UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended SEPTEMBER 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
Commission File Number: 0-22888
CAI WIRELESS SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
Connecticut 06-1324691
<S> <C>
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
18 Corporate Woods Boulevard, Albany, New York 12211
(Address and zip code of principal executive offices)
(518) 462-2632
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No _____
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No _____
Number of shares outstanding of each of registrant's class of common stock at
October 29, 1998:
CLASS OUTSTANDING SHARES
Common Stock, $.01 par value 17,241,379
<PAGE>
PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
CAI WIRELESS SYSTEMS, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SEPTEMBER 30, 1998 MARCH 31, 1998
------------------ --------------
(UNAUDITED)
ASSETS
Cash and cash equivalents $ 1,339,067 $ 1,275,020
Restricted cash 11,204,249 9,134,651
Debt service escrow 16,913,922 16,418,922
Subscriber accounts receivable, net 701,635 387,144
Prepaid expenses 549,100 661,669
Property and equipment, net 41,459,062 49,898,337
Wireless channel rights, net 187,730,254 194,050,792
Investment in CS Wireless Systems, Inc. - 43,337,527
Investment in TelQuest Satellite Services LLC 1,220,404 3,174,732
Goodwill, net of accumulated amortization 22,066,442 22,985,876
Debt financing costs, net 5,838,099 7,079,424
Other assets 3,059,931 3,061,780
------------ -----------
Total Assets $ 292,082,165 $ 351,465,874
============= =============
LIABILITIES AND SHAREHOLDERS' DEFICIT
LIABILITIES
Accounts payable $ 3,125,495 $ 4,852,091
Accrued expenses 28,935,335 12,253,286
Wireless channel rights obligations 2,922,100 4,832,971
Interim debt financing 60,000,000 45,000,000
Long term notes 311,558,053 312,088,506
------------- ------------
406,540,983 379,026,854
============= ==============
Commitments and Contingencies
SHAREHOLDERS' DEFICIT
Common stock, 100,000,000 shares authorized, no par
value; 40,543,039 shares issued and outstanding 275,770,764 275,770,764
Additional paid-in capital 101,711,759 101,711,759
Accumulated deficit (491,941,341) (405,043,503)
------------- ------------
(114,458,818) (27,560,980)
------------- ------------
Total Liabilities and Shareholders' Deficit $ 292,082,165 $ 351,465,874
============= =============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CAI WIRELESS SYSTEMS, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six-Months Ended Three-Months Ended
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- -----------------------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues $ 10,852,156 $ 15,386,043 $ 5,219,189 $ 7,294,791
------------- ------------- ------------- ------------
Costs and expenses
Programming and licensing 7,606,028 7,271,163 3,949,343 3,568,253
General and administrative 12,518,953 14,771,615 6,191,778 7,299,282
Depreciation and amortization 13,637,310 15,907,088 6,817,688 7,968,256
------------- ------------- ------------ ------------
33,762,291 37,949,866 16,958,809 18,835,791
------------- ------------- ------------ ------------
Operating loss (22,910,135) (22,563,823) (11,739,620) (11,541,000)
------------- ------------- ------------ ------------
Other income (expense)
Interest expense (22,552,464) (22,929,735) (9,642,589) (11,956,062)
Equity in losses of affiliates (45,291,855) (13,740,000) (34,324,691) (7,124,000)
Interest and other income 3,856,616 1,623,027 2,917,441 762,390
------------ ------------ ------------ ------------
(63,987,703) (35,046,708) (41,049,839) (18,317,672)
------------ ------------ ------------ ------------
Net loss (86,897,838) (57,610,531) (51,789,459) (29,858,672)
Preferred stock dividends - (7,274,859) - (3,706,901)
------------ ------------ ------------ ------------
Loss applicable to common
stockholders $(86,897,838) $(64,885,390) $(52,789,459) $(35,565,573)
============ ============ ============ ============
Loss per common share $ (2.14) $ (1.60) $ (1.30) $ (0.83)
======== ======== ======== ========
Average common and equivalent
shares outstanding 40,543,039 40,540,539 40,543,039 40,540,539
========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CAI WIRELESS SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE QUARTER ENDED SEPTEMBER 30, 1998 (UNAUDITED)
AND THE YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED TOTAL
SHARES AMOUNT CAPITAL DEFICIT EQUITY (DEFICIT)
------ ------ ------- ------- ----------------
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1997 40,540,539 $275,769,414 $ - $(161,079,224) $114,690,190
Common stock issued in exchange for
BANX warrants 2,500 1,350 - - 1,350
Senior preferred stock and accumulated
dividends contributed to capital
pursuant to the BANX termination
agreement on March 3, 1998 - - 101,711,759 - 101,711,759
Preferred stock dividends accrued - - - (13,891,025) (13,891,025)
Net loss - - - (230,073,254) (230,073,254)
---------- ------------ ------------ ------------- -------------
BALANCE AT MARCH 31, 1998 40,543,039 275,770,764 101,711,759 (405,043,503) (27,560,980)
NET LOSS - - - (86,897,838) 86,897,838)
---------- ------------ ------------ ------------- -------------
BALANCE AT SEPTEMBER 30, 1998 40,543,039 $275,770,764 $101,711,759 $(491,941,341) $(114,458,818)
========== ============ ============ ============= =============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CAI WIRELESS SYSTEMS, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended September 30,
---------------------------------------
1998 1997
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (86,897,838) $ (57,610,531)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 13,637,310 15,907,088
Equity in net losses of affiliates 45,291,855 13,740,000
(Gain) loss on sale of assets (2,566,716) 36,682
Debt financing costs and discount amortization 864,180 2,434,732
Changes in assets and liabilities:
Subscriber accounts receivable and other assets (248,379) 95,181
Accounts payable and accrued expenses 19,766,648 2,470,606
------------ ------------
Net cash used in operating activities (10,152,940) (22,926,242)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Funds deposited in restricted cash account (2,069,598) -
Purchase of wireless channel rights (109,929) (1,761,760)
Purchase of equipment (686,760) (5,224,875)
Proceeds from sale of equipment 4,810,018 39,145
Proceeds from sale of investments 62,166 66,443
Proceeds from sale of escrow investments - 15,083,944
Payments received from CS Wireless Systems, Inc. 212,139 2,514,542
Investment in TelQuest Satellite Services LLC (411,567) (1,512,488)
Loan to related parties (87,421) (197,758)
Cash paid for investment - (356,025)
Other (196,017) (153,823)
----------- -----------
Net cash provided by investing activities 1,523,031 8,497,345
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from interim debt financing 10,894,106 9,500,000
Repayment of debt including wireless channel rights
obligations (2,073,705) (2,167,578)
Debt financing costs paid (126,445) (2,514,372)
----------- -----------
Net cash provided by financing activities 8,693,956 4,818,050
---------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 64,047 (9,610,847)
Cash and cash equivalents, beginning of year 1,275,020 10,471,918
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,339,067 $ 861,071
============ ===========
CASH PAYMENTS DURING THE PERIOD FOR INTEREST $ 22,823 $ 17,429,098
======== ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CAI WIRELESS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not include
all the information and notes required by generally accepted accounting
principles for complete financial statements. The Company does not have
comprehensive income pursuant to SFAS No. 130 for the periods presented and,
accordingly, a comprehensive income disclosure has not been included.
The consolidated financial statements include the accounts of CAI
Wireless Systems, Inc. and its wholly-owned subsidiaries (the "Company" or
"CAI"). All intercompany transactions have been eliminated in consolidation.
CAI's 60% investment in CS Wireless Systems, Inc. ("CS Wireless") and 30%
investment in TelQuest Satellite Services LLC ("TSS") are accounted for on the
equity method since CAI does not control day to day operations of either
company. Current summarized financial information regarding CS Wireless is
presented in Note 5. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation of
results for interim periods have been included. Certain items in the prior
period financial statements have been reclassified to conform with the current
period's presentation. Operating results for the quarter and six months ended
September 30, 1998 are not necessarily indicative of the results that may be
expected for the fiscal year ending March 31, 1999. The unaudited financial
statements presented herein should be read in conjunction with the Company's
Annual Report on Form 10-K for the year ended March 31, 1998 which is on file
with the Securities and Exchange Commission.
NOTE 2. CHAPTER 11 FILING
On July 30, 1998 (the "Petition Date"), CAI Wireless Systems, Inc., a
Connecticut corporation ("CAI Wireless"), and one of its wholly-owned
subsidiaries, Philadelphia Choice Television, Inc., a Delaware corporation
("PCT"; and together with CAI Wireless, the "Debtors"), filed voluntary
petitions for relief under Chapter 11, Title 11 of the United States Code (the
"Bankruptcy Code") with the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court"), Wilmington, Delaware. The bankruptcy cases
(the "Cases") of CAI Wireless and PCT are being jointly administered, for
procedural purposes only, before the Bankruptcy Court under Case No. 98-1765
(JJF). Pursuant to Sections 1107 and 1108 of the Bankruptcy Code, the Debtors,
as debtors and debtors-in-possession, managed and operated their assets and
businesses pending the September 30, 1998 confirmation of a joint
reorganization plan (the "Plan") under the supervision and orders of the
Bankruptcy Court. The Plan was filed with the Bankruptcy Court on the Petition
Date and filed by the Company with the Securities and Exchange Commission (the
"Commission") on a Current Report on Form 8-K on July 1, 1998.
Prior to the Petition Date, the Company solicited and received the
requisite approvals from those classes of creditors that would be impaired
under the Plan. Specifically, the Company solicited and received the requisite
approval of the holders of the Company's 12.25% Senior Notes due 2002 (the "Old
Senior Notes") and the holders of certain subordinated indebtedness of the
Company. The Company did not solicit the vote of its shareholders, for whom
the Plan provided no right to receive or retain any property of the Company
post-reorganization. Section 1126(g) of the Bankruptcy Code specifically deems
such shareholders not to have accepted the Plan.
A confirmation hearing was held in the Bankruptcy Court on September 9,
1998. The Plan was confirmed on September 30, 1998 and consummated on
October 14, 1998. Under the confirmed Plan, each holder of the Old Senior
Notes received a pro rata portion of $212,909,624 aggregate principal
amount at maturity ($100,000,000 aggregate discounted principal amount at
issuance) of 13% Senior Notes due 2004 (the "New Senior Notes"), 91% of the
equity of reorganized CAI and approximately $16,500,000 in cash. Holders of
subordinated indebtedness
<PAGE>
CAI WIRELESS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2. CHAPTER 11 FILING (CONTINUED)
claims against CAI received a pro rata portion of the remaining 9% of the
equity of reorganized CAI. All equity received by the holders of Old Senior
Notes and subordinated indebtedness claims was subsequently diluted by equity
reserved for issuance upon the exercise of options granted to members of CAI's
senior management and for equity of reorganized CAI issued in connection with
the Exit Facility (defined below).
Although the Company has emerged from bankruptcy, there continues to be
substantial doubt as to the Company's ability to continue as a going concern.
Reference is made to Item 7 - "Management's Discussion and Analysis of Results
of Operations and Financial Condition" and the Report of Independent Public
Accountants included in CAI's Annual Report on Form 10-K for the fiscal year
ended March 31, 1998, filed with the Commission on June 30, 1998.
The Company's consolidated financial statements have been prepared on a
going concern basis, which contemplates continuity of operations, realization
of assets and liquidation of liabilities and commitments in the normal course
of business. The appropriateness of reporting on a going concern basis is
dependent upon, among other things, future operations and the ability to
generate sufficient cash from operations and financing sources to meet
obligations. The consolidated financial statements contained herein and to
which these notes relate do not include any adjustments relating to the
confirmation and consummation of the Plan. Reference is made to the pro forma
balance sheet included herein as Exhibit 99.5, which gives effect to the
October 14, 1998 consummation of the Plan as if such consummation had occurred
on September 30, 1998.
NOTE 3. INTERIM FINANCING
DIP FINANCING. In connection with the Cases, CAI consummated a
$60,000,000 Debtor-in-Possession financing arrangement (the "DIP Facility")
provided by Merrill Lynch Global Allocation Fund, Inc. ("MLGAF"). The DIP
financing was governed by an Amended and Restated Note Purchase Agreement dated
as of July 30, 1998 (the "DIP Agreement") between CAI and MLGAF, a copy of
which was filed as an exhibit to CAI's Current Report on Form 8-K dated August
3, 1998. Indebtedness under the DIP Facility was evidenced by certain
promissory notes, accrued interest at 13% per annum and had a maturity date of
January 29, 1999.
Of the $60,000,000 provided to CAI under the DIP Facility, $49,105,894
represented the outstanding principal, interest and fees due to the MLGAF
pursuant to that certain Note Purchase Agreement dated as of November 24, 1997
(the "Existing Note Purchase Agreement") among CAI, certain of its subsidiaries
and MLGAF. All such amounts outstanding under the Existing Note Purchase
Agreement were converted into DIP Notes as if there had been a purchase thereof
under the DIP Agreement in the amount of $49,105,894. The remaining
$10,894,106 was made available to CAI for its use during the Chapter 11 case,
in accordance with the terms of an approved budget.
On October 14, 1998, in connection with consummating the Plan, all
outstanding amounts under the DIP Facility, including the $60,000,000 aggregate
principal amount, accrued and unpaid interest in the amount of $1,646,667 and a
$600,000 commitment fee were repaid out of the proceeds of the Exit Facility
(defined below).
EXIT FACILITY. On October 14, 1998, in connection with consummating the
Plan, the Company obtained an $80,000,000 credit facility (the "Exit
Facility"), also from MLGAF. The Company received net proceeds from the Exit
Facility of $15,953,000, after repaying all outstanding amounts under the DIP
Facility and certain commitment fees associated with the Exit Facility. The
Exit Facility is governed by the terms of a Note Purchase Agreement dated
October 14, 1998 (the "NPA"), a copy of which was filed by the Company with the
Commission as an exhibit to the Company's Current Report on 8-K dated October
15, 1998. The Exit Facility consists of two tranches: Tranche A and Tranche B.
Tranche A is a $30,000,000 senior secured loan bearing interest at 10.5%
compounded
<PAGE>
CAI WIRELESS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3. INTERIM FINANCING (continued)
semi-annually and evidenced by a Senior Secured A Note. The Company has
granted a first priority lien on and security interest in all of its assets to
secure performance of the Company's obligations with respect to Tranche A.
Tranche B is a $50,000,000 senior secured loan bearing interest at 13% per
annum and evidenced by a Senior Secured B Note. The Company has granted a
second priority lien on and security interest in and to all of its assets to
secure performance of its obligations with respect to Tranche B.
In addition to the liens granted by the Company, substantially all of the
Company's wholly-owned subsidiaries have guaranteed the obligations of the
Company with respect to the Exit Facility. The subsidiaries have granted a
lien on and security interest in all of their respective assets to secure their
performance under such subsidiary guaranties.
The Exit Facility is a two-year credit facility, maturing on October 14,
2000. The Company paid a 1% facility fee equal to $300,000 on the Tranche A
amount at the closing of the Exit Facility. In addition, the Company is
required to pay an 8% facility fee equal to $4,000,000 on the Tranche B amount,
of which the Company paid $1,500,000 at the closing of the Exit Facility. The
remaining $2,500,000 balance of the Tranche B facility fee is payable at
maturity of the Exit Facility (by its term, acceleration or otherwise).
The Company issued 2,241,379 shares of its Common Stock, par value $.01
per share (the "New Common Stock") to MLGAF as additional consideration to
MLGAF for providing the Exit Facility. The shares of New Common Stock issued
to MLGAF represent 13% of the total New Common Stock issued and outstanding on
October 14, 1998. The foregoing is a summary of certain terms of the Exit
Facility and is qualified in its entirety by reference to the NPA.
NOTE 4. LITIGATION
IN RE CAI WIRELESS SYSTEMS INC. SECURITIES LITIGATION. CAI has been named
in six class action lawsuits alleging various violations of the federal
securities laws filed in the United States District Court for the Northern
District of New York. The actions were consolidated into one lawsuit entitled
IN RE CAI WIRELESS SYSTEMS, INC. SECURITIES LITIGATION (96-CV-1857) (the
"Securities Lawsuit"), which is currently pending in the Northern District of
New York. The amended, consolidated complaint, which names the Company, Jared
E. Abbruzzese, chairman and chief executive officer of the Company, John J.
Prisco, president, chief operating officer and a director of the Company, and
Alan Sonnenberg, the former president of the Company, as defendants, alleges a
variety of violations of the anti-fraud provisions of the Federal securities
laws by CAI arising out of its alleged disclosure (or alleged omission from
disclosure) regarding its Internet and other flexible use of MMDS spectrum, as
well as its business relationship with Bell Atlantic and NYNEX. Specifically,
the complaint alleges that defendants violated Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule 10b-5
promulgated under the Exchange Act during the specified Class Period (May 23,
1996 through December 6, 1996).
The Company has notified the carrier of its Directors' and Officers'
Liability insurance policy, which is intended to cover not only the Company's
officers and directors, but also the Company, itself, against claims such as
those made in the Securities Lawsuit. The policy covers up to $5,000,000 of
any covered liability, subject to a retention amount of $500,000.
The Securities Lawsuit is in its preliminary stages. A scheduling
conference was held on June 3, 1997, at which the briefing schedule for
defendants' motion to dismiss was agreed upon among the parties. The
defendants' motion to dismiss was heard by the Northern District of New York on
October 17, 1997 and is still pending. While the motion is pending, all other
deadlines affecting motions and discovery have been postponed.
<PAGE>
CAI WIRELESS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4. LITIGATION (continued)
The Plan provided no recovery to any holder of the Company's equity or to
any holder of an equity-based claim, such as the claims made against the
Company in the Securities Lawsuit. Upon the confirmation of the Plan on
September 30, 1998 and the October 14, 1998 consummation of the Plan,
plaintiffs' claims against the Company in the Securities Lawsuit were
discharged and released by order of the Bankruptcy Court. Furthermore, the
Securities Lawsuit plaintiffs were enjoined from continuing their action
against the Company. The Company is currently preparing a stipulation of
dismissal to be filed with the Court in this action. The individual defendants
are continuing to contest the Securities Lawsuit vigorously and believe it is
entirely without merit at this time. Accordingly, management believes the
Securities Lawsuit will not have a material adverse effect on the Company's
earnings, financial condition or liquidity.
OTHER LITIGATION. The Company is also named as a defendant in JOE HAND
PROMOTIONS, INC. V. CAI WIRELESS SYSTEMS, INC. D/B/A POPVISION WIRELESS CABLE
and as a third party defendant by one or more defendants in JOE HAND
PROMOTIONS, INC. V. 601 L & P BAR, INC. AND JOE HAND PROMOTIONS V. CAROL
VALICEE D/B/A MARV'S BAR & RESTAURANT V. CAI WIRELESS SYSTEMS, INC. D/B/A
POPVISION WIRELESS CABLE TV in the U.S. District Court for the Eastern
District of Pennsylvania. These actions arise out of the alleged improper
broadcasts of certain sporting events in commercial establishments in violation
of the alleged distributor's exclusive broadcast rights. The Complaints seek
actual compensatory damages in unspecified amounts, together with statutory
penalties claimed for alleged violations of federal statutes. The Plaintiff,
Joe Hand Promotions, has alleged itself to be the exclusive distributor of
certain televised sporting events in the greater Philadelphia area for
commercial establishments, and has alleged the improper broadcast of such
events in approximately five instances. The lawsuits were in the preliminary
stages when the Company commenced its Chapter 11 case. Action against CAI in
these lawsuits has been suspended by the Court. The Company believes that in
the event of outcomes adverse to it, the amounts would not be material given
the nature of the claims.
NOTE 5. EQUITY INVESTMENTS
CS WIRELESS SYSTEMS, INC. The elimination of the Company's
investment in CS Wireless reflects an equity loss to the extent of its
$43,338,000 investment, and is based on CAI's 60% pro-rata share of CS Wireless'
net loss of $83,300,000 for the six-month period ended June 30, 1998.
$33,336,000 of the $83,300,000 CS Wireless loss occurred in CAI's second quarter
based on the June 1998 write-down of goodwill by CS Wireless in the
amount of $46,378,000. The remaining pro rata share of the $83,300,000 net
loss was not recorded since CAI does not guarantee any CS Wireless debt.
There is no current year amortization of goodwill associated with this
investment since CAI's goodwill relating to CS Wireless was written off as
of March 31, 1998.
<PAGE>
CAI WIRELESS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5. EQUITY INVESTMENTS (continued)
The following is an unaudited condensed consolidated balance sheet of CS
Wireless derived from its Form 10-Q as of June 30, 1998:
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and cash equivalents $ 54,144,000
Restricted cash 5,030,000
Other current assets 1,967,000
Systems and equipment, net 52,939,000
Wireless channel rights, net 170,051,000
Investment in and loans to equity affiliates 7,022,000
Debt issuance costs and other assets, net 8,859,000
------------
Total Assets $300,012,000
============
LIABILITIES AND EQUITY
Accounts payable and accrued expenses $ 6,174,000
FCC Auction payable 4,164,000
Other liabilities 778,000
Debt 299,967,000
Equity (11,071,000)
------------
Total Liabilities and Equity $300,012,000
============
</TABLE>
The following is an unaudited condensed consolidated statement of
operations of CS Wireless derived from its June 30, 1998 Form 10-Q for
the period presented:
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
JUNE 30, 1998 JUNE 30, 1998
------------- ----------------
<S> <C> <C>
Revenues $ 6,805,000 $ 13,628,000
----------- ------------
Operating expenses:
Systems operations 4,017,000 7,925,000
General and administrative 4,983,000 9,102,000
Impairment of goodwill 46,378,000 46,378,000
Depreciation and amortization 7,717,000 14,941,000
----------- -----------
Total operating expenses 63,095,000 78,346,000
Operating loss (56,290,000) (64,718,000)
Interest income 926,000 1,943,000
Interest expense (8,621,000) (16,892,000)
Equity in losses of affiliates (779,000) (1,765,000)
Cumulative effect of change in accounting
principle for organizational costs - (1,868,000)
------------ ------------
Net loss $(64,764,000) $(83,300,000)
============ ============
</TABLE>
TELQUEST SATELLITE SERVICES LLC. The Company's investment in TSS
reflects an equity loss of $760,000 based on CAI's pro-rata share of TSS's net
losses approximating $1,158,000 for the three months ended September 30, 1998
plus a true-up for CAI's ownership which increased as of December 8, 1997 to
30% based on a non-exclusivity agreement signed as of that date. Additionally,
the investment has been reduced by $416,600 in depreciation on the equipment
leased to TSS. As of September 30, 1998, TSS has negative net worth of
$5,764,000.
<PAGE>
CAI WIRELESS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6. OPERATING SEGMENT INFORMATION
The following information is provided for operating segments for the six
months ended September 30, 1998 as determined by senior management and subject
to meeting quantitative thresholds. While CAI is a corporate holding company
and not an operating segment, it is shown separately for clarity in segment
reporting. Atlantic Microsystems, Inc. ("AMI"), a wholly owned subsidiary of
CAI, holds the stock of entities owning or leasing a substantial portion of
CAI's spectrum rights.
<TABLE>
<CAPTION>
Albany New York Philadelphia
CORPORATE MARKET MARKET MARKET AMI ALL OTHER(1)
--------- ------ -------- ----------- --- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues
EXTERNAL
Three months 6/98 $ - $ 766,300 $ 850,989 $ 3,526,503 $ - $ 489,175
Three months 9/98 - 729,393 766,675 3,345,322 - 377,799
----------- ------------ ----------- ----------- ------------ -----------
Total six months $ - $ 1,495,693 $ 1,617,664 $ 6,871,825 $ - $ 866,974
=========== ============ =========== =========== ============ ===========
INTER-COMPANY
Three months 6/98 $ 579,000 $ - $ - $ - $ 4,166,137 $ 72,772
Three months 9/98 579,000 - - - 4,417,308 $ 108,806
----------- ------------ ----------- ----------- ------------ -----------
Total six months $ 1,158,000 $ - $ - $ - $ 8,583,445 $ 181,578
=========== ============ =========== =========== ============ ===========
INTEREST EXPENSE
Three months 6/98 $(12,876,382) $ - $ - $ - $ (21,653) $ (11,499)
Three months 9/98 (9,632,084) - - - $ (4,376) $ (6,470)
----------- ------------ ----------- ----------- ------------ -----------
Total six months $(22,508,466) $ - $ - $ - $ (26,029) $ (17,969)
=========== ============ =========== =========== ============ ===========
DEPRECIATION &
AMORTIZATION
Three months 6/98 $ (519,668) $ (366,840) $ (970,170) $ (2,117,400) $ (3,117,480) $ (2,548,544)
Three months 9/98 (518,217) (366,840) (970,170) (2,117,400) (3,117,480) (2,548,061)
----------- ------------ ----------- ----------- ------------ -----------
Total six months $ (1,037,885) $ (733,680) $ (1,940,340) $ (4,234,800) $ (6,234,960) $ (5,096,605)
=========== ============ =========== =========== ============ ===========
SEGMENT LOSS
Three months 6/98 $(25,795,124) $ (240,450) $ (1,398,798) $ (1,428,194) $ (581,932) $ (4,663,888)
Three months 9/98 (46,842,687) (335,547) (1,499,000) 1,190,997 (680,729) (4,622,486)
----------- ------------ ----------- ----------- ------------ -----------
Total six months $(72,637,811) $ (575,997) $ (2,897,798) $ (237,197) $ (1,262,661) $ (9,286,374)
=========== ============ =========== =========== ============ ===========
ASSETS $392,370,876 $ 2,363,180 $ 1,149,983 $ 7,828,868 $ 180,890,376 $ 33,263,607
DUE FROM SEGMENTS 306,248,161 - - - - -
DUE TO PARENT $ - $ (11,346,839) $(30,331,982) $(22,701,093) $(182,049,004) $(59,819,243)
EXPENDITURES FOR SEGMENT
ASSETS $ 2,649 $ 22,155 $ 6,187 $ 95,756 $ - $ 6,032
(1) includes Boston Market
</TABLE>
CAI WIRELESS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6: OPERATING SEGMENT INFORMATION (continued)
Total revenues, income(loss), and assets are reconciled as follows:
<TABLE>
<CAPTION>
REVENUES (EXTERNAL) INCOME (LOSS) ASSETS
<S> <C> <C> <C>
Total reported for identified segments $ 9,985,182 $(77,611,464) $584,603,283
Boston Market(included in All Other) - (4,730,806) 16,127,159
All Other (excluding Boston Market) 866,974 (4,555,568) 17,136,448
Elimination of inter-segment balances - - (307,940,208)
Elimination of inter-segment investments - - (17,844,517)
---------- ----------- ------------
Consolidated totals $10,852,156 $(86,897,838) $292,082,165
=========== ============ ===========
</TABLE>
The following information for operating segments for the six months ended
September 30, 1997 as determined by senior management and subject to meeting
quantitative thresholds.
<TABLE>
<CAPTION>
Albany New York Philadelphia
CORPORATE MARKET MARKET MARKET AMI ALL OTHER(1)
--------- ------ -------- ------------ --- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
External $ - $ 1,635,435 $ 2,875,122 $ 9,275,527 $ - $ 1,599,959
Inter-company $ 1,158,000 $ - $ - $ - $ 3,964,803 $ 164,857
Interest expense $ (22,922,267) $ - $ - $ - $ - $ (7,468)
Depreciation &
amortization $ (4,428,882) $ (925,590) $ (1,373,970) $ (5,643,090) $ (4,515,390) $ (2,941,556)
Segment loss $ (43,577,141) $ (903,966) $ (2,263,879) $ (3,770,344) $ (1,351,579) $ (5,743,622)
Assets $ 567,381,721 $ 3,854,322 $ 1,617,435 $ 15,993,172 $ 198,490,571 $ 17,741,071
Due from segments $ 282,311,301 $ - $ - $ - $ - $ -
Due to parent $ - $(11,444,496) $(23,562,715) $(26,743,311) $(196,535,305) $(24,025,474)
Expenditures for segment
assets $ 200,060 $ 219,851 $ 159,756 $ 709,890 $ - $ 530,610
</TABLE>
(1) includes Boston Market
<PAGE>
CAI WIRELESS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6: OPERATING SEGMENT INFORMATION (continued)
Total revenues, income(loss), and assets are reconciled as follows:
<TABLE>
<CAPTION>
REVENUES (EXTERNAL) INCOME (LOSS) ASSETS
<S> <C> <C> <C>
Total reported for identified segments $13,786,084 $(51,866,909) $787,337,221
Boston Market(included in All Other) - (973,780) 261,481
All Other (excluding Boston Market) 1,599,959 (4,769,842) 17,479,590
Elimination of inter-segment balances - - (285,211,146)
Elimination of inter-segment investments - - (17,859,517)
----------- ------------ ------------
Consolidated totals $15,386,043 $(57,610,531) $502,007,629
=========== ============ ============
</TABLE>
NOTE 7. RESIGNATION OF AUDITORS
On July 30, 1998, the Company was informed by PricewaterhouseCoopers
LLP ("PWC") that PWC had resigned from its engagement as the Company's
independent accountant. The Company was informed by PWC that it had resigned
from the engagement due to a conflict of interest arising as the result of the
July 1, 1998 merger of Price Waterhouse, LLP and Coopers & Lybrand L.L.P.
Prior to the merger, Coopers & Lybrand L.L.P. acted as the Company's
independent accountant. Price Waterhouse, LLP, acted as collateral agent and
administrative agent for MLGAF under a Note Purchase Agreement dated as of
November 24, 1997, as amended from time to time. PWC currently acts as
collateral agent and administrative agent for MLGAF under the Note Purchase
Agreement dated as of October 14, 1998 between the Company and MLGAF. The
Company is currently seeking independent accountants to replace PWC.
Except as discussed below, the reports of Coopers & Lybrand L.L.P. on the
Company's financial statements for the past two fiscal years contained no
adverse opinion or disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principle.
The report of Coopers & Lybrand L.L.P. delivered in connection with the
Company's audited financial statements for the years ended March 31, 1998 and
1997 contained an explanatory paragraph which indicated that there was
substantial doubt regarding the Company's ability to continue as a going
concern.
In connection with its audits for the two most recent fiscal years and
through July 30, 1998, there have been no disagreements with Coopers & Lybrand
L.L.P. or PWC on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements if
not resolved to the satisfaction of Coopers & Lybrand L.L.P. would have caused
them to made reference thereto in their report on the financial statements for
such years. During the two most recent fiscal years and through July 30, 1998,
there have been no reportable events (as defined in Regulation S-K item
304(a)(1)(v)) involving the Company.
The Company requested that PWC furnish it with a letter addressed to the
SEC stating whether or not PWC agrees with the above statements. A copy of
such letter, dated August 6, 1998, was filed as Exhibit 16 to the Company's
Current Report on Form 8-K dated August 6, 1998.
NOTE 8. SUBSEQUENT EVENTS
Reference is made to Notes 2 and 3 above for a description of the October
14, 1998 consumation of CAI's Chapter 11 case and the Exit Facility that CAI
entered into in connection therewith. Also, reference is made to Exhibit 99.5
for the pro forma effects of the consummation on the Company's balance sheet.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The statements contained in this Quarterly Report on Form 10-Q, including
the exhibits hereto, relating to the Company's future operations may constitute
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. Actual results of the Company may differ
materially from those in the forward-looking statements and may be affected by
a number of factors including the Company's ability to design and implement
competitive, cost effective two-way operating plans, the Company's ability to
attract one or more strategic partners and such strategic partner's willingness
to enter into arrangements with CAI on a timely basis, the terms of such
arrangements, the receipt of regulatory approvals for alternative uses of its
MMDS spectrum, the success of CAI's trials in various of its markets, the
commercial viability of any alternative use of MMDS spectrum, consumer
acceptance of any new products offered or to be offered by CAI, the Company's
ability to fund its business plans, equipment availability for alternative uses
of MMDS spectrum, subscriber equipment availability, practical success of CAI's
engineered technology, tower space availability, absence of interference and
the ability of the Company to redeploy or sell excess equipment, the
assumptions, risks and uncertainties set forth below in this "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
elsewhere herein, as well as other factors contained herein and in the
Company's other securities filings. Furthermore, there can be no assurance
that the financing obtained by the Company to date will enable it to meet its
future cash needs.
CHAPTER 11 FILING. On July 30, 1998 (the "Petition Date"), CAI Wireless
Systems, Inc., a Connecticut corporation ("CAI Wireless"), and one of its
wholly-owned subsidiaries, Philadelphia Choice Television, Inc., a Delaware
corporation ("PCT"; and together with CAI Wireless, the "Debtors"), filed
voluntary petitions for relief under Chapter 11, Title 11 of the United States
Code (the "Bankruptcy Code") with the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court"), Wilmington, Delaware. The
bankruptcy cases (the "Cases") of CAI Wireless and PCT are being jointly
administered, for procedural purposes only, before the Bankruptcy Court under
Case No. 98-1765 (JJF). Pursuant to Section 1107 and 1108 of the Bankruptcy
Code, the Debtors, as debtors and debtors-in-possession, managed and operated
their assets and businesses pending the September 30, 1998 confirmation of a
joint reorganization plan (the "Plan") under the supervision and orders of the
Bankruptcy Court. The Plan was filed with the Bankruptcy Court on the Petition
Date and filed by the Company with the Securities and Exchange Commission (the
"Commission") on a Current Report on Form 8-K on July 1, 1998.
Prior to the Petition Date, the Company solicited and received the
requisite approvals from those classes of creditors that would be impaired
under the Plan. Specifically, the Company solicited and received the requisite
approval of the holders of the Company's 12.25% Senior Notes due 2002 (the
"Old Senior Notes") and the holders of certain subordinated indebtedness of the
Company. The Company did not solicit the vote of its shareholders, for whom
the Plan provided no right to receive or retain any property of the Company
post-reorganization. Section 1126(g) of the Bankruptcy Code specifically deems
such shareholders not to have accepted the Plan.
A confirmation hearing was held in the Bankruptcy Court on September 9,
1998. The Plan was confirmed on September 30, 1998 and consummated on October
14, 1998. Under the confirmed Plan, each holder of the Old Senior Notes
received a pro rata portion of $212,909,624 aggregate principal amount at
maturity ($100,000,000 aggregate principal amount at issuance) of 13% Senior
Notes due 2004 (the "New Senior Notes"), 91% of the equity of reorganized CAI
and approximately $16,500,000 in cash. Holders of subordinated indebtedness
claims against CAI received a pro rata portion of 9% of the equity of
reorganized CAI. All equity received by the holders of Old Senior Notes and
subordinated indebtedness claims was subsequently diluted by equity reserved
for issuance upon the exercise of options granted to members of CAI's senior
management and for equity of reorganized CAI issued in connection with the Exit
Facility (defined below).
Although the Company has emerged from bankruptcy, there continues to be
substantial doubt as to the Company's ability to continue as a going concern.
Reference is made to Item 7 - "Management's Discussion and Analysis of Results
of Operations and Financial Condition" and the Report of Independent Public
Accountants included in CAI's Annual Report on Form 10-K for the fiscal year
ended March 31, 1998, filed with the Commission on June 30, 1998.
The Company's consolidated financial statements have been prepared on a
going concern basis, which contemplates continuity of operations, realization
of assets and liquidation of liabilities and commitments in the normal course
of business. The appropriateness of reporting on a going concern basis is
dependent upon, among other things, future operations and the ability to
generate sufficient cash from operations and financing sources to meet
obligations. The consolidated financial statements contained herein and to
which these notes relate do not include any adjustments relating to the
confirmation and consummation of the Plan. Reference is made to the pro forma
balance sheet included herein as Exhibit 99.5, which pro forma balance sheet
gives effect to the October 14, 1998 consummation of the Plan as if such
consummation had occurred on September 30, 1998.
DIP FINANCING. In connection with the Cases, CAI consummated a
$60,000,000 Debtor-in-Possession financing arrangement (the "DIP Facility")
provided by Merrill Lynch Global Allocation Fund, Inc. ("MLGAF"). The DIP
financing was governed by an Amended and Restated Note Purchase Agreement dated
as of July 30, 1998 (the "DIP Agreement") between CAI and MLGAF, a copy of
which was filed as an exhibit to CAI's Current Report on Form 8-K dated August
3, 1998. Indebtedness under the DIP Facility was evidenced by certain
promissory notes, accrued interest at 13% per annum and had a maturity date of
January 29, 1999.
Of the $60,000,000 provided to CAI under the DIP Facility, $49,105,894
represented the outstanding principal, interest and fees due to the MLGAF
pursuant to that certain Note Purchase Agreement dated as of November 24, 1997
(the "Existing Note Purchase Agreement") among CAI, certain of its subsidiaries
and MLGAF. All such amounts outstanding under the Existing Note Purchase
Agreement were converted into DIP Notes as if there had been a purchase thereof
under the DIP Agreement in the amount of $49,105,894. The remaining
$10,894,106 was made available to CAI for its use during the Chapter 11 case,
in accordance with the terms of an approved budget.
On October 14, 1998, in connection with consummating the Plan, all
outstanding amounts under the DIP Facility, including the $60,000,000 aggregate
principal amount, accrued and unpaid interest in the amount of $1,646,667 and a
$600,000 commitment fee, were repaid out of the proceeds of the Exit Facility
(defined below).
EXIT FACILITY. On October 14, 1998, in connection with consummating the
Plan, the Company obtained an $80,000,000 credit facility (the "Exit
Facility"), also from MLGAF. The Company realized net proceeds from the Exit
Facility of $15,953,000, after repaying all outstanding amounts under the DIP
Facility and certain commitment fees associated with the Exit Facility. The
Exit Facility is governed by the terms of a Note Purchase Agreement dated
October 14, 1998 (the "NPA"), a copy of which was filed by the Company with the
Commission as an exhibit to the Company's Current Report on 8-K dated October
15, 1998. The Exit Facility consists of two tranches: Tranche A and Tranche B.
Tranche A is a $30,000,000 senior secured loan bearing interest at 10.5%
compounded semi-annually and evidenced by a Senior Secured A Note. The Company
has granted a first priority lien on and security interest in and to all of its
assets to secure performance of the Company's obligations with respect to
Tranche A. Tranche B is a $50,000,000 senior secured loan bearing interest at
13% per annum and evidenced by a Senior Secured B Note. The Company has
granted a second priority lien on and security interest in and to all of its
assets to secure performance of its obligations with respect to Tranche B.
In addition to the liens granted by the Company, substantially all of the
Company's wholly-owned subsidiaries have guaranteed the obligations of the
Company with respect to the Exit Facility. The subsidiaries have granted a
lien on and security interest in and to all of their respective assets to
secure their performance under such subsidiary guaranties.
The Exit Facility is a two-year credit facility, maturing on October 14,
2000. The Company was required to pay a 1% facility fee equal to $300,000 on
the Tranche A amount at the closing of the Exit Facility. In addition, the
Company is required to pay an 8% facility fee equal to $4,000,000 on the
Tranche B Amount of which the Company paid $1,500,000 at the closing of the
Exit Facility. The remaining $2,500,000 balance of the Tranche B facility fee
is payable at maturity of the Exit Facility (by its term, acceleration or
otherwise).
The Company issued 2,241,379 shares of its Common Stock, par value $.01
per share (the "New Common Stock") to MLGAF as additional consideration to
MLGAF for providing the Exit Facility. The shares of New Common Stock issued
to MLGAF represent 13% of the total New Common Stock issued and outstanding on
October 14, 1998. The foregoing is a summary of certain terms of the Exit
Facility and is qualified in its entirety by reference to the NPA.
LIQUIDITY AND CAPITAL RESOURCES
CAI's primary sources of liquidity are cash flows from operations, trade
credit and borrowings under the Existing Credit Facility for the period prior
to July 30, 1998 and subsequently under the DIP Facility. During the six months
ended September 30, 1998, CAI expended approximately $10,153,000 of cash to
fund operating activities. CAI also expended $2,074,000 in debt payments,
$687,000 for equipment, and paid $412,000 to TSS in fulfillment of its
investment obligation. The cash requirements were primarily funded by existing
cash balances maintained in the restricted cash account. At September 30,
1998, CAI had available funds of approximately $12,543,000, of which
$11,204,000 was restricted and all of which will be used to fund the operations
of the Company. CAI is committed through additional open purchase orders as of
September 30, 1998 to spend approximately $1,700,000, primarily for capital
expenditures associated with additional development its digital transmission
facilities.
The Company's operating plans, including digital video, voice and two-way
data, Internet and intranet access services and testing, will require
additional funding. The Company's ability to raise additional funds through
borrowings or the issuance of certain equity is currently limited by the terms
of the Indenture governing the Company's 13% Senior Notes due 2004, and/or the
terms of the Exit Facility. There can be no assurance that the funds obtained
by the Company in connection with the Exit Facility will enable CAI to meet its
future cash needs.
RESULTS OF OPERATIONS
SEPTEMBER 30, 1998 COMPARED TO SEPTEMBER 30, 1997
The Company currently operates six analog subscription video
systems. During the last several quarters, the Company has operated these
systems within the confines of a cash conservation strategy, while pursuing a
strategic alliance with one or more strategic partners interested in using the
Company's spectrum for fixed, one- and two-way transmission services. The
Company's cash conservation strategy requires the Company to limit or curtail
entirely analog video subscriber growth, which has had an adverse effect on the
Company's operating results. See Note 6 to the Consolidated Financial
Statements included in this Form 10-Q.
The cash conservation strategy also includes the continued implementation
of cost-cutting measures and the periodic sales of non-core assets in an effort
to maximize the value of assets that are no longer used or useful to the
Company's long-term operating strategy, which is to be a wholesale provider of
two-way transmission services to one or more strategic partners. In addition
to limiting the analog subscription video business growth, the Company has sold
assets relating to the provision of analog subscription video services to
multiple dwelling units ("MDUs"), such as apartment and condominium complexes,
in certain of its markets. Assets typically involved in providing analog
subscription video services to residents of MDUs include the tangible assets
necessary to transmit and receive the video programming signal, customer
premises equipment and a right of entry agreement with the property owner or
manager, pursuant to which the Company's operating subsidiary is granted the
right to provide subscription video services to residents of the MDU.
In March 1998, the Company sold assets relating to MDUs located in its
Washington, DC operating market. Most recently, in September 1998, the Company
completed the sale of assets relating to approximately 60 MDUs located in CAI's
Philadelphia system (the "Philadelphia MDU Sale") to Mid-Atlantic Telcom Plus,
LLC d/b/a OnePoint Communications, a leading operator of Satellite Master
Antenna Television (SMATV) systems. Consummated under the auspices of the
Bankruptcy Court, the Philadelphia MDU Sale generated net proceeds to the
Company of approximately $5,000,000, of which $785,000 is being held in escrow
pending certain post-closing adjustments. The Company expects to use the
proceeds from the Philadelphia MDU Sale, as well as proceeds from subsequent
sales of non-core assets, for working capital purposes.
The limitation on analog video subscriber growth, coupled with the sale
of MDU assets, has had an adverse impact on the Company's analog video
subscriber base. As of September 30, 1998, the Company's subscriber base had
decreased by approximately 27,400 subscribers to 35,100 analog video
subscribers, compared to 62,500 analog video subscribers at September 30, 1997.
The 27,400-subscriber decrease includes the loss of approximately 12,400
subscribers as a result of the Philadelphia MDU Sale. The decrease in analog
video subscribers has resulted in subscriber revenue decreases of $2,492,000
and $4,534,000 for the quarter and six months ended September 30, 1998 compared
to the corresponding periods last year.
Operating expenses were $33,762,000 and $37,950,000 for the six months
ended September 30, 1998 and 1997, respectively. The $4,188,000 reduction in
operating expenses for the six months versus last year's corresponding six-
month period reflects lower technical, customer service and marketing costs
approximating $3,117,000 which were in-line with the decline in subscribers,
offset by an increase in general and administrative expenses of $865,000
consisting of a significant increase in professional fees primarily associated
with the bankruptcy and partially offset by decreases in other expenses.
Programming costs increased by $335,000, primarily in the quarter ended
September 30, 1998 despite the revenue decline as a result of additional
channels being added as well as minimum provisions provided by certain of the
programming agreements. The remaining decrease of $2,271,000 reflects lower
depreciation and amortization, primarily, related to the goodwill write-down at
March 31, 1998, offset in part by greater depreciation recorded on the Boston
digital project.
Interest expense was $22,552,000 and $22,930,000 for the six months ended
September 30, 1998 and 1997, respectively. The slight decrease was primarily
due to higher fees on the interim debt financing in the 1997 period than those
incurred during the comparable period this year.
Interest and other income increased by $2,234,000 for the six months
ended September 30, 1998 compared to the same period last year. The increase
resulted primarily from the Philadephia MDU Sale which generated a net gain of
$2,642,000.
The elimination of CAI's investment in CS Wireless reflects the Company's
60% pro rata share of the $83,300,000 net loss reported by CS Wireless for the
six months ended June 30, 1998 to the extent of its $43,338,00 investment. The
remaining pro rata share of net loss was not recorded since CAI does not
guarantee any CS Wireless debt. The net loss reported by CS Wireless includes a
$46,378,000 write-down of its goodwill. The aggregate decrease in this
investment was $13,013,000 for the same period last year reflecting CAI's
50.7% ownership at that time. The decrease in CAI's investment in TSS
of $1,496,000 reflects primarily the Company's pro-rata share of the estimated
$6,900,000 loss of TSS from April 1, 1998 to September 30, 1998, plus another
$416,600 reflecting CAI's depreciation on the equipment leased to TSS.
THE YEAR 2000 ISSUE
The Company is continuing to assess issues relating to what is generally
referred to as the Year 2000 Issue. Based on preliminary information, as of
the date of this report, the Company believes that it will be able to implement
successfully the systems and programming changes necessary to address the Year
2000 Issue internally. The Company is reviewing the Year 2000 Issue with
various third party vendors and other entities on whom the Company relies for
the provision of certain services, such as subscriber billing, to assess such
vendors' readiness with respect to addressing Year 2000 Issues. The Company
believes that the cost of changes to be made, if any, to the Company's internal
systems and programming in response to Year 2000 Issues will not have a
material impact on the Company's financial position, results of operations or
cash flows in future periods.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is made to Notes 2 and 4 to the Notes to Consolidated Financial
Statements in Part I, Item 1 of this filing.
Item 2. Changes in Securities and Use of Proceeds.
As previously reported in Current Reports on Form 8-K filed with the
Securities and Exchange Commission (the "Commission") on July 1, 1998, July 16,
1998 and October 15, 1998 by CAI Wireless Systems, Inc. ("CAI" or the
"Company"), CAI and its wholly-owned subsidiary, Philadelphia Choice
Television, Inc. ("PCT"), recently emerged from a reorganization under Chapter
11 of the United States Bankruptcy Code (the "Bankruptcy Code"). The
bankruptcy case, entitled IN RE CAI WIRELESS SYSTEMS, INC. AND PHILADELPHIA
CHOICE TELEVISION, INC., DEBTORS, Chapter 11 Case No.: 98-01765 (JJF), was
brought in the United States Bankruptcy Court for the District of Delaware (the
"Bankruptcy Court").
On September 30, 1998, the Bankruptcy Court issued its Findings of Fact,
Conclusions of Law, and Order (the "Confirmation Order") confirming the Joint
Reorganization Plan of CAI and PCT (the "Plan"). On October 14, 1998 (the
"Consummation Date"), CAI and PCT consummated the Plan.
Pursuant to the Plan, from and after the Consummation Date, holders of
CAI's 12.25% Senior Notes due 2002 (the "Old Senior Notes"), upon surrender of
their Old Senior Notes to the Exchange Agent (defined below), were entitled to
receive their pro rata portion of $212,909,624 aggregate principal amount at
maturity ($100,000,000 aggregate discounted principal amount at issuance) of
13% Senior Notes due 2004 (the "New Senior Notes") and 13,650,000 shares of
common stock, par value $.01 per share (the "New Common Stock") of reorganized
CAI. Holders of the Old Senior Notes also received, on or about October 9,
1998, the interest payment on the Old Senior Notes that was due to such holders
on September 15, 1998 (the "September Interest Payment"), plus interest on the
September Interest Payment at a per annum rate of 12.25%.
The issuance of the New Senior Notes and New Common Stock and the
interest payment (collectively, the "Old Senior Note Entitlement") pursuant to
the Plan and the Confirmation Order has terminated all rights of the holders of
the Old Senior Notes (i) under that certain Indenture dated as of September 15,
1995 between CAI and Chemical Bank, as supplemented, and (ii) evidenced by the
Old Senior Notes. From and after the Consummation Date, the Old Senior Notes
represent solely the right to receive the New Senior Notes and New Common Stock
attributable to the surrendered Old Senior Notes (such surrendering noteholders
having already received the September Interest Payment).
The New Senior Notes are governed by an indenture dated as of October 14,
1998 (the "New Senior Note Indenture") between CAI and State Street Bank and
Trust Company, as trustee. A copy of the New Senior Note Indenture was filed
as an exhibit to the Company's Current Report on Form 8-K filed with the
Commission on October 15, 1998. The terms of the New Senior Note Indenture
impose several significant limitations on the Company, including, without
limitation, the Company's right to declare dividends in respect of its capital
stock and on the right of the Company to incur additional indebtedness for
corporate purposes such as working capital. The description of the New Senior
Notes and the New Senior Note Indenture contained herein and elsewhere in the
Company's public filings is qualified in its entirety by reference to the New
Senior Note Indenture filed as an exhibit to the Company's Current Report on
Form 8-K filed with the Commission on October 15, 1998.
To administer the exchange of Old Senior Notes for the appropriate amount
of New Senior Notes and New Common Stock, the Company has engaged State Street
Bank and Trust Company, as exchange agent (the "Exchange Agent"). By letter to
holders of record of Old Senior Notes as of October 8, 1998, the Company
requested that such record holders complete and send a signed letter of
transmittal, together with their Old Senior Notes, to the Exchange Agent. They
were directed to contact the Exchange Agent at (617) 664-5587 with any
questions regarding the exchange.
The Plan also contemplated that the holders of Old Common Stock and
holders of claims against or interests in the Company derived from Old Common
Stock would not receive or retain any property as a result of consummating the
Plan. As a consequence, the Old Common Stock was extinguished as of October
14, 1998.
The Company filed a certificate amending its Amended and Restated
Certificate of Incorporation with the Secretary of State of the State of
Connecticut on October 14, 1998, which amendment modified the Company's capital
structure by authorizing 25,000,000 shares of New Common Stock and 5,000,000
shares of preferred stock, which preferred stock may be designated from time to
time by the Board of Directors of the Company. A copy of the Certificate
Amending the Amended and Restated Certificate of Incorporation of the
Company is filed herewith as an exhibit to this Quarterly Report on Form 10-Q.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company's bankruptcy case was conducted as a "pre-packaged"
bankruptcy. Prior to filing its bankruptcy petition, the Company sought and
obtained agreement to the Plan by the requisite constituencies required by the
Bankruptcy Code. To initiate the pre-packaged bankruptcy process, the Company,
on or about June 30, 1998, commenced a solicitation (the "Solicitation") of
holders of its Old Senior Notes and holders of certain subordinated
indebtedness of the Company in an effort to obtain sufficient acceptances of
the Plan. The Solicitation was conducted by the Company in reliance upon
Section 3(a)(9) of the Securities Act of 1933, as amended (the "'33 Act") and
similar state law provisions to exempt from registration under the securities
laws the offer of the New Senior Notes and New Common Stock that may be deemed
to have been made as a result of the Solicitation. The Solicitation was
conducted through the use of a Disclosure Statement, as supplemented from time
to time. See the Company's Current Reports on Form 8-K dated July 1, and July
16, 1998 for a copy of the Disclosure Statement and the Disclosure Statement
Supplement, filed as exhibits to such Forms 8-K.
The Solicitation expired at midnight on July 28, 1998. The Plan was
accepted by the following vote of the holders of Old Senior Notes and holders
of certain subordinated indebtedness of the Company:
OLD SENIOR NOTES
<TABLE>
<CAPTION>
PERCENTAGE
OF PRINCIPAL Percentage of
PRINCIPAL AMOUNT AMOUNT Number of Creditors THAT
THAT VOTED CREDITORS VOTED
<S> <C> <C> <C> <C>
Accept $217,441,000 99.9% 198 99.9%
Reject 160,000 0.1% 2 0.1%
----------- ----- --- -----
Total $217,601,000 100.0% 200 100.0%
============ ===== === =====
</TABLE>
SUBORDINATED INDEBTEDNESS
<TABLE>
<CAPTION>
PERCENTAGE
OF PRINCIPAL Percentage of
PRINCIPAL AMOUNT AMOUNT NUMBER OF Creditors That
THAT VOTED CREDITORS Voted
<S> <C> <C> <C> <C>
Accept $ 30,072,685 92.3% 5 83.3%
Reject 2,513,692 7.7% 1 16.7%
------------ ----- -- -----
Total $ 32,586,377 100.0% 6 100.0%
============ ===== == =====
</TABLE>
The Company did not solicit the vote of its shareholders, for whom the
Plan provided no right to receive or retain any property of reorganized CAI.
Section 1126(g) of the Bankruptcy Code specifically deems such shareholders not
to have accepted the Plan.
Item 5. Other Information.
FCC TWO-WAY APPLICATION PROCESS. The Company is in the process of
preparing the necessary applications for two-way use of certain of its MMDS
spectrum in accordance with the rules that were released by the Federal
Communications Commission ("FCC") on September 25, 1998 with respect to two-way
transmissions (the "Two-way Rules"). Although the FCC has not yet announced a
definitive date for filing such applications, the Company anticipates that the
first "filing window" will open at the FCC for two-way applications late in the
first quarter or early in the second quarter of calendar year 1999. In
accordance with the Two-way Rules, following the first filing window, the FCC
will accept two-way transmission applications on an on-going, daily, first-come
basis.
The application process involves the formulation of a frequency plan and
coordination of such frequency plan both with internal market, as well as
adjacent market, licenseholders in each market in which an operator seeks two-
way approval. Following the close of the first filing window, completed
applications are reviewed in the order in which they are filed at the FCC and
the granting of an application in a particular market may limit the utilization
of contiguous markets. The frequency plan is also dependent upon the two-way
uses of the spectrum proposed by the applicant in any given market.
The Company, in consultation with other companies in the industry, has
developed a generic frequency plan that can be used as a template for its
markets and has begun to adapt such template to its various markets in an
effort to complete certain two-way applications to be filed at the FCC.
Adaptation of the generic frequency plan is necessary because of the different
channel groups and channels that are available to the Company in its various
markets, and the potential interference that could result from, or be
encountered by the Company as a result of, an operators activities in a
contiguous market. Although the Company has devised such a template, there can
be no assurance that the Company will be able to complete the necessary
processes to enable it to file two-way applications for each of its markets
during the first filing window, nor can there be any assurance that
applications filed after the first filing window will not be preempted or
otherwise limited by previously filed applications of other operators.
Moreover, the plan applied for may not be the frequency plan necessary for the
requirements for the business ultimately conducted in a particular market.
The Company believes that MMDS spectrum, in general, can be utilized in a
two-way environment to provide data, telephony and video transmission services.
In accordance with certain authorizations granted specifically to the Company
by the FCC prior to the release of the Two-way Rules, the Company has performed
certain demonstrations and conducted limited testing of fixed, two-way data and
telephony transmission as well as digital video transmission using its MMDS
spectrum. The use of MMDS spectrum in a two-way environment on a widespread
basis, however, involves the deployment of new technology, engineering and
equipment, most of which will be developed for the first time in response to
the expanded authority recently granted by the FCC to use MMDS spectrum for
two-way transmissions, and the coordinated efforts of MMDS operators in
contiguous and adjacent markets. Although the Company believes that it will be
able to adapt its two-way transmission engineering plans to provide widespread
deployment of its MMDS spectrum in a two-way environment, there can be no
assurance that new technology and such engineering will be developed by the
Company, that cost-effective and efficient equipment will be developed and
produced by the vendor community, or that the Company will be able to deploy
MMDS spectrum in a two-way environment in any of its markets on a competitive,
cost-effective basis. Furthermore, there can be no assurance that the Company
will be able to obtain the necessary cooperation and coordination from MMDS
operators in markets that are contiguous or adjacent to the Company's markets
to enable the Company to maximize the use of its MMDS spectrum in a two-way
environment.
The deployment of MMDS spectrum in a digital two-way environment requires
significant capital expenditures. Implementation of two-way operations requires
an MMDS operator to build an infrastructure that is significantly more complex
than the infrastructure necessary to operate a one-way analog or digital video
system using MMDS spectrum. The Company's business plan contemplates that CAI
will become a wholesale provider of fixed, two-way transmission services, and
does not contemplate retail distribution by CAI of wireless services. The
Company's business plan, which assumes the presence of one or more strategic
partners purchasing or otherwise utilizing the Company's two-way capacity for
consideration, also contemplates that the Company will be able to share certain
capital expenditures necessary for the build-out of digital two-way MMDS
systems with such strategic partners. There can be no assurance that the
Company will be able to identify one or more strategic partners, or that any
strategic partners so identified will be willing to enter into a business
relationship with the Company on terms and conditions, including terms and
conditions relating to capital expenditures, that are satisfactory to the
Company.
The Company owns an average of 7 of the available commercial channels in
each of its primary markets. The balance of the commercial channels, as well
as the ITFS channels owned by educational and similar institutions, available
to the Company in its various markets is provided to the Company through long-
term leases. The Company does not have access to all available channels in all
of its markets. Certain of the Company's more recent leases contain provisions
that contemplate the use of the leased spectrum for fixed, two-way
transmissions. The majority of the spectrum leases to which the Company,
through wholly-owned, indirect subsidiaries, is a party, do not contemplate
two-way usage.The Company is in the process of negotiating these MMDS spectrum
leases. The negotiations involve the use of the leased spectrum by the Company
for two-way services. The Company has recently completed a series of such
negotiations with spectrum lessors in its Boston market, which negotiations
have resulted in the Company entering into leases with various spectrum lessors
in the Boston market that contemplate two-way transmission services. The
Company believes that these leases are on terms and conditions that are fair
and reasonable to the Company. The Company believes that it will continue to
be able to negotiate revised leases with spectrum lessors in markets other than
Boston on terms and conditions that are fair and reasonable to the Company.
STRATEGIC PARTNER SEARCH. As stated above and in prior filings made by
the Company with the Commission, the Company continues to search for one or
more strategic partners interested in utilizing the Company's MMDS spectrum.
In connection with this search and the issuance by the FCC of the two-way
rulemaking, the Company plans to construct a two-way demonstration system in
its Washington, DC market, which system, while not commercially deployed on
anything other than a limited basis, will utilize technology and equipment from
a variety of vendors. The Company believes that the equipment to be deployed
in its Washington, DC demonstration system could be deployed in a widespread
commercial launch of two-way services in one or more markets; however, such
equipment needs further testing, which the Company intends to accomplish in the
Washington, DC market.
The Company currently operates an analog subscription video service and a
limited one-way Internet access service in its Washington, DC market. The
Company's plans for its Washington, DC market do not currently include the
deployment of commercial services utilizing MMDS spectrum for two-way
transmissions on a widespread basis. The Company intends, at this time, to
conduct limited tests and use the Washington, DC system for demonstrating the
capabilities of two-way MMDS transmissions to potential strategic partners, and
possibly, a limited commercial deployment. There can be no assurance that the
demonstration system will be constructed in its entirety or at all, that
Company will receive the necessary regulatory approvals for the demonstration
system, or that the Company will be able to deploy its MMDS spectrum in the
Washington, DC market in a two-way manner for such demonstration system.
Furthermore, the Company does not believe that a limited commercial deployment
of any two-way services in the Washington, DC market will have a material
impact on the Company's revenues.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) EXHIBITS.
The following exhibits are filed herewith or incorporated by reference
as indicated:
<TABLE>
<CAPTION>
Incorporation
by Reference Page REFERENCE
EXHIBIT NO. DESCRIPTION (SEE LEGEND)
<S> <C> <C> <C>
2.1 Joint Reorganization Plan of CAI Wireless Systems, Inc. [3] Exhibit 2.1
and Philadelphia Choice Television, Inc.
3.1 Amended and Restated Certificate of Incorporation of [1] Exhibit 3.1
CAI
3.2 Amended and Restated Bylaws of CAI [1] Exhibit 3.2
<dagger>3.3 Certificate Amending the Amended and Restated
Certificate of Incorporation of CAI
4.1 Amended and Restated Note Purchase Agreement dated as [2] Exhibit 4.1
of July 30, 1998 between Registrant and Merrill Lynch
Global Allocation Fund, Inc.
4.2 Indenture dated as of October 14, 1998 between CAI [3] Exhibit 4.1
and State Street Bank and Trust Company governing
CAI's 13% Senior Notes due 2004
4.3 Note Purchase Agreement dated as of October 14, 1998 [3] Exhibit 4.2
by and between CAI and Merrill Lynch Global
Allocation Fund, Inc.
4.4 Senior Secured A Note in the principal amount of $30 [3] Exhibit 4.3
million due October 14, 2000
4.5 Senior Secured B Note in the principal amount of $50 [3] Exhibit 4.4
million due October 14 2000
<dagger>4.6 Registration Rights Agreement dated as of October 14,
1998 by and among CAI, Merrill Lynch Global
Allocation Fund, Inc. and Merrill Lynch
Equity/Convertible Series Fund (Global Allocation
Portfolio)
16. Letter by PricewaterhouseCoopers to Securities and [4] Exhibit 16.
Exchange Commission dated August 6, 1998
<dagger>27. Financial Data Schedule
99.1 Disclosure Statement dated as of June 30, 1998 [5] Exhibit 99.1
99.2 Disclosure Statement Supplement dated as of July 15, [6] Exhibit 99.1
1998
99.3 Interim Order Authorizing Postpetition Financing [2] Exhibit 99.1
99.4 Press Release dated July 30, 1998 [2] Exhibit 99.2
<dagger>99.5 Pro Forma Balance Sheet Giving Effect to the
Company's Reorganization Plan as if it had Occurred
on September 30, 1998
</TABLE>
LEGEND
[1] Incorporated by reference to the exhibits to the Company's Quarterly Report
on Form 10-Q for September 30, 1995.
[2] Incorporated by reference to the exhibit to the Company's Current Report on
Form 8-K dated August 3, 1998.
[3] Incorporated by reference to the exhibit to the Company's Current Report
on Form 8-K dated October 15, 1998.
[4] Incorporated by reference to the exhibit to the Company's Current Report on
Form 8-K dated August 6, 1998.
[5] Incorporated by reference to the exhibit to the Company's Current Report on
Form 8-K dated July 1, 1998.
[6] Incorporated by reference to the exhibit to the Company's Current Report on
Form 8-K dated July 16, 1998.
<dagger> Filed herewith.
b) REPORTS ON FORM 8-K.
(1) Form 8-K filed July 1, 1998, reporting the following:
Item 5. Other Events:
The Company commenced a solicitation of votes on June 30,
1998 with respect to a pre-packaged reorganization plan and
upon acceptance, intends to file a voluntary petition under
Chapter 11 of the Bankruptcy Code.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
C. Exhibits
99.1 Disclosure Statement dated as of June 30, 1998
(2) Form 8-K filed July 16, 1998, reporting the following:
Item 5. Other Events
The Company disseminated a Disclosure Statement Supplement to
certain impaired creditors, which sets forth additions and/or
amendments to the Disclosure Statement originally sent to
certain impaired creditors.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
C. Exhibits
99.1 Disclosure Statement Supplement dated as of July 15,
1998
(3) Form 8-K filed August 3, 1998, reporting the following:
Item 3. Bankruptcy or Receivership
The Company filed voluntary petitions for relief under
Chapter 11, Title 11 of the United States Code with the
United States Bankruptcy Court for the District of Delaware,
Wilmington, Delaware. CAI, as Debtor-in-Possession, will
continue to manage and operate its assets and business with
its existing directors and officers, subject to the
supervision and orders of the Court. Concurrent with filing
the voluntary petitions, CAI sold 13% senior secured notes
due January 29, 1999 to Merrill Lynch Global Allocation Fund,
Inc. which provided for the rollover of the existing bridge
financing with the remaining $10,894,000 available for use
during the Chapter 11 proceedings, in accordance with the
terms of an approved budget.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
C. Exhibits
4.1 Amended and Restated Note Purchase Agreement dated
as of July 30, 1998 between Registrant and Merrill
Lynch Global Allocation Fund, Inc.
99.1 Interim Order Authorizing Postpetition Financing.
99.2 Press Release dated July 30, 1998.
(4) Form 8-K filed August 6, 1998, reporting the following:
Item 4. Changes in Registrant's Certifying Accountant
PricewaterhouseCoopers LLP resigned from its engagement as
the Company's independent accountant due to a conflict of
interest arising as a result of the merger of the two
accounting firms.
(5) Form 8-K filed October 15, 1998, reporting the following:
Item 3. Bankruptcy or Receivership.
CAI and one of its subsidiaries filed each filed a petition for
reorganization relief under Chapter 11 of the United States
Bankruptcy Code on July 30, 1998. The Plan was confirmed on
September 30, 1998 and consummated on October 14, 1998.
Item 5. Other Events.
Simultaneously with the consummation of the Plan, CAI consummates
an $80 million senior secured credit facility (Exit Facility) of
which $64 million was used to repay principal, interest and fees
on the $60 million interim debtor-in-possession financing.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
2.1 Joint Reorganization Plan of CAI Wireless Systems, Inc.
and Philadelphia Choice Television, Inc. dated June 30,
1998.
4.1 Indenture dated as of October 14, 1998 governing the
terms of registrant's 13% Senior Notes due 2004.
4.2 Note Purchase Agreement dated as of October 14, 1998 by
and between registrant and Merrill Lynch Global Allocation
Fund, Inc.
4.3 Senior Secured A Note in the principal amount of $30
million due October 14, 2000.
4.4 Senior Secured B Note in the principal amount of $50
million due October 14, 2000.
(6) Form 8-K filed October 30, 1998, reporting the following:
Item 1. Changes in Control of Registrant.
In connection with the consummation of its previously-
announced reorganization under Chapter 11 of the U.S.
Bankruptcy Code, the Company issued its voting common stock
to holders of its 12.25% Senior Notes due 2002 (the "Old
Senior Notes"). As a result of this issuance, certain
holders of Old Senior Notes acquired more than 10% of the
voting securities of CAI. In response to Item 1, CAI
disclosed the identity and certain other information
regarding these 10% holders.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/S/ Chairman, Chief Executive Officer November 13, 1998
JARED E. ABBRUZZESE and Director (Principal Executive
Officer)
/S/ Executive Vice President, Chief November 13, 1998
JAMES P. ASHMAN Financial Officer and Director
(Principal Financial Officer)
/S/ Vice President and Controller November 13, 1998
ARTHUR J. MILLER (Principal Accounting Officer)
</TABLE>
Exhibit 3.3
CERTIFICATE AMENDING THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CAI WIRELESS SYSTEMS, INC.
PURSUANT TO SECTION 33-802 OF THE CONNECTICUT BUSINESS CORPORATION ACT
1. The name of the corporation (the "Corporation") is CAI WIRELESS
SYSTEMS, INC.
2. The Amended and Restated Certificate of Incorporation of the
Corporation is hereby amended as follows:
(a) Article THIRD of the Amended and Restated Certificate of
Incorporation of the Corporation is hereby amended by deleting it in its
entirety and substituting the following in lieu thereof:
"THIRD: (a) The amount of capital stock of the Corporation
hereby authorized is thirty million (30,000,000) shares which consists
of twenty-five million (25,000,000) shares of common stock, par value
$0.01 per share (the "Common Stock") and five million (5,000,000)
shares of preferred stock, par value $0.01 per share (the "Preferred
Stock"). The Board of Directors will have the authority to fix the
terms, limitations and relative rights and preferences of any unissued
shares of Preferred Stock, to establish series to the Preferred Stock,
to fix and determine the variations among series and to fix the number
of shares constituting any series of Preferred stock and the
designation of such series, without any further vote or action by
shareholders.
(b) Notwithstanding the foregoing, the Corporation will not issue
any nonvoting equity securities to the extent prohibited by Section
1123 of the United States Bankruptcy Code; provided, however, that
this subsection (b) of Article THIRD (i) will have no further force
and effect beyond that required by Section 1123 of the United States
Bankruptcy Code, (ii) will have such force and effect, if any, only
for so long as such Section 1123 is in effect and applicable to the
Corporation, and (iii) in all events may be amended or eliminated in
accordance with applicable law as from time to time in effect."
(b) Article SIXTH of the Amended and Restated Certificate of
Incorporation of the Corporation is hereby amended by deleting it in its
entirety and substituting the following in lieu thereof:
"SIXTH: The personal liability of any Director to the
Corporation or its shareholders for monetary damages for breach of
duty as a Director is hereby limited to the amount of the compensation
received by the Director for serving the Corporation during the year
of the violation if such breach did not (a) involve a knowing and
culpable violation of law by the Director, (b) enable the Director or
an associate, as defined in Section 33-840 of the Connecticut General
Statutes or any successor statute thereto, to receive an improper
personal economic gain, (c) show a lack of good faith and a conscious
disregard for the duty of the Director to the Corporation under
circumstances in which the Director was aware that his or her conduct
or omission created an unjustifiable risk of serious injury to the
Corporation, (d) constitute a sustained and unexcused pattern of
inattention that amounted to an abdication of the Director's duty to
the Corporation, or (e) create liability under Section 33-757 of the
Connecticut General Statutes, or any successor statute thereto. Any
lawful repeal or modification of this provision by the shareholders
and the Board of Directors of the Corporation shall not adversely
affect any right or protection of a Director existing at or prior to
the time of such repeal or modification."
(c) Articles NINTH and TENTH are hereby added as follows:
"NINTH: The Corporation expressly elects not to be governed by
Sections 33-840 to 33-842, inclusive of the Connecticut General
Statutes.
TENTH: Pursuant to the authority granted in Sections 33-601(a)
of the Connecticut General Statutes , the Corporation expressly elects
not to be governed by Sections 33-843 to 33-845, inclusive, of the
Connecticut General Statutes."
3. The Order of the United States Bankruptcy Court for the District
of Delaware (the "Order") approving this Certificate of Amendment to the
Restated and Amended Certificate of Incorporation of CAI Wireless Systems,
Inc. was entered on September 30, 1998.
4. The title of the reorganization proceeding in which the Order was
entered is IN RE CAI WIRELESS SYSTEMS, INC., Case No. 98-01765 (JJF).
5. The United States Bankruptcy Court for the District of Delaware
had jurisdiction over the above-captioned proceeding under 28 U.S.C.
<section><section> 157 and 1334.
<PAGE>
2
IN WITNESS WHEREOF, the undersigned, being designated by the United
States Bankruptcy Court for the District of Delaware, does hereby declare,
under the penalties of false statement, that the statements in the
foregoing certificate are true.
/S/ JAMES P. ASHMAN
James P. Ashman
Executive Vice President
and Chief Financial Officer
Exhibit 4.6
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") is made
and entered into as of October 14, 1998 among CAI WIRELESS SYSTEMS, INC.
(the "Company"), a Connecticut corporation, MERRILL LYNCH GLOBAL
ALLOCATION FUND, INC. ("GAX"), and MERRILL LYNCH EQUITY/CONVERTIBLE
SERIES: GLOBAL ALLOCATION PORTFOLIO ("Portfolio") together with GAX and
including their respective successors, assigns and direct and indirect
transferees, "SHAREHOLDERS" and "NOTEHOLDERS").
This Agreement is made pursuant to the plan of reorganization
under Chapter 11 of the United States Bankruptcy Code for the Company and
Philadelphia Choice Television, Inc., a Delaware corporation, dated June
30, 1998, as amended, modified or supplemented from time to time (the
"PLAN"), and the Note Purchase Agreement dated October 14, 1998 among the
Company and the other parties thereto (the "PURCHASE AGREEMENT"). In
order to induce (i) the Noteholders to accept the 13% Senior Notes due
2004 of the Company pursuant to the Plan and (ii) the Shareholders to
accept the shares of the Company's common stock, par value $0.01 per
share, (the "Common Stock") pursuant to the Plan and the Purchase
Agreement, the Company has agreed to provide the Noteholders and the
Shareholders the registration rights set forth in this Agreement. The
execution of this Agreement is a condition to the consummation of the
Plan and the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the
following defined terms shall have the following meanings:
"ADVICE" has the meaning ascribed to such term in Section 3
hereof.
"AFFILIATE" shall have the meaning ascribed to such term in
Rule 144A under the Securities Act.
"AGREEMENT" shall have the meaning ascribed to such term in the
preamble hereof.
"BUSINESS DAY" shall mean a day that is not a Legal Holiday.
"CAPITAL STOCK" shall mean, with respect to any Person, any and
all shares, interests, partnership interests, participation's,
rights in or other equivalents (however designated and whether
voting or non-voting) of such person's capital stock, and any rights
(other than debt securities convertible into capital stock),
warrants or options exchangeable for or convertible into such
capital stock whether outstanding on the date hereof or issued
hereafter.
<PAGE>
"COMPANY" shall have the meaning ascribed to such term in the
preamble hereof and shall also include the Company's permitted
successors and assigns.
"COMMON STOCK" shall have the meaning ascribed to such term in
the preamble hereof.
"DEMAND REGISTRATION" shall have the meaning ascribed to such
term in Section 2.2(a) hereof.
"DTC" shall mean The Depository Trust Company.
"EFFECTIVENESS PERIOD" shall mean the respective periods for
which the Company is obligated to keep a Registration Statement
effective pursuant to Sections 2.1(a), 2.2(a) and 2.3(a).
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
"GAX" shall have the meaning ascribed to such term in the
preamble hereof.
"HOLDER" shall mean each holder of any Registrable Securities,
and each of their successors, assigns and direct and indirect
transferees who become registered owners of such Registrable
Securities.
"INDEMNIFIED PARTY" and "INDEMNIFYING PARTY" shall have the
respective meanings ascribed to such terms in Section 4(c).
"INDENTURE" shall mean the Indenture dated the date hereof
between the Company and State Street Bank and Trust Company, as
Trustee, pursuant to which the Notes are issued.
"INSPECTORS" shall have the meaning ascribed to such term in
Section 3(m) hereof.
"LEGAL HOLIDAY" shall mean a Saturday, a Sunday or a day on
which (i) banking institutions in The City of New York are required
or authorized by law or other government action to be closed and
(ii) the principal U.S. securities exchange or market, if any, on
which the Notes or any Common Stock is listed or admitted to trading
are closed for business.
"NOTEHOLDERS" shall have the meaning ascribed to such term in
the preamble hereof.
"NOTES" shall have the meaning ascribed to such term in the
preamble hereof.
"PERSON" shall mean any individual, corporation, limited
liability company, partnership, joint venture, association, joint-
stock company, trust, unincorporated organization or government or
any agency or political subdivision thereof or any other entity,
including any predecessor of any such entity.
"PIGGY-BACK REGISTRATION" shall have the meaning ascribed to
such term in Section 2.3(a) hereof.
"PIGGY-BACK REGISTRATION STATEMENT" shall have the meaning
ascribed to such term in Section 2.3(c) hereof.
"PLAN" shall have the meaning ascribed to such term in the
preamble hereof.
"PORTFOLIO" shall have the meaning ascribed to such term in the
preamble hereof.
"PROSPECTUS" shall mean the prospectus included in any
Registration Statement (including, without limitation, any
prospectus subject to completion and a prospectus that includes any
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, and all other amendments and supplements
to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by
reference in such Prospectus.
"PURCHASE AGREEMENT" shall have the meaning ascribed to such
term in the preamble hereof.
"REGISTRABLE SECURITIES" shall mean securities acquired
pursuant to or in connection with the Plan, including the Common
Stock, the Notes and any other securities issued or issuable with
respect to the Common Stock or the Notes, including by way of stock
dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other
reorganization or otherwise, PROVIDED that if the Common Stock is
listed on any national securities exchange or quoted on any
interdealer quotation system only the shares of Common Stock and
Notes held by Persons deemed to be Affiliates or "underwriters" for
purposes of the Securities Act will be deemed to be Registrable
Securities. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities when (a) a
registration statement with respect to the offering of such
securities by the holder thereof shall have been declared effective
under the Securities Act and such securities shall have been
disposed of by such holder pursuant to such registration statement,
(b) such securities have been sold to the public pursuant to, or are
eligible for sale to the public without volume or manner of sale
restrictions under, Rule 144(k) (or any similar provision then in
force, but not Rule 144A) promulgated under the Securities Act,
(c) such securities shall have been otherwise transferred and new
certificates for such securities not bearing a legend restricting
further transfer shall have been delivered by the Company or its
transfer agent and subsequent disposition of such securities shall
not require registration or qualification under the Securities Act
or any similar state law then in force, or (d) such securities shall
have ceased to be outstanding.
"REGISTRATION EXPENSES" shall mean all expenses incident to the
Company's performance of or compliance with this Agreement,
including, without limitation, all SEC and stock exchange or
National Association of Securities Dealers, Inc. registration and
filing fees and expenses, fees and expenses of compliance with
securities or blue sky laws (including, without limitation,
reasonable fees and disbursements of counsel for the underwriters,
if any, and the Holders in connection with blue sky qualifications
of the Registrable Securities), printing expenses, messenger,
telephone and delivery expenses, fees and disbursements of counsel
for the Company, counsel for the Holders, counsel for the
underwriters, if any, the Trustee, the Transfer Agent and Registrar
and all independent certified public accountants, and other
reasonable out-of-pocket expenses of Holders (it being understood
that Registration Expenses shall not include, as to the fees and
expenses of counsel, the fees and expenses of more than one counsel
for each of the Shareholders, as a whole, and the Noteholders, as a
whole, and one counsel for the underwriters, if any, as to
securities and blue sky matters).
"REGISTRATION STATEMENT" shall mean any appropriate
registration statement of the Company filed with the SEC pursuant to
the Securities Act which covers any of the shares of Common Stock,
the Notes and any other Registrable Securities pursuant to the
provisions of this Agreement and all amendments and supplements to
any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein,
all exhibits thereto and all materials incorporated by reference
therein.
"RULE 144" shall mean Rule 144 promulgated under the Securities
Act, as such Rule may be amended from time to time, or any similar
rule (other than Rule 144A) or regulation hereafter adopted by the
SEC providing for offers and sales of securities made in compliance
therewith resulting in offers and sales by subsequent holders that
are not Affiliates of an issuer of such securities being free of the
registration and prospectus delivery requirements of the Securities
Act.
"RULE 144A" shall mean Rule 144A promulgated under the
Securities Act, as such Rule may be amended from time to time, or
any similar rule (other than Rule 144) or regulation hereafter
adopted by the SEC.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended from time to time.
"SELLING HOLDER" shall mean a Holder who is selling Registrable
Securities in accordance with the provisions of Section 2.3.
"SHAREHOLDERS" shall have the meaning ascribed to such term in
the preamble hereof.
"SHELF REGISTRATION STATEMENT" shall have the meaning ascribed
to such term in Section 2.1(a).
"SUSPENSION PERIOD" shall have the meaning ascribed to such
term in Section 2.4(a).
"TERMINATION DATE" shall mean October 14, 2004.
"TRANSFER AGENT AND REGISTRAR" shall mean American Stock
Transfer & Trust Company and any successor thereto for the Common
Stock.
"TRUSTEE" shall mean State Street Bank and Trust Company and
any successor trustee for the Notes pursuant to the Indenture.
Capitalized terms used herein but not defined shall have the
meaning ascribed thereto in the Plan or the Purchase Agreement.
SECTION 2. REGISTRATION RIGHTS.
2.1 (a) SHELF REGISTRATION STATEMENT. Upon request of
Shareholders of not less than 10% of the outstanding shares of Common
Stock which are deemed to be Affiliates or "underwriters" for purposes of
the Securities Act, the Company shall, as soon as practicable, cause to
be filed pursuant to Rule 415 (or any successor provision) of the
Securities Act a shelf registration statement (the "SHELF REGISTRATION
STATEMENT") covering the resale of the Registrable Securities by the
Holders thereof, and shall use its commercially reasonable efforts to
cause the Shelf Registration Statement to be declared effective under the
Securities Act on or before 180 days after the date of such request.
Subject to Section 2.4(a) hereof, the Company shall use its best efforts
to maintain the effectiveness of the Shelf Registration Statement until
the earlier of (i) such time as all of the Registrable Securities have
been resold thereunder, or (ii) such time as the Registrable Securities
may be sold without restriction under the Securities Act. The Company
shall pay all Registration Expenses in connection with the resale of the
Registrable Securities. Each Holder of Registrable Securities shall pay
all brokerage and sales commissions, underwriting discounts and
commissions, if any, and transfer taxes, if any, relating to the sale or
disposition of such Holder's Registrable Securities pursuant to a
Registration Statement requested pursuant to this Section 2.1.
(b) BLUE SKY. The Company shall use its best efforts to
register or qualify the shares of Common Stock and the Notes under all
applicable securities laws, blue sky laws or similar laws of all
jurisdictions in the United States and Canada in which any Holder may or
may be deemed to purchase such securities and shall use its best efforts
to maintain such registration or qualification for as long as the Shelf
Registration Statement shall be required to be kept effective under
Section 2.1(a); PROVIDED, HOWEVER, that the Company shall not be required
to qualify generally to do business in any jurisdiction where it would
not otherwise be required to qualify but for this Section 2.1(b) or to
take any action which would subject it to general service of process or
to taxation in any such jurisdiction where it is not then so subject.
(c) ACCURACY OF DISCLOSURE. The Company represents and
warrants to each Holder and agrees for the benefit of each Holder that
(i) the Shelf Registration Statement and any amendment thereto will not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements contained therein not misleading; and (ii) each of the
prospectuses furnished to such Holder for delivery in connection with the
resale of Registrable Securities and the documents incorporated by
reference therein will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading; provided,
however, that the Company shall have no liability under clause (i) or
(ii) of this Section 2.1(c) with respect to any such untrue statement or
omission made in the Shelf Registration Statement in reliance upon and in
conformity with information furnished to the Company by or on behalf of
the Holders specifically for inclusion therein.
(d) ADDITIONAL ACTS. If the issuance or sale of any
Registrable Securities requires registration or approval of any
governmental authority (other than the registration requirements under
the Securities Act), or the taking of any other action under the laws of
the United States of America or any political subdivision thereof before
such securities may be validly offered or sold in compliance with such
laws, then the Company covenants that it will, in good faith and as
expeditiously as possible, use its best efforts to secure and maintain
such registration or approval or to take such other action, as the case
may be.
2.2 (a) DEMAND REGISTRATION. The Holders of a number of
Registrable Securities equivalent to at least a majority of the
outstanding shares of Common Stock comprising Registrable Securities at
such time or a majority of the outstanding Notes comprising Registrable
Securities at such time, as the case may be, may make a written request
to the Company, from time to time, to effect up to two registrations
under the Securities Act per year of each such class of Registrable
Securities until the Termination Date (each, a "DEMAND REGISTRATION");
PROVIDED, HOWEVER, that such Holders may not make a second demand for
registration with respect to such class of Registrable Securities until
12 months after the date on which the Registration Statement filed
pursuant to the first demand was declared effective. Within 15 days
after the receipt of such written request for a Demand Registration, the
Company shall notify the Holders of all such class Registrable Securities
that a Demand Registration relating to that class of Registrable
Securities has been requested. As promptly as practicable after
receiving a written request for a Demand Registration, the Company shall
(i) prepare, file with the SEC and use its commercially reasonable
efforts to cause to become effective under the Securities Act within 90
days of such demand a Registration Statement with respect to such class
of Registrable Securities, subject to Section 2.2(b), and (ii) keep such
Registration Statement continuously effective until the earlier to occur
of (A) the date that is 90 days after such effectiveness and (B) such
period of time as all of the Registrable Securities included in such
registration statement shall have been sold thereunder. Any such request
will specify the number of shares of Registrable Securities proposed to
be sold and will also specify the intended method of disposition thereof.
Within 30 days after receipt by any Holder of Registrable Securities of
such notice from the Company, such Holder may request in writing that the
applicable class of such Holder's Registrable Securities be included in
such Registration Statement and, subject to 2.2(b), the Company shall
include in such Registration Statement the applicable class of
Registrable Securities of any such Holder requested to be so included
(the "INCLUDED SECURITIES"). Each such request by such other Holders
shall specify the number of Included Securities proposed to be sold and
the intended method of disposition thereof.
If such demand occurs during the "lock up" or "black out"
period (not to exceed 180 days) imposed on the Company pursuant to or in
connection with any underwriting or purchase agreement relating to an
underwritten Rule 144A or registered public offering of Common Stock or
securities convertible into or exchangeable or exercisable for Common
Stock, the Company shall not be required to so notify holders of
Registrable Securities and file such Demand Registration Statement prior
to the end of such "lock up" or "black out" period, in which event the
Company will use its commercially reasonable efforts to cause such Demand
Registration statement to become effective no later than the later of
(i) 150 days after such demand or (ii) 30 days after the end of such
"lock up" or "black out" period. In the event of any "lock up" or "black
out" period or any underwriting or other purchase agreement, the Company
shall so notify the holders of the Registrable Securities.
(b) PRIORITY IN DEMAND REGISTRATION. In a registration
pursuant to this Section 2.2 involving an underwritten offering, if the
managing underwriter or underwriters of such underwritten offering have
informed, in writing, the Company and the Holders requesting inclusion in
such offering that in such underwriter's or underwriters' reasonable
opinion the total number of securities which the Company and the Holders
intend to include in such offering is such as to materially and adversely
affect the success of such offering, including the price at which such
securities can be sold, then the Company will be required to include in
such registration only the amount of securities which it is so advised
should be included in such registration. In such event, securities shall
be registered in such offering in the following order of priority:
(i) FIRST, the securities which have been requested to be included in
such registration by any Holder deemed to be an Affiliate or
"underwriter" for purposes of the Securities Act (in an amount equal to
the lesser of (x) an amount sufficient to include all Registrable
Securities offered by such Holder and (y) an amount sufficient to reduce
the number of such Holder's Registrable Securities held after the
offering to a level that would cause such Holder to no longer be so
deemed an Affiliate or "underwriter") (ii) SECOND, PROVIDED that no
securities sought to be included by an Affiliate or "underwriter" have
been excluded from such registration pursuant to (i) above, the
securities which have been duly requested to be included in such
registration by all other Holders of Registrable Securities pursuant to
this Agreement (such securities for the account of the Holders to be
allocated among the Holders pro rata based on the amount of securities
sought to be registered by the Holder), (iii) THIRD, PROVIDED that no
securities sought to be included by an Affiliate or "underwriter" or any
other Holder have been excluded from such registration, the securities of
other Persons entitled to exercise "piggy-back" registration rights
pursuant to contractual commitments of the Company (pro rata based on the
amount of securities sought to be registered by such Persons) and (iv)
FOURTH, PROVIDED that no securities of any of the foregoing eligible
Persons sought to be included therein have been excluded from such
registration, securities to be offered and sold for the account of the
Company.
If, as a result of the provisions of this Section 2.2(b), any
Holder shall not be entitled to include all Registrable Securities in a
Demand Registration that such Selling Holder has requested to be
included, such Holder may elect to withdraw his request to include
Registrable Securities in such registration.
(c) EFFECTIVE REGISTRATION. A Registration Statement shall
not be deemed to have been effected as a Demand Registration unless it
shall have been declared effective by the SEC, no later than the later of
(i) 90 days after the request for a Demand Registration or (ii) 30 days
after the end of any "lock up" or "black out" period described in Section
2.2(a) hereof and the Company has complied in all material respects with
all of its obligations under this Agreement with respect thereto;
PROVIDED, HOWEVER, that if, after such Registration Statement has become
effective, the offering of Registrable Securities pursuant to such
Registration Statement is or becomes the subject of any stop order,
injunction or other order or requirement of the SEC or any other
governmental, judicial or administrative order or requirement that
prevents, restrains or otherwise limits the sale of Registrable
Securities pursuant to such Registration Statement for any reason not
attributable to any Holder participating in such registration, and such
Registration Statement has not become effective within a reasonable time
period thereafter, such Registration Statement shall be deemed not to
have been effected. If (i) a registration requested pursuant to this
Section 2.2 is deemed not to have been effected or (ii) a Demand
Registration does not remain effective under the Securities Act until at
least the earlier of (A) an aggregate of 90 days (subject to Section 2.4
herein) after the effective date thereof or (B) the consummation of the
distribution by the Holders of all of the Registrable Securities covered
thereby, then such Demand Registration shall not count towards
determining if the Company has satisfied its obligation to effect Demand
Registrations pursuant to this Section 2.2. For purposes of calculating
the 90-day period referred to in the preceding sentence, any period of
time during which such Registration Statement was not in effect shall be
excluded. The Holders of Registrable Securities shall be permitted to
withdraw all or any part of the Registrable Securities from a Demand
Registration. Notwithstanding any such withdrawal by a Holder of
Registrable Securities, if the Company has complied with all of its
obligations hereunder and has effected a Demand Registration within 90
days after the request for a Demand Registration, such withdrawal shall
not require the Company to effect any additional Demand Registrations.
(d) RESTRICTIONS ON SALE BY HOLDERS. Each Holder of
Registrable Securities whose Registrable Securities are covered by a
Registration Statement filed pursuant to this Section 2.2 and are to be
sold thereunder agrees, if and to the extent reasonably requested by the
managing underwriter or underwriters in an underwritten public offering,
not to effect any public sale or distribution of Registrable Securities
or of securities of the Company of the same class as any securities
included in such Registration Statement, including a sale pursuant to
Rule 144 (except as part of such underwritten offering), during the
30-day period prior to, and during the 180-day period beginning on, the
closing date of each underwritten offering made pursuant to such
Registration Statement, to the extent timely notified in writing by the
Company or such managing underwriter or underwriters.
The foregoing provisions of Section 2.2(d) shall not apply to
any Holders of Registrable Securities if such Holder is prevented by
applicable statute or regulation from entering into any such agreement;
PROVIDED, HOWEVER, that any such Holder shall undertake, in its request
to participate in any such underwritten offering, not to effect any
public sale or distribution of any Registrable Securities commencing on
the date of sale of such Registrable Securities unless it has provided 45
days' prior written notice of such sale or distribution to the managing
underwriter or underwriters.
(e) SELECTION OF UNDERWRITER. If the Holders so elect, the
offering of such Registrable Securities pursuant to such Demand
Registration shall be in the form of an underwritten offering. The
Holders making such Demand Registration shall select one or more
nationally recognized firms of investment bankers, who shall be
reasonably acceptable to the Company, to act as the managing underwriter
or underwriters in connection with such offering and shall select any
additional investment bankers and managers to be used in connection with
the offering.
(f) EXPENSES. The Company will pay all Registration Expenses
in connection with the registrations requested pursuant to Section 2.2(a)
hereof. Each Holder of Registrable Securities shall pay all brokerage
and sales commissions, underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of such
Holder's Registrable Securities pursuant to a Registration Statement
requested pursuant to this Section 2.2.
2.3 (a) PIGGY-BACK REGISTRATION. If at any time prior to
the Termination Date the Company proposes to file a Registration
Statement under the Securities Act with respect to an offering by the
Company for its own account or for the account of any of its
securityholders of Capital Stock (other than (i) a registration statement
on Form S-4 or S-8 (or F-4 or F-8) (or any substitute form that may be
adopted by the SEC) or any other publicly registered offering pursuant to
the Securities Act pertaining to the issuance of shares of Capital Stock
or securities exercisable therefor under any benefit plan, employee
compensation plan, or employee or director stock purchase plan or (ii) a
registration statement filed in connection with an offer of securities
solely to the Company's existing securityholders), then the Company shall
give written notice of such proposed filing to the Holders of Registrable
Securities of the same class intended to be offered by the Company as
soon as practicable (but in no event fewer than 15 days before the
anticipated filing date or 10 days if the Company is subject to filing
reports under the Exchange Act and able to use Form S-3 (or F-3) under
the Securities Act. Such notice shall offer such Holders the opportunity
to register such number of shares of the applicable class of Registrable
Securities as each such Holder may request, and such request must be
received by the Company within 20 days after such written notice was
received by such Holder, (which request shall specify the number of such
Registrable Securities intended to be disposed of by such Selling Holder
and the intended method of distribution thereof) (a "PIGGY-BACK
REGISTRATION"). The Company shall use its commercially reasonable
efforts to effect the registration of such Registrable Securities and
shall use its best efforts to keep such Piggy-Back Registration
continuously effective under the Securities Act in the qualifying
jurisdictions until at least the earlier of (A) 60 days after the
effective date thereof or (B) the consummation of the distribution by the
Holders of all of the Registrable Securities covered thereby. The
Company shall use its commercially reasonable efforts to cause the
managing underwriter or underwriters, if any, of such proposed offering
to permit the Registrable Securities requested to be included in a
Piggy-Back Registration to be included on the same terms and conditions
as any similar securities of the Company or any other securityholder
included therein and to permit the sale or other disposition of such
Registrable Securities in accordance with the intended method of
distribution thereof. Any Selling Holder shall have the right to
withdraw its request for inclusion of its Registrable Securities in any
Registration Statement pursuant to this Section 2.3 by giving written
notice to the Company of its request to withdraw. The Company may
withdraw a Piggy-Back Registration at any time prior to the time it
becomes effective or the Company may elect to delay the registration;
PROVIDED, HOWEVER, that the Company shall give prompt written notice
thereof to participating Selling Holders. The Company will pay all
Registration Expenses in connection with each registration of Registrable
Securities requested pursuant to this Section 2.3, and each Holder of
Registrable Securities shall pay all brokerage and sales commissions,
underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of such Holder's Registrable
Securities pursuant to a Registration Statement effected pursuant to this
Section 2.3.
No registration effected under this Section 2.3, and no failure
to effect a registration under this Section 2.3, shall relieve the
Company of its obligation to effect a registration upon the request of
Holders of Registrable Securities pursuant to Sections 2.1 and 2.2
hereof, and no failure to effect a registration under this Section 2.3
and to complete the sale of securities registered thereunder in
connection therewith shall relieve the Company of any other obligation
under this Agreement.
(b) PRIORITY IN PIGGY-BACK REGISTRATION. In a registration
pursuant to this Section 2.3 involving an underwritten offering, if the
managing underwriter or underwriters of such underwritten offering have
informed, in writing, the Company and the Selling Holders requesting
inclusion in such offering that in such underwriter's or underwriters'
reasonable opinion the total number of securities which the Company, the
Selling Holders and any other persons desiring to participate in such
registration intend to include in such offering is such as to materially
and adversely affect the success of such offering, including the price at
which such securities can be sold, then the Company will be required to
include in such registration only the amount of securities which it is so
advised should be included in such registration. In such event: (x) in
cases only involving the registration for sale of securities for the
Company's own account (which may include securities included pursuant to
the exercise of piggy-back rights herein and in other contractual
commitments of the Company), securities shall be registered in such
offering in the following order of priority: (i) FIRST, the securities
which the Company proposes to register, (ii) SECOND, PROVIDED that no
securities sought to be included by the Company have been excluded from
such registration, the securities which have been properly requested to
be included in such registration by any Holder deemed to be an Affiliate
or "underwriter" for purposes of the Securities Act (in an amount equal
to the lesser of (x) an amount sufficient to include all Registrable
Securities offered by such Holder and (y) an amount sufficient to reduce
the number of such Holder's Registrable Securities held after the
offering to a level that would cause such Holder to no longer be so
deemed an Affiliate or "underwriter"), (iv) THIRD, PROVIDED that no
securities sought to be included by the Company or an Affiliate or
"underwriter" have been excluded from such registration pursuant to (i)
or (ii) above, the securities which have been duly requested to be
included in such registration by all other Holders of Registrable
Securities pursuant to this Agreement (such securities for the account of
the Holders to be allocated among the Holders pro rata based on the
amount of securities sought to be registered by the Holder) and
(iv) FOURTH, PROVIDED that no securities sought to be included by the
Company or any Holders have been excluded from such registration, the
securities of other Persons entitled to exercise "piggy-back"
registration rights pursuant to contractual commitments of the Company
(pro rata based on the amount of securities sought to be registered by
such Persons); and (y) in cases not involving the registration for sale
of securities for the Company's own account only, securities shall be
registered in such offering in the following order of priority:
(i) FIRST, securities to be sold for the account of the Company and the
securities of any Person whose exercise of a "demand" registration right
pursuant to a contractual commitment of the Company is the basis for the
registration (PROVIDED that if such Person is a Holder of Registrable
Securities, as among Holders of Registrable Securities there shall be no
priority), (ii) SECOND, PROVIDED that no securities of the Company or
such Persons referred to in the immediately preceding clause (i) have
been excluded from such registration, the securities properly requested
to be included in such registration by any Holder deemed to be an
Affiliate or "underwriter" for purposes of the Securities Act (in an
amount equal to the lesser of (x) an amount sufficient to include all
Registrable Securities offered by such Holder and (y) an amount
sufficient to reduce the number of such Holder's Registrable Securities
held after the offering to a level that would cause such Holder to no
longer be so deemed an Affiliate or "underwriter"), (iii) THIRD, PROVIDED
that no securities sought to be included by the Company or an Affiliate
or "underwriter" have been excluded from such registration pursuant to
(i) or (ii) above, the securities which have been duly requested to be
included in such registration by all other Holders of Registrable
Securities pursuant to this Agreement (such securities for the account of
the Holders to be allocated among the Holders pro rata based on the total
amount of securities sought to be registered by the Holders) and
(iv) FOURTH, PROVIDED that no securities of such Person referred to in
the immediately preceding clause (i) or of the Holders have been excluded
from such registration, securities of other Persons entitled to exercise
"piggy-back" registration rights pursuant to contractual commitments (pro
rata based on the amount of securities sought to be registered by such
Persons).
If, as a result of the provisions of this Section 2.3(b), any
Selling Holder shall not be entitled to include all Registrable
Securities in a Piggy-Back Registration that such Selling Holder has
requested to be included, such Selling Holder may elect to withdraw his
request to include Registrable Securities in such registration.
(c) RESTRICTIONS ON SALE BY HOLDERS. Each Holder of
Registrable Securities whose Registrable Securities are covered by a
Registration Statement filed pursuant to this Section 2.3 (a "PIGGY-BACK
REGISTRATION STATEMENT") and are to be sold thereunder agrees, if and to
the extent reasonably requested by the managing underwriter or
underwriters in an underwritten public offering, not to effect any public
sale or distribution of Registrable Securities or of securities of the
Company of the same class as any securities included in such Piggy-Back
Registration Statement, including a sale pursuant to Rule 144 (except as
part of such underwritten offering), during the 30-day period prior to,
and during the 180-day period beginning on, the closing date of each
underwritten offering made pursuant to such Piggy-Back Registration
Statement, to the extent timely notified in writing by the Company or
such managing underwriter or underwriters.
The foregoing provisions of Section 2.3(c) shall not apply to
any Holders of Registrable Securities if such Holder is prevented by
applicable statute or regulation from entering into any such agreement;
PROVIDED, HOWEVER, that any such Holder shall undertake, in its request
to participate in any such underwritten offering, not to effect any
public sale or distribution of any Registrable Securities commencing on
the date of sale of such Registrable Securities unless it has provided 45
days' prior written notice of such sale or distribution to the managing
underwriter or underwriters.
2.4 LIMITATIONS, CONDITIONS AND QUALIFICATIONS TO OBLIGATIONS
UNDER REGISTRATION COVENANTS. The obligations of the Company set forth
in Sections 2.1, 2.2, 2.3 and 2.6 hereof are subject to each of the
following limitations, conditions and qualifications:
(a) Subject to the next sentence of this paragraph, the
Company shall be entitled to postpone, for a reasonable period of
time, the filing of, or suspend the effectiveness of, any
registration statement or amendment thereto, or suspend the use of
any prospectus and shall not be required to amend or supplement the
registration statement, any related prospectus or any document
incorporated therein by reference (other than an effective
registration statement being used for an underwritten offering);
PROVIDED that the duration of all such postponements or suspensions
during any consecutive 365-day period (a "SUSPENSION PERIOD") may
not exceed an aggregate of 60 days and shall not include the 60 days
immediately prior to the Termination Date and PROVIDED, FURTHER,
that the duration of such Suspension Period shall be excluded from
the calculation of the 90-day period described in Section 2.2(c)
hereof. Such Suspension Period may be effected only if (i) an event
or circumstance occurs and is continuing as a result of which the
registration statement, any related prospectus or any document
incorporated therein by reference as then amended or supplemented or
proposed to be filed would, in the Company's good faith judgment,
contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading, and (ii) (A) the Company determines in its good faith
judgment that the disclosure of such an event at such time would
have a material adverse effect on the business, operations or
prospects of the Company or (B) the disclosure otherwise relates to
a material business transaction which has not yet been publicly
disclosed; PROVIDED, that the Effectiveness Period shall be extended
by the number of days in any Suspension Period; PROVIDED, FURTHER,
that the Company may from time to time suspend the effectiveness
for a period not in excess of five Business Days to allow for the
updating of the financial statements included in a Registration
Statement to the extent required by law, such suspension for
updating financial statements not to exceed 45 calendar days in
aggregate in any 12-month period. If the Company shall so postpone
the filing of a Registration Statement it shall, as promptly as
possible, deliver a certificate signed by the chief executive
officer of the Company to the Selling Holders as to such
determination, and the Selling Holders shall (1) have the right, in
the case of a postponement of the filing or effectiveness of a
Registration Statement, upon the affirmative vote of the Holders of
not less than a majority of the Registrable Securities to be
included in such Registration Statement, to withdraw the request for
registration by giving written notice to the Company within 10 days
after receipt of such notice or (2) in the case of a suspension of
the right to make sales, receive an extension of the registration
period equal to the number of days of the suspension. Any Demand
Registration as to which the withdrawal election referred to in the
preceding sentence has been effected shall not be counted for
purposes of the Demand Registration the Company is required to
effect pursuant to Section 2.2 hereof.
(b) The Company's obligations shall be subject to the
obligations of the Selling Holders, which the Selling Holders
acknowledge, to furnish all information and materials and to take
any and all actions as may be required under applicable federal and
state securities laws and regulations to permit the Company to
comply with all applicable requirements of the SEC, if applicable,
and to obtain any acceleration of the effective date of the
applicable Registration Statement.
2.5 RESTRICTIONS ON SALE BY THE COMPANY AND OTHERS. The
Company covenants and agrees that (i) it shall not, and that it shall not
cause or permit any of its subsidiaries to, effect any public sale or
distribution of any securities of the same class as any of the
Registrable Securities or any securities convertible into or exchangeable
or exercisable for such securities (or any option or other right for such
securities) during the 30-day period prior to, and during the 90-day
period beginning on, the commencement of any underwritten offering of
Registrable Securities pursuant to a Demand Registration which has been
requested pursuant to this Agreement, or a Piggy-Back Registration which
has been scheduled, prior to the Company or any of its subsidiaries
publicly announcing its intention to effect any such public sale or
distribution; (ii) the Company will not, and the Company will not cause
or permit any subsidiary of the Company to, after the date hereof, enter
into any agreement or contract that conflicts with or limits or prohibits
the full and timely exercise by the Holders of Registrable Securities of
the rights herein to request a Demand Registration or to join in any
Piggy-Back Registration subject to the other terms and provisions hereof;
and (iii) upon request of the Holders of not less than a majority of the
Registrable Securities to be included in such Registration Statement or
any underwriter, it shall use its best efforts to secure the written
agreement of each of its officers and directors to not effect any public
sale or distribution of any securities of the same class as the
Registrable Securities (or any securities convertible into or
exchangeable or exercisable for an such securities), or any option or
right for such securities during the period described in clause (i) of
this Section 2.5.
2.6 RULE 144 AND RULE 144A. The Company covenants that it
will file the reports required to be filed by it under the Securities Act
and the Exchange Act and the rules and regulations adopted by the SEC
thereunder in a timely manner and, if at any time the Company is not
required to file such reports, it will, upon the request of any Holder or
beneficial owner of Registrable Securities, make available such
information necessary to permit sales pursuant to Rule 144A under the
Securities Act. The Company further covenants that it will take such
further action as any Holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such
Holder to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (a)
Rule 144(k) and Rule 144A under the Securities Act, as such Rules may be
amended from time to time, or (b) any similar rule or regulation
hereafter adopted by the SEC. The Company shall also be required to file
with the Trustee and the Transfer Agent and Registrar, and to provide to
each other Holder upon written request, without cost to such Holder,
copies of such reports and documents within 15 days after the date on
which the Company files such reports and documents with the SEC. Upon
the request of any Holder of Registrable Securities, the Company will in
a timely manner deliver to such Holder a written statement as to whether
it has complied with such information requirements.
2.7 UNDERWRITTEN REGISTRATIONS. No Holder of Registrable
Securities may participate in any underwritten registration pursuant to a
Registration Statement filed under this Agreement unless such Holder (a)
agrees to (i) sell such Holder's Registrable Securities on the basis
provided in and in compliance with any underwriting arrangements approved
by the Holders of not less than a majority of the Registrable Securities
to be sold thereunder and (ii) comply with Rules 101, 102 and 104 of
Regulation M under the Exchange Act and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents reasonably required under the terms of such
underwriting arrangements.
If the Company has complied with all its obligations under this
Agreement with respect to a Demand Registration or a Piggy-Back
Registration relating to an underwritten public offering, all holders of
the applicable class of Registrable Securities upon request of the lead
managing underwriter with respect to such underwritten public offering,
will be required to not sell or otherwise dispose of any such Registrable
Securities owned by them for a period not to exceed 30 days prior to and
180 days after the consummation of such underwritten public offering.
SECTION 3. REGISTRATION PROCEDURES. In connection with the
obligations of the Company with respect to any Registration Statement
pursuant to Sections 2.1, 2.2, 2.3 and 2.6 hereof, the Company shall,
except as otherwise provided:
(a) At least five days prior to the initial filing of a
Registration Statement or Prospectus and at least two days prior to
the filing of any amendment or supplement thereto (including any
document that would be incorporated or deemed to be incorporated
therein by reference), furnish to the Trustee, the Transfer Agent
and Registrar, the Holders and the managing underwriters, if any,
copies of all such documents proposed to be filed, which documents
(other than those incorporated or deemed to be incorporated by
reference) shall be subject to the review of such Holders, and such
underwriters, if any, and cause the officers and directors of the
Company, counsel to the Company and independent certified public
accountants to the Company to respond to such reasonable inquiries
as shall be necessary, in the opinion of counsel to such
underwriters, to conduct a reasonable investigation within the
meaning of the Securities Act; PROVIDED that the foregoing
inspection and information gathering shall be coordinated on behalf
of the Holders by GAX. The Company shall not file any such
Registration Statement or related Prospectus or any amendments or
supplements thereto which the Holders of a majority of the
Registrable Securities included in such Registration Statement shall
reasonably object on a timely basis.
(b) Prepare and file with the SEC such amendments, including
post-effective amendments to each Registration Statement as may be
necessary to keep such Registration Statement continuously effective
for the applicable time period required hereunder; cause the related
Prospectus to be supplemented by any required Prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 (or any
similar provisions then in force) promulgated under the Securities
Act; and comply with the provisions of the Securities Act and the
Exchange Act with respect to the disposition of all securities
covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the sellers
thereof set forth in such Registration Statement as so amended or in
such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold
and the managing underwriters, if any, promptly, and (if requested
by any such person) confirm such notice in writing, (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment
is proposed to be filed, and (B) with respect to a Registration
Statement or any post-effective amendment, when the same has become
effective, (ii) of any request by the SEC or any other Federal or
state governmental authority for amendments or supplements to a
Registration Statement or related Prospectus or for additional
information, (iii) of the issuance by the SEC, any state securities
commission, any other governmental agency or any court of any stop
order suspending the effectiveness of such Registration Statement or
of any order or injunction suspending or enjoining the use of a
Prospectus or the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (iv) of the receipt
by the Company of any notification with respect to the suspension of
the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose, and
(v) of the happening of any event, the existence of any information
becoming known that makes any statement made in a Registration
Statement or related Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any
material respect or omit to state any material fact required to be
stated therein or necessary to make the statements therein, not
misleading, and that in the case of the Prospectus, it will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading.
(d) Use its reasonable best efforts to avoid the issuance of
or, if issued, obtain the withdrawal of any order enjoining or
suspending the effectiveness of the Registration Statement or the
use of a Prospectus or the lifting of any suspension of the
qualification (or exemption from qualification) of any of the
Registrable Securities covered thereby for sale in any jurisdiction
described in Section 3(h) at the earliest practicable moment.
(e) If requested by the managing underwriters, if any, or if
none, by the Holders of a majority of the Registrable Securities
being sold pursuant to such Registration Statement, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment
such information as the managing underwriters, if any, or if none,
such Holders reasonably believe should be included therein, and (ii)
make all required filings of such Prospectus supplement or such
post-effective amendment under the Securities Act as soon as
practicable after the Company has received notification of the
matters to be incorporated in such prospectus supplement or
post-effective amendment; PROVIDED, HOWEVER, that the Company shall
not be required to take any action pursuant to this Section 3(e)
that would, in the opinion of counsel for the Company, violate
applicable law.
(f) Upon written request to the Company, furnish to each
Holder of Registrable Securities to be sold pursuant to a
Registration Statement and each managing underwriter, if any,
without charge, at least one conformed copy of the Registration
Statement and each amendment thereto, including financial statements
and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent
requested (including those previously furnished or incorporated by
reference) as soon as practicable after the filing of such documents
with the SEC.
(g) Deliver to each Holder of Registrable Securities to be
sold pursuant to a Registration Statement and each managing
underwriter, if any, without charge, as many copies of each
Prospectus (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and the
Company hereby consents to use of such Prospectus and each amendment
or supplement thereto and each document supplemental thereto by each
of the Selling Holders of Registrable Securities and the
underwriters or agents, if any, in connection with the offering and
sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto.
(h) Prior to any offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the Holders of
Registrable Securities to be sold, the managing underwriter or
underwriters, if any, and their respective counsel in connection
with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for
offer and sale under the securities or Blue Sky laws of such
jurisdictions as any such Holder or underwriter reasonably requests
in writing; keep each such registration or qualification (or
exemption therefrom) effective during the period such Registration
Statement is required to be kept effective hereunder and do any and
all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities
covered by the applicable Registration Statement; PROVIDED, HOWEVER,
that the Company shall not be required to (i) qualify generally to
do business in any jurisdiction where it is not then so qualified or
(ii) take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject or
to taxation in any jurisdiction where it is not so subject.
(i) In connection with any sale or transfer of Registrable
Securities that will result in such securities no longer being
Registrable Securities, cooperate with the Holders of Registrable
Securities and the managing underwriters, if any, to facilitate the
timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates shall not bear
any restrictive legends whatsoever and shall be in a form eligible
for deposit with DTC; and to enable such Registrable Securities to
be in such denominations and registered in such names as the
managing underwriter or underwriters, if any, or such Holders may
reasonably request at least two business days prior to any sale of
Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section
3(c)(v) above, as promptly as practicable prepare a supplement or
amendment, including if appropriate a post-effective amendment to
each Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that,
as thereafter delivered, such Prospectus will not contain an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading.
(k) Prior to the effective date of a Registration Statement,
(i) provide the Trustee and the Transfer Agent and Registrar, as
applicable, with certificates for such securities in a form eligible
for deposit with DTC and (ii) provide CUSIP numbers for such
securities.
(l) Enter into such agreement (including an underwriting
agreement in such form, scope and substance as is customary in
underwritten offerings) and take all such other actions in
connection therewith (including those reasonably requested by the
managing underwriters, if any, or the Holders of a majority of the
Registrable Securities being sold) in order to expedite or
facilitate the disposition of such Registrable Securities, and,
whether or not an underwriting agreement is entered into and whether
or not the registration is an underwritten registration, (i) make
such representations and warranties to the Holders of such
Registrable Securities and the underwriter or underwriters, if any,
with respect to the business of the Company and the subsidiaries of
the Company (including with respect to businesses or assets acquired
or to be acquired by any of them), and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, in form, substance
and scope as are customarily made by issuers to underwriters in
underwritten offerings, and confirm the same if any when requested;
(ii) obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters, if any,
addressed to each selling Holder of Registrable Securities and each
of the underwriters, if any), covering the matters customarily
covered in opinions requested in underwritten offerings and such
other matters as may be reasonably requested by such underwriters;
(iii) use their best efforts to obtain customary "cold comfort"
letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or of
any business acquired by the Company for which financial statements
and financial data are, or are required to be, included in the
Registration Statement), addressed (where reasonably possible) to
each Selling Holder of Registrable Securities and each of the
underwriters, if any, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort"
letters in connection with underwritten offerings; (iv) if an
underwriting agreement is entered into, the same shall contain
customary indemnification provisions and procedures no less
favorable to the Selling Holder and the underwriters, if any, than
those set forth in Section 4 hereof (or such other provisions and
procedures acceptable to Holders of a majority of Registrable
Securities covered by such Registration Statement and the managing
underwriter, if any); and (v) deliver such documents and
certificates as may be reasonably requested by the Holders of a
majority of the Registrable Securities being sold and the managing
underwriters or underwriters to evidence the continued validity of
the representations and warranties made pursuant to clause (i) above
and evidence compliance with any customary conditions contained in
the underwriting agreement or other agreements entered into by the
Company.
(m) Make available for inspection by a representative of the
Selling Holders of Registrable Securities, any underwriter
participating in any such disposition of Registrable Securities, if
any, and any attorney, consultant or accountant retained by such
representative of the Selling Holders of Registrable Securities or
underwriter (collectively, the "INSPECTORS"), at the offices where
normally kept, during the reasonable business hours, all financial
and other records, pertinent corporate documents and properties of
the Company and the subsidiaries of the Company (including with
respect to businesses and assets acquired or to be acquired to the
extent that such information is available to the Company), and cause
the officers, directors, agents and employees of the Company and its
subsidiaries of the Company (including with respect to businesses
and assets acquired or to be acquired to the extent that such
information is available to the Company) to supply all information
in each case reasonably requested by any such Inspector in
connection with such Registration Statement; PROVIDED, HOWEVER, that
the foregoing investigation shall be coordinated on behalf of the
Selling Holders of Registrable Securities by GAX.
(n) Comply with all applicable rules, regulations and policies
of the SEC and make generally available to its securityholders
earnings statements satisfying the provisions of Section 11(a) of
the Securities Act and Rule 158 thereunder no later than 60 days
after the end of any 12-month period (or 135 days after the end of
any 12-month period if such period is a fiscal year) (i) commencing
at the end of any fiscal quarter in which Registrable Securities are
sold to an underwriter or to underwriters in a firm commitment or
best efforts underwritten offering and (ii) if not sold to an
underwriter or to underwriters in such an offering, commencing on
the first day of the first fiscal quarter of the Company after the
effective date of the relevant Registration Statement, which
statements shall cover said such period, consistent with the
requirements of Rule 158 under the Securities Act.
(o) Use its best efforts to cause all Common Stock or Notes
held by the Holders and relating to such Registration Statement to
be listed or declared eligible for quotation on each securities
exchange, if any, on which similar securities issued by the Company
are then listed or quoted.
(p) Cooperate with each seller of Registrable Securities to
facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any
restrictive legends and registered in such names as the Selling
Holders may reasonably request at least two business days prior to
the closing of any sale of Registrable Securities.
(q) Cooperate with each seller of Registrable Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Securities and
its respective counsel in connection with any filings required to be
made with the National Association of Securities Dealers, Inc.
The Company may require a Holder of Registrable Securities to
be included in a Registration Statement to furnish to the Company such
information regarding (i) the intended method of distribution of such
Registrable Securities, (ii) such Holder and (iii) the Registrable
Securities held by such Holder as is required by law to be disclosed in
such Registration Statement and the Company may exclude from such
Registration Statement the Registrable Securities of any Holder who fails
to furnish such information within a reasonable time after receiving such
request.
If any such Registration Statement refers to any Holder by name
or otherwise as the Holder of any securities of the Company, then such
Holder shall have the right to require (i) the insertion therein of
language, in form and substance reasonably satisfactory to such Holder,
to the effect that the holding by such Holder of such securities is not
to be construed as a recommendation by such Holder of the investment
quality of the Company's securities covered thereby and that such holding
does not imply that such Holder will assist in meeting any future
financial requirements of the Company, or (ii) in the event that such
reference to such Holder by name or otherwise is not required by the
Securities Act, the deletion of the reference to such Holder in such
amendment or supplement to the Registration Statement filed or prepared
subsequent to the time that such reference ceases to be required.
Each Holder of Registrable Securities agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
3(c)(ii), 3(c)(iii), 3(c)(iv) or 3(c)(v) hereof, such Holder will
forthwith discontinue disposition of such Registrable Securities covered
by the Registration Statement or Prospectus until such Holder's receipt
of the copies of the supplemented or amended Prospectus contemplated by
Section 3(j) hereof, or until it is advised in writing (the "ADVICE") by
the Company that the use of the applicable Prospectus may be resumed, and
in either case has received copies of any additional or supplemental
filings that are incorporated or deemed to be incorporated by reference
in such Prospectus. If the Company shall give any such notice, the
Effectiveness Period shall be extended by the number of days during such
periods from and including the date of the giving of such notice to and
including the date when each seller of Registrable Securities covered by
such Registration Statement shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 3(j) hereof or
(y) the Advice, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus.
Holders of the Registrable Securities shall be obligated to
keep confidential the existence of a Suspension Period or any
confidential information communicated by the Company to the Holder with
respect thereto.
SECTION 4. INDEMNIFICATION AND CONTRIBUTION. (a) The Company
agrees to indemnify and hold harmless each Holder, each underwriter, if
any, who participates in an offering of Registrable Securities, and
their respective directors, officers, employees, agents and each Person,
if any, who controls any of such parties within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement
or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto) pursuant to which
Registrable Securities were registered under the Securities Act,
including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact required
to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus (or any
amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever, in each case, based upon any
such untrue statement or omission, or any such alleged untrue
statement or omission; PROVIDED that (subject to Section 4(d) below)
any such settlement is effected with the written consent of the
Company; and
(iii) against any and all expenses whatsoever, as incurred
(including the reasonable fees and disbursements of counsel chosen
by GAX), incurred in investigating, preparing or defending against
any litigation, or any investigation or proceeding by any court or
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any
such expense is not paid under subparagraph (i) or (ii) of this
Section 4(a);
PROVIDED, HOWEVER, that this indemnity agreement does not apply to any
loss, liability, claim, damage or expense to the extent arising out of an
untrue statement or omission or alleged untrue statement or omission (A)
made in or omitted from a preliminary Prospectus or Registration
Statement and corrected or included in a subsequent Prospectus or
Registration Statement or any amendment or supplement thereto, (B) made
in reliance upon and in conformity with written information furnished to
the Company by the Selling Holders of Registrable Securities, any Holder,
or any underwriter expressly for use in the Registration Statement (or
any amendment thereto) or the Prospectus (or any amendment or supplement
thereto) or (C) resulting from the use of the Prospectus during a period
when the use of the Prospectus has been suspended for sales thereunder in
accordance with Section 2.2(d), 2.3(c), 2.4, 2.5 or 2.7 hereof, PROVIDED,
in each case, that Holders received prior notice of such suspension or
other unavailability.
(b) In the case of any registration of Registrable Securities,
each Holder agrees, severally and not jointly, to indemnify and hold
harmless the Company, each underwriter, if any, who participates in an
offering of Registrable Securities and the other Selling Holders and each
of their respective directors and officers (including each director and
officer of the Company who signed the Registration Statement) and each
Person, if any, who controls the Company, any underwriter or any Selling
Holder within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act, against any and all loss, liability, claim,
damage and expense described in the indemnity contained in Section 4(a)
hereof, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment thereto) or the Prospectus (or
any amendment or supplement thereto) in reliance upon and in conformity
with written information furnished to the Company by such Holder
expressly for use in the Registration Statement (or any amendment
thereto), or the Prospectus (or any amendment or supplement thereto);
PROVIDED, HOWEVER, that no such Holder shall be liable for any claims
hereunder in excess of the amount of net proceeds received by such Holder
from the sale of Registrable Securities pursuant to such Registration
Statement.
(c) In case any action shall be commenced involving any Person
in respect of which indemnity may be sought pursuant to either paragraph
(a) or (b) above, such Person (the "INDEMNIFIED PARTY") shall give notice
as promptly as reasonably practicable to each Person against whom such
indemnity may be sought (the "INDEMNIFYING PARTY"), but failure to so
notify an indemnifying party shall not relieve such indemnifying party
from any liability hereunder to the extent it is not materially
prejudiced as a result thereof and in any event shall not relieve it from
any liability which it may have otherwise than on account of this
indemnity agreement. An indemnifying party may participate at its own
expense in the defense of such action; PROVIDED, HOWEVER, that counsel to
the indemnifying party shall not (except with the consent of the
indemnified party) also be counsel to the indemnified party. In no event
shall the indemnifying party or parties be liable for the fees and
expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection
with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or
circumstances. No indemnifying party shall, without the prior written
consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body, commenced
or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 4
(whether or not the indemnified parties are actual or potential parties
thereof), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and
expenses of counsel, such indemnifying party agrees that it shall be
liable for any settlement of the nature contemplated by Section 4(a)(ii)
hereof effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party
of the aforesaid request, (ii) such indemnifying party shall have
received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party
shall not have reimbursed such indemnified party in accordance with such
request prior to the date of such settlement.
(e) If the indemnification provided for in any of the
indemnity provisions set forth in this Section 4 is for any reason
unavailable to or insufficient to hold harmless an indemnified party in
respect of any losses, liabilities, claims, damages or expenses referred
to therein, then each indemnifying party shall contribute to the
aggregate amount of such losses, liabilities, claims, damages and
expenses incurred by such indemnified party, as incurred, in such
proportion as is appropriate to reflect the relative fault of such
indemnifying party or parties on the one hand, and such indemnified party
or parties on the other hand, in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations. The
relative fault of such indemnifying party or parties on the one hand, and
such indemnified party or parties on the other hand shall be determined
by reference to, among other things, whether any such untrue or alleged
untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by such
indemnifying party or parties or such indemnified party or parties and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
Company and the Holders of the Registrable Securities agree that it would
not be just and equitable if contribution pursuant to this Section 4 were
determined by pro rata allocation (even if the Selling Holders of
Registrable Securities were treated as one entity for such purpose) or by
another method of allocation which does not take account of the equitable
considerations referred to above in Section 4. The aggregate amount of
losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 4 shall be deemed
to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by an governmental agency
or body, commenced or threatened, or any claim whatsoever based upon any
such untrue or alleged untrue statement or omission or alleged omission.
No Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution
from any Person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 4, each Person, if any, who controls a
Holder within the meaning of this Section 15 of the Securities Act or
Section 20 of the Exchange Act shall have the same rights to contribution
as such Holder, and each director of the Company, each officer of the
Company who signed the Registration Statement, and each Person, if any,
who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Company.
SECTION 5. MISCELLANEOUS. (a) RESALES BY AFFILIATES. In the
event that, and for so long as, any Affiliate of a Holder, or any
successor thereto, in its opinion, is or becomes an Affiliate of the
Company, or any successor thereto, and is making a market in the shares
of Common Stock or the Notes, the Company (or its successor) shall use
its best efforts to keep effective a Shelf Registration Statement
providing for the resale of any shares of Common Stock or Notes, as the
case may be, acquired by such Person from time to time until such time as
each such Person shall, in its opinion, cease to be an Affiliate of the
Company, as evidenced by written notice sent promptly upon such event.
(b) REMEDIES. In the event of a breach by the Company of any
of its obligations under this Agreement, each Holder, in addition to
being entitled to exercise all rights provided herein, in the Plan, the
Purchase Agreement or granted by law, including recovery of damages, will
be entitled to specific performance of its rights under this Agreement.
The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of any of
the provisions of this Agreement.
(c) NO INCONSISTENT AGREEMENTS. The Company will not enter
into any agreement which is inconsistent with the rights granted to the
Holders of Registrable Securities in this Agreement or otherwise
conflicts with the provisions hereof. The rights granted to the Holders
hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's other issued and
outstanding securities, if any, under any such agreements.
(d) NO PIGGY-BACK ON DEMAND REGISTRATIONS. The Company shall
not grant to any of its securityholders (other than the Holders in such
capacity) the right to include any of their securities in any
Registration Statement filed pursuant to a Demand Registration.
(e) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified
or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, otherwise than with the prior written
consent of the Holders of not less than a majority of each class and
series of Registrable Securities; PROVIDED, HOWEVER, that, for the
purposes of this Agreement, Registrable Securities that are owned,
directly or indirectly, by the Company or any of its Affiliates (other
than the Holders existing on the date hereof and any of their respective
affiliates) shall be deemed not to be outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of one or more
Holders and that does not directly or indirectly affect the rights of
other Holders may be given by a majority of the Holders so affected;
PROVIDED, HOWEVER, that the provisions of this sentence may not be
amended, modified or supplemented except in accordance with the
provisions of the immediately preceding sentence. Notwithstanding the
foregoing, no amendment, modification, supplement, waiver or consent with
respect to Section 4 shall be made or given otherwise than the prior
written consent of each Person affected thereby.
(f) NOTICES. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand delivery,
registered first-class mail, facsimile, or any courier guaranteeing
overnight delivery (i) if to a Holder, at the most current address of
such Holder as set forth in the register for the Registrable Securities;
and (ii) if to the Company, initially to CAI WIRELESS SYSTEMS, INC., 18
Corporate Woods Blvd., Albany, NY 12211, Facsimile: (518) 462-3045,
Attention: James P. Ashman, and thereafter at such other address, notice
of which is given in accordance with the provisions of this Section 5(f).
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered;
five Business Days after being deposited in the mail, postage prepaid, if
mailed; when answered back, if telexed; when receipt is acknowledged, if
telecopied; and on the next Business Day, if timely delivered to an air
courier guaranteeing overnight delivery.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of
each of the parties and shall inure to the benefit of each Holder. If
any transferee of any Holder shall acquire Registrable Securities, in any
manner, whether by operation of law or otherwise, such Registrable
Securities shall be held subject to all of the terms of this Agreement,
and by taking and holding such Registrable Securities such Person shall
be conclusively deemed to have agreed to be bound by and to perform all
of the terms and provisions of this Agreement and such Person shall be
entitled to receive the benefits hereof. The Company may not assign any
of its rights or obligations hereunder without the prior written consent
of each Holder of Registrable Securities. Notwithstanding the foregoing,
no successor or assignee of the Company shall have any rights granted
under the Agreement until such person shall acknowledge its rights and
obligations hereunder by a signed written statement of such person's
acceptance of such rights and obligations.
(h) COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the
same Agreement.
(I) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(j) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder
of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their best
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including
any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(k) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(l) ENTIRE AGREEMENT. This Agreement, together with the
Purchase Agreement, the Plan and any other documents entered into
pursuant thereto, is intended by the parties as a final expression of
their agreement, and is intended to be a complete and exclusive statement
of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. This Agreement, the
Purchase Agreement, the Plan and any other documents entered into
pursuant thereto supersede all prior agreements and understandings
between the parties with respect to such subject matter.
(m) SECURITIES HELD BY THE COMPANY OR ITS AFFILIATES.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable Securities held
by the Company or by any of its Affiliates (other than the Holders
existing on the date hereof and any of their respective affiliates) shall
not be counted (in either the numerator or the denominator) in
determining whether such consent or approval was given by the Holders of
such required percentage.
(n) TERMINATION OF AGREEMENT. This Agreement shall terminate
on the Termination Date; PROVIDED, HOWEVER, that the obligations,
representations and warranties in Sections 2.1(c), 4, 5(a), 5(b), 5(m)
and all obligations of the Company relating to the payment of
Registration Expenses shall survive termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
CAI WIRELESS SYSTEMS, INC.
By: /S/ JAMES P. ASHMAN
Name: James P. Ashman
Title: Executive Vice President
Confirmed and accepted as of
the date first above written:
MERRILL LYNCH GLOBAL ALLOCATION FUND, INC.
By: /S/_________________________________
Name:
Title:
MERRILL LYNCH EQUITY/CONVERTIBLE
SERIES: GLOBAL ALLOCATION PORTFOLIO
By: /S/__________________________________
Name:
Title:
Exhibit 99.5
CAI WIRELESS SYSTEMS, INC.
INTRODUCTION TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following unaudited pro forma financial information of CAI Wireless
Systems, Inc. ("CAI" or the "Company") consists of the unaudited Pro Forma
Balance Sheet as of September 30, 1998. The pro forma adjustments reflect the
financial restructuring transactions under Chapter 11 of the U.S. Bankruptcy
Code which were consummated on October 14, 1998 as if they had occurred on
September 30, 1998.
Such transactions include: 1) the issuance by CAI of $100,000,000
(aggregate principal discounted amount at issuance) of 13% Senior Notes due
2004 to holders of CAI's previously issued 12.25% Senior Notes due 2002 in the
aggregate principal amount of $275,000,000, 2) the cancellation of 40,543,039
previously issued and outstanding shares of CAI common stock, without par
value, and the issuance of 17,241,379 shares of CAI common stock, par value
$.01 per share, and 3) the consummation of an $80,000,000 financing facility
(the "Exit Facility").
At the Exit Facility closing, the Company paid $1,800,000 in commitment
fees to Merrill Lynch Global Allocation Fund, Inc., the Exit Facility lender
("MLGAF") and paid $61,900,000 to MLGAF in repayment of the outstanding
principal, interest and commitment fees on the DIP Facility made available to
CAI during its Chapter 11 case. CAI has accrued an additional $2,500,000 in
commitment fees payable to MLGAF at the maturity of the Exit Facility. The
balance of the net proceeds provided to CAI under the Exit Facility will be
classified as Restricted Cash and used to fund CAI's general operating
requirements in accordance with a budget approved by MLGAF.
<PAGE>
<TABLE>
<CAPTION>
CAI WIRELESS SYSTEMS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
UNAUDITED
IN ($000'S)
<S> <C> <C> <C> <C> <C> <C> <C>
Pro Forma Pro Forma
ASSETS Consolidated Refinancing [i] Restructuring [ii] As Adjusted
Cash and cash equivalents $ 1,448 $ - $ - $ 1,448
Restricted cash 11,095 16,300 a,b - 27,395
Debt service escrow 16,914 - (16,914) c -
Subscriber receivables, net 702 - - 702
Prepaid expenses 549 - - 549
Property and equipment, net 41,460 - - 41,460
Wireless channel rights, net 187,730 - - 187,730
Investment in TelQuest Satellite
Services LLC 1,220 - - 1,220
Goodwill, net 22,066 - - 22,066
Debt financing costs, net 5,838 20,909 b,h (5,838) d 20,909
Other assets 3,060 - - 3,060
----------- ----------- ----------- -----------
TOTAL ASSETS $ 292,082 $ 37,209 $ (22,752) $ 306,539
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Accounts payable $ 3,125 $ (600) b $ - $ 2,525
Accrued expenses - interest 20,518 (1,300) b (19,218) b -
Accrued expenses - other 6,917 2,500 b - 9,417
Wireless channel rights obligations 2,922 - - 2,922
DIP financing facility 60,000 (60,000) b - -
Exit financing facility - 80,000 a - 80,000
Notes payable 36,558 - (32,793) f 3,765
Senior notes - extinguished 275,000 - (275,000) c -
Senior discount notes - - 100,000 c 100,000
----------- ---------- --------- ---------
TOTAL LIABILITIES 405,040 20,600 (227,011) 198,629
----------- ---------- --------- ---------
Stockholders' Equity (Deficit)
Preferred stock - - - -
Common stock - extinguished 275,771 - (275,771) e -
Common stock - new issue - 22 h 150 f 172
Additional paid-in capital 101,712 16,587 h (10,561) g 107,738
Accumulated deficit (490,441) - 490,441 g -
----------- ---------- ---------- ---------
TOTAL EQUITY (112,958) 16,609 204,259 107,910
----------- ---------- ---------- ---------
TOTAL LIABILITIES AND EQUITY $ 292,082 $ 37,209 $ (22,752) $ 306,539
=========== ========== ========== ==========
</TABLE>
<PAGE>
CAI WIRELESS SYSTEMS, INC.
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(UNAUDITED)
[i] Adjustments to reflect the Company's refinancing transactions, including:
a. Consummation of an $80,000,000 Exit Facility with MLGAF.
b. Reflects the use of the proceeds from the Exit Facility to (i) repay
the outstanding $60,000,000 DIP Facility provided by MLGAF, including
a $60,000,000 principal payment, $1,300,000 interest payment and a
$600,000 commitment fee, and (ii) pay a $1,800,000 commitment fee to
MLGAF for the Exit Facility. The balance of the proceeds
(approximately $16,000,000) will be used by the Company to fund its
general operating requirements in accordance with the approved budget.
An additional $2,500,000 commitment fee is payable to MLGAF at the
maturity of the Exit Facility.
[ii] Adjustments to reflect the restructuring transactions as the Company
emerges from Chapter 11, including:
c. The cancellation of $275,000,000 of indebtedness of CAI previously
evidenced by CAI's 12.25% Senior Notes due 2002 (the "Old Senior
Notes") in exchange for $100,000,000 aggregate principal discounted
amount at issuance of 13% Senior Notes due 2004 of CAI, the payment
of the semiannual interest on the Old Senior Notes from the debt
service escrow account, plus additional interest accrued on that
semiannual payment from September 16, 1998 to September 30, 1998 and
the issuance of New Common Stock (described in (f) below).
d. Reflects the write-off of capitalized costs associated with the
original issuance of the Old Senior Notes.
e. Reflects the cancellation of 40,543,039 shares of CAI Common Stock,
without par value (the "Old Common Stock").
f. Reflects the issuance by CAI of 15,000,000 shares of common stock,
$.01 par value (the "New Common Stock"), of which 13,650,000 shares
were issued on a pro rata basis to the holders of Old Senior Notes and
1,350,000 shares were issued on a pro rata basis to holders of certain
subordinated indebtedness of CAI. The subordinated indebtedness and
any interest accrued thereon was cancelled in this transaction.
g. Indicates the recapitalization of the Company resulting from the
restructuring transactions described above.
h. Reflects the issuance by CAI of 2,241,379 shares of New Common Stock
to MLGAF as a fee for providing the Exit Facility.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES
FINANCIAL DATA SCHEDULE
AS OF AND FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 12,543,316
<SECURITIES> 0
<RECEIVABLES> 954,010
<ALLOWANCES> 252,375
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 85,743,853
<DEPRECIATION> 44,284,791
<TOTAL-ASSETS> 292,082,165
<CURRENT-LIABILITIES> 0
<BONDS> 311,558,053
0
0
<COMMON> 275,770,764
<OTHER-SE> (390,229,582)
<TOTAL-LIABILITY-AND-EQUITY> 292,082,165
<SALES> 0
<TOTAL-REVENUES> 10,852,156
<CGS> 0
<TOTAL-COSTS> 33,762,291
<OTHER-EXPENSES> 45,291,855
<LOSS-PROVISION> 82,000
<INTEREST-EXPENSE> 22,552,464
<INCOME-PRETAX> (86,897,838)
<INCOME-TAX> 0
<INCOME-CONTINUING> (86,897,838)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (86,897,838)
<EPS-PRIMARY> (2.14)
<EPS-DILUTED> (2.14)
</TABLE>
