<PAGE> 1
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-25703
[WCA LOGO]
WIRELESS CABLE OF ATLANTA
Fellow Shareholders:
I am pleased to invite you to attend a special meeting of shareholders of
Wireless Cable of Atlanta, Inc. on:
Tuesday, May 27, 1997
10:00 a.m.
NationsBank Plaza, 41st Floor
600 Peachtree Street, N.E.
Atlanta, Georgia
THIS IS A VERY IMPORTANT MEETING THAT AFFECTS YOUR INVESTMENT IN WCA.
At this meeting you will be asked to vote on a merger between WCA and a
wholly-owned subsidiary of BellSouth Corporation. In the merger, BellSouth will
pay WCA shareholders 0.49 of a share of BellSouth stock for each share of WCA
stock and WCA will become a subsidiary of BellSouth. This payment is subject to
a possible adjustment based on BellSouth's stock price before the merger and
dividends paid on BellSouth common stock, as described in the Proxy
Statement/Prospectus. The exchange of WCA stock for BellSouth stock (other than
for cash paid in lieu of fractional shares) will be tax-free to WCA shareholders
for federal income tax purposes.
Your Board of Directors unanimously recommends that you vote FOR approval
of the merger, which we believe is in WCA's and your best interests. The
directors and executive officers of WCA, who collectively own approximately 59%
of the outstanding shares of common stock of WCA, have agreed to vote for the
merger.
We have enclosed a notice of the special meeting and a Proxy
Statement/Prospectus discussing the merger. We encourage you to read this
document carefully. Also enclosed is a proxy card so you can vote on the merger
without attending the meeting. Please complete, sign and date the enclosed proxy
card and return it to us as soon as possible in the envelope we have provided.
If you decide to come to the special meeting, you may vote your shares in person
whether or not you have mailed us a proxy.
After the merger is completed, we will notify you as to how you should
proceed to exchange your WCA certificates for BellSouth certificates. DO NOT
SEND IN YOUR CERTIFICATES UNTIL YOU RECEIVE THIS NOTIFICATION.
Very truly yours,
/s/ Ricky C. Haney
Ricky C. Haney
President and Chief Executive Officer
April 25, 1997
<PAGE> 2
PROPOSED MERGER OF
[WCA LOGO]
WIRELESS CABLE OF ATLANTA
WITH
BELLSOUTH
TO THE SHAREHOLDERS OF WIRELESS CABLE OF ATLANTA, INC.:
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD
TUESDAY, MAY 27, 1997
10:00 A.M.
NATIONSBANK PLAZA, 41ST FLOOR
600 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA
The Board of Directors of WCA asks you to attend this meeting to vote on
the following:
1. Proposed Merger. Your vote on the agreement describing WCA's
proposed merger with a subsidiary of BellSouth is important. In the merger,
BellSouth will pay WCA shareholders 0.49 of a share of BellSouth common
stock for each share of WCA common stock. This exchange ratio is subject to
adjustment depending on the price of BellSouth stock before the merger is
completed and dividends paid on BellSouth common stock. After the merger,
WCA will be a subsidiary of BellSouth. The Agreement and Plan of
Reorganization providing for the merger, which describes the terms of the
merger in great detail, is attached to the accompanying Proxy
Statement/Prospectus as Annex I; and
2. Other Business. To consider and vote on any other matters that
properly come before the meeting or any adjournments or postponements.
Only shareholders who hold their stock at the close of business on April
15, 1997 are entitled to notice of and to vote at the special meeting or any
adjournments or postponements thereof.
By Order of the Board of
Directors,
/s/ Richard L. Kendrick
Richard L. Kendrick
Secretary
April 25, 1997
Norcross, Georgia
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
MERGER.
WE INVITE YOU TO ATTEND THE SPECIAL MEETING BECAUSE IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED AT THE MEETING. PLEASE SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE. IF YOU ATTEND THE
MEETING, YOU MAY PERSONALLY VOTE, WHICH WILL REVOKE YOUR SIGNED PROXY. YOU MAY
ALSO REVOKE YOUR PROXY AT ANY TIME BEFORE THE MEETING EITHER IN WRITING OR BY
PERSONAL NOTIFICATION.
<PAGE> 3
PROXY STATEMENT
FOR
SPECIAL MEETING OF
SHAREHOLDERS
OF
[WCA LOGO]
WIRELESS CABLE OF ATLANTA
TO BE HELD ON MAY 27, 1997
The Boards of Directors of BellSouth Corporation and Wireless Cable of
Atlanta, Inc. have agreed to merge WCA with a subsidiary of BellSouth. WCA would
become a wholly-owned subsidiary of BellSouth and BellSouth would pay to WCA
shareholders 0.49 of a share of BellSouth common stock for each share of WCA
common stock that they own, subject to adjustment depending on the price of
BellSouth stock before the merger and dividends paid on BellSouth common stock.
PROSPECTUS OF
BELLSOUTH
COMMON STOCK
PAR VALUE $1.00
The merger cannot be completed unless WCA shareholders approve it. The WCA
Board of Directors has scheduled a special meeting for WCA shareholders to vote
on the merger as follows:
Tuesday, May 27, 1997
10:00 a.m.
NationsBank Plaza, 41st Floor
600 Peachtree St., N.E.
Atlanta, Georgia
This document gives you detailed information about the proposed merger.
BellSouth has provided the information concerning BellSouth, and WCA has
provided the information concerning WCA. Please see "Where You Can Find More
Information" on page 23 for additional information about WCA and BellSouth on
file with the United States Securities and Exchange Commission.
This Proxy Statement/Prospectus and proxy are being mailed to shareholders
of WCA beginning about April 28, 1997.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED THE BELLSOUTH COMMON STOCK TO BE ISSUED
UNDER THIS PROXY STATEMENT/PROSPECTUS OR DETERMINED IF THIS PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS APRIL 25, 1997.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY..................................................... 1
GENERAL INFORMATION......................................... 7
THE MERGER.................................................. 8
Background of the Merger; Determination of Exchange
Ratio.................................................. 8
Reasons for the Merger; Recommendation of the WCA Board... 9
Effective Time of the Merger.............................. 10
Exchange Ratio............................................ 10
Business of WCA and BellSouth Pending the Merger.......... 10
Conditions to Consummation of the Merger.................. 11
Interim Financing......................................... 11
Termination............................................... 12
Federal Communications Commission Approvals............... 12
Hart-Scott-Rodino......................................... 12
Accounting Treatment...................................... 12
Operations After the Merger............................... 12
Interests of Certain Persons in the Merger................ 13
Preferred Stock; Stock Options............................ 14
Certain Federal Income Tax Consequences................... 14
Appraisal Rights.......................................... 14
BUSINESS OF BELLSOUTH....................................... 16
BUSINESS OF WCA............................................. 16
PRICE RANGE OF WCA COMMON STOCK AND DIVIDEND POLICY......... 17
WCA MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................... 17
WCA SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS......... 19
COMPARATIVE RIGHTS OF SHAREHOLDERS.......................... 20
RESALE OF BELLSOUTH COMMON STOCK............................ 22
EXPERTS..................................................... 22
LEGAL OPINIONS.............................................. 22
OTHER MATTERS............................................... 22
SHAREHOLDER PROPOSALS....................................... 23
WHERE YOU CAN FIND MORE INFORMATION......................... 23
FINANCIAL STATEMENTS OF WIRELESS CABLE OF ATLANTA, INC. AND
SUBSIDIARY................................................ F-1
ANNEX I -- Agreement and Plan of Reorganization dated as of
February 11, 1997......................................... I-1
ANNEX II -- Georgia Business Corporation Code -- Appraisal
Rights.................................................... II-1
</TABLE>
<PAGE> 5
SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the
merger fully and for a more complete description of the legal terms of the
merger, you should read carefully this entire document and the documents we have
referred you to. See "Where You Can Find More Information." (Page 23.)
THE COMPANIES
BellSouth WCA Merger Subsidiary, Inc., a wholly-owned subsidiary of
BELLSOUTH CORPORATION
1155 Peachtree Street, N.E.
Atlanta, Georgia 30309-3610
(404) 249-2000
BellSouth is a communications services company. It provides local and toll
telephone, wireless communications, directory advertising and publishing, video,
Internet and information services to more than 27 million customers in 20
countries. Although BellSouth traces its roots back to the Bell System, it was
incorporated in 1983 under the laws of the State of Georgia.
WIRELESS CABLE OF ATLANTA, INC.
3100 Medlock Bridge Road, Suite 340
Norcross, Georgia 30071
(770) 409-3570
WCA is a wireless cable television services company. It provides wireless
cable television service to multiple dwelling units and commercial properties,
such as large apartment complexes and office buildings. WCA was organized under
the laws of the State of Georgia.
REASONS FOR THE MERGER
The WCA Board believes that the terms of the merger and the merger
agreement are fair to and in the best interests of WCA and its shareholders. In
reaching its decision, the WCA Board of Directors considered the following
factors, among other things:
(a) WCA's growth opportunities require large capital and operating
cash commitments for developing its wireless cable business from a
technological and marketing standpoint;
(b) BellSouth has the resources for such development and has offered a
fair price to WCA shareholders; and
(c) the BellSouth stock that WCA shareholders would receive in the
merger represents a more diversified investment than their WCA stock and
would be acquired on a tax-free basis. Also, unlike WCA, BellSouth pays
dividends.
OTHER INTERESTS OF OFFICERS AND
DIRECTORS IN THE MERGER
In considering the WCA Board's recommendation that you vote for the merger,
you should be aware that the officers and directors of WCA have interests in the
merger that are different from, or in addition to, their rights as WCA
shareholders. The merger agreement provides that the three officer/directors of
WCA will enter into three year consulting and noncompete agreements with
BellSouth and receive annual consulting fees of $150,000. Those officers'
current employment agreements provide for minimum annual base salaries of
approximately $100,000. The two other directors of WCA have been elected by
Digital Funding of Atlanta, L.L.C., the holder of WCA's outstanding preferred
stock. In return for Digital Funding of Atlanta's support of the merger, WCA has
agreed to pay an additional dividend on this preferred stock prior to the
merger. This dividend would result in Digital Funding of Atlanta acquiring
approximately 5,000 additional shares of BellSouth common stock in the merger.
(See "Interests of Certain Persons in the Merger" on page 13.)
RECOMMENDATION TO WCA SHAREHOLDERS
The WCA Board believes that the merger is in the best interest of WCA and
its shareholders and unanimously recommends that you vote FOR the merger.
THE MERGER
The Merger Agreement is attached as Annex I to this Proxy
Statement/Prospectus. We encourage you to read the Merger Agreement as it is the
legal document that governs the merger.
1
<PAGE> 6
WHAT WCA SHAREHOLDERS WILL RECEIVE
As a result of the merger, BellSouth will pay WCA shareholders 0.49 of a
share of BellSouth common stock for each share of WCA common stock that they
own. This "exchange ratio" is based on the market price of BellSouth common
stock on April 18, 1997 of $41.00 and is subject to adjustment based on the
market price of BellSouth stock shortly before the merger. If the market price
at this time is above $42.625, the exchange ratio will go down and if the market
price is below $32.625, the exchange ratio will go up. (See "Exchange Ratio" on
page 10.)
WCA shareholders will not receive fractional shares. Instead, they will
receive a check in payment for any fractional shares based on the market value
of BellSouth stock.
For example, if a WCA shareholder owns 100 shares of WCA common stock, this
will translate into 49.4 shares of BellSouth common stock when multiplied by the
0.494 exchange ratio. He or she would receive 49 shares of BellSouth common
stock and a check in the amount of 0.4 times the BellSouth market price used in
the calculation of the exchange ratio. Assuming a BellSouth market price of
$41.00, this check would be in the amount of $16.40.
The Merger Agreement also provides that WCA shareholders will be entitled
to receive the value of dividends declared by BellSouth for the second quarter
of 1997. WCA shareholders will receive the value of those dividends in the form
of BellSouth common stock by means of an increase in the exchange ratio. Based
on the closing price of BellSouth common stock on April 18, 1997 of $41.00, the
aggregate exchange ratio would be 0.494.
DO NOT SEND IN YOUR STOCK CERTIFICATES UNTIL INSTRUCTED TO DO SO AFTER THE
MERGER IS COMPLETED.
WHAT WILL HAPPEN TO WCA
If the merger is completed, WCA will merge with and become a subsidiary of
BellSouth. Individuals who owned stock in WCA before the merger will own stock
in BellSouth after the merger. Former WCA shareholders will own less than 1% of
BellSouth's common stock after the merger.
CONDITIONS TO THE MERGER
The completion of the merger depends upon meeting a number of conditions,
including the approval of the Federal Communications Commission, the approval of
WCA shareholders and the receipt of a legal opinion that the merger will be
treated as a tax-free reorganization. Certain of the conditions to the merger
may be waived by the company entitled to assert the condition. BellSouth and WCA
expect the merger to be tax-free, although this condition can be waived.
However, if the tax-free nature of the merger is in doubt, WCA would resolicit
proxies for approval of the merger on a taxable basis. (See "Conditions to
Consummation of the Merger" on page 11.)
TERMINATION OF THE MERGER AGREEMENT
Either company can agree to terminate the merger agreement without
completing the merger, if, among other things, any of the following occurs:
(a) the merger is not completed before August 11, 1997;
(b) the holders of a majority of the stock of WCA do not approve the
merger;
(c) the business of the other party, or the prospects for the combined
company, materially change for the worse; or
(d) the other party breaches or materially fails to comply with any of
its representations or warranties or obligations under the merger
agreement.
(See "Termination" on page 12.)
VOTE REQUIRED
Each of the directors and officers of WCA have executed a Voting Agreement
and Irrevocable Proxy with BellSouth with respect to a total of approximately
59% of the outstanding WCA shares. Under these agreements, the directors agree
to vote all of their WCA shares in favor of the merger. They also irrevocably
appoint two representatives of BellSouth as proxies to vote their WCA shares in
favor of the merger. Since the vote of these shareholders is sufficient to
approve the merger, approval of the merger is assured.
As a result, WCA shareholders may not defeat the merger by voting against
it. If they oppose the merger and do not wish to receive BellSouth shares
2
<PAGE> 7
in the merger, their only remedy is to seek appraisal of their WCA shares.
(See "Appraisal Rights" below and on page 14.)
BellSouth's Board of Directors has approved the merger. Georgia law does
not require BellSouth shareholders to approve the merger.
REGULATORY APPROVALS
BellSouth and WCA have jointly filed applications with the Federal
Communications Commission seeking its approval of the transfer of control of
certain licenses to BellSouth.
On April 9, 1997, the Federal Communications Commission approved the
transfer of control of the licenses, and such approval will be deemed a final
order after May 27, 1997 unless protested by a third party or set aside by the
Federal Communications Commission. (See "Federal Communications Commission
Approvals" on page 12.)
IMPORTANT FEDERAL INCOME TAX CONSEQUENCES
We have structured the merger so that WCA shareholders will not recognize
any gain or loss for federal income tax purposes in the merger (except for tax
payable because of cash received by WCA shareholders instead of fractional
shares or pursuant to the exercise of appraisal rights). We have conditioned the
merger on our receipt of a legal opinion that such is the case. (See "Certain
Federal Income Tax Consequences" on page 14.)
APPRAISAL RIGHTS
Under Georgia law, WCA shareholders who do not vote in favor of the merger
and who comply with certain notice requirements and other procedures will have
the right to be paid cash for the "fair value" of their shares. "Fair value" may
be more or less than the value of BellSouth stock to be paid to other WCA
shareholders according to the merger agreement. BellSouth is not required to
close the merger if shareholders owning more than 10% of WCA common stock
exercise these dissenters rights. Dissenting WCA shareholders must precisely
follow specific procedures to exercise this right, or the right may be lost.
These procedures are described in this Proxy Statement/Prospectus, and the
Georgia law that grants the right is attached as Annex II. (See "Appraisal
Rights" on page 14.)
COMPARATIVE PER SHARE MARKET PRICE INFORMATION
Shares of BellSouth common stock are listed on the New York Stock Exchange
and certain other stock exchanges. Shares of WCA common stock are quoted on the
Nasdaq SmallCap Market. On October 25, 1996, the last full trading day prior to
the public announcement of the proposed merger, BellSouth stock closed at $38.75
per share on the New York Stock Exchange and WCA stock closed on the Nasdaq
SmallCap Market at $15.00 per share. On April 18, 1997, BellSouth stock closed
at $41.00 per share and WCA stock closed at $18.625 per share. (See "Price Range
of WCA Common Stock and Dividend Policy" on page 17.)
DIVIDENDS AFTER THE MERGER
BellSouth's current annualized dividend rate is $1.44 per share. The
payment of dividends by BellSouth in the future, however, will depend on
business conditions, its financial position and earnings and other factors. WCA
has never paid dividends to holders of its common stock. (See "Price Range of
WCA Common Stock and Dividend Policy" on page 17.)
3
<PAGE> 8
COMPARATIVE PER SHARE INFORMATION
We have summarized below the per share information for BellSouth and WCA on
a historical and equivalent basis. The WCA Per Share Equivalents assume the
merger had occurred in 1996 and are calculated by multiplying the BellSouth
historical per share amounts by an assumed exchange ratio of 0.494. This
information shows how each share of WCA stock that you hold would have
participated in the income from continuing operations, cash dividends and book
value of BellSouth if the merger had been effective in 1996. However, such
amounts do not necessarily reflect future per share levels of income from
continuing operations, cash dividends and book value of BellSouth.
COMPARATIVE PER SHARE INFORMATION
<TABLE>
<CAPTION>
AT OR FOR THE
YEAR ENDED
DECEMBER 31,
1996
-------------
<S> <C>
WCA PER SHARE EQUIVALENTS
(ASSUMING THE MERGER HAD BEEN EFFECTIVE IN 1996)
Income from continuing operations per common share.......... $ 1.42
Cash dividends declared per common share.................... 0.71
Book value per common share................................. 6.60
WCA -- HISTORICAL
Net loss from continuing operations per common share........ $(0.64)
Cash dividends declared per common share.................... --
Book value per common share................................. 1.12
BELLSOUTH -- HISTORICAL
Income from continuing operations per common share.......... $ 2.88
Cash dividends declared per common share.................... 1.44
Book value per common share................................. 13.37
</TABLE>
4
<PAGE> 9
SUMMARY SELECTED HISTORICAL FINANCIAL INFORMATION
We are providing the following financial information to aid you in your
analysis of the financial aspects of the merger. We derived this information,
except for BellSouth Business Volumes, from audited financial statements for
1992 through 1996. The information is only a summary and you should read it in
conjunction with each company's historical financial statements (and related
notes) contained in the annual reports and other information on file with the
Securities and Exchange Commission. See "Where You Can Find More Information" on
page 23.
BELLSOUTH -- HISTORICAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Operating Revenues............................... $19,040 $17,886 $16,845 $15,880 $15,202
Income Before Extraordinary Losses and Accounting
Change(1)(2)................................... $ 2,863 $ 1,564 $ 2,160 $ 1,034 $ 1,659
Extraordinary Losses, net of tax (3)............. -- (2,796) -- (87) (41)
Accounting Change, net of tax.................... -- -- -- (67) --
------- ------- ------- ------- -------
Net Income (Loss)................................ $ 2,863 $(1,232) $ 2,160 $ 880 $ 1,618
======= ======= ======= ======= =======
Weighted Average Common Shares Outstanding....... 994 993 992 991 981
Earnings (Loss) Per Share:
Income Before Extraordinary Losses and
Accounting Change........................... $ 2.88 $ 1.57 $ 2.18 $ 1.04 $ 1.69
Extraordinary Losses, Net of Tax(3)............ -- (2.81) -- (0.09) (0.04)
Accounting Change, Net of Tax.................. -- -- -- (0.06) --
------- ------- ------- ------- -------
Net Income (Loss).............................. $ 2.88 $ (1.24) $ 2.18 $ 0.89 $ 1.65
======= ======= ======= ======= =======
Total Assets..................................... $32,568 $31,880 $34,397 $32,873 $31,463
Long-Term Debt................................... $ 8,116 $ 7,924 $ 7,435 $ 7,381 $ 7,360
Shareholders' Equity............................. $13,249 $11,825 $14,368 $13,495 $13,799
Dividends Declared Per Common Share.............. $ 1.44 $ 1.41 $ 1.38 $ 1.38 $ 1.38
Business Volumes:
Network Access Lines in Service (thousands).... 22,135 21,133 20,220 19,333 18,650
Access Minutes of Use (millions):
Interstate.................................. 67,690 62,411 57,778 53,345 50,546
Intrastate.................................. 21,171 19,197 16,888 15,261 13,994
Toll messages (millions)....................... 1,023 1,374 1,559 1,511 1,462
Cellular Customers (thousands):(4)
Domestic.................................... 3,612 2,847 2,156 1,559 1,118
International............................... 1,244 655 361 192 78
------- ------- ------- ------- -------
Total cellular customers.................... 4,856 3,502 2,517 1,751 1,196
======= ======= ======= ======= =======
</TABLE>
- ---------------
(1) Includes the impact in 1996 of a gain on sale of BellSouth's paging
business, which increased net income by $344.
(2) Includes the impact in 1995 of a work force reduction charge, which reduced
net income by $663 and the impact in 1993 of a charge for restructuring,
which reduced net income by $697.
(3) For 1995, reflects charges of $2,718 ($2.73 per share) for the
discontinuance of Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulation," and $78 ($.08
per share) related to the refinancing of long-term debt issues.
(4) Calculated on the equity basis, which includes customers served based on
BellSouth's ownership percentage in all markets served.
5
<PAGE> 10
WCA -- HISTORICAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------
1996 1995 1994 1993 1992
-------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues......................................... $ 3,546 $3,285 $2,869 $2,249 $1,896
Net loss......................................... $ (703) $ (640) $ (490) $ (62) $ (17)
Preferred dividend requirements.................. $ (437) $ (157) -- -- --
Net loss applicable to common shares............. $(1,140) $ (797) $ (490) $ (62) $ (17)
Weighted average common shares outstanding....... 1,771 1,740 1,729 1,291 1,037
Net loss per share............................... $ (0.64) $(0.46) $(0.28) $(0.05) $(0.02)
Total assets..................................... $ 6,332 $5,644 $4,315 $4,722 $2,105
Preferred stock.................................. $ 3,733 $2,121 -- -- --
Stockholders' equity............................. $ 1,993 $3,108 $3,599 $4,089 $ 520
Dividends declared per common share.............. -- -- -- -- --
</TABLE>
INTERIM RESULTS OF OPERATIONS
On April 21, 1997, BellSouth announced its results of operations for the
quarter ended March 31, 1997. Summary information for this period was as follows
(in millions, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1997 1996
------- -------
<S> <C> <C>
Revenues.................................................... $4,845 $4,541
====== ======
Net Income.................................................. $ 693 $ 970
====== ======
Earnings Per Share.......................................... $ 0.70 $ 0.98
====== ======
</TABLE>
Net income and earnings per share for the 1996 period include an after-tax
gain on the sale of BellSouth's paging business of $344.
On April 23, 1997, WCA announced its results of operations for the quarter
ended March 31, 1997. Summary information for this period was as follows (in
thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
---------------
1997 1996
------ ------
<S> <C> <C>
Revenues.................................................... $ 889 $ 847
====== ======
Net Loss.................................................... ($ 310) ($ 223)
====== ======
Net Loss Per Share.......................................... ($0.17) ($0.13)
====== ======
</TABLE>
6
<PAGE> 11
GENERAL INFORMATION
You have received this Proxy Statement/Prospectus in connection with the
solicitation of proxies by the Wireless Cable of Atlanta, Inc. Board of
Directors. These proxies will be voted at the WCA Shareholder Meeting to be held
at NationsBank Plaza, 41st Floor, 600 Peachtree Street, N.E., Atlanta, Georgia,
on Tuesday, May 27, 1997, at 10:00 a.m. and any adjournment. At this meeting,
WCA shareholders will consider and vote upon: (i) the Merger Agreement providing
for the merger of WCA and a BellSouth subsidiary, and (ii) any other matters
that properly come before the meeting or any adjournments or postponements. Only
shareholders of record of WCA at the close of business on April 15, 1997 are
entitled to notice of and to vote at the meeting. This Proxy
Statement/Prospectus is being mailed to all such holders of record of WCA common
stock beginning about April 28, 1997.
The WCA shareholders are entitled to one vote for each share of WCA common
stock outstanding in the holder's name on the books of WCA. Cumulative voting is
not permitted. The holders of WCA preferred stock are entitled to vote on the
merger as if the preferred stock has been converted to common stock. The
affirmative vote of the greater of (i) a majority of the outstanding shares
entitled to vote or (ii) 55% of the shares represented at the meeting and
entitled to vote, is required for approval of the merger.
Under rules of The New York Stock Exchange, the proposal to adopt the
Merger Agreement is considered a "nondiscretionary item" and brokerage firms may
not vote in their discretion on behalf of their clients if their clients have
not furnished voting instructions. WCA will consider broker "non-votes" and
abstentions in determining the presence of a quorum at the meeting but will not
count these as votes cast for a proposal. Broker "non-votes" and abstentions
will have the effect of a vote against the merger.
If you properly sign and return the attached proxy, it will be voted
according to your instructions. If you do not specify any instructions, the
proxy will be voted FOR the proposed merger, and otherwise at the discretion of
the proxies. You may revoke your proxy at any time before it is exercised by (i)
filing written notice of revocation with the Secretary of WCA (Richard L.
Kendrick, Secretary, Wireless Cable of Atlanta, Inc., 3100 Medlock Bridge Road,
Suite 340, Norcross, Georgia 30071); (ii) submitting a duly executed proxy
bearing a later date; or (iii) appearing at the WCA Shareholder Meeting and
notifying the Secretary of your intention to vote in person; however, attendance
at the WCA Shareholder Meeting will not in and of itself have the effect of
revoking the proxy. Proxies solicited by this Proxy Statement/Prospectus may be
exercised only at the WCA Shareholder Meeting and any adjournment or
postponement and will not be used for any other meeting.
The WCA Board is soliciting the accompanying proxy, and WCA will bear the
cost of the solicitation. Arrangements also may be made with brokerage houses
and custodians, nominees and fiduciaries for forwarding of solicitation material
to beneficial owners of WCA stock and obtaining proxies from the beneficial
owners of WCA stock. WCA will reimburse these persons for their reasonable
expenses.
The WCA Board has no information that other matters will be brought before
the meeting. If, however, other matters are presented, your proxy will be voted
in accordance with the recommendations of the WCA Board with respect to those
matters.
Each of the directors and officers of WCA have executed a Voting Agreement
and Irrevocable Proxy with BellSouth with respect to approximately 59% of the
outstanding WCA common stock. Under these agreements, the directors and officers
agree to vote all of their WCA shares in favor of the Merger Agreement. They
also irrevocably appoint two representatives of BellSouth as proxies to vote
their WCA shares in favor of the merger. The vote of these shareholders would be
sufficient to approve the merger without the affirmative vote of any other
holder of WCA stock. See "WCA Security Ownership of Certain Beneficial Owners."
7
<PAGE> 12
THE MERGER
The following discussion describes the more important aspects of the merger
of WCA with a subsidiary of BellSouth. The detailed terms of the merger are
contained in the Merger Agreement, which is attached as Annex I to this Proxy
Statement/Prospectus. The description in this Proxy Statement/Prospectus is not
complete, and you should refer to the Merger Agreement for more detail.
AS DISCUSSED BELOW IN "REASONS FOR THE MERGER; RECOMMENDATION OF THE WCA
BOARD," THE WCA BOARD BELIEVES THAT THE MERGER AND THE MERGER AGREEMENT ARE FAIR
TO, AND IN THE BEST INTERESTS OF, WCA AND ITS SHAREHOLDERS.
BACKGROUND OF THE MERGER; DETERMINATION OF EXCHANGE RATIO
The WCA Board of Directors historically has understood that WCA would need
substantial additional capital in order to fully develop the Atlanta wireless
cable market. In October 1995, WCA retained Alex. Brown & Sons Inc. to explore
strategic alternatives for WCA to maximize shareholder value, including raising
such capital to develop the market and considering potential business
combinations. In April 1996, WCA announced that it intended to pursue a suitable
business combination that would provide additional management expertise and
financing alternatives. WCA also announced that Alex. Brown would initiate the
process of finding an acceptable partner.
In early October 1996, representatives of BellSouth contacted WCA to
determine WCA's interest in a possible business combination with BellSouth.
BellSouth initially valued WCA common stock based upon the size of the Atlanta
wireless cable market; the number of wireless channels that would be available
for BellSouth's use; the number of WCA customers and potential customers; the
potential for growth of WCA's wireless cable business; the possibility of
integration of WCA's wireless cable business with existing BellSouth products
and services; and the value of comparable private and public companies. This
valuation resulted in a preliminary aggregate valuation of WCA of between $41
million and $42 million. Representatives of BellSouth and WCA met on October 9,
1996 and discussed this valuation. These representatives met again on October
10, 1996 and agreed at this meeting to explore the mutual acceptability of a
taxfree transaction with an exchange ratio of 0.50 shares of BellSouth common
stock for each share of WCA common stock.
On October 17, 1996, representatives of Alex. Brown met with the WCA Board
of Directors and provided the WCA Board of Directors with a preliminary analysis
regarding a possible merger with BellSouth. Alex. Brown reviewed with the WCA
Board the terms of a proposed term sheet pursuant to which each share of WCA
common stock would be exchanged for 0.50 shares of BellSouth common stock,
subject to certain adjustments, and the negotiation of a definitive agreement
mutually acceptable to both parties.
Alex. Brown also reviewed with the WCA Board WCA's recent financial
performance along with the current and historic stock prices of WCA and
BellSouth and discussed the valuations of other companies in the wireless cable
industry, including companies that had been the subject of acquisition
transactions. Alex. Brown also reviewed the proposed term sheet with the WCA
Board, reviewed the daily exchange ratio for the preceding 12 months, market
statistics of selected publicly traded wireless cable companies and selected
acquisitions within the wireless cable industry. Alex. Brown informed the Board
that based upon its review of the above, the proposed BellSouth transaction
seemed more favorable than other available alternatives of which Alex. Brown was
aware and, accordingly, was deserving of further serious consideration by the
WCA Board.
On October 25, 1996, the WCA Board of Directors approved a non-binding
letter of intent providing for a merger of WCA with a subsidiary of BellSouth.
In this letter of intent, WCA and BellSouth agreed that each share of WCA common
stock would be exchanged for 0.50 shares of BellSouth common stock, subject to
adjustments depending on BellSouth's stock price prior to the merger.
Following execution of the letter of intent, BellSouth further reviewed
WCA's financial condition and business, including the number of wireless cable
channels that would be available for BellSouth's use. Based on BellSouth's
review by its due diligence team, the parties agreed that additional
expenditures would be required in order to acquire full use of certain channels
held by WCA. After this review, BellSouth and WCA discussed revising the
purchase price and other issues. WCA and BellSouth agreed to reduce the exchange
ratio from 0.50 to 0.49; however, BellSouth and WCA also agreed upon an
adjustment in the exchange ratio if the merger does not occur until after
BellSouth's dividend record dates for the second and third quarters of
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<PAGE> 13
1997. BellSouth also agreed to provide a $1 million non-interest-bearing loan to
WCA. See "--Interim Financing."
The WCA Board of Directors approved the Merger Agreement, and the Merger
Agreement was executed on February 11, 1997.
REASONS FOR THE MERGER; RECOMMENDATION OF THE WCA BOARD
The WCA Board of Directors believes that the merger is fair to, and in the
best interests of, WCA and its shareholders. In considering the terms and
conditions of the Merger Agreement, the WCA Board considered a number of
factors, including:
(i) WCA's Limited Growth Opportunities; BellSouth Resources. WCA's
growth opportunities require high capital and operating cash requirements
for developing its wireless cable business from a technological and
marketing standpoint. BellSouth has the resources for such development.
(ii) Diversified Investment. The BellSouth stock that WCA
shareholders would receive in the merger represents a more diversified
investment than their WCA stock and would be acquired on a tax-free basis.
Also, unlike WCA, BellSouth pays dividends.
(iii) Fair Price. BellSouth has offered a fair price to WCA
shareholders. As is stated above, in October 1996 the WCA Board of
Directors approved a non-binding letter of intent with BellSouth providing
for a 0.50 exchange ratio. The WCA Board of Directors believed at the time
that an appropriate sale price of the company was in the range of $40
million to $50 million. The bottom end of this range was based on
valuations of $40 per line of sight household and $1,250 per subscriber,
which were common averages of measuring value in the wireless cable
industry based on other transactions of which the WCA Board of Directors
was aware. This 0.50 exchange ratio would have provided for an aggregate
purchase price within this range. In October 1996 Alex. Brown had advised
the Board that the transaction proposed by BellSouth in the October term
sheet was deserving of further serious consideration. Thereafter, the
exchange ratio was finalized as described in "-- Background of the Merger;
Determination of Exchange Ratio" and the BellSouth dividend adjustment was
added. Also, the stock prices of other wireless cable companies had
declined substantially since September 1995 and October 1996, while WCA's
common stock price had increased in response to announcements of the
proposed sale of WCA. The table below lists these comparable stock prices:
<TABLE>
<CAPTION>
9/25/95 10/16/96 2/11/97
------- -------- -------
<S> <C> <C> <C>
Heartland Wireless Communications, Inc.............. $24.50 $23.25 $ 8.88
Peoples Choice TV Corp.............................. $21.31 $11.00 $ 4.50
American Telecasting, Inc........................... $10.00 $ 9.44 $ 2.63
WCA................................................. $12.00 $13.69 $17.50
</TABLE>
Based on this stock price information, the WCA Board believed that if the
BellSouth transaction were not approved, WCA's common stock price would
decline as the comparables had. Also, the revised exchange ratio being
offered by BellSouth continued to provide for an aggregate purchase price
within the range the Board had determined would be acceptable. Given all of
these considerations, the WCA Board of Directors believed it had sufficient
information to approve the Merger Agreement without asking Alex. Brown to
deliver a fairness opinion as to the financial terms of the merger.
Accordingly, when considering the final terms of the merger, the WCA Board
did not request and did not receive from Alex. Brown a report, opinion or
appraisal materially relating to the transaction. Under the terms of the
Alex. Brown engagement, Alex Brown is to receive a fee of $900,000 if the
merger closes; WCA would have been required to pay Alex. Brown a fee of
$100,000 for a fairness opinion at the time of delivering the opinion
whether or not the merger closed.
THE WCA BOARD BELIEVES THAT THE MERGER IS ADVISABLE BECAUSE IT IS FAIR TO,
AND IN THE BEST INTEREST OF, WCA AND ITS SHAREHOLDERS. THE WCA BOARD UNANIMOUSLY
RECOMMENDS THAT WCA'S SHAREHOLDERS VOTE FOR THE MERGER AGREEMENT AND THE MERGER.
9
<PAGE> 14
EFFECTIVE TIME OF THE MERGER
We expect the merger to close as promptly as practicable following the
shareholders meeting. The merger will be effective on the date and the time
specified in the Articles of Merger that WCA will file with the Georgia
Secretary of State as soon as practicable after all of the conditions to the
closing of the merger are satisfied. Either WCA or BellSouth, acting alone, may
terminate the Merger Agreement if the merger has not closed by August 11, 1997.
Until the effective time of the merger, WCA shareholders will retain their
voting rights as shareholders.
EXCHANGE RATIO
The Merger Agreement provides that each share of outstanding WCA common
stock will be converted into and represent the right to receive a fraction of a
share of BellSouth common stock. For purposes of determining the exchange ratio,
the price of BellSouth common stock will be determined by averaging its closing
price as reported on the New York Stock Exchange for the 20 trading days ending
on the tenth day before the merger. The exchange ratio, and the number of shares
of BellSouth common stock, may increase or decrease depending on this average
closing price, as follows:
(i) if the average closing price is between $32.625 and $42.625, the
exchange ratio will be 0.49;
(ii) if the average closing price is greater than $42.625, the
exchange ratio will be the quotient of (A) $20.88625 divided by (B) the
average closing price, rounded to the nearest one-one thousandth of a
share; and
(iii) if the average closing price is less than $32.625, the exchange
ratio will be the quotient of (A) $15.98625 divided by (B) the average
closing price, rounded to the nearest one-one thousandth of a share.
Thus, if the average closing price is $44.625, then the exchange ratio will
be 0.47. If the average closing price is $30.625, the exchange ratio will be
0.52.
The Merger Agreement further provides that if the merger occurs after April
10, 1997 (the record date for BellSouth's second quarter dividend), the exchange
ratio will be increased so that WCA shareholders will receive additional
BellSouth common stock comparable in value to the dividends WCA shareholders
would have received if the merger had occurred on or prior to that date. This
dividend, payable to BellSouth's shareholders of record on April 10, 1997, is
equal to $0.36 per share of BellSouth common stock. WCA shareholders will
receive the value of these dividends in the form of whole shares of BellSouth
common stock and cash instead of fractional shares. Based on the closing price
of BellSouth common stock on April 18, 1997 of $41.00, the aggregate exchange
ratio would be 0.494. If the merger occurs after July 10, 1997 (the anticipated
record date for BellSouth's third quarter dividend), the exchange ratio would be
similarly adjusted to give WCA shareholders the value of the third quarter
dividend as well.
After the merger is completed, we will notify you as to how you should
proceed to exchange your WCA certificates for BellSouth certificates. DO NOT
SEND IN YOUR CERTIFICATES UNTIL YOU RECEIVE THIS NOTIFICATION.
WCA shareholders will be entitled to receive (i) certificates representing
the number of whole shares of BellSouth common stock for which such shares have
been submitted for exchange and (ii) cash instead of any fractional share
interest on the basis of the Exchange Ratio.
Based upon the capitalization of BellSouth and WCA as of the date of this
Proxy Statement/Prospectus, WCA shareholders would own less than 1% of the
outstanding BellSouth common stock following consummation of the merger.
BUSINESS OF WCA AND BELLSOUTH PENDING THE MERGER
WCA has agreed that prior to the effective time of the merger it will
conduct its business as it has in the past. WCA also agreed that it will
maintain its business organization, and relationships with employees,
subscribers and others. Furthermore, WCA agreed that it will not do anything to
hinder or delay any necessary
10
<PAGE> 15
approvals and will perform its covenants and agreements under the Merger
Agreement on a timely basis. The Merger Agreement contains a list of WCA's
specific duties in fulfilling these obligations.
WCA also has agreed that it will not pursue any discussions with any person
other than BellSouth regarding any business combination or change in control
involving WCA or its subsidiaries. WCA must promptly notify BellSouth of any
contact with any person regarding any such combination or change in control.
In addition, WCA has agreed that, prior to the closing of the merger, it
will (i) use its best efforts to maintain all Federal Communications Commission
authorizations; (ii) perform obligations under its leases and Federal
Communications Commission authorizations; (iii) maintain and defend its channel
rights; (iv) use its best efforts to maintain its current level of subscribers
and rates; and (v) use its best efforts to obtain the consent of the Federal
Communications Commission to the transfer of control pursuant to the merger and
the consent of other parties under certain agreements. The Merger Agreement
contains a detailed list of these and other pre-merger obligations of WCA.
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the merger is conditioned upon the approval of the
shareholders of WCA and upon governmental, regulatory and other third party
approvals, including the Federal Communications Commission's approvals by final
order of the transfer of control of WCA to BellSouth. The obligations of WCA and
BellSouth to consummate the merger are further conditioned upon the satisfaction
of terms and conditions listed in the Merger Agreement usual for mergers of this
type, including continued accuracy of representations and warranties made by WCA
and BellSouth, the absence of any material adverse change in WCA's or
BellSouth's business and the receipt of legal and accounting opinions.
BellSouth is not required to close the merger unless the following are
true: (i) immediately prior to the merger and following conversion of the WCA
preferred stock and the exercise of all outstanding options, not more than
2,245,378 shares of WCA common stock are issued and outstanding and no shares of
WCA preferred stock are issued and outstanding; (ii) Messrs. Ricky C. Haney,
Richard L. Kendrick and Allan H. Rudder have delivered consulting and noncompete
agreements to BellSouth; (iii) as of the date of the merger, WCA has delivered
the digital-ready channels previously identified by BellSouth; (iv) on the date
of the merger, WCA has not fewer than 8,600 basic subscribers; and (v) the
holders of not more than 10% of the outstanding shares of WCA common stock have
perfected the right to dissent to the merger.
BellSouth and WCA may waive any condition to their obligations to
consummate the merger except requisite approvals of WCA shareholders and
regulatory authorities.
INTERIM FINANCING
Under the Merger Agreement, BellSouth agreed to provide $1 million of
financing to WCA as of the date after the signing of the Merger Agreement. This
financing is not interest bearing and is to be repaid promptly following the
closing of the merger. The financing proceeds may be used only (a) to fund
negative cash flow from operations not in excess of $150,000 and (b) for the
purposes of constructing new wireless cable facilities for multiple dwelling
units, subject to the prior approval of BellSouth.
This indebtedness will be forgiven if the Merger Agreement is terminated in
accordance with its terms (a) by BellSouth other than as a result of a material
misrepresentation or a material breach of a covenant by WCA, (b) by BellSouth or
WCA other than because of governmental action that renders the merger illegal or
otherwise materially restricted or prohibited or (c) by WCA for reasons other
than the non-consummation of the merger before August 11, 1997. The financing
will convert to an interest-bearing loan, however, if the Merger Agreement is
terminated in accordance with its terms (x) by BellSouth as a result of a
material misrepresentation or a material breach of a covenant by WCA, (y) by
BellSouth or WCA because of governmental action that renders the merger illegal
or otherwise materially restricted or prohibited or (y) by WCA because the
merger does not occur before August 11, 1997, or if the holder of WCA preferred
stock elects to terminate the proxy contained in its Voting Agreement and
Irrevocable Proxy on or after August 11,
11
<PAGE> 16
1997. Under such circumstances, interest will accrue as of the termination date.
The indebtedness will have a maturity date of December 31, 1998 and will be
secured by the stock of WCA's subsidiaries. The annual interest rate would be
10%, increasing to 30% if it is not repaid at maturity.
TERMINATION
The Merger Agreement may be terminated and the merger abandoned by: (i) the
mutual written consent of BellSouth and WCA; (ii) by BellSouth or WCA, in the
event of a material and uncured breach by the other party; (iii) by BellSouth or
WCA, if any governmental body or any court takes any action that would have the
effect of making the merger illegal or burdensome; and (iv) by either BellSouth
or WCA if the merger does not occur before August 11, 1997.
In the event of termination, the Merger Agreement, other than provisions
relating to confidentiality and payment of expenses will become void without
liability on the part of any party or directors or officers, except for breach.
FEDERAL COMMUNICATIONS COMMISSION APPROVALS
As a condition to consummation of the merger, the control of Federal
Communications Commission licenses held by WCA and its subsidiaries must first
be transferred to BellSouth by final order. This requires the Commission to
first approve the qualifications of BellSouth and determine that BellSouth's
control of the licenses would be consistent with its regulations and the public
interest. Applications have been filed with the Commission requesting its
approvals. On April 9, 1997, the Federal Communications Commission approved the
transfer of control of the licenses, and such approval will be deemed a final
order after May 27, 1997 unless protested by a third party or set aside by the
Federal Communications Commission.
HART-SCOTT-RODINO
A Hart-Scott-Rodino filing is not legally required; however, Federal Trade
Commission staff is undertaking a preliminary investigation of the merger to
assess whether it may have any adverse effects on competition in the delivery of
multi-channel video programming in the Atlanta area. We have agreed to cooperate
with this investigation and not to close the merger prior to May 28, 1997.
Although this inquiry could potentially result in Federal Trade Commission
action to challenge or delay the acquisition, we believe the possibility is
unlikely given the merger's pro-competitive nature.
ACCOUNTING TREATMENT
The merger will be accounted for using the purchase method of accounting.
BellSouth will be deemed the acquiror for financial reporting purposes. Under
the purchase method of accounting, the purchase price in the merger is allocated
among the WCA assets acquired and WCA liabilities assumed to the extent of their
fair market value, with any excess purchase price being allocated to goodwill.
Due to the size of BellSouth relative to the purchase price, the purchase method
of accounting and the related amortization of goodwill will have an immaterial
effect on BellSouth's financial statements and, accordingly, no effect on WCA's
shareholders.
OPERATIONS AFTER THE MERGER
After the merger, BellSouth generally will conduct the business presently
conducted by WCA in the Atlanta, Georgia wireless cable market. BellSouth also
plans to upgrade the current wireless cable TV service in Atlanta with new high
capacity digital technology that should allow WCA to transmit more than 100
channels directly to subscribers' homes.
By using new digital technology, BellSouth expects to cover more than
900,000 households in the Atlanta metropolitan area. Digital technology will
permit existing spectrum to be used to carry more programming streams on the
same bandwidth and with a higher quality picture.
12
<PAGE> 17
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The WCA officers and directors have interests in the merger in addition to
their interests as shareholders of WCA generally.
Consulting and Noncompete Agreements. Employment agreements are currently
in effect for Messrs. Ricky C. Haney, Richard L. Kendrick and Allan H. Rudder,
who are members of the WCA Board. These employment agreements provide for
minimum base salaries as follows: Mr. Haney, $102,000; Mr. Kendrick, $102,000;
and Mr. Rudder, $96,000. Under the Merger Agreement, these employment agreements
must be terminated and Messrs. Haney, Kendrick and Rudder must enter into
consulting and noncompete agreements with WCA before the merger is completed. As
employees of WCA, these officers also receive additional employee benefits such
as life and health insurance and eligibility for bonuses. These officers will
not continue to receive these benefits following the merger.
The terms of these new consulting and noncompete agreements continue for
three years from their execution. They provide for fees in the amount of
$150,000 per year, plus expenses. Under the agreements, the consultant agrees to
render all consulting services reasonably required by WCA. Each agreement also
contains a noncompetition clause under which the consultant agrees not to
compete with WCA in the Atlanta and Athens, Georgia areas during the term of the
agreement and for one year after its termination.
Employees of WCA who are terminated by BellSouth without cause within six
months, other than Messrs. Ricky C. Haney, Richard L. Kendrick and Allan H.
Rudder, will be paid two months severance pay.
Holder of Preferred Stock. Digital Funding of Atlanta, L.L.C., a private
investment fund ("DFA"), owns WCA's outstanding Series A Convertible Preferred
Stock. The terms of the preferred stock entitle DFA to elect two of WCA's five
directors. Prior to execution of the Merger Agreement, DFA informed the WCA
Board of Directors that because the merger would be anticipated to occur in the
second quarter in 1997, conversion by DFA of its preferred stock immediately
prior to the merger would result in a significant loss to it of certain future
dividend payments. As consideration to induce DFA to convert its preferred stock
in accordance with the terms of the Merger Agreement, the WCA Board of Directors
agreed that the Company would issue to DFA, prior to the merger, additional
shares of preferred stock. The number of shares to be issued would be the number
of shares of preferred stock which would be due under the preferred stock
dividend requirements at March 1, 1997 (2,362 shares) plus an additional
dividend of 2,362 shares. In exchange DFA agreed to convert all of its shares of
preferred stock into shares of WCA common stock immediately prior to the merger,
and to exchange those shares for shares of BellSouth common stock in accordance
with the ratio provided in the Merger Agreement. This additional dividend would
result in DFA's acquiring approximately 5,000 additional shares of BellSouth
common stock in the merger.
Stock Options. The WCA Board of Directors has approved the acceleration of
the exercise date of outstanding options that would otherwise not be exercisable
prior to the effective time of the merger, contingent upon the merger's
occurring. Mr. Rudder holds 14,000 options which have been accelerated.
Indemnification. After the merger, WCA will provide indemnification to the
directors and officers of WCA for claims occurring after WCA became a reporting
company under the Securities Exchange Act of 1934 and before the merger, to the
extent permitted under the Articles of Incorporation and Bylaws of WCA.
Indemnification will continue for six years after the merger, but any right to
indemnification regarding a claim made within the six year period will continue
until final disposition of the claim. WCA will not be obligated to pay more than
$5,000,000 in the aggregate for these indemnification obligations.
In addition, after the merger, WCA will provide indemnification to the
directors and officers of WCA for all losses or claims, with the approval of
BellSouth, pertaining to the Merger Agreement. This indemnification shall
continue for six years after the merger, but any right to indemnification
regarding a claim asserted or made within the six year period shall continue
until final disposition of the claim.
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<PAGE> 18
PREFERRED STOCK; STOCK OPTIONS
Prior to the merger, each share of WCA preferred stock must be converted
into WCA common stock and all accrued but unpaid dividends on WCA preferred
stock must be paid. In addition, all outstanding WCA options must be exercised
or canceled prior to the merger. Immediately prior to the merger, following
conversion of WCA preferred stock and the exercise of all outstanding WCA
options, the Merger Agreement requires that there shall be not more than
2,245,378 shares of WCA common stock issued and outstanding and no shares of WCA
preferred stock issued and outstanding.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
BellSouth and WCA have received the opinion of Hunton & Williams, counsel
to BellSouth, to the effect that for United States federal income tax purposes:
(i) the merger will constitute a "reorganization" under Section 368(a)(1)(A) of
the Internal Revenue Code; (ii) no gain or loss will be recognized by BellSouth,
BellSouth Sub or WCA upon consummation of the merger, and (iii) the merger will
result in the federal income tax consequences summarized below for WCA
shareholders who receive BellSouth common stock for WCA common stock. Receipt of
the opinion of Hunton & Williams confirming these consequences as of the
effective date of the merger is a condition to consummation of the merger. The
opinion of Hunton & Williams will be based on certain customary assumptions and
representations regarding, among other things, the lack of previous dealings
between WCA and BellSouth, the existing and future ownership of WCA capital
stock and BellSouth capital stock and BellSouth's future business plans for WCA.
WCA and BellSouth currently contemplate that this tax opinion will be
forthcoming. In the unexpected event that the tax opinion is not received, and
WCA and BellSouth desire to proceed with the merger on a taxable basis, WCA
would resolicit proxies for approval of the merger.
In the opinion of Hunton & Williams, if you receive solely BellSouth common
stock in exchange for your shares of WCA common stock, you will not recognize
any gain or loss on the exchange. If you receive BellSouth common stock and cash
in lieu of a fractional share of BellSouth common stock, you will recognize
taxable gain or loss solely with respect to such cash as if the fractional share
had been received and then redeemed for the cash. You will have an aggregate tax
basis in your shares of BellSouth common stock (including any fractional share
interest) received in the merger equal to your tax basis in the shares of WCA
common stock exchanged therefor. Your holding period for shares of BellSouth
common stock (including any fractional share interest) received in the merger
will include your holding period for the exchanged shares of WCA common stock if
they are held as a capital asset at the effective time of the merger.
If you elect appraisal rights (described below), your receipt of cash in
exchange for WCA common stock will be a taxable event. If you are considering
the exercise of appraisal rights you should consult with a tax adviser.
THE PRECEDING DISCUSSION SUMMARIZES THE MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER TO WCA SHAREHOLDERS. IT DOES NOT DISCUSS ALL
POTENTIALLY RELEVANT FEDERAL INCOME TAX MATTERS OR CONSEQUENCES TO ANY FOREIGN
OR OTHER SHAREHOLDERS SUBJECT TO SPECIAL TAX TREATMENT, NOR DOES IT DISCUSS ANY
STATE OR LOCAL TAX CONSEQUENCES OF THE MERGER. THE TAX CONSEQUENCES TO YOU MAY
DEPEND ON YOUR INDIVIDUAL CIRCUMSTANCES. WE ADVISE YOU TO CONSULT YOUR OWN TAX
ADVISORS WITH REGARD TO THE MERGER.
APPRAISAL RIGHTS
Under Georgia law, WCA shareholders who do not vote in favor of the Merger
Agreement and who comply with certain notice requirements and other procedures
will have the right to dissent and to be paid cash for the "fair value" of their
shares. Such "fair value" as finally determined under such procedures may be
more or less than the consideration to be received by other WCA shareholders
under the terms of the Merger Agreement. Failure to follow such procedures
precisely may result in loss of appraisal rights. BellSouth has the right to
elect not to close the merger if the holders of more than 10% of the outstanding
shares of WCA common stock have perfected the right to dissent from the merger.
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<PAGE> 19
The following discussion is only a summary and not a complete statement of
the law pertaining to appraisal rights under the Georgia Business Corporation
Code. The Code section providing for appraisal rights is reprinted in its
entirety as Annex II to this Proxy Statement/Prospectus.
If you wish to exercise appraisal rights, or "dissenters' rights," you must
deliver to WCA before the vote on the Merger Agreement a written notice of your
intent to demand payment for your Shares. You must not vote in favor of the
Merger Agreement. A vote against approval of the Merger Agreement will not, by
itself, constitute a valid written demand for dissenters' rights.
WCA must provide a written dissenters' notice to each dissenting
shareholder within 10 days after shareholder approval of the Merger Agreement
(i) stating where the demand for payment must be sent and where and when
certificates for certificated shares must be deposited and (ii) setting a date
by which WCA must receive the demand for payment, which date may not be fewer
than 30 nor more than 60 days after the date on which the dissenters' notice is
delivered. A shareholder must deliver a demand for payment and deposit his or
her shareholder's certificates on or prior to the payment demand date in
accordance with the terms of the dissenters' notice. Within 10 days after
receipt of the demand for payment or within 10 days after the merger, whichever
is later, WCA must make a written offer to each dissenting shareholder who has
filed a demand for payment to pay an amount estimated to be the "fair value" of
the shares plus accrued interest. If the dissenting shareholder accepts WCA's
offer by written notice to WCA within 30 days of WCA's offer, WCA must make
payment within 60 days after it made the offer or the closing of the merger,
whichever occurs later.
A dissenting shareholder may notify WCA, in writing, of the shareholder's
own estimate of the "fair value" of his or her shares and demand payment, if
such notice is delivered within 30 days after WCA's offer. In addition, if WCA
does not offer payment within the time period set forth in the preceding
paragraph, a dissenting shareholder may demand delivery of certain WCA financial
information (which WCA must provide within 10 days after receipt of such demand)
and may, at any time within three years of the consummation of the merger,
notify WCA of the shareholder's own estimate of the fair value of the
shareholder's shares and demand payment.
If a demand for payment remains unsettled, then WCA, within 60 days after
receipt of the demand for payment, must file a lawsuit requesting that the "fair
value" of the shares be determined, together with accrued interest. If WCA fails
to bring such action within the 60-day period, WCA will be required to pay each
dissenter whose demand remains unsettled the amount demanded.
The costs and expenses of any such action shall be determined by the court
and shall be assessed against WCA. Notwithstanding the foregoing, all or any
part of such costs and expenses may be apportioned and assigned as the court may
deem equitable against any and all of the dissenting shareholders who are party
to the action and to whom WCA shall have made an offer to pay for the shares, if
the court finds that the shareholder acted inappropriately in making a demand
for payment. Such expenses may include reasonable compensation and expenses of
appraisers appointed by the court and fees and expenses of counsel and experts
employed by WCA. If the court finds that WCA failed to comply with legal
requirements, the court may award to any shareholder who is a party to the
proceeding such sum as the court may determine to be reasonable compensation to
any attorneys or experts employed by the shareholder in the action.
Only a shareholder of record is entitled to assert dissenter's rights for
WCA stock registered in that holder's name. The demand for dissenters' rights
should be exercised by or on behalf of the holder of record fully and correctly,
as his or her name appears on his stock certificates. If WCA stock is owned of
record in a fiduciary capacity, such as by a trustee, guardian or custodian, he
or she should execute the demand in that capacity, and if WCA stock is owned of
record by more than one person, such as a joint tenancy or tenants in common,
all joint owners should execute the demand. An authorized agent, including one
or more joint owners, may execute a demand for appraisal on behalf of a holder
of record, but the agent must identify the record owner or owners and expressly
disclose the fact that, in executing the demand, the agent is acting for the
owner or owners.
15
<PAGE> 20
If any holder of WCA stock who demands dissenters' rights with respect to
his or her shares fails to perfect, or effectively withdraws or loses, his right
to dissent, he will no longer have the right to receive the "fair value" of his
shares. Rather, such a shareholder will be entitled only to receive the amount
of BellSouth stock determined by the exchange ratio described above. A WCA
shareholder will fail to perfect, or effectively withdraw or lose, his or her
right to dissent if he or she fails to deliver a notice of intent to WCA prior
to the vote on the Merger Agreement, fails to vote against approval of the
Merger Agreement or abstain with respect to the Merger Agreement, fails to file
a demand for payment with WCA or delivers to WCA a written withdrawal of his or
her demand for payment.
Failure to follow the steps required by Georgia law for perfecting
dissenters' rights will result in the loss of such rights. Consequently, any
shareholder of WCA who desires to exercise his or her dissenters' rights is
urged to consult his or her legal advisor before attempting to exercise such
rights.
BUSINESS OF BELLSOUTH
BellSouth Corporation is a holding company providing telecommunications
services and communications systems and products. BellSouth provides
predominantly tariffed telecommunications services to approximately two-thirds
of the population and one-half of the territory within Alabama, Florida,
Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina and
Tennessee. BellSouth's primary other businesses are wireless and international
communications services and advertising and publishing products.
BUSINESS OF WCA
WCA was organized in 1982 for the purpose of providing private cable
television services for multiple dwelling units. In 1988, Vidcomm, Inc. was
formed by the founders of WCA for the purpose of operating a wireless cable
company. Vidcomm became a wholly-owned subsidiary of WCA in December 1992.
WCA has obtained the rights to transmit wireless cable television in the
Atlanta metropolitan area by holding Federal Communications Commission licenses
and leasing airtime from other licensees. WCA's subscribers consist of apartment
complexes, commercial establishments and, to a lesser extent, single-family
homes. Proposed technical modifications are pending before the Federal
Communications Commission that, if and when approved, would permit WCA to
upgrade its wireless cable TV service with new digital technology.
WCA has two sources for television programming that it sells to
subscribers: satellite programming (such as HBO, ESPN, etc.) and local off-air
broadcast channels. Wireless cable programming is transmitted via microwave, as
opposed to hard-wired cable, from a central location over Federal Communications
Commission-authorized frequencies to subscribers equipped with a special
antenna. For satellite programming, WCA utilizes an initial reception facility
in Atlanta, which receives signals via satellite and then transmits them to
WCA's primary, central transmitter located on top of the NationsBank Plaza in
Atlanta. This facility then transmits the wireless cable programming to WCA's
subscribers. In contrast, the local off-air television signals are transmitted
to a general area and receivable by any television in the reception area. In
providing this programming source, WCA does not use its transmitter facilities
as it does for wireless cable services.
16
<PAGE> 21
PRICE RANGE OF WCA COMMON STOCK
AND DIVIDEND POLICY
WCA common stock is traded on The Nasdaq SmallCap Market under the symbol
"WCAI." The following table sets forth the high and low sales prices of WCA
common stock, based on the trade prices, as reported on The Nasdaq SmallCap
Market for the following calendar quarters:
<TABLE>
<CAPTION>
HIGH LOW
------- ------
<S> <C> <C>
1997
Second Quarter (through April 15 1997).................... $ 19.25 $18.50
First Quarter............................................. 19.875 15.00
1996
Fourth Quarter............................................ $ 18.50 $12.75
Third Quarter............................................. 16.50 13.50
Second Quarter............................................ 18.00 9.50
First Quarter............................................. 11.50 8.75
1995
Fourth Quarter............................................ $ 12.75 $10.25
Third Quarter............................................. 12.25 7.75
Second Quarter............................................ 10.75 8.00
First Quarter............................................. 10.50 7.25
</TABLE>
On April 15, 1997, the Record Date, the outstanding shares of WCA common
stock were held by approximately 800 record holders. The closing price per share
of WCA common stock on April 18, 1997 on The Nasdaq SmallCap Market was $18.625.
WCA has never paid dividends on WCA common stock and, if the merger were
not to occur, does not expect to pay dividends in the future.
WCA MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table sets forth items from WCA's Statement of Income as
percentages of net revenue:
<TABLE>
<CAPTION>
PERCENT
------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Revenue..................................................... 100% 100% 100%
Service Costs............................................... 57.6 65.1 68.1
Selling, general and administrative......................... 52.9 43.0 38.3
Depreciation and amortization............................... 17.2 22.1 26.0
Other (income) expense...................................... (1.7) (1.0) (2.4)
Loss, before income taxes................................... 26.0 29.2 29.9
</TABLE>
WCA's revenue increased 8% to $3,545,000 in 1996. This increase was due
primarily to an increase in the number of subscribers from 8,500 to 9,000.
Service costs for 1996 increased as a percentage of revenue by 3%. This
increase was due primarily to an increase in tower rental and channel lease
costs due to the addition of 16 new wireless channels during the fourth quarter
of 1995.
Selling, general and administrative expense decreased by 4.7% of revenue.
This decrease was due to a full year's reduction in marketing, selling and
administrative salaries and benefits due to the elimination of the advertising
sales department and single family home marketing costs during 1995. WCA has
deferred single family home expansion to study the improvements associated with
digital signal transmission.
17
<PAGE> 22
The deferred tax benefit increased by $359,147 during 1996. The basis for
deferring tax benefits is an excess of appreciated asset value over the tax
basis of WCA's net assets in an amount sufficient to realize the deferred tax
asset and projected future profitable operations. Management forecasts that the
current cumulative net operating loss carryforward will be utilized by 2002 when
the first net operating loss carryforward expires.
WCA's revenue increased 15% to $3,285,000 in 1995. Although the number of
subscribers increased from 8,200 to 8,500 in 1995, the increase in revenue was
due primarily to an increase in subscriptions to premium channels.
Service costs for 1995 increased by 7.5% of revenue. The primary reason for
this increase was increased programming costs related to the increase in premium
channel subscriptions. There also was an increase in tower rental and channel
lease costs because of the addition of 16 new wireless channels during 1995.
Selling, general and administrative expense decreased by 9.9% of revenue in
1995. Approximately 7.0% of this decrease was due to the elimination of costs
related to the advertising sales department and single family home marketing
costs. WCA has deferred single family home expansion while it continues to study
the improvements associated with digital signal transmission. The balance of
this decrease was primarily due to reduced professional fees and travel expense.
GENERAL
Currently, most of WCA's subscribers result from contracts with 40
apartment complexes, which typically have an initial term of ten years. Upon
expiration of the initial term, these contracts automatically convert to month
to month contracts unless they are extended or canceled. Capital costs related
to these contracts are written off during the initial term. WCA continues to add
new contracts and has not had a significant amount of contracts canceled. Any
future contract cancellations should not have a material impact on operations
because WCA is adding new contracts and should not have a significant number of
cancellations in any one year.
WCA currently has agreements to provide a competitive lineup of 38 channels
of programming to its customers. The lineup consists of 28 microwave delivered
channels and 10 local off-air channels. During the fourth quarter of 1995, WCA
relocated its transmission site to NationsBank Plaza, the tallest building in
Atlanta, and increased its transmitter output power from 10 to 50 watts.
LIQUIDITY AND CAPITAL RESOURCES
On March 1, 1995, WCA executed an agreement with Applied Video
Technologies, Inc. for the purchase of $3,500,000 of convertible preferred
equity. Under the terms of the agreement, $2,100,000 was invested in 1995 and
$1,400,000 in January 1996.
As soon as is practical WCA plans to offer a digital package with more than
100 channels, subject to receipt of various Federal Communications Commission
approvals. A basic digital package will be priced comparable to the price of the
basic package of WCA's primary franchise cable competitor. As with the franchise
cable operator, WCA will offer premium channels, pay-per-view and other services
at additional charge to subscribers. WCA believes it will be able to provide a
higher quality, comparably priced service than its cable competitors' service
packages. These development plans will require significant funds in addition to
funds provided from operations. WCA will have to secure these additional funds
to cover the capital needs of additional growth after 1996.
18
<PAGE> 23
WCA SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of WCA common stock and preferred stock as of March 1, 1997 by (i)
each person who is known by WCA to own beneficially more than 5 percent of WCA's
common stock and preferred stock, (ii) each of WCA's directors and (iii) all
directors and executive officers of WCA as a group.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
-------------------------------- ---------------------
NUMBER PERCENT NUMBER PERCENT
NAME OF SHARES OPTIONS OF CLASS OF SHARES OF CLASS
- ---- --------- ------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Allan H. Rudder (Director).................. 359,750(1) 60,000(5) 19.78%
Ricky C. Haney (Director)................... 305,000(2) 16.77
Richard L. Kendrick (Director).............. 294,000(3) 16.17
R.S. Operators, Inc......................... 278,750(4) 15.33
Digital Funding of Atlanta, L.L.C........... 41,734 100.00%
R. Ted Weschler (Director).................. 41,734(6) 100.00
R. Stanley Allen (Director)(7)..............
All Directors and Executive Officers as a
group (5 persons)......................... 958,750 60,000 52.72% 41,734 100.00%
</TABLE>
- ---------------
(1) Includes currently exercisable options to purchase 46,000 shares, 2,000
shares owned by Mr. Rudder's wife and 278,750 shares owned by R.S.
Operators, Inc. Mr. Rudder is Secretary, Treasurer and a director of R.S.
Operators, Inc.
(2) Includes 47,230 shares owned by Mr. Haney's wife and 5,540 shares owned by
his children.
(3) Includes 26,020 shares owned by Mr. Kendrick's wife and 6,960 shares owned
by his children.
(4) Mr. Ray Stevenson, III, President and majority owner of R.S. Operators,
Inc., a real estate and other investment firm, is the beneficial owner of
these shares.
(5) 46,000 options are currently exercisable and 14,000 options are not
exercisable.
(6) Includes 41,734 shares of Preferred Stock owned by Digital Funding of
Atlanta, L.L.C. Mr. Weschler has been elected to the WCA Board of Directors
by, and serves as the administrative agent of, Digital Funding of Atlanta,
L.L.C.
(7) Mr. Allen has been elected to the WCA Board of Directors by Digital Funding
of Atlanta, L.L.C.
19
<PAGE> 24
COMPARATIVE RIGHTS OF SHAREHOLDERS
At the effective time of the merger, shareholders of WCA automatically will
become shareholders of BellSouth, and their rights as shareholders will be
determined by the BellSouth Articles of Incorporation and BellSouth Bylaws.
BellSouth and WCA are Georgia corporations and are subject to the provisions of
the Georgia Business Corporation Code. The following is a summary of the
material differences in the rights of shareholders of BellSouth and WCA. This
summary is not a complete discussion of the rights of holders of shares of WCA
and BellSouth, but only the primary differences.
CAPITALIZATION
WCA. The WCA Articles of Incorporation authorize the issuance of up to
15,000,000 shares of capital stock, par value $1.00 per share, of which
10,000,000 are classified as WCA common stock and 5,000,000 are classified as
WCA preferred stock. A total of 1,773,400 shares of WCA common stock and 41,734
shares of WCA Series A Preferred Stock were issued and outstanding as of March
1, 1997. The shares of WCA preferred stock are issued in series, with relative
rights, preferences and limitations of each series fixed by WCA's Board of
Directors.
BellSouth. The capital stock of BellSouth consists of 2,200,000,000
authorized shares of common stock and 100,000,000 authorized shares of
cumulative first preferred stock, par value $1.00 per share. The shares of
BellSouth preferred stock are issuable in series, with relative rights,
preferences and limitations of each series fixed by BellSouth's Board of
Directors.
DIRECTORS AND CLASSES OF DIRECTORS; VACANCIES AND REMOVAL OF DIRECTORS
WCA. The WCA Bylaws provide that the number of directors must not be fewer
than one nor more than seven. The WCA shareholders have the power to determine
the number of directors within these numerical limitations, and the WCA Board
currently consists of five members. The WCA Board is not divided into classes.
Directors are elected at each annual meeting and serve until the next annual
meeting.
The WCA Bylaws also provide that any one or more directors or the entire
Board of Directors may be removed from office, with or without cause, by the
vote of the holders of 55% of the shares entitled to vote at any shareholder
meeting with respect to which notice of such purpose has been provided.
BellSouth. The BellSouth Bylaws provide for a Board of Directors
consisting of 14 persons. BellSouth's Board of Directors is divided into three
classes, each as nearly equal in number as possible, with one class elected
annually. Each class has a term of three years, which ends at an annual meeting
of shareholders. The authorized number of directors may be increased or
decreased by the vote of a majority of the then authorized number of directors
or by the affirmative vote of at least 75% of the voting power of BellSouth
entitled to vote generally in the election of directors, voting together as a
single class. The number of directors, however, must not be less than nine.
Subject to the rights of the holders of any series of BellSouth preferred
stock then outstanding, any director, or all directors, may be removed from
office at any time, with or without cause, only by the affirmative vote of the
holders of at least 75% of the voting power of all BellSouth stock entitled to
vote generally in the election of directors, voting together as a single class.
ANTI-TAKEOVER PROVISIONS
BellSouth Shareholder Rights Plan. BellSouth's Board of Directors has
established BellSouth's Shareholder Rights Plan. The rights have significant
anti-takeover effects if an acquisition transaction not approved by the Board of
Directors is proposed or initiated by a person or group. Because of these
provisions, it is unlikely that any person or group will initiate an acquisition
transaction that is not approved by BellSouth's Board of Directors. Thus, the
rights could have the effect of discouraging the acquisition of BellSouth unless
approved by BellSouth's Board of Directors. The rights do not interfere with any
merger or other business combination approved by BellSouth's Board of Directors
and shareholders.
20
<PAGE> 25
BellSouth Business Combinations Bylaw. As permitted by the Georgia
Business Corporation Code, BellSouth has elected to be covered by the Georgia
law that (with limited exceptions) prohibits a person or entity from acquiring
10% of the outstanding common stock of BellSouth without the approval of
BellSouth's Board of Directors and thereafter within five years acquiring
BellSouth without shareholder approval. This provision may be repealed only by
an affirmative vote of two-thirds of the continuing directors and a majority of
the votes entitled to be cast by disinterested shareholders and shall not be
effective until 18 months after such shareholder vote. The Georgia statute
provides that a domestic corporation that has repealed such a bylaw may not
thereafter readopt the bylaw.
BellSouth Fair Price Provisions. "Fair price" provisions contained in
BellSouth's Articles require, generally, in connection with a merger or similar
transaction between BellSouth and a 10% shareholder, the unanimous approval of
BellSouth's disinterested directors or the affirmative vote of two-thirds of
such directors and a majority of the outstanding shares held by disinterested
shareholders, unless (a) within the past three years the shareholder has not
increased its shareholdings by more than one percent in any 12-month period or
(b) all shareholders receive at least the same consideration for their shares as
the interested shareholder previously paid. These provisions may be revised or
rescinded only upon the affirmative vote of at least two-thirds of the
disinterested directors and a majority of the outstanding shares held by
disinterested shareholders.
WCA. WCA does not have a shareholders rights plan. Moreover, the WCA
Articles and Bylaws do not contain a provision electing to be governed by the
business combination provisions or the fair price provision in the Georgia
Business Corporation Code.
SPECIAL MEETINGS OF SHAREHOLDERS
WCA. The WCA Bylaws provide that a special meeting of the shareholders may
be called for any purpose at any time by the Chairman of the Board, President,
Vice President, a majority of the Board of Directors or shareholders holding not
less than one-fourth of the voting power of WCA.
BellSouth. The BellSouth Bylaws provide that special meetings of the
shareholders may be called at any time by the Board of Directors or the Chief
Executive Officer and shall be called upon written request to the Chief
Executive Officer or Secretary, signed by the holders of at least two-thirds of
the outstanding shares entitled to vote at the meeting.
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
WCA. The WCA Bylaws provide that, at an annual meeting of shareholders,
any matter relating to the affairs of WCA, whether or not stated in the notice
of the meeting, may be brought up for action except matters that the Georgia
Code requires to be stated in the notice of the meeting.
BellSouth. The BellSouth Bylaws provide that a shareholder desiring to
nominate a person for election to the Board of Directors or to propose any other
business before an annual meeting of shareholders must notify BellSouth's
Secretary in writing between 60 and 120 days prior to the date of the meeting.
The shareholder's notice must contain detailed information as to each person
whom the shareholder proposes to nominate for election as a director and as to
any other business that the shareholder proposes to be brought before the
meeting.
21
<PAGE> 26
RESALE OF BELLSOUTH COMMON STOCK
BellSouth common stock has been registered under the Securities Act of
1933, which allows such shares to be traded freely and without restriction by
those holders of WCA common stock who receive such shares in the merger and who
are not directors, executive officers and 10% or more shareholders of WCA or
BellSouth. This Proxy Statement/Prospectus does not cover any resales of
BellSouth common stock received by these persons.
EXPERTS
The consolidated financial statements of BellSouth and subsidiaries
incorporated by reference in this Proxy Statement/Prospectus from BellSouth's
Annual Report on Form 10-K for the year ended December 31, 1996 have been
incorporated herein in reliance on the report, which includes an explanatory
paragraph related to a change in an accounting method, of Coopers & Lybrand
L.L.P., independent accountants, also incorporated herein by reference, given on
the authority of that firm as experts in accounting and auditing.
The consolidated financial statements of WCA and its subsidiary as of
December 31, 1995 included in this Proxy Statement/Prospectus have been audited
by Blackwell, Poole & Company, independent auditors, as stated in their attached
report, and have been included in reliance on the report of that firm given upon
their authority as experts in accounting and auditing.
The consolidated financial statements of WCA and its subsidiary as of
December 31, 1996 included in this Proxy Statement/Prospectus have been audited
by Arthur Andersen LLP, independent public accountants, as stated in their
attached report with respect thereto, and have been included in reliance upon
the authority of said firm as experts in accounting and auditing in giving said
report.
On May 14, 1996, the appointment of Blackwell, Poole & Company as
independent auditors for WCA was terminated by WCA and Arthur Andersen LLP was
engaged as independent auditors. The decision to change independent auditors was
approved by the Board of Directors of WCA. During the fiscal year ended December
31, 1995, there were no disagreements between WCA and Blackwell, Poole & Company
on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedures, which disagreements if not resolved
to the satisfaction of Blackwell, Poole & Company would have caused them to make
reference to the subject matter of the disagreement in connection with their
report. The audit report of Blackwell, Poole & Company on WCA's financial
statements as of and for the year ended December 31, 1995 did not contain an
adverse opinion or disclaimer of opinion, nor were they qualified or modified as
to uncertainty, audit scope or accounting principles.
LEGAL OPINIONS
The legality of the BellSouth common stock to be issued in the merger will
be passed on for BellSouth by Walter H. Alford, Executive Vice President and
General Counsel of BellSouth. Mr. Alford beneficially owns approximately 34,900
shares of BellSouth common stock.
A condition to consummation of the merger is the delivery by Hunton &
Williams, counsel to BellSouth, of an opinion concerning certain federal income
tax consequences of the merger. See "The Merger -- Certain Federal Income Tax
Consequences."
Certain legal matters will be passed on for WCA by Gambrell & Stolz,
L.L.P., Atlanta, Georgia and Pepper & Corazzini, L.L.P., Washington, D.C.
OTHER MATTERS
As of the date of this Proxy Statement/Prospectus, the WCA Board does not
know of any other matters to be presented for action at the WCA Shareholder
Meeting other than procedural matters incident to the conduct of the meeting.
WCA shareholders may make proposals for consideration at the WCA Shareholder
22
<PAGE> 27
Meeting in accordance with the procedures specified in WCA's Bylaws. If
shareholder proposals are made or any other matters not now known are properly
brought before the WCA Shareholder Meeting, the persons named in the
accompanying proxy will vote the proxy in accordance with the decision of a
majority of the WCA Board.
SHAREHOLDER PROPOSALS
If the merger does not close for any reason, pursuant to Rule 14a-8 under
the Securities Exchange Act of 1934, shareholders may present proper proposals
for inclusion in WCA's proxy statement and for consideration at the 1998 annual
meeting of WCA shareholders by submitting their proposals to WCA in a timely
manner. In order to be considered for the 1998 annual meeting, shareholder
proposals must be received at WCA's headquarters, attention of the Secretary,
3100 Medlock Bridge Road, Suite 340, Norcross, Georgia 30071 no later than
December 16, 1997 and have complied with the requirements of Rule 14a-8.
WHERE YOU CAN FIND MORE INFORMATION
BellSouth and WCA file annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information on file at the SEC's public reference
room in Washington, D.C. You can obtain copies of these documents, upon payment
of a duplicating fee, by writing to the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. SEC filings are also available to the public on the SEC Internet site at
http://www.sec.gov and BellSouth's filings also are available on its Website at
http://www.bellsouth.com. As permitted by the Rules and Regulations of the SEC,
this Proxy Statement/Prospectus does not contain all the information set forth
in the Registration Statement, of which this Proxy Statement/Prospectus is a
part, which has been filed by BellSouth with the SEC to register the BellSouth
common stock issuable in the merger.
Neither BellSouth nor WCA has authorized anyone to give any information
regarding the offer other than the information in this Proxy
Statement/Prospectus. This Proxy Statement/Prospectus is not an offer to sell or
a solicitation of an offer to buy any securities other than the BellSouth common
stock it describes, nor is it an offer to or solicitation of anyone to whom it
would be unlawful to make an offer or solicitation. Neither the delivery of this
Proxy Statement/Prospectus nor the distribution of any of the securities to
which this Proxy Statement/Prospectus relates implies that the information is
correct as of any time after the date of this Proxy Statement/Prospectus.
The SEC allows BellSouth and WCA to "incorporate by reference" the
information it files with it, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this Proxy
Statement/Prospectus, and later information filed with the SEC will update and
supersede this information. The documents we have listed below, and with respect
to BellSouth any future filings made with the SEC under Section 13(a), 13(c), 14
or 15(d) of the Securities and Exchange Act of 1934 until the WCA Shareholder
Meeting, comprise the incorporated documents:
BellSouth Documents:
(a) Annual Report on Form 10-K for the year ended December 31,
1996, which includes the description of BellSouth common stock; and
(b) Current Report on Form 8-K for January 23, 1997.
WCA Documents:
(a) Annual Report on Form 10-KSB for the year ended December 31,
1996.
Upon request, BellSouth and WCA will provide, without charge, a copy of any
or all of their documents incorporated by reference in this document (other than
exhibits to such documents, unless the exhibits are specifically incorporated by
reference in such documents). You should direct requests for copies to BellSouth
Investor Relations, 1155 Peachtree Street, Room 14B06, Atlanta, Georgia
30309-3610 (Telephone: 1-800-
23
<PAGE> 28
241-3419), or to Wireless Cable of Atlanta, Inc., 3100 Medlock Bridge Road,
Suite 340, Norcross, Georgia 30071 (Telephone: (770) 409-3570).
The Agreement and Plan of Reorganization by and between BellSouth and WCA,
dated as of February 11, 1997, which is attached to this Proxy
Statement/Prospectus as Annex I, is also incorporated by reference herein.
24
<PAGE> 29
FINANCIAL STATEMENTS OF
WIRELESS CABLE OF ATLANTA, INC. AND SUBSIDIARY
INDEX TO FINANCIAL STATEMENTS
The following consolidated financial statements of Wireless Cable of
Atlanta, Inc. and its subsidiary, Vidcomm, Inc., are included as follows:
<TABLE>
<S> <C>
Reports of independent public accountants................... F-2
Consolidated balance sheets as of December 31, 1995 and
1996...................................................... F-4
Consolidated statements of operations for the years ended
December 31, 1995 and 1996................................ F-5
Consolidated statements of changes in stockholders' equity
for the years ended December 31, 1995 and 1996............ F-5
Consolidated statements of cash flows for the years ended
December 31, 1995 and 1996................................ F-6
Notes to consolidated financial statements.................. F-7
</TABLE>
F-1
<PAGE> 30
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
and Stockholders
Wireless Cable of Atlanta, Inc.
and Subsidiary
Atlanta, Georgia
We have audited the accompanying consolidated balance sheet of Wireless
Cable of Atlanta, Inc. and Subsidiary as of December 31, 1995, and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Wireless Cable
of Atlanta, Inc. and Subsidiary as of December 31, 1995, and the consolidated
results of its operations and its consolidated cash flows for the year then
ended in conformity with generally accepted accounting principles.
Blackwell, Poole & Company
Certified Public Accountants
Atlanta, Georgia
January 31, 1996
F-2
<PAGE> 31
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Wireless Cable of Atlanta, Inc. and subsidiary:
We have audited the accompanying consolidated balance sheet of WIRELESS
CABLE OF ATLANTA, INC. AND SUBSIDIARY (a Georgia corporation) as of December 31,
1996 and the related consolidated statements of operations, stockholders'
equity, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Wireless Cable of Atlanta,
Inc. and subsidiary as of December 31, 1996 and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 14, 1997
F-3
<PAGE> 32
WIRELESS CABLE OF ATLANTA, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................... $ 133,000 $ 147,471
Accounts receivable......................................... 69,039 35,212
Other current assets........................................ 188,035 171,515
----------- -----------
Total current assets.............................. 390,074 354,198
----------- -----------
PROPERTY AND EQUIPMENT:
Cable systems and equipment................................. 5,930,531 7,181,822
Furniture and office equipment.............................. 473,551 601,199
----------- -----------
6,404,082 7,783,021
Less accumulated depreciation............................... (2,516,327) (3,316,238)
----------- -----------
3,887,755 4,466,783
----------- -----------
OTHER ASSETS:
Deferred licensing costs.................................... 204,000 136,000
Deferred tax benefit........................................ 969,941 1,267,754
Other....................................................... 192,392 107,488
----------- -----------
1,366,333 1,511,242
----------- -----------
Total assets...................................... $ 5,644,162 $ 6,332,223
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................................ $ 184,832 $ 339,893
Accrued expenses and liabilities............................ 229,889 265,850
----------- -----------
Total current liabilities......................... 414,721 605,743
----------- -----------
PREFERRED STOCK............................................. 2,121,214 3,733,155
----------- -----------
STOCKHOLDERS' EQUITY:
Common Stock of $1 par, authorized 10,000,000 shares. Issued
and outstanding: 1,770,000 shares in 1995 and 1,772,600
shares in 1996............................................ 1,770,000 1,772,600
Paid in capital............................................. 3,494,457 3,516,707
Accumulated deficit......................................... (2,156,230) (3,295,982)
----------- -----------
3,108,227 1,993,325
----------- -----------
Total liabilities and stockholders' equity........ $ 5,644,162 $ 6,332,223
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 33
WIRELESS CABLE OF ATLANTA, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
Revenues.................................................... $3,284,816 $ 3,545,611
Costs and expenses:
Service costs............................................. 2,139,431 2,414,484
Selling, general and administrative....................... 1,413,940 1,357,375
Depreciation and amortization............................. 727,400 920,612
---------- -----------
4,280,771 4,692,471
---------- -----------
Loss from operations................................... (995,955) (1,146,860)
---------- -----------
Other income................................................ 38,384 85,005
---------- -----------
Loss before income taxes............................... (957,571) (1,061,855)
Deferred income tax benefits................................ 317,903 359,147
---------- -----------
Net loss............................................... (639,668) (702,708)
---------- -----------
Preferred dividend requirements............................. (157,600) (437,044)
---------- -----------
Net loss applicable to common shares................... $ (797,268) $(1,139,752)
========== ===========
Weighted average number of common shares outstanding... 1,740,000 1,771,000
Net loss per common share outstanding.................. $ (0.46) $ (0.64)
========== ===========
</TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
NUMBER OF $1 PAR PAID-IN ACCUMULATED
SHARES VALUE CAPITAL DEFICIT TOTAL
--------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994........... 1,729,000 $1,729,000 $3,229,207 $(1,358,962) $3,599,245
Stock options and warrants........... 41,000 41,000 265,250 -- 306,250
Preferred stock dividends............ -- -- -- (157,600) (157,600)
Net (loss)........................... -- -- -- (639,668) (639,668)
--------- ---------- ---------- ----------- ----------
Balance, December 31, 1995........... 1,770,000 $1,770,000 $3,494,457 $(2,156,230) $3,108,227
Stock options........................ 2,600 2,600 22,250 -- 24,850
Preferred stock dividends............ -- -- -- (437,044) (437,044)
Net (loss)........................... -- -- -- (702,708) (702,708)
--------- ---------- ---------- ----------- ----------
Balance, December 31, 1996........... 1,772,600 $1,772,600 $3,516,707 $(3,295,982) $1,993,325
========= ========== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 34
WIRELESS CABLE OF ATLANTA, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Net (loss).................................................. $ (639,668) $ (702,708)
Adjustments to reconcile net loss to net cash provided by
(used for) operating activities:
Depreciation and amortization............................. 727,400 920,612
Decrease in receivables................................... 12,439 33,827
Increase in other current assets.......................... (149,636) (59,425)
Increase in other assets.................................. (391,216) (212,909)
Increase (decrease) in accounts payable and accrued
expenses............................................... (301,104) 101,135
----------- -----------
Net cash provided by (used for) operating
activities...................................... (741,785) 80,532
----------- -----------
CASH FLOWS (USED FOR) INVESTING ACTIVITIES:
Purchase of equipment..................................... (1,762,482) (1,431,640)
----------- -----------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Proceeds from common stock issue.......................... 306,250 24,850
Proceeds from preferred stock issue, net of issue costs... 1,963,614 1,340,729
----------- -----------
Net cash provided by financing activities................. 2,269,864 1,365,579
----------- -----------
Net increase (decrease) in cash........................... (234,403) 14,471
Cash and cash equivalents, beginning of year.............. 367,403 133,000
----------- -----------
Cash and cash equivalents, end of year.................... $ 133,000 $ 147,471
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID DURING THE YEAR FOR:
Interest.................................................... $ -- $ --
=========== ===========
Income taxes................................................ $ -- $ --
=========== ===========
FINANCING AND INVESTING ACTIVITIES NOT AFFECTING CASH:
Preferred stock dividends................................... $ 157,600 $ 437,044
Cash paid................................................... -- --
----------- -----------
Liabilities incurred........................................ $ 157,600 $ 437,044
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 35
WIRELESS CABLE OF ATLANTA, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Wireless Cable of Atlanta, Inc. and Subsidiary ("Company") provides cable
television service to multiple dwelling, single family and commercial
subscribers in the Atlanta, Georgia area. The accounting and reporting policies
of the Company conform with generally accepted accounting principles and general
practice within the Company's industry. The following is a description of the
more significant of those policies.
The accompanying consolidated financial statements include the accounts of
Wireless Cable of Atlanta, Inc. and its wholly owned subsidiary, Vidcomm, Inc.
Intercompany transactions and balances have been eliminated in consolidation.
Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts and disclosures in the
financial statements. Actual results could vary from the estimates that were
used.
The cost of property and equipment is depreciated over the estimated useful
lives of the related assets, generally seven years. Depreciation is computed on
the straight-line method and accelerated methods for financial reporting
purposes and for income tax purposes, respectively. Depreciation charged to
operations amounted to $659,400 and $852,612 in 1995 and 1996, respectively.
The Company has entered into a channel frequency lease agreement which
requires payments based on the greater of a minimum payment or a cost per
subscriber. Costs in excess of the cost per subscriber component of the lease
were capitalized as deferred licensing costs prior to 1994, consistent with the
principles set forth in the Statement of Financial Accounting Standards ("SFAS")
No. 51. These capitalized costs are being amortized over a five-year period
commencing in 1994. Amortization charged to operations amounted to $68,000 in
1995 and 1996 each.
Maintenance and repairs are charged to operations when incurred.
Betterments and renewals are capitalized. When property and equipment is sold or
otherwise disposed of, the asset account and related accumulated depreciation
account are relieved, and any gain or loss is included in operations.
The Company accounts for its stock-based compensation plans under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB No. 25"). Effective in 1996, the Company adopted the disclosure
option of SFAS No. 123, "Accounting for Stock-based Compensation." SFAS No. 123
requires that companies which do not choose to account for stock-based
compensation as prescribed by the statement, shall disclose the pro forma
effects on earnings and earnings per share as if SFAS No. 123 had been adopted.
Additionally, certain other disclosures are required with respect to stock
compensation and the assumptions used to determine the pro forma effects of SFAS
No. 123. See Note 3.
The Company sponsors a 401(k) employee benefit plan. All employees are
eligible for participation after one year of employment and may contribute the
maximum allowable under the plan. The Company does not contribute to the plan.
Cash equivalents at December 31, 1995 and 1996 was a certificate of deposit
in the amount of $50,000. The Company maintains cash balances at several banks.
Accounts at each institution are insured by the Federal Deposit Insurance
Corporation up to $100,000.
2. OPERATING LEASES
The Company leases an office and warehouse facility under an operating
lease expiring in November 1997. Rent expense for 1995 and 1996 was $64,962 and
$67,854, respectively.
F-7
<PAGE> 36
WIRELESS CABLE OF ATLANTA, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has a lease agreement for its satellite and microwave dish
facility which will expire June 6, 1997 and may be renewed for an additional
three year term. The lease provides for a monthly rent of $1,500 and is subject
to increase based on increases in the Consumer Price Index. Lease expense for
1995 and 1996 was $18,000 each.
The Company has a lease agreement for placement of its television signal
transmission and processing equipment which will expire May 31, 2003. The lease
provides for a monthly rent of $9,925 which is subject to increase due to the
addition of channels and an increase in the Consumer Price Index. Lease expense
for 1995 and 1996 was $55,445 and $110,018, respectively.
The Company has lease agreements for five wireless cable channels which
will expire February 28 and July 16, 2001. The leases provide for a monthly rent
based on the number of subscribers receiving a signal with a minimum annual
rental of $128,544. Lease expense for 1995 and 1996 was $96,000 and $126,542,
respectively.
The Company has a lease agreement for excess capacity airtime of four ITFS
wireless cable channels which will expire July 19, 2007. The lease provides for
a monthly rent based on the number of subscribers receiving a signal with a
minimum annual rental of $7,560. Any renewal is subject to negotiations. There
was no lease expense for 1995 and 1996 lease expense was $10,403.
The Company has a lease agreement for excess capacity airtime of twelve
ITFS wireless cable channels which will expire March 31, 2006. The lease
provides for a monthly rent based on the number of subscribers receiving a
signal with a minimum annual rental of $36,000. Any renewal is subject to
negotiation, however, the Company has a right of first refusal on any competing
proposal from any commercial entity. Lease expense for 1995 and 1996 was $10,500
and $36,000, respectively.
Minimum future rental payments under operating leases having remaining
terms in excess of one year as of December 31, 1996 for the next five years and
in the aggregate are:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31: AMOUNT
- ----------------------- ----------
<S> <C>
1997................................................. $ 362,404
1998................................................. 291,204
1999................................................. 291,204
2000................................................. 291,204
2001................................................. 188,408
2002 and thereafter.................................. 363,620
----------
Total minimum future rental payments........................ $1,788,044
==========
</TABLE>
3. STOCK OPTIONS AND WARRANTS
In 1992, the shareholders approved the formation of a Stock Option Plan for
key employees to be implemented by the Board of Directors. Under the approved
terms of the plan, options to purchase shares of the Company's common stock will
be granted at a price not less than the fair market value of the stock at the
date the key employee becomes eligible under the plan. Options may be exercised
over a five year period not to exceed 20% per year on a cumulative basis. At
December 31, 1996, options had been granted to five key employees for an
aggregate of 71,900 shares at option prices ranging from $6.25 to $14.00 per
share (average $7.21) and 49,100 shares (average $6.85) were exercisable. At
December 31, 1996, there were 24,500 shares available for future grants under
the plan. 1,000 shares were exercised during 1995 and 2,600 during 1996. Also
3,000 shares under option were canceled in 1996. In addition, warrants to
purchase 40,000 shares of common stock at a price of $7.50 per share were
exercised during 1995. These stock options have not been included in the
weighted average number of shares outstanding as they would be anti-dilutive.
F-8
<PAGE> 37
WIRELESS CABLE OF ATLANTA, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company accounts for its stock-based compensation plans under APB No.
25, under which no compensation expense has been recognized, as all options have
been granted with an exercise price equal to the fair value of the Company's
common stock on the date of grant. The Company adopted SFAS No. 123 for
disclosure purposes in 1996. For SFAS No. 123 purposes, the fair value of each
option grant has been estimated as of the date of grant using the Black-Scholes
option pricing model with the following weighted-average assumptions used for
grants in 1995; risk-free interest rate of 6.72 percent, expected life of 5
years, dividend rate of zero percent, and expected volatility of 55 percent.
Using these assumptions, the fair value of the stock options granted in 1995 is
$119,048, which would be amortized as compensation expense over five
years -- the vesting period of the options. There were no stock options granted
in 1996. Had compensation cost been determined consistent with SFAS No. 123,
utilizing the assumptions detailed above, the Company's net loss and net loss
per share would have been increased to the following pro forma amounts:
<TABLE>
<CAPTION>
1995 1996
-------- ----------
<S> <C> <C>
Net Loss
As reported............................................... $797,268 $1,139,752
Pro forma................................................. $815,163 $1,169,514
Net loss per share
As reported............................................... $ 0.46 $ 0.64
Pro forma................................................. $ 0.47 $ 0.66
</TABLE>
Because SFAS No. 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the resulting pro forma compensation cost may
not be representative of that expected in future years.
4. INCOME TAXES
Deferred income taxes are provided for temporary differences in the bases
of assets and liabilities between financial reporting and income tax reporting.
The temporary differences result from a basis of accounting for financial
reporting different from that used for income tax reporting and different
methods and periods used to calculate depreciation.
The components of the deferred income tax benefit for 1995 and 1996 are as
follows:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Depreciation................................................ $ 80,837 $ 95,147
Difference between accrual basis of accounting and tax basis
of accounting............................................. (51,124) (64,950)
Tax benefit of loss carryforward............................ (347,616) (389,344)
---------- ----------
Deferred tax benefit........................................ $ (317,903) $ (359,147)
========== ==========
</TABLE>
The components of the net nonconcurrent deferred tax asset in 1995 and 1996
are as follows:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Property and equipment...................................... $ (165,648) $ (257,179)
Net operating loss carryforward............................. 1,135,589 1,524,933
---------- ----------
Deferred tax benefit, net................................... $ 969,941 $1,267,754
========== ==========
</TABLE>
F-9
<PAGE> 38
WIRELESS CABLE OF ATLANTA, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the net current deferred tax asset in 1995 and 1996 are
as follows:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Property and equipment...................................... $ (16,824) $ (20,440)
Difference between accrual basis of accounting and tax basis
of accounting............................................. 80,397 145,348
---------- ----------
Deferred tax benefit, net................................... $ 63,573 $ 124,908
========== ==========
</TABLE>
Realization of the net operating loss carryforward deferred tax assets is
dependent on the Company either generating sufficient taxable income prior to
expiration of the loss carryforwards, or employing tax-planning strategies to
utilize the excess of appreciated asset value over the tax basis of the
Company's net assets. Although realization is not assured, management believes
it is more likely than not that all of the deferred tax asset will be realized.
The Company used an effective tax rate of 34% (28% for federal and 6% for
state) which is not significantly different from the statutory tax rate.
The net operating loss carryforwards totaling $4,337,752 expire as follows:
2002, $82,783; 2003, $249,037; 2004, $286,089; 2005, $80,425; 2006, $408,730;
2007, $138,058; 2008, $154,759; 2009, $899,522; 2010, $893,220 and 2011,
$1,145,129. Investment tax credit carryovers in the amount of $6,374 expire in
2000.
5. PREFERRED STOCK
During 1994, shareholders authorized the issuance of 5,000,000 shares of
undesignated Preferred Stock issuable by the Board of Directors at its
discretion in one or more series.
On March 1, 1995, the Company executed an agreement with Applied Video
Technologies, Inc. ("AVT") for the purchase by AVT of $3,500,000 of Cumulative
Convertible Redeemable Preferred Stock, Series A ("Series A Preferred Stock").
Under the terms of the agreement, AVT invested $2,100,000 in the Series A
Preferred Stock in 1995 and $1,400,000 in January 1996.
Other terms of the Series A Preferred Stock include a dividend rate of 12%
payable in kind for five years at the option of the Company and in cash
thereafter, the right to elect two members to the Board of Directors and the
right to vote, on an as converted basis, on all matters submitted to the common
stockholders with the exception of directors. The Series A Preferred Stock can
be converted into common stock at a conversion price of $11.00 per share, and
the Company is obligated to redeem the Series A Preferred Stock on the eighth
anniversary of its issue. Series A Preferred Stock dividends have a preference
over dividends on common stock.
6. EMPLOYMENT CONTRACTS
In September 1993, the Company entered into five year agreements with Ricky
C. Haney, Richard L. Kendrick, and Allan H. Rudder which provide for a minimum
base salary of $102,000, $102,000 and $96,000, respectively. The agreements
provide for a severance payment equal to the remaining contract term base salary
in the event of termination without cause. The agreements also provide for a
$6,000 annual auto allowance and minimum annual base salary increases of five
percent.
7. SUBSEQUENT EVENT
On February 11, 1997, the Company entered into a definitive agreement with
BellSouth Corporation for a merger of the Company with a subsidiary of BellSouth
Corporation. The agreement is noncancelable for a period of six months and is
expected to close within that period of time; however, stockholder and Federal
Communications Commission approval is required. The agreement provides for a
non-taxable stock exchange
F-10
<PAGE> 39
WIRELESS CABLE OF ATLANTA, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of .49 shares of BellSouth Corporation stock for each share of Company stock,
with a maximum value attributable to the Company stock of $20.88625 per share
and a minimum value of $15.98625 per share. The valuations are subject to upward
adjustment for any BellSouth distributions, such as cash dividends, prior to
closing of the merger.
In connection with the agreement, in February 1997, BellSouth provided
$1,000,000 of financing to the Company. Prior to closing the merger, the
proceeds of such financing may be used only a) to fund negative cash flow from
operations not in excess of $150,000 and b) for construction of new wireless
cable facilities for multiple dwelling units, approved by BellSouth. The
financing does not bear interest. In the event the agreement is terminated by
BellSouth, other than as a result of a material misrepresentation or a material
breach of a merger agreement covenant by the Company, the financing will be
forgiven. In the event the agreement is terminated by BellSouth as a result of a
material misrepresentation or a material breach of a merger agreement covenant
by the Company, or by the Company due to the expiration of the six month
noncancelable period of time, or by reason of actions by any governmental entity
which would have the effect of materially restricting the consummation of the
merger, the financing will, as of the date of such event, convert into an
interest-bearing loan with interest accruing from such time at an annual rate of
10%. The loan will be secured by the stock of the Company subsidiary and will
have a maturity date of December 31, 1998.
F-11
<PAGE> 40
ANNEX I
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
BELLSOUTH CORPORATION,
BELLSOUTH WCA MERGER SUBSIDIARY, INC.,
AND
WIRELESS CABLE OF ATLANTA, INC.
DATED FEBRUARY 11, 1997
I-1
<PAGE> 41
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I
CERTAIN DEFINITIONS
Section 1.01 Acceptable Authorization.................................... I-7
Section 1.02 Adjustment Event............................................ I-7
Section 1.03 Affiliate................................................... I-7
Section 1.04 Annual FCC Reports.......................................... I-7
Section 1.05 Average Closing Price....................................... I-7
Section 1.06 Basic Subscriber............................................ I-7
Section 1.07 BellSouth................................................... I-8
Section 1.08 BellSouth Common Stock...................................... I-8
Section 1.09 BellSouth Material Adverse Effect........................... I-8
Section 1.10 BellSouth Reports........................................... I-8
Section 1.11 BellSouth Sub............................................... I-8
Section 1.12 BellSouth Sub Common Stock.................................. I-8
Section 1.13 Business Day................................................ I-8
Section 1.14 CARS........................................................ I-8
Section 1.15 Capacity Lease.............................................. I-8
Section 1.16 Channel..................................................... I-8
Section 1.17 Closing..................................................... I-8
Section 1.18 Code........................................................ I-8
Section 1.19 Communications Act.......................................... I-8
Section 1.20 Companies................................................... I-8
Section 1.21 Company..................................................... I-8
Section 1.22 Company Benefit Plans....................................... I-8
Section 1.23 Company Channel............................................. I-8
Section 1.24 Company Common Stock........................................ I-9
Section 1.25 Company Environmental Permits............................... I-9
Section 1.26 Company ERISA Plan.......................................... I-9
Section 1.27 Company FCC Authorizations.................................. I-9
Section 1.28 Company Material Adverse Effect............................. I-9
Section 1.29 Company Permits............................................. I-9
Section 1.30 Company Preferred Stock..................................... I-9
Section 1.31 Company Reports............................................. I-9
Section 1.32 Competing Transaction....................................... I-9
Section 1.33 Confidentiality Agreement................................... I-9
Section 1.34 Contracts................................................... I-9
Section 1.35 Copyright Office............................................ I-9
Section 1.36 Delivered Digital-Ready Channel............................. I-9
Section 1.37 Dissenting Shares........................................... I-10
Section 1.38 Dividend Amount............................................. I-10
Section 1.39 Effective Date.............................................. I-10
Section 1.40 Effective Time.............................................. I-10
Section 1.41 ERISA....................................................... I-10
Section 1.42 Exchange Act................................................ I-10
Section 1.43 Exchange Agent.............................................. I-10
Section 1.44 Exchange Ratio.............................................. I-10
Section 1.45 Expenses.................................................... I-10
Section 1.46 FCC......................................................... I-10
Section 1.47 FCC Rules................................................... I-10
</TABLE>
I-2
<PAGE> 42
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 1.48 Final Order................................................. I-10
Section 1.49 GAAP........................................................ I-10
Section 1.50 GBCC........................................................ I-10
Section 1.51 Governmental Entity......................................... I-10
Section 1.52 Granted Channel............................................. I-11
Section 1.53 HSR Act..................................................... I-11
Section 1.54 ITFS........................................................ I-11
Section 1.55 Knowledge of the Company.................................... I-11
Section 1.56 Law......................................................... I-11
Section 1.57 Lien........................................................ I-11
Section 1.58 Market...................................................... I-11
Section 1.59 Market Facilities........................................... I-11
Section 1.60 MDS......................................................... I-11
Section 1.61 Merger...................................................... I-11
Section 1.62 NYSE........................................................ I-11
Section 1.63 OFS......................................................... I-11
Section 1.64 Outstanding Options......................................... I-11
Section 1.65 Pending Application......................................... I-11
Section 1.66 Person...................................................... I-11
Section 1.67 Proxy Statement/Prospectus.................................. I-11
Section 1.68 Registration Statement...................................... I-11
Section 1.69 SEC......................................................... I-11
Section 1.70 Securities Act.............................................. I-11
Section 1.71 Site Lease.................................................. I-12
Section 1.72 Special Meeting............................................. I-12
Section 1.73 Stockholders................................................ I-12
Section 1.74 Subsidiary or Subsidiaries.................................. I-12
Section 1.75 Tax or Taxes................................................ I-12
Section 1.76 Wireless Cable Channels..................................... I-12
Section 1.77 Wireless Cable System....................................... I-12
ARTICLE II
THE MERGER
Section 2.01 The Merger.................................................. I-12
Section 2.02 Effective Time of the Merger................................ I-12
Section 2.03 Effect of the Merger........................................ I-12
Section 2.04 Articles of Incorporation................................... I-13
Section 2.05 Conversion of Securities.................................... I-13
Section 2.06 Manner of Exchange.......................................... I-14
Section 2.07 Dissenting Shares........................................... I-14
Section 2.08 Stock Transfer Books........................................ I-15
Section 2.09 Closing..................................................... I-15
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.01 Organization and Qualification; Subsidiaries................ I-15
Section 3.02 Articles of Incorporation and Bylaws........................ I-15
Section 3.03 Capitalization; Subsidiaries................................ I-15
Section 3.04 Authorization; Enforceability............................... I-16
Section 3.05 Required Filings and Consents............................... I-16
Section 3.06 No Conflict................................................. I-17
</TABLE>
I-3
<PAGE> 43
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 3.07 Environmental Matters....................................... I-17
Section 3.08 Permits; Compliance......................................... I-17
Section 3.09 Company Reports; Financial Statements....................... I-18
Section 3.10 Taxes....................................................... I-18
Section 3.11 Litigation.................................................. I-19
Section 3.12 Absence of Changes.......................................... I-20
Section 3.13 Title to and Condition of Assets............................ I-20
Section 3.14 Contracts................................................... I-20
Section 3.15 Labor Matters............................................... I-20
Section 3.16 Employee Benefit Plans...................................... I-21
Section 3.17 Fees and Expenses of Brokers and Others..................... I-22
Section 3.18 Accuracy of Information..................................... I-22
Section 3.19 Absence of Undisclosed Liabilities.......................... I-22
Section 3.20 ITFS, MDS, CARS and OFS Specifications...................... I-22
Section 3.21 ITFS and MDS Capacity Leases................................ I-23
Section 3.22 Site Leases and Lease Options............................... I-24
Section 3.23 No Cable Systems............................................ I-25
Section 3.24 Operating Market............................................ I-25
Section 3.25 Retransmission Consent; Programming Agreements.............. I-25
Section 3.26 Copyright................................................... I-25
Section 3.27 Equal Employment Opportunity................................ I-25
Section 3.28 Interference Consents....................................... I-26
Section 3.29 Certain Stockholder Agreements.............................. I-26
Section 3.30 Transactions with Affiliates................................ I-26
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BELLSOUTH AND BELLSOUTH SUB
Section 4.01 Organization and Qualification.............................. I-26
Section 4.02 Articles of Incorporation and Bylaws........................ I-26
Section 4.03 Capitalization.............................................. I-26
Section 4.04 Authorization; Enforceability............................... I-27
Section 4.05 Required Filings and Consents............................... I-27
Section 4.06 No Conflict................................................. I-27
Section 4.07 BellSouth Reports........................................... I-27
Section 4.08 Fees and Expenses of Brokers and Others..................... I-28
Section 4.09 Accuracy of Information..................................... I-28
ARTICLE V
COVENANTS
Section 5.01 Conduct of the Businesses of the Company.................... I-28
Section 5.02 No Solicitation............................................. I-31
Section 5.03 Access to Information; Confidentiality Agreement............ I-31
Section 5.04 Best Efforts................................................ I-31
Section 5.05 Consents.................................................... I-32
Section 5.06 Public Announcements........................................ I-32
Section 5.07 Payment of Preferred Stock Dividend and Conversion of
Outstanding Options......................................... I-32
Section 5.08 Channel Agreements.......................................... I-32
Section 5.09 Control of Wireless Cable System............................ I-32
Section 5.10 Registration Statement; Proxy Statement/Prospectus; Special
Meeting..................................................... I-33
Section 5.11 Multiple Dwelling Units..................................... I-33
Section 5.12 Interim Financing........................................... I-33
</TABLE>
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<PAGE> 44
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 5.13 HSR Filings................................................. I-34
Section 5.14 Termination of Certain Agreements........................... I-34
Section 5.15 Studio-to-Transmitter Links................................. I-34
ARTICLE VI
CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER
Section 6.01 Conditions Precedent to Each Party's Obligation to Effect
the Merger.................................................. I-34
Section 6.02 Conditions Precedent to Obligations of the Company.......... I-35
Section 6.03 Conditions Precedent to Obligations of BellSouth and
BellSouth Sub............................................... I-35
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.01 Termination................................................. I-37
Section 7.02 Effect of Termination....................................... I-37
Section 7.03 Amendment................................................... I-37
Section 7.04 Waiver...................................................... I-37
Section 7.05 Expenses.................................................... I-38
Section 7.06 Equitable Relief............................................ I-38
ARTICLE VIII
ADDITIONAL COVENANTS
Section 8.01 Employment Matters.......................................... I-38
Section 8.02 Stock Options............................................... I-38
Section 8.03 Indemnification of Company Officers and Directors........... I-38
ARTICLE IX
GENERAL PROVISIONS
Section 9.01 Survival of Representations and Warranties and Covenants.... I-39
Section 9.02 Notices..................................................... I-39
Section 9.03 Headings.................................................... I-39
Section 9.04 Severability................................................ I-39
Section 9.05 Entire Agreement............................................ I-40
Section 9.06 Assignment.................................................. I-40
Section 9.07 Parties in Interest......................................... I-40
Section 9.08 Failure or Indulgence Not Waiver; Remedies Cumulative....... I-40
Section 9.09 Governing Law............................................... I-40
Section 9.10 Counterparts................................................ I-40
</TABLE>
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<PAGE> 45
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
1.23 Company Channel Exceptions
1.36(B) Delivered Digital-Ready Channel -- ITFS
1.59 Market Facilities
3.01 Company Subsidiaries
3.02(a) Company Certificate of Incorporation
3.02(b) Company Bylaws
3.03(b)(i) Company Preferred Stock Dividends
3.03(b)(ii) Outstanding Options
3.03(c) Capitalization
3.05 Consents
3.08 Company Permits
3.10 Taxes
3.11 Litigation
3.12 Changes
3.13 Assets and Liens
3.14 Contracts
3.16 Company Benefit Plans
3.20(a) ITFS, MDS and CARS Technical Specifications
3.20(c) Pending Applications
3.21 Capacity Leases
3.22 Site Leases
3.24 Wireless Cable System Information
3.25(a) Retransmission Consent
3.25(b) Programming Agreements
3.26 Copyright Filings
3.28 Interference Consents
3.29(a) Certain Stockholders
3.29(b) Stockholder's Agreement
3.30 Transactions with Affiliates
5.01(a)(iv) Capital Expenditures
5.01(b)(xii) Form of Estoppel Certificate
5.01(b)(xiii) Certain Employees
5.01(b)(xv) Certain actions to be taken prior to Closing Date
5.05 Consents
5.12 Form of Note
6.02(e) Form of Opinion of Hunton & Williams
6.03(h) Form of Consulting and Noncompetition Agreement
6.03(i)(i) Form of Opinion of Gambrell & Stolz, L.L.P.
6.03(i)(ii) Form of Opinion of Pepper & Corrazzini, L.L.P.
6.03(k) Delivered Digital-Ready Channels and Granted Channels as of
the Effective Date
</TABLE>
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<PAGE> 46
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION dated February 11, 1997 (as it
may be amended from time to time, this "Agreement") is made by and among (i)
BELLSOUTH CORPORATION, a Georgia corporation ("BellSouth"), (ii) BELLSOUTH WCA
MERGER SUBSIDIARY, INC., a Georgia corporation ("BellSouth Sub"), and (iii)
WIRELESS CABLE OF ATLANTA, INC., a Georgia corporation (the "Company").
RECITALS
WHEREAS, BellSouth Sub, upon the terms and subject to the conditions of
this Agreement and in accordance with the Georgia Business Corporation Code of
the State of Georgia ("GBCC"), will merge with and into the Company (the
"Merger"); and
WHEREAS, the Board of Directors of the Company has determined that the
Merger is consistent with and in furtherance of the long-term business strategy
of the Company and is fair to and in the best interests of the Company and the
holders of Company Common Stock and Company Preferred Stock and has approved and
adopted this Agreement and the transactions contemplated hereby; and
WHEREAS, for federal income tax purposes, it is intended that the Merger
qualify as a tax-free reorganization under the provisions of Section 368(a) of
the United States Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements set forth herein and for other good and
valuable consideration, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms shall have the meanings
assigned to them below:
Section 1.01 Acceptable Authorization. "Acceptable Authorization" shall
mean a MDS or ITFS Channel authorized by a license covered by the required
certification or notification of completion of construction timely filed with
the FCC (and not a special temporary, experimental or developmental
authorization) which is in full force and effect, validly issued, free of
special conditions, not subject to a pending revocation proceeding, not in
jeopardy of cancellation under FCC Rule 21.303 for removal of equipment or
failure to offer service, and not subject to forfeiture for any failure to meet
a condition of any instrument of authorization imposed by the FCC.
Section 1.02 Adjustment Event. "Adjustment Event" shall have the meaning
set forth in Section 2.05(f).
Section 1.03 Affiliate. "Affiliate," with respect to any Person, shall
mean a Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such Person.
Section 1.04 Annual FCC Reports. "Annual FCC Reports" shall mean those
reports, filings, notices and regulatory fees required to be filed annually with
the FCC by licensees, permittees, applicants or operators in the MDS, ITFS, CARS
and OFS services, including but not limited to reports required by Sections
21.11, 21.911 and 21.307 of FCC Rules.
Section 1.05 Average Closing Price. "Average Closing Price" shall have
the meaning set forth in Section 2.05(a).
Section 1.06 Basic Subscriber. "Basic Subscriber" means a current
subscriber to a Wireless Cable System's regular monthly basic services who has
paid for at least one full month of basic service in full without
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<PAGE> 47
discount, whose service rates are not lower than the rates generally charged
when that subscriber became a subscriber and whose account receivable for such
service does not include any balance due for service provided more than 90 days
before the date of determination. For bulk rate customers, an equivalent billing
unit shall be a Basic Subscriber. The number of equivalent billing units shall
be determined by dividing the aggregate monthly amount billed for regular
monthly basic services by the Company to bulk rate customers by the average
monthly rate charged to residential customers for regular monthly basic
services.
Section 1.07 BellSouth. "BellSouth" shall mean BellSouth Corporation, a
Georgia corporation.
Section 1.08 BellSouth Common Stock. "BellSouth Common Stock" shall have
the meaning set forth in Section 2.05(a).
Section 1.09 BellSouth Material Adverse Effect. "BellSouth Material
Adverse Effect" shall have the meaning set forth in Section 4.01.
Section 1.10 BellSouth Reports. "BellSouth Reports" shall have the
meaning set forth in Section 4.07(a).
Section 1.11 BellSouth Sub. "BellSouth Sub" shall mean BellSouth WCA
Merger Subsidiary, Inc., a Georgia corporation.
Section 1.12 BellSouth Sub Common Stock. "BellSouth Sub Common Stock"
shall have the meaning set forth in Section 2.05(e).
Section 1.13 Business Day. "Business Day" shall mean any day other than
(i) a day on which banks in the State of New York are authorized or obligated to
be closed or (ii) a day on which BellSouth Common Stock does not trade on the
NYSE.
Section 1.14 CARS. "CARS" shall mean Cable Antenna Relay Service.
Section 1.15 Capacity Lease. "Capacity Lease" shall have the meaning set
forth in Section 3.21.
Section 1.16 Channel. "Channel" shall mean a 6 MHz wide channel capable
of carrying both audio and video signals.
Section 1.17 Closing. "Closing" shall mean the conference held at the
offices of Hunton & Williams in Atlanta, Georgia at 10:00 a.m. on the date
determined by the parties in accordance with Section 2.09.
Section 1.18 Code. "Code" shall have the meaning set forth in the
Recitals (fourth paragraph).
Section 1.19 Communications Act. "Communications Act" shall mean the
Federal Communications Act of 1934, as amended.
Section 1.20 Companies. "Companies" shall mean the Company and each of
its Subsidiaries.
Section 1.21 Company. "Company" shall mean Wireless Cable of Atlanta,
Inc., a Georgia corporation.
Section 1.22 Company Benefit Plans. "Company Benefit Plans" shall have
the meaning set forth in Section 3.16.
Section 1.23 Company Channel. "Company Channel" shall mean an ITFS or MDS
Channel which,
(A) if a MDS Channel, either (i) is authorized by the FCC to the
Company or a wholly-owned Subsidiary of the Company and not subject to any
lease to or rights inuring in any other entity, or (ii) is leased to the
Company or a wholly-owned Subsidiary of the Company by Capacity Lease which
is in full force and effect and is enforceable in accordance with its
terms, which is not subject to termination at the option of the lessor and
which is not in default; and
(B) if an ITFS Channel, is leased to the Company by a Capacity Lease
which shall be in full force and effect and is enforceable in accordance
with its terms, which shall not be subject to termination at the option of
lessor and which is not in default, except as set forth on Exhibit 1.23
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<PAGE> 48
Section 1.24 Company Common Stock. "Company Common Stock" shall have the
meaning set forth in Section 2.05(a).
Section 1.25 Company Environmental Permits. "Company Environmental
Permits" shall have the meaning set forth in Section 3.07.
Section 1.26 Company ERISA Plan. "Company ERISA Plan" shall have the
meaning set forth in Section 3.16.
Section 1.27 Company FCC Authorizations. "Company FCC Authorizations"
shall have the meaning set forth in Section 3.20(a).
Section 1.28 Company Material Adverse Effect. "Company Material Adverse
Effect" shall have the meaning set forth in Section 3.01.
Section 1.29 Company Permits. "Company Permits" shall have the meaning
set forth in Section 3.08(a).
Section 1.30 Company Preferred Stock. "Company Preferred Stock" shall
have the meaning set forth in Section 2.05(b).
Section 1.31 Company Reports. "Company Reports" shall have the meaning
set forth in Section 3.09(a).
Section 1.32 Competing Transaction. "Competing Transaction" shall have
the meaning set forth in Section 5.02.
Section 1.33 Confidentiality Agreement. "Confidentiality Agreement" shall
mean the Nondisclosure Agreement between BellSouth and the Company dated October
15, 1996.
Section 1.34 Contracts. "Contracts" shall mean contracts, agreements,
leases (including, without limitation, the Capacity Leases and the Site Leases),
licenses (including, without limitation, the FCC authorizations required for
BellSouth to operate the Wireless Cable System), relationships and commitments,
written or oral, to which any of the Companies is a party or by which any of the
Companies or any of their properties is bound.
Section 1.35 Copyright Office. "Copyright Office" shall mean the
Copyright Office, the Library of Congress, the Registrar of Copyrights, the
Copyright Tribunal and any successor government agency performing functions
similar to those performed by the foregoing on the date hereof.
Section 1.36 Delivered Digital-Ready Channel. "Delivered Digital-Ready
Channel" shall mean a Granted Channel that:
(A) if an MDS Channel, transmission capacity thereon is available
full-time to the Company under a Capacity Lease which, in BellSouth's
reasonable judgment, allocates the full capacity of the Channel at all
times to the Company on a non-common carrier basis free of any rights in
the lessor to recapture any use of the Channel or, if licensed to the
Company, may be used by the Company full-time, in each case without
violating any rights of third parties;
(B) if an ITFS Channel, transmission capacity thereon is available to
the Company under a Capacity Lease which, in BellSouth's reasonable
judgment, without amendment or modification thereto or the payment of any
consideration, allocates no more than that amount of the transmission
capacity set forth on Exhibit 1.36(B) to the holder of the Company FCC
Authorization therefor, and which allocates all of the remaining
transmission capacity to the Company, free from any rights in such licensee
to recapture additional air time or transmission capacity;
(C) by December 24, 1996, if an MDS Channel or an ITFS Channel
available to the Company under a Capacity Lease, was the subject of one or
more timely-filed applications pending before the FCC proposing facilities
identical in all respects to the Market Facilities set forth on Exhibit
1.59; provided
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<PAGE> 49
that the Company shall be deemed to have complied with this Section
notwithstanding any adverse action taken by the FCC with respect to the 200
watt applications listed on Exhibit 3.20(c-I);
(D) is not subject to any agreement, and was not authorized pursuant
to any existing and expressed or implied undertaking, which requires or
could require the Channel to operate with carrier offset, to time-share, to
cease or curtail operations, or to accept less than a 45 dB
desired-to-undesired signal ratio anywhere within a 35-mile radius of its
transmitter site;
(E) is not required by FCC authorization to use carrier offset; and
(F) if the Channel is made available to the Company by a Capacity
Lease, such Capacity Lease, in BellSouth's reasonable judgment, (i)
obligates the lessor to seek FCC authorization of the digital emission of
the Channel, and (ii) allows the Company to operate the Channel for the
duration of the Capacity Lease with a digital transmission system selected
by the Company.
Section 1.37 Dissenting Shares. "Dissenting Shares" shall have the
meaning set forth in Section 2.07.
Section 1.38 Dividend Amount. "Dividend Amount" shall mean the number of
shares of BellSouth Common Stock that would have been issued under the BellSouth
Dividend Reinvestment and Stock Purchase Plan with respect to the shares of
BellSouth Common Stock that would have been issued to Stockholders hereunder had
the Effective Time occurred as of the date set forth in Section 2.05(g),
assuming all dividends relating to such shares had been reinvested in BellSouth
Common Stock in accordance with the BellSouth Dividend Reinvestment and Stock
Purchase Plan.
Section 1.39 Effective Date. "Effective Date" shall have the meaning set
forth in Section 2.02.
Section 1.40 Effective Time. "Effective Time" shall have the meaning set
forth in Section 2.02.
Section 1.41 ERISA. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
Section 1.42 Exchange Act. "Exchange Act" shall mean the Securities and
Exchange Act of 1934, as amended, and the rules and regulations as promulgated
thereunder.
Section 1.43 Exchange Agent. "Exchange Agent" shall have the meaning set
forth in Section 2.06(a).
Section 1.44 Exchange Ratio. "Exchange Ratio" shall have the meaning set
forth in Section 2.05(a).
Section 1.45 Expenses. "Expenses" shall have the meaning set forth in
Section 7.05(b).
Section 1.46 FCC. "FCC" shall mean the Federal Communications Commission
or any successor governmental entity that has jurisdiction over the matters
which, as of the date hereof, are within the jurisdiction of the FCC.
Section 1.47 FCC Rules. "FCC Rules" shall mean the rules, regulations and
published policies and orders of the FCC.
Section 1.48 Final Order. "Final Order" shall mean an order or action of
the FCC which is effective, which is not subject to any petition for
reconsideration, pending petition to deny or informal objection, application for
review, notice of appeal, request for stay, petition for writ of certiorari, or
other appeal; and which cannot be subject to any timely-filed petition for
reconsideration, application for review, notice of appeal, request for stay,
petition for writ of certiorari, or other appeal or set aside, rescinded or
adversely modified by the FCC sua sponte.
Section 1.49 GAAP. "GAAP" shall mean generally accepted accounting
principles applied on a consistent basis.
Section 1.50 GBCC. "GBCC" shall have the meaning set forth in the
Recitals (first paragraph).
Section 1.51 Governmental Entity. "Governmental Entity" shall have the
meaning set forth in Section 3.05.
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<PAGE> 50
Section 1.52 Granted Channel. "Granted Channel" shall mean an ITFS or MDS
Channel that (A) is the subject of an Acceptable Authorization, (B) is the
subject of one or more modification applications, on file at the FCC, proposing
facilities identical in all respects to the Market Facilities and (C) is a
Company Channel.
Section 1.53 HSR Act. "HSR Act" shall mean the Hart Scott Rodino
Antitrust Improvements Act of 1976, as amended.
Section 1.54 ITFS. "ITFS" shall mean the Instructional Television Fixed
Service as regulated pursuant to 47 C.F.R. sec. 74.901 et. seq.
Section 1.55 Knowledge of the Company. "Knowledge of the Company" shall
mean the knowledge, after due and reasonable inquiry, of Ricky C. Haney, Richard
L. Kendrick or Allan H. Rudder.
Section 1.56 Law. "Law" shall have the meaning set forth in Section 3.06.
Section 1.57 Lien. "Lien" shall mean, with respect to any asset, any
mortgage, lien, pledge, charge, claim, security interest or encumbrance of any
kind in respect of such asset and, for the purposes of this Agreement, a Person
shall be deemed to own subject to a Lien any asset which it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or any other form of title retention agreement relating
to such asset.
Section 1.58 Market. "Market" shall mean the Atlanta, Georgia wireless
cable market.
Section 1.59 Market Facilities. "Market Facilities" shall mean those
technical and operational characteristics set forth in Exhibit 1.59.
Section 1.60 MDS. "MDS" shall mean the Multipoint Distribution Service,
including Multichannel Multipoint Distribution Service Channels, consisting of
the E-Group Channels, F-group Channels, H-group Channels, Channel 1, Channel 2
and Channel 2A as set forth in 47 C.F.R. sec. 21.901, and ITFS Channels
authorized for commercial operation under 47 C.F.R. sec. 74.990.
Section 1.61 Merger. "Merger" shall have the meaning set forth in the
Recitals (first paragraph).
Section 1.62 NYSE. "NYSE" shall mean the New York Stock Exchange.
Section 1.63 OFS. "OFS" shall mean the Private Operational Fixed
Microwave Service as set forth in 47 C.F.R. sec. 94.1 et seq.
Section 1.64 Outstanding Options. "Outstanding Options" shall have the
meaning set forth in Section 3.03(b).
Section 1.65 Pending Application. "Pending Application" shall have the
meaning set forth in Section 3.20(c).
Section 1.66 Person. "Person" shall mean an individual, corporation,
partnership, limited liability company, association, trust, unincorporated
organization, other entity or group (as determined under Section 13(d) of the
Exchange Act).
Section 1.67 Proxy Statement/Prospectus. "Proxy Statement/Prospectus"
shall mean the proxy materials of the Company and the prospectus of BellSouth to
be distributed to the Stockholders in connection with the Special Meeting.
Section 1.68 Registration Statement. "Registration Statement" shall mean
the Registration Statement on Form S-4, including the Proxy Statement/Prospectus
contained therein, to be filed by BellSouth with the SEC with respect to the
BellSouth Common Stock to be offered to the holders of Company Common Stock and
Company Preferred Stock in the Merger.
Section 1.69 SEC. "SEC" shall mean the Securities and Exchange
Commission.
Section 1.70 Securities Act. "Securities Act" shall mean the Securities
Act of 1933, as amended, and all rules and regulations promulgated thereunder.
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<PAGE> 51
Section 1.71 Site Lease. "Site Lease" shall have the meaning set forth in
Section 3.22(a).
Section 1.72 Special Meeting. "Special Meeting" shall mean the special
meeting of the Stockholders to be called pursuant to Section 5.10 to consider
and approve this Agreement and the transactions contemplated hereby, and any
adjournments thereof.
Section 1.73 Stockholders. "Stockholders" shall mean all of the holders
of Company Common Stock (including holders of all Outstanding Options
convertible or exchangeable for shares of Company Common Stock) and Company
Preferred Stock.
Section 1.74 Subsidiary or Subsidiaries. "Subsidiary" or "Subsidiaries"
of the Company, BellSouth, BellSouth Sub, or any other Person shall mean any
corporation, partnership, limited liability company, joint venture or other
legal entity of which the Company, BellSouth, BellSouth Sub or such other
Person, as the case may be (either alone or through or together with any other
Subsidiary), owns, directly or indirectly, 50% or more of the stock or other
equity interests.
Section 1.75 Tax or Taxes. "Tax" or "Taxes" shall mean any and all taxes,
charges, fees, levies or assessments payable to any federal, state, local or
foreign taxing authority or agency including, without limitation, (i) income,
franchise, profits, gross receipts, minimum, alternative minimum, estimated, ad
valorem, value added, sales, use, service, real or personal property, capital
stock, license, payroll, withholding, disability, employment, social security,
workers compensation, unemployment compensation, utility, severance, excise,
stamp, windfall profits, transfer and gains taxes, (ii) customs duties, imposts,
charges, levies or other similar assessments of any kind and (iii) interest,
penalties and additions to tax imposed with respect thereto.
Section 1.76 Wireless Cable Channels. "Wireless Cable Channels" shall
mean ITFS Channels and MDS Channels.
Section 1.77 Wireless Cable System. "Wireless Cable System" shall mean
Wireless Cable Channels and associated transmission, reception and related
equipment and authorizations used or to be used to distribute television, video
and other programming to residences and other receive points and any associated
interactive or other services operated or proposed to be operated by the Company
in the Market.
ARTICLE II
THE MERGER
Section 2.01 The Merger. Subject to the terms and conditions set forth in
this Agreement, at the Effective Time, BellSouth Sub shall be merged with and
into the Company in accordance with the provisions of, and with the effects
provided in Article 11 of the GBCC. The separate existence of BellSouth Sub
shall cease (except as may be continued by operation of law) and the Company
shall continue as the surviving corporation of the Merger under the corporate
name Wireless Cable of Atlanta, Inc. or such other name as may be selected by
BellSouth and shall continue to be governed by the laws of the State of Georgia.
Section 2.02 Effective Time of the Merger. As soon as is practicable
after the satisfaction or, if permissible, waiver of the conditions hereinafter
set forth, the parties hereto shall cause the Merger to be consummated by filing
a certificate of merger relating to the Agreement with the Secretary of State of
the State of Georgia in such form as required by, and executed in accordance
with the relevant provisions of GBCC (the date and time of such filing, or such
later date or time as set forth therein, being the "Effective Date" and the
"Effective Time," respectively) and each of BellSouth and the Company shall take
any and all lawful actions to cause the Merger to become effective.
Section 2.03 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the GBCC.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the property rights, privileges, powers and franchises of
BellSouth Sub shall vest in the Company, and all debts, liabilities and duties
of BellSouth Sub shall become the debts, liabilities and duties of the Company,
and the Company shall become a wholly-owned subsidiary of BellSouth.
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<PAGE> 52
Section 2.04 Articles of Incorporation. As a result of the Merger, the
Articles of Incorporation and Bylaws of the Company shall be amended and
restated in the form of the Articles of Incorporation and Bylaws of BellSouth
Sub until thereafter amended.
Section 2.05 Conversion of Securities. (a) At the Effective Time, by
virtue of the Merger, as provided herein, and without any action on the part of
the Company, BellSouth Sub or the holders thereof, each share of the Company's
common stock, $1.00 par value (the "Company Common Stock"), issued and
outstanding immediately prior to the Effective Time (other than any shares of
Company Common Stock to be canceled pursuant to Section 2.05(c) and Dissenting
Shares) shall be converted into that number of shares of the common stock, $1.00
par value per share, of BellSouth (the "BellSouth Common Stock") determined in
accordance with the Exchange Ratio.
For the purposes of this Agreement the Exchange Ratio shall be calculated
as follows:
(i) if the Average Closing Price (as defined below) is between $32.625
and $42.625, the Exchange Ratio shall be 0.49;
(ii) if the Average Closing Price is greater than $42.625, the
Exchange Ratio shall be the quotient of (A) $20.88625 divided by (B) the
Average Closing Price, rounded to the nearest one-one thousandth of a
share; and
(iii) if the Average Closing Price is less than $32.625, the Exchange
Ratio shall be the quotient of (A) $15.98625 divided by (B) the Average
Closing Price, rounded to the nearest one-one thousandth of a share.
(iv) "Average Closing Price" shall mean the average closing sale price
of BellSouth Common Stock as reported on the NYSE for each of the 20
consecutive trading days ending on the tenth day immediately preceding the
Effective Date; provided that for any such trading day for which such
closing sale price is "ex-dividend," the closing sale price for such day
and any subsequent days in the 20-day period shall be adjusted by adding
the amount of the dividend to the closing sale price.
(b) Prior to the Effective Time, (i) each share of the Company's 12%
Cumulative Convertible Redeemable Preferred Stock, Series A, $1.00 par value
(the "Company Preferred Stock") shall be converted to Company Common Stock and
all accrued but unpaid dividends on the Company Preferred Stock shall have been
paid, and (ii) all Outstanding Options shall be exercised or canceled.
Immediately prior to the Effective Time, following conversion of the Company
Preferred Stock and the exercise of all Outstanding Options, there shall be not
more than 2,245,378 shares of Company Common Stock issued and outstanding and no
shares of Company Preferred Stock shall be issued and outstanding.
(c) Each share of Company Common Stock or Company Preferred Stock held in
treasury and each share of Company Common Stock or Company Preferred Stock owned
by BellSouth immediately prior to the Effective Time shall, by virtue of the
Merger and as provided herein, automatically be canceled and extinguished, and
no payment of any kind shall be made with respect thereto, and each Dissenting
Share shall be treated in accordance with Article 13 of the GBCC.
(d) No fraction of a share of BellSouth Common Stock shall be issued in
connection with the conversion of Company Common Stock in the Merger and the
distribution of BellSouth Common Stock in respect thereof, but in lieu of such
fraction, the Exchange Agent shall make a cash payment (without interest) equal
to the same fraction of the market value of a full share of BellSouth Common
Stock, computed on the basis of the Exchange Ratio.
(e) At and as of the Effective Time and as provided herein, each share of
common stock of BellSouth Sub, no par value per share (the "BellSouth Sub Common
Stock") shall be converted into one share of Company Common Stock.
(f) In the event of any change in BellSouth Common Stock between the date
of this Agreement and the Effective Time by reason of any stock dividend,
subdivision, reclassification, recapitalization, combination, exchange of shares
or the like (an "Adjustment Event"), the Exchange Ratio shall be appropriately
adjusted
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so that each holder of Company Common Stock will receive in the Merger the kind
and amount of securities such holder would have been entitled to receive if the
Effective Time had been immediately prior to such Adjustment Event. Similar
adjustments shall be made successively whenever any Adjustment Event occurs.
(g) In the event the Effective Time does not occur prior to April 10, 1997
(the record date for the cash dividend payable with respect to BellSouth Common
Stock in the second fiscal quarter of 1997), the Dividend Amount for such
quarter shall be issued with respect to each share of Company Common Stock in
addition to the shares of BellSouth Common Stock issued in accordance with the
Exchange Ratio. In the event BellSouth has not terminated this Agreement in
accordance with Section 7.01(e) and the Effective Time does not occur prior to
July 10, 1997 (the record date for the cash dividend payable with respect to
BellSouth Common Stock in the third fiscal quarter of 1997), the Dividend Amount
for such quarter shall be issued with respect to each share of Company Common
Stock, in addition to the shares of BellSouth Common Stock issued in accordance
with the Exchange Ratio.
Section 2.06 Manner of Exchange. (a) After the Effective Time, each
holder of a certificate for theretofore outstanding shares of Company Common
Stock, upon surrender of such certificate to the exchange agent designated by
BellSouth to effect the issuance of certificates (the "Exchange Agent"), and a
Letter of Transmittal, which shall be mailed to each holder of a certificate for
theretofore outstanding shares of Company Common Stock by the Exchange Agent
promptly following the Effective Time, shall be entitled to receive in exchange
therefor a certificate or certificates representing the number of full shares of
BellSouth Common Stock for which shares of Company Common Stock theretofore
represented by the certificate or certificates so surrendered shall have been
exchanged as provided in this Article II and cash in lieu of any fractional
share of BellSouth Common Stock to which such holder is entitled pursuant to
Section 2.05(d). Until so surrendered, each outstanding certificate which, prior
to the Effective Time, represented Company Common Stock will be deemed to
evidence the right to receive the number of full shares of BellSouth Common
Stock into which the shares of Company Common Stock represented thereby may be
converted in accordance with the Exchange Ratio; and, after the Effective Time
will be deemed for all corporate purposes of BellSouth to evidence ownership of
the number of full shares of BellSouth Common Stock into which the shares of
Company Common Stock represented thereby were converted.
(b) For shares of Company Common Stock to be converted into BellSouth
Common Stock, until such outstanding certificates formerly representing Company
Common Stock are surrendered, no dividend payable to holders of record of
BellSouth Common Stock for any period as of any date subsequent to the Effective
Time shall be paid to the holder of such outstanding certificates in respect
thereof. If a certificate representing such shares is presented to BellSouth, it
shall be canceled and exchanged for a certificate representing shares of
BellSouth Common Stock as herein provided. Upon surrender of certificates of
Company Common Stock in exchange for BellSouth Common Stock, there shall be paid
to the recordholder of the certificates of BellSouth Common Stock issued in
exchange therefor (i) the amount of dividends theretofore paid for such full
shares of BellSouth Common Stock as of any date subsequent to the Effective Time
which have not yet been paid to a public official pursuant to abandoned property
laws and (ii) at the appropriate payment date the amount of dividends with a
record date after the Effective Time but prior to surrender and a payment date
subsequent to surrender. No interest shall be payable on such dividends upon
surrender of outstanding certificates.
Section 2.07 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock and Company Preferred
Stock which are issued and outstanding immediately prior to the Effective Time
and which are held by a stockholder (other than BellSouth and its subsidiaries,
which waive such right to dissent) who has the right (to the extent such right
is available by law) to demand and receive payment of the fair value of his
shares of Company Common Stock or Company Preferred Stock pursuant to Section
14-2-1302 of the GBCC (the "Dissenting Shares") shall not be converted into or
be exchangeable for the right to receive the consideration provided in Section
2.01 of this Agreement, unless and until such holder shall fail to perfect his
or her right to dissent or shall have effectively withdrawn or lost such right
under the GBCC, as the case may be. If such holder shall have so failed to
perfect his right to dissent or shall have effectively withdrawn or lost such
right, each of his shares of Company Common Stock or Company
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Preferred Stock shall thereupon be deemed to have been converted into, at the
Effective Time, the right to receive shares of BellSouth Common Stock as
provided in Section 2.01 of this Agreement.
Section 2.08 Stock Transfer Books. At the Effective Time, the stock
transfer books of BellSouth Sub shall be closed, and there shall be no further
registration of transfers of shares of BellSouth Sub Common Stock thereafter on
the records of the BellSouth Sub.
Section 2.09 Closing. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Section 7.01 and subject to the satisfaction or waiver of the conditions set
forth in Article VI, the consummation of the Merger will take place as promptly
as practicable on a date designated by BellSouth (and in any event within 10
Business Days) after satisfaction or waiver of the conditions set forth in
Article VI, at the offices of Hunton & Williams, NationsBank Plaza, 600
Peachtree Street, N.E., Atlanta, Georgia 30308.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to BellSouth and BellSouth Sub that:
Section 3.01 Organization and Qualification; Subsidiaries. Each of the
Companies is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, has all requisite
corporate power and authority to carry on its business as it is now being
conducted and to own, operate and hold under lease its assets and properties as,
and in the places where, such properties and assets now are owned, operated or
held. Each of the Companies is duly qualified and in good standing to do
business in each jurisdiction in which the nature of the business conducted by
it or the ownership or leasing of its properties makes such qualification
necessary, other than where the failure to be so duly qualified and in good
standing would not have a Company Material Adverse Effect. The term "Company
Material Adverse Effect" as used in this Agreement means any change or effect
that, individually or when taken together with all other such changes or
effects, could reasonably be expected to be materially adverse to the assets,
financial condition, business or operations of any of the Companies. Exhibit
3.01 constitutes a true, correct and complete list of all of the Subsidiaries of
the Company. The Company does not own, directly or indirectly, nor has it agreed
to purchase or otherwise acquire 5% or more of the capital stock or other equity
interest in, or any interest convertible into or exchangeable or exercisable for
5% or more of the capital stock or other equity interest in any Person other
than the Subsidiaries listed on Exhibit 3.01.
Section 3.02 Articles of Incorporation and Bylaws. Attached as Exhibits
3.02(a) and (b) hereto, are true, correct and complete copies, in full force and
effect, of the Company's Articles of Incorporation and Bylaws, as amended or
restated. None of the Companies are in violation of any of the provisions of
their respective Articles of Incorporation or Bylaws.
Section 3.03 Capitalization; Subsidiaries. (a) The Company's authorized
equity capitalization consists of 10,000,000 shares of Company Common Stock and
5,000,000 shares of preferred stock. As of the close of business on September
30, 1996, 1,772,450 shares of Company Common Stock and 39,372 shares of Company
Preferred Stock were issued and outstanding, such shares of Company Common Stock
and Company Preferred Stock constituted all of the issued and outstanding shares
of capital stock of the Company as of such date. All issued and outstanding
shares of capital stock of the Company have been duly authorized and validly
issued and are fully paid and non-assessable, are not subject to and have not
been issued in violation of any preemptive or similar rights, and were offered
and sold in compliance with all applicable federal and state securities laws. At
the Effective Time, there shall not be more than 2,245,378 shares of Company
Common Stock issued and outstanding and no shares of Company Preferred Stock
shall be issued and outstanding.
(b) Except as required by Section 5.07 hereof or as set forth on Exhibit
3.03(b)(i), the Company has not, subsequent to December 31, 1995, declared or
paid any dividend on, or declared or made any distribution with respect to, or
authorized or effected any split-up or any other recapitalization of, any of the
Company
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Common Stock or Company Preferred Stock, or directly or indirectly redeemed,
purchased or otherwise acquired any of its outstanding capital stock or agreed
to take any such action and will not take any such action during the period
between the date of this Agreement and the Effective Time. Except as set forth
on Exhibit 3.03(b)(ii), there are no securities or obligations convertible into
or exercisable or exchangeable for shares of Company Common Stock or any other
equity interests in the Companies, or warrants, options or other rights to
acquire any such shares or interests or any such securities or obligations, or
other rights (including registration rights), agreements, arrangements or
commitments of any character to which any of the Companies is a party relating
to the issued or unissued capital stock of, or other equity interest in, the
Companies or obligating the Companies to grant, issue or sell any shares of the
capital stock of, or other equity interest in, the Companies, by sale, lease,
license or otherwise ("Outstanding Options"). There are no obligations,
contingent or otherwise, of the Company to (i) repurchase, redeem or otherwise
acquire any shares of Company Common Stock or Company Preferred Stock or (ii)
make any investment in (in the form of a loan, capital contribution or
otherwise), or provide any guarantee with respect to the obligations of, any
Person. There are no agreements, arrangements or commitments of any character
(contingent or otherwise) pursuant to which any Person is or may be entitled to
receive any payment based on the revenues or earnings, or calculated in
accordance therewith, of the Company. There are no voting trusts, or other
agreements or understandings to which the Company or any Stockholder is a party
or by which the Company or any Stockholder is bound with respect to the voting
of any shares of capital stock of the Company.
(c) All of the outstanding shares of capital stock of the Company's
Subsidiaries are validly issued, fully paid and nonassessable and free of
preemptive rights and are owned by the Company, directly or indirectly, free and
clear of all Liens or other restrictions. Exhibit 3.03(c) sets forth the
authorized equity capitalization and outstanding capital stock of each of the
Company's Subsidiaries. The Company owns directly or indirectly all of the
issued and outstanding shares of the capital stock and partnership or other
ownership interests in each of its Subsidiaries. There are no subscriptions,
options, warrants, rights, calls, contracts, voting trusts, proxies or other
commitments, understandings, restrictions or arrangements relating to the
issuance, sale, voting, transfer, ownership or other rights affecting any shares
of capital stock or partnership or other ownership interests in any Subsidiary
of the Company, including any right of conversion or exchange under any
outstanding security, instrument or agreement.
Section 3.04 Authorization; Enforceability. The Company has all requisite
corporate power and authority to perform its obligations under this Agreement
and to consummate the transactions contemplated to be consummated by it hereby.
The execution and delivery of this Agreement by the Company and the consummation
by it of the transactions contemplated hereby have been duly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby, other than the approval of the Stockholders at
the Special Meeting. This Agreement and all of the other documents and
instruments required hereby have been duly executed and delivered by the Company
and, assuming the due authorization, execution and delivery hereof by BellSouth
and BellSouth Sub, constitute the legal, valid and binding obligations of the
Company enforceable in accordance with their respective terms.
Section 3.05 Required Filings and Consents. Neither the execution and
delivery of this Agreement by the Company, nor the performance of this Agreement
by the Company does or will require any of the Companies to obtain any consent,
approval, authorization or permit of, or to make any filing with or notification
to any federal, state, local or foreign government, authority, agency,
department, bureau, court, commission or other body, office or instrumentality
(individually a "Governmental Entity" and collectively, "Governmental
Entities"), except for applicable requirements, if any, of (i) the
Communications Act and FCC Rules, (ii) the HSR Act, (iii) federal securities
laws or state securities, "Blue Sky" or takeover laws, and (iv) the filing and
recordation of appropriate merger documents as required by Law. Except as set
forth on Exhibit 3.05, there is no requirement that any party to any Contract
consent to the execution and delivery of, or the consummation of the
transactions contemplated by this Agreement. The consummation of the
transactions contemplated hereby will not result in a change in any rights or
obligations of the parties to any Contract.
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Section 3.06 No Conflict. Neither the execution and delivery of this
Agreement by the Company nor the performance of this Agreement by the Company
does or will (a) conflict with or violate any of the articles of incorporation
or bylaws, partnership or organizational documents, in each case as amended or
restated, of the Companies, (b) conflict with or violate any federal, state,
foreign or local law, statute, ordinance, rule, treaty, published policy or
guideline, regulation, order, judgment or decree (individually a "Law" and
collectively, "Laws") applicable to any of the Companies, or by which any of the
Companies' properties are bound or to which any of its properties are subject,
(c) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or
require payment under, or result in the creation of a Lien on any of the
properties or assets of any of the Companies pursuant to any Contract or, any
other note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which any of the
Companies is a party or by which any of the Companies or any of their respective
properties are bound or to which any of their respective properties are subject,
except for such violations, conflicts, defaults or breaches which would not,
singly or in the aggregate, have a Company Material Adverse Effect.
Section 3.07 Environmental Matters. The Company possesses all
environmental permits, licenses, approvals and authorizations ("Company
Environmental Permits") which are required under applicable Environmental Law
with respect to the conduct of its business. The Company has conducted its
business in compliance with such Company Environmental Permits and applicable
Environmental Law. No claim has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or
threatened by (a) any Governmental Entity with respect to the handling,
treatment, use, storage, recycling, transportation, disposal or Release of any
Hazardous Materials at any location in connection with the conduct of business
by the Company or (b) any third party relating to personal injuries resulting
from the Release of any Hazardous Materials by the Company. Except as permitted
by Environmental Law, the Company has not used, treated, transported, generated
or handled any Hazardous Materials in connection with the conduct of its
business. For purposes of this Agreement, (i) "Environmental Law" means all
current federal, state, and local, civil and criminal laws, statutes,
ordinances, codes, permits, permit conditions, rules and regulations and common
law rights of action relating to the protection of the environment and human
health and safety including, without limitation, laws governing the handling,
use, generation, treatment, storage, transportation or disposal of Hazardous
Materials including, without limitation, the Resource Conservation and Recovery
Act of 1976, the Toxic Substances Control Act, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Federal Water Pollution
Control Act, the Clean Air Act, the Hazardous Materials Transportation Act, and
the Occupational Safety and Health Act, as each of the foregoing may be amended,
(ii) "Hazardous Materials" means petroleum and petroleum products, radioactive
materials, ionizing and non-ionizing radiation including without limitation
electro-magnetic fields, pesticides, asbestos and asbestos-containing materials,
polychlorinated biphenyls, lead and products containing lead and any materials
or substances defined as or included in the definition of "hazardous materials,"
"hazardous wastes," "hazardous substances," "toxic substances," "toxic
pollutants," "pollutants," "contaminants," "solid wastes" or "regulated
substances" under any applicable Environmental Law and (iii) "Release" means any
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping, or disposing of a Hazardous Material into the
environment.
Section 3.08 Permits; Compliance. (a) The Companies are in possession of
all franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals, leases, rights and orders
necessary to own, lease and operate its properties and to carry on the business
of the Wireless Cable System as it is now being conducted (collectively, the
"Company Permits"). All of the Company Permits are in full force and effect and
are enforceable in accordance with their terms, except as would not have a
Company Material Adverse Effect. The terms of said Company Permits are not
subject to any restrictions or conditions that materially limit or would
materially limit the operations of the business of the Company or any of its
subsidiaries as presently conducted, other than restrictions or conditions
generally applicable to Company Permits of that type. Except as set forth in
Exhibit 3.11, there is no action, proceeding or investigation pending or, to the
Knowledge of the Company, threatened, regarding suspension, termination,
revocation or cancellation of any of the Company Permits. None of the Company
Permits will terminate or
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lapse by reason of the transactions contemplated by this Agreement. Except as
set forth on Exhibit 3.08, no application has been or is proposed to be made to
amend or modify any Company Permit or to acquire any additional Company Permit.
The Company has no reason to believe that any Company Permit in effect on the
date hereof will not be renewed in the ordinary course.
(b) Exhibit 3.08 hereto sets forth a list of all Company Permits.
(c) None of the Companies is in material conflict with, or in default or
violation of the Communications Act, FCC Rules, any Company Permit or any other
Laws applicable to it or its business or by which their respective properties
are bound or to which their respective properties are subject, and there exist
no conditions or circumstances which could result in such a conflict, default or
violation, except for such minor violations as do not impair or interfere with
the operation of the Wireless Cable System. None of the Companies has received
from any Governmental Entity any notification with respect to possible
conflicts, defaults or violations of Laws.
Section 3.09 Company Reports; Financial Statements. (a) The Company has
filed in a timely manner all forms, reports, statements and other documents
required to be filed with any Governmental Entities (all such forms, reports,
statements and other documents being referred to herein, collectively, the
"Company Reports"). The Company Reports, including all Company Reports filed
after the date of this Agreement and prior to the Effective Time, were or will
be prepared in substantial accordance with the requirements of applicable Law
and did not at the time they were filed, or will not at the time they are filed,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) The audited consolidated financial statements of the Company for the
fiscal year ended December 31, 1995 and any unaudited financial statements for
the period ended September 30, 1996, and for periods ending after September 30,
1996, which have been delivered to BellSouth including, without limitation, such
financial statements previously delivered to BellSouth (including, in each case,
any related notes thereto) are or will be in accordance with and have been or
will be derived from the books and records of the Company, have been prepared in
accordance with GAAP (except as may be indicated in the notes thereto, or, in
the case of unaudited financial statements, for normal recurring year-end audit
adjustments), and fairly present or will fairly present in accordance with GAAP
throughout the periods involved (except to the extent required by changes in
GAAP) the financial position of the Company as of the respective dates thereof
and the results of operations and cash flows for the periods set forth therein.
Section 3.10 Taxes. Except as set forth on Exhibit 3.10 hereto:
(a) each of the Companies that is incorporated under the laws of the
United States or of any of the United States are members of the affiliated
group, within the meaning of Section 1504(a) of the Code, of which the
Company is the common parent, such affiliated group files a consolidated
federal income tax return and none of the Companies has ever filed a
consolidated federal income tax return with (or been included in a
consolidated return of) a different affiliated group;
(b) each of the Companies has timely filed or caused to be filed all
Tax returns required to have been filed by or for it, and all information
set forth in such Tax returns is accurate and complete in all material
respects;
(c) each of the Companies has paid or made adequate provision on its
books and records in accordance with GAAP for all Taxes for the periods
covered by such Tax returns;
(d) each of the Companies is in material compliance with, and its
records contain all information and documents (including, without
limitation, properly completed IRS Forms W-8 and Forms W-9) necessary to
comply with, all applicable information reporting and tax withholding
requirements under federal, state, local and foreign Laws, and such records
identify with specificity all accounts subject to withholding under Section
1441, 1442 or 3406 of the Code or similar provisions of state, local or
foreign Laws;
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(e) there is not a material amount of unpaid Taxes due and payable by
any of the Companies or by any other person that is or could become a lien
on any asset of the Companies, or otherwise have a Company Material Adverse
Effect;
(f) each of the Companies has collected or withheld all Taxes required
to be collected or withheld by it, and all such Taxes have been paid to the
appropriate Governmental Entity or set aside in appropriate accounts for
future payment when due;
(g) none of the Companies has granted (or is subject to) any waiver,
which is currently in effect, of the period of limitations for the
assessment of any Tax; no unpaid Tax deficiency has been assessed or
asserted against or with respect to any of the Companies by any
Governmental Entity; no power of attorney relating to Taxes that is
currently in effect has been granted by or with respect to any of the
Companies; there are no currently pending administrative or judicial
proceedings, or any deficiency or refund litigation, with respect to Taxes
of any of the Companies; and any such assertion, assessment, proceeding or
litigation disclosed on Exhibit 3.10 is being contested in good faith
through appropriate measures, and its status is described in Exhibit 3.10;
(h) none of the Companies has made or entered into, or holds any asset
subject to, a consent filed pursuant to Section 341(f) of the Code and the
regulations thereunder or a "safe harbor lease" subject to former Section
168(f)(8) of the Internal Revenue Code as in effect before amendment by the
Tax Reform Act of 1984 and the regulations thereunder;
(i) none of the Companies is required to include in income any amount
from an adjustment pursuant to Section 481 of the Code or the regulations
thereunder or any similar provision of state or local Law, and to the
Knowledge of the Company, no Governmental Entity has proposed any such
adjustment;
(j) none of the Companies is obligated to make any payments, or is a
party to any Contract that could obligate it to make any payments, that
would not be deductible by reason of Sections 162(m) or 280G of the Code;
(k) there are no excess loss accounts or deferred intercompany gains
with respect to any member of the affiliated group of which the Company is
the common parent;
(l) the most recent audited consolidated balance sheet of the Company
fully and properly reflects, as of the date thereof, the liabilities of the
Companies for all accrued Taxes and deferred liability for Taxes and, for
periods ending after such date, the books and records of each such
corporation fully and properly reflect its liability for all accrued Taxes;
and
(m) none of the Companies has an "overall foreign loss" as defined in
Section 904(f) of the Code.
Exhibit 3.10 describes all material and continuing Tax elections, consents
and agreements made by or affecting any of the Companies, lists all types of
material Taxes paid and Tax returns filed by or on behalf of any of the
Companies and expressly indicates each Tax with respect to which any of the
Companies is or has been included in a consolidated, unitary or combined return.
Section 3.11 Litigation. (a) Except as set forth in Exhibit 3.11 hereto,
there is no claim, action, suit, litigation, proceeding, arbitration or
investigation of any kind, at law or in equity (including, without limitation,
actions or proceedings seeking injunctive relief and any other action or
proceeding of any nature before any Governmental Entity), pending or, to the
Knowledge of the Company, threatened against or affecting the Companies, or any
properties or rights of the Companies. None of the claims set forth in Exhibit
3.11 (i) has had or will have a Company Material Adverse Effect or (ii) has had
or will have a material adverse effect on the Capacity Leases, Site Leases or
FCC authorizations required for BellSouth to operate the Wireless Cable System,
or the operation of the Channels, the transmission facilities relating thereto
or the Wireless Cable System. None of the Companies is subject to any continuing
order of, consent decree, settlement agreement or other similar written
agreement with or, to the Knowledge of the Company, investigation by, any
Governmental Entity, or any judgment, order, writ, injunction, decree or award
of any Governmental Entity or arbitrator including, without limitation,
cease-and-desist or other orders.
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(b) The Company has not admitted in writing its inability to pay its debts
generally as they become due, filed or consented to the filing against it of a
petition in bankruptcy or a petition to take advantage of any insolvency act,
made an assignment for the benefit of creditors, consented to the appointment of
a receiver for itself or for the whole or any substantial part of its property,
or had a petition in bankruptcy filed against it, been adjudicated a bankrupt,
or filed a petition or answer seeking reorganization or arrangement under the
federal bankruptcy laws or any other similar law of any jurisdiction.
Section 3.12 Absence of Changes. Except as specifically disclosed in
Exhibit 3.12 hereto, since December 31, 1995, none of the Companies has suffered
any change in its business, financial condition or results of operations that
has had or will have a Company Material Adverse Effect. Except as disclosed in
Exhibit 3.12, or as otherwise specifically contemplated by this Agreement, there
has not been since December 31, 1995 (a) any entry into any agreement or
understanding or any amendment of any agreement or understanding between any of
the Companies on the one hand, and any of their respective directors, officers
or employees on the other hand, providing for employment, terms of employment or
compensation of any such director, officer or employee, or any adoption of or
increase in any bonus, insurance, pension or other employee benefit plan,
payment or arrangement (including, without limitation, the granting of stock
options or stock appreciation rights or the award of restricted stock) made to,
for or with any such director, officer or employee, (b) any labor dispute that
has had or is expected to have a Company Material Adverse Effect, (c) any entry
by any of the Companies into any material commitment, agreement, license or
transaction (including, without limitation, any borrowing, capital expenditure,
sale of assets or any Lien made on any of the properties or assets of any of the
Companies) other than in the ordinary and usual course of business, (d) any
change in the accounting policies or practices of the Companies, (e) any damage,
destruction or loss, whether covered by insurance or not, which has had or will
have a Company Material Adverse Effect, or (f) any agreement to do any of the
foregoing.
Section 3.13 Title to and Condition of Assets. Exhibit 3.13 hereto
identifies all material assets necessary for the Company to own, lease and
operate its properties and the Wireless Cable System as it is now being
conducted. As of the date hereof, the Companies own, and as of the Effective
Time each of the Companies will own, good, valid and marketable title to all of
their assets (excluding, for purposes of this sentence, assets held under
leases), free and clear of any and all Liens or other restrictions, except as
disclosed on Exhibit 3.13 hereto. Such assets, together with all assets held by
the Companies under leases, include all tangible and intangible assets,
Contracts and rights necessary or required for the operation of the Wireless
Cable System in accordance with past practice. None of the Companies owns any
right, title or interest in any real property.
Section 3.14 Contracts. Exhibit 3.14 hereto lists all of the Contracts.
True, correct and complete copies of each of such Contracts have been delivered
to BellSouth. Each of the Contracts is in full force and effect, is enforceable
in accordance with its terms and is a valid, legal and binding obligation of the
Companies and, to the Knowledge of the Company, the other parties thereto. Each
of the Companies has performed each material term, covenant and condition of
each Contract that is to be performed by it and as of the Closing Date the
Company will be current in payment of all liabilities incurred under such
Contracts. No event has occurred that would, with the passage of time or
compliance with any applicable notice requirements, constitute a default under
any of such Contracts. To the Knowledge of the Company, no party to any material
Contract intends to cancel, terminate or exercise any option under any of such
Contracts. To the Knowledge of the Company, there is no matter that adversely
affects, or would adversely affect, any Contract that, individually or in the
aggregate, has had or would have a Company Material Adverse Effect.
Section 3.15 Labor Matters. With respect to employees of the Companies
(i) to the Knowledge of the Company, no senior executive, key employee or group
of employees has any plans to terminate employment with any of the Companies,
except as contemplated by Section 5.01(b)(xiii) or Section 6.03(g), (ii) there
is no unfair labor practice charge or complaint against any of the Companies
pending or, to the Knowledge of the Company, threatened before the National
Labor Relations Board or any other comparable authority, (iii) no grievance or
any arbitration proceeding arising out of or under collective bargaining
agreements is pending and, to the Knowledge of the Company, no claims therefor
exist or have been threatened, and (iv) there is no litigation, arbitration
proceeding, governmental investigation, administrative
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charge, citation or action of any kind pending or, to the Knowledge of the
Company, proposed or threatened against any of the Companies relating to
employment, employment practices, terms and conditions of employment or wages
and hours.
None of the Companies has any collective bargaining relationship or duty to
bargain with any Labor Organization (as such term is defined in Section 2(5) of
the National Labor Relations Act, as amended), and none of the Companies has
recognized any Labor Organization as the collective bargaining representative of
any of its employees. No union representation petition is pending before the
National Labor Relations Board and, to the Knowledge of the Company, there is no
union organizing activity involving the employees of any of the Companies.
Section 3.16 Employee Benefit Plans. For purposes of this Section, the
term "Company Benefit Plans" shall mean all pension, retirement, profit-sharing,
deferred compensation, stock option, stock bonus, stock purchase, restricted
stock, stock appreciation rights, employee stock ownership, severance pay,
vacation, bonus or other incentive plans, and all other employee programs,
arrangements or agreements, whether arrived at through collective bargaining or
otherwise and whether oral or written, all medical, vision, dental and other
health plans, all disability benefits and plans, all life insurance and death
benefit plans, and all other employee benefit plans or fringe benefit plans,
whether oral or written, including, without limitation, any "employee benefit
plan," as that term is defined in Section 3(3) of ERISA, currently or previously
adopted, maintained by, sponsored in whole or in part by, or contributed to by
any of the Companies or affiliates thereof for the benefit of employees,
retirees, dependents, spouses, directors, independent contractors or other
beneficiaries and under which employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries are eligible to
participate. Any of the Company Benefit Plans which is an "employee pension
benefit plan," as that term is defined in Section 3(2) of ERISA, is referred to
herein as a "Company ERISA Plan."
No Company Benefit Plan is or has been a multiemployer plan within the
meaning of Sections 3(37) or 4001(a)(3) of ERISA. As to each Company ERISA Plan
which is intended to be qualified (within the meaning of Sections 401(a) and
501(a) of the Code), the Company has either received or timely applied for a
favorable determination letter from the Internal Revenue Service confirming the
tax-qualified status of each such Plan for each year each such Plan has been in
existence, and no circumstances exist which would adversely affect such
qualification. All Company Benefit Plans are in compliance with the applicable
provisions (including, without limitation, any funding requirements or
limitations) of ERISA, the Code and any other applicable Laws, the breach or
violation of which could have a Company Material Adverse Effect. No Company
ERISA Plan which is a defined benefit pension plan has any "unfunded current
liability," as that term is defined in Section 302(d)(8)(A) of ERISA, and the
present fair market value of the assets of any such plan exceeds the plan's
"benefit liabilities," as that term is defined in Section 4001(a)(16) of ERISA,
when determined under actuarial factors that would apply if the plan terminated
in accordance with all applicable legal requirements. No prohibited transaction
(within the meaning of Section 406 of ERISA or Section 4975 of the Code)
involving any Company ERISA Plan has occurred that would subject the Company to
any penalty or tax under Section 502(i) of ERISA or Section 4975 of the Code.
The Company will not be obligated to make any "excess parachute payments" within
the meaning of Section 280G of the Code or, except as contemplated by Section
8.01, any severance payments as a result of the transactions provided for in
this Agreement. The Company has never represented, promised, or contracted
(whether in oral or written form) to any current or former employee (either
individually or to employees as a group) that such current or former employee(s)
would be provided with life insurance or employee welfare benefit plan benefits
(within the meaning of Section 3(1) of ERISA) upon retirement or termination of
employment, other than continuation coverage as required by Section 601 of
ERISA, and neither the Company nor any Company Benefit Plans have any liability
with respect to any such benefits.
Exhibit 3.16 is a true, correct and complete list of all Company Benefit
Plans and each trust related thereto. The Company has provided BellSouth with
access to true, correct and complete copies of each governing document
(including, if applicable, any related trust document), agreement or, if the
plan is not written, the terms of the Plan, for each Company Benefit Plan,
together with the most recent summary plan
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description, annual report and audited financial statement for each such plan
and the actuarial report for any Company Benefit Plan that is a defined benefit
pension plan or funded welfare benefit plan.
Section 3.17 Fees and Expenses of Brokers and Others. None of the
Companies (a) has had any dealings, negotiations or communications with any
broker or other intermediary in connection with the transactions contemplated by
this Agreement, (b) is committed to any liability for any brokers' or finders'
fees or any similar fees in connection with the transactions contemplated by
this Agreement or (c) has retained any broker or other intermediary to act on
its behalf in connection with the transactions contemplated by this Agreement,
except that the Company has engaged Alex. Brown & Sons Incorporated to advise it
in connection with such transactions, and the Company shall pay as of the
Effective Date all of Alex. Brown & Sons Incorporated's fees and expenses, not
to exceed $900,000, in connection with such engagement.
Section 3.18 Accuracy of Information. Neither this Agreement nor any
Exhibit to this Agreement contains an untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained
therein not misleading.
Section 3.19 Absence of Undisclosed Liabilities. None of the Companies
have, as of the date hereof, or will have, as of the Effective Time, any
liabilities or obligations of any kind, whether absolute, accrued, asserted or
unasserted, contingent or otherwise, that would be required to be disclosed on a
consolidated balance sheet or the financial statement footnotes of the Company
prepared as of such date, in accordance with GAAP, except liabilities,
obligations or contingencies that were (a) reflected on or accrued or reserved
against in the consolidated balance sheet of the Company as of December 31,
1995, included in the financial statements of the Company or reflected in the
notes thereto, or (b) incurred after the date of such balance sheet in the
ordinary course of business and consistent with past practices and which,
individually or in the aggregate, would not have a Company Material Adverse
Effect.
Section 3.20 ITFS, MDS, CARS and OFS Specifications. (a) Set forth in
Exhibit 3.20(a) hereto is a true, correct and complete list of the technical
specifications of each MDS Channel authorization, ITFS Channel authorization,
CARS authorization and OFS authorization licensed to any of the Companies or
subject to a Capacity Lease (the "Company FCC Authorizations," which term shall
include all such authorizations held by any of the Companies or which become
subject to a Capacity Lease after the date hereof). For each such Company FCC
Authorization, such exhibit sets forth the (i) authorized frequency or
frequencies, (ii) authorized equivalent isotropic radiated power, (iii)
authorized antenna type (and polarization), (iv) authorized orientation of
transmission antenna, (v) authorized transmitter site location, (vi) carrier
offset requirement, (vii) requirement to prevent or reduce or to make
adjustments to prevent or reduce interference to any other station, (viii)
protected service area, (ix) construction certification date, (x) license
expiration date, (xi) the date on which certification or notification of
completion of construction, as appropriate, was filed with the FCC, (xii) the
name of the licensee, and (xiii) if subject to a Capacity Lease, the Company
having the Capacity Lease. Except as set forth on Exhibit 3.20(a), the grant,
renewal or assignment of each Company FCC Authorization to the existing licensee
thereof was approved by the FCC by Final Order in accordance with standard
administrative procedures and each such license is unimpaired by any act or
omission of any such licensee or the Company. No petition to deny or for
reconsideration, application for review, appeal, request for stay or other
challenge to the grant of any of FCC License is pending before the FCC, and the
time for requesting a challenge has passed. There is no complaint, inquiry,
investigation or proceeding pending before the FCC or, to the Knowledge of the
Company threatened, which, if determined as requested by the moving party or as
indicated in any document initiating any inquiry, investigation or proceeding,
could result in the revocation, modification, restriction, cancellation,
termination, non-renewal or other action which is adverse to the operations
under any Company FCC Authorization, or the imposition of a monetary forfeiture.
(b) Except as stated on Exhibit 3.20(a), no facilities subject to a Company
FCC Authorization listed on Exhibit 3.20(a) (A) is operating or at any time has
operated facilities at variance from the FCC authorization therefor, the
Communications Act or FCC Rules, (B) is operating under any special temporary,
experimental or developmental authorization, (C) is the subject of any carrier
offset agreement, (D) is subject to a pending license renewal application, (E)
is subject to a pending request for extension of time to complete construction
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of authorized facilities or for reinstatement of such authorization for failure
to timely complete construction, (F) is subject to any complaint, petition or
other filing before the FCC that the Channel is causing impermissible
interference, (G) is subject to any agreement which requires or could require
the Channel to operate with technical facilities different than those
authorized, to cease operation, to limit the hours of operation or to accept
interference, (H) is authorized pursuant to authorization which is subject to
challenge before the FCC or the United States Court of Appeals, (I) has a
construction certification date, a construction completion date or date by which
submission to the FCC must be made to avoid its forfeiture that has lapsed
without the prior filing of a properly completed, filed, unopposed and pending
application to extend such date or the timely submission of the materials
required to prevent forfeiture of the authorization, or (J) has been authorized
pursuant to authorization which is not in full force and effect or which was not
properly issued or subject to any lease, sublease or any agreement to make it
available to a third party. Except as stated on Exhibit 3.20(a), no MDS Channel
listed on such exhibit (X) has failed to serve subscribers for any consecutive
period of 12 months since the later of the date it was first constructed or the
effective date of any license renewed by Final Order therefor, or (Y) has
experienced the removal or the alteration of equipment which rendered the
Channel non-operational for a period of thirty (30) or more consecutive days.
Except as set forth on Exhibit 3.20(a), no H-group Channel listed on such
exhibit is regulated under Part 101 of FCC Rules or is not regulated under Part
21 of FCC Rules.
(c) Exhibit 3.20(c) and Exhibit 3.20(c-I) contain a true, correct and
complete list of all pending applications (the "Pending Applications") for
modification of MDS and ITFS station authorizations (other than MDS BTA
applications and statements of intention), applications for extensions of time
to construct MDS and ITFS stations and applications to renew ITFS and MDS
station authorizations filed by any of the Companies or subject to any Capacity
Lease. Except for the Pending Applications set forth on Exhibit 3.20(c-I), each
Pending Application is complete, complies with FCC Rules, and if a modification
application, proposes facilities requesting authorization consistent with the
requirement to protect adjacent and co-channel stations and auction winners for
adjacent BTAs from harmful interference as defined by FCC Rules. To the
Knowledge of the Company, no Pending Application is mutually exclusive with any
application for a proposed facility, and no Pending Application can be subject
to any proposal which would be consolidated with such application for purposes
of mutually-exclusive disposition. Except as set forth on Exhibit 3.20(c), no
such application (i) is subject to any informal objection or petition to deny;
(ii) proposes facilities predicted to cause impermissible interference as
determined by FCC Rule 74.903 or 21.902, as applicable; (iii) relies upon any
consent or acceptance of the interference that would be created by such proposed
facility; or (iv) proposes carrier offset to limit either caused or received
interference. Exhibit 3.20(c) accurately lists for each Pending Application the
proposed (i) frequency or frequencies, (ii) equivalent isotropic radiated output
power, (iii) antenna type (and polarization), (iv) system losses, (v)
orientation of transmission antenna and (vi) transmitter site location.
(d) Each of the Companies and each lessor has timely filed all Annual FCC
Reports, except to the extent that the failure to timely file such Annual FCC
Reports will not have a Company Material Adverse Effect. Each Annual FCC Report
is true, correct and complete.
Section 3.21 ITFS and MDS Capacity Leases. Exhibit 3.21 is a true,
correct and complete list of all agreements with respect to the lease to, lease
by, sale by or acquisition by any of the Companies of MDS or ITFS station
transmission capacity or licenses, including any such agreement with respect to
station capacity that has not been authorized (the "Capacity Leases," which term
shall include each such agreement acquired by the Companies, when acquired,
after the date hereof). Except as set forth on Exhibit 3.21, each Capacity Lease
meets all requirements of law and regulation, is in full force and effect and is
enforceable in accordance with its terms except as such enforceability may be
limited by receivership, insolvency and debtor relief laws. Exhibit 3.21 sets
forth for each Capacity Lease a true, correct and complete description of: (i)
the name of the lessor; (ii) the frequencies to which the Company has the right
to use transmission capacity; (iii) the payments due thereunder and all factors
that affected or will affect changes in the payment rate from January 1, 1996
through the end of the current term thereof; (iv) the term of the Capacity
Lease; (v) any rights for early termination or extensions of the term of any
party thereto; (vi) any obligations continuing after the current term and any
obligations that may have not been fulfilled by any party thereto; and (vii) any
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restrictions on full-time usage by the Companies of channel capacity leased
thereunder. There has been no event or circumstances which will give any right
to any party to increase, change or materially adversely modify any usage of any
Channel under any Capacity Lease. Except for ITFS airtime described in the ITFS
Capacity Leases, the Companies have the sole right to use the Channels under
each Capacity Lease required to conduct its business as currently conducted. To
the Knowledge of the Company, there are no facts or circumstances that might
(whether with or without notice, lapse of time or the occurrence of any other
event) reasonably give rise to the issuance of any such notice or which might
preclude the renewal of such Capacity Leases in the normal course in accordance
with their terms. Except as set forth on Exhibit 3.21, there is no default, and
to the Knowledge of the Company, no party has threatened default, under any
Capacity Lease and the consummation of the transactions contemplated by this
Agreement will not cause any default of any Capacity Lease. No party to any
Capacity Lease has claimed, and to the Knowledge of the Company, no party has
threatened, in any written or oral statement to any of the Companies that such
party has a right to terminate the Capacity Lease or to seek damages against any
of the Companies for the Companies' violation of such lease. No party to any
Capacity Lease requires the consent of any third party (other than FCC) to make
the lease binding and enforceable against such party in accordance with its
terms or to deprive such party of the right to void the lease. True, correct and
complete copies of all Capacity Leases as amended through the date of this
Agreement have been provided to BellSouth.
Section 3.22 Site Leases and Lease Options. (a) Set forth on Exhibit 3.22
is a true, correct and complete list of the transmitter site leases held by each
of the Companies (a "Site Lease," which term shall include each of the
Companies' transmitter Site Leases acquired by the Companies, when acquired,
after the date hereof). Except as set forth on Exhibit 3.22, each Site Lease is
in full force and effect and is enforceable in accordance with its terms. There
is no default of any Site Lease, and no party to any Site Lease has given the
other party thereto any notice of default thereunder, except as identified on
Exhibit 3.22. Except as stated on Exhibit 3.22, the consummation of the
transactions contemplated by this Agreement will not cause a default under any
Site Lease. Exhibit 3.22 completely and accurately sets forth, for each Site
Lease, the parties, the location of the real property subject thereto, the
rental and the term. True, correct and complete copies of all Site Leases have
been provided to BellSouth.
(b) To the Knowledge of the Company, none of the real property subject to
any Site Lease is subject to any condemnation proceeding; no lease or use of any
such real property exists which would interfere with the use of such property as
contemplated in any Site Lease for the property; there is no existing written
notice covering future condemnation thereof; and, to the Knowledge of the
Company, no such real property will be condemned or subject to condemnation
proceedings.
(c) To the Knowledge of the Company, the real property described in each
Site Lease is of sufficient size so as to permit the erection of a guyed tower
of the size contemplated in the FCC authorizations for ITFS and MDS stations
authorized by the FCC to be built or that exist at that real property or
contemplated in pending applications to the FCC for such authorizations. To the
Knowledge of the Company, neither the erection of any such tower, nor the
construction of a utility building adjacent thereto, nor the operation of ITFS
or MDS radio stations at any such site will violate the provisions of any
applicable building codes, fire regulations, building restrictions, land use
regulations, safety regulations, environmental regulations, deed covenants,
agreement, zoning, or other governmental ordinances, orders or regulations.
(d) To the Knowledge of the Company, there are no leases, rental
agreements, option agreements, employment contracts, or contracts for service or
maintenance existing and relating to or connected with the occupancy or
operation of any of the real property subject to a Site Lease other than as
listed on Exhibit 3.22. True, correct and complete copies of all such agreements
have been provided to BellSouth. None of the Companies has any interest, present
or future, in any of such real property except for the interest as shown in
Exhibit 3.22.
(e) All of the real property subject to Site Leases is freely accessible
directly from public streets, or any use of adjoining private land to access the
same is done in accordance with valid public or private easements which are
included in the applicable Site Lease.
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Section 3.23 No Cable Systems. The Wireless Cable System does not include
or provide programming to any "cable system," as that term is defined in 47
U.S.C. sec. 522(7). None of the Companies is a "cable operator" as that term is
defined in 47 U.S.C. sec. 522(5).
Section 3.24 Operating Market. (a) Exhibit 3.24 sets forth true, correct
and complete information concerning the number of Basic Subscribers to its
Wireless Cable System, the subscriber rates and offered programming channels for
the Wireless Cable System.
(b) The equipment used in the Wireless Cable System is in good operating
condition, does not require and is not reasonably expected to require any
special or extraordinary expenditures to remain in such condition, and can be
used for its intended purpose.
(c) All transmitters used in the Wireless Cable System meet applicable FCC
type acceptance and frequency stability requirements.
(d) The Wireless Cable System has not received any complaint that it, or
any Channels used in it, is causing interference to any reception, transmission
or detection system.
(e) The Wireless Cable System does not require any FCC authorization that
has not been obtained for it to operate as currently operated.
Section 3.25 Retransmission Consent; Programming Agreements. (a) The
Company has the written consent to the retransmission of each Broadcast Station
whose signal is "retransmitted" on the Wireless Cable System. As used in this
Section, the term "Broadcast Station" means a television broadcast station, a
television translator station, a low power television station, an educational
television broadcasting station, and includes every category of broadcast
station that may enjoy must-carry rights under FCC Rules, but does not include a
"superstation" as defined by FCC Rule 76.64(c)(2) actually received by the
Wireless Cable System by satellite downlink. The term "retransmitted" means the
receipt and retransmission of a signal, but does not include the reception
described in FCC Rule 76.64(e). A true, correct and complete list of each
retransmission consent agreement, including the term and the payment terms of
the agreement, is set forth as Exhibit 3.25(a). True, correct and complete
copies of all such retransmission consent agreements have been provided to
BellSouth.
(b) Exhibit 3.25(b) is a true, correct and complete list of all agreements
for programming, and for each such programming agreement: (i) the name of the
programmer; (ii) the programming service; (iii) the rate, and all factors that
affected or will affect rate changes from January 1, 1996 through the end of the
current term of such agreement; and (iv) the term and any rights for early
termination or extensions of the term of any party thereto. True, complete and
correct copies of all such programming agreements have been provided to
BellSouth.
Section 3.26 Copyright. Except as set forth on Exhibit 3.26, the Company
has timely filed with the Copyright Office semi-annual statements of account for
the Wireless Cable System for each use by the Company of MDS or ITFS Channels
which require a compulsory license for each period during which it has operated
by serving subscribers. Each such statement of account accurately sets forth all
information required to appear on such statement by the statement and by
applicable rules of the Copyright Office, and accurately states the fees due
with respect to such statement. All such fees have been paid and, except as set
forth in Exhibit 3.26, were paid in a timely fashion. The Company is not liable
to any person for copyright infringement under the Copyright Act as a result of
its business operations. There have been no inquiries received from the
Copyright Office or any other party which questioned such statements of account
or any copyright royalty payments made by the Company with respect to the
Wireless Cable System, and no claim, action or demand for copyright infringement
or for non-payment of royalties is pending or, to the Knowledge of the Company,
threatened or probable of assertion with respect to the Wireless Cable System.
Section 3.27 Equal Employment Opportunity. The Company has filed at the
FCC the FCC Forms 395M as required by FCC rule 76.77 for each year since 1993
that the Wireless Cable System has been in operation in service of subscribers.
Each such report is true, correct and complete.
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Section 3.28 Interference Consents. Except as described in Exhibit 3.28
or as required by this Agreement, as of the date of this Agreement, there are no
agreements or understandings (written or oral) between the Company and any
present or proposed Wireless Cable System operator or MDS or ITFS licensee or
applicant with respect to adjacent market interference, the coordination of
adjacent market channel use or other matters concerned with the operation of
nearby markets or obtaining the assistance of a party's Channel capacity
lessors.
Section 3.29 Certain Stockholder Agreements. Each of the Company
Stockholders identified in Exhibit 3.29(a) hereto has duly executed and
delivered to BellSouth a letter agreement in the form of Exhibit 3.29(b) hereto
with respect to, among other things, such stockholder's agreement to vote all
shares of Company Common Stock and Company Preferred Stock over which such
stockholder exercises voting control for approval of the Agreement and the
transactions contemplated hereby at the Special Meeting.
Section 3.30 Transactions with Affiliates. Except as set forth on Exhibit
3.30, (a) the Contracts do not include any obligation or commitment between the
Company and any Affiliate of the Company and (b) there are not any receivables
or other obligations or commitments between an Affiliate of the Company and the
Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BELLSOUTH
AND BELLSOUTH SUB
BellSouth and BellSouth Sub represent and warrant to the Company that:
Section 4.01 Organization and Qualification. Each of BellSouth and
BellSouth Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has all
requisite corporate power and authority to carry on its business as it is now
being conducted and to own, operate and hold under lease its assets and
properties as, and in the places where, such properties and assets now are
owned, operated or held. Each of BellSouth and BellSouth Sub is duly qualified
and in good standing to do business in each jurisdiction in which the nature of
the business conducted by it or the ownership or leasing of its properties makes
such qualification necessary, other than where the failure to be so duly
qualified and in good standing would not have a BellSouth Material Adverse
Effect. The term "BellSouth Material Adverse Effect" as used in this Agreement
means any change or effect that, individually or when taken together with all
other such changes or effects, could reasonably be expected to be materially
adverse to the assets, financial condition, business or operations of BellSouth
on a consolidated basis.
Section 4.02 Articles of Incorporation and Bylaws. BellSouth Sub is not
in violation of any of the provisions of its Articles of Incorporation or
Bylaws.
Section 4.03 Capitalization. (a) BellSouth's authorized equity
capitalization consists of 2,200,000,000 shares of BellSouth Common Stock, $1.00
par value per share. As of the close of business on December 31, 1996,
1,007,575,986 shares of BellSouth Common Stock (exclusive of 15,796,782 shares
held in a grantor trust) were issued and outstanding, such shares of BellSouth
Common Stock constituted all of the issued and outstanding shares of capital
stock of BellSouth as of such date. All issued and outstanding shares of capital
stock of BellSouth have been duly authorized and validly issued and are fully
paid and non-assessable, are not subject to and have not been issued in
violation of any preemptive or similar rights, and were offered and sold in
compliance with all applicable federal and state securities laws.
(b) BellSouth Sub's authorized equity capitalization consists of 100 shares
of BellSouth Sub Common Stock, no par value per share. As of the close of
business on November 1, 1996, one share of BellSouth Sub Common Stock was issued
and outstanding, and such share of BellSouth Sub Common Stock constituted all of
the issued and outstanding shares of capital stock of BellSouth Sub as of such
date. All issued and outstanding shares of capital stock of BellSouth Sub have
been duly authorized and validly issued and are fully paid and non-assessable
and free of preemptive rights and are owned by BellSouth directly, free and
clear of all Liens, claims, charges or encumbrances. There are no subscriptions,
options, warrants, rights, calls,
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contracts, voting trusts, proxies or other commitments, understandings,
restrictions or arrangements relating to the issuance, sale, voting, transfer,
ownership or other rights affecting any shares of capital stock or partnership
or other ownership interests in BellSouth Sub, including any right of conversion
or exchange under any outstanding security, instrument or agreement.
Section 4.04 Authorization; Enforceability. Each of BellSouth and
BellSouth Sub has all requisite corporate power and authority, to perform its
obligations under this Agreement and to consummate the transactions contemplated
to be consummated by it hereby. The execution and delivery of this Agreement by
BellSouth and BellSouth Sub and the consummation by each of them of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action and no other corporate proceedings on the part of BellSouth or
BellSouth Sub are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement and all of the other documents
and instruments required hereby have been duly executed and delivered by
BellSouth and BellSouth Sub and, assuming the due authorization, execution and
delivery hereof by the Company constitute the legal, valid and binding
obligations of BellSouth and BellSouth Sub enforceable in accordance with their
respective terms.
Section 4.05 Required Filings and Consents. Neither the execution and
delivery of this Agreement by BellSouth and BellSouth Sub, nor the performance
of this Agreement by BellSouth and BellSouth Sub does or will require BellSouth
or BellSouth Sub to obtain any consent, approval, authorization or permit of, or
to make any filing with or notification to any Governmental Entity, except for
applicable requirements, if any, of (i) the Communications Act and FCC Rules,
(ii) the HSR Act, and (iii) state securities, "Blue Sky" or takeover laws, and
the filing and recordation of appropriate merger documents as required by Law.
Section 4.06 No Conflict. Neither the execution and delivery of this
Agreement by BellSouth and BellSouth Sub nor the performance of this Agreement
by BellSouth and BellSouth Sub does or will (a) conflict with or violate the
articles of incorporation or bylaws, in each case as amended or restated, of
BellSouth or BellSouth Sub, (b) conflict with or violate any Laws applicable to
BellSouth or BellSouth Sub, or by which any of BellSouth's properties are bound
or to which any of its properties are subject, or (c) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or require payment under, or result
in the creation of a Lien on any of the properties or assets of BellSouth or
BellSouth Sub pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which BellSouth or BellSouth Sub is a party or by which BellSouth, BellSouth
Sub or any of their respective properties are bound or to which any of their
respective properties are subject.
Section 4.07 BellSouth Reports. (a) BellSouth has filed in a timely
manner all forms, reports, statements and other documents required to be filed
with the SEC including, without limitation, all Annual Reports on Form 10-K, all
Quarterly Reports on Form 10-Q, all proxy statements relating to meetings of
stockholders (whether annual or special), all other reports or registration
statements and all amendments and supplements to all such reports and
registration statements (all such forms, reports, statements and other documents
being referred to herein, collectively, as the "BellSouth Reports"). The
BellSouth Reports, including all BellSouth Reports filed after the date of this
Agreement and prior to the Effective Time, were or will be prepared in all
material respects in accordance with the requirements of the Securities Act and
the Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such BellSouth Reports and did not at the time they
were filed, or will not at the time they are filed, contain any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(b) The consolidated financial statements of BellSouth included in the
BellSouth Reports filed with the SEC comply or will comply as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, have been or will have been prepared in accordance with GAAP
(except as may be indicated in the notes thereto, or, in the case of unaudited
financial statements, for normal recurring year-end audit adjustments or as
permitted by Form 10-Q of the SEC) and fairly present or will fairly present in
accordance with GAAP throughout the periods involved (except to the extent
required by changes in GAAP
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or as described in the notes thereto) the consolidated financial position of
BellSouth and its consolidated Subsidiaries as of the respective dates thereof
or for the respective periods set forth therein and the consolidated results of
their operation and cash flows from the periods set forth therein.
Section 4.08 Fees and Expenses of Brokers and Others. Neither BellSouth
nor BellSouth Sub (a) has had any dealings, negotiations or communications with
any broker or other intermediary in connection with the transactions
contemplated by this Agreement, (b) is committed to any liability for any
brokers' or finders' fees or any similar fees in connection with the
transactions contemplated by this Agreement or (c) has retained any broker or
other intermediary to act on its behalf in connection with the transactions
contemplated by this Agreement, except that to the extent BellSouth engages
Bear, Stearns & Co., Inc. as a financial advisor in connection with such
transaction, BellSouth shall pay all of Bear, Stearns & Co., Inc.'s fees and
expenses in connection with such engagement.
Section 4.09 Accuracy of Information. Neither this Agreement nor any
other document provided by BellSouth or BellSouth Sub or their employees or
agents to the Company in connection with the transactions contemplated herein
contains an untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained therein not misleading.
ARTICLE V
COVENANTS
From and after the date of this Agreement and until the Effective Time:
Section 5.01 Conduct of the Businesses of the Company. Except as
otherwise expressly provided in this Agreement or as requested by BellSouth, the
Company will, and will cause each of the Companies to, conduct its operations
according to its ordinary and usual course of business and consistent with past
practice, and will use its best efforts to preserve intact its business
organization, goodwill, properties and assets, to keep available the services of
its and their officers and employees and to maintain satisfactory relationships
with licensors, licensees, lessors, suppliers, contractors, subscribers and
others having material business relationships with it or them.
Without limiting the generality of the foregoing, and except as otherwise
expressly provided in this Agreement, prior to the Effective Time, (a) none of
the Companies will, without the prior written consent of BellSouth:
(i) amend its articles of incorporation, bylaws, partnership or joint
venture agreements or other organizational documents;
(ii) authorize for issuance or issue, sell or deliver (whether through
the issuance, granting, repricing or acceleration of vesting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any
stock of any class or any other securities or interests, except as required
by the terms of any options, warrants, rights or other securities
outstanding as of the date hereof and disclosed pursuant to this Agreement;
(iii) split, combine or reclassify any shares of its capital stock or
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock not required pursuant to the Company's Articles of
Incorporation, or redeem or otherwise acquire any of its securities or any
securities of their respective Subsidiaries;
(iv) (A) assume, guarantee, endorse or otherwise become liable or
responsible for the obligations of any person; (B) incur any indebtedness;
(C) make any loans, advances or capital contributions to, or investments
in, any other Person; (D) enter into any Contract, or alter, amend, modify
or exercise any option under any existing Contract, other than in the
ordinary course of business or in connection with the transactions
contemplated by this Agreement; or (E) authorize any single capital
expenditure which is in excess of $50,000 or capital expenditures which
are, in the aggregate, in excess of $250,000, other than
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capital expenditures pursuant to Contracts entered into prior to the date
hereof which are identified on Exhibit 5.01(a)(iv);
(v) adopt or amend (except as may be required by Law or as provided in
this Agreement) any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right, restricted stock,
pension, retirement, deferred compensation, employment, severance or other
employee benefit agreements, trusts, plans, funds or other arrangements for
the benefit or welfare of any director, officer or employee, or (except for
normal increases in the ordinary course of business that are consistent
with past practices and that, in the aggregate, do not result in a material
increase in benefits or compensation expense) increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any existing Company Benefit Plan (including,
without limitation, the granting of any stock options, stock appreciation
rights, shares of restricted stock or performance units) or enter into any
Contract, agreement, commitment or arrangement to do any of the foregoing;
(vi) acquire, sell, lease or dispose of any material assets outside
the ordinary course of business;
(vii) make any material change to its financial statements or take any
action, other than in the ordinary course of business and in a manner
consistent with past practice or to comply with GAAP, with respect to
accounting policies or practices;
(viii) make any material Tax election or settle or compromise any
material federal, state, local or foreign income Tax liability;
(ix) except for the payment of professional fees, pay, discharge or
satisfy any material indebtedness, claims, liabilities or obligations
(absolute, accrued or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in the Company's fiscal 1995
financial statements or incurred in the ordinary course of business since
the date thereof;
(x) take any action that would or is reasonably likely to result in
any of the conditions set forth in Article VI not being satisfied as of the
Effective Date;
(xi) sell, assign, lease, waive or grant rights with respect to,
sublease or otherwise transfer or dispose of (A) any Capacity Lease, (B)
any Site Lease, or (C) any other asset or property of any of the Companies;
(xii) modify, amend, supplement or agree to a novation of any Capacity
Lease or any Site Lease, except as contemplated in Section 5.08;
(xiii) allow, suffer or permit any default of any of the Companies
under any Site Lease or Capacity Lease;
(xiv) enter into any contract or commitment, or amend or terminate any
contract (or waiver of any material right thereunder), or incur any
obligation (including obligations relating to the borrowing of money or the
guaranteeing of indebtedness) that will be binding on the Company after the
Effective Time, except for subscriber service agreements made in the
ordinary course of business, and other classes of agreements that are not
"material" agreements; or
(xv) agree in writing or otherwise to take any of the foregoing
actions.
(b) the Company will and will cause each of the Companies to:
(i) use its best efforts (A) to cause to be maintained in full force
and effect, and (B) to cause the holders to renew and to extend when
required to prevent their lapse, all Company FCC Authorizations;
(ii) timely and completely perform each and every obligation of it in
each Capacity Lease, and under each Site Lease and Company FCC
Authorization, including but not limited to the filing of Annual FCC
Reports and Equal Employment Opportunity Reports;
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(iii) (A) prosecute and defend diligently and in good faith each MDS
and ITFS station application and authorization; (B) cause each of its
lessors to prosecute and defend diligently and in good faith each MDS and
ITFS application and authorization subject to a Capacity Lease; (C) use
best efforts to prevent any such lessor from entering into any agreement on
or with respect to its proposed or authorized ITFS or MDS Channel capacity
in any Market without the prior consultation with and the prior approval of
BellSouth; and (D) not enter into any agreement on or with respect to its
proposed or authorized MDS or ITFS Channel capacity without the prior
consultation with and the prior approval of BellSouth;
(iv) use its best efforts (A) to prevent the modification of any
Company FCC Authorization, except for such modifications as are required by
this Agreement, specifically approved by BellSouth or are authorized on the
date of this Agreement or which become authorized pursuant to applications
pending on the date of this Agreement and listed in Exhibit 3.20(c); and
(B) to prevent the new application, or amendment to any Pending
Application, to the FCC for authorization related to any Capacity Lease
except (1) as required to comply with this Agreement, including but not
limited to Section 5.01(b)(iii)(E), (2) as specifically required by the
terms of the Capacity Lease, (3) as required by the terms of an applicable
FCC license, or (4) as may be reasonably required to operate the Wireless
Cable System in accordance with the usual and ordinary course of business
consistent with past practices;
(v) cause the Wireless Cable System (A) to use its best efforts to
maintain its current level of Basic Subscribers; (B) to not materially
reduce the present subscriber service rates and installation rates; (C) to
adhere to the current practice with respect to bad debt, collection of
subscriber accounts and deactivation of delinquent account service; (D) to
collect accounts receivable only in the ordinary course consistent with its
past practices; and (E) to take no action designed to accelerate or likely
to accelerate the collection of its accounts receivable;
(vi) except as otherwise set forth herein or as requested by
BellSouth, cause the Wireless Cable System to be operated diligently in the
ordinary course of business in accordance with past practices for such
operation (except where such conduct would conflict with the covenants set
forth in Section 5.01(b) or with the Company's other obligations under this
Agreement);
(vii) at least five days prior to the Closing, deliver to BellSouth a
list of all material contracts entered into by the Company between the date
of this Agreement and the Closing, together with copies of such contracts;
provided, that a contract shall be considered material if (A) it is a
Capacity Lease or an amendment of a Capacity Lease or (B) it has a term
exceeding one year or obligates the Company to provide services or
materials with a cost, or to make purchases for total consideration, in
excess of $50,000.00 individually and $250,000.00 in the aggregate for all
Contracts;
(viii) (A) take all reasonable actions to maintain all of its assets
in good condition (ordinary wear and tear excepted), and use, operate, and
maintain all of such assets in a reasonable manner; (B) maintain
inventories of spare parts, subscriber reception equipment and expendable
supplies at levels consistent with past practices; (C) if any loss, damage,
impairment, confiscation, or condemnation of or to any of such assets
occurs, repair, replace or restore such assets to their prior condition as
soon thereafter as possible, and to use the proceeds of any claim under any
insurance policy to replace such assets that are lost, damaged, impaired or
destroyed;
(ix) maintain insurance policies on the Wireless Cable System, their
equipment, the interruption of their business, liability, workman's
compensation, fire, libel and slander, and casualty as is customary in the
wireless cable business;
(x) ensure that there is no material change in the broadcast hours or
in the current program lineup transmitted by the Wireless Cable System, and
that there is not any other material change in the Wireless Cable System's
programming policies, other than adding programming networks under
agreements entered into in the usual and ordinary course of business and on
terms and conditions typical in the wireless cable industry and fair to the
Company;
(xi) use its best efforts to preserve the business and organization of
the Wireless Cable System and use its best efforts to keep available to the
Wireless Cable System its present employees and to preserve
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the subscriber base of the Wireless Cable System and their present
relationships with suppliers, programmers, and others having business
relations with them;
(xii) use its best efforts to obtain (A) the consent of the FCC to the
transfer of control of the Company as contemplated by this transaction; (B)
the consent of each party to each Capacity Lease and each Site Lease whose
consent is required by the terms of such agreement or by law to ensure that
the transfer of control of the Company to BellSouth does not result in a
default of such agreement; and (C) estoppel certificates substantially in
the form of Exhibit 5.01(b)(xii) hereto from each lessor under each
Capacity Lease and each Site Lease;
(xiii) terminate the employment agreements with the individuals
identified on Exhibit 5.01(b)(xiii);
(xiv) cooperate with BellSouth in its efforts to arrange meetings
with, and to obtain information from, the lessors and other parties under
the Capacity Leases, including without limitation causing Company
representatives to attend meetings with such lessors and other parties; and
(xv) use its best efforts to cause to be taken the actions set forth
in Exhibit 5.01(b)(xv).
Section 5.02 No Solicitation. The Company agrees that it shall not,
directly or indirectly, through any officer, director, employee, agent,
Affiliate, or any representative of such entity or otherwise, initiate, solicit,
pursue, or continue any discussions, negotiations, or agreements (whether
preliminary or definitive) with any Person or entity other than BellSouth
contemplating or providing for any public or private offering of equity, or
merger, share exchange, acquisition, purchase or sale of all or (other than in
the ordinary course of business) a substantial portion of the assets of, or any
equity interest in, any of the Companies or any other business combination or
change in control involving any of the Companies (each, a "Competing
Transaction") or, participate in any negotiations regarding, or furnish to any
other person any information with respect to, or otherwise cooperate in any way
with, or assist or participate in, facilitate or encourage, any effort or
attempt by any other person to do or seek any Competing Transaction. The Company
shall promptly advise BellSouth if any such proposal or offer, or any written
inquiry or contact with any Person with respect to any Competing Transaction, is
made, shall promptly inform BellSouth of all the terms and conditions thereof,
and shall furnish to BellSouth copies of any such written proposal or offer and
the contents of any communications in response thereto.
Section 5.03 Access to Information; Confidentiality Agreement. (a) The
Company will give BellSouth, BellSouth Sub and their authorized representatives
reasonable access during normal business hours to all offices and other
facilities and to all books and records of the Company, will permit BellSouth
and BellSouth Sub to make such inspections as each may reasonably request and
will cause their officers and those of its Subsidiaries to furnish such
financial and operating data and other information with respect to its
businesses and properties as may from time to time reasonably be requested.
Subject to Section 5.06 hereof, all such information shall be kept confidential
in accordance with the Confidentiality Agreement.
(b) Notwithstanding the execution of this Agreement, the Confidentiality
Agreement shall remain in full force and effect through the Effective Time, at
which time the Confidentiality Agreement shall terminate and be of no further
force and effect. Each party hereto hereby waives the provisions of the
Confidentiality Agreement as and to the extent necessary to permit the
solicitation of votes of the Stockholders of the Company and to permit
consummation of the transactions contemplated hereby. Each party further
acknowledges that the Confidentiality Agreement shall survive any termination of
this Agreement pursuant to Section 7.01 hereof.
Section 5.04 Best Efforts. Subject to the terms and conditions herein
provided each of the parties hereto agrees to use its best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper and advisable under applicable Law, to consummate and make
effective the transactions contemplated by this Agreement. In case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and directors of each
party to this Agreement shall take all such necessary action. BellSouth and the
Company will execute any additional instruments necessary to consummate the
transactions contemplated hereby and thereby.
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Section 5.05 Consents. The Company will use its best efforts to obtain
any and all consents of all third parties (including, without limitation, the
lessor under each Capacity Lease, and Site Lease and Governmental Entities
(including, without limitation, the FCC)) necessary to the consummation of the
transactions contemplated by this Agreement, which consents shall be identified
on Exhibit 5.05. Within ten (10) days of the date of this Agreement, the Company
shall tender to BellSouth one or more applications on the proper FCC forms for
the FCC's consent to the transfer of control of the Company with respect to each
FCC-issued license held by the Company, such applications being executed by the
Company, the transferors, and the Company's and the transferor's portion thereof
being fully completed. BellSouth shall be responsible for preparing the
transferee's portion of such transfer applications and for filing the
applications with the FCC within ten (10) days of BellSouth's receipt of the
Company's and transferor's portion of the applications. Each party shall
cooperate with the other fully in prosecuting such applications, such
cooperation including but not limited to responding in a timely fashion to all
FCC inquiries concerning such applications, preparing suitable amendments to
such applications, otherwise taking such actions and refraining from taking such
actions as best conducive to the grant of such applications and joining in such
appeals and requests for reconsideration of adverse FCC orders as BellSouth may
wish to appeal or to request reconsideration. Each party shall bear its own
expenses incurred in preparing, filing and prosecuting such applications,
preparing and filing amendments to them, responding to FCC inquiries concerning
them and filing and prosecuting such petitions for reconsideration and appeals
from adverse FCC orders as regards them.
Section 5.06 Public Announcements. The parties hereto have agreed upon
the text of a joint press release announcing, among other things, the execution
of this Agreement, which joint press release shall be disseminated promptly
following the execution hereof. The Company and BellSouth will consult with each
other before issuing any additional press release or otherwise making any
additional public statement with respect to this Agreement, the Merger or the
transactions contemplated herein and shall not issue any such press release or
make any such public statement prior to such consultation or as to which the
other party promptly and reasonably objects, except as may be required, in the
written opinion of such party's counsel, by Law or by obligations pursuant to
any listing agreement with any national securities exchange or inter-dealer
quotation system, in which case the party proposing to issue such press release
or make such public announcement shall use its best efforts to consult in good
faith with, and accommodate the reasonable comments of, the other party before
issuing any such press release or making any such public announcements.
Section 5.07 Payment of Preferred Stock Dividend and Conversion of
Outstanding Options. Prior to the Effective Time, (i) each share of the Company
Preferred Stock shall be converted to Company Common Stock and all accrued but
unpaid dividends on the Company Preferred Stock (which dividends shall consist
exclusively of not more than 4,724 shares of Company Preferred Stock) shall have
been paid, and (ii) all Outstanding Options shall have been exercised or
canceled.
Section 5.08 Channel Agreements. (a) The Company and the lessors under
the Capacity Leases for the A-, C-, D- and G-Group Channels shall amend such
Capacity Leases to clarify, in form and substance reasonably acceptable to
BellSouth, that the allocation of airtime is as specified in Exhibit 1.36(B).
(b) The Company shall perform all of its obligations required under the
Assignment Agreement with Multichannel Distribution of America, Inc., dated
January 31, 1997, relating to the E-Group Channels in Rome, Georgia.
(c) The Company shall perform all of its obligations under the Contingent
Market Coordination Agreement among the Company, Visionspan, Inc., Wireless
Entertainment Systems, Inc. and BellSouth Wireless Cable, Inc., dated January
13, 1997.
(d) The Company shall use its best efforts to cooperate with the efforts of
BellSouth for the Company to enter into a lease for the use of excess capacity
on the B-Group Channels authorized to Atlanta Interfaith Broadcasters, Inc.
Section 5.09 Control of Wireless Cable System. Prior to Closing, and
notwithstanding any other provision of this Agreement, BellSouth and BellSouth
Sub shall not directly or indirectly control, supervise or direct, or attempt to
control, supervise or direct, any activities associated with the Wireless Cable
System.
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Such activities shall be the sole responsibility of and in the complete
discretion of the holders of the Company FCC Authorizations.
Section 5.10 Registration Statement; Proxy Statement/Prospectus; Special
Meeting. The Company will duly call and use its best efforts to hold the
Special Meeting by April 30, 1997, for the purpose of approving the Agreement
and will comply fully with the provisions of the Securities Act and the Exchange
Act and the rules and regulations of the SEC under such Acts, and its Articles
of Incorporation and Bylaws relating to the call and holding of meetings of the
Stockholders for such purpose. The Board of Directors of the Company will
recommend to and actively encourage the Stockholders that they vote in favor of
this Agreement. BellSouth and the Company will jointly prepare the Proxy
Statement/Prospectus to be used in connection with such meeting and BellSouth
will prepare and file with the SEC the Registration Statement, of which such
Proxy Statement/Prospectus shall be a part, and use its best efforts promptly to
have the Registration Statement declared effective. In connection with the
foregoing, BellSouth will comply with the requirements of the Securities Act,
the Exchange Act, the NYSE and the rules and regulations of the SEC under such
acts with respect to the offering and sale of BellSouth Common Stock in
connection with the Merger and with all applicable state Blue Sky and securities
laws. The notices of such meetings and the Proxy Statement/Prospectus shall not
be mailed to the Stockholders until the Registration Statement shall have become
effective under the Securities Act. The Company covenants that none of the
information supplied by the Company and BellSouth covenants that none of the
information supplied by BellSouth in the Proxy Statement/Prospectus will, at the
time of the mailing of the Proxy Statement/Prospectus to the Stockholders,
contain any untrue statement of a material fact nor will any such information
omit any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances in which they were
made, not misleading; and at all times subsequent to the time of the mailing of
the Proxy Statement/Prospectus, up to and including the date of the meeting of
the Stockholders to which the Proxy Statement/Prospectus relates, none of such
information in the Proxy Statement/Prospectus, as amended or supplemented, will
contain an untrue statement of a material fact or omit any material fact
required to be stated therein in order to make the statements therein, in light
of the circumstances in which they were made, not misleading.
BellSouth, as the sole shareholder of BellSouth Sub, hereby approves this
Agreement.
Section 5.11 Multiple Dwelling Units. The Company shall not enter into
any contract or commitment to provide wireless cable services to or construct
wireless cable facilities for multiple dwelling units without the prior written
consent of BellSouth, such consent not to be unreasonably withheld.
Section 5.12 Interim Financing. BellSouth agrees to provide $1,000,000 of
financing to the Company as of the date following the date of this Agreement,
such financing to be repaid promptly following the Closing. The Company agrees
that, prior to the Closing or the termination of the Agreement, the proceeds of
such financing may be used only (a) to fund negative cash flow from operations
not in excess of $150,000 and (b) for the purposes of constructing new wireless
cable facilities for multiple dwelling units, subject to the prior written
consent of BellSouth. Such financing shall not bear interest. In the event this
Agreement is terminated in accordance with its terms (w) by BellSouth other than
as a result of a material misrepresentation or a material breach of a covenant
by the Company or in accordance with Section 7.01(d) or (x) by the Company other
than in accordance with Section 7.01(d) or Section 7.01(f), such financing shall
be forgiven. In the event (y) this Agreement is terminated in accordance with
its terms (i) by BellSouth as a result of a material misrepresentation or a
material breach of a covenant by the Company or in accordance with Section
7.01(d) or (ii) by the Company in accordance with Section 7.01(d) or Section
7.01(f), or (z) in the event the holder of Company Preferred Stock elects to
terminate the proxy contained in its letter agreement in the form of Exhibit
3.29(b) hereto on or after August 11, 1997, such financing shall as of the date
of any such termination convert into an interest-bearing loan, with interest
accruing as of the termination date, such indebtedness having a maturity date of
December 31, 1998, and being secured by the stock of the Company's Subsidiaries.
Such indebtedness shall bear interest at an annual rate of 10%, increasing to
30% if the indebtedness is not repaid at maturity. The Company has duly
authorized, executed and delivered to BellSouth a promissory note in the form
attached hereto as Exhibit 5.12.
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Section 5.13 HSR Filings. Within 30 days of the date of this Agreement,
each of the Company and BellSouth shall make any and all filings that the
parties determine are required under the HSR Act. In the event a reviewing
governmental agency seeks additional information, through a second request or
otherwise, each of the parties shall comply with the request with reasonable
promptness.
Section 5.14 Termination of Certain Agreements. Prior to the Effective
Time, the Company shall have terminated, without penalty, (a) its paging resale
agreement with Pactel Cellular Inc. of Georgia and (b) its letter of intent
dated July 25, 1996 with General Instrument to purchase digital set-top boxes.
Section 5.15 Studio-to-Transmitter Links. Prior to the Effective Time,
the Company shall have satisfied all obligations under the Capacity Leases for
ITFS Channels to provide studio-to-transmitter links.
ARTICLE VI
CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER
Section 6.01 Conditions Precedent to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to consummate the Merger is
subject to the satisfaction at or prior to the Effective Time of the following
conditions precedent:
(a) the transactions contemplated in this Agreement shall have been
approved, and the Agreement shall have been adopted, by the affirmative
vote of the Stockholders of the Company by the requisite vote in accordance
with the GBCC and any agreements among Stockholders;
(b) no order, decree or injunction shall have been enacted, entered,
promulgated or enforced by any United States court of competent
jurisdiction or any United States governmental authority which prohibits
the consummation of the Merger; provided, however, that the parties hereto
shall use their commercially reasonable best efforts to have any such
order, decree or injunction vacated or reversed;
(c) any waiting period applicable to the Merger under the HSR Act
shall have terminated or expired;
(d) the receipt by BellSouth and the Company, based on customary
assumptions and on representations set forth in certificates of officers of
BellSouth and the Company (including, without limitation, a continuity of
interest representation that satisfies the requirements of Revenue
Procedure 86-42), of the opinion of Hunton & Williams (dated the Effective
Date) to the effect that, for United States federal income tax purposes,
(i) the Merger will constitute a "reorganization" under Section 368(a) of
the Code, (ii) no gain or loss will be recognized by BellSouth, BellSouth
Sub or the Company upon consummation of the Merger, (iii) no gain or loss
will be recognized by Stockholders upon the exchange of shares of the
Company Common Stock solely for shares of BellSouth Common Stock (including
any fractional share interest) in the Merger, (iv) a Stockholder's
aggregate basis in BellSouth Common Stock (including any fractional share
interest) received in the Merger will be the same as the Stockholder's
basis in the Company Common Stock surrendered in exchange therefor, (v) the
holding period for shares of BellSouth Common Stock (including any
fractional share interest) received by a Stockholder in the Merger will
include the holding period for the shares of the Company Common Stock
exchanged therefor, if such shares of the Company Common Stock are held as
a capital asset at the Effective Time, and (vi) cash received in lieu of a
fractional share of BellSouth Common Stock will be treated as having been
received as full payment in exchange for such fractional share;
(e) the Registration Statement shall be effective under the Securities
Act, all applicable requirements of the Securities Act and Exchange Act
shall have been satisfied, any applicable filings under state securities,
"Blue Sky" or takeover laws shall have been made and BellSouth shall have
received all state securities laws or "Blue Sky" permits and other
authorizations or there shall be exemptions from registration requirements
necessary to offer and issue the BellSouth Common Stock in connection with
the Merger, and neither the Registration Statement nor any such permit,
authorization or exemption shall be subject to a stop order or threatened
stop order by the SEC or any state securities authority;
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(f) if the shares of BellSouth Common Stock to be issued in the Merger
are not repurchased on the open market, such shares to be issued in the
Merger shall have been approved for listing, upon notice of issuance, on
the NYSE; and
(g) the transactions contemplated by this Agreement shall (i) be
permitted by the laws and regulations of each jurisdiction or Governmental
Entity including, without limitation, the FCC to which the Companies or any
of their Affiliates are subject and (ii) not violate any applicable Law.
Section 6.02 Conditions Precedent to Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction or waiver at or prior to the Effective Time of the following
conditions precedent:
(a) there shall have occurred no BellSouth Material Adverse Effect
from the date hereof to the Effective Time;
(b) the representations and warranties of BellSouth and BellSouth Sub
contained in Article IV shall be true and correct in all material respects
when made and at and as of the Effective Time with the same force and
effect as if those representations and warranties had been made at and as
of such time except (i) to the extent such representations and warranties
speak as of a specified earlier date, and (ii) as otherwise contemplated or
permitted by this Agreement;
(c) BellSouth shall, in all material respects, have performed all
obligations and complied with all covenants necessary to be performed or
complied with by it on or before the Effective Time;
(d) the Company shall have received a certificate of a senior officer
of BellSouth, in form satisfactory to counsel for the Company, certifying
fulfillment of the matters referred to in paragraphs (a) through (c) of
this Section 6.02;
(e) the Company shall have received the opinion of Hunton & Williams,
counsel for BellSouth and BellSouth Sub, dated the Effective Time, in
substantially the form attached as Exhibit 6.02(e) hereto; and
(f) the FCC shall have granted its consents by Final Order to the
transfer of control of the Company to BellSouth, which consents shall
contain only such conditions as are ordinary for the classes of such
consents except for such conditions as BellSouth may agree to accept in its
sole discretion.
Section 6.03 Conditions Precedent to Obligations of BellSouth and
BellSouth Sub. The obligations of BellSouth and BellSouth Sub to consummate the
Merger are subject to the satisfaction or waiver at or prior to the Effective
Time of the following conditions precedent:
(a) there shall have occurred no Company Material Adverse Effect from
the date hereof to the Effective Time;
(b) the representations and warranties of the Company contained in
Article III shall be true and correct in all material respects when made
and at and as of the Effective Time with the same force and effect as if
those representations and warranties had been made at and as of such time
except (i) to the extent such representations and warranties speak as of a
specified earlier date, and (ii) as otherwise contemplated or permitted by
this Agreement;
(c) the Company shall have received all necessary and material
governmental (including, without limitation, the FCC), regulatory,
stockholder and third party lender, customer or other clearances, consents,
licenses or approvals;
(d) the Company shall, in all material respects, have performed all
obligations and complied with all covenants necessary to be performed or
complied with by it on or before the Effective Time;
(e) immediately prior to the Effective Time, following conversion of
the Company Preferred Stock and the exercise of all Outstanding Options,
there shall be not more than 2,245,378 shares of Company Common Stock
issued and outstanding and no shares of Company Preferred Stock shall be
issued and outstanding;
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(f) BellSouth shall have received a certificate of the Chairman,
President or Executive Vice President of the Company, in form satisfactory
to counsel for BellSouth, certifying fulfillment of the matters referred to
in paragraphs (a) through (d) of this Section 6.03;
(g) Messrs. Ricky C. Haney, Richard L. Kendrick and Allan H. Rudder
shall have delivered to BellSouth evidence of the termination of any
employment agreements with the Company to which any of them is a party;
(h) BellSouth shall have received consulting and non-competition
agreements in the forms attached as Exhibit 6.03(h) hereto from those
persons specified therein;
(i) BellSouth and BellSouth Sub shall have received (i) the opinion of
Gambrell & Stolz, L.L.P., counsel for the Company, dated the Effective
Time, in substantially the form attached as Exhibit 6.03(i)(i) hereto and
(ii) the opinion of Pepper & Corrazzini, L.L.P., in substantially the form
attached as Exhibit 6.03(i)(ii) hereto;
(j) the FCC shall have granted its consents by Final Order to the
transfer of control of the Company to BellSouth of each FCC-issued license
held by the Company, which consents shall contain only such conditions as
are ordinary for the classes of such consents except for such conditions as
BellSouth may agree to accept in its sole discretion;
(k) As of the Effective Date, the Company shall have delivered the
Delivered Digital-Ready Channels set forth on Exhibit 6.03(k);
(l) prior to the mailing of the Proxy Statement/Prospectus, the
Company shall have delivered to BellSouth each estoppel certificate
referred to in Section 5.01(b)(xii);
(m) the Company shall have delivered to BellSouth (A) a supplement to
Exhibit 3.20(a) setting forth the information listed in Sections 3.20(a)
and 3.20(b) for each Company FCC Authorization first acquired by any of the
Companies after the date of this Agreement or subject to a Capacity Lease
entered into after the date of this Agreement; (B) supplements to Exhibits
3.20(c) and 3.20(c-I) deleting Pending Applications which have been granted
and are described on the Exhibit 3.20(a) supplement, and setting forth the
information listed in Section 3.20(c) for each Pending Application filed at
the FCC after the date of this Agreement; (C) a supplement to Exhibit 3.21
setting forth a list of Capacity Leases entered into by the Companies after
the date of this Agreement; (D) a supplement to Section 3.22 identifying
each Site Lease acquired by any of the Companies after the date of this
Agreement and setting forth such other information with respect thereto
listed in Section 3.22; and (E) a supplement to Exhibit 3.25 listing and
setting forth the information listed in Section 3.25 with respect to each
retransmission consent and programming agreement acquired by any of the
Companies or renewed by any of the Companies after the date of this
Agreement; and (F) a supplement to Exhibit 3.28 listing and setting forth
the information listed in Exhibit 3.28 with respect to each interference
consent entered into by any of the Companies after the date of this
Agreement;
(n) the Company shall have received letters of resignation from each
of the officers and directors of the Company;
(o) there shall be not less than 8,600 Basic Subscribers to the
Wireless Cable System as of the Effective Date; and
(p) Stockholders shall have perfected the right to dissent with
respect to no more than 10% of the outstanding shares of Company Common
Stock.
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ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.01 Termination. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual written consent of the Company and BellSouth;
(b) by BellSouth, upon a breach of any representation, warranty,
covenant and agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall have
become untrue, in either case such that the conditions set forth in Section
6.03(b) or Section 6.03(d) would be incapable of being satisfied by August
11, 1997 (or May 12, 1997 in the event BellSouth elects to terminate this
Agreement in accordance with Section 7.01(e));
(c) by the Company upon a material breach of any representation,
warranty, covenant or agreement on the part of BellSouth or BellSouth Sub
set forth in this Agreement, or if any representation or warranty of
BellSouth or BellSouth Sub shall have become untrue, in either case such
that the conditions set forth in Section 6.02(b) or Section 6.02(c) would
be incapable of being satisfied by August 11, 1997 (or May 12, 1997 in the
event BellSouth elects to terminate this Agreement in accordance with
Section 7.01(e));
(d) by either BellSouth or the Company, if any Governmental Entity or
any court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any Law, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and which
has the effect of making, or any such Governmental Entity shall have
commenced, any proceeding (other than the consideration of applications for
approvals under the Communications Act) which, if adversely determined,
would have the effect of making the Merger illegal or otherwise materially
restricting or prohibiting consummation of the Merger;
(e) by BellSouth if the Effective Time shall not have occurred before
May 12, 1997 (provided that if BellSouth shall not elect to terminate this
Agreement under this Section 7.01(e) following such date, the consideration
paid hereunder to Stockholders shall be increased as provided in Section
2.05(g)); and
(f) by either BellSouth or the Company, if the Merger shall not have
been consummated before August 11, 1997 (provided that the right to
terminate this Agreement shall not be available to any party where failure
to fulfill any obligation under this Agreement has been the cause of or has
resulted in the failure of the Merger to be consummated on or before such
date).
Section 7.02 Effect of Termination. Except as provided in Section 7.05
and Section 5.03(b), in the event of the termination of this Agreement pursuant
to Section 7.01, this Agreement shall forthwith become void, there shall be no
liability on the part of BellSouth, the Company or any of their respective
officers, directors or stockholders to the other parties hereto and all rights
and obligations of any party hereto shall cease; provided that any such
termination shall be without prejudice to the rights of any party hereto arising
out of the material breach of any other party of any covenant or material
misrepresentation contained in this Agreement.
Section 7.03 Amendment. This Agreement may be amended by the mutual
consent of the parties hereto at any time prior to the Effective Time; provided,
however, that, after approval of the Agreement by the Stockholders of the
Company, no amendment, which under applicable Law may not be made without the
approval of the Stockholders of the Company, may be made without such approval.
This Agreement may not be amended except by an instrument in writing signed by
the parties hereto.
Section 7.04 Waiver. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of any party hereto, (b) waive any inaccuracies in the
representations and warranties of any party contained herein or in any document
delivered pursuant hereto and (c) waive compliance by any party with any of the
agreements or conditions contained herein. Any such extension or waiver shall be
valid only if set forth in an instrument in writing signed by all of the parties
hereto.
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Section 7.05 Expenses. (a) All Expenses incurred by the parties hereto
shall be borne solely and entirely by the party which has incurred such
Expenses; provided, however, that each of BellSouth and the Company shall pay
50% of any filing fees paid under the Securities Act and the Communications Act.
(b) "Expenses" as used in this Agreement shall include all reasonable
out-of-pocket expenses (including, without limitation, all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to a party
hereto and its Affiliates) incurred by a party or on its behalf in connection
with or related to the authorization, preparation, negotiation, execution and
performance of this Agreement and all other matters related to the closing of
the transactions contemplated herein. The Company agrees that the fees and
expenses of Alex. Brown & Sons Incorporated shall not exceed $900,000. The
Company agrees that its Expenses, other than the fees and expenses of Alex.
Brown & Sons Incorporated, shall be reasonable for a transaction of this type
and shall not exceed $200,000 in the aggregate. Prior to Closing, the Company
shall provide to BellSouth the final statement of Alex. Brown & Sons
Incorporated, which statement shall reflect (i) all fees and expenses of Alex.
Brown & Sons Incorporated in connection with the Merger and (ii) that such fees
and expenses do not exceed $900,000.
Section 7.06 Equitable Relief. BellSouth and the Company each agrees that
each party shall be entitled, in addition to any other remedies it may have
under this Agreement or otherwise, to preliminary and permanent injunctive and
other equitable relief to prevent or curtail any breach of this Agreement;
provided, however, that no specification in this Agreement of a specific legal
or equitable remedy shall be construed as a waiver or prohibition against the
pursuing of other legal or equitable remedies in the event of such a breach.
ARTICLE VIII
ADDITIONAL COVENANTS
Section 8.01 Employment Matters. BellSouth will cause the Company to pay
two months severance pay to any employees (other than Messrs. Ricky C. Haney,
Richard L. Kendrick and Allan H. Rudder) terminated by BellSouth without cause
within the six month period following the Effective Date. Nothing in this
Agreement is intended to give any employees any right to continued employment
after Closing.
Section 8.02 Stock Options. Each holder of Outstanding Options shall, by
giving notice to the Company prior to the Closing Date, exercise the Outstanding
Options for Company Common Stock prior to the Effective Date and convert such
Common Stock into BellSouth Common Stock in the Merger.
Section 8.03 Indemnification of Company Officers and Directors. (a) After
the Effective Time BellSouth agrees that the Company shall provide
indemnification to the directors and officers of the Company for events
occurring subsequent to the Company's becoming a reporting company under the
Exchange Act and prior to the Effective Time, to the extent permitted under the
Articles of Incorporation and Bylaws of the Company as in effect as of the date
of this Agreement. Such indemnification shall continue for six years after the
Effective Time, provided that any right to indemnification in respect of any
claim asserted or made within such six year period shall continue until final
disposition of such claim. The Company is not aware of any facts or
circumstances that it has reason to suppose would give rise to a claim for
indemnification within the scope of the Company's Articles of Incorporation and
Bylaws. The Company shall not be obligated to pay more than $5,000,000 in the
aggregate with respect to its obligations under this Section 8.03(a).
(b) After the Effective Time BellSouth agrees that the Company shall
provide indemnification to the directors and officers of the Company for all
losses, claims, damages, costs, expenses (including attorneys' fees),
liabilities or judgements or amounts that are paid in settlement, with the
approval of BellSouth, based in whole or in part on, or arriving in whole or in
part out of, or pertaining to this Agreement or the transactions contemplated
hereby. Such indemnification shall continue for six years after the Effective
Time, provided that any right to indemnification in respect of any claim
asserted or made within such six year period shall continue until final
disposition of such claim. The Company is not aware of any facts or
circumstances that it has reason to suppose would give rise to a claim for
indemnification within the scope of subsection (b).
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ARTICLE IX
GENERAL PROVISIONS
Section 9.01 Survival of Representations and Warranties and
Covenants. The representations and warranties and covenants made herein shall
not survive beyond the Effective Time.
Section 9.02 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date when delivered personally, mailed by registered or
certified mail (postage prepaid, return receipt requested), transmitted by
facsimile with a confirmation copy simultaneously mailed by registered or
certified mail (postage prepaid, return receipt requested), or sent by a
nationally recognized overnight courier to the recipient at the following
addresses, or at such other address as the recipient party shall have specified
by prior written notice to the sending party:
(a) If to BellSouth:
BellSouth Corporation
1155 Peachtree Street, N.E.
Suite 1800
Atlanta, Georgia 30309-3610
Attention: John A. Harwood
Telephone: (404) 249-4433
Telecopier: (404) 249-5901
with a copy to:
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219-4074
Attention: David M. Carter
Telephone: (804) 788-8200
Telecopier: (804) 788-8218
(b) If to the Company:
Wireless Cable of Atlanta, Inc.
3100 Medlock Bridge Road, Suite 340
Norcross, Georgia 30071
Attention: Allan H. Rudder
Chief Financial Officer
Telephone: (770) 409-3577
Telecopier: (770) 409-3579
with a copy to:
Gambrell & Stolz, L.L.P.
Suite 4300, One Peachtree Center
303 Peachtree Street
Atlanta, Georgia 30308
Attention: Jon L. Andersen
Telephone: (404) 577-6000
Telecopier: (404) 221-6501
Section 9.03 Headings. The headings contained in this Agreement are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 9.04 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this
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<PAGE> 79
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
Section 9.05 Entire Agreement. This Agreement (together with the
exhibits), and the Confidentiality Agreement constitute the entire agreement of
the parties and supersede all prior agreements and undertakings, both written
and oral, between the parties, or any of them, with respect to the subject
matter hereof.
Section 9.06 Assignment. This Agreement shall not be assigned by
operation of law or otherwise.
Section 9.07 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
Person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
Section 9.08 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
Section 9.09 Governing Law. This Agreement and the relationship between
the parties shall be governed by, and construed in accordance with, the laws of
the State of Georgia regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
Section 9.10 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
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<PAGE> 80
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement, or
have caused this Agreement to be duly executed on their behalf, on the day and
year first hereinabove written.
WIRELESS CABLE OF ATLANTA, INC.
/s/ ALLAN H. RUDDER
--------------------------------------
Name: Allan H. Rudder
Title: Chief Financial Officer
BELLSOUTH CORPORATION
/s/ KEITH O. COWAN
--------------------------------------
Name: Keith O. Cowan
Title: Vice President -- Corporate
Development
BELLSOUTH WCA MERGER
SUBSIDIARY, INC.
/s/ JAMES W. MCCLINTOCK, IV
--------------------------------------
Name: James W. McClintock, IV
Title: Vice President
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<PAGE> 81
ANNEX II
ARTICLE 13
DISSENTERS' RIGHTS
PART 1
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder. (Code 1981, sec. 14-2-1301, enacted by Ga. L. 1988, p. 1070,
sec. 1; Ga. L. 1993, p. 1231, sec. 16.)
14-2-1302. RIGHT TO DISSENT
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party;
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially
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all of the net proceeds of the sale will be distributed to the shareholders
within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive mans, regardless of whether the shareholder
has exercised dissenter's rights.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise. (Code 1981,
sec. 14-2-1302, enacted by Ga. L. 1988, p. 1070, sec. 1; Ga. L. 1989, p.
946, sec. 58.)
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders. (Code 1981,
sec. 14-2-1303, enacted by Ga. L. 1988, p. 1070, sec. 1.)
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PART 2
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken. (Code
1981, sec. 14-2-1320, enacted by Ga. L. 1988, p. 1070, sec. 1; Ga. L. 1993, p.
1231, sec. 17.)
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article. (Code 1981, sec. 14-2-1321, enacted by Ga. L. 1988, p. 1070,
sec. 1.)
14-2-1322. DISSENTERS' NOTICE
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article. (Code 1981,
sec. 14-2-1322, enacted by Ga. L. 1988, p. 1070, sec. 1.)
14-2-1323. DUTY TO DEMAND PAYMENT
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
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(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article. (Code 1981,
sec. 14-2-1323, enacted by Ga. L. 1988, p. 1070, sec. 1.)
14-2-1324. SHARE RESTRICTIONS
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(Code 1981, sec. 14-2-1324, enacted by Ga. L. 1988, p. 1070, sec. 1.)
14-2-1325. OFFER OF PAYMENT
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later. (Code 1981,
sec. 14-2-1325, enacted by Ga. L. 1988, p. 1070, sec. 1; Ga. L. 1989, p. 946,
sec. 59; Ga. L. 1993, p. 1231, sec. 18.)
14-2-1326. FAILURE TO TAKE ACTION
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure. (Code 1981, sec. 14-2-1326, enacted by Ga. L. 1988, p. 1070, sec. 1;
Ga. L. 1990, p. 257, sec. 20.)
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
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(2) The corporation, having failed to take the proposed action, 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.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing under subsection (a) of
this Code section within 30 days after the corporation offered payment for his
or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
(Code 1981, sec. 14-2-1327, enacted by Ga. L. 1988, p. 1070, sec. 1; Ga. L.
1989, p. 946, sec. 60; Ga. L. 1990, p. 257, sec. 21; Ga. L. 1993, p. 1231,
sec. 19.)
PART 3
JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provide by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment. (Code 1981, sec. 14-2-1330, enacted by Ga. L.
1988, p. 1070, sec. 1; Ga. L. 1989, p. 946, sec. 61; Ga. L. 1993, p. 1231,
sec. 20.)
II-5
<PAGE> 86
14-2-1331. COURT COSTS AND COUNSEL FEES
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, 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 the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefitted. (Code 1981, sec. 14-2-1331, enacted
by Ga. L. 1988, p. 1070, sec. 1.)
14-2-1332. LIMITATION OF ACTIONS
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322. (Code 1981, sec. 14-2-1332, enacted by Ga. L. 1988, p.
1070, sec. 1.)
II-6
<PAGE> 87
WIRELESS CABLE OF ATLANTA, INC.
REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints each of Allan H. Rudder and Richard L.
Kendrick, with full power of substitution, to act as proxies for the undersigned
and to vote all shares of Common Stock of Wireless Cable of Atlanta, Inc.
("WCA") which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on May 27, 1997 at 10:00 a.m., local time, at
NationsBank Plaza, 41st Floor, 600 Peachtree Street, N.E., Atlanta, Georgia, and
at any and all adjournments thereof.
THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED.
This proxy, when properly executed, will be voted as directed on the reverse
side. If no direction is made, this proxy will be voted FOR each of the
proposals listed. If any other business is properly presented at the Special
Meeting, this proxy will be voted by the proxies in their discretion.
(Continued, and to be marked, signed and dated, on the reverse side)
(Proxy Card, reverse side)
1. The approval and adoption of the Agreement and Plan of Reorganization dated
as of February 11, 1997 (the "Agreement"), by and between WCA and BellSouth
Corporation ("BellSouth"), providing for the merger of WCA with a subsidiary
of BellSouth (the "Merger") as more fully described in the accompanying Proxy
Statement/Prospectus pursuant to which each share of Common Stock of WCA
outstanding as of the effective date of the Merger will be converted into and
become a right to receive the number of shares of Common Stock of BellSouth
(and associated stock rights) as determined in the manner specified in the
accompanying Proxy Statement/Prospectus and the Agreement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting or any adjournments or
postponements thereof.
The undersigned acknowledges receipt prior to the execution of this proxy of
a Notice of Special Meeting of Shareholders and of a Proxy Statement/Prospectus
dated April 25, 1997.
Please sign exactly as your name
appears on this card. When signing as
attorney, executor, administrator,
trustee or guardian, please give your
full title, if shares are held
jointly, each holder may sign, but
only one signature is required.
Dated: , 1997
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Signature
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