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 DECEMBER 31, 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
February 10, 1999:
CLASS OUTSTANDING SHARES
Common Stock, $.01 par value 17,241,379
<PAGE>
PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
CAI WIRELESS SYSTEMS, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31, 1998(a) MARCH 31, 1998
-------------------- --------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 1,785,185 $ 1,275,020
Restricted cash 19,293,330 9,134,651
Debt service escrow - 16,418,922
Subscriber accounts receivable, net 456,768 387,144
Prepaid expenses 606,863 661,669
Property and equipment, net 38,246,981 49,898,337
Wireless channel rights, net 184,565,020 194,050,792
Investment in CS Wireless Systems, Inc. - 43,337,527
Investment in TelQuest Satellite Services LLC 293,240 3,174,732
Goodwill, net of accumulated amortization 21,606,725 22,985,876
Debt financing costs, net 18,672,558 7,079,424
Other assets 2,965,696 3,061,780
------------ ------------
Total Assets $ 288,492,366 $ 351,465,874
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Accounts payable $ 2,148,548 $ 4,852,091
Accrued expenses 7,370,900 8,988,367
Accrued interest 2,076,607 3,264,919
Wireless channel rights obligations 2,825,225 4,832,971
Interim debt financing 80,000,000 45,000,000
Long-term notes 106,456,285 312,088,506
------------ -----------
200,877,565 379,026,854
------------ -----------
Commitments and Contingencies
SHAREHOLDERS' EQUITY (DEFICIT)
Common stock, 25,000,000 new shares authorized,
40,543,039 no par shares canceled as of October 14, 1998 - 275,770,764
17,241,379 new shares issued and outstanding as of
December 31, 1998; par value $.01 172,414 -
Additional paid-in capital 104,110,236 101,711,759
Accumulated deficit (b) (16,667,849) (405,043,503)
------------ ------------
87,614,801 (27,560,980)
------------ -----------
Total Liabilities and Shareholders' Equity (Deficit) $288,492,366 $351,465,874
============ ============
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(a) Reorganized as of October 14, 1998. See Note 2 of the Notes to Consolidated Financial Statements.
(b) Accumulated deficit of $289,958,492, net of a $204,345,447 extraordinary gain from the extinguishment of debt
in the reorganization, was eliminated as of October 14, 1998. The accumulated deficit shown at December 31,
1998 is for the period from October 14, 1998 to December 31, 1998.
See notes to consolidated financial statements.
</TABLE>
CAI WIRELESS SYSTEMS, INC.
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Nine-Months Ended Three-Months Ended
DECEMBER 31, DECEMBER 31,
------------------------------ --------------------------------
1998 (a) 1997 1998 (a) 1997
-------- ---- -------- ----
<S> <C> <C> <C> <C>
Revenues $ 14,972,024 $ 21,977,384 $ 4,119,868 $ 6,591,341
------------ ------------ ----------- ------------
Costs and expenses
Programming 5,461,566 7,506,940 1,538,299 2,292,741
Licensing 5,399,325 3,466,994 1,716,564 1,410,030
General and administrative 15,565,991 23,115,093 4,547,038 8,343,478
Depreciation and amortization 20,454,543 26,152,839 6,817,233 10,245,751
Reorganization costs 1,500,000 - - -
------------ ------------ ------------ ------------
48,381,425 60,241,866 14,619,134 22,292,000
------------ ------------ ------------ ------------
Operating loss (33,409,401) (38,264,482) (10,499,266) (15,700,659)
------------ ------------ ------------ ------------
Other income (expense)
Interest expense (30,282,932) (40,128,505) (7,730,468) (17,198,770)
Equity in losses of affiliates (46,219,019) (23,118,008) (927,164) (9,378,008)
Interest and other income 3,983,067 2,974,426 126,451 1,351,399
------------ ------------ ------------ ------------
(72,518,884) (60,272,087) (8,531,181) (25,225,379)
------------ ------------ ------------ ------------
Loss before extraordinary gain (105,928,285) (98,536,569) (19,030,447) (40,926,038)
Extraordinary gain from extinguishment
of debt, 204,345,447 - 204,345,447 -
------------ ----------- ------------ ------------
Net income (loss) 98,417,162 (98,536,569) 185,315,000 (40,926,038)
Preferred stock dividends - (11,125,453) - (3,850,594)
------------ ----------- ------------ ------------
Net Income (loss) $ 98,417,162 $(109,662,022) $ 185,315,000 $(44,776,632)
============ ============ ============ ===========
Loss since October 14, 1998 $ (16,667,849) $ (16,667,849)
============ ============
Loss per new common share(b): $ (0.97) $ (0.97)
======== ========
Average new common and equivalent
new shares outstanding since
October 14, 1998: 17,241,379 17,241,379
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(a) Reorganized as of October 14, 1998. See Note 2 of the Notes to Consolidated Financial Statements.
(b) Based on post-reorganization loss of $16,667,849. Income(loss) per share data for the pre-
reorganization periods are not presented as such amounts are not meaningful.
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAI WIRELESS SYSTEMS, INC.
Consolidated Statements of Shareholders' Equity (Deficit)
For the Pre-Reorganization Period Ended October 14, 1998 (unaudited) which
includes the Year Ended March 31, 1998
and the Post-Reorganization Period from October 14, 1998 TO December 31, 1998
(Unaudited)
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED TOTAL
SHARES AMOUNT CAPITAL DEFICIT EQUITY (DEFICIT)
------ ------ ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Pre-Reorganization Period:
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 Income for the period ended
October 14, 1998, including extraordinary
gain of $204,345,447 - - - 115,085,011 115,085,011
---------- ----------- ----------- ----------- -----------
Balance at October 14, 1998 40,543,039 275,770,764 101,711,759 (289,958,492) (87,524,031)
Reorganization pursuant to a pre-packaged
bankruptcy plan:
Common shares canceled and new common
shares issued in connection with
debt forgiveness:
Cancel common shares, no par
value (40,543,039) (275,770,764) (14,187,728) 289,958,492 -
Issue new common shares, par
value $.01 15,000,000 150,000 - - 150,000
New shares issued in connection with
Exit Facility 2,241,379 22,414 16,586,205 - 16,608,619
Post - Reorganization Period:
Net loss for the period October 14, 1998 to
December 31, 1998 - - - (16,667,849) (16,667,849)
---------- ----------- ----------- ------------ -----------
Balance at December 31, 1998 17,241,379 $ 172,414 $104,110,236 $ (16,667,849) $ 87,614,801
========== =========== ============= ============= ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CAI WIRELESS SYSTEMS, INC.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended December 31,
1998 (a) 1997
-------- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 98,417,162 $ (98,536,569)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Extraordinary gain on extinguishment of debt (204,345,447) -
Depreciation and amortization 20,454,543 26,152,839
Equity in net losses of affiliates 46,219,019 23,118,008
Gain on sale of assets (2,541,328) (538,307)
Debt financing costs and discount amortization 6,416,348 8,263,013
Write-off of projects and other costs - 633,952
Changes in assets and liabilities:
Subscriber accounts receivable and other assets 215,369 (289,644)
Accounts payable and accrued expenses 1,270,488 12,605,498
------------ ------------
Net cash used in operating activities (33,893,846) (28,591,210)
============ ============
CASH FLOWS FROM INVESTING ACTIVITIES
Funds deposited in restricted cash account (10,158,679) -
Purchase of wireless channel rights (134,961) (2,221,096)
Purchase of equipment (855,931) (6,336,574)
Proceeds from sale of equipment 4,913,762 178,759
Proceeds from sale of investments 96,920 626,937
Proceeds from sale of escrow investments 16,375,575 15,083,943
Payments received from CS Wireless Systems, Inc. 331,231 3,529,689
Investment in TelQuest Satellite Services LLC (411,567) (3,138,797)
Loan to related parties, net of collections (237,046) (297,440)
Cash paid for investment - (356,025)
Other (11,939) -
------------ ------------
Net cash provided by investing activities 9,907,365 7,069,396
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from interim debt financing 26,847,439 20,793,979
Repayment of debt including wireless channel rights
obligations (2,224,348) (2,608,004)
Debt financing costs paid (126,445) (4,965,643)
------------ ------------
Net cash provided by financing activities 24,496,646 13,220,332
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 510,165 (8,301,482)
Cash and cash equivalents, beginning of year 1,275,020 10,471,918
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,785,185 $ 2,170,436
============ ============
CASH PAYMENTS DURING THE PERIOD FOR INTEREST $ 30,596 $ 18,038,893
======== ============
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(a) Reorganized as of October 14, 1998. See Note 2 of the Notes to Consolidated Financial Statements
See notes to consolidated financial statements
</TABLE>
<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. CAI
Wireless Systems, Inc. and one of its subsidiaries emerged from a pre-packaged
Chapter 11 Bankruptcy on October 14, 1998. Financial accounting during a
Chapter 11 proceeding is prescribed in Statement of Position 90-7 of the
American Institute of Certified Public Accountants, titled "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-
7"). The financial statement presentation includes both the pre- and post-
reorganization operations in the nine-month and three-month periods to
facilitate an overall understanding and comparability relating to the
operations. The periods before and after the reorganization are comparable
because assets and liabilities were not restated since Fresh Start Reporting
requiring restatement did not apply pursuant to SOP 90-7 criteria. The
shareholders' equity statement reflects the post-reorganization results of
operations on the accumulated deficit line. Income (loss) per share data for
the pre-reorganization periods are not presented as the amounts are not
meaningful.
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 has a 94% investment (as of December 2, 1998) in CS Wireless Systems, Inc.
("CS Wireless"). CS Wireless has retained CIBC Oppenheimer Corp. ((CIBC() to
serve as its financial advisor. CS Wireless and CIBC have begun to evaluate
available options with respect to the capitalization of CS Wireless, including
financial restructuring alternatives. As a consequence, CAI's investment in
CS Wireless is accounted for on the equity method. CAI also has a 30%
investment in TelQuest Satellite Services LLC ("TSS"), excluding the 30%
interest in TSS held by CS Wireless. CAI's investment in TSS is accounted
for on the equity method. 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 nine months ended December 31, 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. REORGANIZATION
The Company's reorganization plan (the "Plan") was confirmed on
September 30, 1998 and consummated on October 14, 1998. Under the confirmed
Plan, each holder of the Company's 12.25% Senior Notes due 2002 (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 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
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).
In connection with the reorganization, the Company recorded an
extraordinary gain of $204,345,447 reflecting the extinguishment of debt.
Long-term notes totaling approximately $308,000,000 including the interest
accrued thereon along with the associated issuance costs, were replaced with
the $100,000,000 of New Senior Notes. The consolidated balance sheet reflects
the New Senior Notes, together with accreted interest thereon from October 14,
1998 to December 31, 1998.
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.
<PAGE>
CAI WIRELESS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2. REORGANIZATION (CONTINUED)
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.
NOTE 3. INTERIM FINANCING
EXIT FACILITY. On October 14, 1998, in connection with consummating the
Plan, the Company obtained an $80,000,000 credit facility (the "Exit Facility")
from Merrill Lynch Global Allocation Fund, Inc. ("MLGAF"). The Company
received net proceeds from the Exit Facility of $15,953,000, after repaying all
outstanding amounts under the debtor-in-possession credit facility (the "DIP
Facility") provided to the Company by MLGAF during the Company's Chapter 11
case, 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 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). All
interest on amounts outstanding under the Exit Facility accrues at the stated
rates and is payable at maturity of the Exit Facility.
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 issued to MLGAF represent
13% of the total New Common Stock issued and outstanding on October 14, 1998
and were valued at $16,608,618 by the Company and recorded as debt financing
costs and common stock. 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 and certain
individuals had 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 against Jared E. Abbruzzese, chairman and
chief executive officer of the Company, John J. Prisco, a former president,
chief operating officer and director of the Company, and Alan Sonnenberg, a
former president and director of the Company. The amended, consolidated
complaint alleges a variety of
CAI WIRELESS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4. LITIGATION (CONTINUED)
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.
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 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 in JOE HAND PROMOTIONS, INC. V. 601 L & P BAR,
INC. 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 an adverse outcome, the amount 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 equity losses limited to the extent of its investment
since CAI does not guarantee any CS Wireless debt. CS Wireless' net loss of
$100,762,000 for the nine-month period ended September 30, 1998 included a
$46,378,000 writedown of goodwill. CAI's ownership interest in CS Wireless
increased to approximately 94% as a result of the December 2, 1998 purchase by
the Company of 3,836,035 shares of CS Wireless common stock held by Heartland
Wireless Communications, Inc. ("Heartland"). Subsequent to the purchase, CS
Wireless redeemed the shares of CS Wireless common stock purchased by the
Company from Heartland. At December 31, 1998, CAI held 6,421,166 shares of CS
Wireless common stock, representing approximately 94% of the issued and
outstanding common stock of CS Wireless.
CS Wireless has retained CIBC to serve as its financial advisor. CS
Wireless and CIBC have begun to evaluate available options with respect to the
capitalization of CS Wireless, including financial restructuring alternatives.
As a consequence, CAI's investment in CS Wireless is accounted for on the equity
method.
<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 September 30, 1998 Form 10-Q:
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and cash equivalents $ 45,394,000
Restricted cash 4,222,000
Other current assets 2,224,000
Systems and equipment, net 54,905,000
Wireless channel rights, net 168,247,000
Investment in and loans to equity affiliates 6,983,000
Debt issuance costs and other assets, net 8,609,000
-----------
Total Assets $290,584,000
============
LIABILITIES AND EQUITY
Accounts payable and accrued expenses $ 6,042,000
FCC Auction payable 3,942,000
Other liabilities 914,000
Debt 308,219,000
Equity (28,533,000)
-----------
Total Liabilities and Equity $290,584,000
============
</TABLE>
The following are unaudited condensed consolidated statements of
operations of CS Wireless derived from its September 30, 1998 Form 10-Q for the
periods presented:
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
<S> <C> <C>
Revenues $ 6,448,000 $ 20,076,000
------------ ------------
Operating expenses:
Systems operations 4,094,000 12,019,000
Selling, general and administrative 4,500,000 13,602,000
Impairment of goodwill - 46,378,000
Depreciation and amortization 7,062,000 22,003,000
------------ ------------
Total operating expenses 15,656,000 94,002,000
------------ ------------
Operating loss (9,208,000) (73,926,000)
Interest income 803,000 2,746,000
Interest expense (8,765,000) (25,657,000)
Equity in losses of affiliates (292,000) (2,057,000)
Cumulative effect of change in accounting
principle for organizational costs - (1,868,000)
------------ ------------
Net loss $(17,462,000) $(100,762,000)
============ ============
</TABLE>
TELQUEST SATELLITE SERVICES LLC. The Company's investment in TSS
reflects an equity loss of $2,194,000 based on CAI's pro-rata share of TSS's
net losses approximating $6,040,000 for the nine months ended December 31, 1998
plus an adjustment 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 $625,000 in depreciation on
the equipment leased to TSS. As of December 31, 1998, TSS has negative net
worth of $7,504,000. The Company's investment in TSS excludes a 30% ownership
interest in TSS held by CS Wireless.
<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 nine
months ended December 31, 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 (a)
<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 3,255,322 - 467,799
Three months 12/98 - 731,675 674,090 2,241,722 (b) - 472,381
---------- ---------- ---------- ---------- ---------- ----------
Total nine months $ - $ 2,227,368 $ 2,291,754 $ 9,023,547 $ - $ 1,429,355
=========== =========== =========== =========== ============ ===========
INTER-COMPANY
Three months 6/98 $ 579,000 $ - $ - $ - $ 4,166,137 $ 72,772
Three months 9/98 579,000 - - - 4,417,308 108,806
Three months 12/98 579,000 - - - 4,170,662 74,828
----------- ----------- ----------- ----------- ----------- -----------
Total nine months $ 1,737,000 $ - $ - $ - $ 12,754,107 $ 256,406
=========== =========== =========== =========== ============ ===========
INTEREST EXPENSE
Three months 6/98 $(12,876,382) $ - $ - $ - $ (21,653) $ (11,499)
Three months 9/98 (9,632,084) - - - (4,376) (6,470)
Three months 12/98 (7,721,206) - - - (4,468) (4,794)
----------- ----------- ----------- ----------- ------------ -----------
Total nine months $(30,229,672) $ - $ - $ - $ (30,497) $ (22,763)
============ =========== =========== =========== ============ ===========
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)
Three months 12/98 (518,217) (366,840) (970,170) (2,117,400) (3,117,480) (2,547,606)
------------ ----------- ----------- ----------- ----------- -----------
Total nine months $ (1,556,102) $(1,100,520) $(2,910,510) $(6,352,200) $ (9,352,440) $(7,644,211)
============ =========== =========== =========== ============ ============
SEGMENT INCOME (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)
Three months 12/98(c) 193,852,486 (275,513) (1,512,487) (1,550,283) (628,604) (4,570,599)
------------ ----------- ----------- ----------- ------------ ------------
Total nine months $121,214,675 $ (851,510) $(4,410,285) $(1,787,480) $ (1,891,265) $(13,856,973)
============ =========== =========== =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(a) Includes the Boston Market.
(b) The significant decline reflects the sale of certain revenue producing properties to which the company provided
analog subscription video services.
(c) Includes an extraordinary gain of $204,345,447 from the extinguishment of debt.
</TABLE>
CAI WIRELESS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6. OPERATING SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
ALBANY NEW YORK PHILADELPHIA
CORPORATE MARKET MARKET MARKET AMI ALL OTHER(a)
<S> <C> <C> <C> <C> <C> <C>
Assets $380,080,778 $ 1,951,194 $ 904,790 $ 6,115,555 $ 177,797,928 $ 31,257,059
Due from segments $290,403,820 $ - $ - $ - $ - $ -
Due to parent $ - $(11,240,414) $(31,726,081) $(5,232,594) $(179,677,566) $(62,527,165)
Expenditures for segment
assets $ 8,729 $ 37,734 $ 9,074 $ 123,858 $ - $ 19,281
</TABLE>
(a) Includes the Boston Market
Total revenues, income(loss), and assets as of and for the
nine months ended December 31, 1998 are reconciled as follows:
<TABLE>
<CAPTION>
EXTERNAL REVENUES INCOME (LOSS) ASSETS
<S> <C> <C> <C>
Total reported for identified segments $ 13,542,669 $ 112,274,135 $ 566,850,245
Boston Market (included in All Other) - (6,980,768) 15,212,068
All Other (excluding Boston Market) 1,429,355 (6,876,205) 16,044,991
Elimination of inter-segment balances - - (291,829,421)
Elimination of inter-segment investments - - (17,785,517)
------------ ------------ ------------
Consolidated totals $ 14,972,024 $ 98,417,162 $ 288,492,366
============ ============ ============
</TABLE>
<PAGE>
CAI WIRELESS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6: OPERATING SEGMENT INFORMATION (CONTINUED)
The following information is provided for operating segments as
of and for the nine months ended December 31, 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(a)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
External $ - $ 2,447,793 $ 4,042,412 $ 13,385,886 $ - $ 2,101,293
Inter-company $ 1,737,000 $ - $ - $ - $ 9,050,361 $ 245,257
Interest expense $(40,093,996) $ - $ (2,161) $ (3,381) $ (24,479) $ (4,488)
Depreciation &
amortization $ (6,754,323) $ (1,388,385) $ (2,060,955) $ (8,464,635) $ (7,224,885) $ (6,593,541)
Segment loss $(74,849,639) $ (1,277,598) $ (3,350,155) $ (5,419,593) $ (2,009,905) $(11,629,679)
Assets $556,937,815 $ 3,402,731 $ 1,253,211 $ 13,536,289 $ 190,062,593 $ 40,871,883
Due from segments $304,862,260 $ - $ - $ - $ - $ -
Due to parent $ - $(11,452,701) $(24,581,775) $(26,646,846) $(188,692,341) $(53,488,597)
Expenditures for segment
assets $ 226,424 $ 256,460 $ 176,884 $ 793,458 $ - $ 728,039
</TABLE>
(a) Includes the Boston Market.
Total revenues, income(loss), and assets as of and for the
nine months ended December 31, 1997 are reconciled as follows:
<TABLE>
<CAPTION>
EXTERNAL REVENUES INCOME (LOSS) ASSETS
<S> <C> <C> <C>
Total reported for identified segments $19,876,091 $(86,906,890) $ 765,192,639
Boston Market (included in All Other) - (4,231,809) 24,163,779
All Other (excluding Boston Market) 2,101,293 (7,397,870) 16,708,104
Elimination of inter-segment balances - - (307,532,089)
Elimination of inter-segment
investments - - (17,859,517)
----------- ----------- ------------
Consolidated totals $21,977,384 $(98,536,569) $ 480,672,916
=========== ============ =============
</TABLE>
<PAGE>
CAI WIRELESS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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. DEBT OF REORGANIZED COMPANY
Reference is made to Notes 2 and 3 above for a description of the October
14, 1998 consummation of CAI's Chapter 11 case and the Exit Facility that CAI
entered into in connection therewith. The following debt is outstanding as of
December 31, 1998:
<TABLE>
<CAPTION>
LONG-TERM NOTES
<S> <C>
Senior debt of $100,000,000 accreting at 13% per annum,
due October 14, 2004:
Amount due at maturity $ 212,909,624
Less unearned discount (110,165,180)
------------
Principal and earned interest outstanding as of December 31, 1998 102,744,444
Note: Principal and interest are payable at maturity. The senior
debt is unsecured.
Acquisition-related notes 3,708,264
Other 3,577
------------
Total long-term notes $ 106,456,285
=============
INTERIM DEBT FINANCING (EXIT FACILITY)
Senior Secured A Note at 10.5% interest, compounded semi-annually with a first
priority lien on Company assets. $ 30,000,000
Senior Secured B Note at 13.0% interest per annum with a second
priority lien on Company assets. 50,000,000
------------
Total interim debt financing $ 80,000,000
=============
</TABLE>
<PAGE>
CAI WIRELESS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 9. STOCK CAPITALIZATION
The pre and post-reorganization capital structures of the
Company are as follows:
<TABLE>
<CAPTION>
Shares Authorized Shares Issued and Outstanding
---------------------------------------- -------------------------------------
CLASS OF STOCK DECEMBER 31, 1998 MARCH 31, 1998 DECEMBER 31, 1998 MARCH 31, 1998
<S> <C> <C> <C> <C>
PRE-REORGANIZED COMPANY
Preferred stock
14% Senior convertible preferred
stock, par value $10,000 per share 15,000 -
----------- ----------
Series preferred stock, no par value
Series A 8% redeemable convertible
preferred stock, no par value 350,000 -
Undesignated 4,650,000 -
----------- ----------
Total series preferred stock 5,000,000 -
Voting preferred stock, no par value 2,000,000 -
----------- ----------
Total preferred stock 7,015,000 -
=========== ==========
Common stock, no par value 100,000,000 40,543,039
=========== ==========
POST-REORGANIZED COMPANY
Preferred stock, par value $0.01 5,000,000 -
========== ==========
Common stock, par value $0.01 25,000,000 17,241,379
========== ==========
</TABLE>
<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 or that the Company can obtain financing in the future.
REORGANIZATION. 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. The New Senior Notes are governed by that certain Indenture
dated as of October 14, 1998 (the "New Senior Notes Indenture") between the
Company and State Street Bank and Trust Company, as trustee, a copy of which
was filed as an exhibit to the Company's Current Report on Form 8-K filed with
the Commission on October 15, 1998. 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.
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). All interest on amounts outstanding under the Exit Facility
accrues at the stated rates and is payable at maturity of the Exit Facility.
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, subsequently under the DIP Facility and after reorganization
on October 14, 1998, the Exit Facility. Funds provided under these interim
financing facilities totalling $26,847,000 were invested in a restricted
account controlled by MLGAF and made available to the Company for its operating
requirements in accordance with an approved budget. During the nine months
ended December 31, 1998, CAI expended $33,894,000 on operating activities. In
conjunction with the reorganization, the final escrow payment of $16,376,000
was made to holders of the Old Senior Notes. CAI also expended $2,224,000 in
debt payments, $856,000 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 account. At December 31,
1998, CAI had available funds of $21,079,000, of which $19,293,000 was held in
the restricted account. CAI is committed through additional open purchase
orders as of December 31, 1998 to spend approximately $500,000, primarily for
capital expenditures associated with additional development of its two-way and
Internet 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 types of equity instruments is currently
limited by the terms of the New Senior Notes Indenture 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
DECEMBER 31, 1998 COMPARED TO DECEMBER 31, 1997
The Company currently operates six analog subscription video systems.
The Company has experienced a decline in analog-based video subscribers,
which decline has had and will continue to have an adverse effect on the
Company's revenues. See Note 6 to the Consolidated Financial Statements
included in this Form 10-Q for comparative revenues by market.
During the last several quarters, the Company has operated its
analog video 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 includes
the recovery of out-of-pocket expenses associated with adding a new analog
video subscriber by charging such subscriber an up-front installation fee.
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. Accordingly,
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 currently 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 Company's analog video subscriber base has declined over the
last several quarters. As of December 31, 1998, the Company's subscriber
base had decreased to 33,800 analog video subscribers compared to 57,500
at December 31, 1997. The 23,700 subscriber decrease includes the loss of
approximately 10,400 subscribers as a result of the Philadelphia MDU Sale.
The decrease in analog video subscribers has resulted in subscriber revenue
decreases of $2,471,000 and $7,005,000 for the quarter and nine months ended
December 31, 1998, respectively, compared to the corresponding periods last
year.
Operating expenses were $48,381,000 and $60,242,000 for the nine months
ended December 31, 1998 and 1997, respectively. The $11,861,000 reduction in
operating expenses for the nine months versus last year's corresponding nine-
month period reflects lower technical, customer service and marketing costs
approximating $4,528,000 which were in proportion with the decline in
subscribers, offset by a $1,500,000 increase in professional fees associated
with the reorganization. Programming costs decreased by $754,400 and $2,045,400
for the quarter and nine months ended December 31, 1998, respectively, in
proportion with decreased revenues. However, licensing costs were $306,500
and $1,932,000 higher for the quarter and nine months ended December 31, 1998,
respectively, due to certain channel payments which had been previously
capitalized being currently expensed. The remaining decrease of $5,698,000
reflects lower goodwill amortization relative to the write-down at March 31,
1998, offset in part by greater amortization recorded on the Boston digital
project, including amortization of channel payments previously capitalized.
Interest expense was $30,283,000 and $40,129,000 for the nine months
ended December 31, 1998 and 1997, respectively. The decrease of $9,468,000 in
the quarter ended December 31, 1998 compared to the same period last year was
due to the consummation of the Company's Chapter 11 case on October 14, 1998
that resulted in a debt reduction of $207,793,000, offset in part by a
$20,000,000 increase in interim debt under the Exit Facility.
Interest and other income increased by $1,009,000 for the nine months
ended December 31, 1998 compared to the same period last year. The
$2,642,000 net gain from the Philadelphia MDU Sale was partially offset by the
declining interest income on the debt escrow and money market investments.
The elimination of the Company's investment in CS Wireless reflects
equity losses recorded to the extent of its investment (CAI does not guarantee
any CS Wireless debt). CS Wireless' net loss of $100,762,000 for the nine-month
period ended September 30, 1998 includes a $46,378,000 write down of goodwill.
CAI's ownership interest in CS Wireless increased to approximately 94% as a
result of the December 2, 1998 purchase by the Company of 3,836,035 shares of
CS Wireless common stock held by Heartland Wireless Communications, Inc.
("Heartland"). Subsequent to the purchase, CS Wireless redeemed the shares of
CS Wireless common stock purchased by the Company from Heartland. At
December 31, 1998, CAI held 6,421,166 shares of CS Wireless common stock,
representing approximately 94% of the issued and outstanding common stock of
CS Wireless.
THE YEAR 2000 ISSUE
OVERVIEW. The Company is continuing to evaluate and address the impact
of the Year 2000 date transition on its operations. The Company is in the
process of taking steps to (a) inventory and assess for Year 2000 compliance
its equipment, software and systems, (b) determine which items will be
remediated, replaced or retired, and establish a plan to accomplish these
steps, (c) remediate, replace or retire the items, (d) test the items, where
required, and (e) provide senior management with a reporting system to support
a seamless transition to the Year 2000.
STATE OF READINESS. The Company's Year 2000 compliance program focuses
on the Company's analog video operations, limited internet operations, and
internal business processes, such as accounting. As of December 31, 1998, the
inventory, assessment and compliance planning phases for these areas have been
materially completed, and remediation, replacement or retirement
and testing activities are beginning.. The inventory items
that are not assessed as Year 2000 compliant and that require action to avoid
service impact are expected to be fixed, replaced, or retired. CAI's goal for
its accounting services is to have its accounting software and any other mission
critical systems relating directly to the accounting function Year 2000
compliant by April 1, 1999, the beginning of its fiscal year. For all other
areas, CAI's goal is to have all mission critical systems Year 2000 compliant
by July 1, 1999.
VENDOR AND SERVICE PROVIDER ISSUES. The Company has requested that its
vendors and service providers provide CAI with information as to the compliance
status of products and/or services used by CAI and its operating subsidiaries,
which information is subject to Company testing and verification. Although the
Company has received information from some of its vendors and service
providers, it has not yet received information from each of the vendors and
service providers it has identified. The Company will continue to pursue
its vendors and service providers in order to obtain the necessary information
regarding Year 2000 compliance of such vendors and service providers.
COSTS. The Company has estimated that it will cost approximately
$375,000 to effect its Year 2000 compliance program, based on information it has
received as of December 31, 1998 from vendors and service providers. The
Company anticipates that most of the cost associated with its Year 2000
compliance program will be the result of remediation or replacement of non-
compliant equipment necessary for the Company's analog video operations and
internal business processes.
RISKS. The failure to correct a material Year 2000 problem could cause an
interruption or failure of certain of the Company's normal business functions
or operations, which could have a material adverse effect on its results of
operations, liquidity or financial condition. Due to the uncertainty inherent
in other Year 2000 issues that are ultimately beyond CAI's control, including,
for example, the final Year 2000 readiness of its mission critical vendors and
service providers, the Company is unable to determine at this time the
likelihood of a material impact on its results of operations, liquidity or
financial condition, due to such Year 2000 issues.
The costs of the Company's Year 2000 program and the timetable for
completing its Year 2000 preparations are based on current estimates, which
reflect numerous assumptions about future events, including the continued
availability of certain resources, the timing and effectiveness of third-
party remediation plans and other factors. The Company can give no assurance
that these estimates will be achieved, and actual results could differ
materially from those currently anticipated. In addition, there can be no
assurance that the Company's Year 2000 program will be effective or that its
contingency plans will be sufficient. Specific factors that might cause such
material differences include, but are not limited to, the availability and
cost of personnel trained in this area, the ability to locate and correct
relevant computer software codes and embedded technology, the results of
internal and external testing and the timeliness and effectiveness of
remediation efforts of third parties.
CONTINGENCY PLAN. At December 31, 1998, the Company is not aware of
any mission critical aspect of its operations or internal business processes
that can not be made Year 2000 compliant, however, its inventory and assessment
of Year 2000 compliance is not yet completed. Due to the uncertainties
presented by third party Year 2000 problems, and the possibility that, despite its
efforts, the Company is unsuccessful in preparing its internal systems and
equipment for the Year 2000, the Company expects to develop contingency plans
for dealing with the most reasonably likely worst case scenario. The Company's
assessment of its most reasonably likely worst case scenario and the exact
nature and scope of its contingency plans will be affected by the Company's
continued Year 2000 assessment and testing. The Company expects to complete
such assessment by July 1, 1999 and to have all contingency systems in place and
fully tested by the fourth quarter of 1999.
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 the Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1998 and 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), received 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 New Common Stock trades in the over-the-counter market on the
electronic bulletin board under the symbol (CWSS.(
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, par value $.01
per share, and 5,000,000 shares of preferred stock, par value $.01 per share,
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 was filed as Exhibit 3.3
to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1998.
Item 5. Other Information.
GOVERNANCE. During the period ending December 31, 1998, following the
Company's Chapter 11 case, four individuals were appointed to the Company's
board of directors. Named to the Company's board on December 9, 1998 were Paul
M. Albert, Jr., Vernon L. Fotheringham, and John B. Newman. Martin G. Mand was
appointed to the Company's board on December 16, 1998. Jared E. Abbruzzese,
chairman and chief executive officer of CAI, and incumbent director Robert D.
Happ comprise the balance of the 6-member board. Previous members of the
Company's board resigned in connection with the reorganization.
Paul M. Albert, Jr. is a consultant and private investor. From 1996
through 1998, Mr. Albert was employed by or retained as a consultant to The
Globecon Group and Eccles Associates. From 1983 to 1996, Mr. Albert was a
Managing Director, Investment Banking, at Prudential Securities.
Vernon L. Fotheringham is the chairman and chief executive officer of
Composite Group, Inc., a product development and venture formation firm located
in Woodinville, Washington. Mr. Fotheringham also serves as chairman and CEO
of Nutel Corporation and as vice chairman of Angel Technology Corp.
Martin G. Mand is the chairman, president and chief executive officer of
Mand Associates, Limited, a financial consulting, speaking and writing firm
located in Wilmington, Delaware. Mr. Mand previously served as executive vice
president and chief financial officer at Northern Telecom, Ltd. and in senior
management positions at E.I. du Pont de Nemours & Co., and currently serves on
the board of directors of Sun Healthcare Group Inc. and Fuji Bank and Trust
Company.
John B. Newman has been the chairman of MBNT Financial Holdings Limited,
a private investment vehicle since 1990. Immediately prior to that, Mr. Newman
was deputy chairman and a member of the Executive Committee of Prudential
Securities Canada, having been active in the investment banking business since
1960. Mr. Newman is a director of a number of public and private Canadian
corporations engaged in real estate, insurance, investment, manufacturing,
distribution and financing.
Robert D. Happ has served as a director of the Company since 1995. Prior
to his retirement in 1994, Mr. Happ was the senior managing partner of the
Boston, Massachusetts office of KPMG Peat Marwick LLP. Mr. Happ also serves as
a director of Galileo Corporation, Cambridgeport Bank and the Company's 94%-
owned subsidiary, CS Wireless.
Jared E. Abbruzzese has been chairman and chief executive officer of the
Company since its formation in 1991. Mr. Abbruzzese also serves as chairman of
CS Wireless and of TSS.
Effective January 1, 1999, John J. Prisco resigned from the Company. Mr.
Prisco had held the positions of president and chief operating officer, and was
a member of the Company's board of directors from March 1996 until October 14,
1998. Other members of the senior management of CAI have assumed the
operational duties previously performed by Mr. Prisco upon his resignation.
The Company does not have plans for the replacement of Mr. Prisco at this
time.
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
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 preferable 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, operators( activities in
contiguous markets. Although the Company has devised such a template, it is
not necessary for it to be adopted in any given market for the Company
to engage in two-way transmissions. 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 initial plan applied for
may not be the frequency plan ultimately desirable for the future business
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 Instructional Television Fixed Service (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. The strategic business plan of CAI is to become
a wholesale provider of MMDS spectrum capacity that can be purchased by one or
more strategic partners. Although CAI recognizes that there are significant
regulatory, technological and financial issues surrounding its development and
implementation, CAI expects to be able eventually to offer, on a wholesale
basis, two-way spectrum capacity over a wireless broadband network
capable of transmitting video, voice and data throughout its operating
territory. CAI believes that it must enter into a joint venture or other
business relationship with one or more strategic partners, pursuant to which
the strategic partner(s) would commit to purchase all or a portion of CAI's
MMDS spectrum capacity in an amount that would be sufficient to enable CAI to
raise the capital necessary to implement its business plan.
CAI has been vigorously pursuing its strategic business plan. CAI has
had, and continues to have, discussions with several potential strategic
partners regarding CAI's strategic business plan. In addition to on-going
discussions, CAI has demonstrated, and continues to demonstrate, the
technological capabilities of the MMDS spectrum for video, voice and data to
various potential strategic partners.
The nature and frequency of these discussions and of any possible
business relationships differs among the potential strategic partners. With
certain entities, the Company has discussed their purchasing of spectrum
capacity through use of "take-or-pay" or similar arrangements and with other
entities, the Company has discussed more comprehensive relationships. The
Company is also aware that certain potential strategic partners have had
discussions with one or more of CAI's securities holders. All of these
discussions are still in an exploratory stage and there can be no assurance
that any of these discussions will result in an agreement-in-principle, binding
commitment or definitive agreement to enter into any business relationship.
The Company's policy is not to comment on particular on-going discussions
with respect to strategic business relationships prior to an agreement.
Additionally, in connection with the Company's strategic partner search
and the issuance of the Two-Way Rules, 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.
STOCK OPTION PLANS. In connection with the CAI Bankruptcy, CAI adopted
the 1998 Stock Option Plan (the "Management Option Plan") for key employees,
a copy of which is filed as an exhibit hereto. The Management Option
Plan is intended to provide key employees with a meaningful incentive to pursue
CAI's strategic business plan. The Management Option Plan is also intended to
align the interests of such employees with those of CAI's shareholders. There
are 1.5 million shares of CAI Common Stock reserved for issuance upon the
exercise of options granted pursuant to the Management Option Plan.
All options granted under the Management Option Plan are intended to be
10-year options, however, options may lapse and expire prior to the expiration
of such 10-year period in certain circumstances more fully described in the
Management Option Plan. The vesting terms and exercise price of options
granted under Management Option Plan are determined by a committee (the
(Committee() designated by the Company's board of directors to administer
the Management Option Plan. On January 18, 1999 the Committee approved
the issuance to several key employees of the Company of options to
purchase 1,233,500 shares of CAI Common Stock pursuant to the Management Option
Plan, and subject to the surrender of certain options previously
granted in connection with the Company's reorganization on October 14, 1998.
Upon such surrender, the number of options outstanding will be fewer than
the number granted on October 14, 1998.
The options approved by the Committee are exercisable at a per share
price of $0.875, which represents the closing trading price of the CAI Common
Stock on January 19, 1999. The options vest upon the occurrence of specified
conditions or the completion of identified tasks, depending upon the department
in which the optionee is employed by the Company, the satisfaction of which
are determined by the Committee in its reasonable judgment. All options vest in
their entirety upon the occurrence of a change of control of the Company. The
Committee has also imposed a 120-day waiting period following the occurrence of
the vesting events in certain circumstances.
In part to attract qualified outside directors, the Company's board of
directors has also adopted the 1998 Outside Directors' Stock Option Plan
(the "Outside Directors' Plan"), a copy of which is filed as an exhibit hereto.
Under the Outside Directors' Plan, each non-employee director of CAI is entitled
to an initial grant of options to purchase 25,000 shares of CAI Common Stock
at an exercise price equal to the closing trading price on the day on which
such individual is deemed to have become a director of the Company following
the Company's reorganization. The initial options vest over a one-year
period with options to purchase 10,000 shares of CAI Common Stock vesting
on the date that is three months after such individual becomes a CAI
director, options to purchase 7,500 shares of CAI Common Stock vesting
on the date that is eight months after such individual becomes a CAI director
and the remaining options to purchase 7,500 shares of CAI Common Stock vesting
on the one-year anniversary of the date such individual becomes a director.
In addition to the initial grant of option, each individual who has been a
CAI director for at least six months prior to each April 1, beginning on
April 1, 2000, shall receive options to purchase 7,500 shares of CAI Common
Stock at an exercise price equal to the closing trading price on the date of
grant, which options vest on the one-year anniversary of the date of grant.
All options granted under the Outside Directors' Plan are intended to be
10-year options, however, options may lapse and expire prior to the expiration
of such 10-year period in certain circumstances more fully described in the
Outside Directors' Plan. The Company board of directors has reserved 400,000
shares of CAI Common Stock for issuance upon the exercise of options granted
under the Outside Directors' Plan. As of the date of this report, there were
options to purchase 125,000 shares of CAI Common Stock issued and outstanding
under the Outside Directors' Plan.
The foregoing descriptions of the stock option plans maintained by the
Company are summaries of such plans and are qualified in their entirety to the
full text of the Management Option Plan and Outside Directors' Plan attached
hereto as exhibits.
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
EXHIBIT NO. DESCRIPTION (SEE LEGEND) REFERENCE
<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
3.3 Certificate Amending the Amended and Restated [7] Exhibit 3.1
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
4.6 Registration Rights Agreement dated as of October 14, [7] Exhibit 4.1
1998 by and among CAI, Merrill Lynch Global
Allocation Fund, Inc. and Merrill Lynch
Equity/Convertible Series Fund (Global Allocation
Portfolio)
<dagger>10.1 1998 Outside Directors' Stock Option Plan
<dagger>10.2 1998 Stock Option Plan
<dagger>10.3 Amended and Restated Employment Agreement dated as of
October 14, 1998 between CAI and Jared E. Abbruzzese
<dagger>10.4 Amended and Restated Employment Agreement dated as of
October 14, 1998 between CAI and James P. Ashman
<dagger>10.5 Amended and Restated Employment Agreement dated as of
October 14, 1998 between CAI and Gerald Stevens-
Kittner
<dagger>10.6 Amended and Restated Employment Agreement dated as of
October 14, 1998 between CAI and Bruce Kostreski
<dagger>10.7 Amended and Restated Employment Agreement dated as of
October 14, 1998 between CAI and Derwood Edge
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
99.5 Pro Forma Balance Sheet Giving Effect to the [7] Exhibit 99.1
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.
[7] Incorporated by reference to the exhibit to the Company's Quarterly Report
on Form 10-Q for September 30, 1998.
<dagger> Filed herewith.
b) REPORTS ON FORM 8-K.
(1) Form 8-K filed October 15, 1998, reporting the following:
Item 3. Bankruptcy or Receivership.
CAI and one of its subsidiaries 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.
(2) 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.
<PAGE>
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 February 16, 1999
JARED E. ABBRUZZESE and Director (Principal Executive
Officer)
/S/ Executive Vice President, Chief February 16, 1999
JAMES P. ASHMAN Financial Officer
(Principal Financial Officer)
/S/ Vice President and Controller February 16, 1999
ARTHUR J. MILLER (Principal Accounting Officer)
</TABLE>
1
CAI WIRELESS SYSTEMS, INC.
1998 OUTSIDE DIRECTORS' STOCK OPTION PLAN
1. PURPOSE. The purpose of this 1998 Outside Directors' Stock
Option Plan (the "Plan") is to attract and retain the continued services of
non-employee directors of CAI Wireless Systems, Inc. (the "Company") with
the requisite qualification and to encourage such directors to secure or
increase, on reasonable terms, their stock ownership in the Company. The
Board of Directors of the Company (the "Board") believes that the granting
of options (the "Options") under this Plan will promote continuity of
management and increased personal interest in the welfare of the Company by
those individuals who are responsible for shaping and carrying out the
long-range plans of the Company and securing its continued growth and
financial success.
2. EFFECTIVE DATE OF THE PLAN; SHAREHOLDER APPROVAL. The Plan shall
become effective upon its approval by the Board of the Company (the
"Effective Date"). To the extent the Company is subject to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations thereunder, the Company shall seek to obtain shareholder
approval or ratification of the Plan in compliance with Rule 16b-3(d)(2)
under the Exchange Act.
3. STOCK SUBJECT TO PLAN. Four hundred thousand (400,000) of the
authorized but unissued shares of the Company's Common Stock, par value
$0.01 per share (the "Shares"), have been reserved for issuance upon the
exercise of Options; provided, however, that the number of Shares so
reserved may be reduced from time to time to the extent that a
corresponding number of treasury Shares are set aside for issuance upon the
exercise of Options. If any Options expire or terminate for any reason
without having been exercised in full, the unpurchased Shares subject
thereto shall again be available for the grant of Options.
4. ADMINISTRATION. The Plan shall be administered by the Committee
referred to in Section 5 hereof. Subject to the provisions of the Plan,
the Committee shall have complete authority in its discretion to interpret
the Plan, to prescribe, amend and rescind rules and regulations relating to
it and to make all other determinations necessary or advisable for the
administration of the Plan; provided, however, that the Committee shall
have no discretion to determine the non-employee directors who will receive
Options, the number of Shares subject to Options, the terms upon which, the
time at which, or the period within which Shares may be acquired or the
Option may be acquired and exercised.
5. COMMITTEE. The Board shall designate a committee (the
"Committee"), which shall consist of at least two (2) members of the Board,
each of whom shall be a "non-employee director," as defined in Rule 16b-3
under the Exchange Act, or any successor rule under the Exchange Act. The
Board may remove, at any time and from time to time, any member of the
Committee and fill vacancies, however caused, in the Committee. A majority
of the members of the Committee shall constitute a quorum. All
determinations of the Committee shall be made by a majority of its members.
Any decision or determination of the Committee reduced to writing and
signed by all members of the Committee shall be fully effective as if it
had been made at a meeting duly called and held. The Committee may be an
existing committee of the Board, provided such existing committee consists
of at least 2 "non-employee directors."
6. ELIGIBILITY. An Option may be granted only to members of the
Board who are non-employee directors on the date of grant (the
"Participants").
7. GRANT OF OPTIONS AND OPTION PRICE.
(a) INITIAL OPTION GRANT. Each individual who is a Participant on
the date that such individual is deemed first elected or appointed to the
Board (the "Initial Grant Date") shall automatically be granted on such
date an option (the "Initial Option") to purchase twenty-five thousand
(25,000) Shares, vesting: (i) to the extent of options to purchase 10,000
Shares on the date that is three months after the Initial Grant Date; (ii)
to the extent of options to purchase an additional 7,500 Shares on the date
that is eight months after the Initial Grant Date, and (iii) to the extent
of options to purchase an additional 7,500 Shares on the one-year
anniversary of the Initial Grant Date, provided that such individual is a
Participant on each such date.
(b) SUBSEQUENT ANNUAL OPTION GRANTS. In addition to the Initial
Option, each Participant shall receive an automatic grant of an Option
(each, a "Subsequent Option") to purchase seven thousand five hundred
(7,500) Shares on each April 1st, commencing on April 1, 2000 (each April
1st, a "Subsequent Grant Date"), provided that such Participant has been a
member of the Board for at least six months prior to the applicable
Subsequent Grant Date. Each Subsequent Option shall vest in its entirety
on the one-year anniversary of the applicable Subsequent Grant Date.
(c) LIMITATION ON MULTIPLE GRANTS. Notwithstanding the foregoing, no
Participant shall receive more than one (1) grant of an Initial Option at
any time, even if the Participant ceases for any reason to serve on the
Board for any length of time, but is then re-elected or re-appointed.
(d) PRICE. The per Share price to be paid by a Participant upon the
exercise of an Option (the "Exercise Price") shall not be less than the
fair market value of a Share on the date of grant. For purposes hereof,
the fair market value of a Share on any date shall be equal to the last
reported sales price of the Shares as reported on the NASDAQ National
Market System on such date, or, if the Shares are not reported on the
NASDAQ National Market System, the last reported sales price of the Shares
on such date (or if no such quotation occurred on that date, on the next
preceding date on which there was a quotation), as made available for
publication by the National Association of Securities Dealers Automated
Quotation System, or if no such prices are available, the fair market value
as determined rules to be adopted by the Committee.
8. OPTION PERIOD. Participants shall be granted Options which are
exercisable for a period of ten (10) years from the date of granting
thereof. Notwithstanding the foregoing, except as provided in the
following paragraph, to the extent required by Rule 16b-3 under the
Exchange Act and the rules and regulations promulgated thereunder, no
Option granted under this Plan shall be exercisable until six (6) months
after the grant.
In the event that a Participant dies or becomes disabled, or in the
event of a "change of control" (as defined below) of the Company, all
Options held by such Participant which have not yet vested and become
exercisable shall become vested and immediately exercisable.
For purposes of this Plan, a "change of control" shall be deemed
to have occurred if, after the date hereof, (i) any person or two or more
persons acting in concert, other than the Company or any employee benefit
plan sponsored by the Company, acquires beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act directly or
indirectly of thirty-five percent (35%) or more of the total voting power
represented by the Company's then outstanding voting securities (calculated
as provided in paragraph (d) of Rule 13d-3 under the Exchange Act in the
case of rights to acquire voting securities); or (ii) any person or two or
more persons acting in concert, other than the Company or any employee
benefit plan sponsored by the Company, shall purchase shares of the Company
pursuant to a tender offer or exchange offer to acquire any voting
securities of the Company (or securities convertible into such voting
securities) for cash, securities or any other consideration, provided that
after the consummation of the offer, the person or persons in question has
beneficial ownership directly or indirectly of thirty-five percent (35%) or
more of the total voting power represented by the Company's then
outstanding voting securities (all as calculated under clause (i) above));
or (iii) the shareholders of the Company shall approve (A) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation (other than a merger of the Company in
which holders of the Common Shares of the Company immediately prior to the
merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger as immediately before),
or pursuant to which Common Shares of the Company would be converted into
cash, securities or other property, or (B) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of
all or substantially all of the assets of the Company; or (iv) a change in
control of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange
Act, whether or not the Company is then subject to such reporting
requirement; or (v) there shall have been a change in the composition of
the Board of Directors of the Company at any time during any consecutive
twenty-four (24) month period such that "continuing directors" cease for
any reason to constitute at least a 70% majority of the Board. For
purposes of this clause, "continuing directors" means those members of the
Board who either were directors at the beginning of such twenty-four month
period or were elected by or on the nomination or recommendation of at
least a 70% majority of the then-existing "continuing directors." So long
as there has not been a "change of control" within the meaning of clause
(v), the Board of Directors may adopt by a 70% majority of the "continuing
directors" a resolution to the effect that an event described in clauses
(i) or (ii) shall not constitute a "change of control."
9. EXERCISE OF OPTIONS. Subject to Sections 7 and 8 hereof, a
vested Option may be exercised in whole or in part, at any time after the
date it is granted, and only by a written notice of intent to exercise the
Option with respect to a specified number of Shares and payment to the
Company in cash or by certified check, bank draft or postal or express
money order, of the amount of the Option Exercise Price for the number of
Shares with respect to which the Option is then exercised.
10. CEASING TO BE A DIRECTOR.
(a) TERMINATION. If a Participant terminates service as a
director for any reason other than those set forth in clauses (b) and (c)
below, any vested Options held by the Participant at the time of such
termination shall terminate on the date on which such Options would
otherwise expire by their terms, and any unvested Options shall lapse and
expire on the date of such termination.
(b) DISABILITY OR DEATH. If a Participant's service as a
director is terminated by disability or death, the Participant or the
representative of the Participant's estate or beneficiaries thereof to whom
the Option has been transferred shall have the right during the period
commencing on the date of the Participant's disability or death and ending
one (1) year after such termination to exercise any then-outstanding
Options in whole or in part.
(c) TERMINATION FOR CAUSE. If a Participant's service as a
director is terminated for cause, all vested and unvested Options held by
the Participant at the time of such termination for cause shall lapse and
expire immediately upon such termination.
11. DURATION OF PLAN. Unless sooner terminated by the Board, this
Plan shall remain in effect for a period of ten (10) years after the
Effective Date, and shall thereafter terminate automatically by its terms,
without further action by the Board or the Committee. No Options may be
granted after the termination of this Plan; provided, however, that
termination of this Plan shall not affect any Options previously granted,
which Options shall remain in effect until exercised, surrendered or
cancelled, or until they have expired, all in accordance with their
respective terms.
12. CHANGES IN CAPITAL STRUCTURE, ETC. In the event of changes in
the outstanding Common Stock of the Company by reason of stock dividends,
stock splits, recapitalizations, mergers, consolidations, combination or
exchange of shares, separations, reorganization, or liquidations, the
number of Shares available under the Plan in the aggregate and the number
of Shares as to which Options may be granted to any Participant shall be
correspondingly adjusted by the Committee. In addition, the Committee
shall make appropriate adjustments in the number of Shares as to which
outstanding Options, or portions thereof then unexercised, shall relate, to
the end that the Participant's appropriate interest shall be maintained as
before the occurrence of such event; such adjustment shall be made without
change in the total price applicable to the unexercised portion of Options
and with a corresponding adjustment in the Option price per share.
13. RIGHTS AS SHAREHOLDER. A Participant entitled to Shares as a
result of the exercise of an Option shall not be deemed for any purpose to
be, or have rights as, as shareholder of the Company by virtue of such
exercise, except to the extent a stock certificate is issued therefor and
then only from the date such certificate is issued. No adjustments shall
be made for dividends or distributions or other rights for which the record
date is prior to the date such stock certificate is issued.
14. EXPENSES. The expenses of this Plan shall be borne by the
Company.
15. COMPLIANCE WITH APPLICABLE LAW. Notwithstanding anything herein
to the contrary, the Company shall not be obligated to cause to be issued
or delivered any certificates evidencing Shares to be delivered pursuant to
the exercise of an Option, unless and until the Company is advised by its
counsel that the issuance and delivery of such certificates is in
compliance with all applicable laws and regulations of governmental
authority. The Company shall in no event be obligated to register any
securities pursuant to the Securities Act of 1933 (as now in effect or as
hereafter amended), or to take any other action in order to cause the
issuance and delivery of such certificate to comply with any such law or
regulation. The Committee may require, as a condition of the issuance and
delivery of such certificates and in order to ensure compliance with such
laws and regulations, that the Participant make such covenants, agreement
and representations as the Committee, in its sole discretion, deems
necessary or desirable.
16. APPLICATION OF FUNDS. Any cash proceeds received by the Company
from the sale of Shares pursuant to Options will be used for general
corporate purposes.
17. AMENDMENT OF THE PLAN. The Board may, from time to time, suspend
or discontinue this Plan or revise or amend it in any respect whatsoever,
except that no such suspension, discontinuance, revision or amendment shall
in any manner affect any grant theretofore made without the consent of the
Participant or the transferee of the Participant, unless necessary to
comply with applicable law.
CAI WIRELESS SYSTEMS INC.
1998 STOCK OPTION PLAN
1. PURPOSE
The purpose of the CAI Wireless Systems Inc. 1998 Stock Option Plan
is to motivate selected Key Employees of the Company and its subsidiaries
to increase shareholder value and to reward such employees for the
related success of the Company. Options will be granted, effective on the
Consummation Date, to the Initial Optionees and shares issuable pursuant
to any forfeited or expired Initial Optionee options will again be
available for option grants thereafter by the Committee to Key Employees
pursuant to the terms of this Option Plan.
2. DEFINITIONS
When used herein, the following terms shall have the meanings
indicated below:
"Act" means the Securities Exchange Act of 1934.
"Applicable Tranche Exercise Price" has the meaning set forth in the
Initial Option Agreement and on Schedule A hereto.
"Beneficiary" means the beneficiary or beneficiaries designated
pursuant to Paragraph 10 who may exercise any outstanding Options upon
the death of a Key Employee to the extent permitted under the Option
Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as now in effect or
as hereafter amended. (All citations to sections of the Code are to such
sections as they may from time to time be amended or renumbered.)
"Committee" means the Stock Option or Compensation Committee of the Board
or such other committee as may be designated by the Board to administer
the Option Plan. In the absence of the appointment of such a Committee,
the Board shall act as the Committee.
"Company" means CAI Wireless Systems, Inc., and its successors and
assigns.
"Consummation Date" means the date so identified in accordance with
the Reorganization Plan.
"Fair Market Value" means the fair market value as determined by
rules to be adopted by the Committee.
"Incentive Stock Option" means a stock option qualified under
Section 422 of the Code.
<PAGE>
"Key Employee" means an employee of any Participating Company whose
responsibilities and decisions, in the judgment of the Committee,
materially affect the performance of the Company and its subsidiaries and
includes each Initial Optionee.
"Initial Option Agreement" means an Option Agreement in the form
attached as Exhibit I hereto.
"Initial Optionee" means the individuals specified on Schedule A
hereto.
"Option" means an option awarded under Paragraph 4 of the Option
Plan to purchase Stock of the Company, which option may be an Incentive
Stock Option or a non-qualified stock option.
"Option Agreement" means the written agreement evidencing each
Option granted to a Key Employee under the Option Plan, including an
Initial Option Agreement.
"Option Plan" means this CAI Wireless Systems Inc. 1998 Stock Option
Plan, as the same may be amended, administered or interpreted from time
to time.
"Participating Company" means the Company or any corporation that at
the time an award is granted qualifies as a "subsidiary" of the Company
under Section 425(f) of the Code.
"%age of Option Plan Shares" means the percentage of the shares of
Stock initially subject to the Option Plan as determined pursuant to
Paragraph 3, to which an individual Initial Optionee is entitled, as
specified on Schedule A hereto.
"Reorganization Plan" means the Chapter 11 reorganization plan for
the Company and Philadelphia Choice Television, Inc., dated June 30,
1998, as the same may be amended, modified or supplemented from time to
time.
"Stock" means the new common shares of the Company issued in
connection with the Reorganization Plan.
"Total Disability" means a permanent and total disability as defined
in Section 22(e)(3) of the Code.
"Total Plan Shares" has the meaning set for the in Paragraph 3
hereof.
"Tranche" means a grouping of Options, A through D, at a given
Exercise Price as determined in accordance with Paragraph 4(A) hereof.
<PAGE>
3. SHARES SUBJECT TO THE OPTION PLAN
The number of shares of Stock cumulatively available for Options
under the Option Plan shall be fixed as of the Consummation Date and
shall be equal to ten percent (10%) of the total number of shares of
Stock to be issued and outstanding on the Consummation Date pursuant to
the Reorganization Plan (the "Total Plan Shares"). Subject to the above
limitation, shares of Stock to be issued under the Option Plan may be
made available from the authorized but unissued shares, or from shares
purchased in the open market. If any Options under the Option Plan are
forfeited, terminated, expire unexercised or are exchanged for other
Options, the shares of Stock that were theretofore subject to such
Options shall again be available for Options under the Option Plan to the
extent of such forfeiture or expiration of such Options.
4. GRANT OF OPTIONS AND OPTION AGREEMENTS
(a) Options shall be awarded each Initial Optionee employed by the
Company as of the Consummation Date in the number determined by applying
the individual Initial Optionee(s %age of Option Plan Shares, as shown on
Schedule A hereto, to the Total Plan Shares and such number shall be
divided twenty percent (20%) to each of Tranches A through C and forty
percent (40%) to Tranche D. The Applicable Tranche Exercise Price for
each Tranche shall be determined as specified on Schedule A hereto.
(b) With respect to Options other than those granted pursuant to
Paragraph 4(A) above, the Committee shall (i) determine and designate
from time to time those Key Employees or groups of Key Employees to whom
Options are to be granted; (ii) determine the type or types of Options to
be granted to any Key Employee; (iii) determine the number of shares of
Stock subject to each Option, and (iv) determine the terms and conditions
of each Option.
(c) Each Option granted under the Option Plan shall be evidenced by
a written Option Agreement. Such agreement shall be subject to and
incorporate the express terms and conditions, if any, required under the
Option Plan or required by the Committee. The Options granted to the
Initial Optionees pursuant to Paragraph 4(A) shall be evidenced by a
written Initial Option Agreement in the form attached as Exhibit I
hereto.
5. STOCK OPTIONS
(a) The Options granted pursuant to Paragraph 4(A) above, as
specified on Schedule A hereto, shall be governed by the terms provided
in the form of Initial Option Agreement attached as Exhibit I hereto.
With respect to all other Options, the Committee shall (i) authorize the
granting of Incentive Stock Options, non-qualified stock options, or a
combination of Incentive Stock Options and non-qualified stock options;
(ii) determine the number of shares of Stock subject to each Option, and
(iii) determine the time or times when and the manner in which each
Option shall be exercisable and the duration of the exercise period.
<PAGE>
(b) Any Option issued hereunder that is intended to qualify as an
Incentive Stock Option shall be subject to such limitations or
requirements as may be necessary for the purposes of Section 422 of the
Code or any regulations and rulings thereunder to the extent and in such
form as determined by the Committee in its discretion.
(c) The exercise period for a non-qualified stock option shall not
exceed ten years and two days from the date of grant, and the exercise
period for an Incentive Stock Option shall not exceed ten years from the
date of grant.
(d) The Option price per share for the Options provided to the
Initial Optionees pursuant to Paragraph 4(A) shall be the Applicable
Tranche Exercise Price as set forth in Schedule A. The exercise price
for such other Options as may be granted by the Committee from time to
time shall be determined by the Committee at the time the Option is
granted and shall not be less than the Fair Market Value of one share of
Stock on the date the Option is granted.
(e) Except for the Options provided to the Initial Optionees
pursuant to Paragraph 4(A), no part of any Option may be exercised until
the Key Employee who has been granted the Option shall have remained in
the employ of a Participating Company for such period after the date of
grant as the Committee may specify, if any, and the Committee may further
require exercisability in installments; provided, however, that except
for the Options provided to the Initial Optionees pursuant to
Paragraph 4(A), the period during which an Option is exercisable shall
commence no earlier than six months following the date the Option is
granted.
(f) The purchase price of the shares as to which an Option shall be
exercised shall be paid to the Company at the time of exercise either
(i) in cash, or (ii) in Stock already owned by the optionee having a
total Fair Market Value equal to the purchase price, or (iii) provided
the Company has adopted such a procedure at this time, by submitting an
"Irrevocable Letter of Instruction" and "Cashless Exercise and Sale Form"
authorizing the delivery for sale of the exercised Stock, or (iv) a
combination of cash, Stock or cashless exercise, having a total Fair
Market Value equal to the purchase price. The Committee shall determine
acceptable methods for tendering Stock as payment upon exercise of an
Option and may impose such limitations and prohibitions on the use of
Stock to exercise an Option as it deems appropriate. The Committee may
also establish procedure for a cashless exercise of Options.
(g) Except for Options provided to the Initial Optionees pursuant
to Paragraph 4(A), which shall be governed by the terms provided in the
Initial Option Agreement, the following provisions shall apply to all
other Options granted hereunder in case of termination of the Optionee(s
employment:
(1) If a Key Employee who has been granted an Option shall die
before such Option has expired, his or her Option may be exercised
to the extent it was exercisable as of the date of death by the Key
Employee's Beneficiary, at any time, or from time to time, within
one year after the date of the Key Employee's death or within such
other period, and subject to such terms and conditions as the
Committee may specify, but not later than the expiration date
specified in Paragraph 5(C) above.
(2) If the Key Employee's employment by any Participating
Company terminates because of his or her Total Disability, he or she
may exercise his or her Options to the extent they were exercisable
as of the date of termination of employment at any time, or from
time to time, within one year after the date of the termination of
his or her employment or within such other period, and subject to
such terms and conditions as the Committee may specify, but not
later than the expiration date specified in Paragraph 5(C) above.
(3) If the Key Employee is terminated for cause, as defined in
the employment agreement of such Key Employee with the Company, or
absent an employment agreement, defined as neglect of duty or
misconduct as reasonably determined by the Committee, the Options
shall be canceled coincident with the effective date of the
termination of employment.
(4) If the Key Employee's employment terminates for any other
reason, he or she may exercise his or her Options, to the extent
that he or she shall have been entitled to do so at the date of the
termination of his or her employment, at any time, or from time to
time, within three months after the date of the termination of his
or her employment or within such other period, and subject to such
terms and conditions as the Committee may specify, but not later
than the expiration date specified in Paragraph 5(C) above.
(h) No Option granted under the Option Plan shall be transferable
other than to a Beneficiary upon the death of the Key Employee to whom
the Option is granted. During the lifetime of the optionee, an Option
shall be exercisable only by the Key Employee to whom the Option is
granted.
(i) With respect to an Incentive Stock Option, the Committee shall
specify such terms and provisions as the Committee may determine to be
necessary or desirable in order to qualify such Option as an "incentive
stock option" within the meaning of Section 422 of the Code.
6. STOCK CERTIFICATES
(a) The Company shall not be required to issue or deliver any
certificates for shares of Stock prior to (i) the listing of such shares
on any stock exchange on which the Stock may then be listed and (ii) the
completion of any registration or qualification of such shares under any
federal or state law, or any ruling or regulation of any government body
which the Company shall, in its sole discretion, determine to be
necessary or advisable.
(b) All certificates for shares of Stock delivered under the Option
Plan shall be subject to such stop-transfer orders and other restrictions
as the Committee may deem necessary and advisable under the rules,
regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Stock is then listed and
any applicable federal or state securities laws, and the Committee may
cause a legend or legends to be placed on any such certificates to make
appropriate reference to such restrictions.
(c) Each Key Employee entitled to receive Stock in settlement of an
Option shall have all of the rights of a shareholder with respect to the
shares representing such Stock, including the right to vote the shares
and receive dividends and other distributions from and after the date of
payment pursuant to the exercise of the related Option.
7. ADMINISTRATION OF THE OPTION PLAN
(a) All decisions, determinations or actions of the Committee made
or taken pursuant to grants of authority under the Option Plan shall be
made or taken in the sole discretion of the Committee and shall be final,
conclusive and binding on all persons for all purposes.
(b) The Committee shall have full power, discretion and authority
to interpret, construe and administer the Option Plan and any part
thereof, and its interpretations and constructions thereof and actions
taken thereunder shall be, except as otherwise determined in good faith
by the Board, final, conclusive and binding on all persons for all
purposes.
(c) The Committee's decisions and determinations under the Option
Plan need not be uniform and may be made selectively among Key Employees,
whether or not such Key Employees are similarly situated.
(d) The Committee may, in its sole discretion, delegate such of its
powers as it deems appropriate.
8. AMENDMENT, EXTENSION OR TERMINATION
The Board may, at any time, amend or terminate the Option Plan.
However, no amendment shall, without approval of the Company's
stockholders representing a majority of its issued Stock, (a) alter the
group of persons eligible to participate in the Option Plan, (b) except
as provided in Paragraph 9 increase the maximum number of shares of Stock
which are available for Options under the Option Plan, (c) materially
increase the benefits available to persons under the Option Plan or (d)
extend the termination date for the Option Plan. No amendment or
termination shall impair the rights of any person with respect to a prior
Option.
9. ADJUSTMENTS IN EVENT OF CHANGE IN COMMON STOCK
In the event of any recapitalization, reclassification, split-up or
consolidation of shares of Stock or, stock dividend, merger or
consolidation of the Company or sale by the Company of all or a portion
of its assets, the Committee may make such adjustments in the Stock
subject to Options or the terms, conditions or restrictions on Options,
including the price payable upon the exercise of such Option, as the
Committee deems equitable.
10. BENEFICIARY
(a) Each Key Employee shall file with the Company a written
designation of one or more persons as the Beneficiary who shall be
entitled to exercise the Options, if any, exercisable under the Option
Plan upon his or her death. A Key Employee may from time-to-time revoke
or change his or her Beneficiary designation without the consent of any
prior Beneficiary by filing a new designation with the Company. The last
such designation received by the Company shall be controlling; provided,
however, that no designation, or change or revocation thereof shall be
effective unless received by the Company prior to the Key Employee(s
death, and in no event shall it be effective as of a date prior to such
receipt.
(b) If no such Beneficiary designation is in effect at the time of
a Key Employee(s death, or if no designated Beneficiary survives the Key
Employee or if such designation conflicts with law, the Key Employee(s
estate shall be entitled to exercise the Options, if any, exercisable
under the Option Plan upon his or her death.
11. MISCELLANEOUS
(a) Nothing in this Option Plan or any Option granted hereunder
shall confer upon any employee any right to continue in the employ of any
Participating Company or interfere in any way with the right of any
Participating Company to terminate his or her employment at any time. No
Option under the Option Plan shall be deemed to give rise to salary or
compensation for the purpose of computing benefits under any employee
benefit plan or other arrangement of any Participating Company for the
benefit of its employees unless the Company shall determine otherwise.
No Key Employee shall have any claim to an Option until it is actually
granted under the Option Plan.
(b) The Committee may cause to be made, as a condition precedent to
the exercise of any Option or otherwise, appropriate arrangements with
the Key Employee, for the withholding of any federal, state, local or
foreign taxes.
<PAGE>
(c) The Option Plan and the grant of Options shall be subject to
all applicable federal and state laws, rules, and regulations and to such
approvals by any government or regulatory agency as may be required. The
Company shall take such actions as may be necessary to cause the Option
Plan to be registered with the Securities and Exchange Commission on
Form S-8.
(d) The terms of the Option Plan shall be binding upon the Company
and its successors and assigns.
(e) Captions preceding the paragraphs hereof are inserted solely as
a matter of convenience and in no way define or limit the scope or intent
of any provision hereof.
12. EFFECTIVE DATE, TERM OF OPTION PLAN AND SHAREHOLDER APPROVAL
The effective date of the Option Plan shall be the Consummation
Date, the date the Option Plan shall be deemed approved by the Company's
shareholders. No Option shall be granted under this Option Plan after
the Option Plan's termination date. The Option Plan's termination date
shall be the tenth anniversary of the Consummation Date. The Option Plan
will continue in effect for existing Options as long as any such Option
is outstanding.
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") made as
of the Consummation Date (defined below) by and between the undersigned
employee, residing at the address indicated below (hereinafter referred
to as "Employee") and CAI WIRELESS SYSTEMS, INC., a Connecticut
corporation having its principal place of business at 18 Corporate Woods
Boulevard, Third Floor, Albany, New York 12211 (hereinafter referred to
as the "Company").
1. EMPLOYMENT. The Company hereby employs Employee and Employee
agrees to work for the Company with the title specified on Schedule A
below during the Term (as defined below) of and upon the terms and
conditions set forth in this Agreement.
2. COMPENSATION/BENEFITS. (a) BASE SALARY. During the Term of
this Agreement, the Company agrees to pay Employee the base annual salary
specified on Schedule A below ("Base Salary"). Such Base Salary shall be
reviewed no less frequently than annually during the term of this
Agreement and may be increased but not decreased by the Company=s board
of directors. Such Base Salary shall be payable in accordance with the
Company's normal business practices or in such other amounts and at such
other times as the parties may mutually agree.
(b) BONUSES. During the Term of this Agreement, the Company
shall pay to the Employee an annual bonus of up to 25% of Base Salary,
based upon the Company's achievement of performance targets established
by the Company's board of directors. These targets will be revised
annually within ninety days of the beginning of each fiscal year in
consultation with the Employee. The bonus may be structured as a part of
a deferred compensation arrangement.
(c) INCENTIVE COMPENSATION. During the Term of this
Agreement, Employee shall be entitled to participate in any pooled
incentive programs established by the Company for executive employees.
(d) BENEFITS/VACATION. During the Term of this Agreement, the
Company also shall provide Employee with such other benefits, including
medical, disability, pension and severance plans, as are made generally
available to executive employees of the Company from time to time.
Employee shall be entitled to twenty-six bank days as the vacation,
personal and sick benefit during each year of the Term in accordance with
the policy set forth in the Employee Manual of the Company. Accrued
vacation may be carried over or "sold back" to the Company to the extent
permitted by, and in accordance with, the policy set forth in the
Employee Manual of the Company.
<PAGE>
(e) LIFE INSURANCE. Subject to Employee's submitting to any required
physical examinations, the Company shall purchase and maintain in effect
a term insurance policy with a face amount of $1,000,000 or other greater
amount as may be specified in the Company's executive benefit policies or
plans on the life of Employee and shall permit Employee to designate the
beneficiary thereof.
(f) Office/Secretary, etc. During the Term, Employee shall be
entitled to secretarial services and a private office commensurate with
his title and duties.
(g) Club Membership. The Company will pay, or at Employee's
election reimburse, all of the costs of a country club membership at the
club of Employee's choice in the greater Albany area.
3. SERVICES. Employee agrees to devote substantially all of his
working time, attention and energies to the business of the Company and
its Affiliates under the general direction of the board of directors.
Nothing herein shall be interpreted to preclude Employee from
participating as an officer or director of, or advisor to, any charitable
or other tax exempt or civic organization.
4. TERM. The term of this Agreement (the "Term" or the "Term of
this Agreement") shall be for an eighteen (18)-month period beginning on
the Consummation Date and continuing until the first day of the
nineteenth month following the Consummation Date, and shall be
automatically renewed annually thereafter for successive one year periods
on terms no less favorable than are contained herein unless either party
gives notice to the other of its intention not to renew this Agreement
within sixty days of the expiration of the Term of this Agreement. The
Consummation Date is the date so designated under the Plan.
5. EARLY TERMINATION. (a) IN GENERAL. The Employee's employment
hereunder shall be terminated and, other than the obligations listed in
Paragraph 5(b), the Company's obligations hereunder shall cease, including
the obligation to pay compensation for any period after the date of
termination, (i) without the necessity of notice, upon the death of the
Employee, or (ii) upon written notice of a finding by the Company(s
board of directors that the Employee has (a) acted with gross negligence or
willful misconduct in connection with the performance of his duties
hereunder, (b) engaged in a material act of insubordination or of common
law fraud against the Company or its employees, or (c) acted against the
best interests of the Company in a manner that has or could have a material
adverse affect on the financial condition of the Company (any such finding
is referred to herein as "Cause"). Upon any termination of Employee's
employment, the Term of this Agreement shall expire. In the event of
Employee's death or Employee's termination of employment by the Company
other than for Cause, Employee shall be entitled to severance in an amount
equal to one and one-half times his then Base Salary under Paragraph 2
(the "Severance Amount"), payable in twelve equal monthly installments.
If, within eighteen months following the Consummation Date, (a) Employee
terminates his or her employment for Good Reason, or (b) the Company
terminates Employee's employment other than for Cause, the Company shall
pay the Severance Amount in a lump sum not later than ten (10) days
after the date the Company selects as Employee's last day of active
employment (the "Effective Date"), provided, however, that at Employee's
option, the Severance Amount shall be payable to Employee in the form of
equal periodic payments ("Deferred Payment") according to the Company's
regular payroll schedule or at any other intervals elected by Employee
for a period commencing on the first regular payroll pay date beginning
after the Effective Date (the "Deferred Payment Period"). In order to
receive Deferred Payment during a Deferred Payment Period, Employee must
elect such Deferred Payment in writing and specify the Deferred
Payment Period, which may not exceed the number of months of Base
Monthly Salary payable to Employee as the Severance Amount. In the event
of Employee's death during the Deferred Payment Period, any unpaid
Deferred Payment shall be paid in a lump sum to such beneficiary or
beneficiaries designated by Employee in writing or, failing such
designation, to Employee's spouse if Employee is married or to
Employee's estate if Employee is unmarried.
(b) PAYMENTS UPON TERMINATION. Upon termination of this
Agreement for any reason, Employee shall be entitled to all compensation
and benefits earned but not yet paid up to and including the termination
date, including Base Salary, bonus and any other incentive compensation.
Unless otherwise specified in this Agreement, unused vacation shall be
treated in accordance with the policy set forth in the Employee Manual of
the Company.
(c) GOOD REASON. For purposes of this Agreement, Good Reason
shall mean, with respect to Employee, (i) the assignment to Employee of
any material duties materially inconsistent with Employee's position,
authority, duties or responsibilities immediately before the Consummation
Date, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and that is remedied by the
Company promptly after receipt of notice thereof given by Employee;
(ii) any material reduction in Employees Base Salary, opportunity to earn
annual bonuses or other compensation or employee benefits, other than as
a result of an isolated and inadvertent action not taken in bad faith and
that is remedied by the Company promptly after receipt of notice thereof
given by Employee; (iii) the Company's requiring Employee to relocate his
or her principal place of business to a place that is more than thirty-
five miles from his or her previous principal place of business, or (iv)
any purported termination of this Agreement otherwise than as expressly
permitted by this Agreement.
(d) DISABILITY. If Employee shall become unable efficiently
to perform the essential functions of his job, even with reasonable
accommodation, as a result of a disability or illness, as such terms are
defined by the Americans with Disabilities Act, he shall be entitled to
his regular compensation until the total period of disability or illness
(whether or not continuous and whether or not the same disability or
illness) shall exceed 60 days during any calendar year in the Term
hereunder. This Agreement may thereafter be terminated by the Company
and, if such termination is not within two years of the Consummation
Date, the Company's obligations hereunder shall cease, including the
obligation to pay compensation for any period after the date of
termination. Any amounts payable as compensation during the period of
disability or illness shall be reduced by any amounts paid during such
period under any disability plan or similar insurance of the Company.
6. EMPLOYER'S AUTHORITY. Employee agrees to observe and comply
with the rules and regulations of the Company as adopted by the Company's
board of directors respecting the performance of his duties and to carry
out and perform orders, directions and policies communicated to him from
time to time.
7. EXPENSES. During the Term of this Agreement, the Company shall
reimburse Employee for the reasonable business expenses incurred by
Employee in the course of performing his duties for the Company hereunder
in accordance with the procedures then in place for such reimbursement.
8. AUTOMOBILE ALLOWANCE. During the Term of this Agreement,
Employee shall be entitled to an automobile allowance as specified on
Schedule A below, payable monthly in arrears.
9. NON-DISCLOSURE/NON-COMPETITION. (a) Employee has executed a
Nondisclosure Agreement of the Company. Said agreement shall survive
termination of employment hereunder.
(b) Because Employee's services to the Company are special and
because Employee has access to the Company's confidential information,
Employee covenants and agrees that if (i)(x) Employee's employment is
terminated by the Company for Cause or (y) Employee voluntarily
terminates his employment relationship hereunder with the Company other
than for Good Reason, for a period of six (6) months following the
termination of this Agreement, or (ii) Employee's employment is
terminated and Employee is receiving the Severance Amount, for the period
during which Employee is receiving such Severance Amount under Paragraph
5 hereof, whichever is applicable, he will not, directly or indirectly,
either on his own behalf or on behalf of any person, partnership,
corporation or otherwise, (a) engage in any business or undertaking in a
capacity that is directly competitive with any business (each a "Related
Business") being carried on by the Company or any Affiliate thereof at
the time of Employee's termination of employment, or (b) be employed by
or provide consulting services to or be an investor, partner, member or
shareholder in, any entity or other person in a Related Business within
25 miles of any city in which the Company or any Affiliate thereof, does
business at time of execution or any other city or community in which the
Company or any Affiliate thereof, has a transmission license at the time
of termination, without the prior written consent of the Company's board
of directors. The parties agree that the time period and geographical
area of non-competition specified above are reasonable and necessary in
light of the transactions entered into in this Agreement. If, however,
it shall be determined at any time by a court of competent jurisdiction
that either the time period restriction or the geographical area
restriction, or both, are invalid or unenforceable, the parties agree
that any such restriction determined to be invalid or unenforceable shall
be deemed so amended as to make such restriction valid and enforceable in
the determination of said court, and such restriction, as so amended,
shall be enforceable between the parties to the same extent as if such
amendment had been made as of the date of this Agreement. This
subparagraph 9(b) shall survive the termination of this Agreement.
Notwithstanding anything contained herein to the contrary,
Employee may during and after the Term engage in the following permitted
activities: (i) participate as an officer or director of, or advisor to,
any charitable or other tax exempt organization; and (ii) to the extent
not in a Related Business, may engage in providing services to or
investing in entities, businesses or persons other than the Company,
including but not limited to (A) purchasing securities in private
placements by any corporation or other business entity, PROVIDED, that,
if such investments would otherwise be prohibited by the terms of this
paragraph 9, such investments shall not result in his collectively owning
beneficially at any time ten percent or more of the equity securities of
any corporation or other business entity, (B) engaging in any
telecommunications businesses or ventures, and (C) providing services as
an officer, director, employee or consultant to TelQuest Communications,
Inc., TelQuest Satellite Services LLC, Haig Capital L.L.C., Crest
International Holdings LLC and any Affiliates or successors thereof, so
long as those efforts by Employee individually or collectively do not
adversely impact on the business of the Company.
10. EXECUTION, DELIVERY AND PERFORMANCE. To the best of Employee's
knowledge, the execution, delivery and performance by Employee of this
Agreement or any other agreement, instrument or document contemplated
herein or hereby will not result in a breach of or conflict with any
terms of any other agreement, instrument or document to which Employee is
a party or by which Employee or his property is bound. No consent or
approval of any person or entity, other than those that have been
obtained by Employee, is required for Employee to execute, deliver and
perform its obligations under this Agreement or any agreement, instrument
or document contemplated herein or hereby.
11. NOTICES. Any notice permitted or required hereunder shall be
deemed sufficient when hand-delivered or mailed by certified mail,
postage prepaid, and addressed if to the Company at the address indicated
above and if to the Employee at the address indicated below (or to such
other address as may be provided by written notice received at least five
(5) business days prior to the hand delivery or mailing of any such
notice).
12. MISCELLANEOUS. (a) This Agreement (i) constitutes the entire
agreement between the parties concerning the subjects hereof and
supersedes any and all prior agreements or understandings, (ii) may not
be assigned by Employee without the prior written consent of the Company,
and (iii) may be assigned by the Company to any Affiliate of the Company
or to the successors or assigns of the Company, provided such successors
or assigns carry on substantially the Company's telecommunications
business as conducted at the time of assignment and shall be binding
upon, and inure to the benefit of, any such Affiliate, successor or
assign.
(b) Headings herein are for convenience of reference only and
shall not define, limit or interpret the contents hereof.
(c) As used herein, the term "Affiliate" shall mean any entity
controlled by or under common control with the Company.
13. AMENDMENT. This Agreement may be amended, modified or
supplemented by the mutual consent of the parties in writing, but no oral
amendment, modification or supplement shall be effective.
14. SPECIFIC ENFORCEMENT. The parties acknowledge that the Company
would be irreparably damaged and there would be no adequate remedy at law
for the Employee's breach of Paragraph 9 of this Agreement, and
accordingly, the terms thereof shall be specifically enforced. Employee
hereby consents to the entry of any temporary restraining order or
preliminary injunction, in addition to any other remedies available at
law or in equity, to enforce the provisions hereof, provided sufficient
facts are shown to warrant such relief.
15. SEVERABILITY. The provisions of this Agreement are severable.
The invalidity of any provision shall not affect the validity of any
other provision.
16. GOVERNING LAW. This Agreement shall be construed and regulated
in all respects under the laws of the State of New York.
- ------------------------------------------------------------------------
Schedule A
Name: Jared E. Abbruzzese
Title: Chairman and Chief Executive Officer
Base Salary: $350,000.00
Car Allowance: $750.00
Home Address: 59 Old Niskayuna Road
Loudonville, New York 12211
IN WITNESS WHEREOF, this Agreement is entered into as of the date
and year first above written.
CAI WIRELESS SYSTEMS, INC. EMPLOYEE:
By:_____________________________ _______________________________
Name: James P. Ashman Name: Jared E. Abbruzzese
Title: Executive Vice President
and Chief Financial Officer
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") made as
of the Consummation Date (defined below) by and between the undersigned
employee, residing at the address indicated below (hereinafter referred
to as "Employee") and CAI WIRELESS SYSTEMS, INC., a Connecticut
corporation having its principal place of business at 18 Corporate Woods
Boulevard, Third Floor, Albany, New York 12211 (hereinafter referred to
as the "Company").
1. EMPLOYMENT. The Company hereby employs Employee and Employee
agrees to work for the Company with the title specified on Schedule A
below during the Term (as defined below) of and upon the terms and
conditions set forth in this Agreement.
2. COMPENSATION/BENEFITS. (a) BASE SALARY. During the Term of
this Agreement, the Company agrees to pay Employee the base annual salary
specified on Schedule A below ("Base Salary"). Such Base Salary shall be
reviewed no less frequently than annually during the term of this
Agreement and may be increased but not decreased by the Company(s board
of directors. Such Base Salary shall be payable in accordance with the
Company's normal business practices or in such other amounts and at such
other times as the parties may mutually agree.
(b) BONUSES. During the Term of this Agreement, the Company
shall pay to the Employee an annual bonus of up to 25% of Base Salary,
based upon the Company's achievement of performance targets established
by the Company's board of directors. These targets will be revised
annually within ninety days of the beginning of each fiscal year in
consultation with the Employee. The bonus may be structured as a part of
a deferred compensation arrangement.
(c) INCENTIVE COMPENSATION. During the Term of this
Agreement, Employee shall be entitled to participate in any pooled
incentive programs established by the Company for executive employees.
(d) BENEFITS/VACATION. During the Term of this Agreement, the
Company also shall provide Employee with such other benefits, including
medical, disability, pension and severance plans, as are made generally
available to executive employees of the Company from time to time.
Employee shall be entitled to twenty-six bank days as the vacation,
personal and sick benefit during each year of the Term in accordance with
the policy set forth in the Employee Manual of the Company. Accrued
vacation may be carried over or "sold back" to the Company to the extent
permitted by, and in accordance with, the policy set forth in the
Employee Manual of the Company.
<PAGE>
(e) LIFE INSURANCE. Subject to Employee's submitting to any
required physical examinations, the Company shall purchase and maintain
in effect a term insurance policy with a face amount of one times
Employee's Base Salary or other greater amount as may be specified in
the Company's executive benefit policies or plans on the life of
Employee and shall permit Employee to designate the beneficiary thereof.
3. SERVICES. Employee agrees to devote substantially all of his
working time, attention and energies to the business of the Company and
its Affiliates under the general direction of the board of directors
acting through its Chairman and delegated officers. Nothing herein shall
be interpreted to preclude Employee from participating as an officer or
director of, or advisor to, any charitable or other tax exempt or civic
organization.
4. TERM. The term of this Agreement (the "Term" or the "Term of
this Agreement") shall be for a period beginning on the Consummation Date
and continuing until the first anniversary of the Consummation Date, and
shall be automatically renewed annually thereafter for successive one
year periods on terms no less favorable than are contained herein unless
either party gives notice to the other of its intention not to renew this
Agreement within sixty days of the expiration of the Term of this
Agreement. The Consummation Date is the date so designated under the
Plan.
5. EARLY TERMINATION. (a) IN GENERAL. The Employee's employment
hereunder shall be terminated and, other than the obligations listed in
Paragraph 5(b), the Company's obligations hereunder shall cease,
including the obligation to pay compensation for any period after the
date of termination, (i) without the necessity of notice, upon the death
of the Employee, or (ii) upon written notice of a finding by the
Company(s board of directors that the Employee has (a) acted with gross
negligence or willful misconduct in connection with the performance of
his duties hereunder, (b) engaged in a material act of insubordination or
of common law fraud against the Company or its employees, or (c) acted
against the best interests of the Company in a manner that has or could
have a material adverse affect on the financial condition of the Company
(any such finding is referred to herein as "Cause"). Upon any
termination of Employee's employment, the Term of this Agreement shall
expire. In the event of Employee's death or Employee's termination of
employment by the Company other than for Cause, Employee shall be
entitled to severance in an amount equal to his then Base Salary under
Paragraph 2 (the "Severance Amount"), payable in twelve equal monthly
installments. If, within eighteen months following the Consummation
Date, (a) Employee terminates his employment for Good Reason, or (b) the
Company terminates Employee's employment other than for Cause, the
Company shall pay the Severance Amount in a lump sum not later than ten
(10) days after the date the Company selects as Employee's last day of
active employment (the "Effective Date"), provided, however, that at
Employee's option, the Severance Amount shall be payable to Employee in
the form of equal periodic payments ("Deferred Payment") according to the
Company's regular payroll schedule or at any other intervals elected by
Employee for a period commencing on the first regular payroll pay date
beginning after the Effective Date (the "Deferred Payment Period"). In
order to receive Deferred Payment during a Deferred Payment Period,
Employee must elect such Deferred Payment in writing and specify the
Deferred Payment Period, which may not exceed the number of months of
Base Monthly Salary payable to Employee as the Severance Amount. In the
event of Employee's death during the Deferred Payment Period, any unpaid
Deferred Payment shall be paid in a lump sum to such beneficiary or
beneficiaries designated by Employee in writing or, failing such
designation, to Employee's spouse if Employee is married or to Employee's
estate if Employee is unmarried.
(b) PAYMENTS UPON TERMINATION. Upon termination of this
Agreement for any reason, Employee shall be entitled to all compensation
and benefits earned but not yet paid up to and including the termination
date, including Base Salary, bonus and any other incentive compensation.
Unless otherwise specified in this Agreement, unused vacation shall be
treated in accordance with the policy set forth in the Employee Manual of
the Company.
(c) GOOD REASON. For purposes of this Agreement, Good Reason
shall mean, with respect to Employee, (i) the assignment to Employee of
any material duties materially inconsistent with Employee's position,
authority, duties or responsibilities immediately before the Consummation
Date, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and that is remedied by the
Company promptly after receipt of notice thereof given by Employee;
(ii) any material reduction in Employee's Base Salary, opportunity to
earn annual bonuses or other compensation or employee benefits, other
than as a result of an isolated and inadvertent action not taken in bad
faith and that is remedied by the Company promptly after receipt of
notice thereof given by Employee; (iii) the Company's requiring Employee
to relocate his principal place of business to a place that is more than
thirty-five miles from his previous principal place of business, or (iv)
any purported termination of this Agreement otherwise than as expressly
permitted by this Agreement.
(d) DISABILITY. If Employee shall become unable efficiently
to perform the essential functions of his job, even with reasonable
accommodation, as a result of a disability or illness, as such terms are
defined by the Americans with Disabilities Act, he shall be entitled to
his regular compensation until the total period of disability or illness
(whether or not continuous and whether or not the same disability or
illness) shall exceed 60 days during any calendar year in the Term
hereunder. This Agreement may thereafter be terminated by the Company
and, if such termination is not within two years of the Consummation
Date, the Company's obligations hereunder shall cease, including the
obligation to pay compensation for any period after the date of
termination. Any amounts payable as compensation during the period of
disability or illness shall be reduced by any amounts paid during such
period under any disability plan or similar insurance of the Company.
6. EMPLOYER'S AUTHORITY. Employee agrees to observe and comply
with the rules and regulations of the Company as adopted by the Company's
President or Chief Executive Officer or by the Company's board of
directors respecting the performance of his duties and to carry out
and perform orders, directions and policies communicated to him from time
to time.
7. EXPENSES. During the Term of this Agreement, the Company shall
reimburse Employee for the reasonable business expenses incurred by
Employee in the course of performing his duties for the Company hereunder
in accordance with the procedures then in place for such reimbursement.
8. AUTOMOBILE ALLOWANCE. During the Term of this Agreement,
Employee shall be entitled to an automobile allowance as specified on
Schedule A below, payable monthly in arrears.
9. NON-DISCLOSURE/NON-COMPETITION. (a) Employee has executed a
Nondisclosure Agreement of the Company. Said agreement shall survive
termination of employment hereunder.
(b) Because Employee's services to the Company are special and
because Employee has access to the Company's confidential information,
Employee covenants and agrees that if (i)(x) Employee's employment is
terminated by the Company for Cause or (y) Employee voluntarily
terminates his employment relationship hereunder with the Company other
than for Good Reason, for a period of six (6) months following the
termination of this Agreement, or (ii) Employee's employment is
terminated and Employee is receiving the Severance Amount, for the period
during which Employee is receiving such Severance Amount under Paragraph
5 hereof, whichever is applicable, he will not, directly or indirectly,
either on his own behalf or on behalf of any person, partnership,
corporation or otherwise, (a) engage in any business or undertaking in a
capacity that is directly competitive with any business (each a "Related
Business") being carried on by the Company or any Affiliate thereof at
the time of Employee's termination of employment, or (b) be employed by
or provide consulting services to or be an investor, partner, member or
shareholder in, any entity or other person in a Related Business within
25 miles of any city in which the Company or any Affiliate thereof, does
business at time of execution or any other city or community in which the
Company or any Affiliate thereof, has a transmission license at the time
of termination, without the prior written consent of the Company=s board
of directors. The parties agree that the time period and geographical
area of non-competition specified above are reasonable and necessary in
light of the transactions entered into in this Agreement. If, however,
it shall be determined at any time by a court of competent jurisdiction
that either the time period restriction or the geographical area
restriction, or both, are invalid or unenforceable, the parties agree
that any such restriction determined to be invalid or unenforceable shall
be deemed so amended as to make such restriction valid and enforceable in
the determination of said court, and such restriction, as so amended,
shall be enforceable between the parties to the same extent as if such
amendment had been made as of the date of this Agreement. This
subparagraph 9(b) shall survive the termination of this Agreement.
10. EXECUTION, DELIVERY AND PERFORMANCE. To the best of Employee's
knowledge, the execution, delivery and performance by Employee of this
Agreement or any other agreement, instrument or document contemplated
herein or hereby will not result in a breach of or conflict with any
terms of any other agreement, instrument or document to which Employee is
a party or by which Employee or his property is bound. No consent or
approval of any person or entity, other than those that have been
obtained by Employee, is required for Employee to execute, deliver and
perform its obligations under this Agreement or any agreement, instrument
or document contemplated herein or hereby.
11. NOTICES. Any notice permitted or required hereunder shall be
deemed sufficient when hand-delivered or mailed by certified mail,
postage prepaid, and addressed if to the Company at the address indicated
above and if to the Employee at the address indicated below (or to such
other address as may be provided by written notice received at least five
(5) business days prior to the hand delivery or mailing of any such
notice).
12. MISCELLANEOUS. (a) This Agreement (i) constitutes the entire
agreement between the parties concerning the subjects hereof and
supersedes any and all prior agreements or understandings, (ii) may not
be assigned by Employee without the prior written consent of the Company,
and (iii) may be assigned by the Company to any Affiliate of the Company
or to the successors or assigns of the Company, provided such successors
or assigns carry on substantially the Company's telecommunications
business as conducted at the time of assignment and shall be binding
upon, and inure to the benefit of, any such Affiliate, successor or
assign.
(b) Headings herein are for convenience of reference only and
shall not define, limit or interpret the contents hereof.
(c) As used herein, the term "Affiliate" shall mean any entity
controlled by or under common control with the Company.
13. AMENDMENT. This Agreement may be amended, modified or
supplemented by the mutual consent of the parties in writing, but no oral
amendment, modification or supplement shall be effective.
14. SPECIFIC ENFORCEMENT. The parties acknowledge that the Company
would be irreparably damaged and there would be no adequate remedy at law
for the Employee's breach of Paragraph 9 of this Agreement, and
accordingly, the terms thereof shall be specifically enforced. Employee
hereby consents to the entry of any temporary restraining order or
preliminary injunction, in addition to any other remedies available at
law or in equity, to enforce the provisions hereof, provided sufficient
facts are shown to warrant such relief.
15. SEVERABILITY. The provisions of this Agreement are severable.
The invalidity of any provision shall not affect the validity of any
other provision.
16. GOVERNING LAW. This Agreement shall be construed and regulated
in all respects under the laws of the State of New York.
---------------------------------------------------------
Schedule A
Name: James P. Ashman
Title: Executive Vice President
and Chief Financial Officer
Base Salary: $183,000.00
Car Allowance: $650.00
Home Address: 53 Upper Loudon Road
Loudonville, New York 12211
IN WITNESS WHEREOF, this Agreement is entered into as of the date
and year first above written.
CAI WIRELESS SYSTEMS, INC. EMPLOYEE:
By:_____________________________ __________________________
Name: Jared E. Abbruzzese Name: James P. Ashman
Title: Chairman and
Chief Executive Officer
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") made as
of the Consummation Date (defined below) by and between the undersigned
employee, residing at the address indicated below (hereinafter referred
to as "Employee") and CAI WIRELESS SYSTEMS, INC., a Connecticut
corporation having its principal place of business at 18 Corporate Woods
Boulevard, Third Floor, Albany, New York 12211 (hereinafter referred to
as the "Company").
. EMPLOYMENT. The Company hereby employs Employee and Employee
agrees to work for the Company with the title specified on Schedule A
below during the Term (as defined below) of and upon the terms and
conditions set forth in this Agreement.
. COMPENSATION/BENEFITS. () BASE SALARY. During the Term of
this Agreement, the Company agrees to pay Employee the base annual salary
specified on Schedule A below ("Base Salary"). Such Base Salary shall be
reviewed no less frequently than annually during the term of this
Agreement and may be increased but not decreased by the Company's board
of directors. Such Base Salary shall be payable in accordance with the
Company's normal business practices or in such other amounts and at such
other times as the parties may mutually agree.
() BONUSES. During the Term of this Agreement, the Company
shall pay to the Employee an annual bonus of up to 25% of Base Salary,
based upon the Company's achievement of performance targets established
by the Company's board of directors. These targets will be revised
annually within ninety days of the beginning of each fiscal year in
consultation with the Employee. The bonus may be structured as a part of
a deferred compensation arrangement.
() INCENTIVE COMPENSATION. During the Term of this
Agreement, Employee shall be entitled to participate in any pooled
incentive programs established by the Company for executive employees.
() BENEFITS/VACATION. During the Term of this Agreement, the
Company also shall provide Employee with such other benefits, including
medical, disability, pension and severance plans, as are made generally
available to executive employees of the Company from time to time.
Employee shall be entitled to twenty-six bank days as the vacation,
personal and sick benefit during each year of the Term in accordance with
the policy set forth in the Employee Manual of the Company. Accrued
vacation may be carried over or "sold back" to the Company to the extent
permitted by, and in accordance with, the policy set forth in the
Employee Manual of the Company.
<PAGE>
(e) LIFE INSURANCE. Subject to Employee's submitting
to any required physical examinations, the Company shall purchase
and maintain in effect a term insurance policy with a face amount of
one times Employee's Base Salary or other greater amount as may be
specified in the Company's executive benefit policies or plans on
the life of Employee and shall permit Employee to designate the
beneficiary thereof.
3. SERVICES. Employee agrees to devote substantially all of his
working time, attention and energies to the business of the Company and
its Affiliates under the general direction of the board of directors
acting through its Chairman and delegated officers. Nothing herein shall
be interpreted to preclude Employee from participating as an officer or
director of, or advisor to, any charitable or other tax exempt or civic
organization.
4. TERM. The term of this Agreement (the "Term" or the "Term of
this Agreement") shall be for a period beginning on the Consummation Date
and continuing until the first anniversary of the Consummation Date, and
shall be automatically renewed annually thereafter for successive one
year periods on terms no less favorable than are contained herein unless
either party gives notice to the other of its intention not to renew this
Agreement within sixty days of the expiration of the Term of this
Agreement. The Consummation Date is the date so designated under the
Plan.
5. EARLY TERMINATION. (a) IN GENERAL. The Employee's employment
hereunder shall be terminated and, other than the obligations
listed in Paragraph 5(b), the Company's obligations hereunder
shall cease, including the obligation to pay compensation for any
period after the date of termination, (i) without the necessity of notice,
upon the death of the Employee, or (ii) upon written
notice of a finding by the Company's board of directors that the Employee
has (a) acted with gross negligence or willful misconduct in connection
with the performance of his duties hereunder, (b) engaged in a material
act of insubordination or of common law fraud against the Company or its
employees, or (c) acted against the best interests of the Company in a
manner that has or could have a material adverse affect on the
financial condition of the Company (any such finding is referred to
herein as "Cause"). Upon any termination of Employee's employment, the
Term of this Agreement shall expire. In the event of Employee's
death or Employee's termination of employment by the Company other than
for Cause, Employee shall be entitled to severance in an amount equal
to his then Base Salary under Paragraph 2 (the "Severance Amount"),
payable in twelve equal monthly installments. If, within eighteen
months following a the Consummation Date, (a) Employee terminates
his employment for Good Reason, or (b) the Company terminates
Employee's employment other than for Cause, the Company shall pay
the Severance Amount in a lump sum not later than ten (10) days
after the date the Company selects as Employee's last day of active
employment (the "Effective Date"), provided, however, that at
Employee's option, the Severance Amount shall be payable to Employee
in the form of equal periodic payments ("Deferred Payment")
according to the Company's regular payroll schedule or at any
other intervals elected by Employee for a period commencing on the
first regular payroll pay date beginning after the Effective Date
(the "Deferred Payment Period"). In order to receive Deferred
Payment during a Deferred Payment Period, Employee must elect
such Deferred Payment in writing and specify the Deferred Payment
Period, which may not exceed the number of months of Base Monthly
Salary payable to Employee as the Severance Amount. In the event
of Employee's death during the Deferred Payment Period, any unpaid
Deferred Payment shall be paid in a lump sum to such beneficiary
or beneficiaries designated by Employee in writing or, failing such
designation, to Employee's spouse if Employee is married or to
Employee's estate if Employee is unmarried.
(b) PAYMENTS UPON TERMINATION. Upon termination of this
Agreement for any reason, Employee shall be entitled to all compensation
and benefits earned but not yet paid up to and including the termination
date, including Base Salary, bonus and any other incentive compensation.
Unless otherwise specified in this Agreement, unused vacation shall be
treated in accordance with the policy set forth in the Employee Manual of
the Company.
(c) GOOD REASON. For purposes of this Agreement, Good Reason
shall mean, with respect to Employee, (i) the assignment to Employee of
any material duties materially inconsistent with Employee's position,
authority, duties or responsibilities immediately before the Consummation
Date, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and that is remedied by the
Company promptly after receipt of notice thereof given by Employee;
(ii) any material reduction in Employee's Base Salary, opportunity to
earn annual bonuses or other compensation or employee benefits, other
than as a result of an isolated and inadvertent action not taken in bad
faith and that is remedied by the Company promptly after receipt of
notice thereof given by Employee; (iii) the Company's requiring Employee
to relocate his principal place of business to a place that is more than
thirty-five miles from his previous principal place of business, or (iv)
any purported termination of this Agreement otherwise than as expressly
permitted by this Agreement.
(d) DISABILITY. If Employee shall become unable efficiently
to perform the essential functions of his job, even with reasonable
accommodation, as a result of a disability or illness, as such terms are
defined by the Americans with Disabilities Act, he shall be entitled to
his regular compensation until the total period of disability or illness
(whether or not continuous and whether or not the same disability or
illness) shall exceed 60 days during any calendar year in the Term
hereunder. This Agreement may thereafter be terminated by the Company
and, if such termination is not within two years of the Consummation
Date, the Company's obligations hereunder shall cease, including the
obligation to pay compensation for any period after the date of
termination. Any amounts payable as compensation during the period of
disability or illness shall be reduced by any amounts paid during such
period under any disability plan or similar insurance of the Company.
6. EMPLOYER'S AUTHORITY. Employee agrees to observe and comply
with the rules and regulations of the Company as adopted by the Company's
President or Chief Executive Officer or by the Company's board of
directors respecting the performance of his duties and to carry out and
perform orders, directions and policies communicated to him from time to
time.
7. EXPENSES. During the Term of this Agreement, the Company shall
reimburse Employee for the reasonable business expenses incurred by
Employee in the course of performing his duties for the Company hereunder
in accordance with the procedures then in place for such reimbursement.
8. AUTOMOBILE ALLOWANCE. During the Term of this Agreement,
Employee shall be entitled to an automobile allowance as specified on
Schedule A below, payable monthly in arrears.
9. NON-DISCLOSURE/NON-COMPETITION. (a) Employee has executed a
Nondisclosure Agreement of the Company. Said agreement shall survive
termination of employment hereunder.
(b) Because Employee's services to the Company are special and
because Employee has access to the Company's confidential information,
Employee covenants and agrees that if (i)(x) Employee's employment is
terminated by the Company for Cause or (y) Employee voluntarily
terminates his employment relationship hereunder with the Company other
than for Good Reason, for a period of six (6) months following the
termination of this Agreement, or (ii) Employee's employment is
terminated and Employee is receiving the Severance Amount, for the period
during which Employee is receiving such Severance Amount under Paragraph
5 hereof, whichever is applicable, he will not, directly or indirectly,
either on his own behalf or on behalf of any person, partnership,
corporation or otherwise, (a) engage in any business or undertaking in a
capacity that is directly competitive with any business (each a "Related
Business") being carried on by the Company or any Affiliate thereof at
the time of Employee's termination of employment, or (b) be employed by
or provide consulting services to or be an investor, partner, member or
shareholder in, any entity or other person in a Related Business within
25 miles of any city in which the Company or any Affiliate thereof, does
business at the time of execution of this Agreement or any other city or
community in which the Company or any Affiliate thereof, has a
transmission license at the time of termination, without the prior
written consent of the Company's board of directors. Notwithstanding the
foregoing, Employee shall be permitted to be employed by or become a
member of a law firm engaged in the private practice of law and to render
legal services in connection with such employment or membership to
clients of such law firm that are in direct competition with the Company
without violating the provisions of this Paragraph 9(b). Employee shall
at all times remain subject to the restrictions imposed upon Employee set
forth under Paragraph 9(a) above with respect to any subsequent
employment obtained by Employee following the termination of this
Agreement and the provisions of the applicable Code of Professional
Responsibility with respect to former clients. The parties agree that
the time period and geographical area of non-competition specified above
are reasonable and necessary in light of the transactions entered into in
this Agreement. If, however, it shall be determined at any time by a
court of competent jurisdiction that either the time period restriction
or the geographical area restriction, or both, are invalid or
unenforceable, the parties agree that any such restriction determined to
be invalid or unenforceable shall be deemed so amended as to make such
restriction valid and enforceable in the determination of said court, and
such restriction, as so amended, shall be enforceable between the parties
to the same extent as if such amendment had been made as of the date of
this Agreement. This subparagraph 9(b) shall survive the termination of
this Agreement.
10. EXECUTION, DELIVERY AND PERFORMANCE. To the best of Employee's
knowledge, the execution, delivery and performance by Employee of this
Agreement or any other agreement, instrument or document contemplated
herein or hereby will not result in a breach of or conflict with any
terms of any other agreement, instrument or document to which Employee is
a party or by which Employee or his property is bound. No consent or
approval of any person or entity, other than those that have been
obtained by Employee, is required for Employee to execute, deliver and
perform its obligations under this Agreement or any agreement, instrument
or document contemplated herein or hereby.
11. NOTICES. Any notice permitted or required hereunder shall be
deemed sufficient when hand-delivered or mailed by certified mail,
postage prepaid, and addressed if to the Company at the address indicated
above and if to the Employee at the address indicated below (or to such
other address as may be provided by written notice received at least five
(5) business days prior to the hand delivery or mailing of any such
notice).
12. MISCELLANEOUS. (a) This Agreement (i) constitutes the entire
agreement between the parties concerning the subjects hereof and
supersedes any and all prior agreements or understandings, (ii) may not
be assigned by Employee without the prior written consent of the Company,
and (iii) may be assigned by the Company to any Affiliate of the Company
or to the successors or assigns of the Company, provided such successors
or assigns carry on substantially the Company's telecommunications
business as conducted at the time of assignment and shall be binding
upon, and inure to the benefit of, any such Affiliate, successor or
assign.
(b) Headings herein are for convenience of reference only and
shall not define, limit or interpret the contents hereof.
(c) As used herein, the term "Affiliate" shall mean any entity
controlled by or under common control with the Company.
13. AMENDMENT. This Agreement may be amended, modified or
supplemented by the mutual consent of the parties in writing, but no oral
amendment, modification or supplement shall be effective.
14. SPECIFIC ENFORCEMENT. The parties acknowledge that the Company
would be irreparably damaged and there would be no adequate remedy at law
for the Employee's breach of Paragraph 9 of this Agreement, and
accordingly, the terms thereof shall be specifically enforced. Employee
hereby consents to the entry of any temporary restraining order or
preliminary injunction, in addition to any other remedies available at
law or in equity, to enforce the provisions hereof, provided sufficient
facts are shown to warrant such relief.
15. SEVERABILITY. The provisions of this Agreement are severable.
The invalidity of any provision shall not affect the validity of any
other provision.
16. GOVERNING LAW. This Agreement shall be construed and regulated
in all respects under the laws of the State of New York.
<PAGE>
----------------------------------------------
Schedule A
Name: Gerald Stevens-Kittner
Title: Senior Vice President - Spectrum Management
Base Salary: $180,000.00
Car Allowance: $500.00
Home Address: 4300 North 40{th} Street
Arlington, Virginia 22207
IN WITNESS WHEREOF, this Agreement is entered into as of the date
and year first above written.
<TABLE>
<CAPTION>
<S> <C>
CAI WIRELESS SYSTEMS, INC. EMPLOYEE:
By:____________________________ ____________________________
Name: James P. Ashman Name: Gerald Stevens-Kittner
Title: Executive Vice President
and Chief Financial Officer
</TABLE>
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") made as
of the Consummation Date (defined below) by and between the undersigned
employee, residing at the address indicated below (hereinafter referred
to as "Employee") and CAI WIRELESS SYSTEMS, INC., a Connecticut
corporation having its principal place of business at 18 Corporate Woods
Boulevard, Third Floor, Albany, New York 12211 (hereinafter referred to
as the "Company").
1. EMPLOYMENT. The Company hereby employs Employee and Employee
agrees to work for the Company with the title specified on Schedule A
below during the Term (as defined below) of and upon the terms and
conditions set forth in this Agreement.
2. COMPENSATION/BENEFITS. (a) BASE SALARY. During the Term of
this Agreement, the Company agrees to pay Employee the base annual salary
specified on Schedule A below ("Base Salary"). Such Base Salary shall be
reviewed no less frequently than annually during the term of this
Agreement and may be increased but not decreased by the Company's board
of directors. Such Base Salary shall be payable in accordance with the
Company's normal business practices or in such other amounts and at such
other times as the parties may mutually agree.
(b) BONUSES. During the Term of this Agreement, the Company
shall pay to the Employee an annual bonus of up to 25% of Base Salary,
based upon the Company's achievement of performance targets established
by the Company's board of directors. These targets will be revised
annually within ninety days of the beginning of each fiscal year in
consultation with the Employee. The bonus may be structured as a part of
a deferred compensation arrangement.
(c) INCENTIVE COMPENSATION. During the Term of this
Agreement, Employee shall be entitled to participate in any pooled
incentive programs established by the Company for executive employees.
(d) BENEFITS/VACATION. During the Term of this Agreement, the
Company also shall provide Employee with such other benefits, including
medical, disability, pension and severance plans, as are made generally
available to executive employees of the Company from time to time.
Employee shall be entitled to twenty-six bank days as the vacation,
personal and sick benefit during each year of the Term in accordance with
the policy set forth in the Employee Manual of the Company. Accrued
vacation may be carried over or "sold back" to the Company to the extent
permitted by, and in accordance with, the policy set forth in the
Employee Manual of the Company.
<PAGE>
(e) LIFE INSURANCE. Subject to Employee's submitting to
any required physical examinations, the Company shall purchase and
maintain in effect a term insurance policy with a face amount of
one times Employee's Base Salary or other greater amount as may be
specified in the Company's executive benefit policies or plans
on the life of Employee and shall permit Employee to designate the
beneficiary thereof.
3. SERVICES. Employee agrees to devote substantially all of his
working time, attention and energies to the business of the Company and
its Affiliates under the general direction of the board of directors
acting through its Chairman and delegated officers. Notwithstanding the
foregoing, Employee, during the Term hereof, shall be permitted to
provide consulting services for entities other than the Company provided
that the provision of such services by Employee (i) does not materially
interfere with or detract from the performance by Employee of his
obligations to the Company hereunder, (ii) is commenced only after
Employee has given the Company prior written notice of such proposed
engagement, which notice shall indicate the identity of the person for
whom Employee proposes to provide consulting services and the general
nature of the proposed engagement and, (iii) in the case of any person
that is a direct competitor of the Company at the time of the proposed
engagement and for whom Employee has not, previously during the Term
hereof, provided any consulting services, is subject to the written
consent of the Company permitting such engagement. Employee shall at all
times remain subject to the restrictions imposed upon Employee set forth
under Paragraph 9(a) below with respect to the provision of any
consulting services permitted by this Paragraph 3. Nothing herein shall
be interpreted to preclude Employee from participating as an officer or
director of, or advisor to, any charitable or other tax exempt or civic
organization.
4. TERM. The term of this Agreement (the "Term" or the "Term of
this Agreement") shall be for a period beginning on the Consummation Date
and continuing until the first anniversary of the Consummation Date, and
shall be automatically renewed annually thereafter for successive one
year periods on terms no less favorable than are contained herein unless
either party gives notice to the other of its intention not to renew this
Agreement within sixty days of the expiration of the Term of this
Agreement. The Consummation Date is the date so designated under the
Plan.
5. EARLY TERMINATION. () IN GENERAL. The Employee's employment
hereunder shall be terminated and, other than the obligations listed in
Paragraph 5(b), the Company's obligations hereunder shall cease,
including the obligation to pay compensation for any period after the
date of termination, (i) without the necessity of notice, upon the death
of the Employee, or (ii) upon written notice of a finding by the
Company's board of directors that the Employee has (a) acted with gross
negligence or willful misconduct in connection with the performance of
his duties hereunder, (b) engaged in a material act of insubordination or
of common law fraud against the Company or its employees, or (c) acted
against the best interests of the Company in a manner that has or could
have a material adverse affect on the financial condition of the Company
(any such finding is referred to herein as "Cause"). Upon any
termination of Employee's employment, the Term of this Agreement shall
expire. In the event of Employee's death or Employee's termination of
employment by the Company other than for Cause, Employee shall be
entitled to severance in an amount equal to his then Base Salary under
Paragraph 2 (the "Severance Amount"), payable in twelve equal monthly
installments. If, within eighteen months following the Consummation
Date, (a) Employee terminates his or her employment for Good Reason, or
(b) the Company terminates Employee's employment other than for Cause,
the Company shall pay the Severance Amount in a lump sum not later than
ten (10) days after the date the Company selects as Employee's last day
of active employment (the "Effective Date"), provided, however, that at
Employee's option, the Severance Amount shall be payable to Employee in
the form of equal periodic payments ("Deferred Payment") according to the
Company's regular payroll schedule or at any other intervals elected by
Employee for a period commencing on the first regular payroll pay date
beginning after the Effective Date (the "Deferred Payment Period"). In
order to receive Deferred Payment during a Deferred Payment Period,
Employee must elect such Deferred Payment in writing and specify the
Deferred Payment Period, which may not exceed the number of months of
Base Monthly Salary payable to Employee as the Severance Amount. In the
event of Employee's death during the Deferred Payment Period, any unpaid
Deferred Payment shall be paid in a lump sum to such beneficiary or
beneficiaries designated by Employee in writing or, failing such
designation, to Employee's spouse if Employee is married or to Employee's
estate if Employee is unmarried.
(b) PAYMENTS UPON TERMINATION. Upon termination of this
Agreement for any reason, Employee shall be entitled to all compensation
and benefits earned but not yet paid up to and including the termination
date, including Base Salary, bonus and any other incentive compensation.
Unless otherwise specified in this Agreement, unused vacation shall be
treated in accordance with the policy set forth in the Employee Manual of
the Company.
(c) GOOD REASON. For purposes of this Agreement, Good Reason
shall mean, with respect to Employee, (i) the assignment to Employee of
any material duties materially inconsistent with Employee's position,
authority, duties or responsibilities immediately before the Consummation
Date, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and that is remedied by the
Company promptly after receipt of notice thereof given by Employee;
(ii) any material reduction in Employees Base Salary, opportunity to earn
annual bonuses or other compensation or employee benefits, other than as
a result of an isolated and inadvertent action not taken in bad faith and
that is remedied by the Company promptly after receipt of notice thereof
given by Employee; (iii) the Company's requiring Employee to relocate his
or her principal place of business to a place that is more than thirty-
five miles from his or her previous principal place of business, or (iv)
any purported termination of this Agreement otherwise than as expressly
permitted by this Agreement.
(d) DISABILITY. If Employee shall become unable efficiently
to perform the essential functions of his job, even with reasonable
accommodation, as a result of a disability or illness, as such terms are
defined by the Americans with Disabilities Act, he shall be entitled to
his regular compensation until the total period of disability or illness
(whether or not continuous and whether or not the same disability or
illness) shall exceed 60 days during any calendar year in the Term
hereunder. This Agreement may thereafter be terminated by the Company
and, if such termination is not within two years of the Consummation
Date, the Company's obligations hereunder shall cease, including the
obligation to pay compensation for any period after the date of
termination. Any amounts payable as compensation during the period of
disability or illness shall be reduced by any amounts paid during such
period under any disability plan or similar insurance of the Company.
6. EMPLOYER'S AUTHORITY. Employee agrees to observe and comply
with the rules and regulations of the Company as adopted by the Company's
President or Chief Executive Officer or by the Company's board of
directors respecting the performance of his duties and to carry out and
perform orders, directions and policies communicated to him from time to
time.
7. EXPENSES. During the Term of this Agreement, the Company shall
reimburse Employee for the reasonable business expenses incurred by
Employee in the course of performing his duties for the Company hereunder
in accordance with the procedures then in place for such reimbursement.
8. AUTOMOBILE ALLOWANCE. During the Term of this Agreement,
Employee shall be entitled to an automobile allowance as specified on
Schedule A below, payable monthly in arrears.
9. NON-DISCLOSURE/NON-COMPETITION. (a) Employee has executed a
Nondisclosure Agreement of the Company. Said agreement shall survive
termination of employment hereunder.
(b) Because Employee's services to the Company are special and
because Employee has access to the Company's confidential information,
Employee covenants and agrees that if (i)(x) Employee's employment is
terminated by the Company for Cause or (y) Employee voluntarily
terminates his employment relationship hereunder with the Company other
than for Good Reason, for a period of six (6) months following the
termination of this Agreement, or (ii) Employee's employment is
terminated and Employee is receiving the Severance Amount, for the period
during which Employee is receiving such Severance Amount under Paragraph
5 hereof, whichever is applicable, he will not, directly or indirectly,
either on his own behalf or on behalf of any person, partnership,
corporation or otherwise, (a) engage in any business or undertaking in a
capacity that is directly competitive with any business (each a "Related
Business") being carried on by the Company or any Affiliate thereof at
the time of Employee's termination of employment, or (b) be employed by
or provide consulting services to or be an investor, partner, member or
shareholder in, any entity or other person in a Related Business within
25 miles of any city in which the Company or any Affiliate thereof, does
business at time of execution or any other city or community in which the
Company or any Affiliate thereof, has a transmission license at the time
of termination, without the prior written consent of the Company's board
of directors; provided, however, that Employee shall be permitted to
provide or continue to provide consulting services to any person for whom
Employee provided consulting services during the Term hereof in
accordance with the terms of Paragraph 3 above. The parties agree that
the time period and geographical area of non-competition specified above
are reasonable and necessary in light of the transactions entered into in
this Agreement. If, however, it shall be determined at any time by a
court of competent jurisdiction that either the time period restriction
or the geographical area restriction, or both, are invalid or
unenforceable, the parties agree that any such restriction determined to
be invalid or unenforceable shall be deemed so amended as to make such
restriction valid and enforceable in the determination of said court, and
such restriction, as so amended, shall be enforceable between the parties
to the same extent as if such amendment had been made as of the date of
this Agreement. This subparagraph 9(b) shall survive the termination of
this Agreement.
10. EXECUTION, DELIVERY AND PERFORMANCE. To the best of Employee's
knowledge, the execution, delivery and performance by Employee of this
Agreement or any other agreement, instrument or document contemplated
herein or hereby will not result in a breach of or conflict with any
terms of any other agreement, instrument or document to which Employee is
a party or by which Employee or his property is bound. No consent or
approval of any person or entity, other than those that have been
obtained by Employee, is required for Employee to execute, deliver and
perform its obligations under this Agreement or any agreement, instrument
or document contemplated herein or hereby.
11. NOTICES. Any notice permitted or required hereunder shall be
deemed sufficient when hand-delivered or mailed by certified mail,
postage prepaid, and addressed if to the Company at the address indicated
above and if to the Employee at the address indicated below (or to such
other address as may be provided by written notice received at least five
(5) business days prior to the hand delivery or mailing of any such
notice).
12. MISCELLANEOUS. (a) This Agreement (i) constitutes the entire
agreement between the parties concerning the subjects hereof and
supersedes any and all prior agreements or understandings, (ii) may not
be assigned by Employee without the prior written consent of the Company,
and (iii) may be assigned by the Company to any Affiliate of the Company
or to the successors or assigns of the Company, provided such successors
or assigns carry on substantially the Company's telecommunications
business as conducted at the time of assignment and shall be binding
upon, and inure to the benefit of, any such Affiliate, successor or
assign.
(b) Headings herein are for convenience of reference only and
shall not define, limit or interpret the contents hereof.
(c) As used herein, the term "Affiliate" shall mean any entity
controlled by or under common control with the Company.
13. AMENDMENT. This Agreement may be amended, modified or
supplemented by the mutual consent of the parties in writing, but no oral
amendment, modification or supplement shall be effective.
14. SPECIFIC ENFORCEMENT. The parties acknowledge that the Company
would be irreparably damaged and there would be no adequate remedy at law
for the Employee's breach of Paragraph 9 of this Agreement, and
accordingly, the terms thereof shall be specifically enforced. Employee
hereby consents to the entry of any temporary restraining order or
preliminary injunction, in addition to any other remedies available at
law or in equity, to enforce the provisions hereof, provided sufficient
facts are shown to warrant such relief.
15. SEVERABILITY. The provisions of this Agreement are severable.
The invalidity of any provision shall not affect the validity of any
other provision.
16. GOVERNING LAW. This Agreement shall be construed and regulated
in all respects under the laws of the State of New York.
----------------------------------------------
SCHEDULE A
Name: Bruce W. Kostreski
Title: Senior Vice President and Chief Technical
Officer
Base Salary: $180,000.00
Car Allowance: $500.00
Home Address: 11507 Orebaugh Avenue
Wheaton, MD 20902
IN WITNESS WHEREOF, this Agreement is entered into as of the date
and year first above written.
CAI WIRELESS SYSTEMS, INC. EMPLOYEE:
By: _______________________ ____________________________
Name: James P. Ashman Name: Bruce Kostreski
Title: Executive Vice President
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") made as
of the Consummation Date (defined below) by and between the undersigned
employee, residing at the address indicated below (hereinafter referred
to as "Employee") and CAI WIRELESS SYSTEMS, INC., a Connecticut
corporation having its principal place of business at 18 Corporate Woods
Boulevard, Third Floor, Albany, New York 12211 (hereinafter referred to
as the "Company").
1. EMPLOYMENT. The Company hereby employs Employee and Employee
agrees to work for the Company with the title specified on Schedule A
below during the Term (as defined below) of and upon the terms and
conditions set forth in this Agreement.
2. COMPENSATION/BENEFITS. (a) BASE SALARY. During the Term of
this Agreement, the Company agrees to pay Employee the base annual salary
specified on Schedule A below ("Base Salary"). Such Base Salary shall be
reviewed no less frequently than annually during the term of this
Agreement and may be increased but not decreased by the Company=s board
of directors. Such Base Salary shall be payable in accordance with the
Company's normal business practices or in such other amounts and at such
other times as the parties may mutually agree.
(b) BONUSES. During the Term of this Agreement, the Company
shall pay to the Employee an annual bonus of up to 25% of Base Salary,
based upon the Company's achievement of performance targets established
by the Company's board of directors. These targets will be revised
annually within ninety days of the beginning of each fiscal year in
consultation with the Employee. The bonus may be structured as a part of
a deferred compensation arrangement.
(c) INCENTIVE COMPENSATION. During the Term of this
Agreement, Employee shall be entitled to participate in any pooled
incentive programs established by the Company for executive employees.
(d) BENEFITS/VACATION. During the Term of this Agreement, the
Company also shall provide Employee with such other benefits, including
medical, disability, pension and severance plans, as are made generally
available to executive employees of the Company from time to time.
Employee shall be entitled to twenty-six bank days as the vacation,
personal and sick benefit during each year of the Term in accordance with
the policy set forth in the Employee Manual of the Company. Accrued
vacation may be carried over or "sold back" to the Company to the extent
permitted by, and in accordance with, the policy set forth in the
Employee Manual of the Company.
<PAGE>
(e) LIFE INSURANCE. Subject to Employee's submitting to
any required physical examinations, the Company shall purchase and
maintain in effect a term insurance policy with a face amount of one
times Employee's Base Salary or other greater amount as may be specified
in the Company's executive benefit policies or plans on the life of
Employee and shall permit Employee to designate the beneficiary thereof.
3. SERVICES. Employee agrees to devote substantially all of his
working time, attention and energies to the business of the Company and
its Affiliates under the general direction of the board of directors
acting through its Chairman and delegated officers. Nothing herein shall
be interpreted to preclude Employee from participating as an officer or
director of, or advisor to, any charitable or other tax exempt or civic
organization.
4. TERM. The term of this Agreement (the "Term" or the "Term of
this Agreement") shall be for a period beginning on the Consummation Date
and continuing until the first anniversary of the Consummation Date, and
shall be automatically renewed annually thereafter for successive one
year periods on terms no less favorable than are contained herein unless
either party gives notice to the other of its intention not to renew this
Agreement within sixty days of the expiration of the Term of this
Agreement. The Consummation Date is the date so designated under the
Plan.
5. EARLY TERMINATION. (a) IN GENERAL. The Employee's employment
hereunder shall be terminated and, other than the obligations listed in
Paragraph 5(b), the Company's obligations hereunder shall cease,
including the obligation to pay compensation for any period after the
date of termination, (i) without the necessity of notice, upon the death
of the Employee, or (ii) upon written notice of a finding by the
Company's board of directors that the Employee has (a) acted with gross
negligence or willful misconduct in connection with the performance of
his duties hereunder, (b) engaged in a material act of insubordination or
of common law fraud against the Company or its employees, or (c) acted
against the best interests of the Company in a manner that has or could
have a material adverse affect on the financial condition of the Company
(any such finding is referred to herein as "Cause"). Upon any
termination of Employee's employment, the Term of this Agreement shall
expire. In the event of Employee's death or Employee's termination of
employment by the Company other than for Cause, Employee shall be
entitled to severance in an amount equal to his then Base Salary under
Paragraph 2 (the "Severance Amount"), payable in twelve equal monthly
installments. If, within eighteen months following the Consummation
Date, (a) Employee terminates his employment for Good Reason, or (b) the
Company terminates Employee's employment other than for Cause, the
Company shall pay the Severance Amount in a lump sum not later than ten
(10) days after the date the Company selects as Employee's last day of
active employment (the "Effective Date"), provided, however, that at
Employee's option, the Severance Amount shall be payable to Employee in
the form of equal periodic payments ("Deferred Payment") according to the
Company's regular payroll schedule or at any other intervals elected by
Employee for a period commencing on the first regular payroll pay date
beginning after the Effective Date (the "Deferred Payment Period"). In
order to receive Deferred Payment during a Deferred Payment Period,
Employee must elect such Deferred Payment in writing and specify the
Deferred Payment Period, which may not exceed the number of months of
Base Monthly Salary payable to Employee as the Severance Amount. In the
event of Employees death during the Deferred Payment Period, any unpaid
Deferred Payment shall be paid in a lump sum to such beneficiary or
beneficiaries designated by Employee in writing or, failing such
designation, to Employee's spouse if Employee is married or to Employee's
estate if Employee is unmarried.
(b) PAYMENTS UPON TERMINATION. Upon termination of this
Agreement for any reason, Employee shall be entitled to all compensation
and benefits earned but not yet paid up to and including the termination
date, including Base Salary, bonus and any other incentive compensation.
Unless otherwise specified in this Agreement, unused vacation shall be
treated in accordance with the policy set forth in the Employee Manual of
the Company.
(c) GOOD REASON. For purposes of this Agreement, Good Reason
shall mean, with respect to Employee, (i) the assignment to Employee of
any material duties materially inconsistent with Employee's position,
authority, duties or responsibilities immediately before the Consummation
Date, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and that is remedied by the
Company promptly after receipt of notice thereof given by Employee;
(ii) any material reduction in Employee's Base Salary, opportunity to
earn annual bonuses or other compensation or employee benefits, other
than as a result of an isolated and inadvertent action not taken in bad
faith and that is remedied by the Company promptly after receipt of
notice thereof given by Employee; (iii) the Company's requiring Employee
to relocate his principal place of business to a place that is more than
thirty-five miles from his previous principal place of business, or (iv)
any purported termination of this Agreement otherwise than as expressly
permitted by this Agreement.
(d) DISABILITY. If Employee shall become unable efficiently
to perform the essential functions of his job, even with reasonable
accommodation, as a result of a disability or illness, as such terms are
defined by the Americans with Disabilities Act, he shall be entitled to
his regular compensation until the total period of disability or illness
(whether or not continuous and whether or not the same disability or
illness) shall exceed 60 days during any calendar year in the Term
hereunder. This Agreement may thereafter be terminated by the Company
and, if such termination is not within two years of the Consummation
Date, the Company's obligations hereunder shall cease, including the
obligation to pay compensation for any period after the date of
termination. Any amounts payable as compensation during the period of
disability or illness shall be reduced by any amounts paid during such
period under any disability plan or similar insurance of the Company.
6. EMPLOYER'S AUTHORITY. Employee agrees to observe and comply
with the rules and regulations of the Company as adopted by the Company's
President or Chief Executive Officer or by the Company's board of directors
respecting the performance of his duties and to carry out and
perform orders, directions and policies communicated to him from time to time.
7. EXPENSES. During the Term of this Agreement, the Company shall
reimburse Employee for the reasonable business expenses incurred by
Employee in the course of performing his duties for the Company hereunder
in accordance with the procedures then in place for such reimbursement.
8. AUTOMOBILE ALLOWANCE. During the Term of this Agreement,
Employee shall be entitled to an automobile allowance as specified on
Schedule A below, payable monthly in arrears.
9. NON-DISCLOSURE NON-COMPETITION. (a) Employee has executed a
Nondisclosure Agreement of the Company. Said agreement shall survive
termination of employment hereunder.
(b) Because Employee's services to the Company are special and
because Employee has access to the Company's confidential information,
Employee covenants and agrees that if (i)(x) Employee's employment is
terminated by the Company for Cause or (y) Employee voluntarily
terminates his employment relationship hereunder with the Company other
than for Good Reason, for a period of six (6) months following the
termination of this Agreement, or (ii) Employee's employment is
terminated and Employee is receiving the Severance Amount, for the period
during which Employee is receiving such Severance Amount under Paragraph
5 hereof, whichever is applicable, he will not, directly or indirectly,
either on his own behalf or on behalf of any person, partnership,
corporation or otherwise, (a) engage in any business or undertaking in a
capacity that is directly competitive with any business (each a "Related
Business") being carried on by the Company or any Affiliate thereof at
the time of Employee's termination of employment, or (b) be employed by
or provide consulting services to or be an investor, partner, member or
shareholder in, any entity or other person in a Related Business within
25 miles of any city in which the Company or any Affiliate thereof, does
business at time of execution or any other city or community in which the
Company or any Affiliate thereof, has a transmission license at the time
of termination, without the prior written consent of the Company's board
of directors. The parties agree that the time period and geographical
area of non-competition specified above are reasonable and necessary in
light of the transactions entered into in this Agreement. If, however,
it shall be determined at any time by a court of competent jurisdiction
that either the time period restriction or the geographical area
restriction, or both, are invalid or unenforceable, the parties agree
that any such restriction determined to be invalid or unenforceable shall
be deemed so amended as to make such restriction valid and enforceable in
the determination of said court, and such restriction, as so amended,
shall be enforceable between the parties to the same extent as if such
amendment had been made as of the date of this Agreement. This
subparagraph 9(b) shall survive the termination of this Agreement.
10. EXECUTION, DELIVERY AND PERFORMANCE. To the best of Employee's
knowledge, the execution, delivery and performance by Employee of this
Agreement or any other agreement, instrument or document contemplated
herein or hereby will not result in a breach of or conflict with any
terms of any other agreement, instrument or document to which Employee is
a party or by which Employee or his property is bound. No consent or
approval of any person or entity, other than those that have been
obtained by Employee, is required for Employee to execute, deliver and
perform its obligations under this Agreement or any agreement, instrument
or document contemplated herein or hereby.
11. NOTICES. Any notice permitted or required hereunder shall be
deemed sufficient when hand-delivered or mailed by certified mail,
postage prepaid, and addressed if to the Company at the address indicated
above and if to the Employee at the address indicated below (or to such
other address as may be provided by written notice received at least five
(5) business days prior to the hand delivery or mailing of any such
notice).
12. MISCELLANEOUS. (a) This Agreement (i) constitutes the entire
agreement between the parties concerning the subjects hereof and
supersedes any and all prior agreements or understandings, (ii) may not
be assigned by Employee without the prior written consent of the Company,
and (iii) may be assigned by the Company to any Affiliate of the Company
or to the successors or assigns of the Company, provided such successors
or assigns carry on substantially the Company's telecommunications
business as conducted at the time of assignment and shall be binding
upon, and inure to the benefit of, any such Affiliate, successor or
assign.
(b) Headings herein are for convenience of reference only and
shall not define, limit or interpret the contents hereof.
(c) As used herein, the term "Affiliate" shall mean any entity
controlled by or under common control with the Company.
13. AMENDMENT. This Agreement may be amended, modified or
supplemented by the mutual consent of the parties in writing, but no oral
amendment, modification or supplement shall be effective.
14. SPECIFIC ENFORCEMENT. The parties acknowledge that the Company
would be irreparably damaged and there would be no adequate remedy at law
for the Employee's breach of Paragraph 9 of this Agreement, and
accordingly, the terms thereof shall be specifically enforced. Employee
hereby consents to the entry of any temporary restraining order or
preliminary injunction, in addition to any other remedies available at
law or in equity, to enforce the provisions hereof, provided sufficient
facts are shown to warrant such relief.
15. SEVERABILITY. The provisions of this Agreement are severable.
The invalidity of any provision shall not affect the validity of any
other provision.
16. GOVERNING LAW. This Agreement shall be construed and regulated
in all respects under the laws of the State of New York.
---------------------------------------------
Schedule A
Name: Derwood Edge
Title: Chief Systems Officer
Base Salary: $140,000.00
Car Allowance: $500.00
Home Address: 1617 Dey Cove Drive
Virginia Beach, Virginia 23454
IN WITNESS WHEREOF, this Agreement is entered into as of the date
and year first above written.
CAI WIRELESS SYSTEMS, INC. EMPLOYEE:
By:_____________________________ _______________________
Name: James P. Ashman Name: Derwood Edge
Title: Executive Vice President
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES
FINANCIAL DATA SCHEDULE
AS OF AND FOR THE NINE MONTHS ENDED DECEMBER 31, 1998
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 21,078,515
<SECURITIES> 0
<RECEIVABLES> 741,722
<ALLOWANCES> 284,954
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 85,627,391
<DEPRECIATION> 47,380,410
<TOTAL-ASSETS> 288,492,366
<CURRENT-LIABILITIES> 0
<BONDS> 106,456,285
0
0
<COMMON> 172,414
<OTHER-SE> 87,442,387
<TOTAL-LIABILITY-AND-EQUITY> 288,492,366
<SALES> 0
<TOTAL-REVENUES> 14,972,024
<CGS> 0
<TOTAL-COSTS> 48,381,425
<OTHER-EXPENSES> 46,219,019
<LOSS-PROVISION> 159,300
<INTEREST-EXPENSE> 30,282,932
<INCOME-PRETAX> (105,928,285)
<INCOME-TAX> 0
<INCOME-CONTINUING> (105,928,285)
<DISCONTINUED> 0
<EXTRAORDINARY> 204,345,447
<CHANGES> 0
<NET-INCOME> 98,417,162
<EPS-PRIMARY> (0.97)
<EPS-DILUTED> (0.97)
</TABLE>
