UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 12, 1996
Transworld Telecommunications, Inc.
(Exact name of registrant as specified in its charter)
Pennsylvania 33-20252-NY 52-1546434
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
102 West 500 South, Suite 320, Salt Lake City, Utah 84101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (801) 328-5618
N/A
(Former name or former address, if changed since last report.)
<PAGE>
Item 5. Other Matters.
PTG Agreement. On November 9, 1995 the Company, Pacific
Telesis Group and certain of its affiliates ("PTG"), Videotron USA, Inc.
and certain of its affiliates ("Videotron") and other parties entered into an
agreement (the "PTG Agreement") pursuant to which the Company
agreed to sell to PTG, in exchange for shares of PTG common stock, the
Company's shares in Wireless Holdings, Inc. ("WHI") and Videotron (Bay
Area), Inc. The PTG Agreement is described in more detail in the
Company's report on Form 10-KSB for the period ended October 31,
1995. On November 12, 1996, the Company received notice that PTG had
terminated the PTG Agreement. Attached as Exhibit "99.1" is a press
release prepared by the Company which describes the basis for PTG's
termination.
Litigation. On September 25, 1996, the Company received notice
that a request for arbitration (the "San Francisco Arbitration") had been
filed against it in connection with the PTG Agreement. The San
Francisco Arbitration is described in more detail in the Company's report
on Form 8-K filed on October 1, 1996. The arbitration also named
Videotron as a respondent.
The Company and Videotron each filed answers in the San
Francisco Arbitration, as well as counterclaims against PTG. In addition,
Videotron filed a cross-complaint against the Company.
The San Francisco Arbitration was filed by PTG prior to the date
of its termination of the PTG Agreement and related to PTG's efforts to
clarify certain of the parties' responsibilities under the terms of the PTG
Agreement. As a result of PTG's termination of the PTG Agreement on
November 12, 1995, however, the parties expanded the issues to be
addressed in the San Francisco Arbitration to include claims relating to
the proprietary of PTG's termination.
In a related matter, on December 26, 1996, the Company received
notice that Videotron had filed a request for arbitration against the
Company in connection with the Settlement Agreement among the
Company, Videotron and other parties dated March 31, 1995 (the
"Settlement Agreement"). The Settlement Agreement is described in
more detail in the Company's report on Form 10-KSB dated October 31,
1994.
The Chicago Arbitration is based on a request by Videotron for
interpretation of a number of provisions contained in the Settlement
Agreement, including the method to be used to determine the value of
Wireless Holdings, Inc. ("WHI") in the event of any required purchase of
WHI stock by either Videotron or the Company under the terms of the
Settlement Agreement, and a clarification of the time frame within which
any purchase by the Company of Videotron's WHI stock would need to
occur.
<PAGE>
On February 19, 1997, the Company received notice that Videotron
had filed a petition in Delaware State Court for the appointment of a
custodian under the provisions of Section 226 of the General Corporation Laws
of the State of Delaware (the "Delaware Action"). The petition sought the
appointment of a custodian for the purpose of determining whether or not
WHI should pursue certain financing alternatives offered WHI by
Videotron. A copy of Videotron's petition is attached as Exhibit 99.2.
The Company filed an objection and response to Videotron's petition on
March 5, 1997. A copy of the Company's response is attached hereto as
Exhibit 99.3. At a hearing on the matter on March 18 and 19, 1997, the
court granted Videotron's petition.
Resignation of Directors. On March 17, 1997, the Company
received notice from George Sorenson, a member of the Company's
Board of Directors, of his resignation from the Board, effective March 14,
1997. On March 19, 1997, the Company received notices from Wallace
Boyack and R. Bret Jenkins, also members of the Board of Directors, of
their resignations from the Board. Mr. Boyack's and Mr. Jenkins'
resignations were effective March 14, 1997 and March 18, 1997,
respectively. Copies of the letters of resignation are attached as Exhibits
17.1, 17.2 and 17.3. To the knowledge of the Company, the resignations
were not tendered to the Company as a result of any disagreement with
it on any matter relating to its operations, policies or practices, and none
of the resigning directors has furnished the Company with a letter
describing any such disagreements or requested that any matter regarding
their resignation be disclosed.
Item 7. Financial Statements and Exhibits.
(a) Exhibits. Exhibit 99.1 is the Company's press release dated
November 12, 1996. Exhibit 99.2 is Videotron's petition seeking
appointment of a custodian in the Delaware Action. Exhibit 99.3 is the
Company's response in the custodial action. Exhibits 17.1, 17.2 and 17.3
are Messrs. Sorenson's, Boyack's and Jenkins' letters of resignation from
the Company's Board of Directors.
(b) Financial Statements. N/A.
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
TRANSWORLD
TELECOMMUNICATIONS,
INC.
/s/ E. Andrew Lowe
By: E. Andrew Lowe, Vice President
Dated: March 26, 1997
EXHIBIT 99.1
TRANSWORLD TELECOMMUNICATIONS
NEWS RELEASE
Transworld Telecommunications, Inc.
notified that Pacific Telesis Group terminates
Stock Purchase Agreement
FOR IMMEDIATE RELEASE
Salt Lake City, Utah, November 12, 1996. . . .
Transworld Telecommunications, Inc., (TTI) announced that earlier today,
Pacific Telesis Group terminated the Stock Purchase Agreement between
Pacific Telesis Group, Transworld Telecommunications, Inc., LeGroupe
Videotron Ltee and their affiliated companies.
Under that agreement dated November 9, 1995, Pacific Telesis agreed to
purchase all of the stock of Wireless Holdings, Inc. (WHI) and Videotron
(Bay Area), Inc. (VBAI) which own wireless cable rights and certain
operating wireless cable systems in various West Coast cities and in
Tampa, Florida and Greenville, South Carolina.
TTI stated that the agreement with Pacific Telesis provides that it may be
terminated by any of the parties after November 9, 1996, providing the
terminating party has complied with all of its obligations under the
agreement.
TTI intends to study the situation and consider all of its alternatives.
Transworld Telecommunications, Inc., is an owner and operator of
wireless cable television and other pay-television systems in the U.S. and
internationally. In addition to owning 50% of WHI, Transworld owns
20% of Videotron Bay Area (of which Videotron owns 80%), the wireless
cable operator in Tampa/St. Petersburg, Florida. Transworld is a public
company which trades on the over-the-counter market under the symbol
TTIW.
For Information: Andrew Lowe
801-328-5618
EXHIBIT 99.2
IN THE COURT OF CHANCERY FOR THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
)
In re: Wireless Holdings, Inc., ) C.A. No. 15554
a Delaware corporation )
)
PETITION FOR APPOINTMENT OF A CUSTODIAN
Petitioner Videotron USA, Inc. ("Videotron USA"), by its
attorneys, Duane, Morris & Heckscher and Kronish, Lieb, Weiner &
Hellman LLP, for its Petition, alleges upon knowledge as to itself and
upon information and belief as to all other matters as follows:
Nature Of This Action
1. This is an action for the appointment pursuant to 8 Del. C.
Section 226(a)(2) of a custodian for Wireless Holdings, Inc. ("WHI").
2. Petitioner Videotron USA is a corporation organized under
the laws of the State of Delaware with its principal place of business in
the State of Florida.
3. WHI is a corporation organized under the laws of the State
of Delaware with its principal place of business in the State of California.
4. Petitioner Videotron USA and Transworld
Telecommunications, Inc. ("TTI") are equal shareholders in WHI, and
WHI's board of directors (the "WHI Board") is composed of two
representatives of each of its shareholders. WHI's bylaws contain no
provision for the resolution of a deadlock.
<PAGE>
5. The business of WHI is suffering and is threatened to
continue suffering irreparable harm because it has no sourceof future
financing, is currently unable to meet the majority of its obligations to
third parties and is unable to sustain its operations. Although Videotron
USA presented two proposals for financing the company to the WHI
Board, the board is so divided that it has deadlocked over the approval of
plans for financing the continued operations of the company.
Background
6. TTI and Videotron USA are the sole shareholders of WHI,
a business founded in November 1993. Since its incorporation, WHI has
acquired wireless cable systems in geographical markets within the United
States.
7. WHI currently has approximately 25 employees. It operates
its wireless cable systems through licenses and leases of broadcast
spectrum it has obtained from third parties.
The WHI Litigations
8. From December 1994 until March 1995, Videotron USA and
TTI were involved in arbitration and litigation concerning a shareholders
agreement between and among themselves and WHI. (These matters are
referred to collectively as the "Litigations".)
9. The Litigations were resolved by a settlement agreement
dated as of March 31, 1995 (the "March Agreement") which required the
shareholders to retain Goldman Sachs & Company ("Goldman") to
arrange the sale of WHI to a third party and required Videotron USA
and TTI to accept any sale transaction (a "Transaction") recommended by
Goldman as long as certain minimum conditions were satisfied.
10. The March Agreement also obligated Videotron USA to
fund WHI's day-to-day operations, fulfill WHI's existing obligations to
third parties and complete any Transaction recommended by Goldman.
Such funding was to be effected through loans evidenced by unsecured
long-term promissory notes, and under the March Agreement, Videotron
USA was to remain obligated to fund WHI until 90 days after the later of
October 31, 1995 or the termination of a Transaction agreement.
<PAGE>
11. The March Agreement also made certain provisions for
ending the relationship between Videotron USA and TTI in the event that
no Transaction was consummated (collectively, the "Buy-Sell Provisions").
Specifically, upon termination of a Transaction agreement, Videotron
USA had the right to give notice of its election to purchase TTI's interests
in WHI. If Videotron USA did not give such notice within a specified
period, then TTI would be obligated to purchase Videotron USA's interest
in WHI. The Buy-Sell provisions contained a formula for calculating the
purchase price of such interests and provided that if the purchasing party
did not complete its purchase within a specified period, the selling party
could, among other rights and remedies, purchase the other party's
interest in WHI at a ten percent discount.
The PTG Transaction and the November Amendment
12. In or about May 1995, Goldman identified Pacific Telesis
Group and its subsidiaries (collectively, "PTG") as a potential acquiror of
WHI. On September 11, 1995, Goldman advised TTI and Videotron USA
in writing to confirm their acceptance of the terms offered by PTG in a
term sheet of the same date and to proceed to finalize a definitive
agreement for a Transaction with PTG.
13. TTI, however, refused to proceed with the PTG transaction
unless it received consideration in excess of that provided for under the
March Agreement. In September 1995, Videotron USA was forced to
commence a litigation (the "September Litigation") seeking specific
performance of TTI's obligations under the March Agreement.
<PAGE>
14. On September 25, 1995, TTI agreed to return to the
negotiations with PTG, and the September Litigation was subsequently
dismissed. These negotiations resulted in a Stock Purchase Agreement
(the "PTG Agreement") dated as of November 9, 1995 pursuant to which
the capital stock of WHI was to be sold to PTG (the "PTG Transaction").
<PAGE>
15. In addition, the parties to the March Agreement, as well as
certain related entities entered into an Amendment and Supplemental
Agreement (the "November Amendment"), dated as of November 9, 1995,
which amended the March Agreement in certain respects.
16. Among other things, The November Amendment altered the
length of the term of Videotron USA's obligation under the March
Agreement to provide funding to WHI. Under the November
Amendment, Videotron USA remained obligated to fund WHI only as
long as PTG remained obligated to consummate the PTG transaction.
The Termination of the PTG Transaction
17. On November 12, 1996, PTG terminated the PTG
Agreement and abandoned the PTG Transaction. The parties to the PTG
Agreement are currently involved in arbitration over their respective rights
and obligations in connection with the termination of the PTG Agreement.
18. Moreover, under the Buy-Sell Provisions of the March
Agreement, because Videotron USA did not exercise its right to purchase
TTI's interest in WHI within the requisite time period, TTI is obligated
to complete its purchase of Videotron USA's interest by February 22,
1997. However, Videotron USA does not believe that TTI will meet this
obligation.
19. In accordance with the November Amendment, Videotron
USA's obligation to fund WHI ended with the termination of the PTG
Transaction. Neither the March Agreement nor the November
Amendment provides a method for financing WHI after the termination
of the PTG Transaction.
<PAGE>
20. To date, the WHI Board has not approved any alternate
plan for financing WHI's day-to-day operations and obligations to third
parties. WHI's business is currently not generating sufficient cash flow to
meet its capital and cash requirements. WHI does not have financing to
support a profitable exploitation of its assets, and it is currently not able
to meet the bulk of its third party obligations.
21. Accordingly, WHI is currently unable to fund its operations,
preserve the current value of its assets, explore options to exploit those
assets, and defend or prosecute its litigation with PTG. Because of WHI's
current financial condition and various other factors, it is unlikely that a
commercial lender or industry investor would be willing to advance funds
to it.
The February 5 1997 Meeting and the Deadlock
22. In accordance with the procedures set forth in WHI's
bylaws, on January 29, 1997, Guy G. Beaudry, WHI's Chairman of the
Board and one of Videotron USA's representatives to the WHI_Board,
sent notice to the other board members that a special meeting of the WHI
Board was to be held by telephone on January 31, 1997 to discuss, among
other things, a proposal by Videotron USA to provide additional financing
to WHI in the form of an investment structured by purchasing a
non-interest bearing promissory note convertible into WHI common stock.
23. Videotron USA's investment in WHI is now over $55 million
while TTI's investment is less than $8 million.
<PAGE>
24. In light of the disparity of over $45 million in the current
investments of Videotron USA and TTI in WHI, the uncertainty as to
WHI's future and the longstanding conflict in the relationship of WHI's
two shareholders, Videotron USA was unwilling to advance significant
additional funds to WHI on the same terms it had previously provided
pursuant to its obligation under the March Agreement.
25. Thus, on January 30, 1997, Mr. Beaudry sent a
memorandum (the "January 30 Memorandum") to the members of the
WHI Board describing Videotron USA's proposed financing of WHI and
attaching a draft resolution and a proposed form of convertible grid note
to implement the proposal.
26. As described in the January 30 Memorandum, Videotron USA
proposed to commit up to $2.5 million to WHI to be invested in it
through August 31, 1997 as required for the preservation and development
of the WHI business during that period and in accordance with WHI's
current financial projections. This amount would be invested to acquire
common stock of WHI (through a convertible note) at a price based on
the current fair market value of WHI as determined by a reputable
investment banking firm. The proposal contemplated that TTI would have
the opportunity to match investments with Videotron USA for up to 30
days after each investment was made, and that in the event TTI did not
match Videotron USA's investment, it would be entitled to maintain at
least one director provided that its stock ownership in WHI was at least
30%.
27. In the January 30 Memorandum, Mr. Beaudry also informed
the WHI Board that if it did not adopt Videotron USA's financing
proposal or a viable alternative, Videotron USA would propose, as an
interim measure, a 30 day nonconvertible loan to WHI in an amount
sufficient to meet certain of WHI's fixed obligations.
<PAGE>
28. At the request of the TTI representatives to the WHI board,
the meeting scheduled for January 31, 1997 was postponed. After
considerable discussion between the TTI and Videotron USA
representatives to the WHI Board, certain additional items were added to
the agenda. The meeting of the WHI Board (the "Board Meeting") was
held by teleconference on February 5, 1997.
29. At the Board Meeting, a Videotron USA representative to the
WHI Board moved for the adoption of the resolution that would
implement Videotron USA's financing proposal. When the resolution was
put to a vote, the resolution failed because the WHI board members
deadlocked; the two Videotron USA representatives voted in favor of the
proposal, and the two TTI representatives voted against it.
30. Thereafter, a Videotron USA representative to the WHI Board
moved for the adoption of a resolution to approve Videotron USA's
proposal to provide short-term financing to WHI in the manner described
above. Once again, the two Videotron USA representatives voted in favor
of the resolution and the two TTI representatives voted against it. This
deadlock resulted in the failure of the short term financing proposal as
well.
31. As a result of the deadlock of the WHI Board, the Board
Meeting ended without the approval of any plan for the provision of
financing to WHI.
32. TTI has failed to present any viable alternative to solve WHI's
immediate need for financing, stating only that it wants Videotron USA
to purchase its interest in WHI or to continue to provide long term debt
on a basis which is onerous to Videotron USA and therefore not
acceptable to it. Upon information and belief, TTI is unwilling to approve
any financing proposal that would dilute its interest in WHI or impair its
negotiating position with Videotron USA.
33. In recognition of WHI's immediate and urgent financial need,
in response to a funding request by WHI's general manager, on February
13, 1997, Guy Brochu, the vice president of administration of Videotron
USA informed WHI that notwithstanding the inability of the WHI Board
to agree as to how WHI is to be financed, on February 14, 1997,
Videotron USA would advance $200,000 as a demand loan with interest
at 15% to enable WHI to meet certain of its immediate obligations and
preserve the value of its assets. Videotron USA advised TTI that it was
not prepared to make further advances on this basis.
<PAGE>
34. Notwithstanding WHI's immediate need for funding, on
February 14, 1997, one of TTI's representatives telephoned Mr. Brochu
and ordered that Videotron USA not make that advance.
Irreparable Harm
35. As a result of the deadlock of the WHI Board over financing,
the business of WHI is suffering and is threatened to continue to suffer
irreparable harm.
36. Because there is no firm source for financing in place, WHI is
unable to plan for its business and operations, explore options for
exploiting its assets and preserve the current value of those assets. WHI
is already unable to fund its day-today operations, pay its 25 employees
and meet the majority of its contractual obligations to its lessors and other
trade creditors.
37. If WHI does not meet its contractual obligations to its lessors
and other trade creditors, it is in danger of losing by default many of the
leases and other rights which constitute its primary assets.
<PAGE>
FIRST CAUSE OF ACTION
(For Appointment of a Custodian
Pursuant to 8 Del. C. 226(a)(2))
38. Videotron USA repeats and realleges the allegations of
paragraphs 1 through 37 as if fully set forth herein.
39. The business of WHI is suffering and is threatened to continue
to suffer irreparable harm because the directors are so divided respecting
financing for the company that a required vote for action by the WHI
Board cannot be obtained. WHI's bylaws make no provision for resolution
of a deadlock.
40. Because Videotron USA and TTI are 50-50 shareholders in
WHI and have equal representation on the WHI Board, the shareholders
in WHI are unable to terminate the WHI Board's division.
41. Accordingly, a custodian should be appointed for the limited
purpose of resolving any deadlock with respect to financing for WHI
whenever the WHI Board is so divided regarding proposals for financing
that the required vote for action by the WHI Board cannot be obtained.
SECOND CAUSE OF ACTION
(For Expenses and Attorneys' Fees)
42. Videotron USA repeats and realleges the allegations of
paragraphs 1 through 41 as if fully set forth herein.
43. The appointment of a custodian to resolve deadlocks of the
WHI Board regarding financing for WHI will confer benefits on WHI.
<PAGE>
44. Videotron USA is therefore entitled to payment by WHI for
the expenses it actually and reasonably incurs (including attorneys' fees)
in connection with this action.
PRAYER FOR RELIEF
WHEREFORE, Videotron USA respectfully requests that this
Court issue an order:
(a) appointing a custodian for the limited purpose of resolving
deadlocks of the WHI Board regarding financing for WHI;
(b) awarding Videotron USA expenses (including attorneys' fees)
it incurs in connection with this action in an amount to be proven; and
(c) such other and further relief as the Court deems just and
proper.
DUANE, MORRIS & HECKSCHER
By: /s/ Judith Nichols Renzulli
Judith Nichols Renzulli
Robert J. Valihura, Jr.
1201 Market Street, Suite 1500
P.O. Box 195
Wilmington, Delaware 19899
(302) 571-5550
Attorneys for Petitioner
Videotron USA, Inc.
OF COUNSEL:
KRONISH, LIES, WEINER & HELLMAN LLP
Celia Goldwag Barenholtz
Beth E. Levine
1114 Avenue of the Americas
New York, New York 10036-7798
(212) 479-6000
February 19, 1997
EXHIBIT 99.3
IN THE COURT OF CHANCERY FOR THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
)
In re: Wireless Holdings, Inc., ) C.A. No. 15554
a Delaware corporation )
)
OBJECTION AND RESPONSE TO PETITION FOR
APPOINTMENT OF CUSTODIAN
Respondent, Transworld Telecommunications, Inc., ("TTI"), by and
through its attorneys, Richards, Layton & Finger, and Parsons Behle &
Latimer, hereby objects and responds to the petition of Videotron USA,
Inc. ("Videotron") for the appointment of a custodian as follows:
GENERAL STATEMENT OF OBJECTION
TTI objects to the appointment of a custodian because, while a
director deadlock exists on a specific funding proposal, WHI is not
suffering nor faced with the threat of irreparable harm. See 8 Del. C. Section
226. Videotron remains obligated to provide funding to WHI. Further,
Videotron has manufactured its "deadlock" and purported "harm" in an
effort to wrest exclusive control of the parties' joint venture, WHI.
Videotron has unclean hands and is thus ineligible for the relief it truly
seeks -- a custodian authorized to consent to the dilution of TTI's interests
in WHI.
More specifically, TTI states as follows:
Since November 1993 when Videotron and TTI formed their joint
venture, WHI, their relationship has been characterized less by growth and
shepherding of assets than by their animosity that is infamous throughout
the wireless cable industry. Videotron has initiated or forced TTI to
initiate no less than 9 separate arbitrations and court actions in state
courts, federal courts, or arbitration fore in 5 separate states of the United
States.
<PAGE>
It became apparent almost from the beginning of the relationship
that Videotron's parent, Le Groupe Videotron, Lte., did not like having
to do business in the United States where it could not always get its way
and that it regretted having entered into a 50/50 joint venture with TTI,
a company much smaller in size. However, the 50/50 joint venture was
proposed by Videotron, it was not TTI's initial vehicle of choice for the
business relationship. Consequently, in all of their actions, both at the
WHI board level and as a litigious shareholder of the joint venture,
Videotron has frequently attempted to diminish TTI's interest in the joint
venture and to put TTI in a position whereby it could no longer
participate in the control of the WHI assets.
The relationship has, unfortunately, also been characterized by
inaction and deception on the part of Videotron. The vision of making
WHI a leader in the wireless industry in the United States has taken a
back seat to the sheer survival tactics necessary to keep the joint venture
going and to protect the value of its assets. By virtue of changes in the
industry, the value of the assets has grown over the three-and-a-half years
of the joint venture's existence, but the parties have failed to realize the
true potential of the assets because of Videotron's constant attempts to
diminish TTI's value in the joint venture. Videotron's strange attitude is
that it would rather have majority interest in something worth fewer
dollars than an equal interest in something worth many dollars.
<PAGE>
In this action for the appointment of a custodian, Videotron again
attempts a ploy to wrest control of WHI and to put TTI into minority
shareholder status. The all too obvious goal of Videotron's ploy is to
force TTI into a position where TTI would be forced to sell its interest in
WHI to Videotron at a reduced price. This scenario has enormous
implications for TTI: First, it puts TTI in jeopardy of becoming an
"investment company" under the Investment Company Act of 1940 and
thus subject to onerous and unintended regulation or forced liquidation.
Second, it puts TTI in the position whereby it will suffer a substantial
reduction in the value of this interest in WHI. Third it puts TTI in the
position of losing substantial rights guaranteed to it under the Delaware
General Corporation Law. Again, Videotron insisted that Wed be formed
as a Delaware corporation and TTI agreed to the same, recognizing that
the Delaware law of corporations would provide it with significant rights.
In this most recent ploy to take control of WHI, Videotron would wipe
out those rights guaranteed to TTI. Those rights might include, inter alia,
the following:
1. The ability to prevent changes to WHI's certificate of
incorporation.
2. The ability to prevent changes to WHI's bylaws.
3. The ability to prevent a merger of WHI with another
corporation, and to protect against being "cashed out" of WHI in such a
merger.
4. The ability to prevent a sale of WHI's assets.
5. The ability to protect against changes in the composition of
WHI's board.
6. The ability to protect against changes in the officers of WHI.
7. TTI could lose the right to petition the Court for dissolution
of a joint venture under 8 Del. C., Section 273.
WHI's funding problems are other than as portrayed by Videotron.
Videotron has created the problem. Videotron has an obligation to
continue to fund WHI sufficiently to allow it to maintain its assets and
continue as an ongoing business. This obligation lies in the Amendment
and Supplemental Agreement of November 9, 1995, which amends the
March 31, 1995, Settlement Agreement referred to in the petition and
herein as the "November Amendment." Understanding the evolution of
the fictitious problem leads to an understanding as to why the petition for
appointment of a custodian is nothing more than a ploy.
<PAGE>
As noted in the petition, the parties were involved in a potential
sale of their interests in WHI to Pacific Telesis Group ("PTG"). In
November of 1996, PTG gave notice that it would not continue with the
PTG Transaction. An arbitration filed by PTG followed with
counterclaims and crossclaims by WHI, Videotron, and TTI (the
California Arbitrations). Soon thereafter, however, Videotron began to
make overtures to TTI indicating that it would be forthcoming with a
proposal whereby Videotron would buy out TTI's interest in WHI. In
response to Videotron's assurance that all options would be considered,
TTI made several proposals ranging from continued interim financing of
WHI by Videotron with the orderly and predictable dilution of TTI's
interest to the outright purchase of all of TTI's interest in WHI. TTI also
proposed selling its position to a third party which would be more capable
of providing funding to WHI along with Videotron. TTI raised with
Videotron the necessity to arrange for interim funding of WHI or sale of
WHI assets in order to keep WHI as a viable business in the absence of
Videotron's continued funding.
The parties had a series of discussions relating to the ground rules
for implementation of the Buy-Sell Provisions of the March Agreement
which went into effect in the event that the PTG Transaction failed.
Videotron requested an extension of time within.which to determine
whether it would exercise its option to purchase Laos interest in WHI.
TTI objected to such an.extension because of the continuing funding needs
of Wry and TTI. In mid-December 1996, Videotron agreed that the, time
far its performance under the Buy-Sell Provisions had started to run and
farther asserted that TTI was under an obligation to buy Videotron's
interest in WHI beginning in November.
<PAGE>
Videotron attempted to delay the implementation of the Buy-Sell
Provisions first because its employees were on vacation for extended
periods of time towards the end of the year and second because no
Videotron employee was assigned to handle the situation. Furthermore,
it became apparent that Videotron began discussing with a third party the
purchase of WHI while TTI was itself discussing the purchase with that
same party. Their efforts were not joint efforts and it was apparent that
Videotron and TTI were working at cross purposes.
Shortly after agreeing that TTI had the obligation to purchase
WHI, on December 26, 1996, Videotron filed a demand for arbitration in
Chicago, continuing its nefarious plan to interfere and frustrate TTI's
efforts to conclude a satisfactory transaction.
On December 20, 1996, however, Videotron had amended its
counterclaim in the California Arbitration to include a request for specific
performance by PTG of its obligations under the PTG Agreement. The
PTG Agreement can only go forward if WHI maintains its pre-closing
covenants to maintain the Wry assets intact for purchase by PTG pursuant
to the PTG Agreement. A result of Videotron's request for specific
performance by PTG is that Videotron completely controls now the
disposition of WHI. In order to complete the PTG transaction, no WHI
assets can be sold. Under the PTG Agreement, WHI cannot-borrow
funds from any source other than Videotron. Thus, through its tactic of
filing its counterclaim for specific performance, Videotron has severely
limited the future business activities of WHI in terms of sale of assets or
funding. Videotron has pleaded the specific performance remedy in the
alternative so that Videotron has complete control over the disposition of
WHI's business decisions.
<PAGE>
Similarly, under the PTG Agreement, TTI cannot pledge its main
asset, its interest in WHI. Thus, Videotron has now also put TTI in
a.position whereby it cannot collateralize a loan. This fact is significant
because, as will be noted below, Videotron has proposed funding of WHI
which would require TTI to match the funding. Videotron knows full well
that TTI is not in a position to match the funding and that because of
Videotron's own actions, TTI cannot attempt to collateralize a loan so as
to meet any obligation that it would have to fund WHI under Videotron's
financing proposals.
Thus, Videotron has left WHI without funding, despite its
obligation to fund pursuant to the November Amendment, has not
pursued the acquisition of TTI's interest in WHI, and has now devised this
ruse to dilute TTI's interest in WHI.
Videotron's response to the problem created by its own actions has
been to attempt to impose the most implausible funding option
imaginable, a convertible note with an effective term of 30 days and an
obligatory matching provision for TTI. In taking this approach, Videotron
realized that it was again using the most implausible approach to funding
and that TTI would reject it. In "setting up" TTI in this manner,
Videotron clearly had in mind the ultimate involvement of the judiciary
in the affairs of WHI and its acquiescence in its nefarious attempt to wrest
control of WHI from TTI through the funding problems.
<PAGE>
Moreover, however, the funding proposal made by Videotron would
in itself violate the PTG Agreement, because it would represent the sale
of equity in WHI, something that is prohibited by the PTG Agreement.
The WHI funding solution lies in Videotron obligations under the
November Amendment. Immediately after PTG made known its intention
not to close the PTG Transaction and thereby acquire the stock in WHI,
Videotron responded to the California Arbitration by amending its
counterclaim so as to include a demand that the arbitrator order PTG to
specifically perform under the PTG Agreement and thus.acquire the stock
of WHI. Videotron has an obligation, under Section 7 of the November
Amendment to provide funding to WHI "for so long as PTG remains
obligated to consummate the PTG Transaction pursuant to the PTG
Transaction Agreement ...." The funding obligation requires Videotron to
maintain funding for WHI sufficient to allow WHI to meet its obligations
under the PTG Agreement. WHI has an obligation not to diminish the
value of its assets in any way prior to the closing of the PTG Agreement.
Videotron, therefore, has an obligation under the November Amendment
to maintain all of the WHI assets and operating systems intact and fully
funded. Videotron, therefore, maintains in the California Arbitration that
PTG still remains obligated to consummate the transaction, but Videotron
refuses to continue funding WHI as it is required to do under the
November Amendment.
Alternatively, on the short-term side, it is clear that WHI can go
to the commercial markets to attempt to find short-term funding. On its
own TTI has begun to contact commercial lenders. TTI has determined
that an entity which formerly was a lender to one of the systems that WHI
acquired, the Spokane system, is seriously prepared to entertain a funding
request. That entity, U.S. Bank has indicated that it is interested in
reviewing WHI's proposal and that it may be able to finance WHI by
securing the assets which it had previously used as collateral, the Spokane
system, which is well known to the bank.
<PAGE>
Additionally, Videotron proposed that it would provide short-term
funding in the Wed Board meeting on February 5, 1997. There have been
subsequent discussions about interim funding from Videotron and indeed,
Videotron has actually advanced money to Wed ($200,000) without any
formal agreement with Wed for repayment even though TTI told
Videotron this had not been authorized by the directors of WHI or TTI.
In that Board meeting of February 5, 1997, TTI learned for the first time
that Videotron had advanced $5O,000 in January of 1997 to WHI, also
without any agreement for repayment.
In the February board meeting, Videotron had proposed interim
funding through a demand note on a term of 30 days. However, TTI
pointed out to Videotron that it was unrealistic to lend money for such a
short term when the ultimate need of Wed would be to sell off, in a
orderly and reasonable manner, some of its nonessential assets. Again, to
serve its own purposes and in an rather clear demonstration of its bad
faith, Videotron refused to accept reasonable and realistic terms for
shortcuts by it to WHI and has steadfastly maintained that it will lend
money to WHI only on terms that are truly onerous to WHI and which
are ultimately designed to diminish TTI's interest in WHI. TTI offered
to vote in favor of reasonable repayment and collateralization terms for
short-term funding by Videotron, more consistent with if Videotron's
obligations under paragraph 7 of the November Amendment, but
Videotron has insisted on the conversion privilege or very short term debt
which is, of course, completely unacceptable to TTI, because of the
obvious effect on the balance of power in WHI.
<PAGE>
Furthermore, Videotron has not satisfied its obligations under the
November Amendment to reduce WHI's debt, Section 5.2, which requires
that Videotron would promptly contribute $1.85 million of Videotron debt
to WHI. The agreement was executed in January 1996 But dated
November 9, 1995. Many months have passed without Videotron's
fulfilling its obligation. Obviously, the reduction in debt would make
funding of WHI more attractive to an outside lender. Of course,
Videotron's failure to contribute the $1.85 million in debt to WHI in
consistent with the position taken by it in the California arbitration where
it has maintained that PTG has a continuing obligation to close the PTG
Transaction. It is, however, inconsistent with Videotron's refusal to fund
as it is obligated to do by the November Amendment.
Furthermore, Videotron has done nothing to locate outside funding
Videotron's indolence in this regard, coupled with its specific performance
counterclaim in the California Arbitration, is calculated to force WHI into
a position where, in order to survive, it would have to borrow money only
from Videotron and only on the terms imposed by Videotron.
With respect to long-term funding, at the February 5, 1997, WE
Board meeting, TTI representatives to the Board, as an alternative to
Videotron's continued funding obligation, moved for the adoption of a
resolution requiring WHI management to pursue a sale of nonessential
assets of the corporation, particularly, the Greenville, North Carolina and
the Spokane, Washington operating systems. Videotron representatives
to the Board voted in favor of the motion along with TTI representatives
and, accordingly, the resolution passed. In the interim, Videotron has
done absolutely nothing to pursue suck a sale nor has it requested WHI
management to do so. On the other hand, TTI representatives have
actively sought purchasers for those portions of the system. Specifically,
TTI representatives have spoken with Wireless One, regarding the sale of
the Greenville asset, and it has spoken with Wireless Broadcasting Systems
of America regarding the sale of the Spokane asset. However, as of
March 5, 1997, one full month after the February board meeting, the
secretary of the WHI Board meeting, a Videotron employee, has not
prepared and circulated the minutes of the February board meeting for
approval by the WHI Board and has not further circulated them or sent
any directive to WHI's management instructing its management to begin
the process of looking for purchasers for the Greenville and Spokane
systems; Only TTI has taken action in that regard.
<PAGE>
Videotron's bad faith is apparent in its coming to this Court with
the fictitious claim of WHI s irreparable hams designed solely to upset the
balanced ownership and voting rights of these two joint venture
shareholders. Indeed Videotron's goal is to inflict irreparable harm on HI
by denying TTI its rights to 50% ownership and equal voting rights in
WHI.
The Delaware Court of Chancery should exercise its discretion by
not appointing a custodian in this matter. First, it is important to point
out to the Court that, despite the statement in the cover letter from
Videotron's counsel to the Court dated February 19, -1997, there is
no-impasse on the board with respect to Appropriate financing for the
continued operations of the day-to-day business of WHI." The only
proposition on which there is a deadlock is the unacceptable proposal
made by Videotron to fund only in one manner, that is, with a promissory
note that has a conversion feature and a very short term with matching
funding obligations for Videotron's equal shareholder in WHI, TTI.
Videotron does not even mention its obvious conflict of interest or the
failure to satisfy the terms of GCL Section 144(a). Second, Videotron has not
told this Court of its obligation to fund WHI so as to maintain its assets
pursuant to the November Amendment. Third, Videotron has not on its
own sought other financing-nor has it made any proposals to the WHI
Board to instruct WHI management to seek reasonable funding
alternatives. On the other hand, TTI has pursued other funding
alternatives for WHI Videotron has merely put this self-serving, conflict
of interest proposal in front of the WHI Board without having made any
attempt at all to come up with reasonable funding alternatives Fourth, the
Videotron representatives to the WHI Board have an unresolved and
irreconcilable conflict of interest in this matter and are clearly not
exercising their fiduciary duty to the shareholders of WHI. Now they are
requesting this Court to implement their conflict of interest transaction.
Accordingly, a custodian is unwarranted.
<PAGE>
If this Court were to determine that the appointment of a custodian
is necessary because there is a deadlock on-the Board of Directors of
WHI, the custodian should shepherd the short-term funding decisions of
the WHI Board and the Court should make clear to the custodian that the
custodian is not empowered to choose a funding option which upsets the
50/50 ownership and voting balance currently held by the WHI
shareholders or to choose a funding option which puts WHI in default
under the PTG Agreement. To do otherwise would simply further
Videotron's ploys.
RESPONSES TO ALLEGATIONS IN THE PETITION
1. TTI admits that the petition seeks appointment of a
custodian pursuant to 8 Del. C. Sectoin 226(a)(2) for Wireless Holdings, Inc.
("WHI"), but objects to the appointment of a custodian. Alternatively,
assuming arguendo the Court determines to appoint a custodian pursuant
to 8 Del.C. Section 226, any such custodian should not be authorized or
empowered to consent to or implement any funding or other proposal that
would impact the balance of ownership or the equal voting rights presently
held by TTI and Videotron in WHI, or that would result in the dilution
of TTI's ownership or voting interests. Nor should the Court authorize
or empower any custodian to adopt financing proposals that would put
WHI in default under the PTG Agreement.
<PAGE>
2. Answering the allegations of paragraph 2 of the
petition, TTI admits the same.
3. Answering the allegations of paragraph 3 of the
petition, TTI admits the same.
4. Answering the allegations of paragraph 4 of the
petition, TTI admits the same.
5. Answering the allegations of paragraph 5 of the
petition, TTI denies the same, except that TTI admits that WHI has
obligations to third parties and that the Board of WHI is deadlocked with
respect to certain financing proposals advanced by Videotron for its own
interest and not for that of WHI.
6. Answering the allegations of paragraph 6 of the
petition, TTI admits the same.
7. Answering the allegations of paragraph 7 of the
petition, TTI denies the same and states affirmatively that WHI has only
five employees and that subsidiaries of WHI have approximately 20
employees.
8. Answering the allegations of paragraph 8 of the
petition, TTI admits the same.
9. Answering the allegations of paragraph 9 of the
petition, TTI admits the same.
10. Answering the allegations of paragraph in of the
petition, TTI admits the same.
<PAGE>
11. Answering the allegations of paragraph 11 of the
petition, TTI admits that the March Agreement speaks for itself, and
otherwise admits that Videotron is obligated to fund WHI's existing
obligations and day-to-day operations.
12. Answering the allegations of paragraph 12 of the
petition, TTI denies the same.
13. Answering the allegations of paragraph 13 of the
petition, TTI denies same, and TTI states affirmatively that it refused to
proceed with the PTG Transaction because various business conditions of
the proposed sale including the price, were unacceptable and because
Goldman had not recommended the transaction, and TTI further states
affirmatively that Videotron was not forced to commence litigation but did
in fact commence litigation for its own benefits and not for the benefit
of.WHI nor for the benefit of its co-shareholder, TTI.
14. Answering the allegations of paragraph 14 of the
petition, TTI admits that negotiations among TTI, Videotron, and Pacific
Telesis Group resulted in a Stock Purchase Agreement dated November
9, 1995, pursuant to which capital stock of WHI was to be sold to PTG,
but TTI denies the remaining allegations thereof.
15. Answering the allegations of paragraph 15 of the
petition, TTI admits the same.
16. Answering the allegations of paragraph 16 of the
petition, TTI admits the same.
17. Answering the allegations of paragraph 17 of the
petition, TTI admits that PTG has abandoned the PTG transaction, and
TTI states affirmatively that, in the arbitration involving the PTG
Transaction, Videotron has maintained that PTG has a continuing
obligation to go forward with the PTG Transaction and has sought
an.order requiring specific performance by PTG of the PTG Transaction,
and, accordingly, Videotron's funding obligations pursuant to the
November Amendment have not ended and Videotron is obligated to
continue funding pursuant to that agreement until such time as it has been
finally determined, through arbitration and/or the courts, that PTG has no
obligation to conclude the PTG Transaction, and TTI further states
affirmatively that, accordingly, WHI is in no danger of imminent
irreparable berm unless its shareholder, Videotron, refuses to honor its
obligation to fund WHI or, in the alternative, unless Videotron remains
uncooperative and forces the management of WHI to ignore a board
resolution requiring WHI management (as an alternative to the PTG
transaction) to find buyers for WHI nonessential assets including
Greenville and Spokane.
<PAGE>
18. Answering paragraph 18 of the petition, TTI admits
that under the agreement reached between the parties on March 31, 1995,
referred to in the petition as the March Agreement, TTI has the right
under certain circumstances to purchase Videotron's interest in WHI, but
TTI denies that it has an unfulfilled obligation to purchase Videotron's
interest, and states affirmatively that it is without information sufficient to
form an opinion as to the truth of the remaining allegations thereof and,
therefore, denies the same.
19. Answering the allegations of paragraph 19 of the
petition, TTI admits that no agreement between the parties provides a
method for financing WHI after the termination of the PTG Transaction,
but TTI denies the remaining allegations thereof; and TTI states
affirmatively that in the arbitration involving the PTG Transaction,
Videotron has asserted that PTG has a continuing obligation to go
forward with the PTG Transaction and has sought an order requiring
specific performance by PTG of the PTG Transaction, and, accordingly,
Videotron's funding obligations pursuant to the November Amendment
have not ended and Videotron is obligated to continue funding pursuant
to that agreement until such time as it has been finally determined,
through arbitration and for through the courts, that PTG has no obligation
to conclude the PTG Transaction, and TTI further states affirmatively
that, accordingly, WHI is in no danger of imminent irreparable harm
unless its shareholder, Videotron, refuses to honor its obligation to Find
WHI.
20. Answering the allegations of paragraph 20 of the
petition, TTI denies the same, and Till states affirmatively that the WHI
Board has passed a resolution for alternative funding, i.e., the sale of
Unessential assets, and that the Videotron members of the WHI Board
voted for such a resolution but have wrongfully refused to consider other
funding proposals.
21. Answering the allegations of paragraph 21 of the
petition, TTI denies the same, and TTI states affirmatively that the TTI
members of the WHI Board have proposed funding alternatives, including
the sale of nonessential assets (in the event the PTG transaction is not
realized), and that the Videotron members of the WHI Board have voted
for such a resolution, but that the Videotron members of the WHI Board
have wrongfully refused to consider additional funding proposals, and TTI
further states that Videotron remains obligated to fund WHI, and TTI
further states affirmatively that neither the WHI Board nor the WHI
management have undertaken any efforts to investigate funding
alternatives available in the commercial market, and TTI further states
affirmatively that, since the time when PTO made known its decision not
to proceed with the PTG Transaction, management and agents of
Videotron's parent and affiliate companies have intentionally mislead TTI
and its management into believing Videotron would be forthcoming with
serious proposals for acquisition by Videotron of TTI's interest in WHI,
thus obviating the need for commercial funding or further funding of WHI
by Videotron; but that, for its own purposes, Videotron has ultimately not
come forward with such acquisition proposals and instead has attempted
to force a funding proposal on Wry which would dilute the interest of TTI
and change the current balanced ownership and voting rights in WHI and
to gain unfair advantage over TTI thereby and through the instigation of
this litigation, which has in itself further impaired the ability of WHI to
acquire reasonable funding in the marketplace.
<PAGE>
22. Answering the allegations of paragraph 22 of the
petition, TTI admits the same.
23. Answering the allegations of paragraph 23 of the
petition, TTI denies the same.
24. Answering the allegations of paragraph 24 of the
petition, TTI is without information sufficient to form a belief as to the
truth of the allegations contained therein and, therefore, denies the same.
25. Answering the allegations of paragraph 25 of the
petition, TTI admits the same.
26. Answering the allegations of paragraph 26 of the
petition, TTI admits that Videotron proposed a funding commitment as
set forth in a January 30 memorandum but TTI denies the remaking
allegations thereof.
<PAGE>
27. Answering the allegations of paragraph 27 of the
petition, TTI admits that Videotron proposed a funding commitment as
set forth in a January 30 memorandum but TTI denies the remaining
allegations thereof.
28. Answering the allegations of paragraph 28 of the
petition, TTI admits the same.
29. Answering the allegations of paragraph 29 of the
petition, TTI admits the same and TTI states affirmatively that an
alternative motion was made by TTI and passed by the WHI Board
requiring (as an alternative to the PTG transaction) the WHI officers to
pursue, as a funding alternative, the sale of nonessential assets, i.e., the
Greenville and Spokane systems, and that the TTI representatives to the
WHI Board also proposed that the Videotron funding proposal be
changed by Videotron so that, rather than buying equity, Videotron's loan
would be secured against specific assets of WHI, such motion failed
because the Videotron members of the WHI Board, acting in the interest
of Videotron and not in the interest of WHI, voted against the motion.
TTI further states affirmatively that, since the February 5, 1997, WHI
Board meeting, neither Videotron nor WHI has taken any steps to pursue
the funding alternative approved by the WHI Board, i.e., the sale of the
Greenville and-Spokane assets.
30. Answering the allegations of paragraph 30 of the
petition, TTI admits the same and TTI states affirmatively that an
alternative motion was made by TTI and passed by the WHI Board
requiring (as an alternative to the PTG transaction) the WHI officers to
pursue, as a funding alternative, the sale of nonessential assets, i.e., the
Greenville and Spokane systems, and that the TTI representatives to the
WHI Board also proposed that the Videotron funding proposal be
changed by Videotron so that, rather.than buying equity, Videotron's loan
would be secured against specific assets of WHI, but that such motion
failed because the Videotron members of the WHI Board, acting in.the
interest of Videotron and not in the interest of WHI, voted against the
motion TTI further states affirmatively that, since the February 5, 1997,
WHI Board meeting, neither Videotron nor WHI has taken any steps to
pursue the funding alternative approved by the WHI Board, i.e., the sale
of the Greenville and Spokane assets.
31. Answering the allegations of paragraph 31 of the
petition, TTI denies the same, and TTI states affirmatively that an
alternative motion was made by TTI and passed by the WHI Board
requiring (as an alternative to the PTG transaction) the WHI officers to
pursue, as a funding alternative, the sale of nonessential assets, i.e., the
Greenville and Spokane systems, and that the TTI representatives to the
WHI Board also proposed that the Videotron funding proposal be
changed by Videotron so that, rather than buying equity, Videotron's loan
would be secured against specific assets of WHI, but that such motion
failed because the Videotron members of the WHI Board, acting in the
interest of Videotron and not in the interest of WHI, against the motion.
TTI further states affirmatively that, since the February 5, 1997, WHI
Board meeting, neither Videotron nor WHI has taken any steps to pursue
the funding alternative approved by the WHI Board, i.e., the sale of the
Greenville and Spokane assets.
<PAGE>
32. Answering the allegations of paragraph 32 of the
petition, TTI denies the same, and TTI states affirmatively that an
alternative motion was made by TTI and passed by the WHI Board
requiring (as an alternative to the PTG transaction) the WHI officers to
pursue, as a funding alterative, the sale of nonessential assets, i.e., the
Greenville and Spokane systems, and that the TTI representatives to the
WHI Board also proposed that the Videotron funding proposal be
changed by Videotron so that, rather than buying equity, Videotron's loan
would be secured against specific assets of WHI, but that such motion
failed because the Videotron members of the WHI Board, acting in the
interest of Videotron and not in the interest of WHI, voted against the
motion. TTI further states affirmatively that, since the February 5, 1997,
WHI Board meeting, neither Videotron nor WHI has taken any steps to
pursue the funding alternative approved by the WHI Board, i.e., the sale
of the Greenville and Spokane assets. And TTI further states
affirmatively that it has made inquiries in the commercial markets for
reasonable interim financing and has determined that such funding for
WHI is likely available in the commercial market, and TTI further states
that it is likely that nonessential WHI assets, including the wireless cable
television systems and cable rights held by WHI in Greenville, North
Carolina and Spokane, Washington could be sold to generate funds which
WHI could use to exploit its remaining assets. Furthermore, TTI states
affirmatively that it is unnecessary for WHI to pursue financing that would
impact the current balanced ownership or voting rights of TTI and
Videotron in WHI. TTI further states affirmatively that TTI made known
to the Videotron representatives on the WHI Board that it was willing to
vote in favor of Videotron's proposal for interim funding provided that
there would be no conversion mechanism so as to change the balance of
ownership in WHI in favor of Videotron but so that the loan could be
collateralized with WHI assets and so that it would have a preference for
repayment upon the orderly sale of WHI assets, and provided that the
term of the note would be sufficient so as to allow for the orderly sale of
WHI nonessential assets from the proceeds of which the loan could be
repaid, again so as not to upset the balanced ownership interest of
Videotron and TTI in WHI Finally, TTI affirmatively states that WHI has
no immediate need for financing, since Videotron has taken the position
that PTG remains obligated to purchase WHI, so that Videotron's
obligation to provide financing for WHI under the November Agreement,
and otherwise, is continuing.
33. Answering the allegations of paragraph 33 of the petition,
TTI admits that Videotron informed WHI on February 14, 1997, that it
would advance $200,000 to enable WHI to meet obligations. TTI denies
the remainder of paragraph 33 of the petition.
<PAGE>
34. Answering the allegations of paragraph 34 of the-petition,
TTI denies the same, and TTI states affirmatively that Videotron
unilaterally transferred $200,000 to the account of WHI on approximately
February 21, 1997, without the authority of the Board of Directors of
WHI to approve the borrowing of such funds, and TTI further states
affirmatively that at no time has TTI ordered Videotron or WHI, or the
management of WHI to refuse to make or refuse to accept such transfer.
TTI further states affirmatively that Videotron now maintains that the
money so advanced constitutes a demand loan with interest at IS%, a
unilateral action on the part of Videotron which demonstrates its bad
faith.
35. Answering the allegations of paragraph 35 of the petition,
TTI denies the same, and TTI states affirmatively that WHI's financing
needs can be easily remedied if Videotron were to continue its funding
pursuant to its obligations set forth in the November Agreement, if
Videotron were to accept the alternatives proposed by the TTI members
to the WHI Board for interim funding for a reasonable term so as to
allow for the orderly sale; and disposition of nonessential WHI assets and
without the conversion feature which Druid destroy the balanced
Ownership and voting rights of the parties in Wry, or if Videotron were
to exercise diligence in seeking purchasers pursuant to the alternative
proposal for the sale of nonessential WHI assets, which has already been
approved by the WHI Board.
36. Answering the allegations of paragraph 36 of the petition,
TTI denies the same, and TTI states affirmatively that WHI has only five
employees and that subsidiaries of WHI have approximately 20 employees,
and TTI further states affirmatively that certain operating assets of WHI,
for example, Spokane, are projected in fiscal 1997 to be cash flow positive
whereas others in the system are projected to be cash flow negative and
require funding in order to fully exploit the asset, and that, thus, WHI
could maximize its assets by selling off certain nonessential assets.
<PAGE>
37. Answering the allegations of paragraph 37 of the petition,
TTI denies the same, and TTI states affirmatively that, while it is true that
if Wan did not meet its contractual obligations, it would be in default
under various leases or trade accounts; but that Wan can meet its
contractual obligations by finding alternative funding arrangements
including funding in the commercial market, or through the sale
nonessential assets, or by having Videotron meet its obligations for
funding as required under the November Agreement.
38. Answering the allegations of paragraph 38 of the petition,
TTI repeats its answers to paragraphs 1 through 37 as set forth above.
39. Answering the allegations of paragraph 39 of the petition,
HI admits that WHI's bylaws make no provision for resolution of a
deadlock on the WHI Board, but TTI denies the remaining allegations
thereof and TTI states affirmatively that several funding options are
available for WHI including enforcement of Videotron's funding
obligations pursuant to the November Agreement, finding in the
commercial market, and the sale of nonessential assets.
<PAGE>
40. Answering the allegations of paragraph 40 of the petition,
TTI admits the same, and TTI states affirmatively that the deadlock on
the Wed Board is of Videotron's own making, unnecessary and designed
to provide an artificial vehicle by which Videotron can dilute TTI's
ownership in WHI and change the balance of power on the Board of
Directors, and is not threatening, nor will it lead to, irreparable harm.
41. Answering the allegations of paragraph 41 of the petition,
TTI denies the same. In the alternative, assuming arguendo that the
Court determines to appoint a custodian to protect and preserve the assets
of WHI, such custodian should expressly not be authorized or empowered
to resolve Board deadlocks in a manner that would implement any funding
or other proposal that would impact the balance of ownership or the
equal.voting rights presently held by TTI and Videotron's in WHI or that
would dilute TTI s ownership or voting interests in WHI nor should the
Court authorize or empower any custodian to adopt financing proposals
that would put WHI in default under the PTG Agreement.
42. Answering the allegations of paragraph 42 of the petition,
TTI repeats its answers to paragraphs 1 through 41 as set forth above.
43. Answering the allegations of paragraph 43 of the petition,
TTI denies the same, and TTI states affirmatively that the requested need
for a custodian is an artificial need created by Videotron's own actions
taken in bad faith and for its own advantage.
<PAGE>
44. Answering the allegations of paragraph 44 of the petition,
TTI denies the same, and TTI states affirmatively that Videotron's actions
have been taken hastily and with unclean hands and that it should receive
no payments for the institution of this action which resulted of its own
making and TTI further states affirmatively that payment of its costs and
fees should be borne by Videotron as a result of its actions taken in bad
faith, including the filing of this action with the Court.
45. TTI denies each and every other allegation of the Petition
not specifically otherwise answered above.
WHEREFORE, TTI requests that the Court deny Videotron's
Petition for Appointment of a Custodian as requested by Videotron.
Alternatively, should the Court decide to appoint a custodian, TTI
requests that the custodian expressly not be authorized or empowered to
resolve Board deadlocks in a manner that would implement any funding
or other proposal which would impact the balance of ownership or the
equal voting rights presently held by TTI and Videotron in WHI, or that
would dilute TTI's ownership or voting interests in WHI. TTI further
requests that, in the event a custodian is appointed, the custodian not be
authorized to adopt financing proposals that would put WHI in default
under the PTG Agreement.
RICHARDS, LAYTON & FINGER
By: /s/ C. Malcolm Cochran, IV
C. Malcolm Cochran, IV
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
(302) 658-6541
Attorneys for Transworld
Telecommunications, Inc.
OF COUNSEL:
PARSONS, BEHLE & LATIMER
James M. Elegante
201 South Main Street Suite 1800
P.O. Box 45898
Salt Lake City, Utah 84145-0898
(801) 532-1234
Dated: March 5, 1997
<PAGE>
CERTIFICATE OF SERVICE
I hereby certify that on March 5, 1997, I caused two copies of the
foregoing Objection and Response to Petition for Appointment of Custodian to be
served on the following counsel at the addresses indicated:
VIA HAND DELIVERY
Judith N. Renzulli, Esquire
Duane Morris & Heckscher
1201 North Market Street, #1500
P.O. Box 195
Wilmington, DE 19899
VIA FEDERAL EXPRESS
Celia Goldway Barenholtz, Esquire
Kornish, Lieb, Weiner & Hellman LLP
1114 Avenue of the Americas
New York, NY 10036
/s/ C. Malcolm Cochran, IV
C. Malcolm Cochran, IV
EXHIBIT 17.1
FONDELEC GROUP, INC.
VIA FACSIMILE
801-532-6060
March 18, 1997
Mr. Lance D'Ambrosio
President & CEO
Transworld Telecommunications, Inc.
102 West 500 South, Suite 320
Salt Lake City, Utah 84101
Dear Lance:
Effective Friday, March 14, I am resigning from the Board of Directors of
Transworld Telecommunications, Inc.
Sincerely,
/s/ George Gerpheide
George Sorenson
Chairman
Stamford Harbor Park 333 Ludlow Street Stamford, CT 06902
Tel: 203-326-4570 Fax: 203-326-4578
QUITO - BOGOTA - BRASILIA - LA PAZ - LIMA - SANTIAGO
EXHIBIT 17.2
WALLACE T. BOYACK
4739 Fortuna Way
Salt Lake City, Utah 84124
March 14, 1997
Board of Directors
Transworld Telecommunications, Inc.
102 West 500 South, Suite 320
Salt Lake City, Utah 84101
Gentlemen:
The undersigned respectfully resigns as a director of Transworld
Telecommunications, Inc. to be effective as of the date of this letter.
I will coordinate with legal counsel to provide information to the
U.S. Securities and Exchange Commission regarding my resignation.
Very truly yours,
/s/ Wallace T. Boyack
Wallace T. Boyack
EXHIBIT 17.3
R. Bret Jenkins
350 South 400 East, Suite 105
Salt Lake City, Utah 84111
March 18, 1997
Board of Directors
Transworld Telecommunications, Inc.
102 West 500 South, Suite 320
Salt Lake City, Utah 84101
Gentlemen:
The undersigned respectfully resigns as a director of Transworld
Telecommunications, Inc., to be effective as of the date of this letter.
I will coordinate with legal counsel to provide information to the
U.S. Securities and Exchange Commission regarding my resignation.
Very truly yours,
/s/ R. Bret Jenkins
R. Bret Jenkins
