SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 16, 1998 (July 15,
1998)
CAI WIRELESS SYSTEMS, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<CAPTION>
Connecticut 0-22888 06-1324691
<S> <C> <C> <C> <C>
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
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18 CORPORATE WOODS BLVD., THIRD FLOOR, ALBANY, NY 12211
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (518) 462-2632
(Former name or former address, if changed since last report)
1
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Item 5. OTHER EVENTS
In connection with the previously-announced solicitation of acceptances
by the registrant in connection with a pre-packaged reorganization plan (the
"Reorganization Plan")(see registrant's Current Report on Form 8-K dated July
1, 1998 (filed July 2, 1998)), the registrant has disseminated to the holders
of its 12-1/4% Senior Notes due 2002 and certain other impaired creditors
a Disclosure Statement Supplement dated July 15, 1998, which
supplement amends the registrant's plan of reorganization in certain respects
and sets forth additions and/or amendments to the registrant's Disclosure
Statement dated June 30, 1998.
A copy of the Disclosure Statement Supplement is filed in its entirety as
an exhibit hereto. The voting deadline for the solicitation has been extended
from July 27, 1998 to July 28, 1998.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
C. Exhibits
99.1 Disclosure Statement Supplement dated as of July 15, 1998
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CAI WIRELESS SYSTEMS, INC.
By: /S/ARTHUR J. MILLER
Arthur J. Miller
Vice President and Controller
Date: July 16, 1998
2
THIS SOLICITATION IS BEING CONDUCTED TO OBTAIN SUFFICIENT ACCEPTANCES OF A
JOINT REORGANIZATION PLAN PRIOR TO THE FILING OF VOLUNTARY REORGANIZATION CASES
UNDER CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE. BECAUSE NO CHAPTER 11
CASES HAVE YET BEEN COMMENCED, NEITHER THIS SUPPLEMENT NOR THE DISCLOSURE
STATEMENT TO WHICH IT RELATES HAS BEEN APPROVED BY THE BANKRUPTCY COURT AS
CONTAINING ADEQUATE INFORMATION WITHIN THE MEANING OF SECTION 1125(a) OF THE
BANKRUPTCY CODE. FOLLOWING THE COMMENCEMENT OF THEIR CHAPTER 11 CASES, CAI
WIRELESS SYSTEMS, INC. AND PHILADELPHIA CHOICE TELEVISION, INC. EXPECT TO
PROMPTLY SEEK AN ORDER OF THE BANKRUPTCY COURT (i) APPROVING (a) THE DISCLOSURE
STATEMENT, AS SUPPLEMENTED HEREBY, AS HAVING CONTAINED ADEQUATE INFORMATION AND
(b) THE SOLICITATION OF VOTES AS HAVING BEEN IN COMPLIANCE WITH SECTION 1126(b)
OF THE BANKRUPTCY CODE AND (ii) CONFIRMING THE JOINT REORGANIZATION PLAN
DESCRIBED IN THE DISCLOSURE STATEMENT AND HEREIN.
DISCLOSURE STATEMENT SUPPLEMENT
DATED JULY 15, 1998
Pre-Petition Solicitation of Votes
With Respect to Prepackaged Joint Reorganization Plan
of
CAI WIRELESS SYSTEMS, INC.
AND
PHILADELPHIA CHOICE TELEVISION, INC.
from the holders of CAI Wireless Systems, Inc.'s
12-1/4% SENIOR NOTES DUE 2002
AND CERTAIN OTHER
IMPAIRED CREDITORS
NEITHER CAI WIRELESS SYSTEMS, INC. NOR PHILADELPHIA CHOICE TELEVISION,
INC. HAS COMMENCED A CASE UNDER CHAPTER 11 OF THE BANKRUPTCY CODE AT THIS TIME.
THIS SUPPLEMENT MODIFIES THE DISCLOSURE STATEMENT, DATED JUNE 30, 1998,
PREVIOUSLY DISTRIBUTED TO CREDITORS ENTITLED TO VOTE ON THE PLAN. THE
DISCLOSURE STATEMENT, AS SUPPLEMENTED HEREBY, SOLICITS ACCEPTANCES OF THE PLAN
AND CONTAINS INFORMATION RELEVANT TO A DECISION TO ACCEPT OR REJECT THE PLAN.
THE VOTING DEADLINE TO ACCEPT OR REJECT THE PREPACKAGED REORGANIZATION PLAN HAS
BEEN EXTENDED, AND IS NOW 12:00 MIDNIGHT ON JULY 28, 1998, UNLESS FURTHER
EXTENDED BY THE COMPANIES (THE "VOTING DEADLINE"). IN ORDER TO BE COUNTED,
BALLOTS MUST BE RECEIVED BY THE VOTING AGENT BY THE VOTING DEADLINE. YOU
SHOULD USE THE BALLOT THAT ACCOMPANIED THE DISCLOSURE STATEMENT. BALLOTS MAY
BE FORWARDED TO THE VOTING AGENT BY FACSIMILE TRANSMISSION AT (212) 286-9748.
<PAGE>
SUMMARY
On June 30, 1998, CAI Wireless Systems, Inc. ("CAI") and Philadelphia
Choice Television, Inc. ("PCT" and, together with CAI, the "Companies")
commenced a solicitation (the "Solicitation") of acceptances of their proposed
prepackaged joint reorganization plan (the "Plan") by distributing to each
impaired creditor entitled to vote to accept or reject the Plan, a copy of
their disclosure statement, dated June 30, 1998, with respect to the Plan (the
"Disclosure Statement") and a Ballot to accept or reject the Plan. The Plan
provides for, among other things, (i) certain distributions of Cash, (ii) the
issuance by Reorganized CAI of (a) the New Senior Notes and New Common Stock
for distribution to certain holders of Claims against CAI and (b) options to
purchase New Common Stock for distribution to the Companies' financial advisors
and certain members of the management of Reorganized CAI, (iii) the sale and
assignment by CAI of approximately 16 contracts to provide cable television
service to various multi-dwelling units in the Philadelphia market, and (iv)
the distribution of the proceeds of the sale and assignment by PCT of
approximately 48 contracts to provide cable television service to various
multi-dwelling units in the Philadelphia market.
As described in the Disclosure Statement, the terms of the Plan were
developed in the course of discussions and negotiations with (i) MLGAF, the
holder of the Companies' 13% senior secured notes (the "Secured Notes"), and
its legal advisors, (ii) an unofficial committee comprised of certain holders
of CAI's 12-1/4% senior notes due 2002 (the "Senior Notes") who collectively
held or managed approximately 73% of the Senior Notes (the "Unofficial
Noteholders'Committee"), with the assistance of its legal and financial
advisors, and (iii) MLGAF as holder of the Companies' 12% subordinated note
due October 1, 2005 (the "12% Subordinated Note"). Subsequent to the
dissemination of the Plan and Disclosure Statement, the Companies have (i)
engaged in further discussions and negotiations with MLGAF and the
Unofficial Noteholders' Committee and their advisors with respect to the Plan,
including the terms of the New Senior Notes to be issued by Reorganized CAI
under the Plan and distributed on a PRO RATA basis to holders of Senior
Notes, and (ii) with the assistance of their financial advisors, BT Alex.
Brown Incorporated, engaged in discussions with a number of parties regarding
the New Senior Secured Facility described more fully herein. As a result
of the aforementioned negotiations and discussions, certain aspects of the
Plan, including the terms of the Senior Notes described in the Disclosure
Statement, have been modified as described more fully herein. On July 15,
1998 counsel for the Unofficial Noteholders Committee advised
representatives of CAI that the Committee (which currently purports to
represent only approximately 33% of the outstanding Senior Notes) would be
prepared to support the Plan as amended by this Supplement and recommend that
other holders of Senior Notes vote in favor of the Plan if the following three
changes were implemented: (i) MLGAF were to commit to provide the entire amount
of the proposed New Senior Secured Facility (which would be used to refinance
the DIP Facility and provide financing for Reorganized CAI) on the terms
described more fully under Section III of this Supplement, (ii) the interest
rate on the New Senior Notes were to be increased from 13% to 15% per annum,
and (iii) the provision in the DIP Facility providing for an increase in
commitment fees from 1% to 4% after 90 days were to be eliminated. If the
requested changes were not made, counsel for the Unofficial Noteholders
Committee advised that the Committee currently intended to reject the Plan and
recommend that other holders of Senior Notes vote against the Plan. CAI and
its legal and financial advisors engaged in further discussion with
representatives of MLGAF and the Unofficial Noteholders Committee but has
determined that it cannot make the requested changes. Accordingly, CAI
anticipates that the Committee may oppose the Plan and recommend that other
holders vote against the Plan. MLGAF, which owns approximately 36% of the
Senior Notes, has advised CAI that it intends to resign from the Unofficial
Noteholders Committee.
This Supplement provides certain information with respect to, among other
things, the revised terms of the New Senior Notes and the anticipated terms of
the proposed New Senior Secured Facility. If and to the extent that any
information provided in this Supplement is inconsistent with any information in
the Disclosure Statement, the information provided in this Supplement will
supersede such inconsistent information in the Disclosure Statement. All other
information in the Disclosure Statement remains unchanged by the Supplement.
Capitalized terms used herein and not otherwise defined herein have the
meanings ascribed to them in the Disclosure Statement and the Plan.
The Companies continue to believe that the Plan is in the best interests
of their creditors. Accordingly, the Companies again urge all creditors
entitled to vote on the Plan to vote in favor of the Plan. (Voting
instructions are set forth in Section XVI of the Disclosure Statement.) To be
counted, your ballot must be duly completed, executed, and actually received no
later than 12:00 midnight, Eastern Time, on July 28, 1998. BALLOTS AND MASTER
BALLOTS MAY BE CAST BY FORWARDING THEM TO THE VOTING AGENT BY MEANS OF
FACSIMILE TRANSMISSION AT (212) 286-9748. You should use the yellow or white
Ballot sent to you with the Disclosure Statement. If you wish to obtain
additional Ballots or Master Ballots, you should telephone the Voting Agent,
The Altman Group, Inc., at (212) 681-9600 for assistance.
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DISCLAIMER
ALL IMPAIRED CREDITORS ENTITLED TO VOTE ON THE PLAN ARE ADVISED AND
ENCOURAGED TO READ THIS DISCLOSURE STATEMENT SUPPLEMENT (THE "SUPPLEMENT") IN
ITS ENTIRETY IN CONJUNCTION WITH THE DISCLOSURE STATEMENT AND PLAN BEFORE
VOTING TO ACCEPT OR REJECT THE PLAN. STATEMENTS MADE IN THIS SUPPLEMENT,
INCLUDING THE PRECEDING SUMMARY, ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE
TO THE PLAN, EXHIBITS ANNEXED TO THE PLAN, AND THE DISCLOSURE STATEMENT AS A
WHOLE. THE STATEMENTS CONTAINED IN THIS SUPPLEMENT ARE MADE ONLY AS OF THE
DATE HEREOF, AND THERE CAN BE NO ASSURANCE THAT THE STATEMENTS CONTAINED HEREIN
WILL BE CORRECT AT ANY TIME AFTER THE DATE HEREOF.
THIS SUPPLEMENT HAS NEITHER BEEN APPROVED NOR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), NOR HAS THE SEC PASSED UPON
THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN. PERSONS OR
ENTITIES TRADING IN, OR OTHERWISE PURCHASING, SELLING, OR TRANSFERRING
SECURITIES OF THE COMPANIES SHOULD NOT RELY UPON THIS SUPPLEMENT OR THE
DISCLOSURE STATEMENT FOR SUCH PURPOSES AND SHOULD EVALUATE THIS SUPPLEMENT, THE
DISCLOSURE STATEMENT, AND THE PLAN IN LIGHT OF THE PURPOSE FOR WHICH THEY WERE
PREPARED.
AS TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS, AND OTHER ACTIONS OR
THREATENED ACTIONS, THIS SUPPLEMENT SHALL NOT CONSTITUTE OR BE CONSTRUED AS AN
ADMISSION OF ANY FACT OR LIABILITY, STIPULATION, OR WAIVER, BUT RATHER AS A
STATEMENT MADE IN SETTLEMENT NEGOTIATIONS. THIS SUPPLEMENT SHALL NOT BE
ADMISSIBLE IN ANY NONBANKRUPTCY PROCEEDING INVOLVING THE COMPANIES OR ANY OTHER
PARTY, NOR SHALL IT BE CONSTRUED TO BE CONCLUSIVE ADVICE ON THE TAX,
SECURITIES, OR OTHER LEGAL EFFECTS OF THE RESTRUCTURING AS TO HOLDERS OF CLAIMS
AGAINST, OR INTERESTS IN, THE COMPANIES.
THE INFORMATION CONTAINED IN THIS SUPPLEMENT IS INCLUDED HEREIN FOR
PURPOSES OF SOLICITING ACCEPTANCES OF THE PLAN AND MAY NOT BE RELIED UPON FOR
ANY PURPOSE OTHER THAN TO DETERMINE HOW TO VOTE ON THE PLAN. THE DESCRIPTIONS
SET FORTH HEREIN OF THE ACTIONS OR CONCLUSIONS OF THE COMPANIES OR ANY OTHER
PARTY IN INTEREST HAVE BEEN SUBMITTED TO OR APPROVED BY SUCH PARTY, BUT NO SUCH
PARTY MAKES ANY REPRESENTATION REGARDING SUCH DESCRIPTIONS.
IN MAKING AN INVESTMENT DECISION, CREDITORS MUST RELY ON THEIR OWN
EXAMINATION OF THE COMPANIES AND THE TERMS OF THE PLAN, INCLUDING THE MERITS
AND RISKS INVOLVED. CREDITORS SHOULD NOT CONSTRUE THE CONTENTS OF THIS
SUPPLEMENT AS PROVIDING ANY LEGAL, BUSINESS, FINANCIAL, OR TAX ADVICE. EACH
CREDITOR SHOULD CONSULT WITH ITS OWN LEGAL, BUSINESS, FINANCIAL, AND TAX
ADVISORS WITH RESPECT TO ANY SUCH MATTERS CONCERNING THIS SUPPLEMENT, THE
SOLICITATION, THE DISCLOSURE STATEMENT, THE PLAN AND THE TRANSACTIONS
CONTEMPLATED THEREBY.
_____________________________
Except as set forth in the Disclosure Statement (SEE Section XVI.J "The
Solicitation; Voting Procedures -- Further Information; Additional Copies"), no
person has been authorized by the Companies in connection with the Plan or the
Solicitation to give any information or to make any representation other than
as contained in the Disclosure Statement and this Supplement, and the Exhibits
annexed hereto or thereto or incorporated by reference or referred to herein or
therein, and, if given or made, such information or representation may not be
relied upon as having been authorized by the Companies. This Supplement does
not constitute an offer to sell or the solicitation of an offer to buy any
securities other than those to which it relates, or an offer to sell or a
solicitation of an offer to buy any securities in any jurisdiction in which, or
to any person to whom, it is unlawful to make such offer or solicitation.
<PAGE>
I. VOTING DEADLINE
The period during which Ballots and Master Ballots with respect to the
Plan will be accepted by the Companies (and may be withdrawn or revoked unless
the Bankruptcy Court issues an order to the contrary) has been extended from
5:00 p.m. (Eastern Time) on July 27, 1998 until 12:00 midnight (Eastern Time)
on July 28, 1998, unless and until the Companies, in their sole discretion,
further extend the date until which Ballots and Master Ballots will be
accepted, in which case the Solicitation Period will terminate at the time and
date specified in such extension (in either case, the "Voting Deadline").
Except as otherwise determined by the Companies or as permitted by the
Bankruptcy Court, Ballots or Master Ballots that are received after the Voting
Deadline will not be counted or otherwise used by the Companies in connection
with the Companies' request for confirmation of the Plan (or any permitted
modification thereof).
The Companies continue to reserve the absolute right, at any time or from
time to time, to extend, by oral or written notice to the Voting Agent, the
period of time during which Ballots will be accepted for any reason including,
but not limited to, determining whether or not the Requisite Acceptances have
been received, by making a public announcement of such extension no later than
9:00 a.m. (Eastern Time) on the first Business Day next succeeding the
previously announced Voting Deadline. Without limiting the manner in which the
Companies may choose to make any public announcement, the Companies will not
have any obligation to publish, advertise, or otherwise communicate any such
public announcement, other than by issuing a news release through the Dow Jones
News Service. There can be no assurance that the Companies will exercise their
right to further extend the Solicitation Period for the receipt of Ballots and
Master Ballots.
All parties voting on the Plan should use the Ballots that accompanied
the Disclosure Statement. Any party wishing to obtain additional Ballots or
Master Ballots should telephone the Voting Agent, The Altman Group, Inc., at
(212) 681-9600 for assistance. Ballots and Master Ballots may be cast by
forwarding them to the Voting Agent by means of facsimile transmission at (212)
286-9748.
II. THE NEW SENIOR NOTES
As noted above, the Companies, MLGAF, and the Unofficial
Noteholders' Committee have had extensive discussions during the course of the
past several weeks regarding, among other things, the terms of the New Senior
Notes to be issued by CAI and distributed under the Plan. As a result of
these discussions, CAI has modified the terms of the New Senior Notes as
follows:
(a) The interest rate has been increased from 12% to 13% per annum,
causing the aggregate principal amount of the New Senior Notes at maturity to
increase from $201,219,647 to $212,908,624. In addition, CAI will pay interest
on overdue principal from time to time on demand at the rate of 15% per annum.
(b) Pursuant to the covenant entitled, "LIMITATION ON INCURRENCE OF
ADDITIONAL INDEBTEDNESS," the New Indenture will permit CAI and the Restricted
Subsidiaries to incur additional Indebtedness or issue Disqualified Capital
Stock, provided that such incurrence or issuance is made in compliance with a
2.00 to 1 debt to equity ratio from and after the date aggregate cash proceeds
from the sale of equity equals or exceed $25 million, and the aggregate
principal amount of such additional Indebtedness incurred by CAI and the
Restricted Subsidiaries may not exceed $150,000,000. Of such $150,000,000, (i)
up to $25,000,000 may be secured by "blanket" Liens on property of CAI, and
(ii) the following amount of such Indebtedness may be secured by asset-specific
purchase money Liens: $75,000,000, less the sum of (A) the outstanding
principal amount of the secured additional Indebtedness of CAI that is referred
to in the foregoing clause (i), (B) Capitalized Lease Obligations of CAI or its
Restricted Subsidiaries that are secured by Liens, and (C) any unsecured
Indebtedness that may be incurred by Restricted Subsidiaries pursuant to the
additional Indebtedness covenant.
(c) Pursuant to the covenant entitled, "LIMITATION ON RESTRICTED
PAYMENTS," the New Indenture will provide that CAI's right to make certain
payments in connection with (i) the repurchase of its Capital Stock from
employees or former employees, (ii) the making of loans and advances to
employees of CAI, and (iii) any purchase price or other adjustment for which
CAI is obligated pursuant to the terms of the Participation Agreement will be
subject to approval by a majority of the Board of Directors of CAI.
<PAGE>
(d) The New Indenture will provide that CAI's right to dispose of or
otherwise transfer shares of common stock of CS Wireless held by CAI in the
nature of a purchase price or other adjustment for which CAI is obligated
pursuant to the terms of the Participation Agreement will be subject to
approval by a majority of the Board of Directors of CAI.
(e) The New Indenture will provide an exception to the definition of
"Asset Sale" for a lease or sublease, as the case may be, by CAI or any
Restricted Subsidiary of spectrum rights held by CAI or any Restricted
Subsidiary to a third party (other than CAI, any of its Restricted Subsidiaries
or any Affiliate), provided that such lease or sublease is approved by a
majority of the Board of Directors of CAI and provides (i) for lease payments
and other conditions which are no less favorable to CAI or such Restricted
Subsidiary in any material respect than then-prevailing market conditions, (ii)
that the consideration received by CAI or such Restricted Subsidiary in respect
of such lease or sublease consists of 100% Cash or Cash Equivalents, and (iii)
that the term of such lease or sublease expires prior to the Stated Maturity of
the New Senior Notes.
(f) The New Indenture will provide that the amount of any non-cash
Investment shall be the fair market value of such Investment, as determined
conclusively in good faith by management of CAI, unless the fair market value
of such Investment exceeds $5,000,000 (not $10,000,000 as indicated in the
Description of New Senior Notes attached as Exhibit C to the Disclosure
Statement), in which case the fair market value shall be determined
conclusively in good faith by the Board of Directors of CAI at such time as
such Investment is made.
(g) The New Indenture will provide that the definition of "Participation
Agreement" shall be deemed to be the Participation Agreement, as amended and in
effect on the Issue Date.
(h) The New Indenture will provide that CAI's right to incur indebtedness
in satisfaction of any purchase price or other adjustments arising out of the
transactions contemplated by the Participation Agreement will be subject to
approval by a majority of the Board of Directors of CAI.
(i) The New Indenture will provide CAI or any wholly-owned Restricted
Subsidiary with the right to acquire the stock of or assets of a Person (or
Indebtedness of such Person acquired in connection with a transaction in which
such person becomes a Restricted Subsidiary) engaged in the Wireless Broadband
Business, including related activities and services, provided, however, that
the aggregate amount of Investments so made and outstanding shall not exceed
$15,000,000, and such Investment be approved by a majority of the Board of
Directors of CAI.
(j) The New Indenture will permit the Board of Directors of CAI to
designate as a "Permitted Joint Venture" any joint venture, partnership or
other Person (i) in which CAI or one or more Restricted Subsidiaries owns
(directly or beneficially) at least a majority of the Capital Stock with voting
power under ordinary circumstances to elect directors, (ii) all of whose
Indebtedness, if any, is Non-Recourse Indebtedness, (iii) which is engaged in a
Permitted Business, and (iv) in which any Investment made by CAI as a result of
such designation will not violate the provisions of the covenant described
under the caption "LIMITATION ON RESTRICTED PAYMENTS"; provided that in the
event any participation in such joint venture, partnership or other Person
requires CAI or any Restricted Subsidiary to contribute or otherwise transfer
to such joint venture, partnership or other Person more than 50% of the
spectrum rights then held by CAI or a Restricted Subsidiary in any market(s) in
which the Permitted Business is to be transacted by the joint venture,
partnership or other Person, the Board of Directors of CAI may designate such
joint venture, partnership or other Person a "Permitted Joint Venture," if, and
only if, the joint venture partner is a Strategic Partner.
In addition to the definition of "Permitted Joint Venture," the New
Indenture will contain the following additional definitions:
"Non-Recourse Indebtedness" means Indebtedness of a Permitted Joint
Venture (i) as to which neither CAI nor any of its Restricted Subsidiaries
(other than such Permitted Joint Venture), (a) provides any guarantee or credit
support of any kind (including any undertaking, guarantee, indemnity, agreement
or instrument that would constitute Indebtedness) or (b) is directly or
indirectly liable (as a guarantor or otherwise), and (ii) the obligees of which
will have recourse for repayment of the principal of and interest on such
Indebtedness and any fees, indemnities, expense reimbursements or other amount
of whatsoever nature accrued or payable in connection with such Indebtedness
solely against the assets of such Permitted Joint Venture and not against any
of the assets of CAI or its Restricted Subsidiaries (other than such Permitted
Joint Venture).
<PAGE>
"Permitted Business" means the Wireless Broadband Business conducted
by CAI and its Restricted Subsidiaries as of the date of the Indenture and any
and all businesses that in the good faith judgment of the Board of Directors of
CAI are reasonably related thereto.
"Strategic Partner" means (i) any Person engaged in the
telecommunications business (including, without limitation, Wireless Broadband
Business) which, both as of the Trading Day immediately before the day of
determination and the Trading Day immediately after the day of determination,
has a Total Market Capitalization of at least $500 million (or, in the case of
a private company, a fair market equivalent value, as determined by a
nationally recognized investment bank), and (ii) any Person which is majority
owned and controlled by any Person or Persons referred to in clause (i) of this
definition. In calculating Total Market Capitalization for the purpose of
clause (i) of this definition, the consolidated Indebtedness of such Person,
solely when calculated as of the Trading Day immediately after the date of
determination, will be calculated after giving effect to the transactions to
occur on such date of determination (including any Indebtedness incurred in
connection with any sale of Capital Stock to such Person) and the Closing Price
of the Common Stock of such Person, solely when calculated as of the Trading
Day immediately after the day of determination, will be deemed to be the
Closing Price of such Common Stock on such succeeding Trading Day, subject to
the last sentence of the definition of "Total Market Capitalization." For
purposes of this definition, the date of determination shall be the date on
which any transaction which requires a determination of whether a Person is a
Strategic Partner under this Indenture shall have been consummated.
III. THE NEW SENIOR SECURED FACILITY
1. GENERAL
Based on the advice of its financial advisor, BT Alex. Brown, which has
contacted in excess of fifty potential lenders including holders of Senior
Notes, CAI is seeking to secure commitments for the New Senior Secured Facility
on terms substantially similar to those described below. CAI has not received
commitments with respect to all or a part of the proposed New Senior Secured
Facility and there can be no assurance that the terms of the actual New Senior
Secured Facility will not vary from the terms described below or that the New
Senior Secured Facility can be obtained at all. Depending on the manner in
which the terms of the actual New Senior Secured Facility vary from the terms
described below, CAI, acting with advice of counsel, reserves the right to take
such actions as it deems necessary or appropriate which could, but will not
necessarily, include notifying creditors through another supplement or public
announcement, seeking a judicial determination that any such variance is not
material, or seeking to resolicit acceptances of the Plan.
CAI anticipates that the New Senior Secured Facility, which will be used
(a) to refinance amounts outstanding on the Consummation Date under the DIP
Facility and (b) provide additional borrowing capacity to Reorganized CAI and
the Subsidiaries following the Consummation Date, will consist of two tranches
of secured debt. The first tranche would consist of approximately $30,000,000
principal amount of senior secured notes (the "Senior Secured A Notes"), which
would be secured by a first priority lien on and security interest in (i)
substantially all of CAI's existing and after-acquired assets, (ii) the stock
of the Subsidiaries, and (iii) selected assets that are held by certain of the
Subsidiaries, in each case subject to certain limited exceptions and
qualifications. The second tranche would consist of approximately $50,000,000
principal amount of senior secured notes (the "Senior Secured B Notes"), which
would be secured by a second priority lien on and security interest in the same
assets. BT Alex. Brown expects the Senior Secured A Notes will accrue interest
semi-annually at a rate of approximately 10.5% per annum, payable at maturity,
and the Senior Secured B Notes at a rate of approximately 13.0% per annum,
payable at maturity. The maturity date for both the Senior Secured A Notes and
the Senior Secured B Notes (together, the "New Senior Secured Facility") is
expected to be in September, 2000. BT Alex. Brown anticipates that the Senior
Secured A Notes and the Senior Secured B Notes will require the payment at
maturity of certain commitment and other fees (collectively, the "Facility
Fees") of approximately 1% and 7% respectively.
2. WARRANTS FOR CAI COMMON STOCK
<PAGE>
BT Alex. Brown anticipates that prospective purchasers of the Senior
Secured A Notes and Senior Secured B Notes would expect to receive six year
warrants to purchase shares of New Common Stock, which would be exercisable
for $.01 per share and would contain usual and customary registration rights
and standard anti-dilution protections. Although no definitive negotiations
have taken place with any prospective Exit Lenders, depending upon a wide
variety of factors including the actual interest rate of such notes, the
Facility Fees, the apparent prospects of Reorganized CAI at the time of
consummation of the Plan, and the interest of prospective lenders, it is
anticipated that warrants to acquire approximately 2% and 10% of the common
equity of Reorganized CAI would be issued to purchasers of the Senior
Secured A Notes and Senior Secured B Notes, respectively. The economic terms
of the New Senior Secured Facility are interrelated and the interest rate,
Facility Fees and equity components of the proposed New Senior Secured
Facility may vary without significantly affecting the overall economic
impact of the proposed New Senior Secured Facility on the Companies or
their current stakeholders.
3. RIGHT TO PARTICIPATE
If the New Senior Secured Facility is provided in significant part by one
or more current holders of Senior Notes, CAI anticipates offering each holder
of Senior Notes the non-transferable right to subscribe for up to 65% of the
principal amount of Senior Secured A Notes and Senior Secured B Notes. Under
the terms of the proposed DIP Facility Agreement, MLGAF already has the right,
but not the obligation, to assume up to 35% of the New Senior Secured Facility.
If and to the extent that holders of Senior Notes wish to subscribe for more
than the entire principal amount of the New Senior Secured Facility (subject to
MLGAF's aforementioned right as lender under the DIP Facility), the right to
subscribe would be allocated on a PRO RATA basis, in accordance with the amount
each current holder of Senior Notes wishes to invest in the New Senior Secured
Facility.
4. REDEMPTION
Both the Senior Secured A Notes and the Senior Secured B Notes would be
prepayable at any time without premium or penalty. The notes would be required
to be redeemed, with accrued interest thereon, upon the receipt of Net Cash
Proceeds (to be defined substantially as defined in the existing Note Purchase
Agreement) from the sale or other disposition of certain assets. Sales of
assets in the ordinary course of business and sales of certain assets that
shall have been approved in advance by the Exit Lenders would be exempted from
the mandatory redemption provisions, and the proceeds from such sales would be
available for use by Reorganized CAI in accordance with an approved budget.
Net Cash Proceeds from asset sales would be applied first to the redemption of
the Senior Secured A Notes and then to the redemption of the Senior Secured B
Notes.
5. REPRESENTATIONS AND WARRANTIES; COVENANTS AND EVENTS OF DEFAULT
CAI anticipates that the New Senior Secured Facility will contain
representations and warranties of Reorganized CAI appropriate in the context of
the proposed Facility and substantially similar to those set forth in the
existing Note Purchase Agreement, including without limitation, as to the
absence of any material adverse change in the business, condition (financial or
otherwise), operations, performance, properties or prospects of Reorganized CAI
since June 29, 1998 (the date of the filing of CAI's annual report on Form 10-K
for its fiscal year ended March 31, 1998) other than (a) the filing of the
petition by CAI in the Chapter 11 Case and (b) those disclosed in writing and
satisfactory to the Exit Lenders prior to the closing of the New Senior Secured
Facility. CAI anticipates that the New Senior Secured Facility will contain
substantially the same affirmative and negative covenants and events of default
as those contained in the existing Note Purchase Agreement.
6. ADDITIONAL SIGNIFICANT PROVISIONS
The following are certain additional significant provisions that CAI
anticipates being included in the New Senior Secured Facility: (a) a
requirement that Reorganized CAI maintain its existing cash management system,
and (b) a requirement that Reorganized CAI be responsible for all of the costs
and expenses incurred by the holders of the New Secured Notes (including
reasonable attorneys' fees and costs) relating to the negotiation,
documentation, administration and enforcement of obligations under the New
Senior Secured Facility.
IV. MODIFICATIONS TO PLAN
<PAGE>
The Companies intend to modify the Plan as necessary to reflect their recent
negotiations and discussions with MLGAF and the Unofficial Noteholders'
Committee and to correct certain technical inaccuracies in the Plan and
Disclosure Statement distributed on June 30, 1998. Except as specifically and
explicitly described herein and modified in the Plan to be filed with the
Bankruptcy Court on or about the Petition Date, the terms and provisions of the
Plan will remain unaltered and will remain in full force and effect, subject to
confirmation of the Plan, as modified, under section 1129 of the Bankruptcy
Code. In addition, as described in Article XI of the Plan, the Companies
expressly reserve the right to alter, amend, or modify the Plan or any Exhibits
thereto under Section 1127(a) of the Bankruptcy Code at any time prior to the
Confirmation Date, including, but not limited to, making non-material changes
to clarify or eliminate ambiguity in any provision of the Plan, or otherwise,
and, if necessary, to institute proceedings in the Bankruptcy Court to remedy
any defect or omission or reconcile any inconsistencies in the Plan, the
Disclosure Statement, or the Confirmation Order, and such matters as may be
necessary to carry out the purposes and effects of the Plan so long as such
proceedings do not materially adversely affect the treatment of holders of
Claims or Interests under the Plan. Subject to the foregoing, the Plan will be
modified as follows:
(a) The definition of "Senior Notes Indenture" in Article I.B.1.126 of
the Plan will be modified to clarify that the Indenture Trustee is The Chase
Manhattan Bank.
(b) In view of the expressed intention by the Unofficial Noteholders
Committee to reject the Plan and recommend to other holders of Senior Notes
that they vote against the Plan, the Plan has been amended to delete any
reference to the Unofficial Noteholders Committee including but not limited to
the right of such Committee to approve the form and substance of the
Confirmation Order, the post petition payment of fees for advisors to such
Committee and the right of such Committee to receive exculpation and
limitations on its liability as set forth in Article XIV.I of the Plan.
(c) The definition of "Voting Deadline" in Article I.B.1.141 of the Plan
will be modified to reflect the extension of such deadline until 12:00 midnight
on July 28, 1998, unless further extended.
(d) Article IV.E of the Plan will be modified to provide that the boards
of directors of the Reorganized Debtors will initially include two (2) members
of current management of CAI, with the composition of the remainder of each
board initially to consist of nominees designated by holders of the Senior
Notes, subject to the requirements of Section 1129(a)(5) of the Bankruptcy
Code.
(e) The "Exercise Price" column of the chart contained in Exhibit F to
the Plan will be modified to correct a typographical error by deleting the
entry "$4.96" in the first line thereof and substituting the entry "4.76" in
its place.
(f) The chart contained in Exhibit H to the Plan inadvertently omitted
certain participants who will share in the aggregate pool of Management Options
described in Exhibit F to the Plan (which remains at 10% of the outstanding
shares of Reorganized CAI) and therefore overstated the percentage of
Management Options allocated to the persons listed thereon. Exhibit H to the
Plan thus will be modified by deleting the chart contained therein in its
entirety and substituting in lieu thereof the following chart:
<TABLE>
<CAPTION>
NAME POSITION(S) WITH CAI ALLOCATION (AS % OF OPTION POOL)
- ---- -------------------- --------------------------------
<S> <C> <C>
Jared E. Abbruzzese Chairman of the Board and Chief 29.034
Executive Officer
John J. Prisco President and Chief Operating Officer 14.517
James P. Ashman Executive Vice President and Chief 11.61
Financial Officer
Gerald Stevens-Kittner Senior Vice President -- Spectrum 8.712
Management
Bruce W. Kostreski Senior Vice President -- Engineering and 8.712
Chief Technical Officer
George J. Parise Senior Vice President -- Finance 5.805
Derwood R. Edge Senior Vice President -- Engineering and 4.644
Chief Systems Officer
Wayne R. Barr, Jr. Associate General Counsel 4.644
George M. Williams Vice President and General Manager 2.322
Donna A. Balaguer Vice President -- Governmental Affairs 2.00
Michael Ray Vice President -- Government and Regula- 1.00
tory Affairs
Todd Marshall Director of License Relations 1.00
Richard LaMontagne Vice President -- Project Development 1.00
Sanjay Nagdev RF Program Manager 1.00
Robert Tenten Senior Staff Engineer 1.00
Christopher Gunnufsen Director of Field Operations 1.00
Robert McCarthy Director of Network Engineering 1.00
Yang Weng RF Engineer 1.00
</TABLE>
V. MISCELLANEOUS DISCLOSURES
(a) As described in Section XII.A.2 of the Disclosure Statement, based on
its tax returns as filed and its estimates for its fiscal year ended March 31,
1998, CAI believes that, as of March 31, 1998, it had approximately $257.9
million of NOLs on a consolidated federal income tax basis ("Consolidated NOLs")
of which approximately $140 million are separately allocable to CAI. In the
Disclosure Statement, CAI estimated that following consummation of the Plan (and
application of the discharge of indebtedness rules and the attribute reduction
rules of the Tax Code Section 382 Bankruptcy Exception discussed elsewhere in
Section XIII of the Disclosure Statement), it would have Consolidated NOLs of
approximately $157 million, of which approximately $40 million would be
separately allocable to Reorganized CAI. Following further analysis of the
applicable rules, CAI now estimates that it will have post-consummation
Consolidated NOLs of approximately $157 to $180 million, of which
approximately $40 to $63 million would be separately allocable to
Reorganized CAI.
(b) The chart on page 75 of the Disclosure Statement contains a
typographical error. Specifically, the first line of the chart,
describing the expiration of the Companies' Pre-Plan NOLs during the
tax year ending March 31, 1999 should read as follows:
<TABLE>
<CAPTION>
Expires Tax
YEAR ENDING MARCH 31 CAI SUBSIDIARIES TOTAL
-------------------- --- ------------ -----
<S> <C> <C> <C>
1999 $ 100 $ 15 $ 115
</TABLE>
(c) Although the rate at which interest will accrue on the New Senior
Notes has been increased from 12% to 13%, the Companies, in consultation
with their financial advisors, BT Alex. Brown, have determined that the
effect on the projected financial information contained in Exhibit E to
the Disclosure Statement is not material. Thus, the Companies are not
including revised projected financial information in this Supplement.
VI. CONCLUSION
For all of the reasons set forth in the Disclosure Statement and this
Supplement, the Companies believe that confirmation and consummation of the
Plan is in the best interests of the Companies and their creditors. The
Plan provides for an equitable and early distribution to creditors and
preserves the Companies' going concern value. The Companies believe that any
alternative to confirmation of the Plan, such as liquidation or attempts by
another party in interest to file a plan, could result in significant delays,
litigation, and costs, as well as a significant reduction in the going concern
value of the Companies and their non-debtor affiliates. Further, the Companies
believe that their creditors will receive greater and earlier recoveries under
the Plan than those that would be achieved in liquidation. Consequently, the
Companies urge all eligible holders of Impaired Claims to vote to ACCEPT the
Plan, and to complete and return their ballots so that they will be RECEIVED by
the Voting Agent on or before 12:00 Midnight (Eastern Time) on July 28, 1998.
Dated:Albany, New York
July 15, 1998
<TABLE>
<CAPTION>
CAI WIRELESS SYSTEMS, INC., PHILADELPHIA CHOICE
TELEVISION, INC.,
<S> <C>
By: /S/ JARED E. ABBRUZZESE By: /S/ JOHN J. PRISCO
Name: Jared E. Abbruzzese Name: John J. Prisco
Title: Chief Executive Officer Title: President
</TABLE>
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
Attorneys for CAI Wireless Systems, Inc. and
Philadelphia Choice Television, Inc.
By: /S/ J. GREGORY MILMOE
J. Gregory Milmoe
Carlene J. Gatting
Lawrence V. Gelber
919 Third Avenue
New York, New York 10022-3897
(212) 735-3000
-and-
Gregg M. Galardi (I.D. #2991)
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899-0636
(302) 651-3000
