prior to the assignment to Purchaser
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* Confidential portions omitted pursuant to a confidential treatment request and
filed separately with Securities and Exchange Commission
<PAGE> 6
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
hereunder), and deliver whatever documents of assumption may be
necessary or desirable * to reflect such assumption.
(b) on the April Closing Date, each Seller shall deliver or
cause to be delivered to Purchaser all of such Seller's right, title and
interest in and to the Part II Securities, and all documentation related
thereto, and whatever documents of conveyance or transfer may be necessary or
desirable to transfer to and confirm in Purchaser, or at Purchaser's request,
Purchaser's nominee, all right, title and interest in and to the Part II
Securities, in each case without recourse or warranty to any Seller except as
set forth in this Agreement and Purchaser shall assume such Seller's obligations
under the Wireless One DIP Note and Wireless One DIP Note Purchase Agreement
(other than liabilities for breaches thereof by, or other obligations thereunder
of, Seller accrued prior to the assignment to Purchaser hereunder), and deliver
whatever documents of assumption may be necessary or desirable to reflect such
assumption.
(c) on the Final Closing Date, each Seller shall deliver or
cause to be delivered to Purchaser all of such Seller's right, title and
interest in and to the CAI Stock and stock power duly executed by such Seller,
and whatever documents of conveyance or transfer may be necessary or desirable
to transfer to and confirm in Purchaser, or at Purchaser's request, Purchaser's
nominee, all right, title and interest in and to the CAI Stock, without recourse
or warranty to any Seller except as set forth in this Agreement.
SECTION 1.05. Closing Deliveries by Purchaser. On each Closing
Date, Purchaser shall deliver to each Seller in same day funds, by wire transfer
to an account to be designated by such Seller, the portion of the Purchase Price
to be paid to such Seller on such Closing Date in the amount set forth in
Schedule I opposite such Closing Date.
ARTICLE II
REPRESENTATIONS, WARRANTIES
AND COVENANTS OF SELLERS
SECTION 2.01. Representations and Warranties and Covenants of
Sellers. Each Seller, severally and not jointly and each solely as to itself,
hereby represents, warrants and covenants to Purchaser as of the date hereof
that:
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* Confidential portions omitted pursuant to a confidential treatment request and
filed separately with Securities and Exchange Commission
<PAGE> 7
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
(a) Such Seller is the sole legal and beneficial owner and
holder of the Securities and the Assigned Rights to be assigned by it hereunder
and has undivided good title to such Securities and Assigned Rights, free and
clear of any lien, security interest or other adverse claim, except the
Agreement Concerning Voting dated * with respect to the * Notes (the " * Voting
Agreement") and such Securities are not subject to any prior sale, transfer,
assignment or participation by such Seller or any agreement by such Seller to
assign, convey, transfer or participate, in whole or in part;
(b) Such Seller is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, and has
the full power and authority to take, and has taken, all action necessary to
execute and deliver this Agreement and any other documents required or permitted
to be executed or delivered by it in connection with this Agreement and to
fulfill its obligations hereunder and thereunder, and the execution, delivery
and performance by it of this Agreement does not violate its charter or bylaws
or any law, rule, regulation, order or decree applicable to it and does not
conflict with or result in the breach of any contract or other instrument
binding upon it;
(c) This Agreement has been duly executed and delivered by
such Seller and constitutes the legal, valid and binding obligation of such
Seller, enforceable against such Seller in accordance with its terms, subject,
as to enforceability, to bankruptcy, insolvency, fraudulent conveyance,
moratorium, reorganization and other laws of general application relating to or
affecting creditors' rights and to general equitable principles, provided,
however, that such Seller makes no representation in this Section 2.01(c) with
respect to the collectability or enforceability of any of the Securities or the
Securities Documents or any portion thereof;
(d) No notice to, registration or filing with, consent or
approval of, or other action by, any person or federal, state or other
governmental agency, authority, administrator or regulatory body, arbitrator,
court or other tribunal, foreign or domestic, is required in connection with the
due execution, delivery and performance of this Agreement by such Seller and the
sale by such Seller of the Securities to be assigned by it hereunder, except
with respect to the Wireless One DIP Note, the filing under Section 13(g) of the
Securities Exchange Act of 1934 (the "Securities Exchange Act") in connection
with the sale of the CAI Stock and as otherwise provided for herein;
(e) Prior to the closing of the purchase of a Security
hereunder (other than the Wireless One DIP Note), Seller shall consult with
Purchaser with respect to the exercise of any material right under or relating
to, and the taking of any material action with respect to, the Securities or
Assigned Rights, provided, however, that any investment, voting or other
decision relating to the Securities shall remain with and in the sole discretion
of Sellers. Prior to the closing of the purchase of a Security hereunder (other
than the Wireless One DIP Note) Seller shall not knowingly exercise any rights
under or relating to, or take any action with respect to,
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* Confidential portions omitted pursuant to a confidential treatment request and
filed separately with Securities and Exchange Commission
<PAGE> 8
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
the Securities or Assigned Rights which would have the effect of adversely
affecting the ability to consummate the transactions contemplated hereby or
materially lessen the benefits or rights that Purchaser would otherwise receive
in connection with the transactions contemplated hereby. Subject to Section 6.11
hereof and for the period from the date hereof through the April Closing Date,
Seller shall promptly advise Purchaser if Seller determines in its discretion
that it is necessary to disclose the sale of its interest in the Wireless One
DIP Note.
(f) Other than this Agreement, neither Seller has entered into
any written contract, agreement or other documents conveying or purporting to
convey rights to any person or entity that relate to the Securities or the
Assigned Rights other than the Securities Documents and the * Voting Agreement;
(g) Neither Seller has made any filings under Rule 144 under
the Securities Act of 1933 (the "Securities Act"), Section 13(d), Section 13(g)
or Section 16 of the Securities Exchange Act, or any other statute, rule or
regulation under the federal securities laws relating to the transactions
contemplated hereby or the Securities, except for a Schedule 13G filing with
respect to the CAI Stock. Neither Seller has made any public disclosure of any
kind relating to this Agreement or the transactions contemplated hereby except
that Sellers have made disclosure and may hereafter make disclosure to
employees, officers, directors and advisors or other persons subject to
appropriate obligations of confidentiality (whether in writing or otherwise). To
the best of such Seller's knowledge, such Seller is not required to make any
filing with respect to the Securities or the transactions contemplated hereby
under Rule 144 of the Securities Act, Section 13(d), Section 13(g) or Section 16
of the Securities Exchange Act, or any other statute, rule or regulation under
the federal securities laws prior to April 25, 1999; provided, however, if such
Seller determines that any such filing shall be required prior to April 25,
1999, such Seller shall promptly advise Purchaser of any determination that such
filing is necessary and prior to the making of such filing;
(h) Neither Seller possesses any other right, title or
interest of any kind in any issuer of the Securities other than the Securities
and the Assigned Rights. Except as disclosed to Purchaser prior to the execution
of this Agreement, no Seller possesses any interest of any kind in or has any
representatives on the board of directors of any person or entity whose primary
business, to such Seller's actual knowledge, is in the wireless CATV industry or
the use of MMDS, MDS, ITFS or H channels. Within six months after the execution
of this Agreement, except for securities of * , a Delaware corporation and
debtor and debtor in possession under a case pending under chapter 11 of the
Bankruptcy Code (" * ") owned by Sellers on the date hereof or any consideration
distributed under * 's plan of reorganization confirmed in * 's
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* Confidential portions omitted pursuant to a confidential treatment request and
filed separately with Securities and Exchange Commission
<PAGE> 9
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
chapter 11 case in respect of such securities, no Seller shall purchase or
otherwise acquire any interest of any kind in or have any representatives on the
board of directors of any person or entity, to the actual knowledge of such
Seller, whose primary business is in the wireless CATV industry or the use of
MMDS, MDS, ITFS or H channels;
(i) (i) To the best of such Seller's knowledge, such Seller
has not breached or violated the terms and conditions of the * Voting Agreement,
the Wireless One DIP Note, the Wireless One DIP Note Purchase Agreement, the CAI
A Note, the CAI B Note or the CAI Note Purchase Agreement (the "Assumed
Agreements") and (ii) Seller has not taken any action with respect to the
Securities that would materially impair the ability of Purchaser, upon
consummation of the transactions contemplated hereby, to exchange any of the
Securities for any type of securities in any existing or potential bankruptcy
proceedings of the issuer of such Securities. Seller shall satisfy any of its
obligations that accrue prior to the assumption thereof by Purchaser under the
Assumed Agreements;
(j) Each Seller is a sophisticated buyer and with respect to
the Securities, has adequate information concerning the business and financial
condition of each issuer of such Securities to make an informed decision
regarding the Securities, and has independently, without reliance upon Purchaser
and based on such information as it deemed appropriate, made its own analysis
and decision to enter into this Agreement and each Seller acknowledges and
agrees that Purchaser may possess material information with respect to any
issuer of such Securities not known to such Seller or otherwise publicly
available which may be material to a decision to sell the Securities (the
"Non-public Information"), that such Seller has determined to sell the
Securities notwithstanding its lack of knowledge of the Non-public Information,
and that Purchaser shall not have any liability to Seller to the extent such
liability arises from, is caused by or relates to the non-disclosure of the
Non-public Information and such Seller hereby releases Purchaser therefrom with
respect to such nondisclosure; provided that the foregoing shall not operate to
lessen any liability for the breach of any other representation, warranty or
covenant contained herein.
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* Confidential portions omitted pursuant to a confidential treatment request and
filed separately with Securities and Exchange Commission
<PAGE> 10
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
ARTICLE III
REPRESENTATIONS, WARRANTIES
AND COVENANTS OF PURCHASER
SECTION 3.01. Representations, Warranties and Covenants of
Purchaser. Purchaser hereby represents, warrants and covenants to Seller as of
the date hereof that:
(a) Purchaser is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its formation, and has the full
power and authority to take, and has taken, all action necessary to execute and
deliver this Agreement, and any other documents required or permitted to be
executed or delivered by it in connection with this Agreement, and to fulfill
its obligations hereunder and thereunder, and the execution, delivery and
performance by it of this Agreement does not violate its charter or bylaws or
any law, rule, regulation, order or decree applicable to it and does not
conflict with or result in the breach of any contract or other instrument
binding upon it;
(b) No notice to, registration or filing with, consent or
approval of, or other action by, any person or federal, state or other
governmental agency, authority, administrator or regulatory body, arbitrator,
court or other tribunal, foreign or domestic, is required in connection with the
due execution, delivery and performance of this Agreement by Purchaser or the
purchase by Purchaser of the Securities, except as provided for herein;
(c) This Agreement has been duly executed and delivered by
Purchaser and constitutes the legal, valid and binding obligations of Purchaser,
enforceable against Purchaser in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, fraudulent conveyance, moratorium,
reorganization and other laws of general application relating to or affecting
creditors' rights and to general equitable principles;
(d) Purchaser is a sophisticated buyer and with respect to the
Securities, has adequate information concerning the business and financial
condition of each issuer of such Securities to make an informed decision
regarding the Securities, and has independently, without reliance upon any
Seller and based on such information as it deemed appropriate, made its own
analysis and decision to enter into this Agreement and Purchaser acknowledges
and agrees that each Seller may possess material information with respect to any
issuer of such Securities not known to the Purchaser or otherwise publicly
available which may be material to a decision to buy the Securities (the "Seller
Non-public Information"), that Purchaser has determined to acquire the
Securities notwithstanding its lack of knowledge of the Non-public Information,
and that no Seller shall have any liability to Purchaser to the extent such
liability arises from, is
<PAGE> 11
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
caused by or relates to the non-disclosure of the Seller Non-public Information
and Purchaser hereby releases each Seller therefrom with respect to such
nondisclosure; provided that the foregoing shall not operate to lessen any
liability for the breach of any other representation, warranty or covenant
contained herein;
(e) Purchaser acknowledges that no Seller has made nor makes
any representation or warranty, whether express or implied, except as expressly
set forth in this Agreement. Purchaser acknowledges that the sale of the
Securities to Purchaser by each Seller is irrevocable, and that Purchaser shall
have no recourse to any Seller, except with respect to breaches of
representations, warranties and covenants expressly set forth in this Agreement
and the put set forth in Section 5.01. Purchaser acknowledges that the
consideration paid pursuant hereto for the purchase of the Securities may differ
both in kind and amount from any payments or distributions that ultimately may
be received by Purchaser with respect thereto. Purchaser acknowledges that it is
assuming the risk of full or partial loss which is inherent with each of the
Securities, and all collectability risks associated therewith; provided that the
foregoing shall not operate to lessen any liability for the breach of any other
representation, warranty or covenant contained herein;
(f) Purchaser is an "accredited investor" within the meaning
of Section 2(15) of the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder. Purchaser is purchasing the Securities
without a view toward selling or distributing the Securities in a manner that
would violate applicable securities laws and Purchaser has not solicited or
received any offer from any third party to purchase any of the Securities;
provided, however, that Purchaser may exchange the Securities with any issuer of
such Securities for other securities of such issuer or other consideration and
Purchaser may transfer the Securities to one or more of its affiliates.
Purchaser acknowledges that the sale of the Securities was not in any way
solicited by any Seller or any of its affiliates or advisors;
(g) Purchaser hereby acknowledges that, except as otherwise
provided in this Agreement, no Seller (i) makes any representation or warranty
whatsoever with respect to any statements, warranties or representations made by
other persons or entities in or in connection with the Securities Documents or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of, or the perfection or priority of any lien, security interest, pledge,
charge, encumbrance, assignment, financing statement or other security created
or purported to be created under or in connection with, the Securities Documents
nor (ii) makes any representation or warranty nor assumes any responsibility
with respect to the financial condition of any issuer of the Securities or the
performance or observance by any party (other than a Seller) to the Securities
Documents of any of its obligations under any of the Securities Documents;
<PAGE> 12
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
(h) Purchaser has not engaged any third party as broker or
finder or incurred or become obligated to pay any broker's commission or
finder's fee in connection with the transactions contemplated by this Agreement,
other than Donaldson, Lufkin and Jenrette Securities Corporation for whose fees
and expenses Purchaser shall be solely responsible;
(i) Purchaser acknowledges that the sale of the Securities to
Purchaser has not been registered under the Securities Act and that the
Securities may be resold only if registered pursuant to the provisions of the
Securities Act or if an exemption from registration is available, except under
circumstances where neither such registration nor such exemption is required by
applicable law, and the issuer thereof is not required to register such
Security;
(j) Purchaser shall make an appropriate filing pursuant to the
HSR Act (as hereinafter defined) with respect to the transfer (i) of the CAI
Stock and (ii) of more than 50% of the capital stock of CAI as soon as
practicable after April 15, 1999 and shall supply as promptly as practicable to
the appropriate governmental authorities any additional information and
documentary material that may be requested pursuant to the HSR Act. Purchaser
shall, to the extent Purchaser deems it reasonable to do so, contest any claim,
action, suit, arbitration, inquiry, proceeding or investigation by or before any
governmental authority seeking to restrain, enjoin or alter the transactions
contemplated by this Agreement and attempt to avoid the imposition of such
restraint, injunction or alteration, and if any such order, writ, judgment,
injunction, decree, stipulation or award (an "Order") has been granted by any
governmental authority, to the extent Purchaser deems it reasonable to do so,
attempt to have such Order vacated or lifted;
(k) Purchaser shall file or cause to be filed the
application(s) for the FCC's consent to acquisition of more than 50% of the
capital stock of CAI as soon as practicable after April 15, 1999 and shall
supply as promptly as possible any additional information and documentary
material that may be requested by the FCC in order to obtain such consent;
(l) Purchaser or an affiliate of Purchaser is legally
qualified under all relevant laws and regulations to hold the FCC licenses, and
to receive any authorization from any other federal, state or local regulatory
or governmental authority necessary to consummate the transactions contemplated
by this Agreement; and
(m) Purchaser is not an affiliate of CAI.
<PAGE> 13
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
ARTICLE IV
CONDITIONS TO CLOSING
SECTION 4.01. Conditions to Obligations of Sellers. The
obligations of each Seller to assign, sell, transfer and convey the Securities
and the Assigned Rights to Purchaser on the applicable Closing Date shall be
subject to the fulfillment of each of the following conditions on such Closing
Date:
(a) such Seller shall have received on such Closing Date
payment of its portion of the Purchase Price allocable to the Securities to be
sold to Purchaser on such Closing Date;
(b) the representations and warranties of Purchaser contained
in this Agreement shall have been true and correct in all material respects when
made and as of such Closing Date (it being agreed that such representations and
warranties shall be deemed to have been confirmed by Purchaser as of such
Closing Date, without the need for further written certification, unless
Purchaser shall have notified each Seller in writing to the contrary prior to
the such Closing Date);
(c) Purchaser shall have complied in all material respects
with all covenants required by this Agreement to be complied with by it on or
prior to such Closing Date;
(d) Purchaser shall have executed the * Voting Agreement or an
assumption agreement relating thereto; and
(e) There shall not have been instituted and there shall not
be pending any action or proceeding before any court of competent jurisdiction
or governmental agency or regulatory or administrative body, and no order or
decree shall have been entered in any action or proceeding before such court,
agency or body, (i) for the purpose of enjoining or preventing the consummation
of the transactions contemplated hereunder or (ii) which claims that this
Agreement, the transactions contemplated hereby or the consummation thereof is
illegal; provided that prior to invoking this condition, such Seller shall have
used its reasonable best efforts to have any such action, proceeding or notice
withdrawn or dismissed or such order or decree vacated.
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* Confidential portions omitted pursuant to a confidential treatment request and
filed separately with Securities and Exchange Commission
<PAGE> 14
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
SECTION 4.02. Conditions to Obligations of Purchaser. The
obligations of Purchaser to purchase and accept assignment of the Securities and
the Assigned Rights and to assume the obligations contemplated hereby from any
Seller on the applicable Closing Date shall be subject to the fulfillment of
each of the following conditions on or prior to such Closing Date:
(a) On the Initial Closing Date, Purchaser shall have
received, in each case without recourse or warranty to any Seller except as set
forth in this Agreement, the deliveries required by Section 1.04(a);
(b) On the April Closing Date, Purchaser shall have received,
in each case without recourse or warranty to any Seller except as set forth in
this Agreement, the deliveries required by Section 1.04(b);
(c) Each Seller shall have complied in all material respects
with all covenants required by this Agreement to be complied with by it on or
prior to such Closing Date;
(d) on the Final Closing Date, Purchaser shall have received,
without recourse or warranty to any Seller except as set forth in this
Agreement, the deliveries required by Section 1.04(c);
(e) the representations and warranties of each Seller
contained in this Agreement shall have been true and correct in all material
respects when made and as of such Closing Date (it being agreed that such
representations and warranties shall be deemed to have been confirmed by such
Seller as of such Closing Date, without the need for further written
certification, unless such Seller shall have notified Purchaser in writing to
the contrary prior to such Closing Date);
(f) with respect to the Final Closing Date, any waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder (the "HSR Act") applicable to
the purchase of more than 50% of the capital stock of CAI shall have expired or
been terminated; provided however, that the condition set forth in this Section
4.02(f) cannot be waived by Purchaser;
(g) There shall not have been instituted and there shall not
be pending any action or proceeding before any court of competent jurisdiction
or governmental agency or regulatory or administrative body, and no order or
decree shall have been entered in any action or proceeding before such court,
agency or body, (i) for the purpose of enjoining or preventing the consummation
of the transactions contemplated hereunder, (ii) which claims that this
Agreement, the transactions contemplated hereby or the consummation thereof is
illegal or (iii) requiring or seeking to require divestiture by Purchaser or any
issuer of the Securities of all or any material
<PAGE> 15
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
portion of their respective businesses, securities or assets as a result of the
transactions contemplated hereby; provided that prior to invoking this
condition, Purchaser shall have used its reasonable best efforts to have any
such action, proceeding or notice withdrawn or dismissed or such order or decree
vacated.
ARTICLE V
THE PUTS
SECTION 5.01. Purchaser Put Option. (a) Notwithstanding
anything contained herein to the contrary, Purchaser shall have a Put Right (as
herein defined) that shall become exercisable upon the earlier of (i) June 21,
1999 if the Waiting Condition (as herein defined) is satisfied, or (ii) the
satisfaction of the Denial Condition (as hereinafter defined) ((i) and (ii)
shall be referred to as "Trigger Events"). The "Waiting Condition" is satisfied
if any of the following are true: (1) the FCC has not consented to the transfer
of more than 50% of the capital stock of CAI to Purchaser, (2) the FCC has not
consented to the transfer of a controlling interest in CS to Purchaser (and such
consent is required), or (3) any waiting period under the HSR Act applicable to
the purchase of more than 50% of the capital stock of CAI shall not have expired
or been terminated. The "Denial Condition" is satisfied if any of the following
are true: (A) the FCC has denied its consent to the transfer of more than 50% of
the capital stock of CAI to Purchaser, or (B) the FCC has denied its consent to
the transfer of a controlling interest in CS to Purchaser. "Put Right" means
Purchaser's right to put the Put Securities (as hereinafter defined) to Seller.
Purchaser shall have three business days following the occurrence of a Trigger
Event to give notice of its intent to exercise its Put Right. In such notice
Purchaser shall specify a date ("Put Exercise Date") upon which it intends to
exercise the Put Right, which Put Exercise Date shall be within five business
days of the Trigger Event. Subject to the conditions precedent in (b) below, on
the Put Exercise Date, the Seller shall purchase from Purchaser and Purchaser
shall sell to Sellers all, but not less than all, of the Securities, the
Assigned Rights and the Wireless One Voting Agreement purchased by Purchaser
prior to the Put Exercise Date, or any securities, properties or other
consideration received (i) in exchange therefor pursuant to any bankruptcy
proceeding, (ii) pursuant to any stock split or stock dividend or (iii)
otherwise in connection with the Securities (the "Put Securities"). The
aggregate purchase price for the Put Securities shall be an amount equal to the
portion of the Purchase Price paid by Purchaser for such Securities (the "Put
Exercise Price"). Subject to the conditions set forth in (b) below, upon the
exercise of the Put Right by Purchaser, Purchaser shall deliver to Sellers the
Securities previously sold to Purchaser, and all documentation related thereto,
and whatever documents of conveyance or transfer may be necessary or desirable
to transfer to and confirm in such Seller, or at such Seller's request, Seller's
nominee, all right, title and interest in and to such Securities, in each case
without recourse or warranty to Purchaser except as set forth in this Agreement,
and such Seller shall assume Purchaser's obligations under the Assumed
Agreements (other than liabilities for
<PAGE> 16
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
breaches thereof by, or other obligations thereunder of, Purchaser accrued prior
to the assignment to Seller hereunder), and deliver whatever documents of
assumption may be necessary or desirable to reflect such assumption and such
Seller shall pay to Purchaser the Put Exercise Price by wire transfer of
immediately available funds. Upon the closing of the put transaction, this
Agreement shall terminate and be of no further force or effect except for
provisions that survive termination.
(b) (i) The right of Purchaser to exercise the put and the
obligation of Sellers to purchase the Put Securities is subject to each of the
following conditions:
(x) with respect to the Assumed Agreements, Purchaser
shall have performed and complied in all material respects with all
agreements, covenants and conditions contained in the Securities
Documents related to the Put Securities which are required to be
performed or complied with by it on or before the Put Exercise Date;
(y) from the date such Securities were purchased by
Purchaser hereunder, no material amendment, modification or change has
been made by or on behalf of or consented to by Purchaser to the terms
or conditions of such Security or Securities Documents that would
reasonably be likely to be materially adverse to a holder of such
Security;
(z) Purchaser represents and warrants to Sellers that, as
of the Put Exercise Date, Purchaser is the sole legal and beneficial
owner and holder of the Put Securities and has undivided good title to
such Put Securities, free and clear of any lien, security interest or
other adverse claim, and such Put Securities are not subject to any
prior sale, transfer, assignment or participation by Purchaser or any
agreement by Purchaser to assign, convey, transfer or participate in
whole or in part.
(ii) Each Seller may, in its sole and absolute discretion,
waive the conditions in Section (b)(i)(x) and (b)(i)(z) above if Purchaser
provides Sellers with an indemnification satisfactory to each Seller.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Further Assurances. Each Seller and Purchaser
each hereby agree to execute and deliver, or cause to be executed and delivered,
such other documents, instruments and agreements, and take such other actions,
as either party may reasonably request in connection with the transactions
contemplated by this Agreement.
<PAGE> 17
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
SECTION 6.02. Receipt of Information and Interest. Seller
shall (a) use all reasonable efforts promptly to advise Purchaser of any notices
it receives under the Securities, the Securities Documents or the Assigned
Rights from and after the date hereof, to the extent such notices have been sent
to all holders of such Securities, are not subject to any separate
confidentiality arrangements, do not contain any proprietary information or do
not relate to the Wireless One DIP Note and (b) at Purchaser's request, promptly
forward any such notices that it receives to Purchaser. If Seller shall receive
any interest or other distribution in respect of any of the Securities that
accrued for the period following the applicable Closing Date with respect to
such Security, Seller shall promptly pay to Purchaser such interest or other
distribution it received.
SECTION 6.03. Amendment; Waiver; Remedies. This Agreement
shall not be amended or otherwise modified unless in writing and signed by the
parties hereto. No failure on the part of either party to exercise, and no delay
in exercising, any right hereunder shall operate as a waiver thereof by such
party, nor shall any single or partial exercise of any right hereunder preclude
any other or further exercise thereof or the exercise of any other right. The
rights and remedies of each party provided herein are cumulative and are in
addition to, and not exclusive of, any rights or remedies provided by law or in
equity.
SECTION 6.04. Notices. All notices and other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given (a) when delivered, if sent by registered or certified mail
(return receipt requested), (b) when delivered, if delivered personally, (c)
when transmitted, if sent by facsimile if a confirmation of transmission is
produced by the sending machine or (d) when delivered, if sent by overnight mail
or overnight courier, in each case to the parties at the following addresses or
facsimile numbers (or at such other addresses or facsimile numbers as shall be
specified by like notice):
<PAGE> 18
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
If to Sellers, at:
*
with a copy (which shall not constitute notice) to:
*
If to Purchaser, at:
MCI WORLDCOM, Inc.
3060 Williams Drive, Suite 600
Fairfax, VA 22031
Attention: Robert Finch
Vice President - Strategic Development
Fax: (703) 645-4637
with a copy (which shall not constitute notice) to:
P. Bruce Borghardt
General Counsel - Corporate Development
MCI WORLDCOM, Inc.
10777 Sunset Office Drive, Suite 330
St. Louis, MO 63127
Fax: (314) 909-4101
SECTION 6.05. Costs and Expenses. The Sellers and Purchaser
shall each pay their own respective costs and expenses incurred in connection
with the negotiation, preparation, execution and performance of this Agreement,
including, but not limited to, attorneys' fees. In the event of litigation or
other proceedings arising out of the interpretation or enforcement of this
Agreement or any document, instrument or agreement executed pursuant hereto, the
prevailing party shall be entitled to receive its out-of-pocket costs and
expenses incurred in connection with such litigation or proceedings, including,
without limitation, reasonable attorneys' fees and expenses.
SECTION 6.06. Survival. Subject to Section 5.01, the
agreements, covenants, representations and warranties of the parties contained
herein shall survive the consummation of the transactions contemplated hereby.
- -----------------
* Confidential portions omitted pursuant to a confidential treatment request and
filed separately with Securities and Exchange Commission
<PAGE> 19
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
SECTION 6.07. Successors and Assigns. This Agreement shall
inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns; provided, however, that no party shall assign
its rights and obligations hereunder without the prior written consent of the
other party, which consent shall not be unreasonably withheld. Any purported
assignment absent such consent shall be void.
SECTION 6.08. Counterparts. This Agreement may be executed in
any number of counterparts and all of such counterparts taken together shall be
deemed to constitute one and the same instrument.
SECTION 6.09. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York. Each
party to this Agreement hereby irrevocably consents to the jurisdiction of the
United States District Court for the Southern District of New York located in
the State and City of New York in any action to enforce, interpret or construe
any provision of this Agreement or of any other agreement or document delivered
in connection herewith and hereby waives any objection to venue, whether by
reason of improper venue, forum non conveniens or lack of personal jurisdiction
or otherwise, to any such action brought in that Court.
SECTION 6.10. Waiver of Trial by Jury. Each Seller and
Purchaser each hereby knowingly, voluntarily and intentionally waive any rights
they may have to a trial by jury in respect of any litigation based hereon, or
arising out of, under, or in connection with this Agreement, the Securities
Documents, any related documents and agreements or any course of conduct, course
of dealing, or statements (whether verbal or written) in connection therewith.
SECTION 6.11. Confidentiality. No party hereto shall disclose
any Confidential Information (as defined below) to any third party without the
prior written consent of the other party hereto, other than (a) to the officers,
directors, employees, agents and advisors of such party or its affiliates who
have a need to know such Confidential Information and are subject to appropriate
confidentiality obligations, (b) as and only to the extent required by
applicable law, rule, regulation or judicial process, (c) as and only to the
extent requested or required by any state, federal or foreign authority or
examiner regulating any of Sellers or Purchaser and (d) information that, at the
time of disclosure or thereafter is generally available to the public (other
than as a result of a disclosure in violation of the terms of this Section);
provided, however, that prior to any disclosure under parts (b) or (c), such
party shall promptly advise the other party when requested or required to make a
disclosure thereunder. For purposes of this Section 6.11, "Confidential
Information" means any information related to or in connection with the identity
of the parties hereto or the price or value of any interest transferred
hereunder or the existence or terms of this Agreement. This Section 6.11 shall
survive the termination of this Agreement.
<PAGE> 20
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
SECTION 6.12. No-Shop. No Seller including the employees,
officers, directors and agents of the Seller shall make, solicit, assist or
initiate any inquiry or proposal, or provide any information to or participate
in any negotiations with, any corporation, partnership, agent, attorney,
financial advisor, person, or other entity or group (other than Purchaser)
("Third Parties") for the purpose of consummating any sale, transfer or other
disposition of the Securities or Assigned Rights ("Disposition"). Each Seller
acknowledges that entering into any contract or agreement with any Third Party
with respect to any Disposition, even if any such Disposition were conditional
upon the termination of this Agreement or nonconsummation of the transactions
contemplated hereby, would violate this Agreement.
SECTION 6.13. Miscellaneous. (a) This Agreement and any
agreement, document or instrument attached hereto or referred to herein
integrate all the terms and conditions mentioned herein or incidental hereto,
constitute the entire agreement and understanding between the parties hereto and
supersede any and all prior agreements and understandings relating to the
subject matter hereof.
(b) All payments made hereunder shall be made without any
set-off or counterclaim.
(c) If any provision of this Agreement shall be determined to
be unenforceable by any court of law, the remaining provisions shall be
severable and enforceable in accordance with their terms unless to do so would
frustrate the purpose of the parties in entering into this Agreement, in which
case the party whose purpose is frustrated shall have the right to terminate
this Agreement without liability or obligation hereunder except for the
provisions which provide that they shall survive the termination of this
Agreement.
(d) Each Seller and Purchaser agree that no adequate remedy at
law may exist for breach of certain of their respective obligations under this
Agreement, and that therefore in the event any party hereto fails to comply with
its obligations hereunder, the other party hereto shall have the right to obtain
specific performance of the obligations of such defaulting party, injunctive
relief or such other equitable relief as may be available.
(e) The section captions and headings in this Agreement are
for convenience only and are not intended to be full or accurate descriptions of
the contents thereof. They shall not be deemed to be part of this Agreement and
in no way define, limit, extend or describe the scope or intent of any provision
hereof.
(f) Each Seller and Purchaser intend and agree that the
transactions contemplated hereby shall not (i) constitute a loan by Purchaser to
any Seller nor (ii) result in the
<PAGE> 21
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
creation of any trust or fiduciary relationship between Purchaser and any
Seller, or in the creation of a joint venture between such parties.
(g) For purposes of this Agreement, the term "Securities"
shall be deemed to include any securities, properties or other consideration
received by the holder of such Securities (i) in exchange therefor pursuant to
any bankruptcy proceeding, (ii) pursuant to any stock split or stock dividend or
(iii) otherwise in connection with the Securities following the execution of
this Agreement and prior to the applicable Closing Date or the Put Exercise
Date, as the case may be.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their duly authorized signatories as of the date
first above written.
*
By
--------------------------------
Name:
Title:
- ---------------
* Confidential portions omitted pursuant to a confidential treatment request and
filed separately with Securities and Exchange Commission
<PAGE> 22
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
*
By
--------------------------------
Name:
Title:
MCI WORLDCOM, INC.
By /s/ CHARLES T. CANNADA
--------------------------------
Name: Charles T. Cannada
Title: Senior Vice President
- ---------------
* Confidential portions omitted pursuant to a confidential treatment request and
filed separately with Securities and Exchange Commission
<PAGE> 23
CONFIDENTIAL TREATMENT
REQUESTED BY MCI WORLDCOM, INC.
SCHEDULE 1
<TABLE>
<CAPTION>
Closing Date Purchase Price
- ------------ --------------
<S> <C> <C> <C>
* * Aggregate
------- ------- ---------
Part I
Initial Closing Date $ * $ * $ *
------- ------- -------
Part II
April Closing Date $ * $ * $ *
------- ------- -------
Part III
Final Closing Date $ * $ * $ *
------- ------- -------
TOTAL PURCHASE PRICE: $ *
========
</TABLE>
- --------
* Confidential portions omitted pursuant to a confidential treatment request
and filed separately with Securities and Exchange Commission
<PAGE> 1
EXHIBIT C
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of April 26, 1999 (the "Agreement"),
by and between MCI WORLDCOM, INC., a Georgia corporation ("MCI WorldCom"), and
CAI WIRELESS SYSTEMS, INC., a Connecticut corporation ("CAI").
RECITALS
(A) MERGER AGREEMENT. MCI WorldCom, CAI and Cardinal Acquisition
Subsidiary, Inc., a Connecticut corporation and wholly owned subsidiary of MCI
WorldCom ("Acquisition Subsidiary"), have entered into an Agreement and Plan of
Merger dated as of the date hereof (the "Merger Agreement"), which provides,
upon the terms and subject to the conditions set forth therein, for the merger
of Acquisition Subsidiary with and into CAI (the "Merger"); and
(B) CONDITION TO MERGER AGREEMENT. As a condition and inducement to
MCI WorldCom's pursuit of the transactions contemplated by the Merger
Agreement, and in consideration therefor, CAI has agreed to grant MCI WorldCom
the Option (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, and intending to be legally bound hereby, MCI WorldCom
and CAI, agree as follows:
1. DEFINED TERMS. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Merger Agreement.
2. GRANT OF OPTION. Subject to the terms and conditions set forth
herein, CAI hereby grants to MCI WorldCom an irrevocable option (the "Option")
to purchase a number of shares of common stock, par value $.01 per share ("CAI
Common"), of CAI up to 6,090,481 of such shares (as adjusted as set forth
herein, the "Option Shares", which shall include the Option Shares before and
after any transfer of such Option Shares, and which represents 24.4% of the
fully diluted shares of CAI Common as of the date hereof), at a purchase price
per Option Share (as adjusted as set forth herein, the "Purchase Price") equal
to $28.
3. EXERCISE OF OPTION.
(a) Provided that no preliminary or permanent injunction or other
order against the delivery of Option Shares issued by any court of competent
jurisdiction in the United States shall be in effect, Holder (as hereinafter
defined) may exercise the Option, in whole or in part, at any time and from
time to time following the occurrence of a Purchase Event (as hereinafter
defined); provided that the Option shall terminate and be of no further force
or effect as follows:
(A) If the Merger is consummated, upon the Effective Time;
(B) If the Merger Agreement is terminated for any reason and a
Purchase Event has occurred prior to such termination, eighteen (18) months
after the occurrence of such Purchase Event;
<PAGE> 2
(C) If the Merger Agreement is terminated pursuant to Sections 7.1(a),
7.1(b)(i), 7.1(b)(iii), or 7.1(e) and a Purchase Event has not occurred prior
to such termination, upon such termination;
(D) If the Merger Agreement is terminated for any reason other than
those enumerated in clause (C) above and a Purchase Event has not occurred
prior to such termination, eighteen (18) months after such termination; and
(E) Thirty (30) months from the date hereof if the Merger has not been
consummated and the Merger Agreement has not been terminated by such date.
provided, however, that any purchase of Option Shares shall be subject to
compliance with applicable law. The term "Holder" shall mean the holder or
holders of the Option from time to time, and which is initially MCI WorldCom.
(b) As used herein, a "Purchase Event" means any of the following
events:
(i) CAI shall have recommended to its shareholders, or CAI or
any person (other than MCI WorldCom or any affiliate or associate of MCI
WorldCom) shall have publicly proposed or publicly announced, a bona fide
Takeover Proposal that shall not have been withdrawn at the time of the
exercise of the Option; or
(ii) any person (other than MCI WorldCom or any affiliate or
associate of MCI WorldCom) shall have acquired beneficial ownership (as such
term is defined in Rule 13d-3 promulgated under the Securities Exchange Act) of
or the right to acquire beneficial ownership of, or any "group" (as such term
is defined in Section 13(d)(3) of the Securities Exchange Act), other than a
group of which MCI WorldCom or any affiliate or associate of MCI WorldCom is a
member, shall have been formed which beneficially owns, or has the right to
acquire beneficial ownership of, 15% or more of the voting power of CAI; or
(iii) CAI's Board of Directors shall have withdrawn or
modified in a manner adverse to MCI WorldCom the recommendation of CAI's Board
of Directors with respect to the Merger Agreement and the Merger.
As used in this Agreement, "person" shall have the meaning specified
in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act.
(c) CAI shall notify Holder promptly in writing of the occurrence of
any Purchase Event, it being understood that the giving of such notice by CAI
shall not be a condition to the right of Holder to exercise the Option.
2
<PAGE> 3
(d) In the event Holder wishes to exercise the Option, it shall send
to CAI a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise and (ii) a place and date not earlier than
three (3) business days nor later than fifteen (15) business days from the
Notice Date for the closing (the "Closing") of such purchase (the "Closing
Date"). If prior notification to or approval of any Governmental Authority is
required in connection with such purchase, CAI shall cooperate with Holder in
the filing of the required notice or application for approval and the obtaining
of such approval and the Closing shall occur immediately following such
regulatory approvals (and any mandatory waiting periods). Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(e) Holder, which is initially MCI WorldCom, by this Agreement, with
respect to any Option Shares acquired by it on or prior to the record date for
the meeting of shareholders of CAI called to consider the Merger Agreement and
the Merger, does hereby constitute and appoint CAI, or any nominee of CAI, with
full power of substitution, from the date hereof to the earlier to occur of the
termination of the Merger Agreement or the Effective Time, as its true and
lawful attorney and proxy (its "Proxy"), for and in its name, place and stead,
to vote each of such Option Shares as its Proxy, at every annual, special or
adjourned meeting of the shareholders of CAI, including the right to sign its
name (as shareholder) to any consent, certificate or other document relating to
CAI that the law of the State of Connecticut may permit or require:
(i) in favor of the Merger Agreement and the Merger; and
(ii) against any proposal for any recapitalization, merger
(other than the Merger), sale of assets or other business combination between
CAI and any person or entity (other than MCI WorldCom or Acquisition Subsidiary
or other permitted assignee thereof under the Merger Agreement) or any other
action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of MCI WorldCom
under the Merger Agreement or which could result in any of the conditions to
the Merger Agreement not being fulfilled.
THIS POWER OF ATTORNEY IS IRREVOCABLE, IS GRANTED IN CONSIDERATION OF
CAI ENTERING INTO THE MERGER AGREEMENT AND IS COUPLED WITH AN INTEREST
SUFFICIENT IN LAW TO SUPPORT AN IRREVOCABLE POWER. This appointment shall
revoke all prior powers of attorney and proxies appointed by Holder at any time
with respect to the Option Shares and no subsequent powers of attorney or
proxies will be appointed by Holder, or be effective, with respect thereto
during the term of this Agreement.
Holder shall perform such further acts and execute such further
documents and instruments as may reasonably be required to vest in CAI the
power to carry out and give effect to the provisions of this Agreement.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
3
<PAGE> 4
(a) On each Closing Date, Holder shall (i) pay to CAI, in immediately
available funds by wire transfer to a bank account designated by CAI, an amount
equal to the Purchase Price multiplied by the number of Option Shares to be
purchased on such Closing Date, and (ii) present this Agreement to CAI at the
address of CAI specified in Section 11(f) and CAI shall mark and return this
Agreement to Holder to reflect the exercise of this Option.
(b) At each Closing, simultaneously with the delivery of immediately
available funds, and presentation of this Agreement as provided in Section
4(a), (i) CAI shall deliver to Holder (A) a certificate or certificates
representing the Option Shares to be purchased at such Closing, which Option
Shares shall be free and clear of all liens, fully paid and nonassessable and
subject to no preemptive rights, and (B) an executed new agreement with the
same terms as this Agreement evidencing the right to purchase the balance of
the Option Shares purchasable hereunder, if any, and the remaining rights of
the Holder, and (ii) Holder shall deliver to CAI a letter agreeing that Holder
shall not offer to sell or otherwise dispose of such Option Shares in violation
of applicable federal and state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by applicable
law, certificates for the Option Shares delivered at each Closing shall be
endorsed with a restrictive legend which shall read substantially as follows:
THE TRANSFER AND VOTING OF THE STOCK REPRESENTED BY THIS CERTIFICATE
IS SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND A STOCK OPTION AGREEMENT DATED AS OF APRIL 26, 1999. A
COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT
CHARGE UPON RECEIPT BY CAI OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the portion of the above legend relating to
restrictions on transfer shall be removed by delivery of substitute
certificate(s) without such legend if Holder shall have delivered to CAI a copy
of a letter from the staff of the SEC, or an opinion of counsel in form and
substance reasonably satisfactory to CAI and its counsel, to the effect that
such legend is not required for purposes of the Securities Act. It is
understood and agreed that the portion of the above legend relating to voting
shall be removed upon expiration or termination of the proxy referred to in
Section 3(e) hereof.
(d) Upon the giving by Holder to CAI of the written notice of exercise
of the Option provided for under Section 3(d), the tender of the applicable
purchase price in immediately available funds and the tender of this Agreement
to CAI, Holder shall be deemed to be the holder of record of the shares of CAI
Common issuable upon such exercise, notwithstanding that the stock transfer
books of CAI shall then be closed or that certificates representing such shares
of CAI Common shall not then be actually delivered to Holder. CAI shall pay all
expenses, and any and all United States federal, state, and local taxes and
other charges that may be payable in connection with the preparation, issuance
and delivery of stock certificates under this Section in the name of Holder or
its assignee, transferee, or designee.
4
<PAGE> 5
(e) CAI agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of CAI
Common so that the Option may be exercised without additional authorization of
CAI Common after giving effect to all other options, warrants, convertible
securities and other rights to purchase CAI Common, (ii) that it will not, by
charter amendment or through reorganization, consolidation, merger, dissolution
or sale of assets, or by any other voluntary act, avoid or seek to avoid the
observance or performance of any of the covenants, stipulations or conditions
to be observed or performed hereunder by CAI, and (iii) promptly to take all
action as may from time to time be required (including (A) complying with all
premerger notification, reporting and waiting period requirements, (B) in the
event prior approval of or notice to any governmental regulatory agency is
necessary before the Option may be exercised, cooperating fully with Holder in
preparing such applications or notices and providing such information to such
Governmental Authority as it may require and (C) amending, redeeming or taking
such other action with respect to the Rights Plan so as to preclude MCI
WorldCom from becoming an "Acquiring Person" (as defined in the Rights Plan)
and to preclude a "Stock Acquisition Date" (as defined in the Rights Plan) or a
"Distribution Date" (as defined in the Rights Plan) (or similar events) from
occurring thereunder in order to permit Holder to exercise the Option and CAI
duly and effectively to issue shares of the CAI Common pursuant hereto.
5. REPRESENTATIONS AND WARRANTIES OF CAI. CAI hereby represents and
warrants to MCI WorldCom (and Holder, if different from MCI WorldCom) as
follows:
(a) Corporate Authority. CAI has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby; the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of CAI, and no other
corporate proceedings on the part of CAI are necessary to authorize this
Agreement or to consummate the transactions so contemplated; this
Agreement has been duly and validly executed and delivered by CAI.
(b) Beneficial Ownership. To the best knowledge of CAI, as of the date
of this Agreement, no person or group has beneficial ownership of more
than 10% of the issued and outstanding shares of CAI Common other than
persons or other entities affiliated with Merrill Lynch Asset Management,
L.P. and Moore Capital Management, Inc., as reflected in Schedule 13Gs,
publicly filed with the SEC on or prior to April 15, 1999.
(c) Shares Reserved for Issuance; Capital Stock. CAI has taken all
necessary corporate action to authorize and reserve and permit it to
issue, and at all times from the date hereof through the termination of
this Agreement in accordance with its terms will have reserved for
issuance upon the exercise of the Option, that number of shares of CAI
Common equal to the maximum number of shares of CAI Common at any time and
from time to time purchasable upon exercise of the Option, and all such
shares, upon issuance pursuant to the Option, will be duly authorized,
validly issued, fully paid and nonassessable, and will be delivered free
and clear of all claims, liens, encumbrances, and security interests
(other than those created by this Agreement) and not subject to any
preemptive rights.
5
<PAGE> 6
(d) No Violations. The execution, delivery and performance of this
Agreement does not and will not, and the consummation by CAI of any of the
transactions contemplated hereby will not, constitute or result in (A) a
breach or violation of, or a default under, its certificate of
incorporation or by-laws, or the comparable governing instruments of any
of its subsidiaries, or (B) a breach or violation of, or a default under,
any agreement, lease, contract, note, mortgage, indenture, arrangement or
other obligation of it or any of its subsidiaries (with or without the
giving of notice, the lapse of time or both) or under any law, rule,
ordinance or regulation or judgment, decree, order, award or governmental
or non-governmental permit or license to which it or any of its
subsidiaries is subject, that would, in any case, give any other person
the ability to prevent or enjoin CAI's performance under this Agreement in
any material respect.
6. REPRESENTATIONS AND WARRANTIES OF MCI WORLDCOM. MCI WorldCom hereby
represents and warrants to CAI as follows:
(a) Corporate Authority. MCI WorldCom has full corporate power and
authority to enter into this Agreement and, subject to obtaining the approvals
referred to in this Agreement, to consummate the transactions contemplated by
this Agreement; the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of MCI WorldCom; and this
Agreement has been duly executed and delivered by MCI WorldCom.
(b) Investment Representations.
(i) MCI WorldCom is acquiring the Option and the Option Shares
(collectively, the "Securities") for its own account for investment
only, and not with a view to, or for sale in connection with, any
distribution of the Securities in violation of the Securities Act, or
any rule or regulation under the Securities Act.
(ii) MCI WorldCom has had such opportunity as it deems adequate
to obtain from representatives of CAI such information as is necessary
to permit MCI WorldCom to evaluate the merits and risks of its
investment in CAI.
(iii) MCI WorldCom has sufficient experience in business,
financial and investment matters to be able to evaluate the risks
involved in the purchase of the Securities and to make an informed
investment decision with respect to such purchase.
(iv) MCI WorldCom acknowledges that (1) the Securities have not
been registered under the Securities Act and are "restricted
securities" within the meaning of Rule 144 under the Securities Act
and (2) the Securities cannot be sold, transferred or otherwise
disposed of unless they are subsequently registered under the
Securities Act or an exemption from registration is then available.
6
<PAGE> 7
7. ADJUSTMENT UPON CHANGES IN CAI CAPITALIZATION, ETC.
(a) In the event of any change in the CAI Common by reason of a stock
dividend, stock split, split-up, recapitalization, combination, exchange of
shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transaction so that Holder shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Holder would
have received in respect of CAI Common if the Option had been exercised
immediately prior to such event, or the record date therefor, as applicable. If
any additional shares of CAI Common are issued after the date of this Agreement
(other than pursuant to an event described in the first sentence of this
Section 7(a), upon exercise of any option to purchase CAI Common outstanding on
the date hereof or upon conversion into CAI Common of any convertible security
of CAI outstanding on the date hereof), the number of shares of CAI Common
subject to the Option shall be adjusted so that, after such issuance, it,
together with any shares of CAI Common previously issued pursuant hereto,
equals [24.4]% of the number of shares of CAI Common then issued and
outstanding, giving effect to any shares subject to or issued pursuant to the
Option. No provision of this Section 7 shall be deemed to affect or change, or
constitute authorization for any violation of, any of the covenants or
representations in the Merger Agreement.
(b) In the event that CAI shall enter into an agreement (i) to
consolidate with or merge into any person, other than MCI WorldCom or one of
its subsidiaries, and shall not be the continuing or surviving corporation of
such consolidation or merger, (ii) to permit any person, other than MCI
WorldCom or one of its subsidiaries, to merge into CAI and CAI shall be the
continuing or surviving corporation, but, in connection with such merger, the
then outstanding shares of CAI Common shall be changed into or exchanged for
stock or other securities of CAI or any other person or cash or any other
property or the outstanding shares of CAI Common immediately prior to such
merger shall after such merger represent less than 50% of the outstanding
shares and share equivalents of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets to any person, other
than MCI WorldCom or one of its subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provisions so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
to acquire the number and class of shares or other securities or property that
Holder would have received in respect of CAI Common if the Option had been
exercised immediately prior to such consolidation, merger, sale or transfer, or
the record date therefor, as applicable.
8. REGISTRATION RIGHTS.
(a) Demand Registration Rights. CAI shall, subject to the conditions
of Section 8(c) below, if requested by Holder, including MCI WorldCom and any
permitted transferee acquiring at least 10% of the shares of CAI Common
represented by the Option on the date hereof (each, a
7
<PAGE> 8
"Selling Shareholder"), as expeditiously as possible prepare and file a
registration statement under the Securities Act if such registration is
necessary in order to permit the sale or other disposition of any or all shares
of CAI Common or other securities that have been acquired by or are issuable to
the Selling Shareholder upon exercise of the Option in accordance with the
intended method of sale or other disposition stated by the Selling Shareholder
in such request, including without limitation a "shelf" registration statement
under Rule 415 under the Securities Act or any successor provision, and CAI
shall use its best efforts to qualify such shares or other securities for sale
under any applicable state securities laws, provided, however, that CAI shall
not be required to consent to general jurisdiction or qualify to do business in
any state where it is not otherwise required to so consent to such jurisdiction
or to so qualify to do business.
(b) Additional Registration Rights. If CAI at any time after the
exercise of the Option proposes to register any shares of CAI Common under the
Securities Act, CAI will promptly give written notice to the Selling
Shareholders of its intention to do so and, upon the written request of any
Selling Shareholder given within thirty (30) days after receipt of any such
notice (which request shall specify the number of shares of CAI Common intended
to be included in such public offering by the Selling Shareholder), CAI will
cause all such shares for which a Selling Shareholder requests participation in
such registration to be so registered and included in such public offering,
provided, however, that CAI may elect to not cause any such shares to be so
registered (i) if such public offering is to be underwritten and the
underwriters in good faith object for valid business reasons, or (ii) in the
case of a registration solely to implement an employee benefit plan or a
registration filed on Form S-4 of the Securities Act or any successor Form;
provided, further, however, that such election pursuant to (i) may only be made
two times. If some but not all the shares of CAI Common, with respect to which
CAI shall have received requests for registration pursuant to this Section
8(b), shall be excluded from such registration, CAI shall make appropriate
allocation of shares to be registered among the Selling Shareholders desiring
to register their shares pro rata in the proportion that the number of shares
requested to be registered by each such Selling Shareholder bears to the total
number of shares requested to be registered by all such Selling Shareholders
then desiring to have CAI Common registered for sale.
(c) Conditions to Required Registration. CAI shall use all reasonable
efforts to cause each registration statement referred to in Section 8(a) above
to become effective and to obtain all consents or waivers of other parties
which are required therefor and to keep such registration statement effective;
provided, however, that CAI may delay any registration of Option Shares
required pursuant to Section 8(a) above for a period not exceeding ninety (90)
days provided CAI shall in good faith determine that any such registration
would adversely affect CAI (provided that this right may not be exercised more
than once during any twelve month period), and CAI shall not be required to
register Option Shares under the Securities Act pursuant to Section 8(a) above:
(i) on more than one occasion during any calendar year;
(ii) within ninety (90) days after the effective date of a
registration referred to in Section 8(b) above pursuant to which the
Selling Shareholder or Selling Shareholders concerned were afforded
the opportunity to register such shares under the Securities Act and
such shares were registered as requested;
8
<PAGE> 9
(iii) unless a request therefor is made to CAI by Selling
Shareholders that hold at least 25% or more of the aggregate number of
Option Shares (including shares of CAI Common issuable upon exercise
of the Option) then outstanding; or
(iv) if all the Option Shares proposed to be registered could be
sold by the Selling Shareholders in a 90-day period in accordance with
Rule 144.
In addition to the foregoing, CAI shall not be required to maintain
the effectiveness of any registration statement after the expiration of six (6)
months from the effective date of such registration statement. CAI shall use
all reasonable efforts to make any filings, and take all steps, under all
applicable state securities laws to the extent necessary to permit the sale or
other disposition of the Option Shares so registered in accordance with the
intended method of distribution for such shares; provided, however, that CAI
shall not be required to consent to general jurisdiction or qualify to do
business in any state where it is not otherwise required to so consent to such
jurisdiction or to so qualify to do business.
(d) Expenses. Except where applicable state law prohibits such
payments, CAI will pay all expenses (including without limitation registration
fees, qualification fees, blue sky fees and expenses, including the fees and
expenses of counsel, legal expenses, including the reasonable fees and expenses
of one counsel to the holders whose Option Shares are being registered (not to
exceed $15,000), printing expenses, the costs of special audits or "cold
comfort" letters, expenses of underwriters, excluding discounts and commissions
but including liability insurance if CAI so desires or the underwriters so
require, and the reasonable fees and expenses of any necessary special experts)
in connection with each registration pursuant to Section 8(a) or 8(b) above
(including the related offerings and sales by holders of Option Shares) and all
other qualifications, notifications or exemptions pursuant to Section 8(a) or
8(b) above.
(e) Indemnification. In connection with any registration under
Section 8(a) or 8(b) above, CAI hereby indemnifies the Selling Shareholders,
and each underwriter thereof, including each person, if any, who controls such
Holder or underwriter within the meaning of Section 15 of the Securities Act,
against all expenses, losses, claims, damages and liabilities caused by any
untrue, or alleged untrue, statement of a material fact contained in any
registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) or any preliminary
prospectus, or caused by any omission, or alleged omission, to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such expenses, losses,
9
<PAGE> 10
claims, damages or liabilities of such indemnified party are caused by any
untrue statement or alleged untrue statement that was included by CAI in any
such registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) in reliance upon and in
conformity with, information furnished in writing to CAI by such indemnified
party expressly for use therein, and CAI and each officer, director and
controlling person of CAI shall be indemnified by such Selling Shareholders, or
by such underwriter, as the case may be, for all such expenses, losses, claims,
damages and liabilities caused by any untrue, or alleged untrue, statement,
that was included by CAI in any such registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) in reliance upon, and in conformity with, information furnished in
writing to CAI by or on behalf of such Selling Shareholder or such underwriter,
as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this Section 8(e)
of notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 8(e), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 8(e) except to the extent the indemnified party is materially
prejudiced thereby. In case notice of commencement of any such action shall be
given to the indemnifying party as above provided, the indemnifying party shall
be entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably
satisfactory to such indemnified party. The indemnified party shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel (other than
reasonable costs of investigation) shall be paid by the indemnified party
unless (i) the indemnifying party either agrees to pay the same, (ii) the
indemnifying party fails to assume the defense of such action with counsel
reasonably satisfactory to the indemnified party, or (iii) the indemnified
party has been advised by counsel that one or more legal defenses may be
available to the indemnifying party that may be contrary to the interest of the
indemnified party, in which case the indemnifying party shall be entitled to
assume the defense of such action notwithstanding its obligation to bear fees
and expenses of such counsel. No indemnifying party shall be liable for any
settlement entered into without its consent, which consent may not be
unreasonably withheld.
If the indemnification provided for in this Section 8(e) is
unavailable to a party otherwise entitled to be indemnified in respect of any
expenses, losses, claims, damages or liabilities referred to herein, then the
indemnifying party, in lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by such party to be
indemnified as a result of such expenses, losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative
benefits received by CAI, the Selling Shareholders and the underwriters from
the offering of the securities and also the relative fault of CAI, the Selling
Shareholders and the underwriters in connection with the statements or
omissions which resulted in such expenses, losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The amount
paid or payable by a party as a result of the expenses, losses, claims, damages
and liabilities referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim, provided, however, that in no
case shall any Selling Shareholder be responsible, in the aggregate, for any
amount in excess of the net offering proceeds attributable to its Option Shares
included in the offering. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation. Any obligation by any Selling Shareholder to indemnify shall
be several and not joint with other holders.
10
<PAGE> 11
In connection with any registration pursuant to Section 8(a) or 8(b)
above, CAI and each Selling Shareholder (other than MCI WorldCom) shall enter
into an agreement containing the indemnification provisions of this Section
8(e). In the event of an underwritten public offering pursuant to Section 8(b),
the Company and the Selling Shareholders shall enter into an underwriting
agreement containing customary terms and provisions; provided that the
indemnification provisions as they relate to Selling Shareholders shall contain
substantially the same limitations as the provisions set forth herein.
(f) Miscellaneous Reporting. CAI shall comply with all reporting
requirements and will do all such other things as may be necessary to permit
the expeditious sale at any time of any Option Shares by the Selling
Shareholders thereof in accordance with and to the extent permitted by any rule
or regulation promulgated by the SEC from time to time, including, without
limitation, Rule 144. CAI shall at its expense provide the Selling Shareholders
with any information necessary in connection with the completion and filing of
any reports or forms required to be filed by them under the Securities Act or
the Securities Exchange Act, or required pursuant to any state securities laws
or the rules of any stock exchange.
(g) Issue Taxes. CAI will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will hold the Selling Shareholders harmless, without
limitation as to time, against any and all liabilities, with respect to all
such taxes.
9. QUOTATION; LISTING. If CAI Common or any other securities to be
acquired in connection with the exercise of the Option are then authorized for
quotation or trading or listing on any securities exchange or market, CAI, upon
the request of Holder, will promptly file an application, if required, to
authorize for quotation or trading or listing the shares of CAI Common or other
securities to be acquired upon exercise of the Option on such securities
exchange or market and will use its best efforts to obtain approval, if
required, of such quotation or listing as soon as practicable.
10. DIVISION OF OPTION. This Agreement (and the Option granted hereby)
are exchangeable, without expense, at the option of Holder, upon presentation
and surrender of this Agreement at the principal office of CAI for other
Agreements providing for Options of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of CAI
Common purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by CAI of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, CAI will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of CAI, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
11
<PAGE> 12
11. MISCELLANEOUS.
(a) Expenses. Except as expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(c) Entire Agreement; No Third-Party Beneficiaries; Severability. This
Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein, between MCI WorldCom and CAI (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof, and (ii) is not intended to confer upon any person other
than the parties hereto (other than the indemnified parties under Section 8(e)
and any transferees of the Option Shares or any permitted transferee of this
Agreement pursuant to Section 11(h)) any rights or remedies hereunder. If any
term, provision, covenant or restriction of this Agreement is held by a court
of competent jurisdiction or Governmental Authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. If for any reason such court or
Governmental Authority determines that the Option does not permit Holder to
acquire the full number of shares of CAI Common as provided in Section 3 (as
may be adjusted herein), it is the express intention of CAI to allow Holder to
acquire such lesser number of shares as may be permissible without any
amendment or modification hereof.
(d) Governing Law. This Agreement shall be interpreted, construed and
governed in accordance with the internal laws of the State of New York (without
regard to any applicable conflicts of law rules), except for matters governed
by the Connecticut Code, which shall be interpreted, construed and governed by
Connecticut Code.
(e) Descriptive Headings. The descriptive headings contained herein
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the addresses set forth in the Merger Agreement
(or at such other address for a party as shall be specified by like notice).
12
<PAGE> 13
(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed and delivered, it being understood that both parties need not sign the
same counterpart.
(h) Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Holder may assign this
Agreement to a wholly-owned subsidiary of Holder and Holder may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
(i) Further Assurances. In the event of any exercise of the Option by
Holder, CAI and Holder shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree that this Agreement
may be enforced by either party through specific performance, injunctive relief
and other equitable relief. Both parties further agree to waive any requirement
for the securing or posting of any bond in connection with the obtaining of any
such equitable relief and that this provision is without prejudice to any other
rights that the parties hereto may have for any failure to perform this
Agreement.
IN WITNESS WHEREOF, CAI and MCI WorldCom have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
CAI WIRELESS SYSTEMS, INC.
By: /s/ JARED E. ABBRUZZESE
Name: Jared E. Abbruzzese
Title: Chairman and Chief Executive Officer
MCI WORLDCOM, INC.
By: /s/ CHARLES T. CANNADER
Name: Charles T. Cannader
Title: Senior Vice President
13
<PAGE> 1
EXHIBIT D
===============================================================================
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CAI WIRELESS SYSTEMS, INC.,
MCI WORLDCOM, INC.
AND
CARDINAL ACQUISITION SUBSIDIARY INC.
Dated as of
April 26, 1999
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - TERMS OF THE MERGER...............................................1
1.1 The Merger.........................................................1
1.2 Effective Time......................................................2
1.3 Merger Consideration................................................2
1.4 Shareholders' Rights upon Merger....................................2
1.5 Dissenting Shares...................................................3
1.6 Surrender and Exchange of Shares....................................3
1.7 Options and Warrants................................................5
1.8 Certificate of Incorporation........................................5
1.9 By-Laws.............................................................6
1.10 Other Effects of Merger............................................6
1.11 Additional Actions.................................................6
ARTICLE II - REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF TARGET......6
2.1 Organization and Good Standing......................................6
2.2 Capitalization......................................................7
2.3 Subsidiaries........................................................8
2.4 Authorization; Binding Agreement....................................8
2.5 Governmental Approvals.............................................10
2.6 No Violations......................................................10
2.7 Securities Filings and Litigation..................................11
2.8 Target Financial Statements........................................12
2.9 Absence of Certain Changes or Events...............................13
2.10 Compliance with Laws..............................................14
2.11 Permits, FCC Licenses; Channel Leases; System Agreements; and the
Systems; Interference; Households.................................14
2.12 Finders and Investment Bankers....................................20
2.13 Contracts.........................................................20
2.14 Employee Benefit Plans............................................21
2.15 Taxes and Tax Returns.............................................23
2.16 Liabilities.......................................................25
2.17 Environmental Matters.............................................25
2.18 Intellectual Property.............................................26
2.19 Real Estate.......................................................27
2.20 Corporate Records.................................................27
2.21 Title to and Condition of Personal Property.......................28
2.22 No Adverse Actions................................................28
2.23 Labor Matters.....................................................28
2.24 Change of Control Agreements......................................29
2.25 Insurance.........................................................29
2.26 Information Supplied..............................................29
</TABLE>
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<TABLE>
<S> <C>
2.27 Takeover Statutes.................................................30
2.28 Target Rights Plan................................................30
2.29 Year 2000.........................................................30
2.30 Target Options....................................................31
2.31 Transactions with Affiliates......................................31
2.32 No Existing Discussions...........................................32
2.33 TelQuest..........................................................32
2.34 Disclosure........................................................33
ARTICLE III - REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF ACQUIROR..33
3.1 Organization and Good Standing.....................................33
3.2 Authorization; Binding Agreement...................................34
3.3 Governmental Approvals.............................................34
3.4 No Violations......................................................34
3.5 Finders and Investment Bankers.....................................35
3.6 Information Supplied...............................................35
3.7 Acquiror Ownership.................................................35
ARTICLE IV - ADDITIONAL COVENANTS OF TARGET..................................36
4.1 Conduct of Business of Target and Target Subsidiaries..............36
4.2 Notification of Certain Matters....................................40
4.3 Access and Information.............................................40
4.4 Shareholder Approval; Proxy Statement; Shareholder Lists...........41
4.5 Reasonable Business Efforts........................................42
4.6 Public Announcements...............................................42
4.7 Compliance.........................................................43
4.8 Benefit Plans......................................................43
4.9 No Solicitation of Takeover Proposal...............................43
4.10 Securities and Shareholder Materials..............................44
4.11 Resignations......................................................44
4.12 Noncompete and Confidentiality Agreements; Consulting Agreement...45
4.13 Comfort Letters...................................................45
4.14 Takeover Statutes.................................................45
4.15 Year 2000 Plan....................................................45
4.16 Purchase of Target Common Stock...................................45
4.17 Conversion of Options.............................................46
ARTICLE V - ADDITIONAL COVENANTS OF ACQUIROR.................................46
5.1 Public Announcements...............................................46
5.2 Compliance.........................................................46
5.3 Proxy Statement....................................................46
5.4 Target Senior Secured Credit Facility..............................47
5.5 CS Borrowing.......................................................47
5.6 Indemnification and Insurance......................................47
</TABLE>
iii
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<TABLE>
<S> <C>
ARTICLE VI - CONDITIONS......................................................48
6.1 Conditions to Each Party's Obligations.............................48
6.1.1 Shareholder Approval..........................................48
6.1.2 No Injunction or Action.......................................49
6.1.3 HSR Act.......................................................49
6.1.4 Opinion of Financial Advisor..................................49
6.1.5 Governmental Approvals........................................49
6.2 Conditions to Obligations of Target................................50
6.2.1 Acquiror Representations and Warranties.......................50
6.2.2 Performance by Acquiror.......................................50
6.2.3 Certificate...................................................50
6.3 Conditions to Obligations of Acquiror..............................50
6.3.1 Target Representations and Warranties.........................50
6.3.2 Performance by Target.........................................51
6.3.3 No Material Adverse Change....................................51
6.3.4 No Pending Action.............................................51
6.3.5 Dissenting Shares.............................................52
6.3.6 Required Consents.............................................52
6.3.7 Certificates and Other Deliveries.............................52
6.3.8 Opinion of Target Counsel.....................................53
6.3.9 Comfort Letters...............................................53
ARTICLE VII - TERMINATION AND ABANDONMENT....................................53
7.1 Termination........................................................53
7.2 Termination Fees and Rights........................................54
7.3 Procedure Upon Termination.........................................55
ARTICLE VIII - MISCELLANEOUS.................................................55
8.1 Confidentiality....................................................55
8.2 Amendment and Modification.........................................56
8.3 Waiver of Compliance; Consents.....................................56
8.4 Survival of Representations and Warranties.........................56
8.5 Notices............................................................56
8.6 Binding Effect; Assignment.........................................57
8.7 Expenses...........................................................58
8.8 Governing Law......................................................59
8.9 Counterparts.......................................................58
8.10 Interpretation....................................................58
8.11 Entire Agreement..................................................58
8.12 Severability......................................................58
8.13 Specific Performance..............................................59
8.14 Third Parties.....................................................59
8.15 Schedules.........................................................59
8.16 Control...........................................................59
</TABLE>
iv
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LIST OF SCHEDULES*
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
-------- -----------
<S> <C>
2.2(a) Rights, Subscriptions, Warrants, Options, etc., with Respect to Stock
2.2(b) Restrictions with Respect to Stock
2.3(a) Target Ownership Interests
2.3(b) Claims as to Capital Stock and Other Interests Held
2.3(c) Rights with respect to Target Subsidiary Securities
2.3(d) CS Limitations
2.5 Regulatory Consents
2.6 Target Required Approvals
2.7 Target Litigation
2.9 Target Subsequent Events
2.10 Compliance with Laws
2.11(a) Target Markets
2.11(b) Target Channel Leases
2.11(c) Target FCC Licenses
2.11(d) Target Systems Status
2.11(f) Target Systems
2.11(g) Target Systems Licenses, Permits
2.11(h) Target Systems Electrical Interference
2.11(i) Target Collocation and Other Applications
2.11(j) Target Fees
2.11(k) Target Total Households
2.11(l) Target License Judgments, Orders, Complaints & Proceedings
2.11(m) Target Regulatory Reports
2.13 Target Material Contracts
2.14 Target Employee Benefit Plans
2.15 Target Tax Matters
2.16 Target Liabilities
2.17 Target Environmental Matters
2.18(a)(1) Target Intellectual Property
2.18(a)(2) Target Intellectual Property Exceptions
2.19(b) Target Leased Real Property
2.20 Target Records Off Premises
2.22 Target Adverse Actions
2.23 Target Labor Matters
2.24 Target Change In Control Agreements
2.31 Target Affiliate Transactions
</TABLE>
*The reporting person undertakes to furnish supplementally a copy of any omitted
schedule to the Securities and Exchange Commission upon request.
iv
<PAGE> 6
<TABLE>
<S> <C>
2.33(a)(1) TelQuest Capitalization
2.33(a)(2) TelQuest Capitalization Exceptions
2.33(b) TelQuest Subsidiaries
2.33(d) TelQuest Investment Exceptions
4.12(a) Form of Noncompete and Confidentiality Agreement
4.12(b) Designated Persons for Noncompete and Confidentiality Agreement
6.3.8 Opinion of Counsel to Acquiror
</TABLE>
v
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GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
Term Page Where
- ---- Defined
----------
<S> <C>
Acquiror.....................................................................1
Acquiror Ancillary Agreements...............................................34
Acquiror Material Adverse Effect............................................34
Acquiror Material Contract .................................................35
Acquiror Modified Representation............................................51
Acquiror Nonmodified Representation.........................................51
Acquisition Subsidiary.......................................................1
affiliate...................................................................59
Agreement....................................................................1
Alternative Use.............................................................19
Alternative Use Application.................................................19
associate...................................................................59
Benefit Plan................................................................22
Booster Application.........................................................19
Booster License.............................................................19
BTA.........................................................................19
BTA Authorization...........................................................19
Certificate of Merger........................................................1
Certificates.................................................................3
Channel Leases..............................................................19
Channel License.............................................................19
Channels....................................................................19
Claim Notice................................................................26
Closing......................................................................2
Closing Date.................................................................2
Code.........................................................................4
Collocation Application.....................................................17
Collocation Site............................................................19
Connecticut Code.............................................................1
Consent.....................................................................10
CS..........................................................................11
CS Approved Budget..........................................................13
CS Borrowing................................................................40
CS Subsidiaries.............................................................13
Effective Time...............................................................2
Enforceability Exceptions....................................................9
Environmental Laws..........................................................26
ERISA.......................................................................22
</TABLE>
vii
<PAGE> 8
<TABLE>
<S> <C>
Event.......................................................................13
Exchange Agent...............................................................3
FCC Licenses................................................................19
FCC Rules...................................................................20
Final Order.................................................................50
GAAP........................................................................13
Governmental Authority......................................................10
HSR Act.....................................................................10
Intellectual Property.......................................................26
IRS.........................................................................22
ITFS........................................................................20
Law.........................................................................11
Letter of Transmittal.......................................................3
Licensee....................................................................20
Litigation..................................................................12
MDS.........................................................................20
Merger.......................................................................1
Merger Consideration.........................................................2
MMDS........................................................................20
Multi-employer Plan.........................................................22
NASD........................................................................10
Noncompete and Confidentiality Agreements...................................45
Other Application...........................................................18
person......................................................................59
Proxy Statement.............................................................42
Rights Plan.................................................................31
SEC.........................................................................11
Securities Act...............................................................8
Securities Exchange Act......................................................8
Senior Secured Credit Facility..............................................36
Senior Secured Notes........................................................36
shareholder.................................................................59
Subsidiary...................................................................7
Surviving Corporation........................................................1
Surviving Corporation Common Stock...........................................2
Surviving Corporation Material Adverse Effect...............................50
System......................................................................20
System Agreements...........................................................20
Takeover Statute............................................................30
Target.......................................................................1
Target Ancillary Agreements..................................................8
Target Approved Budget......................................................13
Target Common Stock..........................................................2
Target Financial Statements.................................................12
Target Material Adverse Effect...............................................7
</TABLE>
ii
<PAGE> 9
<TABLE>
<S> <C>
Target Material Contract....................................................21
Target Minority Entity.......................................................8
Target Modified Representation..............................................51
Target Nonmodified Representation...........................................51
Target Permits..............................................................14
Target Real Property Leases.................................................27
Target Securities Filings...................................................11
Target Shares................................................................2
Target Subsidiaries..........................................................6
Tax.........................................................................23
Tax Return..................................................................23
TelQuest....................................................................32
TelQuest Subsidiaries.......................................................33
Termination Fee.............................................................55
Tower Site Leases...........................................................27
Wireless Cable Service......................................................20
Wireless Telecommunications Service.........................................20
Year 2000 Compliant.........................................................31
Year 2000 Plan..............................................................31
Year 2000 Problem...........................................................31
</TABLE>
iii
<PAGE> 10
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is made and
entered into as of April 26, 1999, by and among MCI WORLDCOM, Inc., a Georgia
corporation ("Acquiror"), Cardinal Acquisition Subsidiary, Inc., a Connecticut
corporation and wholly owned subsidiary of Acquiror ("Acquisition Subsidiary"),
and CAI Wireless Systems, Inc., a Connecticut corporation ("Target").
Recitals
A. The respective Boards of Directors of Target, Acquisition
Subsidiary and Acquiror have approved the merger (the "Merger") of Acquisition
Subsidiary with and into Target in accordance with the laws of the State of
Connecticut and the provisions of this Agreement.
B. Target, Acquisition Subsidiary and Acquiror desire to make
certain representations, warranties and agreements in connection with, and
establish various conditions precedent to, the Merger.
C. As a condition and inducement to Acquiror and Acquisition
Subsidiary entering into this Agreement, concurrently with the execution and
delivery of this Agreement, Target has granted an option to Acquiror to
purchase 6,090,481 shares of common stock of Target pursuant to the terms and
conditions of a Stock Option Agreement between Target and Acquiror dated as of
even date herewith (the "Stock Option Agreement").
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements hereinafter set forth,
the parties hereto agree as follows:
ARTICLE I
TERMS OF THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions of
this Agreement, the Merger shall be consummated in accordance with the
Connecticut Business Corporation Act (the "Connecticut Code"). At the Effective
Time (as defined in Section 1.2, below), upon the terms and subject to the
conditions of this Agreement, Acquisition Subsidiary shall be merged with and
into Target in accordance with the Connecticut Code and the separate existence
of Acquisition Subsidiary shall thereupon cease, and Target, as the surviving
corporation in the Merger (the "Surviving Corporation"), shall continue its
corporate existence under the laws of the State of Connecticut as a subsidiary
of Acquiror. Acquiror shall prepare and Target shall execute a certificate of
merger (the "Certificate of Merger") in order to comply in all respects with
the requirements of the Connecticut Code and with the provisions of this
Agreement.
1.2 EFFECTIVE TIME. The Merger shall become effective at the time
of the filing of the Certificate of Merger with Secretary of State of the State
of Connecticut in accordance with the applicable provisions of the Connecticut
Code or at such later time as may be specified in the
<PAGE> 11
Certificate of Merger. The Certificate of Merger shall be filed as soon as
practicable after all of the conditions set forth in this Agreement have been
satisfied or waived by the party or parties entitled to the benefit of the
same. Acquiror, after consultation with Target, shall determine the time of
such filing and the place where the closing of the Merger (the "Closing") shall
occur. The time when the Merger shall become effective is herein referred to as
the "Effective Time" and the date on which the Effective Time occurs is herein
referred to as the "Closing Date."
1.3 MERGER CONSIDERATION.
(a) Subject to the provisions of this Agreement and any
applicable backup or other withholding requirements, each of the issued and
outstanding shares ("Target Shares") of common stock, par value $0.01 per
share, of Target ("Target Common Stock") (other than shares canceled pursuant
to Section 1.3(b) and Dissenting Shares (as hereinafter defined), if any) as of
the Effective Time shall by virtue of the Merger and without any action on part
of the holder thereof, be converted into the right to receive, and there shall
be paid as hereinafter provided, in exchange for each of the Target Shares,
$28.00 in cash (the "Merger Consideration"), payable to the holder thereof,
without interest thereon, upon the surrender of the certificate formerly
representing such Target Share in the manner provided in Section 1.6.
(b) Each share of Target Common Stock issued and outstanding
immediately prior to the Effective Time that is owned by Acquiror or
Acquisition Subsidiary and each share of Target Common Stock held in the
treasury of Target or by a wholly owned subsidiary of Target shall be canceled
as of the Effective Time and no Merger Consideration shall be payable with
respect thereto. From and after the Effective Time, there shall be no further
transfers on the stock transfer books of Target of any of the Target Shares
outstanding prior to the Effective Time. If, after the Effective Time,
Certificates (as hereinafter defined) are presented to the Surviving
Corporation, they shall be canceled and exchanged for the Merger Consideration
provided for in, and in accordance with the procedures set forth in, this
Agreement.
(c) Subject to the provisions of this Agreement, at the Effective
Time, the shares of Acquisition Subsidiary common stock outstanding immediately
prior to the Merger shall be converted, by virtue of the Merger and without any
action on the part of the holder thereof, into one validly issued, fully paid
and nonassessable share of the common stock of the Surviving Corporation (the
"Surviving Corporation Common Stock"), which share of the Surviving Corporation
Common Stock shall constitute all of the issued and outstanding capital stock
of the Surviving Corporation.
1.4 SHAREHOLDERS' RIGHTS UPON MERGER. Upon consummation of the
Merger, the certificates which theretofore represented Target Shares (other
than Dissenting Shares) (the "Certificates") shall cease to represent any
rights with respect thereto, and, subject to applicable Law (as hereinafter
defined) and this Agreement, the Certificates shall only represent the right to
receive the Merger Consideration.
1.5 DISSENTING SHARES. (a) Notwithstanding anything in this
Agreement to the contrary, Shares which are issued and outstanding immediately
prior to the Effective Time and which are held by holders of Target Common
Stock who have demanded and exercised any
2
<PAGE> 12
dissenters' rights in the manner provided under the Connecticut Code, if
applicable and, as of the Effective Time, have neither effectively withdrawn
nor lost their rights to payment under the Connecticut Code (the "Dissenting
Shares"), shall not be converted into or be exchangeable for the right to
receive the Merger Consideration, unless and until such holder shall have
failed to exercise or shall have effectively withdrawn or lost such holder's
right to payment under the Connecticut Code. If such holder shall have so
failed to exercise or shall have effectively withdrawn or lost such right, such
holder's Shares shall thereupon be deemed to have been converted into and to
have become exchangeable for, at the Effective Time, the right to receive the
Merger Consideration provided for in this Agreement, without any interest
thereon.
(b) Target shall give Acquiror (i) prompt notice of any demands
for appraisal and payment pursuant to Section 33-861 of the Connecticut Code
received by Target, withdrawals of such demands, and any other instruments
served pursuant to the Connecticut Code, and received by Target and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal and payment under the Connecticut Code. Target shall not, except
with the prior written consent of Acquiror or as otherwise required by
applicable law, make any payment with respect to any such demands for appraisal
and payment or offer to settle or settle any such demands.
1.6 SURRENDER AND EXCHANGE OF SHARES.
(a) Prior to the Effective Time, Acquiror shall designate The
Bank of New York or such other bank or trust company as it may designate to act
as exchange agent in the Merger (the "Exchange Agent"). Immediately prior to
the Effective Time, Acquiror will deposit with the Exchange Agent the funds
necessary to make the payments contemplated herein on a timely basis. After the
Effective Time, each holder of a Target Share (other than Dissenting Shares)
shall surrender and deliver the Certificates to the Exchange Agent together
with a duly completed and executed transmittal letter provided by the Exchange
Agent (the "Letter of Transmittal") and any other required documents. Upon such
surrender and delivery, the holder shall be entitled to receive in exchange
therefor the Merger Consideration, and such Certificate shall forthwith be
canceled. No interest will be paid or accrued on the cash payable upon the
surrender of the Certificates. If payment is to be made to a person other than
the person in whose name the Certificate surrendered is registered, it shall be
a condition of payment that the Certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the person
requesting such payment shall pay any transfer or other taxes required by
reason of the payment to a person other than the registered holder of the
Certificate surrendered or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
in accordance with the provisions of this Section 1.6 and exchanged, each
outstanding Certificate after the Effective Time (other than Certificates
representing Dissenting Shares) shall be deemed for all purposes only to
evidence the right to receive Merger Consideration, without any interest
thereon.
(b) At any time following the sixth (6th) month after the
Effective Time, the Surviving Corporation shall be entitled to require the
Exchange Agent to deliver to it any portion of the funds which had been made
available to the Exchange Agent and not disbursed to holders of shares of
Target Common Stock (including, without limitation, all interest and other
income
3
<PAGE> 13
received by the Exchange Agent in respect of all amounts of funds made
available to it), and thereafter each such holder shall be entitled to look
only to the Surviving Corporation (subject to abandoned property, escheat and
other similar laws), and only as general creditors thereof, with respect to any
Merger Consideration that may be payable upon due surrender of the Certificates
held by such holder. If any Certificates representing shares of Target Common
Stock shall not have been surrendered immediately prior to such date on which
the Merger Consideration in respect of such Certificate would otherwise escheat
to or become the property of any Governmental Entity (as hereinafter defined),
any such cash, shares, dividends or distributions payable in respect of such
Certificate shall, to the extent permitted by applicable Law, become the
property of the Surviving Corporation, free and clear of all claims or interest
of any person previously entitled thereto. Notwithstanding the foregoing, none
of the Surviving Corporation, Acquiror, Acquisition Subsidiary or the Exchange
Agent shall be liable to any holder of a share of Target Common Stock for any
Merger Consideration delivered in respect of such share of Target Common Stock
to a public official pursuant to any abandoned property, escheat or other
similar Law.
(c) At the Effective Time, the stock transfer books of the Target
shall be closed and thereafter there shall be no further registration of
transfers of shares of Target Common Stock on the records of the Target. Except
for Acquiror and Acquisition Subsidiary, the holders of shares of Target Common
Stock outstanding immediately prior to the Effective Time shall cease to have
any rights, from and after the Effective Time, with respect to such shares of
Target Common Stock except as otherwise provided herein or by applicable Law,
and all cash paid pursuant to this Article I upon the surrender or exchange of
Certificates shall be deemed to have been paid in full satisfaction of all
rights pertaining to the shares of the Target Common Stock theretofore
represented by such Certificate.
(d) Acquiror, Acquisition Subsidiary, the Surviving Corporation
and the Exchange Agent, as the case may be, shall be entitled to deduct and
withhold from the Merger Consideration otherwise payable pursuant to this
Agreement to any holder of shares of Target Common Stock and Target Options (as
hereinafter defined) such amounts that Acquiror, Acquisition Subsidiary, the
Surviving Corporation or the Exchange Agent is required to deduct and withhold
with respect to the making of such payment under the Internal Revenue Code of
1986, as amended (the "Code"), the rules and regulations promulgated thereunder
or any provision of state, local or foreign tax Law. To the extent that amounts
are so withheld by Acquiror, Acquisition Subsidiary, the Surviving Corporation
or the Exchange Agent, such amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Target Common
Stock and Target Options in respect of which such deduction and withholding was
made by Acquiror, Acquisition Subsidiary, the Surviving Corporation or the
Exchange Agent.
1.7 OPTIONS AND WARRANTS.
(a) Prior to the Effective Time, Target shall cause each
outstanding and unexpired option or warrant to purchase Shares described in
Schedule 2.2 (an "Option" and, collectively, the "Options"), if such Option is
exercisable as of the Effective Time, to be converted into the right to receive
from the Surviving Corporation an amount of cash equal to the product of (i)
the
4
<PAGE> 14
number of Shares subject to the Option and (ii) the excess, if any, of the
Merger Consideration over the exercise price per Share of such Option (the
"Option Consideration"), as contemplated by Section 4.17. Prior to the
Effective Time, the Target shall cause each Option to be converted as described
herein, and shall take all steps necessary to give written notice to each
holder of an Option that, as applicable: (i) all Options which are exercisable
as of the Effective Time shall be canceled effective as of the Effective Time;
(ii) the Option Consideration for such Options which are exercisable as of the
Effective Time held by such holder shall be payable as described in Section
1.7(b); (iii) all Options which are not exercisable as of the Effective Time
shall be converted, immediately prior to the Effective Time, to the right to
receive, when exercisable, solely the Option Consideration, with such Option
otherwise becoming exercisable in accordance with its terms; and (iv) the
Option Consideration for such Options which are not exercisable as of the
Effective Time held by such holder shall be payable as described in Section
1.7(b). The Board of Directors of Target or any committee thereof responsible
for the administration of any plans under which Options have been granted shall
take any and all action necessary to effectuate matters described in this
Section 1.7 and Section 4.17 on or before the Effective Time.
(b) The Option Consideration shall be payable by the Surviving
Corporation to each holder of Options promptly following the Effective Time, in
the case of Options which are exercisable as of the Effective Time, or promptly
following exercise, in the case of Options which become exercisable after the
Effective Time, only after (i) verification by the Acquiror and the Surviving
Corporation of the ownership and terms of the particular Option by reference to
the Surviving Corporation's records, and (ii) delivery of a written instrument
duly executed by the holder of the applicable Option, in a form provided by the
Target and acceptable to Acquiror and setting forth (x) the aggregate number of
Options owned by that person and their respective issue dates and exercise
prices, (y) a representation by the person that he or she is the owner of all
Options described pursuant to clause (x) and that none of those Options has
expired or ceased to be exercisable and (z) a confirmation of, and consent to,
the cancellation and/or conversion of all Options held by such person effective
as of the Effective Time, as contemplated by this Section 1.7 and Section 4.17.
(c) Any amounts payable pursuant to this Section 1.7 shall be
subject to any required withholding of taxes and shall be paid without interest.
1.8 CERTIFICATE OF INCORPORATION. At and after the Effective
Time, the Certificate of Incorporation of the Surviving Corporation shall be
amended and restated in its entirety to read as the Certificate of
Incorporation of the Acquisition Subsidiary in effect at the Effective Time
except that Article First shall be amended to read as follows: "The name of the
corporation is CAI Wireless Systems, Inc." (subject to any subsequent
amendment).
1.9 BY-LAWS. At and after the Effective Time, the By-Laws of
Acquisition Subsidiary in effect at the Effective Time shall be the By-Laws of
the Surviving Corporation (subject to any subsequent amendment).
1.10 OTHER EFFECTS OF MERGER. The directors and officers of
Acquisition Subsidiary at the Effective Time shall be the initial directors and
officers of the Surviving Corporation and will hold office from the Effective
Time until their respective successors are duly elected or appointed
5
<PAGE> 15
and qualify in the manner provided in the Certificate of Incorporation and
By-Laws of the Surviving Corporation, or as otherwise provided by Law. The
Merger shall have all further effects as specified in the applicable provisions
of the Connecticut Code.
1.11 ADDITIONAL ACTIONS. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of Acquisition Subsidiary or Target or otherwise to carry
out this Agreement, the officers and directors of the Surviving Corporation
shall be authorized to execute and deliver, in the name and on behalf of
Acquisition Subsidiary or Target, as the case may be, all such deeds, bills of
sale, assignments and assurances and to take and do, in the name and on behalf
of Acquisition Subsidiary or Target, as the case may be, all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any and
all right, title and interest in, to and under such rights, properties or
assets in the Surviving Corporation or otherwise to carry out this Agreement.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF TARGET
Target represents, warrants and/or covenants to and with Acquiror as
follows:
2.1 ORGANIZATION AND GOOD STANDING. Target and, except for
TelQuest (as hereinafter defined), each of its Subsidiaries (as defined below)
(the "Target Subsidiaries") is a corporation, limited liability company or
partnership duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization and has all
requisite corporate, limited liability company or partnership power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Target and each of the Target Subsidiaries is duly
qualified and in good standing to do business in each jurisdiction in which the
character of the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so duly qualified and in good standing would not have a Target
Material Adverse Effect (as defined below). For purposes of this Agreement,
"Target Material Adverse Effect" shall mean a material adverse effect on (i)
the business, assets, condition (financial or otherwise), properties,
liabilities, prospects or the results of operations of Target and the Target
Subsidiaries taken as a whole, (ii) the ability of Target to perform its
obligations set forth in this Agreement and the Target Ancillary Agreements (as
hereinafter defined), or (iii) the ability to timely consummate the
transactions contemplated by this Agreement and the Target Ancillary
Agreements. Target has delivered to Acquiror a complete and accurate list of
the jurisdictions of incorporation or organization and qualification of Target
and the Target Subsidiaries. Target has heretofore delivered to Acquiror
accurate and complete copies of the Certificates or Articles of Incorporation
and By-Laws, or equivalent governing instruments, as currently in effect, of
Target and each of the Target Subsidiaries. "Subsidiary" means, with respect to
any person, any affiliate controlled by such person directly, or indirectly
through one or more intermediaries, and shall include, without limitation, any
corporation, partnership, joint venture, limited liability company,
6
<PAGE> 16
trust, estate or other organization or entity, of which (or in which) 50% or
more of: (i) the issued and outstanding shares of capital stock having ordinary
voting power to elect a majority of the board of directors or others performing
similar functions with respect thereto of such corporation or other
organization (irrespective of whether at the time shares of capital stock or
other interests of any other class or classes of such corporation shall or
might have voting power upon the occurrence of any contingency); (ii) the
interest in the capital or profits of such partnership, joint venture, limited
liability company or other organization or entity; or (iii) the beneficial
interest in such trust or estate; is at the time, directly or indirectly, owned
or controlled by such person, by such person and one or more of its other
subsidiaries or by one or more of such person's other subsidiaries;
2.2 CAPITALIZATION. As of the date hereof, the authorized capital
stock of Target consists of 25,000,000 shares of Target Common Stock and
5,000,000 shares of preferred stock, of which 2,000,000 shares have been
designated by the Board of Directors of Target as Series A Preferred Stock and
are reserved for issuance under the Rights Plan (as hereinafter defined). As of
the opening of business on the date hereof, (a) 17,241,379 shares of Target
Common Stock were issued and outstanding, and (b) no shares of Target Common
Stock were issued and held in the treasury of Target. No other capital stock of
Target is issued or outstanding. All issued and outstanding shares of the
Target Common Stock are duly authorized, validly issued, fully paid and
non-assessable and were issued free of preemptive rights and in compliance with
applicable corporate and securities Laws (as hereinafter defined). Except as
set forth on Schedule 2.2(a) attached hereto, as of the date of this Agreement
there are no outstanding rights, reservations of shares, subscriptions,
warrants, puts, calls, unsatisfied preemptive rights, options or other
agreements of any kind relating to any of the capital stock or any other
security of Target, and there is no authorized or outstanding security of any
kind convertible into or exchangeable for any such capital stock or other
security. There are no restrictions upon the transfer of or otherwise
pertaining to the securities (including, but not limited to, the ability to pay
dividends thereon) or retained earnings of Target and the Target Subsidiaries
or the ownership thereof other than those, if any, described on Schedule 2.2(b)
attached hereto or those imposed generally by the Securities Act of 1933, as
amended (the "Securities Act"), the Securities Exchange Act of 1934, as amended
(the "Securities Exchange Act"), applicable state or foreign securities Laws or
applicable corporate Law.
2.3 SUBSIDIARIES. Schedule 2.3(a) attached hereto sets forth the
name and percentages of outstanding capital stock or other interest held,
directly or indirectly, by Target and other persons, with respect to Target's
Subsidiaries or other persons in which Target or a Target Subsidiary holds,
directly or indirectly, any capital stock or other interest (a "Target Minority
Entity"). Except as set forth on Schedule 2.3(b) attached hereto, all of the
capital stock and other interests so held by Target are owned by it or a Target
Subsidiary as indicated on said Schedule 2.3(a), free and clear of any claim,
lien, encumbrance, security interest or agreement with respect thereto. All of
the outstanding shares of capital stock in each of the Target Subsidiaries are
duly authorized, validly issued, fully paid and non-assessable and were issued
free of preemptive rights and in compliance with applicable Laws. Except as set
forth on Schedule 2.3(c) attached hereto, there are no irrevocable proxies,
voting agreements or similar obligations with respect to such capital stock of
the Target Subsidiaries or a Target Minority Entity held by Target or any of
the Target Subsidiaries and no equity securities or other interests
7
<PAGE> 17
of any of the Target Subsidiaries are or may become required to be issued or
purchased by reason of any options, warrants, rights to subscribe to, puts,
calls, reservation of shares or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for,
shares of any capital stock of any Target Subsidiary, and there are no
contracts, commitments, understandings or arrangements by which any Target
Subsidiary is bound to issue additional shares of its capital stock, or
options, warrants or rights to purchase or acquire any additional shares of its
capital stock or securities convertible into or exchangeable for such shares.
Except as set forth on Schedule 2.3(d), Target is not aware of any provision of
the Certificate of Incorporation or By-Laws of CS (as hereinafter defined) or
Target or any other agreement, contract, understanding or arrangement or of any
Law that would restrict, limit or condition, or otherwise adversely affect, the
ability of Target, as the holder of over 90% of the capital stock of CS, to
cause CS, immediately following the Effective Time, to merge with and into
Target or a direct or indirect wholly-owned subsidiary of Target or Acquiror.
2.4 AUTHORIZATION; BINDING AGREEMENT. (a) Target has all
requisite corporate power and authority to execute and deliver this Agreement
and the Stock Option Agreement and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the other
agreements and documents referred to herein and to be executed in connection
herewith to which Target is or will be a party or a signatory, including,
without limitation, the Stock Option Agreement (the "Target Ancillary
Agreements") and the consummation of the transactions contemplated hereby and
thereby including, but not limited to, the Merger have been duly and validly
authorized by Target's Board of Directors and no other corporate proceedings on
the part of Target or any Target Subsidiary are necessary to authorize the
execution and delivery of this Agreement and the Target Ancillary Agreements or
to consummate the transactions contemplated hereby or thereby (other than the
adoption of this Agreement by the shareholders of Target in accordance with the
Connecticut Code and the Certificate of Incorporation and By-Laws of Target).
This Agreement and the Stock Option Agreement have been duly and validly
executed and delivered by Target and constitute, and upon execution and
delivery thereof as contemplated by this Agreement, the Target Ancillary
Agreements will constitute, the legal, valid and binding agreements of Target,
enforceable against Target in accordance with its and their respective terms,
except to the extent that enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by principles of equity
regarding the availability of remedies ("Enforceability Exceptions").
(b) At a meeting duly called and held on April 26, 1999, the
Board of Directors of Target, after consideration of (A) the long-term as well
as the short-term interests of Target, (B) the interests of the shareholders,
long-term as well as short-term, including the possibility that those interests
may be best served by the continued independence of Target, (C) the interests
of Target's employees, customers, creditors and suppliers, and (D) community
and societal considerations including those of any community in which any
office or other facility of Target is located, unanimously (i) determined that
this Agreement and the other transactions contemplated hereby, including the
Merger, are fair to and in the best interests of Target and the holders of
Target Shares, (ii) approved, authorized and adopted this Agreement, the Target
Ancillary Agreements, the Merger and the other transactions contemplated hereby
and thereby, and (iii)
8
<PAGE> 18
resolved to recommend approval and adoption of this Agreement and the Merger
and the other transactions contemplated hereby and thereby by the holders of
Target Shares.
(c) Target's Board of Directors has received from Target's
financial advisor, BT Alex. Brown Incorporated, a written opinion addressed to
it for inclusion in the Proxy Statement (as hereinafter defined) to the effect
that the Merger Consideration is fair to the holders of the Target Shares
(other than Acquiror and its affiliates) from a financial point of view. An
accurate and complete copy of such opinion has been provided to Acquiror.
(d) The affirmative vote of the holders of two-thirds of the
outstanding Target Shares is required to adopt this Agreement and the Merger
and the other transactions contemplated hereby and thereby. No other vote of
the holders of Target Common Stock or any other capital stock of Target is
required by Law or the Certificate of Incorporation or By-Laws of Target or
otherwise in order for Target to consummate the Merger and the transactions
contemplated hereby and by the Target Ancillary Agreements.
(e) The Certificate of Incorporation of Target, as amended
through the date hereof, specifically provides that Target has elected not to
be governed by Sections 33-840 to 33-845, inclusive, of the Connecticut Code.
Such provisions of the Certificate of Incorporation have been duly adopted by
vote of the Board of Directors and shareholders of Target, as necessary and
appropriate to ensure the effectiveness of such provisions, in the case of
Sections 33-840 to 33-843, inclusive, of the Connecticut Code such that such
provisions are inapplicable to the Merger, the Target Ancillary Agreements and
the transactions contemplated hereby and thereby, and the execution, delivery
and performance of any agreement to acquire, or any other acquisition of,
Target Common Stock by Acquiror or any of its affiliates or associates, and, in
the case of Sections 33-844 to 33-845, inclusive, of the Connecticut Code such
that such provisions are, in Target's reasonable business judgment,
inapplicable to the Merger, the Target Ancillary Agreements and the
transactions contemplated hereby and thereby and the execution, delivery and
performance of any agreement to acquire, or any other acquisition of, Target
Common Stock by Acquiror or any of its affiliates or associates. The Board of
Directors of Target and a majority of the nonemployee directors (as described
in Section 33-844 of the Connecticut Code), of which there are at least two,
have approved this Agreement, the Target Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby, including,
but not limited to, the Merger. Accordingly, the restrictions on "business
combinations" under the provisions of Sections 33-840 to 33-845, inclusive, of
the Connecticut Code are inapplicable to the Merger, the Target Ancillary
Agreements and the transactions contemplated hereby and thereby and the
execution, delivery and performance of any agreement to acquire, or any other
acquisition of, Target Common Stock by Acquiror or any of its affiliates or
associates.
2.5 GOVERNMENTAL APPROVALS. No consent, approval, waiver or
authorization of, notice to or registration, declaration or filing with or
other action by ("Consent") any nation or government, any state or other
political subdivision thereof, any person, authority or body exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government including, without limitation, any governmental or
regulatory authority, agency, department, board, commission or instrumentality,
any court, tribunal or arbitrator and any self-regulatory organization
("Governmental Authority") on the part of Target or any of the
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Target Subsidiaries is required in connection with any change of control of
Target or any of the Target Subsidiaries, including, without limitation, any
acquisition of Target Common Stock by Acquiror or any of its affiliates or
associates, or the execution or delivery by Target of this Agreement and the
Target Ancillary Agreements or the consummation by Target of the transactions
contemplated hereby or thereby, other than (i) the filing of the Certificate of
Merger with the Secretary of the State of Connecticut in accordance with the
Connecticut Code, (ii) filings with the SEC, state securities laws
administrators and the National Association of Securities Dealers, Inc. (the
"NASD"), (iii) Consents from or with Governmental Authorities set forth on
Schedule 2.5 attached hereto, (iv) filings under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act"), and (v) Consents described in Section
2.11 below, and (vi) those Consents that, if they were not obtained or made, do
not or would not have a Target Material Adverse Effect, provided that the
failure to obtain any Consent relating to any FCC License (as hereinafter
defined) shall be deemed to have a Target Material Adverse Effect and the
failure to obtain Consents relating to Channel Leases (as hereinafter defined)
or Tower Site Leases (as hereinafter defined), which, in the aggregate, are or
would be material to Target and the Target Subsidiaries or are or would be
material to the future plans or objectives of Acquiror, or the failure of which
to obtain would otherwise have a Target Material Adverse Effect, shall be
deemed to have a Target Material Adverse Effect.
2.6 NO VIOLATIONS. The execution and delivery of this Agreement
and the Target Ancillary Agreements, the consummation of the transactions
contemplated hereby and thereby and compliance by Target with any of the
provisions hereof or thereof and any change of control of Target or any of the
Target Subsidiaries, including, without limitation, any acquisition of Target
Common Stock by Acquiror or any of its affiliates or associates, will not (i)
conflict with or result in any breach of any provision of the Certificate
and/or Articles of Incorporation or By-Laws or other governing instruments of
Target or any of the Target Subsidiaries, (ii) except as set forth on Schedule
2.6(a) attached hereto, require any Consent under or result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation or
acceleration or augment the performance required) under any of the terms,
conditions or provisions of any Target Material Contract (as hereinafter
defined) or other obligation to which Target or any Target Subsidiary is a
party or by which any of them or any of their properties or assets may be
bound, (iii) result in the creation or imposition of any lien or encumbrance of
any kind upon any of the assets of Target or any Target Subsidiary, or (iv)
subject to obtaining the Consents from Governmental Authorities referred to in
Section 2.5, above, contravene any applicable provision of any constitution,
treaty, statute, law, code, rule, regulation, tariff, ordinance, policy, permit
or order of any Governmental Authority or other matters having the force of law
including, but not limited to, any orders, decisions, injunctions, judgments,
awards and decrees of or agreements with any court, tribunal, arbitrator,
mediator or other Governmental Authority ("Law") currently in effect to which
Target or any Target Subsidiary or its or any of their respective assets or
properties are subject, except in the case of clauses (ii), (iii) and (iv),
above, for any deviations from the foregoing which do not or would not have a
Target Material Adverse Effect.
2.7 SECURITIES FILINGS AND LITIGATION. Target has made available
to Acquiror true and complete copies of (i) its Annual Reports on Form 10-K, as
amended, for the years ended
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March 31, 1996, 1997 and 1998, as filed with the Securities and Exchange
Commission (the "SEC"), (ii) the Annual Reports on Form 10-K, as amended, for
the years ended December 31, 1996, 1997 and 1998, as filed by CS Wireless
Systems, Inc. ("CS") with the SEC, (iii) the proxy statements relating to all
of the meetings of shareholders (whether annual or special) of Target and the
Target Subsidiaries (including CS) since January 1, 1996, as filed with the
SEC, and (iv) all other reports, statements, schedules, registration statements
and other filings or documents and amendments thereto (including, without
limitation, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as
amended) filed by Target or CS with the SEC since January 1, 1996. The reports,
statements, schedules, registration statements, and other filings and documents
set forth in clauses (i) through (iv), above, and those subsequently provided
or required to be provided pursuant to this Section, are referred to
collectively herein as the "Target Securities Filings."
Target and the Target Subsidiaries have filed with the SEC all Target
Securities Filings required to be filed therewith on or prior to the date of
this Agreement and, as of the Closing, Target and the Target Subsidiaries shall
have filed with the SEC all Target Securities Filings required to be filed on
or prior thereto. As of their respective dates, or as of the date of the last
amendment thereof, if amended after filing, none of the Target Securities
Filings (including all schedules thereto and disclosure documents incorporated
by reference therein), contained or, as to Target Securities Filings subsequent
to the date hereof, will contain any untrue statement of a material fact or
omitted or, as to Target Securities Filings subsequent to the date hereof, will
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. Each of the Target Securities Filings at the time of
filing or as of the date of the last amendment thereof, if amended after
filing, complied or, as to Target Securities Filings subsequent to the date
hereof, will comply in all material respects with the Securities Exchange Act
or the Securities Act, as applicable. Except as set forth in Schedule 2.7
attached hereto, there is no action, cause of action, claim, demand, suit,
proceeding, citation, summons, subpoena, inquiry or investigation of any
nature, civil, criminal, regulatory or otherwise, in law or in equity, by or
before any court, tribunal, arbitrator, mediator or other Governmental
Authority ("Litigation") pending or, to the knowledge of Target, threatened
against Target, any Target Subsidiary or any Target Minority Entity, or any
officer, director, employee or agent thereof, in his or her capacity as such,
or as a fiduciary with respect to any Benefit Plan (as hereinafter defined) of
Target, or otherwise relating, in a manner that could have a Target Material
Adverse Effect, to Target, any Target Subsidiary, any Target Minority Entity or
the securities of any of them, or any properties or rights of Target, any of
the Target Subsidiaries or any Target Minority Entity or any Benefit Plan. No
event has occurred as a consequence of which Target would be required to file a
Current Report on Form 8-K pursuant to the requirements of the Securities
Exchange Act as to which such a report has not been timely filed with the SEC.
Any reports, statements, schedules, registration statements and other filings
and documents and amendments thereto (including, without limitation, Reports on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as
amended) filed by Target with the SEC after the date hereof shall be provided
to Acquiror no later than the date of such filing.
2.8 TARGET FINANCIAL STATEMENTS. The audited consolidated and
unaudited interim financial statements of Target and the Target Subsidiaries
included in the Target Securities
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<PAGE> 21
Filings and, as prepared by Target, the unaudited financial statements of
Target and the Target Subsidiaries as of and for the months ended January 31,
1999, February 28, 1999 and March 31, 1999 (the "Target Financial Statements")
have been provided to Acquiror. Except as noted therein, the Target Financial
Statements were or, as to those Target Financial Statements provided or
required to be provided subsequent to the date hereof pursuant to this Section,
will be prepared in accordance with generally accepted accounting principles
applicable to the businesses of Target and the Target Subsidiaries consistently
applied in accordance with past accounting practices and fairly present
(including, but not limited to, the inclusion of all adjustments with respect
to interim periods which are necessary to present fairly the financial
condition and assets and liabilities or the results of operations of Target and
the Target Subsidiaries except as may be indicated therein or in the notes
thereto, subject to normal year-end adjustments in the ordinary course with
respect to certain items immaterial in amount or effect and the exclusion of
footnote disclosure in interim Target Financial Statements) the financial
condition and assets and liabilities and the results of operations of Target
and the Target Subsidiaries as of the dates and for the periods indicated.
Except as reflected in the Target Financial Statements, as of their respective
dates, neither Target nor any Target Subsidiary had any debts, obligations,
guaranties of obligations of others or liabilities (contingent or otherwise)
that would be required in accordance with generally accepted accounting
principles to be disclosed in the Target Financial Statements. Any financial
statements prepared with respect to Target or a Target Subsidiary subsequent to
the date hereof promptly shall be provided to Acquiror and shall constitute
Target Financial Statements for purposes hereof.
2.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
the Target Securities Filings made available by Target to Acquiror prior to the
date of this Agreement or in Schedule 2.9 attached hereto, since December 31,
1998, through the date of this Agreement, there has not been: (i) any event,
occurrence, fact, condition, change, development or effect ("Event") that has
had or could reasonably be expected to have a Target Material Adverse Effect
(except for (A) any decrease in monthly average revenues, as determined based
on generally accepted accounting principles ("GAAP") , of Target and the Target
Subsidiaries (other than CS and its Subsidiaries (the "CS Subsidiaries") ) of
no more than 5.5% per month, subject to adjustment by percentage increase or
decrease of 0.7% for seasonal trends (e.g., college population subscribers),
(B) deviations of cash flow from operations of Target and the Target
Subsidiaries (other than CS and the CS Subsidiaries) of 25% or less on a
month-to-month basis as compared to cash flow from operations projected in the
budget of Target dated March 22, 1999 for the period from April 1, 1999 to
October 31, 2000 delivered by Target pursuant to that certain Note Purchase
Agreement dated as of October 14, 1998, a copy of which budget has been
delivered to Acquiror (the "Target Approved Budget")), (C) any decrease in
monthly average GAAP-based revenues of CS and the CS Subsidiaries of no more
than 5.5% per month, subject to adjustment by percentage increase or decrease
of 0.7% for seasonal trends (e.g., college population subscribers), and (D)
deviations of cash flow from operations of CS and the CS Subsidiaries of 25% or
less on a month-to-month basis as compared to cash flow from operations
projected in the budget of CS dated April 20, 1999 (the "CS Approved Budget"),
a copy of which has been delivered to Acquiror); (ii) any declaration, payment
or setting aside for payment of any dividend (except to Target or a Target
Subsidiary wholly owned by Target) or other distribution or any redemption,
purchase or other acquisition of any shares of capital stock or securities of
or
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interest in Target or any Target Subsidiary; (iii) any return of any capital or
other distribution of assets to shareholders of Target or any Target Subsidiary
(except to Target or a Target Subsidiary wholly owned by Target); (iv) other
than in the ordinary course of business and consistent with the Target Approved
Budget, with respect to Target and any Target Subsidiary other than CS and the
CS Subsidiaries, and the CS Approved Budget, with respect to CS and the CS
Subsidiaries, any investment of a capital nature by the purchase of any
property or assets by Target or any Target Subsidiary; (v) any acquisition (by
merger, consolidation, acquisition of stock or assets or otherwise) of any
person or business; (vi) any sale, disposition, pledge, mortgage or other
transfer of assets or properties of Target or any Target Subsidiary other than
in the ordinary course of business consistent with past practice or having a
net book value in excess of $250,000 individually or $500,000 in the aggregate;
(vii) any action or agreement or undertaking by Target or any Target Subsidiary
to take any action that, if taken or done on or after the date hereof, would
result in a breach of Section 4.1, below; (viii) any change in accounting
methods or practices or any change in depreciation or amortization policies or
rates of or applicable to Target or any Target Subsidiary; (viii) any
employment, severance or consulting agreement entered into by Target or any
Target Subsidiary with any shareholder, officer, director, agent, employee or
consultant of Target or any Target Subsidiary or any amendment or modification
to, or termination of, any current employment, severance or consulting
agreement to which Target or any Target Subsidiary is a party or by which it is
bound; (ix) any forgiveness, cancellation, compromise, settlement, waiver or
release of any debts, claims, rights or Litigation; (x) any agreement,
authorization or commitment to take, whether in writing or otherwise, any
action which, if taken prior to the date hereof, would have made any
representation or warranty of Target in this Agreement untrue or incorrect in
any material respect; or (xi) any failure by Target or any Target Subsidiary to
conduct its business in the ordinary course consistent with past practice.
2.10 COMPLIANCE WITH LAWS. Other than as may be set forth on
Schedule 2.10, the business of Target and each Target Subsidiary has been
operated in compliance with all Laws applicable thereto, except for any
instances of non-compliance which do not and would not have a Target Material
Adverse Effect.
2.11 PERMITS, FCC LICENSES; CHANNEL LEASES; SYSTEM AGREEMENTS; THE
SYSTEMS; INTERFERENCE; Households. Target and the Target Subsidiaries have all
permits, certificates, licenses, approvals, tariffs and other authorizations
required in connection with the operation of their respective businesses
(collectively, "Target Permits"), (ii) neither Target nor any Target Subsidiary
is in violation of any Target Permit, and (iii) no proceedings are pending or,
to the knowledge of Target, threatened, to revoke or limit any Target Permit,
except, in the case of clause (i) or (ii) above, those the absence or violation
of which do not and would not have a Target Material Adverse Effect. Without
limiting the generality of the foregoing:
(a) Schedule 2.11(a) sets forth a description of each of the
markets in which Target and each of its Target Subsidiaries has a System.
(b) Schedule 2.11(b) lists all Channel Leases by name of
underlying lessee and the monthly payment obligations thereunder. Except as set
forth in Schedule 2.11(b), (A) each Channel Lease constitutes a legal, valid,
and binding obligation of the parties thereto and is in
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<PAGE> 23
full force and effect and enforceable in accordance with its terms, subject to
the Enforceability Exceptions, and materially complies with all applicable Laws
and has been filed with the FCC, to the extent required by the FCC Rules, and
no other Consent of any Governmental Authority is required to enable Target or
any of the Target Subsidiaries to operate under such Channel Lease to recognize
the benefits thereunder, or to comply with applicable Laws; (B) none of Target
or any of the Target Subsidiaries has assigned its rights and interests under
any Channel Lease to any other Person; (C) none of Target or any of the Target
Subsidiaries is in material breach or default under any such Channel Lease,
which breach or default could result in the termination, impairment, or
forfeiture of any rights under or any payments being made with respect to any
such Channel Lease, nor has an event occurred with respect to any Channel Lease
which (whether with or without notice, the lapse of time, or the happening or
occurrence of any other event) would constitute a breach or default under such
Channel Lease; (D) to the knowledge of Target, no third party has any rights to
assert any interest in any Channel Lease or the rights and benefits granted to
Target or any of the Target Subsidiaries pursuant thereto; (E) there are no
contractual restrictions relating to any such Channel Lease that reasonably
could be expected to materially adversely affect or delay the collocation of
the Channels (as hereinafter defined) at their respective Collocation Sites (as
hereinafter defined) or the implementation of digital technology or Alternative
Use (as hereinafter defined) services; (F) there are no material provisions of
any such Channel Lease that are the subject of negotiation, nor has any party
to any such Channel Lease requested the renegotiation of any material term
thereof; (G) none of the Channel Leases contain a put or call option with
respect to the subject matter thereof; and (H) none of the Channel Leases
contains any provisions granting the other party thereto the right to terminate
the Channel Leases upon, or otherwise limiting or adversely affecting the
ability of Acquiror or any of its affiliates or associates to effect, a change
in control of Target or any of the Target Subsidiaries, including, without
limitation, any acquisition of Target Common Stock by Acquiror or any of its
affiliates or associates, or the execution and delivery of this Agreement or
the Target Ancillary Agreements or the consummation of the transactions
contemplated hereby and thereby. Except as set forth on Schedule 2.11(b), upon
any such change in control and upon the closing of the transactions
contemplated by this Agreement, all such Channel Leases shall continue in force
and effect in accordance with their terms without penalty, acceleration or
rights of early termination and Acquisition Subsidiary will have the sole right
to use the transmission capacity of the FCC License under each of the Channel
Leases (other than the transmission capacity expressly reserved by such Channel
Lease for the holder of an FCC License). Target has delivered or made available
to Acquiror complete and accurate copies of each of the Channel Leases and none
of such have been amended in any respect.
(c) Schedule 2.11(c) lists all FCC Licenses and applications for
FCC Licenses. Except as set forth in Schedule 2.11(c), (A) each of such FCC
Licenses has been duly and validly issued and is enforceable in accordance with
its terms, subject to the Enforceability Exceptions, and is in full force and
effect; (B) neither Target nor any of the Target Subsidiaries has assigned its
rights and interest under any of the FCC Licenses or any application for an FCC
License; (C) neither Target, any of the Target Subsidiaries nor any lessor
under any Channel Lease, as the case may be, is in violation of the terms under
the corresponding FCC License, which violation could result in the termination
or forfeiture of any rights under, or any payments being made with respect to,
such FCC License, nor has an event occurred with respect to any of the FCC
Licenses
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<PAGE> 24
which (whether with or without notice, the lapse of time, or the happening or
occurrence of any other event) would constitute such a violation of the terms
of such FCC License that could result in the termination or forfeiture of such
FCC License; (D) to the knowledge of Target, except with respect to the lessors
under the Channel Leases, no third party has any rights to assert any interest
in any of the FCC Licenses or applications for FCC Licenses; and (E) there are
no contractual restrictions relating to any of the FCC Licenses which
reasonably could be expected to materially adversely affect the collocation of
the Channels that are the subject thereof at their respective Collocation Site
(as hereinafter defined) or the implementation of an Alternative Use (as
hereinafter defined). Upon a change in control of Target or any of the Target
Subsidiaries, including, without limitation, any acquisition of Target Common
Stock by Acquiror or any of its affiliates or associates, or the execution and
delivery of this Agreement or the Target Ancillary Agreements or the
consummation of the transactions contemplated hereby and thereby, all such FCC
Licenses shall continue in full force and effect in accordance with their terms
without penalty, acceleration or rights of termination and Acquisition
Subsidiary will have full rights and benefits under and to the FCC Licenses.
Target has delivered or made available to Acquiror complete and accurate copies
of each of the FCC Licenses and none of them have been amended in any respect.
(d) Schedule 2.11(d) accurately lists, with respect to each of
the Systems, all Channels, and accurately describes the following:
(i) the status of each FCC License, including (A) the
expiration date of the license, (B) the renewal deadline and any pending
construction deadline and the status of compliance therewith (including whether
one or more extensions of the filing deadline have been requested or obtained),
(C) the status of any pending applications (including assignment and transfer
of control applications) including whether the application has been accepted
for filing by the FCC and any pending deadline for filing timely petitions to
deny such FCC applications, (D) whether there are any threatened or pending
interference issues, petitions to deny, informal objections, competing or
conflicting applications, outstanding no-objection letters, comments or waiver
requests, and (E) with respect to any licensed service areas of Target or any
of the Target Subsidiaries that otherwise qualify as protected service areas
pursuant to 47 C.F.R. Section 21.902(d), whether there are any currently
pending FCC applications that were also pending on September 9, 1983 that
Target has identified as causing harmful interference to its service area;
(ii) the status of each Collocation Application (as
hereinafter defined), Booster Application (as hereinafter defined) and
Alternative Use Application (as hereinafter defined) and any amendments
thereto, including (A) the relevant Collocation Site or other transmission site
and proposed technical parameters and conditions for analog and digital
operations, (B) whether the application has been accepted for filing by the
FCC, (C) whether there are any threatened or pending interference issues,
petitions to deny, informal objections, competing or conflicting applications,
outstanding no-objection letters, outstanding consent letters, comments or
waiver requests, and (D) with respect to any licensed service areas of Target
or any of the Target Subsidiaries that otherwise qualify as protected service
areas pursuant to 47 C.F.R. Section 21.902(d), whether there are any currently
pending FCC applications that were also pending on September 9, 1983 that
Target has identified as causing harmful interference to its service area; and
15
<PAGE> 25
(iii) the market trials and operations that Target or any of
the Target Subsidiaries are conducting, or intend to conduct, pursuant to the
Target Approved Budget, with respect to Target and any Target Subsidiary other
than CS and the CS Subsidiaries, and the CS Approved Budget, with respect to CS
and the CS Subsidiaries, with respect to Alternative Uses of the Channels or
the Systems and the relevant authorizations used, or to be used, in conjunction
with such trial and operations and the conditions contained therein.
(e) Complete and correct copies of all of the Target Permits,
including, without limitation, Booster Applications, Collocation Applications,
Alternative Use Applications and amendments thereto (with the FCC file date
stamped thereon), FCC Licenses and material related thereto, including pending
applications filed with the FCC relating to the Systems and other Target
Permits owned, held or possessed by Target or any of the Target Subsidiaries
have been provided to Acquiror.
(f) Except as set forth on Schedule 2.11(f) and except for
Channel Licenses held by third parties, with respect to each of the Systems,
all of the assets, Target Permits and System Agreements relating to each System
are owned by one or more of Target and the Target Subsidiaries.
(g) Except as disclosed in Schedule 2.11(g), (i) Target and each
of the Target Subsidiaries have obtained and possess all System Agreements,
patents, copyrights, certificates of confirmation, licenses, permits,
trademarks, and trade names, or rights thereto, necessary to conduct its
business as currently conducted by Target and each of the Target Subsidiaries
and none of Target or any of the Target Subsidiaries is in violation of any
valid rights of others with respect to any of the foregoing; (ii) no other
license, permit or franchise is necessary to the operation by Target or any of
the Target Subsidiaries of the Systems as currently conducted by Target and
each of its Target Subsidiaries; and (iii) Target and each of the Target
Subsidiaries have obtained and possess or applied for all licenses, and have
obtained and possess all leases, conduit use, equipment rental and microwave or
satellite relay agreements necessary for the operation of the Systems as
required by the System Agreements.
(h) Except as set forth on Schedule 2.11(h), neither any of
Target, any of the Target Subsidiaries, nor any Licensee of a Channel has
contractually accepted or will contractually accept any electrical interference
from any source that is likely to result in material adverse electrical
interference to any of the Channels in any of the Systems now operating or
expected to be operated, including the BTA Authorizations (as hereinafter
defined) or any newly licensed Channel in any BTA (as hereinafter defined) in
which any System operates or Target or any of the Target Subsidiaries expect to
operate. Except as set forth in Schedule 2.11(h), neither Target nor any of the
Target Subsidiaries has filed a petition currently pending before the FCC
against any application filed with the FCC by a third party applicant and no
third party has filed a petition currently pending before the FCC against any
application filed with the FCC by Target or any of the Target Subsidiaries.
(i) Except as set forth in Schedule 2.11(i), (i) each Collocation
Application and Other Application (as hereinafter defined) complies with the
FCC rules (including the interference protection requirements), has been
accepted for filing by the FCC, and cut-off from competing
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<PAGE> 26
and conflicting applications; (ii) the deadline for filing timely petitions to
deny each Collocation Application and each Other Application has lapsed; (iii)
there are no threatened or pending petitions to deny, informal objections,
competing or conflicting applications, outstanding no-objection letters,
comments, petitions for reconsideration, petitions for review or waiver
requests relating to such Collocation Applications and Other Applications; and
(iv) a protected service area for the FCC License has been granted or
requested. For purposes hereof, (i) a "Collocation Application" shall mean any
application filed with, or granted by, the FCC to authorize the operation of
the facilities associated with each FCC License at a common transmitter site
with other ITFS (as hereinafter defined) and Multichannel Multipoint
Distribution Service and Multipoint Distribution Service stations pursuant to
common technical parameters of the FCC License and (ii) "Other Application"
shall mean any other applications, in addition to Collocation Applications,
filed with or granted by the FCC to authorize the provision of digital services
and/or two-way services on the facilities associated with each FCC License.
(j) Except as set forth in Schedule 2.11(j), all regulatory fees
and expenses due and payable associated with the FCC Licenses have been paid to
the FCC, including all fees and costs associated with the FCC Licenses held by
the Target or any of the Target Subsidiaries to provide MMDS (as hereinafter
defined) or MDS (as hereinafter defined) service in BTAs. Schedule 2.11(j)
discloses any discounts or bidding credits that the Target or any of the Target
Subsidiaries received from the FCC in conjunction with the licensing of the BTA
Authorizations.
(k) Schedule 2.11(k) lists the total number of households for
each BTA in which Target or any of the Target Subsidiaries has been granted or
is leasing an FCC License and describes any material assumptions for arriving
at such determinations.
(l) Except as disclosed on Schedule 2.11(l), all FCC Licenses are
in full force and effect and there are no outstanding adverse judgments,
injunctions, decrees or orders that have been issued by the FCC against the
Target or any Target Subsidiary or affiliate thereof or the holder of an FCC
License and there are no pending or threatened complaints, investigations,
inquiries or proceedings by or before the FCC or other Governmental Authority
or any actions or events that (i) could result in the revocation, cancellation,
adverse modification or non-renewal of any FCC License or the imposition of a
material fine or forfeiture, (ii) materially impair Target's or any of the
Target Subsidiaries' ability to develop or operate any of the Channels or
Systems, or (iii) otherwise result in a Target Material Adverse Change. The
Systems, Channels, FCC Licenses and related facilities are currently providing
and, to the knowledge of Target, have been providing service to the public
(rather than a test signal or color bar) and are being operated and/or
developed in material compliance with the respective FCC License and other
Target Permits and with all other Laws.
(m) Except as set forth on Schedule 2.11(m), since January 1,
1996 all material reports and other documents required to be filed with the FCC
or other Governmental Authority with respect to the Systems, Channels, FCC
Licenses, System Agreements and Channel Leases have been timely filed,
including, without limitation certifications of completion of construction.
Notwithstanding anything contained herein to the contrary, to the knowledge of
Target, except as set forth on Schedule 2.11(m), there have been no failures to
make filings with the FCC or any Governmental Authority at any time that would
reasonably be likely to have a material adverse
17
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effect on any of the Channels, FCC Licenses, System Agreements or Systems, or
any of Target or any of the Target Subsidiaries, or what would reasonably be
likely to result in the imposition of a material fine or forfeiture, including
copyright filings, extension requests, and reports required by Sections
21.11(a), 21.911 and 21.920 of the FCC Rules.
(n) As used in this Agreement, the following terms have the
respective meanings set forth below (such meanings to be equally applicable to
both the singular and plural forms of the term defined):
"Alternative Use" means the provision of service other than Wireless
Cable Service through the use of, among others, ITFS, MDS, and MMDS channels,
including two-way transmission services and fixed or mobile telecommunications
services.
"Alternative Use Application" means an application filed by Target or
any of the Target Subsidiaries or the Licensee of a Channel to provide an
Alternative Use, including an application for developmental authority,
experimental authority, or special temporary authority or any Booster
Application requesting to provide an Alternative Use.
"Booster Application" means any application filed with, or granted by,
the FCC to authorize the operation of a booster station.
"Booster License" means a license for a booster station.
"BTA" means basic trading area, as defined by Rand McNally and used by
the FCC in licensing MDS and MMDS channels pursuant to the competitive bidding
process.
"BTA Authorization" means the Target Permit granted by the FCC to
apply for individual MDS and MMDS channels with a certain BTA.
"Channel Leases" means all leases to use transmission capacity held by
or for benefit of one or more of Target or any of the Target Subsidiaries of
transmission capacity on ITFS, MDS, or MMDS frequencies licensed by the FCC.
"Channel License" means any Target Permits for a Channel granted by
the FCC to any one or more of Target or the Target Subsidiaries or leased to
Target or any of the Target Subsidiaries by a lessor of a Channel Lease, or any
application pending before the FCC for such Target Permit.
"Channels" means the ITFS, MDS, or MMDS frequencies licensed, or
expected to be licensed, to one or more of Target or any of the Target
Subsidiaries by the FCC pursuant to an FCC License or made available to one or
more of Target or any of the Target Subsidiaries by an ITFS, MDS, or MMDS
applicant, permittee, conditional licensee or licensee pursuant to a Channel
lease, including any frequencies associated with any booster station, repeater
station, response station hub or any facility used to provide an Alternative
Use.
"Collocation Site" means the site at which the facilities for the
corresponding Channel are, or are to be, collocated at a common transmitter
site with other Channels that are used to
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provide Wireless Telecommunications Service (as hereinafter defined) on the
System.
"FCC Licenses" means the Target Permits, including, without
limitation, any Channel Licenses, Booster Licenses and any other related
facility licenses and construction permits, issued by the FCC to Target or any
of the Target Subsidiaries or any lessor under a Channel Lease, or that are the
subject of an application filed with the FCC by Target or any of the Target
Subsidiaries or any such lessor under a Channel Lease, to operate one or more
of the Channels, including, without limitation, any BTA Authorization,
individual Target Permit to construct or operate Channels within a BTA, and any
Alternative Use permit.
"FCC Rules" means Title 47 of the Code of Federal Regulations, as
amended at any time and from time to time, and FCC decisions issued pursuant to
the adoption of such regulations.
"ITFS" means the Instructional Television Fixed Service, a class of
microwave frequencies licensed by the FCC pursuant to Part 74 of the FCC Rules.
"Licensee" means an applicant, permittee, conditional licensee, or
licensee of a facility regulated by the FCC.
"MDS" means the Multipoint Distribution Service, a domestic
transmission service licensed by the FCC pursuant to Part 21 of the FCC Rules.
"MMDS" means Multichannel Multipoint Distribution Service, a domestic
transmission service licensed by the FCC pursuant to Part 21 of the FCC Rules.
"System Agreements" means, collectively, all FCC Licenses for Channels
and booster stations, Channel Leases, Tower Site Leases, programming
agreements, retransmission agreements, non-interference or cooperation
agreements (excluding no-objection letters issued in the ordinary course of
business), equipment agreements or instruments, licenses, permits, and other
material agreements pertaining to the transmission of video, voice, or data
signals through wireless cable transmission facilities, of each of Target and
each of the Target Subsidiaries now existing or hereafter acquired or obtained,
relative to the Channels or the construction and operation of the Systems.
"Systems" means the wireless telecommunications systems constructed
and operated by one or more of Target and each of the Target Subsidiaries for
the provision of Wireless Telecommunications Service.
"Tower Site Leases" is defined in Section 2.19(b).
"Wireless Cable Service" means the provision of subscription video or
entertainment and additional programming services and services ancillary
thereto through the use of, among other, ITFS, MDS, and MMDS channels.
"Wireless Telecommunications Service" means any service that is
permitted under FCC rules and regulations or authorized by the FCC to be
provided on or by means of the transmission capacity on an ITFS, MDS, or MMDS
channel, including Wireless Cable Services and
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Alternative Use services.
2.12 FINDERS AND INVESTMENT BANKERS. Neither Target nor any of the
Target Subsidiaries nor any of their officers or directors or other affiliates
has employed any broker or finder or incurred any liability for any brokerage
fees, commissions or finders' fees in connection with the acquisition of Target
Common Stock by Acquiror or any of its affiliates or associates, the Merger,
the Target Ancillary Agreements or the transactions contemplated hereby or
thereby, other than pursuant to the agreement with BT Alex. Brown Incorporated,
an accurate and complete copy of which has been provided to Acquiror.
2.13 CONTRACTS. Schedule 2.13 attached hereto sets forth a
complete and accurate list of all material notes, bonds, mortgages, indentures,
contracts, leases, licenses, agreements, understandings, arrangements,
commitments, instruments, bids or proposals to which Target or any Target
Subsidiary is a party or is subject ("Target Material Contract") . For purposes
of this Section 2.13, a note, bond, mortgage, indenture, contract, lease,
license, agreement, understanding, arrangement, commitment, instrument, bid or
proposal shall be considered material if (i) it is with an affiliate or
associate of Target or of a Target Subsidiary or with a Target Minority Entity,
(ii) it is required to be described in or filed as an exhibit to any document
filed under the Securities Act or the Securities Exchange Act by an issuer
subject thereto, (iii) the financial obligation of Target or a Target
Subsidiary thereunder or applicable to the assets or properties of Target or a
Target Subsidiary could exceed $250,000, (iv) it provides for recurring monthly
revenues to Target or a Target Subsidiary in excess of $20,000, (v) it includes
any exclusivity or non-competition restrictions applicable to Target or a
Target Subsidiary, (vi) it is for the purchase or sale of any assets otherwise
than in the ordinary course of business, or (vii) it is a collective bargaining
or similar agreement or an agreement relating to which employees of Target or
any of the Target Subsidiaries are represented by a union in their employment
relationship with Target and any of the Target Subsidiaries. Target has made
available to Acquiror true and accurate copies of all Target Material
Contracts. Target Material Contracts are valid and binding and are in full
force and effect and enforceable in accordance with their respective terms
(assuming the other parties thereto are bound, as to which Target has no basis
to believe otherwise), subject to the Enforceability Exceptions. Any and all
transactions between or involving Target or a Target Subsidiary and an
affiliate or associate thereof were entered into in the ordinary course of
business and are upon fair and reasonable terms not materially less favorable
than Target or such Target Subsidiary could obtain or become entitled to in an
arm's-length transaction with a person that is not an affiliate or an
associate. Except as set forth in Schedule 2.6(b) attached hereto, (i) no
Consent of any person is needed in order that each such Target Material
Contract shall continue in full force and effect in accordance with its terms
without penalty, acceleration or rights of early termination by reason of any
change of control of Target or any of the Target Subsidiaries, including,
without limitation, any acquisition of Target Common Stock by Acquiror or any
of its affiliates or associates, or the execution, delivery or performance of
this Agreement and the Target Ancillary Agreements or the consummation of the
transactions contemplated hereby or thereby, and (ii) neither Target nor any
Target Subsidiary is in violation or breach of or default under any such Target
Material Contract, nor to Target's knowledge is any other party to any such
Target Material Contract in violation or breach of or default under any such
Target Material Contract.
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2.14 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth in Schedule 2.14 attached hereto, there
are no Benefit Plans (as defined below) maintained or contributed to by Target
or a Target Subsidiary under which Target, a Target Subsidiary or the Surviving
Corporation could incur any liability. A "Benefit Plan" shall include (i) an
employee benefit plan as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended, together with all regulations
thereunder ("ERISA"), even if, because of some other provision of ERISA, such
plan is not subject to any or all of ERISA's provisions, and (ii) whether or
not described in the preceding clause, (a) any pension, profit sharing, stock
bonus, deferred or supplemental compensation, retirement, thrift, stock
purchase, stock appreciation or stock option plan, or any other compensation,
welfare, fringe benefit or retirement plan, program, policy, course of conduct,
understanding or arrangement of any kind whatsoever, whether formal or
informal, oral or written, providing for benefits for or the welfare of any or
all of the current or former employees or agents of Target or a Target
Subsidiary or their beneficiaries or dependents, (b) a multi-employer plan as
defined in Section 3(37) of ERISA (a "Multi-employer Plan"), or (c) a multiple
employer plan as defined in Section 413 of the Code.
(b) With respect to each Benefit Plan (where applicable): Target
has made available to Acquiror complete and accurate copies of (i) all plan and
trust texts and agreements, insurance contracts and other funding arrangements;
(ii) annual reports on the Form 5500 series for the last three (3) years; (iii)
financial statements and/or annual and periodic accountings of plan assets for
the last three (3) years; (iv) the most recent determination letter received
from the Internal Revenue Service ("IRS"); (v) actuarial valuations for the
last three (3) years; and (vi) the most recent summary plan description as
defined in ERISA.
(c) With respect to each Benefit Plan while maintained or
contributed to by Target or a Target Subsidiary: (i) if intended to qualify
under Code Sections 401(a) or 403(a), such Benefit Plan has received a
favorable determination letter from the IRS that it so qualifies, and its trust
is exempt from taxation under Code Section 501(a) and nothing has since
occurred to cause the loss of the Benefit Plan's qualification; (ii) except for
payment of benefits made in the ordinary course of the plan administration, no
event has occurred and there exists no circumstance under which Target, a
Target Subsidiary or the Surviving Corporation could incur material liability
under ERISA, the Code or otherwise; (iii) no accumulated funding deficiency as
defined in Code Section 412 has occurred or exists; (iv) no material non-exempt
prohibited transaction as defined under ERISA and the Code has occurred; (v) no
reportable event as defined in Section 4043 of ERISA has occurred; (vi) all
contributions and premiums due have fully been made and paid on a timely basis;
and (vii) except as set forth on Schedule 2.14 attached hereto, all
contributions made or required to be made under any Benefit Plan meet the
requirements for deductibility under the Code, and all contributions accrued
prior to the Effective Time which have not been made have been properly
recorded on the Target Financial Statements.
(d) No Benefit Plan of Target or a Target Subsidiary is a defined
benefit pension plan subject to Title IV of ERISA or Section 412 of the Code.
Each of such Benefit Plans has been maintained in compliance with its terms and
all applicable Law, except where the failure to do so would not result in a
Target Material Adverse Effect or a Surviving Corporation Material
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Adverse Effect (as hereinafter defined). Neither Target nor any of the Target
Subsidiaries contributes to, or has any outstanding liability with respect to,
any Multi-employer Plan.
(e) With respect to each Benefit Plan which is a welfare plan (as
defined in ERISA Section 3(1)): (i) any liability for medical or death benefits
with respect to current or former employees beyond their termination of
employment is set forth in the Target Financial Statements (or footnotes
thereto) to the extent required to be so set forth by applicable accounting
principles; (ii) there are no reserves, assets, surplus or prepaid premiums
under any such plan; (iii) except as set forth in Schedule 2.14 attached
hereto, no term or provision of any such plan prohibits the amendment or
termination thereof; and (iv) Target and the Target Subsidiaries have complied
with Code Section 4980B, except for any deviations from the foregoing which do
not and would not have a Target Material Adverse Effect or a Surviving
Corporation Material Adverse Effect.
(f) Except as set forth in Schedule 2.14 attached hereto, the
consummation of the Merger or the other transactions contemplated by this
Agreement or the Target Ancillary Agreements or any change of control of Target
or any of the Target Subsidiaries, including, without limitation, any
acquisition of Target Common Stock by Acquiror or any of its affiliates or
associates, will not, either alone or in conjunction with another Event: (i)
entitle any individual to severance pay, or (ii) accelerate the time of payment
or vesting of benefits or increase the amount of compensation or benefits due
to any individual.
2.15 TAXES AND TAX RETURNS.
(a) Except as disclosed in Schedule 2.15 attached hereto,
Target and each of the Target Subsidiaries has timely filed, or caused to be
timely filed, all federal, state, local and foreign income, gross receipts,
sales, use, property, production, payroll, franchise, withholding, employment,
social security, license, excise, transfer, gains, and other tax returns or
reports required to be filed by it (any of the foregoing being referred to
herein as a "Tax Return"), and each such Tax Return is true, correct and
complete, and further, Target and each of the Target Subsidiaries has paid,
collected or withheld, or caused to be paid, collected or withheld, all taxes
and governmental charges, assessments and contributions of any nature
whatsoever including, but not limited to, any related penalties, interest and
liabilities (any of the foregoing being referred to herein as a "Tax"),
required to be paid, collected or withheld, other than such Taxes for which
adequate reserves in the Target Financial Statements have been established or
which are being contested in good faith and have been disclosed in writing to
Acquiror prior to the date of this Agreement. Except as set forth in Schedule
2.15 attached hereto, there are no claims or assessments pending against Target
or any Target Subsidiary for any alleged deficiency in any Tax, and Target does
not know of any threatened Tax claims or assessments against Target or any
Target Subsidiary (other than those for which adequate reserves in the Target
Financial Statements have been established or which are being contested in good
faith and have been disclosed in writing to Acquiror prior to the date of this
Agreement). Except as set forth in Schedule 2.15 attached hereto, neither
Target nor any Target Subsidiary has made an election under Section 338 of the
Code or has taken any action that would result in any Tax liability of Target
or any Target Subsidiary as a result of a deemed election within the meaning of
Section 338 of the Code. Except as set forth in Schedule 2.15 attached hereto,
neither Target nor any
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Target Subsidiary has any waivers or extensions of any applicable statute of
limitations to assess any Taxes. Except as set forth in Schedule 2.15 attached
hereto, there are no outstanding requests by Target or a Target Subsidiary for
any extension of time within which to file any Tax Return or within which to
pay any Taxes shown to be due on any Tax Return. Except as set forth on
Schedule 2.15 attached hereto, no taxing authority is conducting or has
notified or, to the knowledge of Target, has threatened Target or any Target
Subsidiary that it intends to conduct, an audit of any prior Tax period of
Target or any of its past or present subsidiaries. Except as disclosed in
Schedule 2.15 attached hereto, neither Target nor any Target Subsidiary has
ever been an "S" corporation under the Code.
(b) Neither Target nor any Target Subsidiary is a party to
any Tax sharing agreements or similar arrangements with respect to or involving
Target or a Target Subsidiary.
(c) Neither Target nor any Target Subsidiary has made or
become obligated to make, or will, as a result of the transactions contemplated
by this Agreement, make or become obligated to make, any "excess parachute
payment" as defined in Section 280G of the Code.
(d) Neither Target nor any Target Subsidiary is or has been a
United States real property holding company (as defined in Section 897(c)(2) of
the Code) during the applicable period specified in Section 897(c)(1)(A)(ii) of
the Code.
(e) Neither Target nor any Target Subsidiary is a person
other than a United States person within the meaning of the Code.
(f) None of the assets of Target or of any Target Subsidiary
is property which Target or any Target Subsidiary is required to treat as being
owned by any other person pursuant to the so-called "safe harbor lease"
provisions of former Section 168(f)(8) of the Code.
(g) Target and each Target Subsidiary have disclosed on their
federal income Tax Returns all positions taken therein that could give rise to
a substantial understatement of federal income tax liability within the meaning
of Section 6662(d) of the Code.
(h) There are no liens for Taxes on the assets of Target or
any Target Subsidiary except for statutory liens for current Taxes not yet due
and payable.
(i) All elections with respect to Taxes affecting Target and
the Target Subsidiaries are set forth in Schedule 2.15 attached hereto or, with
respect to elections made on or before March 31, 1999, are reflected in the Tax
Returns of Target filed and provided to Acquiror prior to the date of this
Agreement. Neither Target nor any Target Subsidiary: (i) has made or will make
a deemed dividend election under former Treas. Reg. Section 1.1502-32(f)(2) or
a consent dividend election under Section 565 of the Code; (ii) has consented
at any time under Section 341(f)(l) of the Code to have the provisions of
Section 341(f)(2) of the Code apply to any disposition of the assets of Target
or any Target Subsidiary; (iii) has agreed, or is required, to make any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method or otherwise; (iv) has made an express election, or is required, to
treat any asset of Target or any Target Subsidiary as owned by another person
for federal income tax purposes or as
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tax-exempt bond financed property or tax-exempt use property within the meaning
of Section 168 of the Code; or (v) has made any of the foregoing elections or is
required to apply any of the foregoing rules under any comparable state, foreign
or local income Tax provision.
(j) Target and the Target Subsidiaries are not and have never
been includible corporations in an affiliated group of corporations, within the
meaning of Section 1504 of the Code, other than in the affiliated group of
which Target is the common parent corporation.
(k) Except as set forth in Schedule 2.15 attached hereto, the
consolidated net operating losses, net capital losses, foreign tax credits,
investment and other tax credits set forth in the Target Financial Statements
are not subject to any limitations under Section 382, Section 383 or the
Treasury regulations (whether temporary, proposed or final) under Section 1502
of the Code.
(l) Except as set forth in Schedule 2.15 attached hereto,
neither Target nor any Target Subsidiary is a partner or member in or subject
to any joint venture, partnership, limited liability company or other
arrangement or contract that is or could be treated as a partnership for
federal income tax purposes.
(m) Except as set forth in Schedule 2.15 attached hereto,
neither Target nor any Target Subsidiary is a party to or otherwise subject to
any arrangement having the effect of or giving rise to the recognition of a
deduction or loss before the Effective Time, and a corresponding recognition of
taxable income or gain after the Effective Time, or any other arrangement that
would have the effect of or give rise to the recognition of taxable income or
gain by Target or a Target Subsidiary after the Effective Time without the
receipt of or entitlement to a corresponding amount of cash.
2.16 LIABILITIES. From December 31, 1998, through the date of this
Agreement, except as expressly disclosed in the Target Securities Filings made
available by Target to Acquiror prior to the date of this Agreement or in
Schedule 2.16 attached hereto, Target and the Target Subsidiaries do not have
any direct or indirect indebtedness, liability, claim, loss, damage,
deficiency, obligation or responsibility, fixed or unfixed, choate or inchoate,
liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent
or otherwise, whether or not of a kind required by generally accepted
accounting principles to be set forth in a financial statement other than those
incurred in the ordinary course of business and in an amount not in excess of
$500,000 individually or $2,000,000 in the aggregate. Except as set forth on
Schedule 2.16 attached hereto or reflected in the Target Securities Filings
made available by Target to Acquiror prior to the date of this Agreement, as of
the date of this Agreement, neither Target nor the Target Subsidiaries have any
(i) obligations in respect of borrowed money, (ii) obligations evidenced by
bonds, debentures, notes or other similar instruments, (iii) obligations which
would be required by generally accepted accounting principles to be classified
as "capital leases," (iv) obligations to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business and payable not more than twelve (12) months from the date
of incurrence, and (v) any guaranties of any obligations of any other person.
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2.17 ENVIRONMENTAL MATTERS. As of the date of this Agreement, (i)
Target and the Target Subsidiaries are in compliance in all material respects
with all applicable Environmental Laws (as hereinafter defined), (ii) there is
no civil, criminal or administrative judgment, action, suit, demand, claim,
hearing, notice of violation, investigation, proceeding, notice or demand
letter pending or, to the knowledge of Target, threatened against Target, a
Target Subsidiary or any of their properties pursuant to Environmental Laws,
and (iii) except as set forth on Schedule 2.17 attached hereto, there are no
past or present Events which reasonably may be expected to prevent compliance
with, or which have given rise to or will give rise to material liability on
the part of Target or a Target Subsidiary under, Environmental Laws. As used
herein the term "Environmental Laws" shall mean Laws relating to pollution,
chemical usage, waste or emission control, the management, generation, presence
or disposal of asbestos, hazardous or toxic wastes or substances, the
protection or remediation of the environment, environmental activity, product
stewardship or public health and safety.
2.18 INTELLECTUAL PROPERTY.
(a) For purposes of this Agreement, "Intellectual Property" shall
mean all U.S. and foreign patents, trademarks, service marks, trade names,
copyrights, franchises and similar rights of or used by Target or a Target
Subsidiary, all applications for any of the foregoing and all permits, grants
and licenses or other rights running to or from Target or any of the Target
Subsidiaries relating to any of the foregoing and any and all goodwill
associated therewith. Target or one of the Target Subsidiaries owns, or is
licensed to, or otherwise has, the full and exclusive rights to use all right,
title and interest in, to and under any and all Intellectual Property
identified on Schedule 2.18(a)(1) and any and all goodwill associated
therewith. Except as set forth on Schedule 2.18(a)(2), Target or one of the
Target Subsidiaries owns, or is licensed to use, or otherwise has, legally
enforceable rights to all of the Intellectual Property currently used or
proposed to be used in, and necessary for the conduct of the business of Target
and the Target Subsidiaries as presently or proposed to be conducted. The
rights of Target and the Target Subsidiaries in the Intellectual Property are,
subject to the rights of any licensor thereof, free and clear of any liens or
other encumbrances and restrictions and Target and the Target Subsidiaries have
not received, as of the date of this Agreement, notice of any adversely-held
Intellectual Property of any other person, or notice of any charge or claim of
any person relating to such Intellectual Property or any process or
confidential information of Target or any Target Subsidiary ("Claim Notice")
and do not know of any basis for any such charge or claim. Target, the Target
Subsidiaries and their respective predecessors, if any, have not conducted
business at any time during the period beginning five (5) years prior to the
date hereof under any corporate, trade or fictitious names other than their
current corporate names. Target shall promptly notify, and shall cause the
Target Subsidiaries to promptly notify, Acquiror of any Claim Notice received
by Target or a Target Subsidiary after the date of this Agreement. The business
of each of Target and the Target Subsidiaries, presently conducted, does not
conflict with and, to the knowledge of Target, has not been alleged to conflict
with any patents, trademarks, trade names, service marks, copyrights or other
intellectual property rights of others. The execution and delivery of this
Agreement, the Target Ancillary Agreements, the consummation of the
transactions contemplated hereby and thereby and any change of control of
Target or any of the Target Subsidiaries, including, without limitation, any
acquisition of Target Common Stock by Acquiror or any of its affiliates or
associates, will not result in the loss or impairment of any of
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the Intellectual Property rights or Target's or any Target Subsidiaries' right
to use any of the licensed Intellectual Property rights. To the knowledge of
Target, there are no third parties using any of the Intellectual Property
rights material to the business of Target or any Target Subsidiaries as
presently conducted.
(b) Without limiting the generality of paragraph (a) above,
except as disclosed in Schedule 2.18(b), each of Target and the Target
Subsidiaries owns, or possesses valid rights to, all computer software programs
that are material to the conduct of the business of the Target and Target
Subsidiaries. To Target's knowledge, there are no infringement suits, actions
or proceedings pending or threatened against the Target or any Target
Subsidiary with respect to any software owned or licensed by the Target or any
Target Subsidiary.
2.19 REAL ESTATE.
(a) Neither Target nor any of the Target Subsidiaries owns or
has any agreement or other right to acquire any real property as of the date of
this Agreement.
(b) Schedule 2.19(b) attached hereto sets forth a true,
correct and complete schedule as of the date of this Agreement of all material
leases, subleases, easements, rights-of-way, licenses or other agreements under
which Target or any of the Target Subsidiaries uses or occupies, or has the
right to use or occupy, now or in the future, any real property or improvements
thereon (the "Target Real Property Leases"), including, without limitation, all
agreements relating to the location of towers and transmitters (the "Tower Site
Leases") . Schedule 2.19(b) accurately and completely lists and sets forth a
description (including location of premises, term and assignability) of the
Tower Site Leases and office and studio space and the same constitute the only
Tower Site Leases and other leases necessary in connection with the conduct of
business by Target and any of the Target Subsidiaries as currently conducted.
Each of Target and the Target Subsidiaries enjoys quiet possession under all
leases (including Tower Site Leases) to which it is a party as lessee, and all
of such leases are valid, subsisting, and in full force and effect. Except as
set forth in Schedule 2.19(b), upon a any change of control of Target or the
Target Subsidiaries, including, without limitation, any acquisition of Target
Common Stock by Acquiror or any of its affiliates or associates, or the
execution or delivery of this Agreement and the Target Ancillary Agreements or
the consummation of the Merger or the transactions contemplated hereby or
thereby, all such Target Real Property Leases shall continue in full force and
effect in accordance with their terms, without penalty, acceleration or rights
of early termination. Except for the matters listed on said Schedule 2.19(b),
Target or a Target Subsidiary, as indicated thereon, holds the leasehold estate
under or other interest in each Target Real Property Lease free and clear of
all liens, encumbrances and other rights of occupancy other than statutory
landlords or mechanics' liens which have not been executed upon.
(c) All of the existing towers owned by Target or any Target
Subsidiaries and, to the best of Target's knowledge, all of the other existing
towers, used in the operation of the Systems are obstruction-marked and lighted
to the extent required by, and in accordance with, the rules and regulations of
the Federal Aviation Administration (the "FAA") or the FCC. Appropriate
notification to the FAA has been filed for each tower where required by the
rules and regulations of the FAA or FCC.
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2.20 CORPORATE RECORDS. The respective corporate record books of
or relating to Target and each of the Target Subsidiaries have been made
available to Acquiror by Target and contain materially accurate and complete
records of (i) all corporate actions of the respective shareholders and
directors (and committees thereof) of Target and the Target Subsidiaries, (ii)
the Certificate and/or Articles of Incorporation, By-Laws and/or other
governing instruments, as amended, of Target and the Target Subsidiaries, and
(iii) the issuance and transfer of stock of Target and the Target Subsidiaries.
Except as set forth on Schedule 2.20 attached hereto, neither Target nor any
Target Subsidiary has any of its material records or information recorded,
stored, maintained or held off the premises of Target and the Target
Subsidiaries.
2.21 TITLE TO AND CONDITION OF PERSONAL PROPERTY. Target and each
of the Target Subsidiaries have good and marketable title to, or a valid
leasehold interest in, all material items of any personal property reflected in
the Target Financial Statements dated December 31, 1998, or currently used in
the operation of their respective businesses, and such property or leasehold
interests are free and clear of all liens, claims, charges, security interests,
options, or other title defects or encumbrances, except for property disposed
of in the ordinary course since the date thereof consistent with the provisions
of Section 2.9, above, and such exceptions to title and liens, claims, charges,
security interests, options, title defects or encumbrances which do not and
would not have a Target Material Adverse Effect or interfere with the use and
enjoyment of such property and interests. As of the date of this Agreement, all
such personal property is in good operating condition and repair (ordinary wear
and tear excepted), is suitable for the use to which the same is customarily
put by Target or any Target Subsidiary, is, to the knowledge of Target, free
from inherent or latent manufacturing defects, and is free from all other
material defects and is of a quality and quantity presently usable in the
ordinary course of the operation of the business of Target and the Target
Subsidiaries.
2.22 NO ADVERSE ACTIONS. Except as set forth on Schedule 2.22
attached hereto, there is no existing, pending or, to the knowledge of Target,
threatened termination, cancellation, limitation, modification or change in the
business relationship of Target or any of the Target Subsidiaries, with any
supplier, customer or other person except as are immaterial individually and in
the aggregate and are in the ordinary course of business. None of Target, any
Target Subsidiary or, to the knowledge of Target, any director, officer, agent,
employee or other person acting on behalf of any of the foregoing has used any
corporate funds for unlawful contributions, payments, gifts, entertainment or
other unlawful expenses relating to political activity, or made any direct or
indirect unlawful payments to governmental or regulatory officials or others.
2.23 LABOR MATTERS. Except as set forth on Schedule 2.13 or
Schedule 2.23 attached hereto, neither Target nor any of the Target
Subsidiaries has any obligations, contingent or otherwise, under any
employment, severance or consulting agreement, collective bargaining agreement
or other contract with a labor union or other labor or employee group. To the
knowledge of Target, as of the date of this Agreement, there are no efforts
presently being made or threatened by or on behalf of any labor union with
respect to the unionizing of employees of Target or any Target Subsidiary. As
of the date of this Agreement, there is no unfair labor practice complaint
against Target or any Target Subsidiary pending or, to the knowledge of Target,
threatened before the National Labor Relations Board or comparable agency;
there is no labor strike, dispute, slowdown or stoppage pending or, to the
knowledge of Target, threatened
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against or involving Target or any Target Subsidiary; no representation
question exists respecting the employees of Target or any Target Subsidiary; no
grievance or internal or informal complaint exists, no arbitration proceeding
arising out of or under any collective bargaining agreement is pending and no
claim therefor has been asserted; no collective bargaining agreement is
currently being negotiated by Target or any Target Subsidiary; and neither
Target nor any Target Subsidiary is experiencing any work stoppage, strike,
slowdown or other labor difficulty. As of the date of this Agreement, there has
not been, and to the knowledge of Target there will not be, any material
adverse change in relations with employees or agents of Target or any Target
Subsidiary as a result of any announcement or consummation of the transactions
contemplated by this Agreement or the Target Ancillary Agreements or any change
of control of Target or the Target Subsidiaries, including, without limitation,
any acquisition of Target Common Stock by Acquiror or any of its affiliates or
associates. Target shall promptly notify, and shall cause the Target
Subsidiaries to promptly notify, Acquiror upon knowledge by Target or a Target
Subsidiary of the occurrence after the date hereof of any matter referenced in
this Section.
2.24 CHANGE OF CONTROL AGREEMENTS. Except as set forth in Schedule
2.24, neither the execution and delivery of this Agreement or the Target
Ancillary Agreements nor the consummation of the Merger or the other
transactions contemplated hereby or thereby, nor any change of control of
Target or the Target Subsidiaries, including without limitation, any
acquisition of Target Common Stock by Acquiror or any of its affiliates or
associates will (either alone or in conjunction with any other Event) result
in, cause the accelerated vesting or delivery of, or increase the amount of
value of, any payment or benefit to any director, officer or employee of Target
or any Target Subsidiary. Except as set forth in Schedule 2.24, without
limiting the generality of the foregoing, (x) no amount paid or payable by
Target in connection with the Merger or the other transactions contemplated by
this Agreement or the Target Ancillary Agreements, including accelerated
vesting of options, (either solely as a result thereof or as a result of such
transactions in conjunction with any other event) will be an "excess parachute
payment" within the meaning of Section 280G of the Code and (y) there are no
agreements or arrangements on behalf of any officer, director or employee
providing for payment or other benefits to such person contingent upon the
execution of this Agreement or the Target Ancillary Agreements or the
transactions contemplated hereby or thereby or a transaction involving a change
control of the Target or the Target Subsidiaries, including, without
limitation, any acquisition of Target Common Stock by Acquiror or any of its
affiliates or associates.
2.25 INSURANCE. Target and each of the Target Subsidiaries has
obtained and maintains in full force and effect insurance with responsible and
reputable insurance companies or associations in such amounts, on such terms
and covering such risks, including fire and other risks insured against by
extended coverage, public liability insurance and insurance against claims for
personal injury or death or property damage occurring in connection with the
activities of Target or the Target Subsidiaries or any properties owned,
occupied or controlled by them, as is customary and prudent. Neither Target nor
any of the Target Subsidiaries has received notice of default under, or
intended cancellation or nonrenewal of, any policies of insurance. Neither
Target nor any Target Subsidiary has been refused any insurance for coverage by
an insurance carrier to which it has applied for insurance.
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2.26 INFORMATION SUPPLIED. The Proxy Statement (as hereinafter
defined) to be mailed to the holders of Target Common Stock in connection with
the Shareholders' Meeting (as hereinafter defined) to be called to consider the
Merger at the date such document is first published, sent or delivered to the
holders of Target Common Stock or at any time prior to or during the pendency
of the Shareholders' Meeting, will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The Proxy Statement
and any related schedules or other filings made with the SEC, as contemplated
hereby, will comply as to form and substance in all material respects with the
requirements of the Securities Exchange Act and the applicable rules and
regulations of the SEC thereunder and other applicable Laws. Notwithstanding
the foregoing, no representation or warranty is made by Target with respect to
statements made or incorporated by reference therein based on information
relating solely to Acquiror or Acquisition Subsidiary supplied by Acquiror or
Acquisition Subsidiary in writing expressly for inclusion or incorporation by
reference in the foregoing document.
2.27 TAKEOVER STATUTES. No "business combination," "fair price,"
"moratorium," "control share acquisition" or other similar antitakeover statute
or regulation enacted under state or federal laws in the United States (each a
"Takeover Statute"), including, without limitation, Sections 33-840 et seq. of
the Connecticut Code (inasmuch as Target has taken all requisite corporate
action thereunder), applicable to Target or any of the Target Subsidiaries is
applicable to the Merger, this Agreement, the Target Ancillary Agreements or
the other transactions contemplated hereby or thereby or any change of control
of Target or the Target Subsidiaries, including, without limitation, any
acquisition of Target Common Stock by Acquiror or any of its affiliates or
associates.
2.28 TARGET RIGHTS PLAN. Under the Rights Agreement dated April
16, 1999, between Target and ChaseMellon Shareholder Services LLC, as Rights
Agent (the "Rights Plan"), Acquiror will not become an "Acquiring Person", no
"Stock Acquisition Date" or "Distribution Date" will occur and the "Rights"
will not separate from the Target Common Stock (as such terms are defined in
the Rights Plan), and Target's shareholders will not be entitled to receive any
benefits under the Rights Plan as a result of the approval, execution or
delivery of this Agreement, the Target Ancillary Agreements or the consummation
of the transactions contemplated hereby or thereby or the execution, delivery
or performance of any other agreement to acquire, or any other acquisition of,
Target Common Stock by Acquiror or any affiliate or associate. As of the
Effective Time, the Rights Plan will terminate and the "Rights" thereunder will
be of no further force or effect.
2.29 YEAR 2000. (a) The Target has initiated a review and
assessment of the Year 2000 Problem (as hereinafter defined), has developed a
plan for addressing the Year 2000 Problem on a timely basis and is implementing
such plan on a timely basis. Except as would not reasonably be expected to have
a Target Material Adverse Effect, to the best knowledge of the Target after due
inquiry, none of the assets or equipment owned or utilized by Target or any of
the Target Subsidiaries will fail to perform because of, or due in any way to,
a Year 2000 Problem. To the best knowledge of the Target based on responses to
written inquiries made by Target or otherwise based on information brought
specifically to the attention of the Target, no
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vendor, supplier or customer of Target or any of the Target Subsidiaries is
reasonably expected to experience Year 2000 Problem that, individually or in
the aggregate, could constitute a Target Material Adverse Effect. The term
"Year 2000 Problem" means the inability of any hardware, software or process to
recognize or correctly calculate dates on and after January 1, 2000, or the
failure of computer systems, products or services to perform any of their
intended functions in a proper manner in connection with data containing any
date on or after January 1, 2000.
(b) Target has made available to Acquiror Target's plan to
address the Year 2000 Problem (the "Year 2000 Plan"). To the Target's
knowledge, the Year 2000 Plan will enable the Target and the Target
Subsidiaries to be Year 2000 Compliant in a timely manner except as to matters
which are not reasonably likely to result in a Target Material Adverse Effect
and the aggregate cost for the Target and the Target Subsidiaries to become
Year 2000 Compliant is estimated to be $800,000. "Year 2000 Compliant" means
that (a) the products, services, or other item(s) at issue accurately process,
provide and/or receive date/time data (including calculating, comparing, and
sequencing), within, from, into, and between centuries (including the twentieth
and twenty-first centuries and the years 1999 and 2000), including leap year
calculations, and (b) neither performance nor the functionality nor the supply
of the products, services, and other items at issue will be affected by
dates/times prior to, on, after, or spanning January 1, 2000. The design of the
products, services, and other items at issue to ensure compliance with the
foregoing warranties and representations includes proper date/time data century
recognition and recognition of 1999 and 2000, calculations that accommodate
same century and multicentury formulae and date/time values before, on, after,
and spanning January 1, 2000, and date/time data interface values that reflect
the century, 1999 and 2000.
2.30 TARGET OPTIONS. Upon the consummation of the Merger, each of
Target's outstanding Options to acquire shares of Target Common Stock shall,
pursuant to their terms as amended as contemplated hereby, if vested as of the
Effective Time, become converted into the right to receive an amount in cash
equal to the Option Consideration, as contemplated by Section 1.7, or, if
unvested, shall become converted into the right to receive an amount in cash
equal to the Option Consideration, as contemplated by Section 1.7, and shall
become vested following the Effective Time in accordance with their terms.
2.31 TRANSACTION WITH AFFILIATES. Except as set forth in Schedule
2.31 (other than compensation and benefits received in the ordinary course of
business as an employee or director of Target or the Target Subsidiaries), no
director, officer or any other affiliate or associate of Target or any of the
Target Subsidiaries or any entity in which, to the knowledge of Target, any
such director, officer or other affiliate or associate, owns any beneficial
interest (other than a publicly held corporation whose stock is traded on a
national securities exchange or in the over-the-counter market and less than 1%
of the stock of which is beneficially owned by such persons), (A) has any
interest in: (i) any contract, arrangement or understanding with, or relating
to the business or operations of Target or any of the Target Subsidiaries; (ii)
any loan, arrangement, understanding, agreement or contract for or relating to
indebtedness of Target or any of the Target Subsidiaries, or (ii) any property
(real, personal or mixed), tangible or intangible, used or currently intended
to be used in, the business or operations of Target or any of the Target
Subsidiaries or (B) is an obligor under any notes receivable of Target or any
of the Target Subsidiaries.
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2.32 NO EXISTING DISCUSSIONS. As of the date hereof, Target is not
engaged, directly or indirectly, in any negotiations or discussions with any
other party with respect to a Takeover Proposal (as hereinafter defined).
2.33 TELQUEST
(a) TelQuest Satellite Services LLC ("TelQuest") is a limited
liability company duly organized, validly existing and in good standing under
the laws of Delaware and has all requisite limited liability company power and
authority to own, lease and operate its properties and to carry on its
business. TelQuest is in good standing to do business in each jurisdiction in
which the character of the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified and in good standing would not have
a Target Material Adverse Effect. As of the date hereof, the authorized
capitalization of TelQuest is as set forth on Schedule 2.33(a)(1) and each of
Target and CS has a 28.34% membership interest, subject to dilution as set
forth on Schedule 2.33(a)(2); and all outstanding interests in TelQuest are
duly authorized, validly issued and fully paid and non-assessable and issued
free of preemptive rights and in compliance with applicable Laws. Except as set
forth on Schedule 2.33(a)(2), there are no outstanding rights, reservations of
shares, subscriptions, warrants, puts, calls, unsatisfied preemptive rights,
options or other agreements of any kind relating to any of the interests in or
any other security of TelQuest, and there is no authorized or outstanding
interest or other security of any kind convertible into or exchangeable for any
such interest or other security.
(b) Except as set forth on Schedule 2.33(b), TelQuest has no
Subsidiaries, and holds no direct or indirect capital stock or other interest
in any other person. The business, affairs, financial condition or results of
operations are not, and are not required to be, reported in the Target
Financial Statements and are not reflected in the Target Approved Budget or the
CS Approved Budget, except to the extent reported on an equity basis.
(c) The execution and delivery of this Agreement and the Target
Ancillary Agreements, the consummation of the transactions contemplated hereby
and thereby and compliance by Target with any of the provisions hereof or
thereof, and any change of control of Target or any of the Target Subsidiaries,
including, without limitation, any acquisition of Target Common Stock by
Acquiror or any of its affiliates or associates, will not (i) conflict with or
result in any breach of any provision of any governing instruments of TelQuest
or any of its Subsidiaries ("TelQuest Subsidiaries") , (ii) require any Consent
relating directly or indirectly to TelQuest or any of the TelQuest Subsidiaries
or result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration or augment the performance required)
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, contract, lease, license, agreement, understanding, instrument, bid
or proposal or other obligation relating directly or indirectly to TelQuest or
any of the TelQuest Subsidiaries, or (iii) result in the creation or imposition
of any lien or encumbrance of any kind upon any of the assets of TelQuest or
any of the TelQuest Subsidiaries, or (iv) contravene any applicable Law
currently in effect to which TelQuest or any of the TelQuest Subsidiaries or
any of its assets or properties is subject.
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(d) Except as set forth on Schedule 2.33(d), neither Target nor
any Target Subsidiary has any direct or indirect obligation or liability, fixed
or unfixed, choate or inchoate, liquidated or unliquidated, secured or
unsecured, accrued, absolute, contingent or otherwise, to invest, contribute,
loan, borrow, sell, assign, convey or otherwise transfer or dispose of, or to
provide, purchase or otherwise acquire, any funds, property or services, or
make any payments, to or from TelQuest or any of the TelQuest Subsidiaries or
otherwise to directly or indirectly participate in any transaction with or
relating to TelQuest or any of the TelQuest Subsidiaries, directly or
indirectly. No Event relating to or in connection with TelQuest or any of the
TelQuest Subsidiaries, directly or indirectly, does or could give rise to any
direct or indirect indebtedness, liability, claim, loss, damage, deficiency,
obligation or responsibility of, against or on the part of Target or any of the
Target Subsidiaries, fixed or unfixed, choate or inchoate, liquidated or
unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise,
whether or not of a kind required by generally accepted accounting principles
to be set forth in a financial statement.
2.34 DISCLOSURE. All information and documents provided prior to
the date of this Agreement, and all information and documents subsequently
provided, to Acquiror or its representatives or lenders by or on behalf of
Target in connection with the transactions contemplated by this Agreement are
or contain, or will be or will contain as to subsequently provided information
or documents, true, accurate and complete information in all material respects
with respect to the subject matter thereof and are, or will be as to
subsequently provided information or documents, reasonably responsive to any
specific request made by or on behalf of Acquiror or its representatives or
lenders.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND
CERTAIN COVENANTS OF ACQUIROR
Acquiror represents, warrants and/or covenants to and with Target as
follows:
3.1 ORGANIZATION AND GOOD STANDING. Acquiror is a corporation
duly organized and validly existing under the laws of the State of Georgia.
Acquisition Subsidiary is a corporation duly organized and validly existing
under the laws of the State of Connecticut. Acquiror and Acquisition Subsidiary
have all requisite corporate power and authority to own, lease and operate its
properties and to carry on their businesses as now being conducted, except
where the failure to have such power and authority would not have an Acquiror
Material Adverse Effect (as hereinafter defined). Acquiror and Acquisition
Subsidiary are duly qualified and in good standing to do business in each
jurisdiction in which the character of the property owned, leased or operated
by it or the nature of the business conducted by it makes such qualification
necessary, except where the failure to be so duly qualified and in good
standing would not have an Acquiror Material Adverse Effect. For purposes of
this Agreement, "Acquiror Material Adverse Effect" shall mean a material
adverse effect on (i) the business, assets, condition (financial or otherwise),
properties, liabilities, prospects or the results of operations of Acquiror and
its subsidiaries (including Acquisition Subsidiary) taken as a whole, (ii) the
ability of Acquiror to perform its obligations set forth in this Agreement and
the Acquiror Ancillary Agreements (as hereinafter
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defined), or (iii) the ability to timely consummate the transactions
contemplated by this Agreement and the Acquiror Ancillary Agreements.
3.2 AUTHORIZATION; BINDING AGREEMENT. Acquiror and Acquisition
Subsidiary have all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the other agreements and
documents referred to herein and to be executed in connection herewith to which
Acquiror or Acquisition Subsidiary is or will be a party or a signatory (the
"Acquiror Ancillary Agreements") and the consummation of the transactions
contemplated hereby and thereby including, but not limited to, the Merger have
been duly and validly authorized by the respective Boards of Directors of
Acquiror and Acquisition Subsidiary, as appropriate, and no other corporate
proceedings on the part of Acquiror or Acquisition Subsidiary are necessary to
authorize the execution and delivery of this Agreement and the Acquiror
Ancillary Agreements or to consummate the transactions contemplated hereby or
thereby. This Agreement has been duly and validly executed and delivered by
each of Acquiror and Acquisition Subsidiary and constitutes, and upon execution
and delivery thereof as contemplated by this Agreement, the Acquiror Ancillary
Agreements will constitute, the legal, valid and binding agreements of Acquiror
and Acquisition Subsidiary, enforceable against each of Acquiror and
Acquisition Subsidiary in accordance with its and their respective terms,
subject to the Enforceability Exceptions.
3.3 GOVERNMENTAL APPROVALS. No Consent from or with any
Governmental Authority on the part of Acquiror or Acquisition Subsidiary is
required in connection with the execution or delivery by Acquiror and
Acquisition Subsidiary of this Agreement and the Acquiror Ancillary Agreements
or the consummation by Acquiror and Acquisition Subsidiary of the transactions
contemplated hereby or thereby other than (i) filings with the SEC, state
securities laws administrators and the NASD and filing and recordation of
appropriate merger documents as required by the Connecticut Code, (ii) Consents
from or with Governmental Authorities, (iii) filings under the HSR Act, and
(iv) those Consents that, if they were not obtained or made, do not or would
not have an Acquiror Material Adverse Effect.
3.4 NO VIOLATIONS. The execution and delivery of this Agreement
and the Acquiror Ancillary Agreements, the consummation of the transactions
contemplated hereby and thereby and compliance by Acquiror and Acquisition
Subsidiary with any of the provisions hereof or thereof will not (i) conflict
with or result in any breach of any provision of the Certificate and/or
Articles of Incorporation or By-Laws or other governing instruments of Acquiror
or Acquisition Subsidiary, (ii) require any Consent under or result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration or augment the performance required) under any of the terms,
conditions or provisions of any Acquiror Material Contract (as hereinafter
defined) or other obligation to which Acquiror or the Acquisition Subsidiary is
a party or by which any of them or any of their properties or assets may be
bound, (iii) result in the creation or imposition of any lien or encumbrance of
any kind upon any of the assets of Acquiror or the Acquisition Subsidiary, or
(iv) subject to obtaining the Consents from Governmental Authorities referred
to in Section 3.3, above, contravene any Law currently in effect to which
Acquiror or the Acquisition Subsidiary or its or any of their respective assets
or properties are subject, except in the case of clauses (ii), (iii)
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and (iv), above, for any deviations from the foregoing which do not or would
not have an Acquiror Material Adverse Effect. An "Acquiror Material Contract"
is any material note, bond, mortgage, indenture, contract, lease, license,
agreement, understanding, instrument, bid or proposal that is required to be
described in or filed as an exhibit to any reports, statements or registration
statements filed, or required be filed, by Acquiror pursuant to the Securities
Act or the Securities Exchange Act.
3.5 FINDERS AND INVESTMENT BANKERS. Neither Acquiror nor any of
its officers or directors has employed any broker or finder other than
Donaldson, Lufkin & Jenrette Securities Corporation or otherwise incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby.
3.6 INFORMATION SUPPLIED. None of the information relating solely
to Acquiror or Acquisition Subsidiary supplied or to be supplied by Acquiror or
Acquisition Subsidiary in writing expressly for inclusion or incorporation by
reference in the Proxy Statement (as hereinafter defined) will, at the date
such document is first published, sent or delivered to holders of Target Common
Stock or, at any time during the pendency of the Shareholders' Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing, no representation or warranty is
made by the Acquiror or Acquisition Subsidiary with respect to statements made
or incorporated by reference therein based on information supplied by the
Target for inclusion or incorporation by reference in the foregoing document.
3.7 ACQUIROR OWNERSHIP. As of the date of this Agreement,
Acquiror is a party to agreements to purchase an aggregate of approximately
10,555,140 shares of Target Common Stock, $35,418,097 face amount of 13% Senior
Notes due 2004 of Target and $86,750,000 face amount of 11.375% Senior Discount
Notes due 2006 of CS. The agreements provide, among other things, that
Acquiror's obligation to purchase such securities is subject to certain
conditions, including one or more of the following conditions generally
relating to the delivery of the shares, the accuracy of representations and
warranties of the sellers, the performance of certain covenants by the sellers,
the expiration of any waiting period under the HSR Act, the receipt of the
Consent of the FCC, the absence of certain actions or proceedings or orders or
decrees, and the failure of the agreement to be terminated. The agreements
provide, among other things, that the sellers' obligations to sell such
securities are subject to certain conditions, including one or more of the
following conditions generally relating to payment, the accuracy of
representations and warranties of Acquiror, the performance of certain
covenants by Acquiror, the absence of certain actions or proceedings or orders
or decrees, and the failure of the agreement to be terminated. As of the date
of this Agreement, Acquiror is the beneficial owner (as assignee or otherwise)
of approximately (i) $83,994,512 aggregate principal amount of 13% Senior Notes
due 2004 issued by Target, and (ii) $30.0 million principal amount of the
Senior Secured A Note due October 14, 2000 and $50.0 million principal amount
of the Senior Secured B Note due October 14, 2000 (the "Senior Secured Notes"),
each issued under the Note Purchase Agreement dated as of October 14, 1998 of
Target (the "Senior Secured Credit Facility"), and (iii) $129,000,000 aggregate
principal amount of 11.375% Senior Notes due 2006 issued by CS.
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ARTICLE IV
ADDITIONAL COVENANTS OF TARGET
Target represents, covenants and agrees as follows:
4.1 CONDUCT OF BUSINESS OF TARGET AND TARGET SUBSIDIARIES. Except
as expressly contemplated by this Agreement, during the period from the date of
this Agreement to the Effective Time, Target shall conduct, and it shall cause
the Target Subsidiaries to conduct, its or their respective businesses in the
ordinary course and consistent with past practice, subject to the limitations
contained in this Agreement, and Target shall, and it shall cause the Target
Subsidiaries to, use its or their respective reasonable business efforts to
preserve intact its or their respective business organizations, to maintain and
protect the FCC Licenses and Channel Leases, to keep available the services of
its officers, agents and employees and to maintain satisfactory relationships
with all persons with whom any of them does business. Without limiting the
generality of the foregoing, and except as otherwise expressly provided in this
Agreement, after the date of this Agreement and prior to the Effective Time,
neither Target nor any Target Subsidiary will, without the prior written
consent of Acquiror:
(i) amend or propose to amend its Certificate or Articles
of Incorporation or By-Laws (or comparable governing instruments) in any
material respect;
(ii) authorize for issuance, issue, grant, sell, pledge,
dispose of or propose to issue, grant, sell, pledge or dispose of any shares
of, or any options, warrants, commitments, subscriptions or rights of any kind
to acquire or sell any shares of, the capital stock or other securities of
Target or any Target Subsidiary including, but not limited to, any securities
convertible into or exchangeable for shares of stock of any class of Target or
any Target Subsidiary, except for the issuance of shares of Target Common Stock
pursuant to the exercise of stock options or warrants outstanding on the date
of this Agreement or under the Rights Plan in accordance with their present
terms;
(iii) split, combine or reclassify any shares of its capital
stock or declare, pay or set aside any dividend or other distribution (whether
in cash, stock or property or any combination thereof) in respect of its
capital stock, other than dividends or distributions to Target or a Target
Subsidiary wholly owned by Target, or directly or indirectly redeem, purchase
or otherwise acquire or offer to acquire any shares of its capital stock or
other securities;
(iv) (a) except for debt (including, but not limited to,
obligations in respect of capital leases) not in excess of the amounts set
forth in the Target Approved Budget (except as contemplated in the last
paragraph of this Section 4.1), with respect to Target and the Target
Subsidiaries (other than CS and the CS Subsidiaries), or the CS Approved
Budget, with respect to CS and the CS Subsidiaries, create, incur or assume any
short-term debt, long-term debt or obligations in respect of capital leases;
(b) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, indirectly, contingently or otherwise) for the obligations
of any person, except for obligations permitted by this Agreement of any wholly
owned Target Subsidiary in the ordinary course of business consistent with past
practice; (c) make any capital expenditures or make any loans, advances or
capital contributions to, or investments in, any other
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person (other than customary advances to employees made in the ordinary course
of business consistent with past practice), provided that Target will continue
to make capital expenditures, maintain, upgrade and expand its facilities and
those of the Target Subsidiaries (other than CS and the CS Subsidiaries) and
otherwise operate in accordance with the Target Approved Budget and that CS
will continue to make capital expenditures, maintain, upgrade and expand its
facilities and those of the CS Subsidiaries and otherwise operate in accordance
with the CS Approved Budget; (d) acquire the stock or assets of, or merge or
consolidate with, any other person or business; or (e) voluntarily incur any
material liability or obligation (absolute, accrued, contingent or otherwise);
(v) sell, transfer, mortgage, pledge or otherwise dispose
of, or encumber, or agree to sell, transfer, mortgage, pledge or otherwise
dispose of or encumber, any material assets or properties, real, personal or
mixed;
(vi) increase in any manner the compensation of any of its
officers, agents or employees other than any increases required pursuant to the
Target Material Contracts in accordance with their terms in effect on the date
of this Agreement and increases in the ordinary course of business consistent
with past practice not in excess on an individual basis of the lesser of 8.0%
of the current compensation of such individual or $10,000 per annum, or
increase in any manner the compensation of any director;
(vii) except as required by ERISA and only after reasonable
prior consultation with Acquiror, enter into, establish, amend, make
non-routine or material interpretations or determinations with respect to, or
terminate any employment, consulting, retention, change in control, collective
bargaining, bonus or other incentive compensation, profit sharing, health or
other welfare, stock option, stock purchase, restricted stock, or other equity,
pension, retirement, vacation, severance, deferred compensation or other
compensation or benefit plan, policy, agreement, trust, fund or arrangement
with, for or in respect of, any shareholder, officer, director, other employee,
agent, consultant, affiliate or associate;
(viii) make any elections with respect to Taxes that are
inconsistent with the prior elections reflected in the Target Financial
Statements as of and to the period ended December 31, 1998;
(ix) compromise, settle, forgive, cancel, grant any waiver
or release relating to or otherwise adjust any debts, claims, rights or
Litigation, except routine debts, claims, rights or Litigation in the ordinary
course of business consistent with past practice, involving only a payment not
in excess of $250,000 individually or $1,000,000 when aggregated with all such
payments by Target and the Target Subsidiaries combined;
(x) take any action or omit to take any action, which
action or omission, if taken prior to, on or after the date hereof, would
result in a breach of any of the covenants, representations or warranties of
Target set forth in this Agreement or would have a Target Material Adverse
Effect;
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(xi) enter into any lease or other agreement, or amend any
lease or other agreement, with respect to real property;
(xii) subject to clauses (xiv) and (xv) below, enter into or
amend any agreement or transaction (a) pursuant to which the aggregate
financial obligation of Target or a Target Subsidiary or the value of the
services to be provided could exceed $500,000 individually or $2,000,000 in the
aggregate for all such agreements or transactions, and (b) which is not
terminable upon no more than 30 days' notice by Target or the Target Subsidiary
involved without penalty in excess of $50,000 individually or $250,000 when
aggregated with the penalties under all such agreements or transactions;
(xiii) terminate any Channel Lease;
(xiv) enter into, amend, modify or waive any rights under
any Channel Lease (a) outside the ordinary course of business, provided,
however, that Acquiror shall not unreasonably withhold its consent, taking into
account the plans and objectives of Acquiror regarding Target and the Target
Subsidiaries, or (b) without providing notice to, and reasonable consultation
with, Acquiror prior to taking such action;
(xv) enter into, amend, modify, terminate or waive any
rights under (a) any Target Material Contract, including, without limitation,
any Tower Site Lease or System Agreement, other than Channel Leases and FCC
Licenses; or (b) any material agreement or other material obligation that
restricts, in any material respect, the activities of Target or a Target
Subsidiary; or (c) any agreement or obligation that restricts in any material
respect any other person;
(xvi) enter into any leasing or licensing agreements,
take-or-pay arrangements or other affiliations, alignments or agreements with
respect to any Channel Leases, provided, that Acquiror shall not unreasonably
withhold its consent, taking into account the plans and objectives of Acquiror
regarding Target and the Target Subsidiaries, and, provided further, that
Target or any of the Target Subsidiaries may, without the prior written consent
of Acquiror, renegotiate any Channel Leases in the ordinary course of business
and after prior notice to, and reasonable consultation with, Acquiror;
(xvii) take any action with respect to the indemnification of
any person;
(xviii) change any accounting practices or policies or
depreciation or amortization rates, except as required by generally accepted
accounting principles or Laws or as agreed to or requested by Target's auditors
after consultation with Acquiror's auditors;
(xix) adopt a plan of liquidation, dissolution, merger,
consolidation, share exchange, restructuring, recapitalization, or other
reorganization; or
(xx) resolve, agree, commit or arrange to do any of the
foregoing.
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Furthermore, Target covenants, represents and warrants that from and
after the date hereof, unless Acquiror shall otherwise expressly consent in
writing, Target shall, and Target shall cause each Target Subsidiary to, use
its or their reasonable business efforts to:
(i) keep in full force and effect insurance comparable in
amount and scope of coverage to insurance now carried by it or them;
(ii) pay all accounts payable and other obligations, when
they become due and payable, in the ordinary course of business
consistent with past practice and with the provisions of this
Agreement, except if the same are contested in good faith, and, in the
case of the failure to pay any material accounts payable or other
obligations which are contested in good faith, only after consultation
with Acquiror; and
(iii) comply in all material respects with all Laws
applicable to it or any of them or their respective properties, assets
or businesses and maintain in full force and effect all Target Permits
necessary for, or otherwise material to, such businesses.
Notwithstanding the foregoing and subject to certain conditions
described in the following sentence, Target may borrow up to $22.0 million from
CS on terms that are reasonably acceptable to Acquiror by increasing the
maximum principal amount of the Senior Secured B Notes due October 14, 2000
under the Senior Secured Credit Facility, and a non-transferable Senior Secured
B Note in such amount will be issued by Target to CS to evidence such borrowing
(the "CS Borrowing") , provided CS shall waive its right to participate in the
Facility B Fee (as such term is defined in the Senior Secured Credit Facility).
The proceeds of the CS Borrowing shall be used for the purpose of funding
general working capital purposes pursuant to the Target Approved Budget and
expenses incurred in connection with the transactions contemplated hereby prior
to the consummation of the Merger. Target's ability to borrow such sum from CS
shall be subject to the necessary documentation of the CS Borrowing on terms
satisfactory to Acquiror, the compliance with all applicable Laws, the
Certificate of Incorporation and the By-Laws of Target and CS, the obtaining of
all necessary Consents of Governmental Authorities and third parties and the
delivery of appropriate legal opinions, certificates, information and other
documentation, each in form and substance to the satisfaction of Acquiror.
Target hereby represents and warrants that the CS Borrowing shall not give rise
to liability or obligation for any brokerage fees, commissions, finder's fees
or other similar fees or expenses. Subject to and upon satisfaction of the
foregoing, Acquiror agrees that it will grant its consent to the CS Borrowing
as a holder of the Senior Secured Notes, the 13% Senior Notes due 2004 of
Target and the 11.375% Senior Notes due 2006 of CS, to the extent permitted
thereunder.
4.2 NOTIFICATION OF CERTAIN MATTERS. Target shall give prompt
notice to Acquiror if any of the following occur after the date of this
Agreement: (i) any notice of, or other communication relating to, a default or
Event which, with notice or lapse of time or both, would become a default under
any Target Material Contract; (ii) receipt of any notice or other communication
from any third party alleging that the Consent of such third party is or may be
required in connection with the transactions contemplated by this Agreement;
(iii) receipt of any material notice or other communication from any
Governmental Authority (including, but not limited to, the FCC, the NASD or any
other securities exchange) in connection with the
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transactions contemplated by this Agreement; (iv) the occurrence of an Event
which would have a Target Material Adverse Effect; (v) the commencement or
threat of any Litigation involving or affecting Target or any Target Subsidiary
or any affiliate, or any of their respective properties or assets, or, to its
knowledge, any employee, agent, director or officer of Target or any Target
Subsidiary, in his or her capacity as such or as a fiduciary under a Benefit
Plan of Target, which, if pending on the date hereof, would have been required
to have been disclosed in or pursuant to this Agreement or which relates to the
consummation of the Merger or any material development in connection with any
Litigation disclosed by Target in or pursuant to this Agreement or the Target
Securities Filings; and (vi) the occurrence of any Event that would cause a
breach by Target of any provision of this Agreement or a Target Ancillary
Agreement, including such a breach that would occur if such Event had taken
place on or prior to the date of this Agreement.
4.3 ACCESS AND INFORMATION. Between the date of this Agreement
and the Effective Time, Target and the Target Subsidiaries, upon reasonable
notice, will give, and shall direct its accountants and legal counsel to give,
Acquiror, its lenders and their respective authorized representatives
(including, without limitation, financial advisors, accountants and legal
counsel) at all reasonable times full access to all offices and other
facilities, to all personnel and to all contracts, agreements, commitments,
books and records (including, but not limited to, Tax Returns) of or pertaining
to Target and the Target Subsidiaries, will permit the foregoing to make such
inspections as they may reasonably require and will cause its officers and
employees promptly to furnish Acquiror with (a) such financial and operating
data and other information with respect to the business, assets, liabilities,
obligations and operations of Target and the Target Subsidiaries as Acquiror
may from time to time reasonably request including, but not limited to, data
and information required for inclusion in any of Acquiror's registration
statements and/or other filings with the SEC, and (b) a copy of each material
report, schedule and other document filed or received by Target or any Target
Subsidiary pursuant to the requirements of applicable securities Laws, the NASD
or other securities exchange or the FCC.
4.4 SHAREHOLDER APPROVAL; PROXY STATEMENT; SHAREHOLDER LISTS.
(a) As soon as practicable, Target will in accordance with
applicable Law, its Certificate of Incorporation and its By-Laws take all steps
necessary to duly call, give notice of, convene and hold a meeting of its
shareholders (the "Shareholders' Meeting") for the purpose of adopting this
Agreement and the Merger and the other transactions contemplated hereby and for
such other purposes as may be necessary or desirable in connection with
effectuating the transactions contemplated hereby. Except as otherwise
contemplated in this Agreement, the Board of Directors of Target (i) will take
all steps necessary to present and recommend to the shareholders of Target that
they adopt this Agreement and approve the transactions contemplated hereby, and
(ii) will use its reasonable best efforts to obtain any necessary adoption and
approval by Target's shareholders of this Agreement and the Merger and the
other transactions contemplated hereby, including, without limitation, voting
the Target Shares held by such Directors for such adoption and approval.
(b) Acquiror and Target will as promptly as practicable following
the execution of this Agreement jointly prepare, and Target shall file, a proxy
statement on an appropriate schedule or other form for distribution to holders
of Target Shares in advance of the
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Shareholders' Meeting and such other schedules and other filings as may be
necessary or appropriate (collectively, together with any amendments or
supplements thereto, the "Proxy Statement") with the SEC and will use its
reasonable best efforts to respond to the comments of the SEC and to cause the
Proxy Statement to be mailed to the holders of Target Shares at the earliest
practical time. Target shall furnish all information concerning it and the
holders of its capital stock as Acquiror may reasonably request in connection
with such actions. Target will notify Acquiror promptly of the receipt of the
comments of the SEC, if any, and of any request by the SEC for amendments or
supplements to the Proxy Statement or for additional information with respect
thereto, and will supply Acquiror with copies of all correspondence between
Target or its representatives, on the one hand, and the SEC or members of its
staff, on the other hand, with respect to the Proxy Statement or the Merger or
this Agreement, the Target Ancillary Targets or the other transactions
contemplated hereby or thereby. If (A) at any time prior to the Shareholders'
Meeting, any event should occur relating to Target or any of the Target
Subsidiaries which should be set forth in an amendment of, or a supplement to,
the Proxy Statement, Target will promptly inform Acquiror and (B) if at any
time prior to the Shareholders' Meeting, any event should occur relating to
Acquiror or Acquisition Subsidiary or any of their respective associates or
affiliates, or relating to the plans of any such persons for Target after the
Effective Time that should be set forth in an amendment of, or a supplement to,
the Proxy Statement, Acquiror will promptly inform Target and in the case of
(A) or (B) Target and Acquiror shall file and, if required, mail such amendment
or supplement to holders of Target Shares; provided, prior to such filing or
mailing, Target and Acquiror shall consult with each other with respect to such
amendment or supplement and shall incorporate the other's comments thereon.
Target will not distribute or file the Proxy Statement, or any amendment
thereof or supplement thereto, to which Acquiror reasonably objects.
(c) Target hereby consents to the inclusion in the Proxy
Statement of the recommendation of the Board of Directors of Target described
in Section 2.4, subject to any modification, amendment or withdrawal thereof
permitted hereby, and represents that its financial advisers have, subject to
the terms of their engagement letters with Target and the Board of Directors of
Target, consented to the inclusion of references to their opinions in the Proxy
Statement. Target and its counsel shall permit Acquiror and its counsel to
participate in all communications with the SEC and its staff, including any
meetings and telephone conferences, relating to the Proxy Statement, the Merger
or this Agreement or the other transactions contemplated hereby.
(d) Target shall promptly upon the request by Acquiror, or shall
cause its transfer agent to promptly, furnish Acquiror and Acquisition
Subsidiary with mailing labels containing the names and addresses of all record
holders of shares of Target Common Stock and with security position listings of
shares of Target Common Stock held in stock depositories, each as of the most
recent practicable date, together with all other available listings and
computer files containing names, addresses and security position listings of
record holders and beneficial owners of shares of Target Common Stock. Target
shall furnish Acquiror and Acquisition Subsidiary with such additional
information, including, without limitation, updated listings and computer files
of the holders of Target Common Stock, mailing labels and security position
listings, and such other assistance as Acquiror or their agents may reasonably
request.
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4.5 REASONABLE BUSINESS EFFORTS. Subject to the terms and
conditions herein provided, Target agrees to use its reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the Merger and the other transactions contemplated by
this Agreement and the Target Ancillary Agreements, including, without
limitation, any acquisition of Target Common Stock by Acquiror or any of its
affiliates or associates, including, but not limited to (i) obtaining the
Consent of others to this Agreement, the Target Ancillary Agreements and the
transactions contemplated hereby and thereby, including, without limitation,
any acquisition of Target Common Stock by Acquiror or any of its affiliates or
associates, (ii) the defending of any Litigation against Target or any Target
Subsidiary challenging this Agreement, the Target Ancillary Agreements or the
consummation of the transactions contemplated hereby or thereby, including,
without limitation, any acquisition of Target Common Stock by Acquiror or any
of its affiliates or associates, (iii) obtaining all Consents from Governmental
Authorities required for the consummation of the Merger and the transactions
contemplated hereby or thereby, including, without limitation, any acquisition
of Target Common Stock by Acquiror or any of its affiliates or associates, and
(iv) timely making all necessary filings under the HSR Act. Upon the terms and
subject to the conditions hereof, Target agrees to use its reasonable best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary to satisfy the other conditions of the Closing set
forth herein. Target will consult with counsel for Acquiror as to, and will
permit such counsel to participate in, at Acquiror's expense, any Litigation
referred to in clause (ii) above brought against or involving Target or any
Target Subsidiary.
4.6 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in effect,
Target shall not, and shall cause its affiliates not to, without the written
consent of Acquiror, make any announcement or other disclosure relating to this
Agreement, the terms hereof, the Merger or negotiations with respect thereto,
except to their legal, accounting and financial advisers engaged in connection
with the Merger, unless otherwise required by Law or pursuant to any applicable
listing agreement with, or rules of, the NASD or other securities exchange;
provided, that the Target shall give Acquiror notice a reasonable time prior to
any such disclosure required by Law or otherwise, as referred to above, and
shall cooperate with and consult with Acquiror regarding the contents of any
such disclosure.
4.7 COMPLIANCE. In consummating the Merger and the transactions
contemplated hereby and by the Target Ancillary Agreements, Target shall comply
in all material respects with the applicable provisions of the Securities
Exchange Act and shall comply, and/or cause the Target Subsidiaries to comply
or to be in compliance, in all material respects, with all other applicable
Laws.
4.8 BENEFIT PLANS. Between the date of this Agreement and through
the Effective Time, no discretionary award or grant under any Benefit Plan of
Target or a Target Subsidiary shall be made without the prior written consent
of Acquiror; nor shall Target or a Target Subsidiary take any action or permit
any action to be taken to accelerate the vesting of any warrants or options
previously granted pursuant to any such Benefit Plan. Neither Target nor any
Target Subsidiary shall make any amendment to any Benefit Plan, any awards
thereunder or the
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terms of any security convertible into or exchangeable for capital stock
without the prior written consent of Acquiror.
4.9 NO SOLICITATION OF TAKEOVER PROPOSAL.
(a) Target shall, and shall direct and cause its officers,
directors, employees, representatives and agents to, immediately cease any
discussions or negotiations with any parties that may be ongoing with respect
to a Takeover Proposal (as hereinafter defined). Target shall not, nor shall it
permit any of the Target Subsidiaries to, nor shall it authorize or permit any
of its officers, directors or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained by it or any of
the Target Subsidiaries to, directly or indirectly, (i) solicit, initiate or
encourage (including by way of furnishing information), or take any other
action designed or reasonably likely to facilitate, any inquiries or the making
of any proposal which constitutes, or may reasonably be expected to lead to,
any Takeover Proposal, or (ii) participate in any discussions or negotiations
regarding any Takeover Proposal. Without limiting the generality of the
foregoing, it is understood that any violation of the restrictions set forth in
the previous two sentences by any director, officer, employee, agent or
representative of Target or any of the Target Subsidiaries, including, without
limitation, any investment banker, financial advisor, attorney, accountant or
other representative retained by Target or any of the Target Subsidiaries,
whether or not acting on behalf of Target or any of the Target Subsidiaries,
shall be deemed to be a breach of this Section by Target. For all purposes of
this Agreement, "Takeover Proposal" means any inquiry, proposal or offer
relating to any direct or indirect acquisition or purchase, in one transaction
or a series of related transactions, of 15% or more of the assets of Target or
any of the Target Subsidiaries or 5% or more of any class of equity securities
of Target or any of the Target Subsidiaries, any tender offer or exchange offer
that if consummated would result in any person beneficially owning 15% or more
of any class of equity securities of Target or any Target Subsidiary, any
merger, consolidation, share exchange, business combination, recapitalization,
liquidation, dissolution or similar transaction involving Target or any Target
Subsidiary, other than the transactions contemplated by this Agreement, or any
other transaction the consummation of which could reasonably be expected to
impede, interfere with, prevent or materially delay the Merger or which could
reasonably be expected to dilute materially the benefits to Acquiror of the
transactions contemplated by this Agreement.
(b) The Board of Directors of Target shall promptly recommend to
the shareholders of Target that they adopt this Agreement and approve the
transactions contemplated hereby. Neither the Board of Directors of Target nor
any committee thereof shall (i) withdraw or modify, or propose publicly to
withdraw or modify, the approval or recommendation by such Board of Directors
or such committee of the Merger or this Agreement, (ii) approve or recommend,
or propose publicly to approve or recommend, any Takeover Proposal or (iii)
cause Target to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement related to any Takeover
Proposal.
(c) In addition to the obligations of Target set forth in
paragraphs (a) and (b) of this Section 4.9, Target shall immediately advise
Acquiror orally and in writing of any request for information or of any
Takeover Proposal, the material terms and conditions of such request or
Takeover Proposal and the identity of the person making such request or
Takeover Proposal.
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Target will keep Acquiror fully informed of the status and details (including
amendments or proposed amendments) of any such request or Takeover Proposal.
(d) Nothing contained in this Section 4.9 shall prohibit Target
from taking and disclosing to its shareholders a position consistent with its
obligations hereunder contemplated by Rule 14e-2(a) promulgated under the
Securities Exchange Act or from making any disclosure consistent with its
obligations hereunder to Target's shareholders if, in the good faith judgment
of the Board of Directors of Target, after consultation with outside counsel,
failure so to disclose would be inconsistent with applicable Law; provided,
however, neither Target nor its Board of Directors nor any committee thereof
shall withdraw or modify, or propose publicly to withdraw or modify, its
position with respect to the Merger or this Agreement or approve or recommend,
or propose publicly to approve or recommend, a Takeover Proposal.
4.10 SECURITIES AND SHAREHOLDER MATERIALS. Target and the Target
Subsidiaries shall send to Acquiror a copy of all material public reports and
materials as and when it sends the same to its shareholders, the SEC, the NASD
or any other securities commission, exchange or market.
4.11 RESIGNATIONS. Target shall cause the officers and/or
directors of Target and the Target Subsidiaries as Acquiror may request to
voluntarily resign their positions as such prior to and as of the Effective
Time. The instruments effecting such resignations are herein referred to as the
"Resignations." Target shall cause such directors, prior to their resignation,
to appoint new directors nominated by Acquiror to fill such vacancies.
4.12 NONCOMPETE AND CONFIDENTIALITY AGREEMENTS. Target shall use
its reasonable business efforts to obtain, at or prior to the Closing, duly
executed noncompete and confidentiality agreements in substantially the form
attached hereto as Schedule 4.12(a) (the "Noncompete and Confidentiality
Agreements") from the persons designated on Schedule 4.12(b) attached hereto.
4.13 COMFORT LETTERS. Upon the request of Acquiror, Target shall
use reasonable business efforts to provide to Acquiror prior to the Effective
Time "comfort letters" from the independent certified public accountants for
Target dated as of the date of the Proxy Statement and the Closing Date,
addressed to the Board of Directors of each of Target and Acquiror, covering
such matters as Acquiror shall reasonably request with respect to facts
concerning the financial condition and results of operations of Target and the
Target Subsidiaries and customary for such certified public accountants to
deliver in connection with a transaction similar to the Merger.
4.14 TAKEOVER STATUTES. If any Takeover Statute is or may become
applicable to the Merger or this Agreement or the Target Ancillary Agreements
or the transactions contemplated hereby or thereby or the execution, delivery
or performance of any other agreement to acquire, or any other acquisition of,
Target Common Stock by Acquiror or any of its affiliates or associates, Target
and the members of its Board of Directors will grant such approvals, and will
take such other actions as are necessary so that the Merger, this Agreement,
the Target Ancillary Agreements and the other transactions contemplated by
hereby or thereby or the execution,
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delivery or performance of any other agreement to acquire, or any other
acquisition of, Target Common Stock by Acquiror or any of its affiliates or
associates may be consummated as promptly as practicable on the terms
contemplated hereby and will otherwise act to eliminate or minimize the effects
of any Takeover Statute on the Merger, this Agreement, the Target Ancillary
Agreements and any of the transactions contemplated hereby or thereby or the
execution, delivery or performance of any other agreement to acquire, or any
other acquisition of, Target Common Stock by Acquiror or any of its affiliates
or associates.
4.15 YEAR 2000 PLAN. Target shall use all commercially reasonable
efforts to ensure that the Year 2000 Plan shall be completed in a timely
manner. Target shall (i) allow Acquiror to monitor Target's Year 2000
compliance issues and Year 2000 Plan, (ii) provide prompt notice to Acquiror if
Target does not achieve, or reasonably expects it shall not achieve, milestones
and objectives identified in the Year 2000 Plan and (iii) cooperate in good
faith with Acquiror's efforts to cause Target to be Year 2000 Compliant.
4.16 PURCHASE OF TARGET COMMON STOCK. Target shall in no way
prohibit Acquiror or any of its affiliates or associates from purchasing shares
of Target Common Stock or entering into option, lock-up, voting or proxy
agreements or any other similar agreements with respect to Target Common Stock
(including, but not limited to, amending the Rights Plan to cause such
acquisition or agreement to trigger a "Stock Acquisition Date" or "Distribution
Date" or cause Acquiror or any of its affiliates or associates to become an
"Acquiring Person" (as such terms are defined in the Rights Plan) at any time
prior to the consummation of the Merger.
4.17 CONVERSION OF OPTIONS. Target shall offer to modify, and
shall obtain such modification to, each outstanding Option which is exercisable
on or prior to the Effective Time, to cause each such Option either to be
exercised (if otherwise exercisable) prior to the Effective Time, or to be
canceled as of the Effective Time in exchange for the Option Consideration, as
contemplated by Section 1.7(b). Target shall offer to modify, and shall obtain
such modification to, each outstanding Option which is not exercisable on or
prior to the Effective Time to be converted, as of the Effective Time, to the
right to receive solely the Option Consideration, with such Option otherwise
becoming exercisable following the Effective Time, in accordance with its
terms, as contemplated by Section 1.7(b). Target shall effect the foregoing
after reasonable consultation with Acquiror pursuant to written agreements in
form and substance reasonably satisfactory to Acquiror, including, without
limitation, in a form consistent with Section 1.7(b) hereof.
ARTICLE V
ADDITIONAL COVENANTS OF ACQUIROR
Acquiror covenants and agrees as follows:
5.1 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in effect,
Acquiror shall not, and shall cause its affiliates not to, without the written
consent of Target, make any announcement or other disclosure relating to this
Agreement, the terms hereof, the Merger or negotiations with respect thereto,
except to their legal, accounting and financial advisers
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engaged in connection with the Merger, unless otherwise required by Law or
pursuant to any applicable listing agreement with, or rules and regulations of,
the NASD or other securities exchange; provided, that the Acquiror shall give
Target notice a reasonable time prior to any such disclosure required by Law or
otherwise, as referred to above, and shall cooperate with and consult with
Target regarding the contents of any such disclosure
5.2 COMPLIANCE. In consummating the Merger and the transactions
contemplated hereby, Acquiror shall comply in all material respects with the
applicable provisions of the Securities Exchange Act and shall comply, and/or
cause the Acquisition Subsidiary to comply or to be in compliance, in all
material respects, with all other applicable Laws applicable thereto.
5.3 PROXY STATEMENT. Acquiror shall cooperate with Target with
respect to the preparation of the Proxy Statement as set forth in Section 4.4.
and shall provide Target with such information concerning Acquiror and
Acquisition Subsidiary as shall be required to be included therein. Acquiror
shall vote, or cause to be voted, in favor of the Merger and this Agreement all
shares of Target Common Stock directly or indirectly beneficially owned by it.
5.4 TARGET SENIOR SECURED CREDIT FACILITY. Acquiror shall give
its consent to the Merger in Acquiror's capacity as the assignee of the holder
of the Senior Secured Notes issued by Target under the Senior Secured Credit
Facility, at the Closing, subject to satisfaction of the conditions to
Acquiror's obligations to effect the Merger.
5.5 CS BORROWING. Acquiror shall use its reasonable efforts to
request consents to the CS Borrowing from the sellers of any notes from which
Acquiror has agreements to purchase such notes that are described in Section
3.7, above, to the extent that Acquiror shall not have purchased such notes.
5.6 INDEMNIFICATION AND INSURANCE.
(a) The Certificate of Incorporation and By-Laws of the
Surviving Corporation shall contain provisions with respect to indemnification
and exculpation similar to those set forth in the Certificate of Incorporation
and By-Laws of Target, which provisions the Acquiror shall not and shall cause
the Surviving Corporation not to amend, repeal or otherwise modify for a period
of six (6) years from the Effective Time in any manner that would materially
and adversely affect the rights thereunder of individuals who at the Effective
Time were directors, officers, employees or agents of Target, unless such
amendment, repeal or other modification is required by applicable Law.
(b) From and after the Effective Time, Acquiror agrees that
it will indemnify and hold harmless each present director and officer of Target
(when acting in such capacity) determined as of the Effective Time (the
"Indemnified Parties"), against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent that Target would have been
permitted
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under the Connecticut Code and its Certificate of Incorporation or By-Laws in
effect on the date of this Agreement to indemnify such person (and Acquiror
shall also advance expenses as incurred to the fullest extent permitted under
applicable Law and the Certificate of Incorporation and the By-Laws of Target,
provided that the person to whom expenses are advanced provides an undertaking
to repay such advances if it is ultimately determined that such person is not
entitled to indemnification).
(c) Any Indemnified Party wishing to claim indemnification
under paragraph (b) of this Section 5.6, upon learning of any such claim,
action, suit, proceeding or investigation, shall promptly notify Acquiror
thereof in writing, but the failure to so notify shall not relieve Acquiror of
any liability it may have to such Indemnified Party if such failure does not
materially prejudice Acquiror. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time), (i) Acquiror or the Surviving Corporation shall have the right to assume
the defense thereof, and Acquiror shall not be liable to such Indemnified
Parties for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Parties in connection with the
defense thereof, except that if Acquiror or the Surviving Corporation elects
not to assume such defense, or if there are any issues which raise material
conflicts of interest between Acquiror or the Surviving Corporation and the
Indemnified Parties, the Indemnified Parties may retain counsel reasonably
satisfactory to Acquiror, and Acquiror or the Surviving Corporation shall pay
all reasonable fees and expenses of such counsel for the Indemnified Parties;
provided, however, that Acquiror shall be obligated pursuant to this paragraph
(c) to pay for only one firm or counsel for all Indemnified Parties, (ii) the
Indemnified Parties will cooperate in the defense of any such matter, and (iii)
Acquiror shall not be liable for any settlement effected without its prior
written consent.
(d) For a period of six (6) years after the Effective Time
and to the extent available, Acquiror or the Surviving Corporation shall
maintain in effect policies of directors' and officers' liability insurance
covering those persons who are currently covered by Target's directors' and
officers' liability insurance policy on terms (including the amounts of
coverage and the amounts of deductibles, if any) that are no less favorable to
them in any material respect than the terms now applicable to them under
Target's current insurance policies; provided that the Surviving Corporation
shall not be required to pay an annual premium for such insurance in excess of
175% of the last annual premium paid prior to the date hereof, but in such case
shall purchase as much coverage as possible for such amount.
(e) If Acquiror or the Surviving Corporation or any of their
successors or assigns (i) shall consolidate with or merge into any other
corporation or entity and shall not be the continuing or surviving corporation
or entity in such consolidation or merger or (ii) shall transfer all or
substantially all of its properties and assets to any individual, corporation
or other entity, then and in each case, proper provisions shall be made so that
the successors and assigns of Acquiror or the Surviving Corporation, as the
case may be, shall assume all of the obligations set forth in this Section 5.6;
provided, that the failure to make such provisions shall not affect the
validity of any such consolidation, merger or transfer.
(f) The provisions of this Section 5.6 are intended to be for
the benefit of, and shall be enforceable by, each of the Indemnified Parties,
their heirs and representatives.
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ARTICLE VI
CONDITIONS
6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligations of each party to effect the Merger shall be subject to the
fulfillment or waiver at or prior to the Effective Time of the following
conditions:
6.1.1 SHAREHOLDER APPROVAL. This Agreement and the Merger and
the other transactions contemplated hereby shall have been duly
adopted at or prior to the Effective Time by the requisite vote of the
shareholders of Target in accordance with the Certificate of
Incorporation and By-Laws of Target, the Connecticut Code and the
Securities Exchange Act.
6.1.2 NO INJUNCTION OR ACTION. No order, statute, rule,
regulation, executive order, stay, decree, judgment or injunction
shall have been enacted, entered, promulgated or enforced by any court
or other Governmental Authority, which prohibits or prevents the
consummation of the Merger or the other transactions contemplated
hereby and which has not been vacated, dismissed or withdrawn by the
Effective Time. Target and Acquiror shall use their reasonable best
efforts to have any of the foregoing vacated, dismissed or withdrawn
by the Effective Time.
6.1.3 HSR ACT. Any waiting period applicable to the Merger
under the HSR Act shall have expired or earlier termination thereof
shall have been granted and no action shall have been instituted by
either the United States Department of Justice or the Federal Trade
Commission to prevent the consummation of the transactions
contemplated by this Agreement or to modify or amend such transactions
in any material manner, or if any such action shall have been
instituted, it shall have been withdrawn or a final judgment shall
have been entered against such Department or Commission, as the case
may be.
6.1.4 OPINION OF FINANCIAL ADVISOR. The fairness opinion
referenced in Section 2.4(c) above shall not have been withdrawn at or
prior to the Effective Time.
6.1.5 GOVERNMENTAL APPROVALS. All Consents, other than
Consents the failure of which to be obtained or made, in the judgment
of Acquiror, would not have a material adverse effect on the business,
assets, condition (financial or otherwise), properties, liabilities,
prospects or the result of operations of the Surviving Corporation and
its subsidiaries taken as a whole ("Surviving Corporation Material
Adverse Effect"), of any Governmental Authority required for the
consummation of the Merger and the transactions contemplated by this
Agreement shall have been obtained by Final Order (as hereinafter
defined), provided that any Consent relating to any FCC License shall
be so obtained or made by Final Order. The term "Final Order" with
respect to any Consent of a Governmental Authority shall mean an
action by the appropriate Governmental Authority as to which: (i) no
request for stay by such Governmental Authority of the action is
pending, no such stay is in effect, and, if any deadline for filing
any such request is designated by statute or regulation, it has
passed; (ii) no petition for rehearing or
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reconsideration of the action is pending before such Governmental
Authority, and no appeal or comparable administrative remedy is
pending before such Governmental Authority, and the time for filing
any such petition, appeal or administrative remedy has passed; (iii)
such Governmental Authority does not have the action under
reconsideration on its own motion and the time for such
reconsideration has passed; and (iv) no appeal to a court, or request
for stay by a court, of the Governmental Authority action is pending
or in effect, and if any deadline for filing any such appeal or
request is designated by statute or rule, it has passed. The condition
contained in this Subsection 6.1.5 may be waived by Acquiror, in its
sole judgment.
6.2 CONDITIONS TO OBLIGATIONS OF TARGET. The obligation of Target
to effect the Merger shall be subject to the fulfillment at or prior to the
Effective Time of the following additional conditions, any one or more of which
may be waived by Target:
6.2.1 ACQUIROR REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Acquiror contained in this Agreement
that are modified by materiality or Acquiror Material Adverse Effect
("Acquiror Modified Representation") shall be true and correct in all
respects and those that are not so modified ("Acquiror Nonmodified
Representation") shall be true and correct in all material respects,
on the date hereof and, except for changes not prohibited by this
Agreement, as of the Effective Time as if made at the Effective Time.
Furthermore, none of the representations or warranties of Acquiror
contained in this Agreement, disregarding any qualifications therein
or in this Section 6.2.1 regarding materiality or Acquiror Material
Adverse Effect, shall be untrue or incorrect to the extent that such
untrue or incorrect representations or warranties, when taken together
as a whole, have had or would have an Acquiror Material Adverse
Effect.
6.2.2 PERFORMANCE BY ACQUIROR. Acquiror shall have performed
and complied with all of the covenants and agreements in all material
respects and satisfied in all material respects all of the conditions
required by this Agreement to be performed or complied with or
satisfied by Acquiror at or prior to the Effective Time.
6.2.3 CERTIFICATE. Acquiror shall have delivered to Target a
certificate executed on its behalf by its President or another
authorized officer to the effect that the conditions set forth in
Subsections 6.2.1 and 6.2.2, above, have been satisfied.
6.3 CONDITIONS TO OBLIGATIONS OF ACQUIROR. The obligations of
Acquiror to effect the Merger shall be subject to the fulfillment at or prior
to the Effective Time of the following additional conditions, any one or more
of which may be waived by Acquiror:
6.3.1 TARGET REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Target contained in this Agreement
that are modified by materiality or Target Material Adverse Effect
("Target Modified Representation") shall be true and correct in all
respects, and those that are not so modified ("Target Nonmodified
Representation") shall be true and correct in all material respects,
on the date hereof and, except for changes not prohibited by this
Agreement, as of the Effective Time as if made at the Effective Time.
Furthermore, none of the representations or warranties of Target
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contained in this Agreement, disregarding any qualifications therein
or in this Section 6.3.1 regarding materiality or Target Material
Adverse Effect, shall be untrue or incorrect to the extent that such
untrue or incorrect representations or warranties, when taken together
as a whole, have had or would have a Target Material Adverse Effect.
6.3.2 PERFORMANCE BY TARGET. Target shall have performed and
complied with all the covenants and agreements in all material
respects and satisfied in all material respects all the conditions
required by this Agreement to be performed or complied with or
satisfied by Target at or prior to the Effective Time.
6.3.3 NO MATERIAL ADVERSE CHANGE. There shall have not
occurred after the date hereof any Event that has or reasonably could
be expected to have a Target Material Adverse Effect or a Surviving
Corporation Material Adverse Effect (as hereinafter defined) (except
for (A) any decrease in monthly average GAAP-based revenues of Target
and the Target Subsidiaries (other than CS and the CS Subsidiaries) of
no more than 5.5% per month, subject to adjustment by percentage
increase or decrease of 0.7% for seasonal trends (e.g., college
population subscribers), (B) deviations of cash flow from operations
of Target and the Target Subsidiaries (other than CS and the CS
Subsidiaries) of 25% or less on a month-to-month basis as compared to
cash flow from operations projected in the Target Approved Budget, (C)
any decrease in monthly average GAAP-based revenues of CS and the CS
Subsidiaries of no more than 5.5% per month, subject to adjustment by
percentage increase or decrease of 0.7% for seasonal trends (e.g.,
college population subscribers), and (D) deviations of cash flow from
operations of CS and the CS Subsidiaries of 25% or less on a
month-to-month basis as compared to cash flow from operations
projected in the CS Approved Budget).
6.3.4 NO PENDING ACTION There shall not be instituted,
pending or threatened any action, investigation or proceeding by any
Governmental Authority, and there shall not be instituted, pending or
threatened any action or proceeding by any other person, domestic or
foreign, before any Governmental Authority, which is reasonably likely
to be determined adversely to Acquiror or Acquisition Subsidiary, (A)
challenging or seeking to make illegal, to delay materially or
otherwise, directly or indirectly, to restrain or prohibit the
consummation of the Merger, seeking to obtain material damages or
imposing any material adverse conditions in connection therewith or
otherwise, directly or indirectly relating to the transactions
contemplated by the Merger, (B) seeking to restrain, prohibit or delay
the exercise of full rights of ownership or operation by Acquiror or
Acquisition Subsidiary or their affiliates of all or any portion of
the business or assets of Target and the Target Subsidiaries, taken as
a whole, or of Acquiror or Acquisition Subsidiary or any of their
affiliates, or to compel Acquiror or Acquisition Subsidiary or any of
their affiliates to dispose of or hold separate all or any material
portion of the business or assets of Target and the Target
Subsidiaries, taken as a whole, or of Acquiror or Acquisition
Subsidiary or any of their affiliates, (C) seeking to impose or
confirm material limitations on the ability of Acquiror or Acquisition
Subsidiary or any of their affiliates to exercise full rights of the
ownership of the shares of Target Common Stock, including, without
limitation, the right to vote the shares of Target Common Stock
acquired or owned by Acquiror or Acquisition Subsidiary or any of
their affiliates on all
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matters properly presented to the holders of Target Common Stock, (D)
seeking to require divestiture by Acquiror or Acquisition Subsidiary
or any of their affiliates of the shares of Target Common Stock, or
(E) that otherwise would reasonably be expected to have a Target
Material Adverse Effect.
6.3.5 DISSENTING SHARES. At the Effective Time, Dissenting
Shares shall not exceed 10% of the Target Shares.
6.3.6 REQUIRED CONSENTS. All required Consents of any person
(other than a Governmental Authority) to the Merger or the
transactions contemplated hereby shall have been obtained or made on
terms and conditions reasonably acceptable to Acquiror and be in full
force and effect, except for those the failure of which to obtain or
be made, in the judgment of Acquiror, would not have a Surviving
Corporation Material Adverse Effect; provided that any Consents
relating to any Channel Leases or Tower Site Leases, the failure of
which to obtain, in the aggregate, are or would be material to Target
and the Target Subsidiaries or are or would be material to the future
plans or objectives of Acquiror or the failure of which to obtain
would otherwise have a Target Material Adverse Effect shall be so
obtained or made.
6.3.7 CERTIFICATES AND OTHER DELIVERIES. Target shall have
delivered, or caused to be delivered, to Acquiror (i) a certificate
executed on its behalf by its President or another duly authorized
officer to the effect that the conditions set forth in Subsections
6.1.1, 6.1.4, 6.1.5, 6.3.1, 6.3.2, 6.3.3, 6.3.4, 6.3.5 and 6.3.6,
above, have been satisfied; (ii) a certificate of good standing or of
legal existence, as applicable, from the Secretary of State of each
state or comparable authority in other jurisdictions in which Target
and the Target Subsidiaries are incorporated or qualified to do
business stating that each is a validly existing corporation in good
standing or of legal existence, as applicable; (iii) duly adopted
resolutions of the Board of Directors and shareholders of Target
approving the execution, delivery and performance of this Agreement,
the Target Ancillary Agreements and the instruments contemplated
hereby and thereby, certified by the Secretary or Assistant Secretary
of Target; (iv) a true and complete copy of the Articles or
Certificate of Incorporation or comparable governing instruments, as
amended, of Target and each of the Target Subsidiaries certified by
the Secretary of State of the state of incorporation or comparable
authority in other jurisdictions, and a true and complete copy of the
By-Laws or comparable governing instruments, as amended, of Target and
each of the Target Subsidiaries certified by the Secretary thereof;
(v) the duly executed Noncompete and Confidentiality Agreements; (vi)
the duly executed Resignations on terms and conditions reasonably
acceptable to Acquiror; (vii) a list of the shareholders of Target
entitled to vote on the adoption of this Agreement and an undertaking
from Target's transfer agent to deliver a list of the shareholders of
Target as of the Effective Time as soon thereafter as it is available,
each such list to be certified by the transfer agent of Target; and
(viii) such other documents and instruments as Acquiror reasonably may
request.
6.3.8 OPINION OF TARGET COUNSEL. Acquiror shall have received
the opinion of Day, Berry & Howard LLP, counsel to the Target, in form
and substance reasonably satisfactory to Acquiror, covering the
matters set forth in Schedule 6.3.8 attached hereto.
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6.3.9 COMFORT LETTERS. Acquiror shall have received "comfort
letters" from the independent certified public accountants for Target
dated as of the date of the Proxy Statement and the Closing Date,
addressed to the Board of Directors of each of Target and Acquiror,
covering such matters as Acquiror shall reasonably request with
respect to facts concerning the financial condition and results of
operations of Target and the Target Subsidiaries and customary for
such certified public accountants to deliver in connection with a
transaction similar to the Merger.
ARTICLE VII
TERMINATION AND ABANDONMENT
7.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the
shareholders of Target described herein, only:
(a) by mutual written consent of Acquiror and Target;
(b) by either Acquiror or Target if:
(i) the Merger shall not have been consummated on or prior to
February 1, 2000; provided, however, that if Target or Acquiror determines that
additional time is necessary in connection with obtaining a Consent from the
FCC or, solely with respect to the HSR Act, any other Governmental Authority or
satisfying any related waiting period, such date may be extended by Target or
Acquiror from time to time by written notice to the other party to a date no
later than May 1, 2000; and provided further, however, that the right to
terminate this Agreement pursuant to this Section 7.1(b)(i) shall not be
available to any party whose failure to perform any of its obligations under
this Agreement results in the failure of the Merger to be consummated by such
time;
(ii) the approval of holders of Target Common Stock required
by Section 6.1.1 shall not have been obtained at a meeting duly convened
therefor or at any adjournment or postponement thereof;
(iii) any court of competent jurisdiction or other
Governmental Authority shall have issued an order, decree or ruling or taken
any other action permanently enjoining, restraining or otherwise prohibiting
the consummation of the Merger and such order, decree or ruling or other action
shall have become final and nonappealable;
(c) by Acquiror, if (i) there are any breaches of any Target
Modified Representation or there are any material breaches of any Target
Nonmodified Representation, or (ii) Target shall have breached or failed to
perform, notwithstanding satisfaction or due waiver of all conditions thereto,
any of its material covenants or agreements contained herein as to which notice
specifying such breach or failure has been given to Target promptly after the
discovery thereof and Target has failed to cure or otherwise resolve the same
to the reasonable satisfaction of Acquiror within twenty (20) days after
receipt of such notice;
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(d) by Acquiror, if Section 4.9 shall be breached by Target in
any material respect, including, without limitation, by failing to promptly
notify Acquiror as required thereunder;
(e) by Target, if (i) there are any breaches of any Acquiror
Modified Representation or there are any material breaches of any Acquiror
Nonmodified Representation, or (ii) Acquiror shall have breached or failed to
perform, notwithstanding satisfaction or due waiver of all conditions thereto,
any of its material covenants or agreements contained herein as to which notice
specifying such breach or failure has been given to Acquiror promptly after the
discovery thereof and Acquiror has failed to cure or otherwise resolve the same
to the reasonable satisfaction of Target within twenty (20) days after receipt
of such notice.
The party desiring to terminate this Agreement pursuant to
the preceding paragraphs (b), (c), (d) or (e), shall give written notice of
such termination to the other party in accordance with Section 8.5 below.
7.2 TERMINATION FEES AND RIGHTS.
(a) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article VII, this Agreement (other
than as set forth in this Section 7.2, Section 7.3, Section 8.1 and Section
8.7) shall become void and of no effect with no liability on the part of any
party hereto (or of any of its directors, officers, employees, agents, legal or
financial advisers or other representatives); provided, however, that no such
termination shall relieve any party hereto from any liability for breach of
this Agreement.
(b) In the event that (A) a bona fide Takeover Proposal shall
have been made known to Target or any of the Target Subsidiaries and made known
to the holders of Target Common Stock generally or has been made directly to
holders of Target Common Stock generally or any person shall have publicly
announced an intention (whether or not conditional) to make a bona fide
Takeover Proposal and such Takeover Proposal or announced intention shall not
have been withdrawn and thereafter this Agreement is terminated by either
Acquiror or Target pursuant to Section 7.1(b)(i), or (B) this Agreement is
terminated by Acquiror pursuant to Section 7.1(d), then Target shall promptly,
but in no event later than two days after the date of such termination, pay
Acquiror a fee equal to $18 million (the "Termination Fee"), payable by wire
transfer of same day funds. Target acknowledges that the agreements contained
in this Section 7.2(b) are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, Acquiror would not enter
into this Agreement; accordingly, if Target fails to promptly pay the amount
due pursuant to this Section 7.2(b), and in order to obtain such payment,
Acquiror commences a suit which results in a judgment against Target for the
Termination Fee set forth in this paragraph (b), Target shall also pay to
Acquiror its costs and expenses (including attorneys' fees) in connection with
such suit, together with interest on the amount of the Termination Fee at the
prime rate of NationsBank, N.A. in effect on the date such payment was required
to be made.
7.3 PROCEDURE UPON TERMINATION. In the event of termination
pursuant to this Article VII, this Agreement shall terminate and the Merger
shall be abandoned without further action by Target or Acquiror, provided that
the agreements contained in Sections 7.2, 7.3, 8.1 and
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8.7 hereof shall remain in full force and effect. If this Agreement is
terminated as provided herein, each party shall use its reasonable best efforts
to redeliver all documents, work papers and other material (including any
copies thereof) of any other party relating to the transactions contemplated
hereby, whether obtained before or after the execution hereof, to the party
furnishing the same. Nothing contained in this Agreement shall relieve any
party from any liability for any inaccuracy, misrepresentation or breach of
this Agreement prior to termination.
ARTICLE VIII
MISCELLANEOUS
8.1 CONFIDENTIALITY. Unless (i) otherwise expressly provided in
this Agreement, (ii) required by applicable Law or any listing agreement with,
or the rules and regulations of, any applicable securities exchange or the
NASD, (iii) necessary to secure any required Consents as to which the other
party has been advised, or (iv) consented to in writing by Acquiror and Target,
this Agreement and any information or documents furnished in connection
herewith shall be kept strictly confidential by Target and the Target
Subsidiaries, Acquiror and Acquisition Subsidiary and their respective
officers, directors, employees and agents. Prior to any disclosure pursuant to
the preceding sentence, the party intending to make such disclosure shall
consult with the other party regarding the nature and extent of the disclosure.
Nothing contained herein shall preclude disclosures to the extent necessary to
comply with accounting, SEC and other disclosure obligations imposed by
applicable Law. In connection with any filing with the SEC under the Securities
Exchange Act, Target or Acquiror, after consultation with the other party, may
include any information required to be included therein with respect to the
Merger. Acquiror and Target shall cooperate with the other and provide such
information and documents as may be required in connection with any such
filings. In the event the Merger is not consummated, Acquiror and Target shall
return to the other all documents furnished by the other and will hold in
absolute confidence all information obtained from the other party except to the
extent (i) such party is required to disclose such information by Law or such
disclosure is necessary or desirable in connection with the pursuit or defense
of a claim, (ii) such information was known by such party prior to such
disclosure or was thereafter developed or obtained by such party independent of
such disclosure, (iii) such party received such information on a
non-confidential basis from a source, other than the other party, which is not
known by such party to be bound by a confidentiality obligation with respect
thereto or (iv) such information becomes generally available to the public or
is otherwise no longer confidential. Prior to any disclosure of information
pursuant to the exception in clause (i) of the preceding sentence, the party
intending to disclose the same shall so notify the party which provided the
same in order that such party may seek a protective order or other appropriate
remedy should it choose to do so.
8.2 AMENDMENT AND MODIFICATION. To the extent permitted by
applicable Law, this Agreement may be amended, modified or supplemented only by
a written agreement among Target, Acquiror and Acquisition Subsidiary, whether
before or after approval of the Merger and this Agreement by the holders of
Target Common Stock and the holders of the common stock of Acquisition
Subsidiary.
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8.3 WAIVER OF COMPLIANCE; CONSENTS. Any failure of Target on the
one hand, or Acquiror on the other hand, to comply with any obligation,
covenant, agreement or condition herein may be waived by Acquiror on the one
hand, or Target on the other hand, only by a written instrument signed by the
party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section
8.3.
8.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties of Target and Acquiror contained herein or in
any certificates or other documents delivered prior to or at the Closing shall
survive the execution and delivery of this Agreement, notwithstanding any
investigation made or information obtained by the other party, but shall
terminate at the Effective Time.
8.5 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given when delivered in
person, by facsimile, receipt confirmed, or on the next business day when sent
by overnight courier or on the second succeeding business day when sent by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
(i) if to Target, to:
CAI Wireless Systems, Inc.
18 Corporate Woods Blvd., Third Floor
Albany, NY 12211
Attention: James P. Ashman, Executive Vice President
Telecopy: 518-462-3045
with a copy to:
Day, Berry & Howard LLP
One Canterbury Green
Stamford, CT 06901
Attention: Sabino Rodriguez III, Esq.
Telecopy: 203-977-7301
and
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: J. Gregory Milmoe, Esq.
Telecopy: 212-735-2000
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and
(ii) if to Acquiror or Acquisition Subsidiary, to:
Robert M. Finch
Vice President - Strategic Development
MCI WORLDCOM, Inc.
3060 Williams Drive, Suite 600
Fairfax, VA 22031
Telecopy: 703-645-4637
with copies to:
P. Bruce Borghardt, Esq.
General Counsel - Corporate Development
MCI WORLDCOM, Inc.
10777 Sunset Office Drive, Suite 330
St. Louis, MO 63127
Telecopy: 314-909-4101
and
Bryan Cave LLP
211 N. Broadway, Suite 3600
St. Louis, MO 63102
Attention: R. Randall Wang, Esq.
Telecopy: 314-259-2020
8.6 BINDING EFFECT; ASSIGNMENT. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto prior to the Effective Time without the
prior written consent of the other party hereto, except that Acquisition
Subsidiary may assign to Acquiror or any other Subsidiary of Acquiror any and
all rights, interests and obligations of Acquisition Subsidiary under this
Agreement.
8.7 EXPENSES. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs or expenses, subject to the rights of such party
contemplated under Section 7.2, above.
8.8 GOVERNING LAW. This Agreement shall be deemed to be made in, and
in all respects shall be interpreted, construed and governed by and in
accordance with the internal laws of, the State of New York (without regard for
its choice of law rules), except for matters governed by the Connecticut Code,
which shall be interpreted, construed and governed by the Connecticut Code.
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8.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.10 INTERPRETATION. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. No rule of construction shall apply to this
Agreement which construes ambiguous language in favor of or against any party
by reason of that party's role in drafting this Agreement. As used in this
Agreement, (i) the term "person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a limited liability company, a
trust, an association, an unincorporated organization, a Governmental Authority
and any other entity; (ii) the terms "affiliate" and "associate" shall have the
same meanings as set forth in Rule 12b-2 under the Securities Exchange Act; and
(iii) the term "shareholder" of any specified person shall mean any holder of
capital stock or other equity interest in such person.
8.11 ENTIRE AGREEMENT. This Agreement and the other agreements,
documents or instruments referred to herein or executed in connection herewith
including, but not limited to, the Schedules attached hereto, which Schedules
are incorporated herein by reference, embody the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. There are no restrictions, promises, representations, warranties,
covenants, or undertakings, other than those expressly set forth or referred to
herein. This Agreement supersedes all prior agreements and the understandings
between the parties with respect to such subject matter, including, without
limitation, the letter agreement dated April 15, 1999 between Acquiror and
Target.
8.12 SEVERABILITY. In case any provision in this Agreement or in any
of the other agreements, documents or instruments referred to herein shall be
held invalid, illegal or unenforceable in any jurisdiction, such provision
shall be modified or deleted, as to the jurisdiction involved, only to the
extent necessary to render the same valid, legal and enforceable, and the
validity, legality and enforceability of the remaining provisions hereof or
thereof shall not in any way be affected or impaired thereby nor shall the
validity, legality or enforceability of such provision be affected thereby in
any other jurisdiction.
8.13 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. Accordingly, the parties further agree that each party shall be
entitled to an injunction or restraining order to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other right or remedy to which such party may be entitled under
this Agreement, at law or in equity.
8.14 THIRD PARTIES. Nothing contained in this Agreement or in any
instrument or document executed by any party in connection with the
transactions contemplated hereby shall create any rights in, or be deemed to
have been executed for the benefit of, any person that is not
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a party hereto or thereto, or, a successor or permitted assign of such a party,
provided that the Indemnified Parties shall be entitled to the benefits of
Section 5.6 hereof.
8.15 SCHEDULES. The Schedules in this Agreement shall be arranged in
separate parts corresponding to the numbered and lettered sections, and the
disclosure in any numbered or lettered part shall be deemed to relate to and to
qualify only the particular representation or warranty set forth in the
corresponding numbered or lettered section, and not any other representation or
warranty (unless an express and specific reference to any other Schedule which
clearly identifies the particular item being referred is set forth therein).
8.16 CONTROL. Neither Acquiror nor Acquisition Subsidiary have
exercised, and neither shall exercise, any control over Target, the Target
Subsidiaries or the FCC Licenses held by Target or any of the Target
Subsidiaries prior to the grant of necessary approvals by the FCC, to the
extent such approvals are required by Law prior to the exercise of any such
control.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, Acquiror, Acquisition Subsidiary and Target have
caused this Agreement to be signed and delivered by their respective duly
authorized officers as of the date first above written.
CAI WIRELESS SYSTEMS, INC.
By: /s/ JARED E. ABBRUZZESE
-----------------------------------------
Name: Jared E. Abbruzzese
---------------------------------------
Title: Chairman and Chief Executive Officer
---------------------------------------
MCI WORLDCOM, INC.
By: /s/ JOHN SIDGMORE
-----------------------------------------
Name: John Sidgmore
---------------------------------------
Title:
---------------------------------------
CARDINAL ACQUISITION SUBSIDIARY, INC.
By: /s/ JOHN SIDGMORE
-----------------------------------------
Name: John Sidgmore
---------------------------------------
Title:
---------------------------------------
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