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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of report: July 29, 1996
(Date of earliest event reported)
WIRELESS ONE, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
0-26836 72-1300837
(Commission File Number) (I.R.S. Employer Identification No.)
11301 Industriplex Boulevard
Suite 4
Baton Rouge, Louisiana 70809-4115
(504) 293-5000
(Address of Principal Executive Offices, Including Zip Code, and
Registrant's Telephone Number, Including Area Code)
Exhibit Index on page 5
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) Description of Acquisition
On July 29, 1996, pursuant to the Agreement and Plan of Merger dated as of
April 25, 1996 among TruVision Wireless, Inc. ("TruVision"), Wireless One
MergerSub, Inc. ("MergerSub") and Wireless One, Inc. (the "Company"), as amended
by the First Amendment to the Agreement and Plan of Merger dated as of July 29,
1996 (the "Merger Agreement"), the Company acquired all of the outstanding
capital stock of TruVision through the merger (the "Merger") of MergerSub, a
wholly owned subsidiary of the Company, with TruVision.
Pursuant to the Merger Agreement, on July 29, 1996, the Company issued
3,262,945 shares of Common Stock, of which 2,856,490 were issued to the
TruVision stockholders, and 406,455 were placed in escrow. Based on closing
market price of the Company's Common Stock as of July 9, 1996, the total value
of the shares of Common Stock issued to the TruVision stockholders and those
placed in escrow was $57,917,274. In connection with the Merger, the Company
also issued to Vision Communications, Inc. ("VCI") 180,000 shares of Common
Stock and paid to VCI $1.8 million in cash, in each case in satisfaction of
certain obligations of TruVision.
In addition to the information contained herein, a more detailed
description of the Merger from the Company's Schedule 14A filed with the SEC on
July 13, 1996 relating to the Annual Meeting Of Stockholders on July 26, 1996
(the "Schedule 14A") is incorporated by reference.
(b) Physical Properties
The transaction described above included the acquisition of TruVision's
transmission equipment, including transmitting antennae and low power repeaters,
as well as TruVision's existing inventory of subscriber equipment, including
set-top converters and integrated down converters. The Company intends to
continue to use this equipment for the operation of wireless cable television
systems.
The Company also acquired TruVision's existing leasehold interests in
certain properties. The Company acquired a lease of approximately 10,400 square
feet which TruVision used for its centralized administrative offices and
regional offices in Jackson, Mississippi, which lease expires on April 30, 1998.
In addition, the Company acquired TruVision's leases of office space of
approximately 10,000 square feet in Indianola, Mississippi (expiring on March
30, 2000), 7,300 square feet in Biloxi, Mississippi (expiring on November 30,
2000), 3,500 square feet in Meadville, Mississippi (expiring on December 15,
1996, plus an extension not to exceed 30 months), 9,400 square feet in Oxford,
Mississippi (expiring on June 10, 2001, plus a five year extension), and 6,000
square feet in Demopolis, Alabama (expiring on April 1, 2001). The Company also
acquired TruVision's lease of approximately 4,400 square feet which TruVision
used for its executive offices in Jackson, Mississippi, which lease expires on
January 31, 2001. In addition to office space, the Company acquired TruVision's
leasehold interests in space which it used for its transmitters, related
buildings, and transmission towers. The Company intends to continue to use
these properties as described above.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired:
i) Incorporated by reference from the Schedule 14A.
(b) Pro forma financial information:
i) Incorporated by reference from the Schedule 14A.
(c) Exhibits
2.1 Agreement and Plan of Merger dated as of April 25, 1996 among
TruVision, MergerSub, and the Company
2.2 First Amendment to the Agreement and Plan of Merger dated as
of July 29, 1996
10.1 Amended and Restated Stockholders Agreement dated as of July
29, 1996, among CVCA, the TruVision Stockholders, Hans
Sternberg, Sean Reilly, the Wireless One Stockholders, CMCC,
Baseball Partners ("Baseball"), Heartland Wireless
Communications, Inc., on behalf of itself and each of its
subsidiaries which holds Common Stock (the "Heartland
Subsidiaries"), and the Company
10.2 Amended and Restated Registration Agreement dated as of July
29, 1996, among CVCA, CMCC, Baseball, the TruVision
Stockholders, the Heartland Subsidiaries, Premier Venture
Capital Corporation, as the representative of the holders of
Wireless One Registrable Securities, and the Company
20.1 Schedule 14A
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
WIRELESS ONE, INC.
By: /s/ Sean Reilly
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Name: Sean Reilly
Title: Chief Executive Officer
Dated: August 13, 1996
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EXHIBIT INDEX
Exhibit No. Document
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2.1 Agreement and Plan of Merger dated as of April 25, 1996 among
TruVision, MergerSub, and the Company (incorporated by
reference to the Company's Schedule 14A filed with the SEC on
July 13, 1996 relating to the Annual Meeting Of Stockholders on
July 26, 1996)
2.2 First Amendment to the Agreement and Plan of Merger dated as of
July 29, 1996 (incorporated by reference to the Company's
Registration Statement on Form S-1 filed on June 4, 1996
(Registration Number 333-5109))
10.6 Amended and Restated Stockholders Agreement dated as of July
29, 1996, among CVCA, the TruVision Stockholders, Hans
Sternberg, Sean Reilly, the Wireless One Stockholders, CMCC,
Baseball Partners ("Baseball"), Heartland Wireless
Communications, Inc., on behalf of itself and each of its
subsidiaries which holds Common Stock (the "Heartland
Subsidiaries"), and the Company (incorporated by reference to
the Company's Registration Statement on Form S-1 filed on June
4, 1996 (Registration Number 333-5109))
10.7 Amended and Restated Registration Agreement dated as of July
29, 1996, among CVCA, CMCC, Baseball, the TruVision
Stockholders, the Heartland Subsidiaries, Premier Venture
Capital Corporation, as the representative of the holders of
Wireless One Registrable Securities, and the Company
(incorporated by reference to the Company's Registration
Statement on Form S-1 filed on June 4, 1996 (Registration
Number 333-5109))
20.1 Schedule 14A filed with the SEC on July 13, 1996 relating to
the Annual Meeting Of Stockholders on July 26, 1996
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF APRIL 25, 1996
AMONG
TRUVISION WIRELESS, INC.
(A DELAWARE CORPORATION)
AND
WIRELESS ONE MERGERSUB, INC.
(A DELAWARE CORPORATION)
AND
WIRELESS ONE, INC.
(A DELAWARE CORPORATION)
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), is made and entered
into as of the 25th day of April, 1996, by and among TRUVISION WIRELESS, INC., a
Delaware corporation ("TWI"), WIRELESS ONE MERGERSUB, INC., a Delaware
corporation ("MergerSub") and WIRELESS ONE, INC., a Delaware corporation
("WOI").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of TWI, MergerSub and WOI have
approved the merger of MergerSub with and into TWI pursuant and subject to the
terms and conditions of this Agreement (the "Merger"), whereby each issued and
outstanding share of common stock, par value $0.01 per share, of TWI at the
Effective Time ("TWI Common Share") will be converted into the right to receive
the Per-Share Portion of the Conversion Amount for such TWI Common Share; and
WHEREAS, TWI, MergerSub and WOI contemplate that the Merger will be
classified as a tax-free reorganization pursuant to Section 368(a)(i)(B) of the
Code; and
WHEREAS, TWI, MergerSub and WOI desire to make certain representations,
warranties and agreements in connection with the Merger and also to set forth
the various conditions to the Merger; and
WHEREAS, the respective Boards of Directors of TWI, MergerSub and WOI have
adopted resolutions approving this Agreement; and
WHEREAS, the terms used in this Agreement shall have the meanings
respectively ascribed to them in Article 11.1 hereof.
NOW, THEREFORE, the parties hereto hereby adopt the above recitals and
agree as follows:
ARTICLE 1. THE MERGER
1.1 THE MERGER. At the Effective Time, MergerSub will merge with and
into TWI in accordance with the terms and conditions of this Agreement. TWI
shall be the corporation surviving the Merger (the "Surviving Corporation") and
shall continue to be governed by the laws of the State of Delaware. The Merger
shall have the effects specified under the Delaware General Corporation Law
("DGCL").
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1.2 EFFECT OF THE MERGER.
(A) EFFECTIVE TIME. At the Effective Time, subject in all instances
to each of the terms, conditions, provisions and limitations contained in this
Agreement, (i) MergerSub will merge with and into TWI by the filing with the
Secretary of the State of Delaware of a Certificate of Merger; (ii) each TWI
Common Share outstanding at the Effective Time, by said occurrence and with no
further action on the part of the holder thereof, shall be transformed and
converted into the right to receive, upon surrender of the certificate for such
TWI Common Share, the Per-Share Portion of the Merger Shares for such TWI Common
Share without interest or any similar payment thereon or with respect thereto;
(iii) each share of common stock of MergerSub outstanding prior to the Merger
will, by said occurrence and with no further action on the part of the holder
thereof, be transformed and converted into one share of common stock of the
Surviving Corporation, so that thereafter WOI will be the sole and exclusive
owner of all equity securities of the Surviving Corporation; and (iv) the
Surviving Corporation shall be the owner of all of the business, assets, rights
and other attributes thereto of, or held by, either TWI or MergerSub.
(B) MERGER SHARES. On the Closing Date, the Outstanding TWI Shares,
in the aggregate, shall be converted into the right to receive the number of WOI
Common Shares equal to the "Merger Shares," which shall consist of the aggregate
of (i) the Non-Contingent Amount, (ii) upon the expiration of the General Escrow
Period, the General Contingent Amount, (iii) if the Gadsden Acquisition has not
been consummated prior to the Effective Time, then the Gadsden Contingent
Amount, if and when the Gadsden Acquisition is consummated and the Market
Delivery Requirement is satisfied with respect to the Gadsden, Alabama market,
(iv) if the Huntsville Acquisition has not been consummated prior to the
Effective Time, the Huntsville Contingent Amount, if and when the Huntsville
Acquisition is consummated and the Market Delivery Requirement is satisfied with
respect to the Huntsville, Alabama market, (v) if the Jackson Acquisition has
not been consummated prior to the Effective Time, then the Jackson Contingent
Amount, if and when the Jackson Acquisition is consummated and the Market
Delivery Requirement is satisfied with respect to the Jackson, Tennessee market,
(vi) if the Memphis Acquisition has not been consummated prior to the Effective
Time, then the Memphis Contingent Amount, if and when the Memphis Acquisition is
consummated and the Market Delivery Requirement is satisfied with respect to the
Memphis, Tennessee Market, and (vii) as and when additional WOI Common Shares
become issuable pursuant to Section 10.3, the WOI Contingent Amount. As used
herein:
(A) the "General Contingent Amount" shall mean 168,667 WOI Common
Shares, subject to reduction as provided herein and in accordance with the terms
of the General Escrow Agreement;
(B) if the Gadsden Acquisition is consummated prior to the Effective
Time, then the "Gadsden Contingent Amount" shall mean zero (0) WOI Common
Shares,
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and if the Gadsden Acquisition is not consummated prior to the Effective Time,
then the "Gadsden Contingent Amount" shall mean 258,793 WOI Common Shares;
(C) if the Huntsville Acquisition is consummated prior to the
Effective Time, then the "Huntsville Contingent Amount" shall mean zero (0) WOI
Common Shares, and if the Huntsville Acquisition is not consummated prior to the
Effective Time, then the "Huntsville Contingent Amount" shall mean 121,447 WOI
Common Shares;
(D) if the Jackson Acquisition is consummated prior to the Effective
Time, then the "Jackson Contingent Amount" shall mean zero (0) WOI Common
Shares, and if the Jackson Acquisition is not consummated prior to the Effective
Time, then the "Jackson Contingent Amount" shall mean 36,633 WOI Common Shares;
(E) if the Memphis Acquisition is consummated prior to the Effective
Time, then the "Memphis Contingent Amount" shall mean zero (0) WOI Common
Shares, and if the Memphis Acquisition is not consummated prior to the Effective
Time, then the "Memphis Contingent Amount" shall mean 731,167 WOI Common Shares;
(F) the "Non-Contingent Amount" shall mean (1) the number of Base
Shares, reduced by (2) 168,667, and further reduced by (3) the aggregate of the
Acquisition Contingent Amounts;
(G) the "Acquisition Contingent Amounts" means the Gadsden Contingent
Amount, the Huntsville Contingent Amount, the Jackson Contingent Amount and the
Memphis Contingent Amount;
(H) the "Market Delivery Requirement" shall be deemed to have been
satisfied with respect to any Market at the time in question if, at such time,
at least 12 Channels licensed by the FCC to, or leased to, TWI or any of its
Subsidiaries in such Market are both Granted Channels and Good Channels;
(I) A "Granted Channel" means a Channel authorized by conditional
license, license or construction authorization (in each case, other than a STA,
experimental or developmental authorization) which is in full force and effect,
validly issued, not subject to a pending revocation proceeding, not in jeopardy
of cancellation under FCC Rule 21.303 for removal of equipment, and not subject
to forfeiture for any failure to meet a condition of the instrument; and
(J) A "Good Channel" means a Channel as to which at the time in
question (1) if such Channel has been authorized pursuant to a construction
authorization, either the last date for construction printed on such
construction authorization has not occurred or such Channel is the subject of a
pending application for the extension of such last date which was filed prior to
such last date, (2) each Consent, if any, which is required
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with respect to such Channel (including under the related TWI Channel Lease, if
any) has been obtained and is in effect, (3) if such Channel is the subject of a
TWI Channel Lease, then such Channel Lease is in full force and effect, such TWI
Channel Lease is not subject to termination at the option of the TWI Lessor, and
no party to such TWI Channel Lease is in default or breach in any material
respect under such Channel Lease, (4) if such Channel is an MDS Channel, then
TWI or a Subsidiary of TWI has full-time use of the capacity of such Channel,
and (5) in the case of a Channel which is the subject of a Specified
Acquisition, such Specified Acquisition has been consummated and there have been
obtained all consents, approvals, authorizations and waivers of any public,
government or regulatory body, authority, agency or unit and any and all
consents, approvals, authorizations and waivers from parties to any contract or
agreement related thereto or any other person that are required for the lawful
consummation of such Specified Acquisition or are necessary for TWI and its
Subsidiaries to conduct their operations with respect to such Channel after the
consummation of such Specified Acquisition.
Notwithstanding the foregoing, if at the Effective Time the Market Delivery
Requirement has not been satisfied with respect to any Owned Market (a "Non-
Delivery Market"), then there shall be withheld from the Non-Contingent Amount a
number of WOI Common Shares which is equal to the number of shares specified on
the attached Exhibit 1.2(b) for such Owned Market (the "Market Delivery
Contingent Shares" for such Owned Market). The Market Delivery Contingent
Shares for any Non-Delivery Market shall be restored to the Non-Contingent
Amount if and when, after the Effective Time, the Market Delivery Requirement is
satisfied with respect to such Non-Delivery Market.
Except as set forth in Section 7.3(d), the fact that any Channel or Channels are
not Granted Channels or Good Channels shall not (i) constitute a breach of any
representation, warranty, covenant or agreement set forth herein or failure of
any condition set forth herein to be satisfied, (ii) be considered in
determining whether or not there has been a Material Adverse Effect with respect
to TWI or (iii) constitute the basis or part of the basis for any right of WOI
not to proceed with the Closing.
The respective quantities of WOI Common Shares which constitute the General
Contingent Amount, the Gadsden Contingent Amount, the Huntsville Contingent
Amount, the Jackson Contingent Amount, the Memphis Contingent Amount and any
Market Delivery Contingent Amount will be (x) proportionately increased to
reflect any stock dividend, stock split or other subdivision of the WOI Common
Shares effected after the date of this Agreement and prior to the Effective
Time, and (y) proportionately decreased to reflect any reverse stock split or
other combination of the WOI Common Shares which is effected after the date of
this Agreement and prior to the Effective Time.
(C) BASE SHARES; ADJUSTMENTS. As used herein, the "Base Shares" means
the number of WOI Common Shares equal to the Aggregate Initial Share Amount
minus the Adjustment Shares, and the "Adjustment Shares" means the number of WOI
Common Shares,
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equal to the Adjustment Amount divided by the Exchange Price. As used herein,
the term "Adjustment Amount" means
(i) the product of (A) 14,200 minus the number of Bona Fide
Subscribers in the Existing Markets on March 31, 1996 multiplied by (B) $1,275;
plus
(ii) the amount of the Net GAAP Debt as of March 31, 1996 in excess of
the amount of the Permitted Net GAAP Debt; plus
(iii) the excess of the aggregate amount of all Prior Offering
Expenses over $1,000,000; plus
(iv) the aggregate amount of any payments to TWI's officers,
directors, employees or any of TWI's or their Affiliates in violation of the
terms of this Agreement; and
(v) the aggregate amount of any payments made or required to be made
pursuant to the terms of all TWI Channel Leases by reason of the Merger (other
than the acceleration of any scheduled amount which would otherwise be payable
pursuant to any TWI Channel Lease) in excess of $60,000.
(D) OUTSTANDING TWI SHARES. As used herein, the "Outstanding TWI
Shares" means the TWI Common Shares which are outstanding immediately prior to
the Effective Time.
(E) CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION. The
certificate of incorporation of the Surviving Corporation shall be the
certificate of incorporation of MergerSub immediately prior to the Effective
Time.
(F) BYLAWS OF THE SURVIVING CORPORATION. The bylaws of the Surviving
Corporation shall be the bylaws of MergerSub immediately prior to the Effective
Time.
(G) BOARD OF DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The
board of directors and officers of MergerSub immediately prior to the Effective
Time shall be the board of directors and the officers of the Surviving
Corporation, respectively, immediately upon the Effective Time, and such persons
shall serve in such positions for the respective terms provided by applicable
Legal Requirements or in the bylaws of the Surviving Corporation and until their
respective successors are elected and qualified.
(H) WOI TO ESTABLISH ESCROWS.
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(i) United States Trust Company of New York, or another person who is
selected prior to the Effective Time by TWI and WOI, shall act as the General
Escrow Agent, the Acquisition Escrow Agent and the Market Delivery Escrow Agent
for purposes of administering the distribution of the General Contingent
Amount, the Acquisition Contingent Amounts, if any, and the Market Delivery
Contingent Shares, if any, respectively. In the event United States Trust
Company of New York or any other person so selected is unable or unwilling to
act as the General Escrow Agent, the Acquisition Escrow Agent or the Market
Delivery Escrow Agent, then TWI and WOI shall, upon mutual agreement, seek to
select a comparable party to act as such. Neither WOI nor TWI will unreasonably
withhold its approval of any financial institution proposed by the other of
them to act as the General Escrow Agent, the Acquisition Escrow Agent or the
Market Delivery Escrow Agent.
(ii) WOI Common Shares representing the General Contingent Amount
shall be held by the General Escrow Agent pursuant to the terms of an Escrow
Agreement (the "General Escrow Agreement") in the form attached hereto as
Exhibit 1.2(h).
(iii) WOI Common Shares representing the Acquisition Contingent
Amounts, if any, shall be held by the Acquisition Escrow Agent pursuant to the
terms of an escrow agreement (the "Acquisition Escrow Agreement") which will
provide for the release of the WOI Common Shares constituting the Acquisition
Contingent Amount for any Specified Acquisition upon the later of the
consummation after the Effective Time of such Specified Acquisition and the
satisfaction of the Market Delivery Requirement with respect to the related
Market, in accordance with procedural, dispute and resolution mechanism and
other provisions comparable to those set forth in the General Escrow Agreement.
(iv) WOI Common Shares representing the Market Delivery Contingent
Share for the Non-Delivery Market(s), if any, shall be held by the Market
Delivery Escrow Agent pursuant to the terms of an escrow agreement (the "Market
Delivery Escrow Agreement") which will provide for the release of the WOI
Common Shares constituting the Market Delivery Contingent Shares for each Non-
Delivery Market upon the satisfaction of the Market Delivery Requirement with
respect to such Non-Delivery Market, in accordance with procedural, dispute and
resolution mechanism and other provisions comparable to those set forth in the
General Escrow Agreement.
(I) EXCHANGE PROCEDURES. At or prior to the Effective Time, each
holder of record of Outstanding TWI Shares shall deliver to WOI for
cancellation the certificates representing such Outstanding TWI Shares (the
"Certificates"). Upon surrender of a Certificate for cancellation, together
with an investment letter in the form attached hereto as Exhibit 1.2(i)
("Stockholder Letter"), duly executed as of such time, (i) the holder of such
Certificate shall receive in exchange therefor the Per-Share Portion of the
Non-Contingent Amount, and shall be
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entitled to receive (A) upon the expiration of the General Escrow Period, the
Per-Share Portion of the General Contingent Amount (to the extent not released
to WOI pursuant to the General Escrow Agreement), (B) the Per-Share Portion of
the Acquisition Contingent Amount(s), if any, pursuant to the Acquisition Escrow
Agreement, (C) the Per-Share Portion of the Market Delivery Contingent Shares,
if any, pursuant to the Market Delivery Escrow Agreement, and (D) to the extent
issued or issuable pursuant to Section 10.3, the Per-Share Portion of the WOI
Contingent Amount, in each case for the Outstanding TWI Shares represented by
such Certificate, and (ii) the Certificate so surrendered shall forthwith be
canceled. Until surrendered as contemplated by this Section 1.2(i), each
Certificate shall, at and after the Effective Time, be deemed to represent only
the right to receive, upon surrender of such Certificate, the Per-Share Portion
of the Merger Shares with respect to each Outstanding TWI Share represented
thereby in accordance with the terms of this Agreement, as follows:
(I) Upon the Closing Date (or, if later, on the date of the surrender
of such Certificate), the holder of the Outstanding TWI Shares represented by
such Certificate shall receive the Per-Share Portion of the Non-Contingent
Amount for the Outstanding TWI Shares represented by such Certificate;
(II) Subject to the terms of the General Escrow Agreement, the holder
of the Outstanding TWI Shares represented by such Certificate shall be entitled
to receive the Per-Share Portion of the General Contingent Amount for the
Outstanding TWI Shares represented by such Certificate;
(III) Subject to the terms of the Acquisition Escrow Agreement,
the holder of the Outstanding TWI Shares represented by such Certificate shall
be entitled to receive the Per-Share Portion of the Acquisition Contingent
Amount(s), if any, for the Outstanding TWI Shares represented by such
Certificate;
(IV) Subject to the terms of the Market Delivery Escrow Agreement, the
holder of the Outstanding TWI Shares represented by such Certificate shall be
entitled to receive the Market Delivery Contingent Shares, if any, for the
Outstanding TWI Shares represented by such Certificate; and
(V) As and when issued pursuant to Section 10.3 (or, if later, on the
date of the surrender of such Certificate), the holder of the Outstanding TWI
Shares represented by such Certificate shall be entitled to receive the Per-
Share Portion of the WOI Contingent Amount for the Outstanding TWI Shares
represented by such Certificate.
(J) REGISTRATION RIGHTS AND STOCKHOLDERS AGREEMENT. The WOI shares to
be received by the TWI Stockholders will be offered and sold in reliance upon
an exemption from the Securities Act of 1933, as amended, and will bear the
restrictive legend set forth in Exhibit 1.2(j)-1 hereto. On the Closing Date,
(i) WOI shall amend and restate that
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certain Registration Agreement dated October 24, 1995 among WOI and the WOI
stockholders who are parties thereto (collectively, the "WOI Initial
Stockholders"), as provided in the Amended and Restated Registration Agreement
attached in the form of Exhibit 1.2(j)-2 hereto, and each TWI Stockholder upon
his or its counter signature thereto shall be bound by and entitled to the
benefits of such agreement; and (ii) WOI shall amend and restate that certain
Stockholders Agreement dated October 24, 1995 among WOI and certain of the WOI
Initial Stockholders, as provided in the Amended and Restated Stockholders
Agreement attached in the form of Exhibit 1.2(j)-3 hereto, and each TWI
Stockholder upon his or its counter signature thereto shall be bound by and
entitled to the benefits of such agreement (such Amended and Restated
Registration Agreement and such Amended and Restated Stockholders Agreement
being collectively referred to as the "Amended Agreements").
(K) DIVIDENDS; TRANSFER TAXES. No dividends or other distributions
that are declared on or after the Effective Time on WOI Common Shares or are
payable to the holders of record of WOI Common Shares on or after the Effective
Time will be paid to persons entitled by reason of the Merger to receive WOI
Common Shares until such persons surrender their Certificates, as provided in
this Article 1. Subject to the effect of applicable Legal Requirements, there
shall be paid to the record holder of such WOI Common Shares (i) at the time of
such surrender or as promptly as practicable thereafter, the amount of any
dividends or other distributions theretofore paid with respect to whole WOI
Common Shares and having a record date on or after the Effective Time and a
payment date prior to such surrender and (ii) at the appropriate payment date or
as promptly as practicable thereafter, the amount of dividends or other
distributions payable with respect to whole WOI Common Shares and having a
record date on or after the Effective Time but prior to surrender and a payment
date subsequent to surrender. In no event shall the person entitled to receive
such dividends or other distributions be entitled to receive interest on such
dividends or other distributions. If any dividends, cash in lieu of fractional
shares or WOI Common Shares are to be paid to or issued in a name other than
that in which the Certificate surrendered in exchange therefor is registered, it
shall be a condition of such exchange that the Certificate so surrendered shall
be properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange shall pay to Wireless One any transfer or other
taxes required by reason of the issuance of WOI Common Shares in a name other
than that of the registered holder of the Certificate surrendered or shall
establish to the satisfaction of Wireless One that such tax has been paid or is
not applicable.
(L) NO FRACTIONAL SHARES. No certificates or scrip representing
fractional WOI Common Shares shall be issued upon the surrender for exchange of
Certificates pursuant to this Article 1, and, except as provided in this Section
1.2(l), no dividend or other distribution, stock split or interest shall relate
to any such fractional security, and such fractional interests shall not entitle
the owner thereof to vote or to any rights of a security holder of WOI. In lieu
of any fractional security, each holder of Outstanding TWI Shares who would
otherwise have been entitled to a fraction of a WOI Common Share upon surrender
of Certificates for exchange pursuant to this Article 1 will be paid an amount
in cash (without interest) equal to the value of the fractional share based upon
the Exchange Price. WOI shall repurchase any
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fractional shares at the Exchange Price, and the proceeds thereof shall be
disbursed to the former holders of Outstanding TWI Shares at the time of the
distribution of the Non-Contingent Amount, the General Contingent Amount, the
Acquisition Contingent Amount(s), if any, the Market Delivery Contingent Shares,
if any, and/or the WOI Contingent Amount, as the case may be.
(M) RETURN OF SHARES. Any portion of the Merger Shares and any
dividends or distributions with respect to WOI Common Shares which remain
undistributed to the former holders of Outstanding TWI Shares for three (3)
months after the expiration of the General Escrow Period (as it may be extended
pursuant to the General Escrow Agreement) shall be delivered to WOI, upon demand
of WOI, and any former holders of Outstanding TWI Shares who have not
theretofore complied with this Article 1 shall thereafter look only to the
Surviving Corporation and WOI for payment of their claim for the Merger Shares
into which such Outstanding TWI Shares are convertible, any cash in lieu of
fractional WOI Common Shares, and any dividends or distributions with respect to
WOI Common Shares.
(N) NO FURTHER OWNERSHIP RIGHTS IN COMMON STOCK. All WOI Common
Shares issued, and any cash paid pursuant to this Section 1.2, upon the
surrender for exchange of Certificates in accordance with the terms hereof,
shall be deemed to have been issued or paid, as the case may be, in full
satisfaction of all rights pertaining to the Outstanding TWI Shares.
(O) CLOSING OF TWI TRANSFER BOOKS. At the Effective Time, the stock
transfer books of TWI shall be closed and no transfer of TWI Common Shares shall
thereafter be made. If, after the Effective Time, Certificates are presented to
the Surviving Corporation, they shall be cancelled and exchanged as provided in
this Article 1.
(P) FURTHER ASSURANCES. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (i) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation, its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of TWI, or (ii)
otherwise to carry out the purposes of this Agreement, the Surviving Corporation
and its proper officers and directors or their designees shall be authorized to
execute and deliver, in the name and on behalf of each such corporation, all
such deeds, bills of sale, assignments and assurances and do, in the name and on
behalf of each of such corporations, all such other acts and things necessary,
desirable or proper to vest, perfect or confirm its right, title or interest in,
to or under any of the rights, privileges, powers, franchises, properties or
assets of such corporations and otherwise to carry out the purposes of this
Agreement.
1.3 CLOSING. The Closing of the Merger (the "Closing") shall take place
at 10:00 a.m. on a date (the "Closing Date") to be specified by the parties,
which shall be no later than the fifth (5th) business day after the satisfaction
or waiver of the conditions set forth in Articles
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6, 7 and 8 hereof, unless another date or place is agreed to in writing by the
parties hereto, at the offices of Kirkland & Ellis, 153 East 53rd Street, New
York, New York, or some other mutually agreeable location in New York, New York.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF TWI.
TWI hereby represents and warrants to WOI and MergerSub, that as of the
date hereof:
2.1 ORGANIZATION; GOOD STANDING. TWI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
TWI and each of its Subsidiaries is qualified as a foreign corporation in all
jurisdictions in which it is required to qualify as a result of the conduct of
its business or ownership of its properties, other than any jurisdiction in
which the failure of any such person(s) to be so qualified would not have a
Material Adverse Effect on TWI.
2.2 SUBSIDIARIES. [LIST SUBSIDIARIES] are the only Subsidiaries of TWI.
Except as set forth on Schedule 2.2 or as disclosed in the TWI SEC Filings, TWI
owns directly, free and clear of Liens, all outstanding shares or equity
interests of each Subsidiary of TWI, and all such shares are validly issued,
fully paid, non-assessable and not subject to preemptive rights. Except as set
forth on Schedule 2.2 or as disclosed in the TWI SEC Filings, there are no
outstanding subscriptions, options, warrants, calls, conversion or exchange
rights, commitments or agreements of any character obligating any Subsidiary of
TWI to issue, deliver or sell additional shares of its capital stock or equity
interests of any class or any securities convertible into or exchangeable for
any such capital stock or equity interests, and there are no rights of first
refusal, transfer restrictions or similar rights or obligations with respect to
the ownership interests of TWI in any Subsidiary of TWI. Except as set forth on
Schedule 2.2 or as disclosed in the TWI SEC Filings, TWI does not own, directly
or indirectly, any shares of stock or any other equity or long-term debt
securities of any corporation or have any equity interest in any firm,
partnership, Joint Venture, association or other Person.
2.3 CAPITALIZATION. The authorized capital stock of TWI as of the date of
this Agreement consists of (i) 8,077,778 shares of common stock, $0.01 par value
per share, of which 2,400,000 are issued and outstanding, and (ii) 2,077,778
shares of preferred stock, $0.01 per share, consisting of 800,000 shares of
Series A Preferred Stock and 300,000 shares of Series B Preferred Stock,
(collectively, "TWI Preferred Stock"), of which 1,100,000 shares ("TWI Preferred
Shares") have been issued and are convertible into 2,200,000 TWI Common Shares.
There are no outstanding options, warrants, calls, puts, commitments or other
rights to purchase, or securities or other rights convertible into or
exercisable or exchangeable for, capital stock of TWI other than as set forth on
Schedule 2.3 or as disclosed in the TWI SEC Filings, which in each case
indicates the record and the beneficial owner thereof, the exercise, conversion
or exchange price and period thereof, the term and any vesting or other
conditions thereof. Except as set forth on Schedule 2.3 or as disclosed in the
TWI SEC Filings, no Person has rights to the registration of any securities of
TWI or any Subsidiary of TWI. All securities issued by TWI
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have been paid for and delivered in accordance with the terms of applicable
agreements or instruments, duly authorized and validly issued and are fully paid
and non-assessable; the holders thereof have no rights of rescission with
respect thereto and are not subject to personal liability by reason of being
such holders; none of such securities were issued in violation of the preemptive
rights of any holder of any security of TWI or any similar rights granted by TWI
or applicable Legal Requirements.
2.4 AUTHORITY; ENFORCEABILITY; NON-CONTRAVENTION. TWI has the corporate
power and authority to conduct the business and activities conducted by it and
to own or lease the assets owned or leased by it. TWI has the corporate power
and authority (subject to stockholder approval as set forth in Section 8.1 and
obtaining all required Consents as set forth in Section 4.2) to execute and
deliver this Agreement and all other documents required to be executed and
delivered by TWI hereunder, to consummate the transactions hereby contemplated,
and to take all other actions required to be taken by TWI pursuant to the
provisions hereof. This Agreement and all other documents required to be
executed and delivered by TWI hereunder have been duly authorized by all
corporate action necessary on the part of TWI (subject to stockholder approval
as set forth in Section 8.1 and obtaining all required Consents as set forth in
Section 4.2) and have been duly or will when executed and delivered be duly
executed and delivered by TWI and constitute the legal, valid and binding
obligations of TWI, enforceable against TWI in accordance with their terms.
Except as disclosed in Schedule 2.4, neither the execution nor the delivery of
this Agreement and all other documents required to be executed and delivered by
TWI hereunder or the consummation of the transactions hereby contemplated by TWI
(i) conflicts with or constitutes any violation or breach of the Certificate of
Incorporation or the Bylaws of TWI; (ii) constitutes any violation or breach of,
or gives any other Person any rights (including any right of acceleration,
termination or cancellation) under, any Material Contract; (iii) constitutes a
violation of any Order or Legal Requirement; or (iv) may result in the creation
of any Lien on any of the assets or properties of TWI or any of its
Subsidiaries.
2.5 CERTAIN ACTIVITIES AND SERVICES. Except with respect to the
Huntsville Wired System (as that term is defined in the TWI SEC Filings),
neither TWI nor any Subsidiary of TWI engages in any business other than the
Wireless Cable Business.
2.6 EMPLOYEE PLANS.
(A) Schedule 2.6 sets forth a true and complete list of each "employee
benefit plan," as such term is defined in section 3(3) of the ERISA, whether or
not subject to ERISA, and each bonus, incentive or deferred compensation,
severance, termination, retention, change of control, stock option, stock
appreciation, stock purchase, phantom stock or other equity-based, performance
or other employee or retiree benefit or compensation plan, program, arrangement,
agreement, policy or understanding, whether written or unwritten, that provides
benefits or compensation in respect of any employee or former employee of TWI or
any Subsidiary of TWI or the beneficiaries or dependents of any such employee or
former employee (such employees, former employees, beneficiaries and dependents
collectively, the "TWI
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Employees") or under which any TWI Employee is or may become eligible to
participate or derive a benefit and that is or has been maintained or
established by TWI or to which TWI or any Subsidiary of TWI contributes or is or
has been obligated or required to contribute or with respect to which TWI or any
Subsidiary of TWI may have any liability or obligation (collectively, the "TWI
Plans"). TWI has not communicated to any TWI Employee any intention or
commitment to modify any TWI Plan or to establish or implement any other
employee or retiree benefit or compensation arrangement other than in a manner
which would conform the terms of such TWI Plan or arrangement with any
description set forth in the TWI SEC Filings.
(B) All TWI Plans conform (and at all times within the five years
preceding the date hereof have conformed) in all material respects to, and are
being administered and operated (and have at all times within the five years
preceding the date hereof been administered and operated) in material compliance
with, the requirements of ERISA, the Code and all other applicable Legal
Requirements. All returns, reports and disclosure statements required to be
made under ERISA and the Code with respect to all TWI Plans have been timely
filed or delivered. There have not been any "prohibited transactions," as such
term is defined in Section 4975 of the Code or Section 406 of ERISA, involving
any of the TWI Plans that could subject TWI or any Subsidiary of TWI to any
material penalty or tax imposed under the Code or ERISA. Neither TWI nor any
Subsidiary of TWI maintains or has maintained any TWI Plan qualified under
Section 401(a) of the Code and exempt from tax under Section 501(a) of the Code.
Neither TWI nor any Subsidiary of TWI has any announced plan or legally binding
commitment to create any TWI Plans or to materially amend or modify any existing
TWI Plan.
(C) There are no pending or threatened claims asserted or instituted
against
(i) any TWI Plan or its assets,
(ii) any fiduciary with respect to any such TWI Plan, or
(iii) TWI or any Subsidiary of TWI or any of its officers, directors
or employees,
under ERISA or any other applicable Legal Requirements and rules and regulations
promulgated thereunder, or claiming benefit payments other than those made in
the ordinary operation of such plans, nor is there any basis for such claim. To
the knowledge of TWI, the TWI Plans are not the subject of any investigation,
audit or action by any governmental agency, including, but not limited to, the
IRS, the Department of Labor, the Equal Employment Opportunity Commission or the
Pension Benefit Guaranty Corporation ("PBGC").
2.7 FINDER'S FEES. Except as set forth on Schedule 2.7, neither TWI nor
any Subsidiary of TWI has taken any action which would impose upon TWI, any
Subsidiary of TWI, MergerSub or WOI any obligation or liability to any person
for finder's fees, agent's
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commissions or like payments in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.
2.8 SEC FILINGS. TWI has previously delivered to WOI the TWI SEC Filings.
No TWI SEC Filing contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (i) as of the time such
document was filed and (ii) as of the date of this Agreement, in each case
except as set forth on Schedule 2.8 or in a TWI SEC Filing of a subsequent date.
2.9 DIRECTORS, OFFICERS AND EMPLOYEES. Other than as set forth on
Schedule 2.9 or as described in any TWI SEC Filing, neither TWI nor any
Subsidiary of TWI has any outstanding loans or extension of credit to, or any
contracts, agreements or understandings with, any executive officer or director
or member of their immediate family or any person with which any such person has
a material relationship. Schedule 2.9 sets forth a list of (a) the names and
positions of each employee of TWI and each Subsidiary of TWI who was paid an
aggregate compensation for the fiscal year ended December 31, 1995 in excess of
$50,000, together with the amount thereof; and (b) any agreement or arrangement
with any current or former employees, officers or directors of such parties that
would entitle such person to receive any compensation or other payment upon or
arising from (i) the termination of such person's services as an employee,
officer or director, or (ii) the consummation of the Merger, together with the
amount thereof (such aggregate amount is referred to herein as "Severance
Obligations"). TWI has made available to WOI a true and correct copy of the
current payroll which lists all employees of TWI and each Subsidiary of TWI by
category of employment and salary.
2.10 TWI FCC REPRESENTATIONS.
(A) Except for agreements executed after the date of this Agreement,
Schedule 2.10(a) hereto sets forth a true and correct list of the TWI Channel
Leases. Except as stated on Schedule 2.10(a), no TWI Channel Lease (i) requires
the consent of the lessor thereunder (a "TWI Lessor") to the Merger, (ii) will
terminate or allow the lessor thereunder to terminate it as a result of the
Merger, or (iii) will require a change in the compensation payable to the lessor
thereunder, or the formula for determining that compensation as a result of the
Merger. Except as stated on Schedule 2.10(a), each such TWI Channel Lease which
is not pending acquisition by TWI or a Subsidiary of TWI is in full force and
effect and, to the knowledge of TWI, each other TWI Channel Lease is in full
force and effect. Except as set forth on Schedule 2.10(a), neither TWI nor any
Subsidiary of TWI has received, or has knowledge that any other party has
received, any notice from a TWI Lessor that a TWI Channel Lease is in default or
is terminated, except for such notices of default which have been cured prior to
termination and for such notices of termination which have been withdrawn.
(B) Schedule 2.10(b) lists (i) each application to the FCC for
commercial ITFS, MDS, MMDS, cable antenna relay service or low power commercial
television FCC Licenses
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pending before the FCC in the name of TWI or any of its Subsidiaries or
Affiliates and proposing facilities which are within the State of Mississippi or
any of the Target Markets, (ii) each FCC License held by TWI or any of its
Subsidiaries or Affiliates (or pending acquisition by TWI or any of its
Subsidiaries or Affiliates) and authorizing facilities which are within the
State of Mississippi or any of the Target Markets, and (iii) each cable
television franchise which is held by TWI or any of its Subsidiaries or
Affiliates (or pending acquisition by TWI or any of its Subsidiaries or
Affiliates) and authorizing facilities which are within the State of Mississippi
or any of the Target Markets.
(C) Schedule 2.10(c)-1 hereto lists each Rand McNally Basic Trading
Area ("BTA") for which TWI or a Subsidiary of TWI is the highest bidder in the
FCC's MDS auction. Neither TWI nor any Subsidiary of TWI is in default of its
payment obligations to the U.S. Treasury for any such BTA, as such obligations
are imposed under the FCC's small business payment regulations. Except as set
forth on Schedule 2.10(c)-2 or as described in any TWI SEC Filing, neither TWI
nor any Subsidiary of TWI has agreed to sell or otherwise transfer the whole or
any part of the MDS channel rights accorded to the MDS BTA authorization holder
for any of those BTAs.
2.11 ACCREDITED INVESTORS. Each TWI Stockholder is, and VCI is, an
"accredited investor," as such term is defined in Rule 501(a) of Regulation D
promulgated under the Securities Act of 1933, as amended.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF MERGERSUB AND WOI.
WOI and MergerSub each hereby represent and warrant to TWI and to the
stockholders of TWI, the following:
3.1 ORGANIZATION AND GOOD STANDING. WOI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
MergerSub is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. WOI and each of its Subsidiaries is
qualified as a foreign corporation in all jurisdictions in which it is required
to qualify as a result of the conduct of its business or ownership of its
properties, other than any jurisdiction in which the failure of any such
person(s) to be so qualified would not have a Material Adverse Effect on WOI.
3.2 AUTHORITY; ENFORCEABILITY; NON-CONTRAVENTION. WOI has the corporate
power and authority to conduct the business and activities conducted by it and
to own or lease the assets owned or leased by it. WOI has corporate power and
authority (subject to stockholder approval and obtaining lenders' Consents as
set forth in Sections 7.1 and 7.6) to execute and deliver this Agreement and all
other documents required to be executed by WOI hereunder, to consummate the
transactions hereby contemplated, and to take all other actions required to be
taken by WOI pursuant to the provisions hereof. This Agreement and all other
documents required to be
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executed and delivered by WOI hereunder have been duly authorized by all
corporate action necessary on the part of WOI (subject to stockholder approval
and obtaining lenders' Consents as set forth in Sections 7.1 and 7.6) and have
been duly or will when executed and delivered be duly executed and delivered by
WOI, and constitute the legal, valid and binding obligations of WOI enforceable
against WOI in accordance with their terms. Neither the execution nor the
delivery of this Agreement and all the documents required to be executed and
delivered by WOI hereunder or the consummation of the transactions hereby
contemplated by WOI (i) conflicts with or constitutes any violation or breach of
the Certificate of Incorporation or the Bylaws of WOI; (ii) constitutes any
violation or breach of, or gives any other Person any rights (including any
right of acceleration, termination or cancellation) under, any Material Contract
to which WOI is a party; (iii) constitutes a violation of any Order or Legal
Requirement; or (iv) may result in the creation of any Lien on any of the assets
or properties of WOI or any of its Subsidiaries. MergerSub has the corporate
power and authority to conduct the business and activities conducted by it and
to own or lease the assets owned or leased by it. MergerSub has corporate power
and authority (subject to stockholder approval and obtaining lenders' Consents
as set forth in Sections 7.1 and 7.6) to execute and deliver this Agreement and
all other documents required to be executed by MergerSub, to consummate the
transactions hereby contemplated, and to take all other actions required to be
taken by MergerSub pursuant to the provisions hereof. This Agreement and all
other documents required to be executed and delivered by MergerSub hereunder
have been duly authorized by all corporate action necessary on the part of
MergerSub (subject to stockholder approval and obtaining lenders' Consents as
set forth in Sections 7.1 and 7.6) and have been duly or will when executed and
delivered be duly executed and delivered by MergerSub, and constitute the legal,
valid and binding obligations of MergerSub enforceable against MergerSub in
accordance with their terms. Neither the execution nor delivery of this
Agreement and all other documents required to be executed and delivered by
MergerSub hereunder or the consummation of the transactions hereby contemplated
by MergerSub conflict with or constitute a violation or breach of the
Certificate of Incorporation or the Bylaws of MergerSub.
3.3 CAPITALIZATION. The authorized capital stock of WOI as of the date
hereof consists of 50,000,000 shares of common stock, par value $.01 per share,
of which 13,498,752 shares are issued and outstanding, and 10,000,000 of
preferred stock, par value $.01 per share, of which no shares have been issued.
WOI Common Shares to be issued pursuant to this Agreement will be, upon
issuance, validly issued, fully paid and non-assessable. There are no
outstanding options, warrants, calls, puts, commitments or other rights to
purchase, or securities or other rights convertible into or exercisable or
exchangeable for, capital stock of WOI other than as described in the WOI SEC
Filings. Except as disclosed in the WOI SEC Filings, no Person has rights to
the registration of any securities of WOI or any Subsidiary or WOI. All
securities issued by WOI have been paid for and delivered in accordance with the
terms of applicable agreements or instruments, duly authorized and validly
issued and are fully paid and non-assessable; the holders thereof have no rights
of rescission with respect thereto and are not subject to personal liability by
reason of being such holders; none of such securities were issued
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in violation of the preemptive rights of any holder of any security of WOI or
any similar rights granted by WOI or applicable Legal Requirements.
3.4 SEC FILINGS. WOI has previously delivered to TWI copies of (i) its
Form 10-K for the period ended December 31, 1995, (ii) its Registration
Statement on Form S-1 (File No. 33-94942) declared effective by the SEC on
October 18, 1995, and (iii) its Registration Statement on Form S-1 (File No. 33-
95106) declared effective by the SEC on October 18, 1995 ("WOI SEC Filings").
Each such filing was timely filed with the SEC, and did not contain any untrue
statement of material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading (i) as of the time such document was filed and (ii) except
as does not reflect a Material Adverse Effect on WOI, as of the date of this
Agreement, in each case except as set forth in a WOI SEC Filing of a subsequent
date or as set forth on Schedule 3.4.
3.5 WOI FCC REPRESENTATIONS.
(A) Except for agreements executed after the date of this Agreement,
Schedule 3.5(a) hereto sets forth a true and correct list of the WOI Channel
Leases. Except as stated on Schedule 3.5(a), no WOI Channel Lease (i) requires
the consent of the lessor thereunder (a "WOI Lessor") to the Merger, (ii) will
terminate or allow the lessor thereunder to terminate it as a result of the
Merger, or (iii) will require a change in the compensation payable to the lessor
thereunder, or the formula for determining that compensation as a result of the
Merger. Except as stated on Schedule 3.5(a), each such WOI Channel Lease which
is not pending acquisition by WOI or a Subsidiary of WOI is in full force and
effect and, to the knowledge of WOI, each other WOI Channel Lease is in full
force and effect. Except as set forth on Schedule 3.5(a), neither WOI nor any
of its Subsidiaries has received, or has knowledge that any other party has
received, any notice from a WOI Lessor that a WOI Channel Lease is in default or
is terminated, except for such notices of default which have been cured prior to
termination and for such notices of termination which have been withdrawn.
(B) [Reserved.]
(C) Schedule 3.5(c)-1 hereto lists each BTA for which WOI or any of
its Subsidiaries is the highest bidder in the FCC's MDS auction. WOI is not in
default of its payment obligations to the U.S. Treasury for any such BTA, as
such obligations are imposed under the FCC's small business payment regulations.
Except as set forth on Schedule 3.5(c)-2 or as described in any WOI SEC Filing,
neither WOI nor any of its Subsidiaries has agreed to sell or otherwise transfer
the whole or any part of the MDS channel rights accorded to the MDS BTA
authorization holder for any of those BTAs.
3.6 FINDER'S FEES. Neither MergerSub nor WOI has taken any action which
would impose upon TWI, MergerSub, WOI or any Subsidiary of WOI any obligation or
liability to any
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person for finder's fees, agent's commissions or like payments in connection
with the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
3.7 EMPLOYEE PLANS.
(A) For purposes of this Agreement, "WOI Plan" shall mean each
"employee benefit plan" as such term is defined in section 3(3) of the ERISA,
whether or not subject to ERISA, and each bonus, incentive or deferred
compensation, severance, termination, retention, change of control, stock
option, stock appreciation, stock purchase, phantom stock or other equity-based,
performance or other employee or retiree benefit or compensation plan, program,
arrangement, agreement, policy or understanding, whether written or unwritten,
that provides benefits or compensation in respect of any employee or former
employee of WOI or any Subsidiary of WOI or the beneficiaries or dependents of
any such employee or former employee (such employees, former employees,
beneficiaries and dependents collectively, the "WOI Employees") or under which
any WOI Employee is or may become eligible to participate or derive a benefit
and that is or has been maintained or established by WOI or to which WOI or any
Subsidiary of WOI contributes or is or has been obligated or required to
contribute or with respect to which WOI or any Subsidiary of WOI may have any
liability or obligation.
(B) All WOI Plans conform (and at all times within the five years
preceding the date hereof have conformed) in all material respects to, and are
being administered and operated (and have at all times within the five years
preceding the date hereof been administered and operated) in material compliance
with, the requirements of ERISA, the Code and all other applicable Legal
Requirements. All returns, reports and disclosure statements required to be
made under ERISA and the Code with respect to all WOI Plans have been timely
filed or delivered. There have not been any "prohibited transactions," as such
term is defined in Section 4975 of the Code or Section 406 of ERISA, involving
any of the WOI Plans that could subject WOI or any Subsidiary of WOI to any
material penalty or tax imposed under the Code or ERISA. Neither WOI nor any
Subsidiary of WOI maintains or has maintained any WOI Plan qualified under
Section 401(a) of the Code and exempt from tax under Section 501(a) of the Code.
Neither WOI nor any Subsidiary of WOI has any announced plan or legally binding
commitment to create any WOI Plans or to materially amend or modify any existing
WOI Plan.
(C) There are no pending or threatened claims asserted or instituted
against
(i) any WOI Plan or its assets,
(ii) any fiduciary with respect to any such WOI Plan, or
(iii) WOI or any Subsidiary of WOI or any of its officers, directors
or employees,
under ERISA or any other applicable Legal Requirements and rules and regulations
promulgated thereunder, or claiming benefit payments other than those made in
the ordinary operation of such
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plans, nor is there any basis for such claim. To the knowledge of WOI, the WOI
Plans are not the subject of any investigation, audit or action by any
governmental agency, including, but not limited to, the IRS, the Department of
Labor, the Equal Employment Opportunity Commission or the PBGC.
ARTICLE 4. COVENANTS OF TWI.
TWI hereby agrees to perform as follows:
4.1 OPERATION PRIOR TO THE CLOSING DATE. From the date hereof through the
Closing Date:
(A) Other than consummating the acquisitions of the Target Markets
pursuant to the Target Market Existing Agreements, neither TWI nor any
Subsidiary of TWI shall engage in any practice, take any action or enter into
any transaction other than in the customary and ordinary course of business.
(B) TWI will, and will cause each Subsidiary of TWI to, use reasonable
efforts to keep its business, properties and business relationships
substantially intact.
(C) TWI will, and will cause each Subsidiary of TWI to, (i) pay and
perform all of its debts, liabilities and obligations as and when due, except to
the extent either (A) being contested in good faith or (B) as to which adequate
liabilities have been accrued and recorded (determined in accordance with GAAP),
(ii) perform its material obligations under all Authorizations and Material
Contracts, and (iii) comply in all material respects with all Governmental
Rules.
(D) TWI agrees that (i) TWI will not take any action or cause or
permit any of its Subsidiaries to take any action, and will endeavor in good
faith not to permit any event to occur, which would cause or constitute one or
more breaches of the representations or warranties of TWI set forth in Article
2, if such representations and warranties were made at the time of the taking of
such action or the occurrence of such event, which breaches individually or in
the aggregate would reflect a Material Adverse Effect on TWI as compared with
the state of affairs which would exist if all such representations and
warranties were true and correct in all respects at such time; (ii) TWI will,
and will cause its Subsidiaries to, in the event of, and promptly after the
occurrence of, or promptly after becoming aware of the occurrence of or the
impending or threatened occurrence of, any event which would cause or constitute
such a breach or would, if it had occurred immediately prior to the date hereof,
have caused or constituted such a breach of any of the representations and
warranties set forth in said Article 2, give notice thereof to WOI; and (iii)
TWI shall and shall cause its Subsidiaries to use reasonable efforts to prevent
or promptly to remedy any such breach.
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(E) TWI will, and will cause each of its Subsidiaries to, use
reasonable efforts to preserve, protect and maintain its and their rights and
interests in the TWI Channel Leases, FCC Licenses, and Material Contracts,
including, but not limited to, filing or having licensees or permittees file
with the FCC any and all reports, applications or other documents necessary to
preserve the FCC Licenses in full force and effect.
(F) Other than in the ordinary course of business, without WOI's
consent (which consent will not be unreasonably withheld or delayed, with such
reasonableness to be adjudged with respect to the maintenance and development of
TWI's business), TWI will not, and will not cause or permit any of its
Subsidiaries to, enter into, amend in any material respect or terminate, or
agree to enter into, amend in any material respect or terminate, except to
comply with this Agreement, any TWI Channel Lease, FCC License, Application or
Material Contract; provided that TWI or any of its Subsidiaries may enter into
any TWI Channel Lease or make any Application as may be required by the terms
and conditions of any Target Market Existing Agreement.
(G) TWI shall not repurchase, declare or pay any dividends (other than
the amount payable with respect to accrued and unpaid dividends on the TWI
Preferred Shares upon the conversion thereof into TWI Common Shares in
accordance with the terms of the TWI Preferred Stock), or make any other
distributions with respect to its shares of capital stock (including, without
limitation, the TWI Preferred Shares) consisting of cash or marketable
securities or any contribution thereof, nor shall TWI or any of its Subsidiaries
issue, sell or agree to sell any shares of its capital stock, or any securities
convertible into, or options with respect to, or warrants to purchase or rights
to subscribe for, any shares of its capital stock (other than upon conversion of
the TWI Preferred Stock into TWI Common Shares in accordance with the terms of
the TWI Preferred Stock).
(H) TWI will not, and will not cause or permit any of its Subsidiaries
to, sell, lease, transfer or otherwise dispose of any of its assets, except as
provided for by, or contemplated in, this Agreement, or in the ordinary course
of business, or as it may be required to do so as described in any TWI SEC
Filing.
(I) TWI will not, and will not cause any of its Subsidiaries to,
increase in any manner the base compensation of, or enter into any new bonus or
incentive agreement or arrangement with, any of its directors, officers or
employees, pay bonuses to any such director, officer of employee, to the extent
the aggregate of the foregoing for all such persons exceeds $50,000, or pay any
salaries except in the ordinary course of business, except as required under any
existing written employment agreement with any officer, director or employee of
TWI or any Subsidiary of TWI, except with respect to new employees who are
compensated at a rate of less than $50,000 per annum.
(J) TWI shall not transfer, or cause or permit any Subsidiary of TWI
to transfer, any interest in any Subsidiary.
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4.2 ESTOPPEL CERTIFICATES AND CONSENTS. Except as otherwise provided
herein, TWI shall use reasonable efforts to obtain or cause to be made, all
consents, governmental authorizations, approvals and filings necessary by virtue
of the Merger contemplated by this Agreement on or before the Closing Date, so
as to endeavor to ensure (a) that the Surviving Corporation will as of the
Effective Time enjoy all of the rights and privileges currently enjoyed by TWI
and each Subsidiary of TWI under each of the TWI Channel Leases (including,
without limitation, those listed on Schedule 2.10(a)), Licenses and Material
Contracts, (b) that the FCC has consented to the transfer of control to WOI with
respect to each cable antenna relay service license held by TWI or any of its
Subsidiaries or listed on Schedule 2.10(b), (c) that the FCC has consented to
the transfer of control to WOI of each other FCC License held by TWI or any of
its Subsidiaries or listed on Schedule 2.10(b), (d) that the franchising
authorities with jurisdiction over the matters have consented to the transfer of
control to WOI of all cable television franchises of TWI or any of its
Subsidiaries or listed on Schedule 2.10(b), and (e) that the FCC has waived FCC
Rule 21.952(c)(3) so that the consummation of the transactions contemplated by
this Agreement will not cause TWI's or any its Subsidiaries' BTA applications to
be dismissed. WOI will use reasonable efforts to join in and cooperate with the
filing and prosecution of applications for the consents and waivers described in
clauses (b) through (e) above. Upon request of WOI, TWI shall use reasonable
efforts to assist WOI to obtain from each of the other respective parties to
each of such Channel Leases and Material Contracts estoppel certificates in the
form of Exhibit 4.2 ("Estoppel Certificates"), certifying that TWI or a
Subsidiary of TWI, as applicable, is not in breach or violation of or in default
under any of such Channel Leases or Material Contracts and that it will not be
by virtue of the transaction contemplated hereby, and other matters specified
therein.
4.3 RENEWAL OR EXTENSION OF FCC AUTHORIZATIONS. TWI shall, and shall
cause each Subsidiary of TWI to:
(A) timely file, or cause to be filed, all applications, reports and
other submissions in such form and with such information as may be required by
the FCC, including but not limited to renewal applications, applications for
extensions of time to complete construction and Annual FCC Reports, to assure
that all Channels licensed or authorized to either TWI or any Subsidiary of TWI
remain in full force and effect without material adverse alteration or
modification, except to the extent that such alteration or modification results
from changes in the FCC's rules or policies of general applicability. TWI shall
utilize reasonable efforts to prosecute in good faith all applications, reports
and submissions submitted in accordance with this Section 4.3. TWI shall
promptly disclose to WOI any information TWI or any of its Subsidiaries receives
regarding any conditions or circumstances that would cause the FCC to decline to
accept such applications, reports and submissions as may be necessary or
desirable to keep the Licenses in full force and effect.
(B) use reasonable efforts to assure that the licensees or permittees
under the TWI Channel Leases timely file all applications, reports, and other
submissions in such form and with such information as may be required by the
FCC, including, but not limited to, renewal
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applications, applications for extensions of time to complete construction and
Annual FCC Reports, to assure that the FCC Licenses subject to such TWI Channel
Leases remain in full force and effect without material adverse alteration or
modification, except to the extent that such alteration or modification results
from changes in the FCC's rules or policies of general applicability. TWI shall
use its reasonable efforts to assure that the licensees or permittees under the
TWI Channel Leases diligently prosecute in good faith all such applications,
reports and submissions. TWI shall promptly disclose to WOI any information TWI
or any of its Subsidiaries receives regarding any conditions or circumstances
that would cause, or could reasonably be expected cause, the FCC to decline to
issue such authorizations as may be necessary or desirable to keep the Licenses
in full force and effect.
(C) use reasonable efforts to prosecute its FCC Form 175-M application
for MDS Licenses to the extent that it was the high bidder in the MDS BTA
auction, including, without limitation, making all payments with respect thereto
to the United States Treasury, when and as required by applicable Legal
Requirements, and in filing applications for initial BTA authorizations or
statements of intention when and as required by applicable Legal Requirements to
preserve its rights as the high bidder in such BTAs.
4.4 NO SOLICITATION. From and after the date hereof, TWI will not, and
will not authorize any of its Subsidiaries or officers, directors, employees,
agents and other representatives or those of any Subsidiary of TWI
(collectively, "TWI Representatives") to, solicit, initiate or encourage
(including by way of furnishing information) any inquiries or the making of any
proposal which constitutes, or may reasonably be expected to lead to, an
Acquisition Proposal (as defined herein) from any Person or engage in any
discussion or negotiations relating thereto, or accept any Acquisition Proposal.
TWI shall immediately cease and cause to be terminated any existing
solicitation, discussion or negotiation with any parties conducted heretofore by
TWI or any TWI Representatives with respect to any of the foregoing. To the
extent permitted by applicable Legal Requirements, TWI will promptly notify WOI
of any such discussion or negotiations, requests for such information or the
receipt of any Acquisition Proposal, including the identity of the person or
group engaging in such discussions or negotiations requesting such information
or making such Acquisition Proposal, and the material terms and conditions of
any Acquisition Proposal. As used in this Agreement, "Acquisition Proposal"
shall mean any proposal or offer considered by the Board of Directors of TWI to
be bona fide, other than a proposal or offer by WOI or any of its affiliates,
for a tender or exchange offer, a merger, consolidation or other business
combination involving TWI or any Subsidiary of TWI or any proposal to acquire in
any manner (a) a substantial equity interest in TWI or any Subsidiary of TWI,
(b) any rights of TWI or any Subsidiary of TWI to any Channels or (c) any
Wireless Cable Television System.
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4.5 RESIGNATION OF DIRECTORS OF TWI. TWI shall deliver to WOI on the
Closing Date, except as otherwise requested by WOI, the written resignation of
all directors of TWI and each Subsidiary of TWI.
ARTICLE 5. ADDITIONAL AGREEMENTS.
5.1 SHAREHOLDERS MEETING. TWI and WOI shall each take all action
necessary in accordance with applicable Legal Requirements and in accordance
with their respective certificates of incorporation and bylaws to convene a
meeting of their respective stockholders (in the case of WOI, the "WOI
Stockholders Meeting") as promptly as practicable to consider and vote upon the
approval of this Agreement. TWI and WOI each, through its board of directors,
shall recommend to its stockholders (and, if applicable, its lenders) approval
of this Agreement and shall use best efforts to obtain approval and adoption of
this Agreement by such stockholders. Without limiting the foregoing, promptly
following the date of this Agreement, WOI shall prepare and file with the
Securities Exchange Commission (i) a proxy statement relating to the WOI
Stockholders Meeting (as amended from time to time, the "Proxy Statement"). The
Proxy Statement shall include the recommendation of WOI's board of directors
that this Agreement be approved and shall comply with all applicable laws and
regulations. WOI shall use its best efforts to cause the Proxy Statement to be
mailed to the Company's stockholders as promptly as practicable after the date
of this Agreement. WOI and TWI each shall also use its reasonable efforts to
take any action required to be taken under any applicable state securities laws
in connection with the issuance of WOI Common Shares in the Merger. WOI shall
cause all information included in the Proxy Statement to be true and correct in
all material respects and not omit to state any material fact required to be
stated therein or necessary in order to make such information not misleading in
light of the circumstances in which they are made, and WOI agrees to correct any
information in the Proxy Statement as may be required by applicable laws and
regulations. All costs of preparing, distributing and filing the Proxy
Statement and all other incremental costs incurred in obtaining the consent of
WOI's stockholders to the Merger shall be borne in full by WOI. All incremental
costs incurred in obtaining the consent of TWI's stockholders to the Merger
shall be borne in full by TWI. In addition, WOI shall use its best efforts to
obtain the WOI Bondholder Consent (as defined in Section 7.6) as promptly as
practicable, including, without limitation, preparing, obtaining and filing all
necessary documentation, complying with all applicable Legal Requirements and
requirements under the applicable indenture, and paying any consent fees or
other fees or premiums reasonably required by the holders of WOI's 13% Senior
Notes due 2003.
5.2 ACCESS.
(A) WOI and its officers, employees and representatives (including
independent public accountants, investment bankers, environmental consultants
and counsel), as applicable, will at all reasonable times during regular
business hours be permitted reasonable access to the Facilities and TWI's
corporate offices; will be permitted to make copies of or abstracts from all of
the books and records, financial and operating data and other information
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of TWI and each Subsidiary of TWI; and will be permitted to discuss the affairs
and accounts of TWI and each Subsidiary of TWI with the directors, officers,
employees, counsel, and accountants of TWI and each Subsidiary of TWI. Such
investigation shall not, however, affect the representations and warranties of
TWI set forth in Article 2 hereof.
(B) TWI and its officers, employees and representatives (including
independent public accountants, investment bankers, environmental consultants
and counsel), as applicable, will at all reasonable times during regular
business hours be permitted reasonable access to the facilities of WOI and its
Subsidiaries and WOI's corporate offices; will be permitted to make copies of or
abstracts from all of the books and records, financial and operating data and
other information of WOI and each Subsidiary of WOI; and will be permitted to
discuss the affairs and accounts of WOI and each Subsidiary of WOI with the
directors, officers, employees, counsel, and accountants of WOI and each
Subsidiary of WOI. Such investigation shall not, however, affect the
representations and warranties of WOI set forth in Article 3 hereof.
5.3 STOCK OPTIONS.
(A) All TWI Stock Option Plans shall terminate as of the Effective
Time and the provisions in any other plan, program or arrangement providing for
the issuance or grant of any other interest in respect of the capital stock of
TWI or any Subsidiary shall be deleted as of the Effective Time, and TWI shall
take all action necessary to ensure that following the Effective Time no
participant in any TWI Stock Option Plan or other plans, programs or
arrangements shall have any right thereunder to acquire equity securities of
TWI, the Surviving Corporation or any subsidiary thereof, and to terminate all
such rights. A "TWI Stock Option Plan" means any TWI stock option plan for its
directors or employees or the directors or employees of any Subsidiary or any
other person.
(B) At the Closing, upon and in consideration for the surrender,
cancellation and exchange of the Existing Burkhalter Options, WOI will issue to
Henry M. Burkhalter fully-vested options which will entitle him to acquire an
aggregate of 78,015 WOI Common Shares for an exercise price of $6.82 per WOI
Common Share and which will have substantially the same other terms and
conditions as are described in the TWI SEC Filings for the options to acquire
TWI Common Shares which are presently held by Burkhalter (the "Existing
Burkhalter Options").
(C) At the Closing, upon and in consideration for the surrender,
cancellation and exchange of the Existing Byer Options, WOI will issue to Bill
R. Byer, Jr. fully-vested options which will entitle him to acquire an aggregate
of 62,411 WOI Common Shares for an exercise price of $6.82 per WOI Common Share
and which will have substantially the same other terms and conditions as are
described in the TWI SEC Filings for the options to acquire TWI Common Shares
which are presently held by Byer (the "Existing Byer Options").
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(D) At the Closing, upon and in consideration for the surrender,
cancellation and exchange of the Existing Woolhiser Options, WOI will issue to
Laurence O. Woolhiser, Jr. fully-vested options which will entitle him to
acquire an aggregate of 22,000 WOI Common Shares for an exercise price of $6.82
per WOI Common Share and which will have substantially the same other terms and
conditions as are described in the TWI SEC Filings for the options to acquire
TWI Common Shares which are presently held by Woolhiser (the "Existing Woolhiser
Options").
(E) At the Closing, upon and in consideration for the surrender,
cancellation and exchange of the Existing Eilers Options, WOI will issue to
Walter Eilers fully-vested options which will entitle him to acquire an
aggregate of 14,467 WOI Common Shares for an exercise price of $6.82 per WOI
Common Share and which will have substantially the same other terms and
conditions as are described in the TWI SEC Filings for the options to acquire
TWI Common Shares which are presently held by Eilers (the "Existing Eilers
Options").
(F) At the Effective Time, the Existing Burkhalter Options, the
Existing Byer Options, the Existing Woolhiser Options and the Existing Eilers
Options will be canceled. The number of WOI Common Shares covered by the
options described in clauses (b), (c), (d) and (e) above will be proportionately
increased, and the exercise price per share thereunder will be proportionately
reduced, to reflect any stock dividend, stock split or other subdivision of the
WOI Common Shares effected after the date of this Agreement and prior to the
Effective Time. The number of WOI Common Shares covered by the options
described in clauses (b), (c), (d) and (e) above will be proportionately
reduced, and the exercise price per share thereunder will be proportionately
increased, to reflect any reverse stock split or other combination of the WOI
Common Shares effected after the date of this Agreement and prior to the
Effective Time.
5.4 EFFORTS TO CONSUMMATE SPECIFIED ACQUISITIONS. If at the Effective
Time any of the Specified Acquisition has not been consummated and the related
Target Market Existing Agreement has not been terminated, then after the
Effective Time WOI will use, and will cause the Surviving Corporation to use,
reasonable efforts to consummate such Specified Acquisition and to cause the
Market Delivery Requirement to be satisfied with respect to such specified
Acquisition.
5.5 REASONABLE EFFORTS. Upon the terms and subject to the conditions set
forth in this Agreement, each of the parties agrees to use its reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including (a) the obtaining of all necessary
actions or non-actions, waivers, consents and approvals from Governmental
Authorities and the making of all necessary registrations and filings (including
filings with Governmental Entities) and the taking of all reasonable steps as
may be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by any Governmental Entity (including, without limitation, the TWI
BTA Waiver); (b) the obtaining of all necessary consents, approvals or waivers
from third parties
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(including, without limitation, the WOI Bondholder Consent); (c) the defending
of any lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions contemplated
hereby including seeking to have any stay or temporary restraining order entered
by any court or other Governmental Entity vacated or reversed; and (d) the
execution and delivery of any additional instruments necessary to consummate the
transactions contemplated by this Agreement.
5.6 PUBLIC ANNOUNCEMENTS. WOI and MergerSub, on the one hand, and TWI, on
the other hand, will consult with each other before issuing any press release
with respect to the transactions contemplated by this Agreement, and shall not
issue any such press release prior to such consultation, unless otherwise
required under applicable Legal Requirements.
5.7 NOTIFICATION OF CERTAIN MATTERS. TWI shall give to WOI prompt notice
of: (i) any notice of, or other communication relating to, a default or event
that, with notice or lapse of time or both, would become a default, received
subsequent to the date of this Agreement and prior to the Effective Time under
any note, license, agreement or other instrument or obligation other than in
respect of defaults which, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect on TWI; and (ii) any Material
Adverse Effect on TWI or the occurrence of any event which, so far as reasonably
can be foreseen at the time of its occurrence, is reasonably likely to result in
a Material Adverse Effect on TWI. WOI shall give to TWI prompt notice of: (i)
any notice of, or other communication relating to, a default or event that, with
notice or lapse of time or both, would become a default, received subsequent to
the date of this Agreement and prior to the Effective Time under any note,
license, agreement or other instrument or obligation other than in respect of
defaults which, individually or in the aggregate, could reasonably be expected
to result in a Material Adverse Effect on WOI; and (ii) any Material Adverse
Effect on WOI or the occurrence of any event which, so far as reasonably can be
foreseen at the time of its occurrence, is reasonably likely to result in a
Material Adverse Effect on WOI. Each party shall give the other prompt notice
of any written notice or other written communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement.
5.8 HART-SCOTT-RODINO ACT FILING. The parties will cooperate in preparing
and filing any Notification and Report Forms and related material that it may be
required to file with the Federal Trade Commission and the Antitrust Division of
the United States Department of Justice under the HSR Act, and will use their
respective best efforts to obtain an early termination of the applicable waiting
period, and will make any further filings pursuant thereto that may be
necessary, proper, or advisable with respect to the transactions contemplated
hereby.
5.9 ACQUISITION OF TARGET MARKETS. Notwithstanding any provisions
contained herein to the contrary, TWI shall have the right to acquire the
Wireless Cable Television System and related assets servicing the Target Markets
pursuant to the terms of the Target Markets' Existing Agreements, as the same
may be amended; provided that (i) TWI shall keep WOI fully informed regarding
the status of any negotiations regarding the acquisition of the Target Markets,
and (ii)
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WOI shall have the right to approve any material amendment or waiver of any
matter regarding or material condition of any Target Market Existing Agreement.
5.10 TERMINATION OF CERTAIN AGREEMENTS. On the Closing Date and at the
request of WOI, TWI shall terminate any items described on Schedule 2.9
Affiliate Agreements and employment or other management agreements designated by
WOI.
5.11 EXCESS CONSENTS. If on the date which is six months after the Closing
Date any Channel described in the TWI SEC Filings for any Owned Market is not a
Good Channel (any such Channel being an "Adjustment Channel"), then WOI shall
have recourse to the WOI Common Shares held pursuant to the General Escrow
Agreement (the "General Escrow Shares") in accordance with the terms of the
General Escrow Agreement. In such event, General Escrow Shares having an
aggregate Exchange Price equal to the Stipulated Consent Amount for such
Adjustment Channel shall be delivered to WOI, as further provided in the General
Escrow Agreement.
5.12 WOI LOAN. Promptly after the date of this Agreement, TWI and WOI will
enter into a loan agreement having terms and conditions, and in a form,
reasonably acceptable to TWI and WOI providing for loans (collectively, the
"Bridge Loan") to TWI and its Subsidiaries and having material terms which
include those set forth on the attached Exhibit 5.11.
5.13 PAYMENT OF CERTAIN AMOUNTS. Immediately following the Effective Time,
WOI or the Surviving Corporation shall satisfy TWI's present obligation to pay
$4.5 million to Vision Communications, Inc. ("VCI") by delivery of (i)
$1,800,000 in cash and (ii) 180,000 WOI Common Shares (the "VCI WOI Shares").
WOI's obligations set forth in this Section 5.13 shall be subject to VCI
executing on the Closing Date (i) a Stockholder Letter, and (ii) the Amended
Agreements, with respect to the VCI WOI Shares so issued.
5.14 CAPITAL STRUCTURE. Prior to the Effective Time, TWI shall not alter
its capital structure by stock split, stock dividend, recapitalization or other
event. This Section 5.14 shall not be deemed to prohibit the conversion of the
TWI Preferred Shares into TWI Common Shares in accordance with the terms of the
TWI Preferred Stock.
5.15 GUARANTY OF INTERIM FACILITY. From and after the Effective Time, WOI
hereby guarantees the payment in full by the Surviving Corporation of the
principal amount of, and interest in respect of, the "Interim Facility," as that
term is defined in the TWI SEC Filings. Chase Venture Capital Associates is an
express, third-party beneficiary of the agreement of WOI set forth in this
Section 5.15.
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ARTICLE 6. CONDITIONS PRECEDENT TO MERGER.
The obligation of the parties hereto to consummate the Merger is subject to
fulfillment, or written waiver signed by all parties hereto, of each of the
following conditions precedent on or prior to the Closing Date or the date
specified therein.
6.1 SECURITIES MATTERS. All necessary state securities or blue sky
authorizations shall have been received.
6.2 NO ORDER. No Governmental Authority or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order or
Legal Requirement (whether temporary, preliminary or permanent) which is then in
effect and has the effect of prohibiting the Merger or any of the transactions
contemplated hereby or otherwise making the consummation of the Merger or any of
the transactions contemplated hereby illegal.
6.3 OTHER APPROVALS. The waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been terminated and all
filings required to be made prior to the Effective Time with, and all consents,
approvals, permits and authorizations required to be obtained prior to the
Effective Time from, any Governmental Authority in connection with the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby by TWI, WOI and MergerSub, shall have been made or obtained
(as the case may be) without restrictions.
ARTICLE 7. CONDITIONS PRECEDENT TO CLOSING BY WOI AND MERGERSUB.
The obligations of WOI and MergerSub to consummate the Merger are subject
to fulfillment, or written waiver signed by WOI and MergerSub, of each of the
following conditions precedent on or prior to the Closing Date.
7.1 STOCKHOLDER APPROVAL. The Merger shall have been approved by the
requisite vote of the holders of WOI Common Shares in accordance with applicable
Legal Requirements, its Certificate of Incorporation and Bylaws or any rule or
regulation of any securities exchange or market upon which WOI's securities are
traded or quoted.
7.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by TWI shall be true and correct in all material respects when made and
shall be true and correct in all respects as if originally made on and as of the
Closing Date (except as to such matters which have arisen or occurred, or any
actions taken, since the date of this Agreement and which, in the aggregate, do
not reflect a Material Adverse Effect on TWI as compared with the state of
affairs which would exist if all such representations and warranties were true
and correct in all respects as if originally made on and as of the Closing
Date).
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7.3 TWI DOCUMENTS. TWI shall have delivered the following to WOI in form
and substance satisfactory to WOI and its counsel:
(A) A certificate signed by the chief executive officer of TWI, on
behalf of and in his capacity as an officer of TWI, confirming, on and as of the
Closing Date, that each representation and warranty set forth in Article 2
hereof was true and correct on the date made and is true and correct on and as
of the Closing Date (in each case, other than as set forth in such certificate)
and that TWI is in compliance with the applicable covenants set forth in
Articles 4 and 5 (other than as set forth in such certificate).
(B) An opinion of corporate and FCC counsel to TWI and each Subsidiary
of TWI in form reasonably acceptable to WOI.
(C) The minute books, bylaws, certificate of incorporation and other
organizational documents of TWI and each Subsidiary of TWI.
(D) An Estoppel Certificate from Mississippi EdNet Institute, Inc.
with respect to the "EdNet Agreement" referred to in the TWI SEC Filings.
(E) (i) Waiver of Rule 21.952(c)(3) of the FCC with respect to TWI's
BTA Applications (the "TWI BTA Waiver"); and
(ii) A "final" order by the FCC consenting, without any
materially adverse or onerous condition, to the transfers of control of FCC
Licenses described in Section 4.2. For purposes of this Section, the term
"final" shall mean an order of the FCC which has not been stayed and, by lapse
of time or otherwise, is no longer subject to administrative or judicial
reconsideration, review, appeal or stay.
(F) The resignations described in Section 4.5.
7.4 NO MATERIAL ADVERSE CHANGE. No change shall have occurred with
respect to TWI or any Subsidiary of TWI, or their respective assets, from the
date hereof through the Closing Date which would have a Material Adverse Effect
on TWI.
7.5 ABSENCE OF DISSENTERS' RIGHTS. The Merger shall be approved by all of
the holders of TWI Common Shares issued and outstanding at the Effective Time.
7.6 BONDHOLDERS' CONSENTS. WOI shall have obtained on or before the
Effective Time written consent and/or approval of the Merger, and the related
transactions contemplated by this Agreement, by the holders of the $150,000,000
of 13% Senior Notes due 2003 of WOI (the "WOI Bondholder Consent").
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7.7 TWI OBLIGATIONS PERFORMED. All obligations of TWI to be performed
hereunder through and including the Closing Date shall have been performed in
all material respects.
7.8 STOCK OPTIONS. Each of the Existing Burkhalter Options, the Existing
Byer Options, the Existing Eilers Options and the Existing Woolhiser Options
shall have been surrendered as provided in Section 5.3, and each other stock
option and warrant to purchase TWI Common Shares that has not been exercised
prior to the Effective Time shall have been exercised, canceled or otherwise
terminated.
7.9 TWI PREFERRED STOCK. Each TWI Preferred Share shall have been
converted into TWI Common Shares prior to the Effective Time.
7.10 [RESERVED.]
7.11 STOCKHOLDER DOCUMENTS. Each holder of TWI Common Shares at the
Effective Time (the "TWI Stockholders") shall have executed and delivered to WOI
(a) the General Escrow Agreement, (b) a Stockholder Letter, (c) the Amended
Agreements, (d) the Acquisition Escrow Agreement, if there is any Acquisition
Contingent Amount, and (e) the Market Delivery Escrow Agreement, if the Market
Delivery Requirement is not satisfied with respect to any Owed Market as of the
Effective Time. VCI shall have executed and delivered to WOI the Amended
Agreements and a Stockholder Letter.
7.12 [RESERVED.]
7.13 [RESERVED.]
7.14 [RESERVED.]
7.15 EMPLOYMENT AGREEMENTS. Henry Burkhalter and Bill R. Byer, Jr. shall
have executed employment agreements in the form attached hereto as Exhibit
7.15(a) and 7.15(b), respectively, which agreements shall supersede (and
terminate) any prior employment agreements between such parties and TWI and its
Subsidiaries (collectively, the "Amended Employment Agreements").
ARTICLE 8. CONDITIONS PRECEDENT TO CLOSING BY TWI.
The obligation of TWI to consummate the Merger is subject to fulfillment,
or written waiver signed by TWI, of each of the following conditions precedent
on or prior to the Closing Date.
8.1 STOCKHOLDER APPROVAL. The Merger shall have been approved by the
requisite vote of the holders of the TWI Common Shares in accordance with
applicable Legal Requirements and its Certificate of Incorporation and Bylaws.
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8.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by WOI and/or MergerSub shall be true and correct in all material respects
when made and shall be true and correct in all respects as if originally made on
and as of the Closing Date (except as to such matters which have arisen or
occurred, or any actions taken, since the date of this Agreement and which, in
the aggregate, do not reflect a Material Adverse Effect on WOI as compared with
the state of affairs which would exist if all such representations and
warranties were true and correct in all respects as if originally made on and as
of the Closing Date).
8.3 WOI AND/OR MERGERSUB DOCUMENTS. WOI and/or MergerSub, as the
applicable case may be, shall have executed and delivered to TWI in form and
substance satisfactory to TWI and to counsel:
(A) A certificate signed by the chief executive officer of WOI and
MergerSub, on behalf of and in his respective capacity as an officer of WOI or
MergerSub, confirming, on and as of the Closing Date, that each of the
representations and warranties set forth in Article 3 hereof was true and
correct on the date made and is true and correct on and as of the Closing Date
(in each case, other than as set forth in such certificate), and that WOI and
MergerSub are in compliance with their respective covenants set forth in
Articles 4 and 5 (other than as set forth in such certificate).
(B) An opinion of corporate counsel to WOI and/or MergerSub in forms
reasonably acceptable to TWI.
(C) The General Escrow Agreement (and the Acquisition Escrow
Agreement, if there is any Acquisition Contingent Amount, and the Market
Delivery Escrow Agreement, if the Market Delivery Requirement is not satisfied
with respect to any Owned Market as of the Effective Time), executed by WOI or
the Acquisition Escrow Agent, as the case may be.
(D) The Amended Agreements, executed by WOI and each WOI Initial
Stockholder.
(E) The Amended Employment Agreements, executed by WOI.
(F) A certificate substantially in the form of the attached Exhibit
8.3, executed by WOI.
8.4 WOI AND MERGERSUB OBLIGATIONS PERFORMED. All obligations of WOI and
MergerSub to be performed hereunder through and including the Closing Date shall
have been performed in all material respects.
8.5 NO MATERIAL ADVERSE CHANGE. No change shall have occurred with
respect to WOI or any Subsidiaries of WOI, or their respective assets, from the
date hereof through the
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Closing Date which could reasonably be expected to have a Material Adverse
Effect on WOI or any Subsidiaries of WOI.
ARTICLE 9. TERMINATION.
9.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated and
may be abandoned at any time prior to the Effective Time, before or after the
approval of this Agreement by the stockholders of TWI and WOI, by the mutual
consent of WOI, MergerSub and TWI.
9.2 TERMINATION BY TWI. This Agreement may be terminated and the Merger
may be abandoned by TWI if the Closing conditions set forth in Articles 6 and 8
shall not have been satisfied in full or waived on or before December 31, 1996.
9.3 TERMINATION BY WOI OR MERGERSUB. This Agreement may be terminated and
the Merger may be abandoned by WOI or MergerSub if the Closing conditions set
forth in Articles 6 and 7 shall not have been satisfied in full or waived on or
before December 31, 1996.
9.4 EFFECT OF TERMINATION AND ABANDONMENT.
(A) In the event of the termination of this Agreement and the
abandonment of the Merger pursuant to this Article 9, the remedies set forth
below shall constitute the minimum Damages payable by a party hereunder with
regard to the circumstances set forth therein. The amounts set forth below are
minimum amounts payable hereunder, and nothing contained herein shall preclude
any party from pursuing Damages in excess of the amounts set forth below or
pursuing any equitable remedies.
(B) In the event that this Agreement is terminated solely as a result
of the failure of one or more of the conditions set forth in Sections 7.2, 7.3,
7.5, 7.7, 7.8, 7.9, 7.11, 7.15 or 8.1, or if TWI is obligated to, but does not,
consummate the Merger, then TWI shall deliver to WOI the TWI Default Shares.
The TWI Default Shares shall mean 204,545 TWI Common Shares (subject to
adjustment for any stock split, recapitalization, or related event) plus an
additional number of TWI Common Shares equal to the TWI IPO Adjustment Shares.
The "TWI IPO Adjustment Shares" shall mean additional TWI Common Shares to be
issued upon consummation of any initial public offering of TWI Common Shares
effected following the termination of this Agreement or such failure to
consummate the Merger and prior to the third anniversary of the date of this
Agreement at a price ("IPO Price") less than $11.00 per share (adjusted for
stock splits, recapitalizations and other events) determined as follows: the
product of (a)(i) $11.00 divided by the IPO Price, minus (ii) $1.00, multiplied
by (b) 204,545. The TWI Default Shares shall be issued in a private placement,
with one long-form, and (when, as and if available under applicable Legal
Requirements) one short-form, demand registration right similar to those set
forth in the Stockholders Agreement described in the TWI SEC Filings.
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(C) In the event that this Agreement is terminated solely as a result
of the failure of one or more of the conditions set forth in Sections 7.1, 7.6,
8.2, 8.3 or 8.4, or if WOI is obligated to, but does not, cause MergerSub to
consummate the Merger, then WOI shall deliver to TWI a number of WOI Common
Shares which is equal to $2,250,000 divided by the lesser of (i) the Exchange
Price and (ii) the WOI Market Price determined as of the last day prior to such
delivery. Such shares shall be issued in a private placement, with demand
registration rights similar to those set forth in the Amended Agreements for the
"TruVision Registrable Securities" described therein.
ARTICLE 10. CONDITIONS FOR RELEASE OR ISSUANCE OF GENERAL CONTINGENT AMOUNT
AND WOI CONTINGENT AMOUNT.
10.1 PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES; INDEMNIFICATIONS.
The statements, certifications, representations and warranties made by
TWI in this Agreement, and any schedule or in any exhibit, certificate, or other
instrument delivered by or on behalf of TWI or any Subsidiary of TWI pursuant to
this Agreement shall survive the Merger for a period of six (6) months from the
Closing Date. TWI shall indemnify and hold WOI and Merger Sub and their
respective officers and directors ("WOI Indemnitees") harmless from any and all
Damages relating to or arising from any material breach or material non-
performance of any representation or warranty or covenant of TWI contained in
this Agreement. The statements, certifications, representations and warranties
made by WOI and MergerSub in this Agreement, and any schedule or in any exhibit,
certificate, or other instrument delivered by or on behalf of WOI or any
Subsidiary of WOI pursuant to this Agreement shall survive the Merger for a
period of six (6) months from the Closing Date. WOI shall indemnify and hold
the TWI Stockholders and their respective officers, partners and directors ("TWI
Indemnitees") harmless from any and all Damages relating to or arising from any
material breach or material non-performance of any representation or warranty or
covenant of WOI or MergerSub contained in this Agreement.
10.2 GENERAL CONTINGENT AMOUNT; CONSENTS. The General Contingent Amount
shall be held by the General Escrow Agent pursuant to the terms of the General
Escrow Agreement, which shall remain in effect until the expiration of the
General Escrow Period. The indemnification obligations of TWI shall be limited
to and satisfied solely from the General Contingent Amount in accordance with
the terms of the General Escrow Agreement. Upon the expiration of the General
Escrow Period, the General Contingent Amount to be received by each former
holder of TWI Common Shares shall be proportionately reduced by the amount of
the Claims properly charged against the General Contingent Amount in accordance
with the terms of the General Escrow Agreement and by the Stipulated Consent
Amount for all Adjustment Channels. WOI acknowledges and agrees that there
shall be no remedy or other recourse by WOI or MergerSub, or its successors or
assigns, against TWI or its shareholders, or their successors and assigns of any
nature whatsoever, including, but not limited to breaches of
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representations, warranties or covenants of this Agreement, other than the
General Contingent Amount and other than for fraud, and that the General
Contingent Amount shall be the sole remedy and recourse by WOI or MergerSub
against TWI or its shareholders.
10.3 WOI CONTINGENT AMOUNT. The indemnification obligations of WOI
shall be limited to and satisfied solely by the issuance by WOI of WOI Common
Shares in quantities such that the aggregate Exchange Price of the shares so
issued is equal to the aggregate amount of the Damages deemed paid or satisfied
thereby; provided that in no event will WOI be required to issue pursuant to
this Section 10.3 WOI Common Shares having an aggregate Exchange Price in excess
of $2,530,000. Any dispute as to the indemnity obligations of WOI pursuant to
this Section 10.3 which cannot be resolved by WOI and the "Stockholder
Representative" referred to in General Escrow Agreement (any which resolution
will be binding upon WOI and the TWI Stockholders) will be resolved in the
manner provided in Section 3.3(c) of the General Escrow Agreement. There shall
be no remedy or other recourse by any TWI Stockholder, or of its successors or
assigns, against WOI or its shareholders, or their successors and assigns of any
nature whatsoever, including, but not limited to breaches of representations,
warranties or covenants of this Agreement to be performed by WOI prior to the
Effective Time, other than the WOI Contingent Amount and other than for fraud,
and the WOI Contingent Amount shall be the sole remedy and recourse by the TWI
Stockholders against WOI, MergerSub or their respective shareholders.
ARTICLE 11. DEFINITIONS.
11.1 The terms used in this Agreement have the respective meanings
specified or referred to in this Article 12:
"ACQUISITION CONTINGENT AMOUNTS" shall have the meaning set forth in
Section 1.2(b).
"ACQUISITION ESCROW AGENT" means the "Escrow Agent" referred to in the
Acquisition Escrow Agreement.
"ACQUISITION ESCROW AGREEMENT" shall have the meaning set forth in Section
1.2(h).
"ACQUISITION PROPOSAL" shall have the meaning set forth in Section 4.4.
"ACT" means The Communications Act of 1934, as amended.
"ADJUSTMENT AMOUNT" shall have the meaning set forth in Section 1.2(c).
"ADJUSTMENT SHARES" shall have the meaning set forth in Section 1.2(c).
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"AFFILIATE" means with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such Person, and any other Person who or which, directly or indirectly, has any
equity interest in such Person, is a director, officer or employee of such
Person, or a member of the immediate family of any of the foregoing Persons,
whether or not living under the same roof with such Person.
"AGGREGATE INITIAL SHARE AMOUNT" means 3,373,333, as such amount may be
proportionately increased to reflect any stock dividend, stock split or other
subdivision of the WOI Common Shares which may be effected after the date of
this Agreement and prior to the Effective Time, and as such amount may be
proportionately decreased to reflect any reverse stock split or other
combination of the WOI Common Shares which may be effected after the date of
this Agreement and prior to the Effective Time.
"AMENDED AGREEMENTS" shall have the meaning set forth in Section 1.2(j).
"AMENDED EMPLOYMENT AGREEMENTS" shall have the meaning set forth in Section
7.15.
"ANNUAL FCC REPORT" means the reports which a licensee in the MDS service
is required to file annually with the FCC pursuant to Section 21.911 of the FCC
Rules.
"APPLICATION" means a pending application by TWI or any Subsidiary of TWI
or Institution or other Person to the FCC for a License in any Market.
"AUTHORIZATION" means any license, permit, authorization, franchise, grant,
registration, certificate, consent and waiver awarded to a Person (or which a
Person has the right to acquire in any market) by a Governmental Authority which
is used, useable or held for use in or in conjunction with or otherwise
associated with the provision of wireless cable services.
"BASE SHARES" shall have the meaning set forth in Section 1.2(c).
"BONA FIDE SUBSCRIBER" means a customer or subscriber receiving and paying
for (either as an individual subscriber or as an "equivalent subscriber")
regular monthly basic wireless cable television services of TWI or a Subsidiary
of TWI in an Existing Market, who has paid for at least one month of basic
service at the normal rate applicable to such customer or subscriber, and whose
account receivable for such service does not include any amount overdue (and for
which a bill has been or should have been received by such subscriber) for more
than a total of 75 days' subscription service, except for (i) customers or
subscribers repaying such balances in accordance with a reasonable repayment
arrangement with the Company or (ii) institutional customers or subscribers that
the Company has reasonably determined are not credit risks. Any
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inactive subscriber or active subscriber whose accounts receivable balance
included any amount overdue in excess of 75 days as of March 31, 1996 who
becomes current and (if disconnected) whose service is reconnected prior to
Closing will also be considered a Bona Fide Subscriber. For purposes of this
definition, the number of "equivalent subscribers" in a given multiple dwelling
unit means (i) the number of subscribers in such multiple dwelling unit, times
(ii) the basic bulk rate for such subscribers, divided by (iii) the basic
service rate for individual subscribers in the applicable market.
"BRIDGE LOAN" shall have the meaning set forth in Section 5.12.
"BTA" shall have the meaning set forth in Section 2.10(c).
"CERTIFICATES" shall have the meaning set forth in Section 1.2(i).
"CHANNEL" means a frequency band which may be licensed by the FCC to an
eligible Person for the provision of ITFS, MDS or MMDS service in any Market.
"CHANNEL LEASE" means an agreement pursuant to which the channel capacity
licensed or to be licensed under an Authorization has been leased to TWI, WOI or
a Subsidiary of TWI or WOI or which TWI or a Subsidiary of TWI otherwise has
rights to acquire in any Market.
"CLOSE" OR "CLOSING" means the consummation of the transactions
contemplated in Article 1 hereof as provided for in Section 1.3.
"CLOSING DATE" means the date on which the Closing shall occur as provided
for in Section 1.3.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONSENTS" means the consents (including, without limitation, FCC
Consents), approvals, authorizations, and waivers of any public, government, or
regulatory body, authority, agency, or unit and any and all consents, approvals,
authorizations and waivers from parties to any of the Material Contracts or any
other Person that are (i) required for the lawful consummation of this Agreement
and/or any other transaction contemplated by this Agreement, or (ii) necessary
for WOI and its Subsidiaries to conduct the operations currently conducted by
TWI and its Subsidiaries or to consummate the acquisition of the Target Markets
and fulfill their other obligations after the Closing.
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"COPYRIGHT ACT" means the Copyright Act of 1976, as amended.
"COPYRIGHT OFFICE" means the United States Copyright Office of the Library
of Congress.
"COPYRIGHT RULES" means the rules and regulations promulgated by the
Copyright Office under authority of the Copyright Act, as set forth in Part 201,
Volume 37 of the Code of Federal Regulations.
"DAMAGES" means all losses, obligations, liabilities, settlement payments,
awards, judgments, fines, penalties, damages, deficiencies, court costs, costs
of arbitration or administrative proceedings, attorneys' fees and other
reasonable expenses and costs.
"DGCL" means the Delaware General Corporation Law.
"EFFECTIVE TIME" shall mean the date and time of the filing of the
applicable certificate of merger in the State of Delaware.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESTOPPEL CERTIFICATE" shall have the meaning set forth in Section 4.2.
"EXCHANGE PRICE" means $15.00, as such amount may be proportionately
decreased to reflect any stock dividend, stock split or other subdivision of the
WOI Common Shares which may be effected after the date of this Agreement and
prior to the Effective Time, and as such amount may be proportionately increased
to reflect any reverse stock split or other combination of the WOI Common Shares
which may be effected after the date of this Agreement and prior to the
Effective Time.
"EXISTING MARKETS" shall mean Jackson, Delta, Gulf Coast, Tupelo,
Hattiesburg, Natchez, Meridian, Starkville and Oxford, Mississippi and Demopolis
and Tuscaloosa, Alabama.
"FAA" means the Federal Aviation Administration or any successor
agency(ies) with jurisdiction over towers and other antenna structures.
"FAA RULES" means the rules promulgated by the FAA and applicable to
antenna towers and other structures.
"FCC" means the Federal Communications Commission.
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"FCC CONSENT" shall mean the consent of the FCC to the transfer of
control or assignment of any MDS and MMDS License.
"FCC LICENSE" shall mean an FCC-issued Authorization to construct and/or
operate a MDS, MMDS, low power television or ITFS facility, including any
special temporary authority.
"FCC PROCEEDING" means a Proceeding relating to Applications or Licenses.
"FCC RULES" means the rules and regulations promulgated by the FCC under
authority of the Act, as set forth in Volume 47 of the Code of Federal
Regulations.
"FLIPPIN ACQUISITION" means the purchase and sale of assets relating to the
Flippin, Tennessee market pursuant to the Flippin Purchase Agreement.
"FLIPPIN PURCHASE AGREEMENT" means the Purchase and Sale Agreement dated as
of November 7, 1995 between TWI and Heartland Wireless Communications, Inc., as
such Agreement may be amended or otherwise modified after the date of this
Agreement as permitted by this Agreement and prior to the Effective Time or
after the Effective Time.
"GAAP" means generally accepted accounting principles in effect as of the
applicable time or the date of any financial statements in the United States of
America. The term "generally accepted accounting principles" shall mean
accounting principles which are (a) consistent with the principles promulgated
or adopted by the Financial Accounting Standards Board and its predecessors as
generally accepted accounting principles, and (b) such that a certified public
accountant would, insofar as the use of accounting principles is pertinent, be
in a position to deliver an unqualified opinion as to financial statements in
which such principles have been properly applied.
"GAAP DEBT" means indebtedness for borrowed money (other than indebtedness
to the United States government incurred in connection with the "BTA Auction"
referred to in the TWI SEC Filings) on March 31, 1996 which would be properly
reportable as such on a consolidated balance sheet for TWI and its Subsidiaries
prepared in accordance with GAAP.
"GADSDEN ACQUISITION" means the purchase and sale of assets relating to the
Gadsden, Alabama market pursuant to the Flippin Purchase Agreement.
"GADSDEN CONTINGENT AMOUNT" shall have the meaning set forth in Section
1.2(b).
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"GADSDEN PURCHASE AGREEMENT" means the Purchase and Sale Agreement
dated as of February 15, 1996 between TWI and Gadsden Wireless Cable
Corporation, Inc., as such Agreement may be amended or otherwise modified after
the date of this Agreement as permitted by this Agreement and prior to the
Effective Time or after the Effective Time.
"GENERAL CONTINGENT AMOUNT" shall have the meaning set forth in Section
1.2(b).
"GENERAL ESCROW AGENT" means the "Escrow Agent" referred to in the General
Escrow Agreement.
"GENERAL ESCROW AGREEMENT" shall have the meaning set forth in Section
1.2(h).
"GENERAL ESCROW PERIOD" means the "Escrow Period," as that term is defined
in the General Escrow Agreement.
"GENERAL ESCROW SHARES" has the meaning set forth in Section 5.11.
"GOOD CHANNEL" has the meaning set forth in Section 1.2(b).
"GOVERNMENTAL AUTHORITY" means any federal, state, local, municipal,
foreign or other government or any federal, state or local regulatory authority.
"GRANTED LICENSE" has the meaning set forth in Section 1.2(b).
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976.
"HUNTSVILLE ACQUISITION" means the purchase and sale of assets relating to
the Huntsville, Alabama market pursuant to the Huntsville Purchase Agreement.
"HUNTSVILLE CONTINGENT AMOUNT" shall have the meaning set forth in Section
1.2(b).
"HUNTSVILLE PURCHASE AGREEMENT" means the Purchase and Sale Agreement dated
as of February 6, 1996 among TWI, Madison Communications, Inc. and Beasley
Communications, Inc., as such Agreement may be amended or otherwise modified
after the date of this Agreement and prior to the Effective Time as permitted by
this Agreement or after the Effective Time.
"INSTITUTION" shall mean an accredited institution or a governmental
organization engaged in the formal education of enrolled students, or a non-
profit organization whose
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purposes are educational, which is a qualified applicant for any Channel and has
entered into a Channel Lease.
"IRS" means the Internal Revenue Service.
"ITFS" means Instructional Television Fixed Service.
"JACKSON ACQUISITION" means the purchase and sale of assets relating to the
Jackson, Tennessee market pursuant to the Jackson Purchase Agreement.
"JACKSON CONTINGENT AMOUNT" shall have the meaning set forth in Section
1.2(b).
"JACKSON PURCHASE AGREEMENT" means the Purchase and Sale Agreement dated
February 7, 1996 between TWI and SkyView Wireless Cable, Inc., as such Agreement
may be amended or otherwise modified after the date of this Agreement as
permitted by this Agreement and prior to the Effective Time or after the
Effective Time.
"JOINT VENTURE" means a joint venture, partnership, limited liability
company or other similar arrangement, whether in corporate, partnership or other
legal form; provided that in no event shall any corporate Subsidiary of any
Person be considered a Joint Venture to which such Person is a party.
"LEGAL REQUIREMENT" means any federal, state, local, municipal, foreign or
other law, statute, legislation, act, constitution, ordinance, code, treaty,
rule, regulation or FCC guideline applicable to or against TWI or any Subsidiary
of TWI, or to which TWI will become subject upon the acquisition of any Target
Market or Other Market.
"LIABILITIES" means damages, obligations, claims, demands, judgments or
settlements of any nature or kind, known or unknown, fixed, accrued, absolute or
contingent, liquidated or unliquidated, including all costs and expenses (legal,
accounting or otherwise).
"LICENSES" means all FCC licenses, conditional licenses, construction
permits, authorizations and approvals which are required to transmit commercial
programming, educational programming or any other use currently authorized by
any legal requirement.
"LIENS" means any lien, pledge, hypothecation, charge, mortgage, deed of
trust, security interest or encumbrance against any assets or properties of any
Person or any of its Subsidiaries (or assets or properties that any Person or
any of its Subsidiaries has rights to acquire).
"MARKETS" means the Existing Markets and Target Markets, or any of them.
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"MARKET DELIVERY CONTINGENT SHARES" shall have the meaning set forth
in Section 1.2(b).
"MARKET DELIVERY ESCROW AGENT" shall have the meaning set forth in Section
1.2(h).
"MARKET DELIVERY ESCROW AGREEMENT" shall have the meaning set forth in
Section 1.2(h).
"MARKET DELIVERY REQUIREMENT" shall have the meaning set forth in Section
1.2(b).
"MATERIAL ADVERSE EFFECT" with respect to any Person means any event or
circumstance which results in or is reasonably likely to result in a material
adverse change in (i) the financial condition, business, operations or
properties of such person and its Subsidiaries, taken as a whole, other than
general economic change over which neither such person nor any Subsidiary of
such person has control; (ii) the ability of such person or any Subsidiary of
such person prior to the Effective Time to perform its obligations under this
Agreement, or (iii) the validity or enforceability of this Agreement.
"MATERIAL CONTRACTS" shall mean the Target Market Existing Agreements, the
"EdNet Agreement" referred to in the TWI SEC Filings, and any agreement the
termination of which prior to the end of its stated term, or the breach or
default under which by any person, could reasonably be expected to have a
Material Adverse Effect on TWI.
"MDS" shall mean a Multipoint Distribution Service, including (unless
otherwise specified) the former Operational Fixed Service ("OFS") H-channels.
"MEMPHIS ACQUISITION" means the purchase and sale of assets relating to the
Memphis, Tennessee market pursuant to the Memphis Purchase Agreement.
"MEMPHIS CONTINGENT AMOUNT" shall have the meaning set forth in Section
1.2(b).
"MEMPHIS PURCHASE AGREEMENT" means the Purchase and Sale Agreement dated as
of November 7, 1995 between TWI and American Wireless Systems, Inc., as such
Agreement may be amended or otherwise modified after the date of this Agreement
as permitted by this Agreement and prior to the Effective Time or after the
Effective Time.
"MERGER" means the merger described in the recitals.
"MERGER SHARES" shall have the meaning set forth in Section 1.2(c).
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"MMDS" means the Multichannel Multipoint Distribution Service.
"NET GAAP DEBT" means (i) GAAP Debt minus (ii) cash of TWI and its
Subsidiaries as of March 31, 1996 on a consolidated basis in accordance with
GAAP.
"NON-CONTINGENT AMOUNT" shall have the meaning set forth in Section 1.2(b).
"ORDER" means any order, judgment, injunction, or FCC ruling issued, made,
entered or rendered by any court, administrative agency or other Governmental
Authority or by any arbitrator as to which a person or any Subsidiary of such
person is a party or will become a party upon this consummation of any
acquisition in a Target Market or Other Market.
"OTHER MARKETS" shall mean Chattanooga, Tennessee; Hot Springs, Arkansas;
Lawrenceburg, Tennessee; and Jacksonville, North Carolina.
"OUTSTANDING TWI SHARES" shall have the meaning set forth in Section
1.2(d).
"OWNED MARKET" means each Existing Market (other than Tuscaloosa, Alabama)
and (a) Flippin, Tennessee, if the Flippin Acquisition is consummated prior to
the Effective Time, (b) Gadsden, Alabama, if the Gadsden Acquisition is
consummated prior to the Effective Time, (c) Huntsville, Alabama, if the
Huntsville Acquisition is consummated prior to the Effective Time, (d) Jackson,
Tennessee, if the Jackson Acquisition is consummated prior to the Effective
Time, and (e) Memphis, Tennessee, if the Memphis Acquisition is consummated
prior to the Effective Time.
"PBGC" shall have the meaning set forth in Section 2.6.
"PERMITTED NET GAAP DEBT" means $10,050,000.
"PERSON" OR "PERSON" means any individual, corporation, partnership, joint
venture, estate, trust, cooperative, foundation, union, syndicate, league,
consortium, coalition, committee, society, firm, company or other enterprise,
association, organization or other entity or Governmental Authority.
"PER-SHARE PORTION" for any Outstanding TWI Share means 1.0 divided by the
number of Outstanding TWI Shares.
"PRIOR OFFERING EXPENSES" means all costs and expenses of TWI paid or
accrued through the date hereof associated with the preparation of the TWI SEC
Filings and the proposed sale of securities of TWI to be registered thereunder,
other than accounting and engineering costs.
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"PROCEEDING" means any suit, litigation, arbitration, proceeding
(including any civil, criminal, administrative, investigative or appellate
proceeding or FCC Proceeding).
"PROXY STATEMENT" shall have the meaning set forth in Section 5.1.
"REQUIRED CONSENTS" means, with respect to each Wireless Cable Television
System, Consents with respect to twelve (12) authorized Channels in the
applicable Market.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SEVERANCE OBLIGATIONS" shall have the meaning set forth in Section 2.9.
"SITE" means a wireless cable television site with respect to which TWI is
operating or has rights to acquire a Wireless Cable Business and transmitting
programming to subscribers in connection therewith.
"SPECIFIED ACQUISITIONS" means the Flippin Acquisition, the Gadsden
Acquisition, the Huntsville Acquisition, the Jackson Acquisition and the Memphis
Acquisition.
"SITE LEASE" shall mean an agreement for the lease of real estate or tower
space permitting the construction of a transmitter on a Site.
"SITE OPTION" shall mean an option or right to obtain a Site Lease.
"SPECIFIED MARKETS" shall mean Flippin, Tennessee, Memphis, Tennessee,
Huntsville, Alabama, Jackson, Tennessee and Gadsden, Alabama.
"STIPULATED CONSENT AMOUNT" for any Adjustment Channel means the product of
(a) a fraction, the numerator of which is one and the denominator of which is
the number of "Channels" set forth for the Market to which such Adjustment
Channel relates on the attached Schedule A, multiplied by (b) $43.00, and
further multiplied by (c) the number of "LOS Households" set forth for such
Market on the attached Schedule A.
"STOCKHOLDER LETTER" shall have the meaning set forth in Section 1.2(i).
"SUBSIDIARY" of any person means any other person, of which a majority of
the capital stock or other equity interests is owned directly or indirectly by
such first person.
"SURVIVING CORPORATION" shall have the meaning set forth in Section 1.1.
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<PAGE>
"TARGET MARKETS" means the Specified Markets and the Other Markets.
"TARGET MARKET EXISTING AGREEMENTS" shall mean the agreements between TWI,
as purchaser, and the owners of the Wireless Cable Television Systems (or of the
capital stock of such owners) in the Target Markets, as described in the TWI SEC
Filings, copies of which agreements are appended hereto, as the same may be
amended or otherwise modified in accordance with this Agreement.
"TWI BTA WAIVER" shall have the meaning set forth in Section 7.3.
"TWI CHANNEL LEASE" means any Channel Lease under which TWI or any of its
Subsidiaries is the lessee or which TWI or any of its Subsidiaries has the right
to acquire.
"TWI COMMON SHARES" shall mean all of the issued and outstanding capital
stock of TWI immediately before the Merger.
"TWI EMPLOYEES" shall have the meaning set forth in Section 2.6(a).
"TWI LESSOR" shall have the meaning set forth in Section 2.10(a).
"TWI PLAN" shall have the meaning set forth in Section 2.6(a).
"TWI LESSOR APPLICATION" shall have the meaning set forth in Section
2.10(b).
"TWI PREFERRED SHARES" shall have the meaning set forth in Section 2.3.
"TWI PREFERRED STOCK" shall have the meaning set forth in Section 2.3.
"TWI REPRESENTATIVES" shall have the meaning set forth in Section 4.4.
"TWI SEC FILINGS" means Form S-1 Registration Statements (File Nos. 333-
1282 and 333-01284) filed with the SEC on April 11, 1996.
"TWI STOCK OPTION PLANS" shall have the meaning set forth in Section 5.3.
"TWI STOCKHOLDERS" shall have the meaning set forth in Section 7.11.
"VCI" shall have the meaning set forth in Section 5.13.
"VCI WOI SHARES" shall have the meaning set forth in Section 5.13.
B-43
<PAGE>
"WIRELESS CABLE BUSINESS" means the business of transmitting
programming to subscribers through the use of MMDS, MDS or ITFS channels.
"WIRELESS CABLE TELEVISION SYSTEMS" means all wireless cable television
systems or prospective wireless cable television systems, whether or not
operational or constructed, and all assets relating thereto relative to the
Markets.
"WOI" shall have the meaning set forth in the Recitals.
"WOI BONDHOLDER CONSENT" shall have the meaning set forth in Section 7.6.
"WOI CHANNEL LEASE" means any Channel Lease under which WOI or any of its
Subsidiaries is the lessee or which WOI or any of its Subsidiaries has the right
to acquire.
"WOI COMMON SHARES" means shares of common stock, $.01 par value per share,
WOI.
"WOI CONTINGENT AMOUNT" shall have the meaning set forth in Section 1.2(b).
"WOI EMPLOYEE" shall have the meaning set forth in Section 3.7(a).
"WOI LESSOR" shall have the meaning set forth in Section 3.5(a).
"WOI LESSOR APPLICATION" shall have the meaning set forth in Section
3.5(b).
"WOI MARKET PRICE" for any day means the average of the closing prices for
WOI shares as reported on the NASDAQ NMS on the 20 trading days prior to such
day. If WOI Common Shares do not trade on any trading day during such 20-
trading-day-period, the closing price for such day will be deemed to be the
closing price on the trading day preceding such trading day.
"WOI PLAN" shall have the meaning set forth in Section 3.7(a).
"WOI SEC FILINGS" shall have the meaning set forth in Section 4.7.
"WOI STOCKHOLDERS MEETING" shall have the meaning set forth in Section 5.1.
11.2 DEFINED TERMS. In this Agreement, all definitions shall be
equally applicable to both the singular and the plural forms.
B-44
<PAGE>
ARTICLE 12. MISCELLANEOUS.
12.1 EXPENSES OF THE TRANSACTION. Each of TWI, WOI and MergerSub
agrees to pay its own fees and expenses in connection with this Agreement and
the transactions hereby contemplated.
12.2 FURTHER ASSURANCES. Each of TWI, WOI and MergerSub agrees that
it will, at any time and from time to time after the Closing Date, upon the
request of the other party, do, execute, acknowledge and deliver, or will cause
to be done, executed, acknowledged and delivered, all such further acts,
assignments, transfers, conveyances, powers of attorney and assurances as may be
reasonably required from time to time in order to effectuate the provisions and
purposes of this Agreement.
12.3 NOTICES. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given or delivered
(a) when delivered personally or by private courier, (b) when actually delivered
by registered United States mail, return receipt requested, or (c) when sent by
telecopy (provided, however, that, it is telephonically or electronically
confirmed), addressed as follows:
If to WOI, to:
11301 Industriplex Boulevard
Suite 4
Baton Rouge, LA 70809-5400
Attention: Hans J. Sternberg
Sean Reilly
Telecopy: (504) 293-5400
With copy (which copy will not constitute notice to WOI) to:
John Kuehn, Esq.
Kirkland & Ellis
153 E. 53rd Street
New York, New York 10022
Telecopy: (212) 446-4900
If to TWI, to:
181 Kroger Drive
Suite H
Jackson, MS 39218
Attention: Henry M. Burkhalter
Telecopy: (601) 936-1517
B-45
<PAGE>
With copy (which copy will not constitute notice to TWI) to:
Samuel A. Fishman
Latham & Watkins
885 Third Avenue
Suite 1000
New York, New York 10022
Telecopy: (212) 751-4864
or such other address as such party may indicate by a notice delivered to the
other parties hereto in the manner herein provided.
12.4 NO MODIFICATION EXCEPT IN WRITING. This Agreement shall not be
changed, modified, or amended except by a writing signed by the party to be
charged and this Agreement may not be discharged except by performance in
accordance with its terms or by a writing signed by the party to which
performance is to be rendered.
12.5 ENTIRE AGREEMENT. This Agreement, together with the Schedules
and Exhibits hereto, sets forth the entire agreement and understanding among the
parties as to the subject matter hereof. The execution and delivery of this
Agreement shall have no effect on the confidentiality agreements executed as of
April 19, 1996, among WOI, TWI and Heartland Wireless Communications, Inc.
12.6 SEVERABILITY. If any provision of this Agreement or the
application of any provision hereof to any person or in any circumstances is
held invalid, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected unless the
provision held invalid shall substantially impair the benefits of the remaining
portions of this Agreement.
12.7 ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns. This Agreement may not be assigned by any party hereto except with the
prior written consent of the other parties. Any purported assignment contrary to
the terms of this Agreement shall be void.
12.8 CHOICE OF LAW. This Agreement shall be deemed to have been made
in, and shall be construed in accordance with the laws of the State of Delaware,
and its validity, construction, interpretation and legal effect shall be
governed by the laws of the State of Delaware applicable to contracts entered
into and performed entirely therein.
12.9 CAPTIONS; CONSTRUCTION. The captions appearing in this Agreement
are inserted only as a matter of convenience and for reference and in no way
define, limit or describe the scope and intent of this Agreement or any of the
provisions hereof. All uses of the term
B-46
<PAGE>
"including" shall be construed as descriptive and not a limitation of the item
described. All words used herein shall be construed to be of such gender as the
circumstances require.
12.10 SPECIFIC PERFORMANCE. In the event of a breach of any obligations
under this Agreement, each party hereto, in addition to being entitled to
exercise all rights provided herein or granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The parties hereto agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach of any of the
provisions of this Agreement.
12.11 SCHEDULES AND EXHIBITS. The Schedules and Exhibits referred to
herein attached hereto are hereby made a part of this Agreement.
12.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original. This Agreement may
also be executed by facsimile signature.
[SIGNATURE PAGE(S) FOLLOWS]
B-47
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the day and year first above written.
TWI:
TRUVISION WIRELESS, INC.
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
-------------------------------------------
WOI:
WIRELESS ONE, INC.
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
-------------------------------------------
MERGERSUB:
WIRELESS ONE MERGERSUB, INC.
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
-------------------------------------------
B-48
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Market Channels LOS Households
- ------ -------- --------------
<S> <C> <C>
Jackson, MS 32 179,000
Delta, MS 32 92,800
Gulf Coast, MS 32 121,700
Tupelo, MS 32 90,600
Hattiesburg, MS 32 88,800
Natchez, MS 32 60,000
Meridian, MS 32 44,800
Starkville, MS 32 65,200
Oxford, MS 32 53,600
Memphis, TN 33 381,200
Huntsville, AL 32 181,900
Jackson, TN 32 96,500
Flippin, TN 32 41,300
Demopolis, AL 32 15,600
Gadsden, AL 32 133,300
</TABLE>
B-49
<PAGE>
EXHIBIT 2.2
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
-----------------------------------------------
THIS FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this "AMENDMENT") is
made as of July 29, 1996 among Truvision Wireless, Inc., a Delaware corporation
("TWI"), Wireless One Mergersub, Inc., a Delaware corporation ("WOI MERGERSUB")
and Wireless One, Inc., a Delaware corporation ("WOI") .
RECITALS
--------
A. The parties hereto entered into an Agreement and Plan of Merger dated
as of April 25, 1996 (the "AGREEMENT").
B. The parties to the Agreement desire to amend the Agreement as provided
herein, among other things, in light of TWI's having granted certain stock
options to certain of its key employees and to correct certain typographical
errors.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Except as otherwise specifically provided herein, all capitalized terms
used herein shall have the respective meanings given to them in the Agreement.
2. Section 5.3 of the Agreement is amended as follows:
a. Section 5.3(b) shall be replaced by the following:
At the Closing, upon and in consideration for the surrender,
cancellation and exchange of the options to acquire TWI Common Shares
which are presently held by Henry M. Burkhalter (the "Existing
Burkhalter Options"), WOI will issue to Burkhalter, pursuant to WOI's
1995 Long-Term Performance Incentive Plan, a copy of which is attached
hereto as Exhibit 9, fully-vested options which will entitle him to
---------
acquire an aggregate of 78,015 WOI Common Shares for an exercise price
of $6.82 per WOI Common Share and which will be governed by the terms
and conditions of an Agreement Evidencing a Grant of a Non-Qualified
Stock Option, substantially in the form attached as Exhibit 10.
----------
b. Section 5.3(c) shall be replaced by the following:
At the Closing, upon and in consideration for the surrender,
cancellation and exchange of the options to acquire TWI Common Shares
which are presently held by Bill R. Byer, Jr. (the "Existing Byer
Options"), WOI will issue to Byer, pursuant to WOI's 1995 Long-Term
Performance Incentive Plan, a copy of which is attached hereto as
Exhibit 9, fully-vested options which will entitle him to acquire an
---------
aggregate of 62,411 WOI Common Shares for an exercise price of $6.82
per WOI Common Share and which will be governed by the terms and
conditions of an Agreement Evidencing a Grant of a Non-Qualified Stock
Option, substantially in the form attached as Exhibit 10.
----------
<PAGE>
c. Section 5.3(d) shall be replaced by the following:
At the Closing, upon and in consideration for the surrender,
cancellation and exchange of the options to acquire TWI Common Shares
which are presently held by Laurence O. Woolhiser, Jr. (the "Existing
Woolhiser Options"), WOI will issue to Woolhiser, pursuant to WOI's
1995 Long-Term Performance Incentive Plan, a copy of which is attached
hereto as Exhibit 9, fully-vested options which will entitle him to
---------
acquire an aggregate of 22,000 WOI Common Shares for an exercise price
of $6.82 per WOI Common Share and which will be governed by the terms
and conditions of an Agreement Evidencing a Grant of a Non-Qualified
Stock Option, substantially in the form attached as Exhibit 10.
----------
d. Section 5.3(e) shall be replaced by the following:
At the Closing, upon and in consideration for the surrender,
cancellation and exchange of the options to acquire TWI Common Shares
which are presently held by Walter Eilers (the "Existing Eilers
Options"), WOI will issue to Eilers, pursuant to WOI's 1995 Long-Term
Performance Incentive Plan, a copy of which is attached hereto as
Exhibit 9, fully-vested options which will entitle him to acquire an
---------
aggregate of 14,467 WOI Common Shares for an exercise price of $6.82
per WOI Common Share and which will be governed by the terms and
conditions of an Agreement Evidencing a Grant of a Non-Qualified Stock
Option, substantially in the form attached as Exhibit 10.
----------
e. Section 5.3(f) shall be redesignated as 5.3(j) and such
Section 5.3(j) shall read as follows:
At the Effective Time, the Existing Burkhalter Options, the
Existing Byer Options, the Existing Woolhiser Options, the Existing
Eilers Options, the Existing Balius Options, the Existing Goodwin
Options, the Existing Robertson Options, and the Existing Pitts
Options will be cancelled. The number of WOI Common Shares covered by
the options described in clauses (b), (c), (d), (e), (f), (g), (h) and
(i) above will be proportionately increased, and the exercise price
per share thereunder will be proportionately reduced, to reflect any
stock dividend, stock split or other subdivision of the WOI Common
Shares effected after the date of this Agreement and prior to the
Effective Time. The number of WOI Common Shares covered by the
options described in clauses (b), (c), (d), (e), (f), (g), (h) and (i)
above will be proportionately reduced, and the exercise price per
share thereunder will be proportionately increased, to reflect any
reverse stock split or other combination of the WOI Common Shares
effected after the date of this Agreement and prior to the Effective
Time.
f. A new Section 5.3(f) shall be added as follows:
At the Closing, upon and in consideration for the surrender,
cancellation and exchange of the options to acquire TWI Common Shares
which at the time of the Closing are held by Kelly Balius (the
"Existing Balius Options"), WOI will issue to Balius, pursuant to
WOI's 1995 Long-Term Performance Incentive Plan, a copy of which is
attached hereto as Exhibit 9, fully-vested options which will entitle
---------
him to acquire an aggregate of 11,000 WOI Common Shares for an
exercise price of $6.82
2
<PAGE>
per WOI Common Share and which will be governed by the terms and
conditions of an Agreement Evidencing a Grant of a Non-Qualified Stock
Option, substantially in the form attached as Exhibit 10.
----------
g. A new Section 5.3(g) shall be added as follows:
At the Closing, upon and in consideration for the surrender,
cancellation and exchange of the options to acquire TWI Common Shares
which at the time of the Closing are held by Douglas Goodwin (the
"Existing Goodwin Options"), WOI will issue to Goodwin, pursuant to
WOI's 1995 Long-Term Performance Incentive Plan, a copy of which is
attached hereto as Exhibit 9, fully-vested options which will entitle
---------
him to acquire an aggregate of 1,833 WOI Common Shares for an exercise
price of $6.82 per WOI Common Share and which will be governed by the
terms and conditions of an Agreement Evidencing a Grant of a Non-
Qualified Stock Option, substantially in the form attached as Exhibit
-------
10.
--
h. A new Section 5.3(h) shall be added as follows:
At the Closing, upon and in consideration for the surrender,
cancellation and exchange of the options to acquire TWI Common Shares
which at the time of the Closing are held by Sam Robertson (the
"Existing Robertson Options"), WOI will issue to Robertson, pursuant
to WOI's 1995 Long-Term Performance Incentive Plan, a copy of which is
attached hereto as Exhibit 9, fully-vested options which will entitle
---------
him to acquire an aggregate of 1,833 WOI Common Shares for an exercise
price of $6.82 per WOI Common Share and which will be governed by the
terms and conditions of an Agreement Evidencing a Grant of a Non-
Qualified Stock Option, substantially in the form attached as Exhibit
-------
10.
--
i. A new Section 5.3(i) shall be added as follows:
At the Closing, upon and in consideration for the surrender,
cancellation and exchange of the options to acquire TWI Common Shares
which at the time of the Closing are held by Jerrod Pitts (the
"Existing Pitts Options"), WOI will issue to Pitts, pursuant to WOI's
1995 Long-Term Performance Incentive Plan, a copy of which is attached
hereto as Exhibit 9, fully-vested options which will entitle him to
---------
acquire an aggregate of 3,667 WOI Common Shares for an exercise price
of $6.82 per WOI Common Share and which will be governed by the terms
and conditions of an Agreement Evidencing a Grant of a Non-Qualified
Stock Option, substantially in the form attached as Exhibit 10.
----------
3. Section 7.8 of the Agreement is amended to read as follows:
STOCK OPTIONS. Each of the Existing Burkhalter Options, the
Existing Byer Options, the Existing Woolhiser Options, the Existing
Eilers Options, the Existing Balius Options, the Existing Goodwin
Options, the Existing Robertson Options and the Existing Pitts Options
shall have been surrendered as provided in Section 5.3, and each other
stock option and warrant to purchase TWI Common Shares that has not
been exercised prior to the Effective Time shall have been exercised,
canceled or otherwise terminated.
3
<PAGE>
4. In Article 11 of the Agreement, in the definition of "Aggregate
Initial Share Amount", the number 3,373,333 is replaced with the number
3,363,333.
5. The definition of the term "Damages" set forth in Section
11.1 shall be replaced by the following:
"DAMAGES" means all losses, obligations, liabilities, settlement payments,
Prior Offering Expenses to the extent they exceed $2,924,820, awards,
judgments, fines, penalties, damages, deficiencies, court costs, costs of
arbitration or administrative proceedings, attorney's fees and other
reasonable expenses and costs.
6. In order to correct certain typographical errors, certain
Sections of the Agreement are hereby amended as follows:
a. The first recital to the Agreement shall be replaced by
the following:
WHEREAS, the respective Boards of Directors of TWI,
MergerSub and WOI have approved the merger of MergerSub with and
into TWI pursuant and subject to the terms and conditions of this
Agreement (the "Merger"), whereby each issued and outstanding
share of common stock, par value $0.01 per share, of TWI at the
Effective Time (a "TWI Common Share") will be converted into the
right to receive the Per-Share Portion of the WOI Common Shares
which are issuable in connection with the Merger as provided in
this Agreement (as such shares may be adjusted in accordance with
the terms and conditions of this Agreement); and
b. The final paragraph of Section 1.2(b) shall be replaced
by the following:
The respective quantities of WOI Common Shares which constitute
the General Contingent Amount, the Gadsden Contingent Amount, the
Huntsville Contingent Amount, the Jackson Contingent Amount, the
Memphis Contingent Amount and any Market Delivery Contingent
Shares will be (x) proportionately increased to reflect any stock
dividend, stock split or other subdivision of the WOI Common
Shares effected after the date of this Agreement and prior to the
Effective Time, and (y) proportionately decreased to reflect any
reverse stock split or other combination of the WOI Common Shares
which is effected after the date of this Agreement and prior to
the Effective Time.
c. Section 1.2(c)(i) shall be replaced by the following:
the product of (A) 14,000 minus the number of Bona Fide
Subscribers in the Existing Markets on March 31, 1996 multiplied
by (B) $1,275; plus
----
d. Section 1.2(h)(iv) shall be replaced by the following:
4
<PAGE>
(iv) WOI Common Shares representing the Market Delivery
Contingent Shares for the Non-Delivery Market(s), if any, shall
be held by the Market Delivery Escrow Agent pursuant to the terms
of an escrow agreement (the "Market Delivery Escrow Agreement")
which will provide for the release of the WOI Common Shares
constituting the Market Delivery Contingent Shares for each Non-
Delivery Market upon the satisfaction of the Market Delivery
Requirement with respect to such Non-Delivery Market, in
accordance with procedural, dispute and resolution mechanisms and
other provisions comparable to those set forth in the General
Escrow Agreement.
e. The initial sentence of Section 2.2 shall be replaced by
the following:
BarTel, Inc. is the only Subsidiary of TWI.
f. The initial sentence of Section 2.3 shall be replaced by
the following:
The authorized capital stock of TWI as of the date of this
Agreement consists of 8,077,778 shares, comprised of (i)
6,000,000 shares of common stock, $0.01 par value per share, of
which 2,400,000 are issued and outstanding, and (ii) 2,077,778
shares of preferred stock, $0.01 per share, of which 1,100,000
shares ("TWI Preferred Shares"), consisting of 800,000 shares of
Series A Preferred Stock and 300,000 shares of Series B Preferred
Stock, (collectively, "TWI Preferred Stock"), have been issued
and are convertible into 2,200,000 TWI Common Shares.
g. The final sentence of Section 2.8 shall be replaced by
the following:
No TWI SEC Filing contains any untrue statement of a material
fact or omits to state a material fact necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading (i) as of the time such document
was filed and (ii) as of the date of this Agreement, in each case
except as set forth on Schedule 2.8 or in the amendments to the
------------
TWI SEC Filings filed with the SEC on April 23, 1996.
h. The fourth sentence of Section 3.3 shall be replaced by
the following:
Except as disclosed in the WOI SEC Filings, no Person has rights
to the registration of any securities of WOI or any Subsidiary of
WOI.
i. Section 4.1(i) shall be replaced by the following:
(i) TWI will not, and will not cause any of its
Subsidiaries to, increase in any manner the base compensation of,
or enter into any new bonus or incentive agreement or arrangement
with, any of its directors, officers or employees, or pay bonuses
to any such director, officer
5
<PAGE>
or employee, to the extent the aggregate of the foregoing for all
such persons exceeds $50,000, or pay any salaries except in the
ordinary course of business, except as required under any
existing written employment agreement with any officer, director
or employee of TWI or any Subsidiary of TWI, except with respect
to new employees who are compensated at a rate of less than
$50,000 per annum.
j. Section 5.4 shall be replaced by the following:
5.4 EFFORTS TO CONSUMMATE SPECIFIED ACQUISITIONS. If
at the Effective Time any of the Specified Acquisitions has not
been consummated and the related Target Market Existing Agreement
has not been terminated, then after the Effective Time WOI will
use, and will cause the Surviving Corporation to use, reasonable
efforts to consummate such Specified Acquisition and to cause the
Market Delivery Requirement to be satisfied with respect to such
Specified Acquisition.
k. The first sentence of Section 10.3 shall be replaced by
the following:
The indemnification obligations of WOI shall be limited to and
satisfied solely by the issuance by WOI of WOI Common Shares
(collectively the "WOI Contingent Amount") in quantities such
that the aggregate Exchange Price of the shares so issued is
equal to the aggregate amount of the Damages deemed paid or
satisfied thereby; provided that in no event will WOI be required
to issue pursuant to this Section 10.3 WOI Common Shares having
an aggregate Exchange Price in excess of $2,530,000.
l. The definition of the term "Merger Shares" set forth in
Section 11.1 shall be replaced by the following:
"MERGER SHARES" shall have the meaning set forth in Section
1.2(b).
m. The definition of the term "WOI Contingent Amount" set
forth in Section 11.1 shall be replaced by the following:
"WOI CONTINGENT AMOUNT" shall have the meaning set forth in
Section 10.3.
n. The definition of the term "WOI SEC Filings" set forth
in Section 11.1 shall be replaced by the following:
"WOI SEC FILINGS" shall have the meaning set forth in Section
3.4.
o. The address for notices to TWI set forth in Section 12.3
shall be replaced by the following:
1080 River Oaks Drive
Suite A150
Jackson, MS 39208
6
<PAGE>
Attention: Henry M. Burkhalter
Telecopy: (601) 936-1517
7. Except as specifically provided herein, the Agreement shall
remain unchanged and in full force and effect.
[SIGNATURE PAGE FOLLOWS]
7
<PAGE>
IN WITNESS WHEREOF, TWI, WOI Mergersub and WOI have duly executed and
delivered this Amendment to the Agreement or have caused this Amendment to the
Agreement to be duly executed on their respective behalf by their respective
officers or representatives thereunto duly authorized, as of the day and year
first above written.
TRUVISION WIRELESS, INC.
a Delaware corporation
By:_________________________________________
Name:
Title:
WIRELESS ONE MERGERSUB, INC.
a Delaware corporation
By:_________________________________________
Name:
Title:
WIRELESS ONE, INC.
a Delaware corporation
By:________________________________________
Name:
Title:
8
<PAGE>
EXHIBIT 10.1
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
-------------------------------------------
THIS AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this "Agreement") is made
---------
as of July 29, 1996, by and among Chase Venture Capital Associates, L.P.
("CVCA"), the Persons named on Schedule I hereto (the "TruVision Stockholders"),
---- ---------- ----------------------
Hans Sternberg ("Sternberg"), Sean Reilly ("Reilly") and those persons named on
--------- ------
Schedule II hereto (together with Sternberg and Reilly, the "Wireless One
- ----------- ------------
Stockholders"), Chase Manhattan Capital Corporation ("CMCC"), Baseball Partners
- ------------ ----
("Baseball"), Heartland Wireless Communications, Inc., a Delaware corporation
--------
("Heartland"), on behalf of itself and each of its subsidiaries which holds
- -----------
Common Stock (the "Heartland Subsidiaries"), and Wireless One, Inc., a Delaware
----------------------
corporation (the "Company"). Unless otherwise indicated herein, capitalized
-------
terms used herein are defined in Section 6 hereof.
WHEREAS, the Wireless One Stockholders, CMCC, certain subsidiaries of
Heartland and Heartland are parties to a certain Stockholders Agreement dated
October 24, 1995 (the "Old Stockholders Agreement") as amended by the Amendment
--------------------------
to the Stockholders Agreement dated April 25, 1996;
WHEREAS, the Company, the Wireless One Stockholders, Heartland and the
Heartland Subsidiaries (collectively with Heartland, the "Heartland Entities"),
------------------
Wireless One Operating Company, a Delaware corporation ("Old Wireless One"),
----------------
Wireless One Merger Company, a Delaware corporation and a direct wholly-owned
Subsidiary of the Company ("Heartland MergerSub"), and the other stockholders of
-------------------
Old Wireless One are parties to a Contribution Agreement and Agreement and Plan
of Merger, dated as of October 18, 1995 (the "Heartland Merger Agreement"),
--------------------------
pursuant to which certain subsidiaries of Heartland contributed certain of their
assets to the Company and pursuant to which Old Wireless One merged with and
into Heartland MergerSub with Old Wireless One surviving. In addition, pursuant
to Article IX of the Heartland Merger Agreement, after the Second Closing (as
that term is defined in the Heartland Merger Agreement) the Company has had the
right under certain circumstances to acquire certain assets of Heartland and/or
its Subsidiaries (the "Call Market Assets") in exchange for either cash or
------------------
shares of the Company's Common Stock;
WHEREAS, the execution, delivery and continued effectiveness of the Old
Stockholders Agreement were conditions precedent to Old Wireless One's
obligation under the Heartland Merger Agreement to consummate the Heartland
Merger and the obligation of the Company under the Heartland Merger Agreement to
<PAGE>
cause Heartland MergerSub to consummate the Heartland Merger. The Old
Stockholders Agreement was executed and delivered contemporaneously with the
First Closing (as that term is defined in the Heartland Merger Agreement).
WHEREAS, the Company, Wireless One MergerSub, Inc. ("TruVision MergerSub")
-------------------
and TruVision Wireless, Inc. ("TruVision") are parties to an Agreement and Plan
---------
of Merger, dated April 25, 1996 (the "TruVision Merger Agreement"), pursuant to
--------------------------
which TruVision MergerSub will merge with and into TruVision with TruVision
surviving. The execution and delivery this Agreement are conditions precedent
to the Company's obligation under the TruVision Merger Agreement to cause
TruVision MergerSub to consummate the TruVision Merger and to TruVision's
obligation to consummate the TruVision Merger. This Agreement is being executed
and delivered contemporaneously with the TruVision Closing.
WHEREAS, the Company and the Stockholders desire to amend and restate the
Old Stockholders Agreement, as amended, for the purposes, among others, of (i)
establishing the composition of the Company's Board of Directors (the "Board")
-----
and (ii) establishing limitations on the rights of certain Stockholders to make
future acquisitions of the Company's Common Stock.
NOW, THEREFORE, the parties to this Agreement hereby agree as follows:
1. Voting Agreement Related to Board Composition.
---------------------------------------------
(a) From and after the date of this Agreement and until the provisions of
this Section 1 cease to be effective, each Stockholder shall vote all of his
Stockholder Shares and shall take all other necessary or desirable actions
within his control (whether in his capacity as a stockholder, director, member
of a board committee or officer of the Company or otherwise, and including,
without limitation, attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written consents in lieu of meetings), and
the Company shall take all necessary and desirable actions within its control
(including, without limitation, calling special board and stockholder meetings),
so that:
(i) the authorized number of directors on the Board shall be established at
nine (9);
(ii) the Majority TruVision Holders shall have the right in any election of
directors to the Board to designate one (1) director so long as the number of
TruVision Shares is greater than one-half ( 1/2) of the Initial TruVision Share
Quantity (any such director so selected being referred
- 2 -
<PAGE>
to herein as a "TruVision Director") (the initial TruVision Director shall be
------------------
Henry M. Burkhalter);
(iii) the Majority Wireless One Holders shall have the right in any
election of directors to the Board to designate two (2) directors so long as the
number of Wireless One Shares is greater than one-half ( 1/2) of the Initial
Wireless One Share Quantity (any such director so selected being referred to
herein as a "Wireless One Director") (the initial Wireless One Directors shall
---------------------
be Sternberg and Reilly);
(iv) the Majority Heartland Holders shall have the right in any election of
directors to the Board to designate two (2) directors so long as the number of
Heartland Shares is greater than one-half ( 1/2) of the Initial Heartland Share
Quantity (any such director so selected being referred to herein as a "Heartland
---------
Director") (the initial Heartland Directors shall be David E. Webb and J.R.
- --------
Holland, Jr.);
(v) the Majority Chase Holders shall have the right in any election of
directors to the Board to designate two (2) directors so long as the number of
Chase Shares is greater than one-half ( 1/2) of the Initial Chase Share Quantity
(any such director so selected being referred to herein as a "Chase Director")
--------------
(the initial Chase Directors shall be Arnold Chavkin and William J. Van
Devender);
(vi) the Majority Wireless One Holders shall have the right in any election
of directors to the Board to designate one (1) Independent Director so long as
the number of Wireless One Shares is greater than one-half ( 1/2) of the Initial
Wireless One Share Quantity (any such director so selected being referred to
herein as a "Wireless One Independent Director") (the initial Wireless One
---------------------------------
Independent Director shall be William K. Luby);
(vii) the Majority Heartland Holders shall have the right in any election
of directors to the Board to designate one (1) Independent Director so long as
the number of Heartland Shares is greater than one-half ( 1/2) of the Initial
Heartland Share Quantity (any such director so selected being referred to herein
as a "Heartland Independent Director") (the initial Heartland Independent
------------------------------
Director shall be Daniel L. Shimer);
(viii) the board of directors of each of the Company's Subsidiaries (each
a "Sub Board") shall be comprised of the President of the Company, the Chief
---------
Executive Officer of the Company, and one director from among the TruVision
Director, the Heartland Directors and the Chase Directors,
- 3 -
<PAGE>
which latter director (the "Non-Management Sub Director") will be chosen by the
---------------------------
holders of a majority of the Stockholder Shares and shall initially be Arnold
Chavkin;
(ix) the removal from the Board (with or without cause) of any TruVision
Director shall be at the written request of the Majority TruVision Holders, but
only upon such written request and under no other circumstances, so long as the
number of TruVision Shares is greater than one-half (1/2) of the Initial
TruVision Share Quantity;
(x) the removal from the Board (with or without cause) of any Wireless One
Director or Wireless One Independent Director shall be at the written request of
the Majority Wireless One Holders, but only upon such written request and under
no other circumstances so long as the number of Wireless One Shares is greater
than one-half (1/2) of the Initial Wireless One Share Quantity;
(xi) the removal from the Board (with or without cause) of any Heartland
Director or Heartland Independent Director shall be at the written request of
the Majority Heartland Holders, but only upon such written request and under no
other circumstances, so long as the number of Heartland Shares is greater than
one-half (1/2) of the Initial Heartland Share Quantity;
(xii) the removal from the Board (with or without cause) of any Chase
Director shall be at the written request of the Majority Chase Holders, but only
upon such written request and under no other circumstances, so long as the
number of Chase Shares is greater than one-half (1/2) of the Initial Chase
Share Quantity;
(xiii) in the event that any TruVision Director ceases to serve as a
member of the Board during such member's term of office, the resulting vacancy
on the Board shall be filled by the Majority TruVision Holders, so long as the
number of TruVision Shares is greater than one-half (1/2) of the Initial
TruVision Share Quantity;
(xiv) in the event that any Wireless One Director or Wireless One
Independent Director ceases to serve as a member of the Board during such
member's term of office, the resulting vacancy on the Board shall be filled by
the Majority Wireless One Holders, so long as the number of Wireless One Shares
is greater than one-half (1/2) of the Initial Wireless One Share Quantity;
- 4 -
<PAGE>
(xv) in the event that any Heartland Director or Heartland Independent
Director ceases to serve as a member of the Board during the member's term of
office, the resulting vacancy on the Board shall be filled by the Majority
Heartland Holders, so long as the number of Heartland Shares is greater than
one-half (1/2) of the Initial Heartland Share Quantity;
(xvi) in the event that any Chase Director ceases to serve as a member of
the Board during such member's term of office, the resulting vacancy on the
Board shall be filled by the Majority Chase Holders, so long as the number of
Chase Shares is greater than one-half (1/2) of the Initial Chase Share
Quantity;
(xvii) the removal from any Sub Board (with or without cause) of any Non-
Management Sub Director shall be at the written request of the holders of a
majority of the Stockholder Shares, but only upon such written request (provided
that any Non-Management Sub Director shall be removed as such if he or she
ceases to be either a Chase Director, a Heartland Director or a TruVision
Director, as the case may be), and in the event that any Non-Management Sub
Director ceases to serve as a member of any Sub Board during such Director's
term of office, the resulting vacancy on such Sub Board shall be filled by the
holders of a majority of the Stockholder Shares; and
(xviii) Henry M. Burkhalter shall be the Vice-Chairman of the Board for so
long as he is President of the Company.
(b) The Company shall pay the reasonable out-of-pocket expenses incurred by
each director in connection with attending the meetings of the Board, any Sub
Board and any committee thereof.
2. Legend. Each certificate evidencing Stockholder Shares and each
------
certificate issued in exchange for or upon the transfer of any Stockholder
Shares (if such shares remain Stockholder Shares as defined herein after such
transfer) shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"The securities represented by this certificate are subject to an
Amended and Restated Stockholders Agreement dated as of July 29, 1996,
among the issuer of such securities (the "Company") and certain of the
-------
Company's stockholders. A copy of such Stockholders Agreement will be
furnished without charge by the
- 5 -
<PAGE>
Company to the holder hereof upon written request."
The legend set forth above shall be removed from the certificates evidencing any
shares which cease to be Stockholder Shares.
3. Additional Stockholders. Prior to Transferring any Stockholder Shares
-----------------------
(other than in a Public Sale) to any Person, the transferring Stockholder shall
cause the prospective Transferee (other than Transferees which are already
parties to this Agreement) to execute and deliver to the Company and the other
Stockholders a counterpart of this Agreement and thereby agree to be bound by
this Agreement as an additional "Stockholder". Any Transfer or attempted
Transfer of any Stockholder Shares in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported Transferee of such Stockholder Shares as the owner
of such shares for any purpose. In addition, contemporaneously with any
issuance of Common Stock pursuant to Article IX of the Heartland Merger
Agreement to any Subsidiary of Heartland which is not already a party to this
Agreement, Heartland will cause such Subsidiary to execute and deliver to the
Company and the other Stockholders a counterpart of this Agreement and thereby
agree to be bound by this Agreement as an additional "Stockholder".
4. Acquire Shares; Solicit Proxies; Form Group. Until October 24, 1998,
-------------------------------------------
each Stockholder shall not (and shall cause any Person controlled by it or him
not to), directly or indirectly, without the prior approval of the Board:
(a) acquire, or offer to acquire, directly or indirectly, by purchase
or otherwise, any equity securities of the Company (or direct or indirect rights
or options to acquire any equity securities of the Company), except for (i)
Common Stock acquired by such Person pursuant to the Heartland Merger Agreement
(as adjusted pursuant to the Heartland Merger Agreement and the Heartland Escrow
Agreement), or TruVision Merger Agreement (as adjusted pursuant to the TruVision
Merger Agreement and the TruVision Escrow Agreement) and any equity securities
issued or issuable directly or indirectly with respect to such Common Stock by
way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization, (ii)
any securities issued (or issuable) by the Company to such Stockholder pursuant
to any option plan of the Company approved by the Board, (iii) in the case of
Advantage Capital Partners, Limited Partnership and Advantage Capital Partners
II, Limited Partnership, the acquisition (in the aggregate among them) of not
more than 250,000 shares of Common Stock (as such number may be proportionately
adjusted to reflect stock dividends, splits or combinations of the Common Stock
after the
- 6 -
<PAGE>
date hereof) on or after the date of the Old Stockholders Agreement in addition
to the Wireless One Shares received or to be received by them, and (iv) in the
case of the Heartland Entities, the acquisition (in the aggregate among them) of
not more than 250,000 shares of Common Stock (as such number may be
proportionately adjusted to reflect stock dividends, splits or combinations of
the Common Stock after the date hereof) on or after the date of the Old
Stockholders Agreement in addition to the Heartland Shares received or to be
received by them;
(b) solicit proxies or consents or become a "participant" in a
"solicitation" (as such terms are defined in Regulation 14A under the Securities
Exchange Act of 1934, as amended) of proxies or consents with respect to
securities of the Company in opposition to solicitations made by or on behalf of
the Board with regard to any matter; or
(c) except for this Agreement, join a partnership, limited
partnership, syndicate or other group (as that term is used in Rule 13d-5 under
the Securities Exchange Act of 1934, as amended) or otherwise act in concert
with any other person for the purpose of acquiring, holding, voting or disposing
of securities of the Company.
No director shall be deemed to be disqualified from voting with respect to any
matter subject to Board approval in this Section 4 on the basis that such
director has an interest in such matter.
5. Definitions.
-----------
"Affiliate" means a Person that directly, or indirectly through one or
---------
more intermediaries, controls or is controlled by or is under common control
with the Person in question and in the case of a partnership or limited
liability company, any partner or member of such partnership or limited
liability company. For purposes of this Agreement, Baseball will be deemed to
be an "Affiliate" of CMCC and CVCA and CMCC's and CVCA's "Affiliates", and CMCC,
CVCA, CMCC's Affiliates and CVCA's Affiliates will be deemed to be "Affiliates"
of Baseball.
"Baseball" means Baseball Partners, a New York general partnership.
--------
"Chase Shares" means (i) all Common Stock which is part of the portion
------------
of the Wireless One Share Consideration issued to CMCC or Baseball pursuant to
the Heartland Merger Agreement (as adjusted pursuant to the Heartland Merger
Agreement and the Heartland Escrow Agreement) and all Common Stock which is part
of the portion of Consideration issued to CVCA pursuant to the TruVision Merger
Agreement (as adjusted pursuant to the TruVision
- 7 -
<PAGE>
Merger Agreement and the TruVision Escrow Agreement) and (ii) any equity
securities issued or issuable directly or indirectly with respect to the Common
Stock referred to in clause (i) by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization. As to any particular shares constituting Chase Shares,
such shares shall cease to be Chase Shares when they have been (a) effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them or (b) distributed to the public through a
broker, dealer or market maker pursuant to Rule 144 under the Securities Act (or
any similar provision then in force).
"Common Stock" means the Company's common stock, par value $.01 per
------------
share.
"Entity" means any general partnership, limited partnership,
------
corporation, association, cooperative, joint stock company, trust, limited
liability company, business trust, joint venture, unincorporated organization
and governmental entity (or any department, agency or political subdivision
thereof).
"Heartland Escrow Agreement" means the "Escrow Agreement," as that
--------------------------
term is defined in the Heartland Merger Agreement.
"Heartland Merger" means the "Merger," as that term is defined in the
----------------
Heartland Merger Agreement.
"Heartland Share Consideration" has the meaning given such term in the
-----------------------------
Heartland Merger Agreement.
"Heartland Shares" means (i) all Common Stock which is part of the
----------------
Heartland Share Consideration issued to the Heartland Entities pursuant to the
Heartland Merger Agreement (as adjusted pursuant to the Heartland Merger
Agreement and the Heartland Escrow Agreement) or which is issued to Heartland or
any Subsidiary of Heartland in consideration of any Call Market Assets acquired
by the Company or any of its Affiliates pursuant to the Heartland Merger
Agreement and (ii) any equity securities issued or issuable directly or
indirectly with respect to the Common Stock referred to in clause (i) by way of
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular shares constituting Heartland Shares, such shares shall cease to be
Heartland Shares when they have been (a) effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering them or (b) distributed to the public through a broker, dealer or
market maker pursuant to Rule 144 under the Securities Act.
- 8 -
<PAGE>
"Independent Director" means a natural person who is not an employee,
--------------------
officer, director (other than of the Company), Affiliate, or stockholder holding
more than 5% of the outstanding common stock (on a fully diluted basis), of the
Company, Heartland or any of the Wireless One Stockholders, or a member of the
Family Group, as applicable, of any such Person.
"Initial Chase Share Quantity" means the aggregate number of shares of
----------------------------
Common Stock issued to CMCC and Baseball pursuant to the Heartland Merger
Agreement (as adjusted pursuant to the Heartland Merger Agreement and the
Heartland Escrow Agreement, and as adjusted for any subsequent stock splits,
stock dividends, combinations of shares and similar recapitalizations) and to
CVCA pursuant to the TruVision Merger Agreement (as adjusted pursuant to the
TruVision Merger Agreement and the TruVision Escrow Agreement, and as adjusted
for any subsequent stock splits, stock dividends, combinations of shares and
similar recapitalizations).
"Initial Heartland Share Quantity" means the aggregate number of
--------------------------------
shares of Common Stock issued to Heartland and certain subsidiaries of Heartland
pursuant to the Heartland Merger Agreement (as adjusted pursuant to the
Heartland Merger Agreement and the Heartland Escrow Agreement, and as adjusted
for any subsequent stock splits, stock dividends, combinations of shares and
similar recapitalizations).
"Initial TruVision Share Quantity" means the aggregate number of
--------------------------------
shares of Common Stock issued to the TruVision Stockholders pursuant to the
TruVision Merger Agreement, including Common Stock issuable pursuant to Article
I and Section 5.13 of the TruVision Merger Agreement(as adjusted pursuant to the
TruVision Merger Agreement and the TruVision Escrow Agreement, and as adjusted
for any subsequent stock splits, stock dividends, combinations of shares and
similar recapitalizations).
"Initial Wireless One Share Quantity" means the aggregate number of
-----------------------------------
shares of Common Stock issued to the Wireless One Stockholders pursuant to the
Heartland Merger Agreement (as adjusted pursuant to the Heartland Merger
Agreement and the Heartland Escrow Agreement, and as adjusted for any subsequent
stock splits, stock dividends, combinations of shares and similar
recapitalizations).
"Majority Chase Holders" at any time means holders of a majority of
----------------------
the Chase Shares.
"Majority Heartland Holders" at any time means holders of a majority
--------------------------
of the Heartland Shares.
- 9 -
<PAGE>
"Majority TruVision Holders" at any time means holders of a majority
--------------------------
of the TruVision Shares.
"Majority Wireless One Holders" at any time means holders of a
-----------------------------
majority of the Wireless One Shares.
"Person" means any individual or any Entity.
------
"Public Sale" means any sale of Stockholder Shares to the public
-----------
pursuant to an offering registered under the Securities Act or to the public
through a broker, dealer or market maker pursuant to the provisions of Rule 144
adopted under the Securities Act (or any similar provision then in force).
"Securities Act" means the Securities Act of 1933, as amended from
--------------
time to time.
"Stockholder" means any holder of Stockholder Shares.
-----------
"Stockholder Shares" means the TruVision Shares, the Chase Shares, the
------------------
Wireless One Shares and the Heartland Shares. As to any particular shares
constituting Stockholder Shares, such shares will cease to be Stockholder Shares
when they have been (A) effectively registered under the Securities Act and
disposed of in accordance with the registration statement covering them or (B)
sold to the public through a broker, dealer or market maker pursuant to Rule 144
(or any similar provision then in force) under the Securities Act.
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (irrespective
of whether, at the time, stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a partnership, association or other business entity, a majority of
the partnership or other similar ownership interest thereof is at the time owned
or controlled, directly or indirectly, by any Person or one or more Subsidiaries
of that Person or a combination thereof. For purposes hereof, a Person or
Persons shall be deemed to have a majority ownership interest in a partnership,
association or other business entity if such Person or Persons shall be
allocated a majority of partnership, association or other business entity gains
or losses or shall be or control the managing director or general partner of
such partnership, association or other business entity.
- 10 -
<PAGE>
"Transfer" means any sale, transfer, assignment, pledge, hypothecation
--------
or other direct or indirect disposition of an interest in a security. The terms
"Transferee," "Transferred," and other forms of the word "Transfer" shall have
correlative meanings.
"TruVision Closing" means the "Closing," as that term is defined in
-----------------
the TruVision Merger Agreement.
"TruVision Escrow Agreement" means, collectively, the escrow
--------------------------
agreements dated as of the date of this Agreement and executed and delivered in
connection with the consummation of the TruVision Merger.
"TruVision Shares" means (i) all Common Stock issued to the TruVision
----------------
Stockholders pursuant to the TruVision Merger Agreement, including Common Stock
issuable pursuant to Article I and Section 5.13 of the TruVision Merger
Agreement(as adjusted pursuant to the TruVision Merger Agreement and the
TruVision Escrow Agreement), and (ii) any equity securities issued or issuable
directly or indirectly with respect to the Common Stock referred to in clause
(i) by way of stock dividend or stock split or in connection with a combination
of shares, recapitalization, merger, consolidation or other reorganization. As
to any particular shares constituting TruVision Shares, such shares shall cease
to be TruVision Shares when they have been (a) effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering them or (b) distributed to the public through a broker, dealer or
market maker pursuant to Rule 144 under the Securities Act (or any similar
provision then in force).
"Wireless One Share Consideration" has the meaning given such term in
--------------------------------
the Heartland Merger Agreement.
"Wireless One Shares" means (i) all Common Stock which is part of the
-------------------
portion of the Wireless One Share Consideration issued to the Wireless One
Stockholders pursuant to the Heartland Merger Agreement (as adjusted pursuant
to the Heartland Merger Agreement and the Heartland Escrow Agreement) and (ii)
any equity securities issued or issuable directly or indirectly with respect to
the Common Stock referred to in clause (i) by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization. As to any particular shares constituting
Wireless One Shares, such shares shall cease to be Wireless One Shares when they
have been (a) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them or (b) distributed to
the public through a broker, dealer or market maker pursuant to Rule 144 under
the Securities Act (or any similar provision then in force).
- 11 -
<PAGE>
6. Amendment and Waiver. Except as otherwise provided herein, the
--------------------
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company, the Majority TruVision Holders, the Majority
Wireless One Holders, the Majority Heartland Holders and the Majority Chase
Holders. The failure of any party to enforce any of the provisions of this
Agreement shall in no way be construed as a waiver of such provisions and shall
not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
7. Governing Law. The corporate law of the State of Delaware shall
-------------
govern all issues and questions concerning the relative rights of the Company
and its stockholders. This Agreement shall be construed in accordance with the
laws of the State of New York, without giving effect to any choice of law or
conflict of law rules or provisions (whether of the State of New York or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.
8. Notices. All notices, demands and other communications to be given
-------
and delivered under or by reason of provisions under this Agreement shall be in
writing and shall be deemed to have been given to any party when personally
delivered, sent by telecopy (with a hard copy to follow) or express overnight
courier service, or mailed by first class mail, return receipt requested, to the
applicable addresses or telecopy numbers set forth for such party on Exhibit
11.2 to the Heartland Merger Agreement or Section 12.3 of the TruVision Merger
Agreement or Schedule III hereto or to such other addresses or telecopy numbers
as such party shall have designated by notice to the other party.
9. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
10. Entire Agreement. Except as otherwise expressly set forth herein and
----------------
in the Heartland Merger Agreement and the TruVision Merger Agreement, this
document embodies the complete agreement and understanding among the parties
hereto with respect to the subject matter hereof and supersedes and preempts any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
11. Successors and Assigns. Except as otherwise provided herein, this
----------------------
Agreement shall bind and inure to the benefit of and
- 12 -
<PAGE>
be enforceable by the Company and its successors and assigns and the
Stockholders and any subsequent holders of Stockholder Shares and the respective
successors and assigns of each of them, so long as they hold Stockholder Shares.
12. Remedies. The Company and the holders of Stockholder Shares shall be
--------
entitled to enforce their rights under this Agreement specifically to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights existing in their favor. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that the Company and the holders of
Stockholder Shares may in their sole discretion apply to any court of law or
equity of competent jurisdiction for specific performance and/or injunctive
relief (without posting a bond or other security) in order to enforce or prevent
any violation of the provisions of this Agreement.
13. No Strict Construction. The parties hereto have participated jointly
----------------------
in the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement.
14. Descriptive Headings; Interpretation. The descriptive headings of
------------------------------------
this Agreement are inserted for convenience only and do not constitute a Section
of this Agreement. The use of the word "including" in this Agreement shall be
---------
by way of example rather than by limitation. The use of the words "he", "his",
-- ---
"it", or "its" shall be deemed to include any Person, regardless of gender or
-- ---
status as an Entity.
15. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
16. Effect of Amendment and Restatement. This Agreement amends and
-----------------------------------
restates the terms of the Old Stockholders Agreement (as amended) with respect
to the obligations of the parties thereto. The obligations under the Old
Stockholders Agreement (as amended), as amended and restated hereunder, remain
in full force and effect under this Agreement. Each party hereto by their
execution of a counterpart hereof consents to this amendment and restatement of
the Old Stockholders Agreement (as amended).
17. Execution by Heartland. Heartland is executing this Agreement on
----------------------
behalf of both itself and each of the Heartland Subsidiaries, each of whom shall
be bound by this Agreement by
- 13 -
<PAGE>
virtue of such execution by Heartland, and Heartland agrees to cause each
Heartland Subsidiary to perform and honor each of its obligations hereunder.
* * * * *
- 14 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
CHASE MANHATTAN CAPITAL CORPORATION
By: ______________________________
Name:
Title:
BASEBALL PARTNERS
By: ______________________________
Name:
Title:
PREMIER VENTURE CAPITAL CORPORATION
By: ______________________________
Name:
Title:
HEARTLAND WIRELESS COMMUNICATIONS, INC.
By: ______________________________
Name:
Title:
WIRELESS ONE, INC.
By: ______________________________
Name:
Title:
MISSISSIPPI WIRELESS TV, L.P.
By: WIRELESS TV, INC.
Its: General Partner
By: ______________________________
Name:
Title:
<PAGE>
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By: Chase Capital Partners, L.P.
Its: General Partner
By: ______________________________
Name:
Title:
VANCOM, INC.
By: ______________________________
Name:
Title:
VISION COMMUNICIATIONS, INC.
By: ______________________________
Name:
Title:
___________________________________
Hans Sternberg
___________________________________
Sean R. Reilly
<PAGE>
SCHEDULE I
----------
TRUVISION STOCKHOLDERS
Mississippi Wireless TV, L.P.
VanCom, Inc.
Vision Communications, Inc.
<PAGE>
SCHEDULE II
-----------
Advantage Capital Partners, Limited Partnership
Advantage Capital Partners II, Limited Partnership
Premier Venture Capital Corporation
Hans Sternberg
Sean Reilly
<PAGE>
SCHEDULE III
------------
For Mississippi Wireless TV, L.P., or Vision Communications, Inc.
- -----------------------------------------------------------------
c/o TruVision Wireless, Inc.
1080 River Oaks Drive
Suite A150
Jackson, Mississippi 39208
Attention: Henry M. Burkhalter
Telecopy: (601) 936-1517
with a copy (which copy will not constitute
-------------------------------------------
notice to such stockholder) to:
------------------------------
Samuel A. Fishman
Latham & Watkins
885 Third Avenue
Suite 100
New York, New York 10022
Telecopy: (212) 751-4864
For Chase Venture Capital Associates, L.P.:
- ------------------------------------------
380 Madison Avenue
12th Floor
New York, New York 10014
Attention: Arnold Chavkin
Telecopy: (212) 622-3101
with a copy (which copy will not constitute
-------------------------------------------
notice to such stockholder) to:
------------------------------
Samuel A. Fishman
Latham & Watkins
885 Third Avenue
Suite 100
New York, New York 10022
Telecopy: (212) 751-4864
<PAGE>
For VanCom, Inc.:
- ----------------
P.O. Box 5327
Jackson, Mississippi 39296
Attention: William Van Devender
Telecopy: (601) 354-0904
with a copy (which copy will not constitute
-------------------------------------------
notice to such Stockholder) to:
------------------------------
Walter Weems
___________________________________
___________________________________
___________________________________
Telecopy: (601) 960-6902
<PAGE>
EXHIBIT 10.2
AMENDED AND RESTATED REGISTRATION AGREEMENT
-------------------------------------------
THIS AMENDED AND RESTATED REGISTRATION AGREEMENT (this "Agreement") is made
---------
as of July 29, 1996, by and among Chase Venture Capital Associates, L.P.
("CVCA"), Chase Manhattan Capital Corporation ("CMCC"), Baseball Partners
---- ----
("Baseball"), those Persons named on Schedule I hereto (the "TruVision
- ---------- ---------- ---------
Stockholders"), Heartland Wireless Communications, Inc., a Delaware corporation
- ------------
("Heartland"), on behalf of itself and each of its subsidiaries which holds
---------
Common Stock (the "Heartland Subsidiaries"), Premier Venture Capital
----------------------
Corporation, as the representative of the holders of Wireless One Registrable
Securities (as that term is defined below), and Wireless One, Inc., a Delaware
corporation (the "Company"). Unless otherwise indicated herein, capitalized
-------
terms used herein are defined in Section 8 hereof.
WHEREAS, the Company, the former stockholders of Wireless One, Heartland
and certain subsidiaries of Heartland are parties to a certain Registration
Agreement dated October 24, 1995 (the "Old Registration Agreement");
--------------------------
WHEREAS, the Company, the former stockholders of Wireless One, certain
subsidiaries of Heartland, Wireless One Operating Company, a Delaware
corporation ("Old Wireless One"), Wireless One Merger Company, a Delaware
----------------
corporation and a direct wholly-owned Subsidiary of the Company ("Heartland
---------
MergerSub"), and the other stockholders of Old Wireless One are parties to a
- ---------
Contribution Agreement and Agreement and Plan of Merger, dated as of October 18,
1995 (the "Heartland Merger Agreement"), pursuant to which Heartland Entities
--------------------------
contributed certain of their assets and pursuant to which Old Wireless One
merged with and into Heartland MergerSub with Old Wireless One surviving. In
addition, pursuant to Article IX of the Heartland Merger Agreement, the Company
has the right under certain circumstances to acquire certain assets of Heartland
and/or its Subsidiaries (the "Call Market Assets") in exchange for either cash
------------------
or shares of the Company's Common Stock. The execution, delivery and continued
effectiveness of the Old Registration Agreement were conditions precedent to Old
Wireless One's obligation under the Heartland Merger Agreement to consummate the
Heartland Merger and the obligation of the Company under the Heartland Merger
Agreement to cause Heartland MergerSub to consummate the Heartland Merger. The
Old Registration Agreement was executed and delivered contemporaneously with the
First Closing (as that term is defined in the Heartland Merger Agreement);
<PAGE>
WHEREAS, the Company, Wireless One MergerSub, Inc. ("TruVision MergerSub")
-------------------
and TruVision Wireless, Inc. ("TruVision") are parties to an Agreement and Plan
---------
of Merger, dated April 25, 1996 (as in effect from time to time, the "TruVision
---------
Merger Agreement"), pursuant to which TruVision MergerSub will merge with and
- ----------------
into TruVision with TruVision surviving. The execution and delivery of this
Agreement are conditions precedent to the Company's obligation under the
TruVision Merger Agreement to cause TruVision Merger Sub to consummate the
TruVision Merger and to TruVision's obligation to consummate the TruVision
Merger. This Agreement is being executed and delivered contemporaneously with
the TruVision Closing.
WHEREAS, the parties hereto desire to amend and restate the Old
Registration Agreement in order to provide for the registration of the
Registrable Securities;
NOW, THEREFORE, the parties to this Agreement hereby agree as follows:
1. Demand Registrations.
--------------------
(a) Requests for Registration. At any time after October 24, 1997, subject
-------------------------
to paragraphs 1(b) and 1(c), the Majority Chase Holders, the Majority TruVision
Holders, the Majority Wireless One Holders or the Majority Heartland Holders may
request registration under the Securities Act of all or any portion of their
Registrable Securities on Form S-1 or any similar long-form registration ("Long-
----
Form Registrations"), and the Majority Chase Holders, the Majority TruVision
- ------------------
Holders, the Majority Wireless One Holders or the Majority Heartland Holders
may request registration under the Securities Act of all or any portion of their
Registrable Securities on Form S-2 or S-3 (including under Rule 415 promulgated
under the Securities Act or any similar provision then in force) or any similar
short-form registration ("Short-Form Registrations"), if available (with the
------------------------
Majority Chase Holders, the Majority Chase Holders, the Majority TruVision
Holders, the Majority Wireless One Holders or the Majority Heartland Holders, as
the case may be, constituting, with respect to such registration, the
"Requesting Holders"). All registrations requested pursuant to this paragraph
- -------------------
1(a) are referred to herein as "Demand Registrations"; all Demand Registrations
--------------------
initially so requested by the Majority Chase Holders are referred to herein as
"Chase Demand Registrations;" all Demand Registrations initially so requested by
- ---------------------------
the Majority TruVision Holders are referred to herein as "TruVision Demand
----------------
Registrations;" all Demand Registrations initially so requested by the Majority
- -------------
Wireless One Holders are referred to herein as "Wireless One Demand
-------------------
Registrations;" and all Demand Registrations initially so requested
- -------------
2
<PAGE>
by the Majority Heartland Holders are referred to herein as "Heartland Demand
----------------
Registrations." Within 10 days after receipt of any such request (any such
- -------------
request a "Demand Notice"), the Company shall give written notice of such
-------------
requested registration to all other holders of Registrable Securities and,
subject to the other terms hereof, shall include in such registration all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein within 15 days after the receipt of the Company's
notice.
(b) Long-Form Registrations. The Majority Chase Holders shall be entitled
-----------------------
to request three Long-Form Registrations in which the Company shall pay all
Registration Expenses ("Company-paid Long-Form Chase Registrations"); the
------------------------------------------
Majority TruVision Holders shall be entitled to request three Long-Form
Registrations in which the Company shall pay all Registration Expenses
("Company-paid Long-Form TruVision Registrations"); the Majority Wireless One
- ------------------------------------------------
Holders shall be entitled to request three Long-Form Registrations in which the
Company shall pay all Registration Expenses ("Company-paid Long-Form Wireless
-------------------------------
One Registrations"); and the Majority Heartland Holders shall be entitled to
- -----------------
request three Long-Form Registration in which the Company shall pay all
Registration Expenses ("Company-paid Long-Form Heartland Registration"). All
---------------------------------------------
Long-Form Registrations shall be underwritten registrations.
(c) Short-Form Registrations. In addition to the Long-Form Registrations
------------------------
provided pursuant to Section 1(b), the Majority Chase Holders shall be entitled
to request three Short-Form Registrations in which the Company shall pay all
Registration Expenses ("Company-paid Short-Form Chase Registrations"); the
-------------------------------------------
Majority TruVision Holders shall be entitled to request three Short-Form
Registrations in which the Company shall pay all Registration Expenses
("Company-paid Short-Form TruVision Registrations"); the Majority Wireless One
- -------------------------------------------------
Holders shall be entitled to request three Short-Form Registrations in which the
Company shall pay all Registration Expenses ("Company-paid Short-Form Wireless
--------------------------------
One Registrations") and the Majority Heartland Holders shall be entitled to
- -----------------
request three Short-Form Registration in which the Company shall pay all
Registration Expenses ("Company-paid Short-Form Heartland Registration").
----------------------------------------------
Demand Registrations shall be Short-Form Registrations whenever the Company is
permitted to use any applicable short form. Each request for a Short-Form
Registration shall state the intended method of distribution of Registrable
Securities requested to be registered. After the Company has become subject to
the reporting requirements of the Securities Exchange Act, the Company shall use
3
<PAGE>
its best efforts to make Short-Form Registrations on Form S-3 available for the
sale of Registrable Securities.
(d) Withdrawal of Demand Registration. The Majority Chase Holders, the
---------------------------------
Majority TruVision Holders, the Majority Wireless One Holders or the Majority
Heartland Holders, whichever are the Requesting Holders, may withdraw any
request for a Demand Registration at any time prior to the effectiveness of the
related registration statement and any such withdrawn request shall not count as
one of such Requesting Holders' permitted Demand Registrations; provided that
--------
any Registration Expenses in connection with any such withdrawn Demand
Registration shall be borne by the withdrawing Requesting Holders pro rata based
on number of Registrable Securities requested to be included in such
registration by each such holder.
(e) Company Right to Preempt Demand Registration. The Company shall have
--------------------------------------------
the right to preempt any request for a Demand Registration by providing written
notice (pursuant to Section 2(a)) to all holders of Registrable Securities
(within twenty (20) business days of receipt of the Demand Notice in connection
with such Demand Registration) of the Company's intention to effect a
registration under the Securities Act within 180 days of the receipt of such
Demand Notice. Upon delivery of such notice, the registration initially
requested by the Requesting Holders shall no longer be deemed to be a Demand
Registration and shall not count as one of such Requesting Holders' permitted
Demand Registrations.
(f) Priority on Demand Registrations. If a Demand Registration is an
--------------------------------
underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such offering exceeds the number of securities (the "Offering Quantity")
-----------------
which can be sold in an orderly manner in such offering within a price range
acceptable to the Requesting Holders, then the Company shall include in the
registration securities in the following priority:
(i) first, before including any securities which are not Registrable
Securities, the Company shall include all of the Registrable Securities
requested to be included by holders thereof, and if the number of Registrable
Securities requested to be included exceeds the Offering Quantity, then the
Company shall include the pro rata share of the Offering Quantity of each holder
of Registrable Securities which requests inclusion therein, based on the amount
of Registrable Securities held by each such holder; and
4
<PAGE>
(ii) to the extent (and only to the extent) that the Offering Quantity
exceeds the aggregate amount of Registrable Securities which are requested to be
included in such registration, the Company may include in such registration any
other securities requested to be included in the offering.
(g) Restrictions on Long-Form Registrations. The Company shall not be
---------------------------------------
obligated to effect any Long-Form Registration within 180 days after the
effective date of a previous Long-Form Registration or a previous registration
in which the holders of Registrable Securities were given piggyback rights
pursuant to Section 2. The Company may postpone for up to 180 days the filing
or the effectiveness of a registration statement for a Demand Registration if
the Board determines in its reasonable good faith judgment that such Demand
Registration would reasonably be expected to have a material adverse effect on
any proposal or plan by the Company or any of its Subsidiaries to engage in any
acquisition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer, offering of securities, reorganization or
similar transaction; provided that in such event, the Requesting Holders shall
--------
be entitled to withdraw such request and, if such request is withdrawn, such
Demand Registration shall not count as one of the permitted Demand Registrations
hereunder and the Company shall pay all Registration Expenses in connection with
such registration. The Company may delay a Demand Registration hereunder only
once in an twelve-month period.
(h) Selection of Underwriters. The Requesting Holders shall have the right
-------------------------
to select the investment banker(s) and manager(s) to administer the offering in
connection with each Demand Registration, subject to the Company's approval,
which approval shall not be unreasonably withheld.
(i) Other Registration Rights. Except as provided in this Agreement, the
-------------------------
Company shall not grant to any Persons the right to request that the Company
initiate a registration under the Securities Act of any equity securities of the
Company, or any securities convertible or exchangeable into or exercisable for
such securities, without the prior written consent of each of the Majority Chase
Holders, the Majority TruVision Holders, the Majority Wireless One Holders and
the Majority Heartland Holders unless the holders of Registrable Securities are
permitted to participate therein, pro rata based upon the number of Registrable
Securities and other shares of Common Stock held and such rights are otherwise
not inconsistent with the rights of the holders of Chase Registrable Securities,
holders of TruVision Registrable Securities, holders of Wireless One Registrable
Securities or the holders of Heartland Registrable Securities.
5
<PAGE>
(j) Termination. The rights of the parties hereto to Demand Registrations
-----------
(whether Long-Form Registrations or Short-Form Registrations) and to Piggyback
Registrations (collectively, the "Rights") shall terminate on the date all
------
Rights have been fully exercised and satisfied in accordance with this
Agreement.
(k) VCI Registration Right. At any time after October 24, 1996, the
----------------------
Majority VCI Holders shall be entitled to request one registration under the
Securities Act of all or any portion of the VCI Registrable Securities on Form
S-3 (including under Rule 415 promulgated under the Securities Act or any
similar provision then in force) or any similar short-form registration
("Company paid Short-Form VCI Registration") and the Majority VCI Holders shall
be the Requesting Holders with respect to such registration. The Company shall
pay all Registration Expenses of the Company paid Short-Form VCI Registration.
Within 10 days after receipt of any such request, the Company shall give written
notice of such requested registration to all other holders of VCI Registrable
Securities and, subject to the other terms hereof, shall include in such
registration all VCI Registrable Securities with respect to which the Company
has received written requests for inclusion therein within 15 days after the
receipt of the Company's notice.
2. Piggyback Registrations.
-----------------------
(a) Right to Piggyback. Whenever the Company proposes to register any of
------------------
its securities under the Securities Act (other than pursuant to a Demand
Registration or a Company paid Short-Form VCI Registration) and the
registration form to be used may be used for the registration of Registrable
Securities (a "Piggyback Registration"), the Company shall give prompt written
----------------------
notice (in any event within 10 business days after its receipt of notice of any
exercise of demand registration rights other than under this Agreement) to all
holders of Registrable Securities of its intention to effect such a registration
and, subject to the provisions hereof, shall include in such registration all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein within 20 days after the receipt of the Company's
notice.
(b) Piggyback Expenses. The Registration Expenses of the holders of
------------------
Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) Priority on Primary Registrations. If a Piggyback Registration is an
---------------------------------
underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to
6
<PAGE>
be included in such registration exceeds the number (the "Maximum Company
---------------
Number") which can be sold in an orderly manner in such offering within a price
range acceptable to the Company, the Company shall include in such registration
(but only to the extent the aggregate amount of securities so included does not
exceed such Maximum Company Number) (i) first, the securities the Company
-----
proposes to sell and (ii) second, the other securities requested to be included
------
in such registration (including Registrable Securities), pro rata among the
holders of such securities on the basis of the number of securities owned by
each such holder.
(d) Priority on Secondary Registrations. If a Piggyback Registration is an
-----------------------------------
underwritten secondary registration on behalf of holders of the Company's equity
securities other than the holders of Registrable Securities which are entitled
to request registrations of the Company's securities, and the managing
underwriters advise the Company in writing that in their opinion the number of
such securities requested to be included in such registration exceeds the
number (the "Maximum Secondary Number") which can be sold in an orderly manner
------------------------
in such offering within a price range acceptable to the holders initially
requesting such registration, the Company shall include in such registration all
securities requested to be included therein pro rata among the holders of such
securities on the basis of the number of such securities owned by each such
holder.
(e) Selection of Underwriters. If any Piggyback Registration is an
-------------------------
underwritten offering and the number of Registrable Securities included therein
exceeds 30% of the total number of shares being offered, the selection of
investment banker(s) and manager(s) for the offering must be approved by the
holders of a majority of the Registrable Securities requested to be included in
such Piggyback Registration, which approval shall not be unreasonably withheld.
(f) Other Registrations. If the Company has previously filed a
-------------------
registration statement with respect to the Chase Registrable Securities, the
TruVision Registrable Securities, the Wireless One Registrable Securities or the
Heartland Registrable Securities either pursuant to Section 1 or pursuant to
this Section 2, and if such previous registration has not been withdrawn or
abandoned, then the Company shall not file or cause to be effected any other
registration of any of its equity securities or securities convertible or
exchangeable into or exercisable for its equity securities under the Securities
Act (except on Form S-8 or any successor form), whether on its own behalf or at
the request of any holder or holders of such securities, until a period of at
least six months has elapsed from the effective date of such
7
<PAGE>
previous registration (except (i) in the case of such a filing pursuant Section
1, with the prior written consent of the Requesting Holders, or (ii) in the case
of such a filing pursuant to this Section 2, with the prior written consent of
the holders of a majority of the Registrable Securities included in such
Piggyback Registration).
3. Holdback Agreements.
-------------------
(a) Each holder of Registrable Securities shall not effect any public sale
or distribution (including sales pursuant to Rule 144) of equity securities of
the Company, or any securities convertible into or exchangeable or exercisable
for such securities, during the seven days prior to and the 180-day period
beginning on the effective date of any registered underwritten offering of the
Company's equity securities or securities convertible or exchangeable into or
exercisable for its equity securities under the Securities Act (except as part
of such underwritten offering), unless the underwriters managing the
underwritten offering otherwise agree.
(b) The Company (i) shall not effect any public sale or distribution of its
equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and during the
180-day period beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration (except as part of such
underwritten registration or pursuant to registrations on Form S-8 or any
successor form), unless the underwriters managing such underwritten offering
otherwise agree, and (ii) shall cause each holder of its Common Stock, or any
securities convertible into or exchangeable or exercisable for Common Stock,
purchased from the Company at any time after the date of this Agreement and
representing 5% or more of the Common Stock on a fully-diluted basis (other than
in a registered public offering) to agree not to effect any public sale or
distribution (including sales pursuant to Rule 144) of any such securities
during such period (except as part of such underwritten offering, if otherwise
permitted), unless the underwriters managing such underwritten offering
otherwise agree.
4. Registration Procedures. Whenever holders of Registrable Securities
-----------------------
have requested that any Registrable Securities be registered pursuant to this
Agreement, the Company shall use its best efforts to effect the registration and
the sale of such Registrable Securities in accordance with the intended method
of disposition thereof, and pursuant thereto the Company shall as expeditiously
as possible:
8
<PAGE>
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective (provided
that before filing a registration statement or prospectus or any amendments or
supplements thereto, the Company shall furnish to the counsel selected by the
Requesting Holders and any other counsel, if any, designated by the holders of
not less than 25% of the Registrable Securities covered by such registration
statement copies of all such documents proposed to be filed, which documents
shall be subject to the review and comment of such counsel);
(b) notify each holder of Registrable Securities of the effectiveness of
each registration statement filed hereunder and prepare and file with the
Securities and Exchange Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period of not less
than 180 days and comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement;
(c) furnish to each seller of Registrable Securities such number of copies
of such registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each preliminary
prospectus) and such other documents as such seller may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
seller;
(d) use its best efforts to register or qualify such Registrable Securities
under such other securities or blue sky laws of such jurisdictions as any seller
reasonably requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided that the Company shall not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
(e) notify each seller of such Registrable Securities, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in such registration
9
<PAGE>
statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading, and, at the request of
any such seller, the Company shall prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not contain an untrue statement of
a material fact or omit to state any fact necessary to make the statements
therein not misleading;
(f) cause all such Registrable Securities to be listed on each securities
exchange on which similar securities issued by the Company are then listed and,
if not so listed, to be listed on the NASD automated quotation system and, if
listed on the NASD automated quotation system, use its best efforts to secure
designation of all such Registrable Securities covered by such registration
statement as a NASDAQ "national market system security" within the meaning of
Rule 11Aa2-1 of the Securities and Exchange Commission or, failing that, to
secure NASDAQ authorization for such Registrable Securities and, without
limiting the generality of the foregoing, to arrange for at least two market
makers to register as such with respect to such Registrable Securities with the
NASD;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting agreements
in customary form) and take all such other actions as the Requesting Holders or
holders of not less than 25% of the Registrable Securities being sold or the
underwriters (if any) reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities (including effecting a stock split or
a combination of shares);
(i) make available for inspection by any seller of Registrable Securities,
any underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors, employees and independent accountants to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(j) otherwise use its best efforts to comply with all applicable rules and
regulations of the Securities and Exchange
10
<PAGE>
Commission, and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least twelve months
beginning with the first day of the Company's first full calendar quarter after
the effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;
(k) obtain a cold comfort letter from the Company's independent public
accountants in customary form and covering such matters of the type customarily
covered by cold comfort letters as the Requesting Holders or holders of a
majority of the Registrable Securities being sold reasonably request (provided
that such Registrable Securities constitute at least 10% of the securities
covered by such registration statement);
(l) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order; and
(m) use its best efforts to cause such Registrable Securities covered by
such registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the sellers
thereof to consummate the disposition of such Registrable Securities.
If any such registration or comparable statement refers to any holder by
name or otherwise as the holder of any securities of the Company and if in its
sole and exclusive judgment, such holder is or might be deemed to be an
underwriter or a controlling person of the Company, such holder shall have the
right to require (i) the insertion therein of language, in form and substance
satisfactory to such holder and presented to the Company in writing, to the
effect that the holding by such holder of such securities is not to be construed
as a recommendation by such holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such holder
shall assist in meeting any future financial requirements of the Company, or
(ii) in the event that such reference to such holder by name or otherwise is not
required by the Securities Act or any similar Federal statute then in force, the
deletion of the reference to such holder; provided that with respect to this
clause (ii) such holder shall furnish to the Company an opinion of counsel
11
<PAGE>
to such effect, which opinion and counsel shall be reasonably satisfactory to
the Company.
5. Registration Expenses.
---------------------
(a) All expenses incident to the Company's performance of or compliance
with this Agreement, including without limitation all registration and filing
fees, fees and expenses of compliance with securities or blue sky laws, printing
expenses, messenger and delivery expenses, fees and disbursements of custodians,
and fees and disbursements of counsel for the Company and all independent
certified public accountants, underwriters (excluding discounts and commissions)
and other Persons retained by the Company (all such expenses being herein called
"Registration Expenses"), shall be borne as provided in this Agreement, except
---------------------
that the Company shall, in any event, pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit or
quarterly review, the expense of any liability insurance and the expenses and
fees for listing the securities to be registered on each securities exchange on
which similar securities issued by the Company are then listed or on the NASD
automated quotation system. Underwriting discounts and commissions shall be
borne by the Person or Persons selling securities, in proportion to the value of
securities sold.
(b) In connection with each Demand Registration, the Company shall
reimburse the holders of Registrable Securities included in such registration
for the reasonable fees and disbursements of one counsel chosen by the
Requesting Holders. In connection with each Piggyback Registration, the Company
shall reimburse the holders of Registrable Securities included in such
registration for the reasonable fees and disbursements of one counsel chosen by
the holders of a majority of the Registrable Securities included in such
registration. In connection with each Demand Registration and each Piggyback
Registration, the Company shall reimburse the holders of Registrable Securities
included in such registration for the reasonable fees and disbursements of each
additional counsel retained by any holder of Registrable Securities for the
purpose of rendering any legal opinion required by the Company or the managing
underwriter(s) to be rendered on behalf of such holder in connection with any
underwritten Demand Registration or Piggyback Registration.
(c) To the extent Registration Expenses are not required to be paid by the
Company, each holder of securities included in any registration hereunder shall
pay those Registration Expenses allocable to the registration of such holder's
securities so
12
<PAGE>
included, and any Registration Expenses not so allocable shall be borne by all
sellers of securities included in such registration in proportion to the
aggregate selling price of the securities to be so registered.
6. Indemnification.
---------------
(a) The Company agrees to indemnify, to the extent permitted by law, each
holder of Registrable Securities, its officers and directors and each Person who
controls such holder (within the meaning of the Securities Act) against all
losses, claims, damages, liabilities and expenses caused by any untrue or
alleged untrue statement of material fact contained in any registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such holder expressly for use
therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company shall indemnify
such underwriters, their officers and directors and each Person who controls
such underwriters (within the meaning of the Securities Act) to the same extent
as provided above with respect to the indemnification of the holders of
Registrable Securities.
(b) In connection with the preparation of any registration statement with
respect to any registration in which a holder of Registrable Securities is
participating, each such holder shall furnish to the Company in writing such
information and affidavits as the Company reasonably requests for use in
connection with any such registration statement or prospectus and, to the extent
permitted by law, shall indemnify the Company, its directors and officers and
each Person who controls the Company (within the meaning of the Securities Act)
against any losses, claims, damages, liabilities and expenses resulting from any
untrue or alleged untrue statement of material fact contained in the
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, but only to the extent that such untrue statement or omission is
contained in any information or affidavit so furnished in writing by such
holder; provided that the obligation to indemnify shall be individual, not joint
and several, for each holder and shall be limited to the net
13
<PAGE>
amount of proceeds received by such holder from the sale of Registrable
Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder shall (i) give prompt
written notice to the indemnifying party of any claim with respect to which it
seeks indemnification (provided that the failure to give prompt notice shall not
impair any Person's right to indemnification hereunder to the extent such
failure has not prejudiced the indemnifying party) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement shall remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and shall survive the transfer of securities. The Company
also agrees to make such provisions, as are reasonably requested by any
indemnified party, for contribution to such party in the event the Company's
indemnification is unavailable for any reason.
7. Participation in Underwritten Registrations. No Person may participate
-------------------------------------------
in any registration hereunder which is underwritten unless such Person (i)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; provided that no
--------
holder of Registrable Securities included in any underwritten registration shall
be required to make any representations or warranties to the Company or the
underwriters (other than representations and warranties regarding such holder
and such holder's intended method of distribution) or to undertake any
indemnification obligations to
14
<PAGE>
the Company or the underwriters with respect thereto, except as otherwise
provided in Section 6 hereof.
8. Definitions. Unless otherwise defined herein or below, capitalized
-----------
terms used herein shall have the meanings given such terms in the TruVision
Merger Agreement.
"Board" means the Company's board of directors.
-----
"Chase Registrable Securities" means (i) all Common Stock which is (a) part
----------------------------
of the portion of Wireless One Share Consideration issued to CMCC or Baseball as
a part of the Wireless One Share Consideration pursuant to the Heartland Merger
Agreement (as adjusted pursuant to the Heartland Merger Agreement and the
Heartland Escrow Agreement) and (b) issued to CVCA pursuant to the TruVision
Merger Agreement (as adjusted pursuant to the TruVision Merger Agreement and the
TruVision Escrow Agreement) and (ii) any Common Stock issued or issuable with
respect to the Common Stock referred to in clause (i) by way of stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization. As to any particular Chase
Registrable Securities, such securities shall cease to be Chase Registrable
Securities when they have been (a) effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering them
or (b) distributed to the public through a broker, dealer or market maker
pursuant to Rule 144 under the Securities Act (or any similar provision then in
force).
"Common Stock" means the Company's common stock, par value $.01 per share.
------------
"Designated Wireless One Shares" means (i) all Common Stock which is part
------------------------------
of the portion of the Wireless One Share Consideration issued to the Designated
Wireless One Stockholders pursuant to the Heartland Merger Agreement (as
adjusted pursuant to the Heartland Merger Agreement and the Heartland Escrow
Agreement) and (ii) any equity securities issued or issuable directly or
indirectly with respect to the Common Stock referred to in clause (i) by way of
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular shares constituting Designated Wireless One Shares, such shares shall
cease to be Designated Wireless One Shares when they have been (a) effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them or (b) distributed to the public through a
broker, dealer or market maker pursuant to
15
<PAGE>
Rule 144 under the Securities Act (or any similar provision then in force).
"Designated Wireless One Stockholders" means the Persons named on Schedule
------------------------------------ --------
II hereto.
- --
"Heartland Escrow Agreement" means the "Escrow Agreement," as that term is
--------------------------
defined in the Heartland Merger Agreement.
"Heartland Registrable Securities" means (i) all Common Stock which is
--------------------------------
part of the Heartland Share Consideration issued to Heartland and certain
subsidiaries of Heartland pursuant to the Heartland Merger Agreement (as
adjusted pursuant to the Heartland Merger Agreement and the Heartland Escrow
Agreement) or which is or was issued to Heartland or a Subsidiary of Heartland
in consideration of any Call Market Assets (as that term is defined in the
Heartland Merger Agreement) acquired by the Company or any of its Affiliates
pursuant to the Heartland Merger Agreement and (ii) any Common Stock issued or
issuable with respect to the Common Stock referred to in clause (i) by way of
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular Heartland Registrable Securities, such securities shall cease to be
Heartland Registrable Securities when they have been (a) effectively registered
under the Securities Act and disposed of in accordance with the registration
statement covering them or (b) distributed to the public through a broker,
dealer or market maker pursuant to Rule 144 under the Securities Act (or any
similar provision then in force).
"Heartland Share Consideration" has the meaning given such term in the
-----------------------------
Heartland Merger Agreement.
"Majority Chase Holders" at any time means holders of a majority of the
----------------------
Chase Registrable Securities.
"Majority Heartland Holders" at any time means holders of a majority of the
--------------------------
Heartland Registrable Securities.
"Majority TruVision Holders" at any time means holders of a majority of the
--------------------------
TruVision Registrable Securities.
"Majority Wireless One Holders" at any time means holders of a majority of
-----------------------------
the Designated Wireless One Shares.
"Majority VCI Holders" at any time means holders of a majority of the VCI
--------------------
Registrable Shares.
16
<PAGE>
"Person" means an individual, a partnership, a limited liability company, a
------
corporation, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof.
"Registrable Securities" means VCI Registrable Securities Chase Registrable
----------------------
Securities, TruVision Registrable Securities, Wireless One Registrable
Securities and Heartland Registrable Securities.
"Securities Act" means the Securities Act of 1933.
--------------
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (irrespective
of whether, at the time, stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a partnership, association or other business entity, a majority of
the partnership or other similar ownership interest thereof is at the time owned
or controlled, directly or indirectly, by any Person or one or more Subsidiaries
of that Person or a combination thereof. For purposes hereof, a Person or
Persons shall be deemed to have a majority ownership interest in a partnership,
association or other business entity if such Person or Persons shall be
allocated a majority of partnership, association or other business entity gains
or losses or shall be or control the managing director or general partner of
such partnership, association or other business entity.
"TruVision Closing" means the "Closing," as that term is defined in the
-----------------
TruVision Merger Agreement.
"TruVision Escrow Agreement" means, collectively, the escrow agreements
--------------------------
dated as of the date of this Agreement and executed and delivered in connection
with the consummation of the TruVision Merger.
"TruVision Merger" means the "Merger," as that term is defined in the
----------------
TruVision Merger Agreement.
"TruVision Registrable Securities" means (i) all Common Stock which is
--------------------------------
issued to TruVision Stockholders pursuant to the TruVision Merger Agreement,
including the VCI Registrable
17
<PAGE>
Securities and Common Stock of the Company issuable pursuant to Article I of the
TruVision Merger Agreement or upon exercise of the options provided for in
Section 5.3 of the TruVision Merger Agreement (as adjusted pursuant to the
TruVision Merger Agreement and the TruVision Escrow Agreement) (ii) any Common
Stock issued or issuable with respect to the Common Stock referred to in clause
(i) by way of stock dividend or stock split or in connection with a combination
of shares, recapitalization, merger, consolidation or other reorganization. As
to any particular TruVision Registrable Securities, such securities shall cease
to be TruVision Registrable Securities when they have been (a) effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them or (b) distributed to the public through a
broker, dealer or market maker pursuant to Rule 144 under the Securities Act (or
any similar provision then in force).
"VCI" means Vision Communications, Inc.
---
"VCI Registrable Securities" means (i) all Common Stock which is issued to
--------------------------
VCI pursuant to Section 5.13 of the TruVision Merger Agreement (as adjusted
pursuant to the TruVision Merger Agreement and the TruVision Escrow Agreement)
and (ii) any Common Stock issued or issuable with respect to the Common Stock
referred to in clause (i) by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization. As to any particular VCI Registrable Securities, such
securities shall cease to be VCI Registrable Securities when they have been (a)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them or (b) distributed to the public
through a broker, dealer or market maker pursuant to Rule 144 under the
Securities Act (or any similar provision then in force).
"Wireless One Registrable Securities" means (i) all Common Stock which is
-----------------------------------
part of the portion of the Wireless One Share Consideration issued other than to
CMCC and Baseball pursuant to the Heartland Merger Agreement (as adjusted
pursuant to the Heartland Merger Agreement and the Heartland Escrow Agreement)
and (ii) any Common Stock issued or issuable with respect to the Common Stock
referred to in clause (i) by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization. As to any particular Wireless One Registrable
Securities, such securities shall cease to be Wireless One Registrable
Securities when they have been (a) effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering them
or (b) distributed to the public through a broker,
18
<PAGE>
dealer or market maker pursuant to Rule 144 under the Securities Act (or any
similar provision then in force).
"Wireless One Share Consideration" has the meaning given such term in the
--------------------------------
Heartland Merger Agreement.
9. Miscellaneous.
-------------
(a) No Inconsistent Agreements. The Company shall not hereafter enter into
--------------------------
any agreement with respect to its securities which is inconsistent with or
violates the rights granted in this Agreement to the holders of Registrable
Securities.
(b) Remedies. Any Person having rights under any provision of this
--------
Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(c) Amendments and Waivers. No amendment or waiver to the provisions of
----------------------
this Agreement shall be effective against the Company without the prior written
consent of the Company. No amendment or waiver to the provisions of this
Agreement shall be effective against the holders of Chase Registrable Securities
without the prior written consent of the Majority Chase Holders. No amendment or
waiver to the provisions of this Agreement shall be effective against the
holders of TruVision Registrable Securities without the prior written consent of
the Majority TruVision Holders. No amendment or waiver to the provisions of
this Agreement shall be effective against the holders of Heartland Registrable
Securities without the prior written consent of the Majority Heartland Holders.
No amendment or waiver to the provisions of this Agreement shall be effective
against the holders of Wireless One Registrable Securities without the prior
written consent of the Majority Wireless One Holders.
(d) Successors and Assigns. All covenants and agreements in this Agreement
----------------------
by or on behalf of any of the parties hereto shall bind and inure to the benefit
of the respective successors and assigns of the parties hereto whether so
expressed or not. In addition, whether or not any express assignment has been
made, the provisions of this Agreement which are for the
19
<PAGE>
benefit of purchasers or holders of Registrable Securities are also for the
benefit of, and enforceable by, any subsequent holder of Registrable Securities.
(e) Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(f) Counterparts. This Agreement may be executed simultaneously in two or
------------
more counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts taken together shall constitute one and the
same Agreement.
(g) Descriptive Headings. The descriptive headings of this Agreement are
--------------------
inserted for convenience only and do not constitute a part of this Agreement.
(h) Governing Law. This Agreement shall be construed in accordance with
-------------
the laws of the State of New York, without giving effect to any choice of law
or conflict of law rules or provisions (whether of the State of New York or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.
(i) Notices. All notices, demands and other communications to be given and
-------
delivered under or by reason of provisions under this Agreement shall be in
writing and shall be deemed to have been given when personally delivered, sent
by telecopy (with a hard copy to follow) or express overnight courier service,
or mailed by first class mail, return receipt requested, (i) with respect to
each of the TruVision Stockholders, to the addresses or telecopy numbers set
forth on Schedule IV hereto, (ii) with respect to each of the Designated
-----------
Wireless One Stockholders, to the addresses or telecopy numbers set forth on
Schedule II hereto, (iii) with respect to each of CMCC, CVCA and Baseball, to
- -----------
the addresses or telecopy numbers set forth on Schedule III hereto, and (iv)
------------
with respect to all other parties, to the addresses or telecopy numbers set
forth on Exhibit 11.2 to the Heartland Merger Agreement.
20
<PAGE>
(j) No Strict Construction. The parties hereto have participated jointly
----------------------
in the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement.
(k) Effect of Amendment and Restatement. This Agreement amends and
-----------------------------------
restates the terms of the Old Registration Agreement with respect to the
obligations of the parties thereto. The obligations under the Old Registration
Agreement, as restated hereunder, remain in full force and effect under this
Agreement. Each party hereto by their execution of a counterpart hereof consents
to the amendment of the Old Registration Agreement, which shall be effective as
against each party to the Old Registration Agreement and each holder of
Registrable Securities, whether or not such party or holder is a signatory
hereto.
(l) Execution by Heartland. Heartland is executing this Agreement on
----------------------
behalf of both itself and each of the Heartland Subsidiaries, each of whom shall
be bound by this Agreement by virtue of such execution by Heartland, and
Heartland agrees to cause each Heartland Subsidiary to perform and honor each of
its obligations hereunder.
* * * * *
21
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
CHASE MANHATTAN CAPITAL CORPORATION
By: ______________________________
Name:
Title:
BASEBALL PARTNERS
By: ______________________________
Name:
Title:
PREMIER VENTURE CAPITAL CORPORATION
By: ______________________________
Name:
Title:
HEARTLAND WIRELESS COMMUNICATIONS, INC.
By: ______________________________
Name:
Title:
WIRELESS ONE, INC.
By: ______________________________
Name:
Title:
22
<PAGE>
WIRELESS ONE STOCKHOLDERS
By: PREMIER VENTURE CAPITAL CORPORATION,
attorney-in-fact
By: ______________________________
Name:
Title:
MISSISSIPPI WIRELESS TV, L.P.
By: WIRELESS TV, INC.
Its: General Partner
By: ______________________________
Name:
Title:
VISION COMMUNICATIONS, INC.
By: ______________________________
Name: Henry M. Burkhalter
Title: President
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By: Chase Capital Partners
Its: General Partner
By: _______________________________
Name:
Title:
VANCOM, INC.
By: _______________________________
Name:
Title:
23
<PAGE>
___________________________________
Laurence O. Woolhiser, Jr.
___________________________________
Walter Eilers
___________________________________
Henry M. Burkhalter
___________________________________
Bill R. Byer, Jr.
___________________________________
Kelly Balius
___________________________________
Douglas Goodwin
___________________________________
Sam Robertson
___________________________________
Jerrod Pitts
24
<PAGE>
SCHEDULE I
----------
TRUVISION STOCKHOLDERS
Mississippi Wireless TV, L.P.
VanCom, Inc.
Vision Communications, Inc.
Henry M. Burkhalter
Bill R. Byer, Jr.
Laurence O. Woolhiser, Jr.
Walter Eilers
Kelly Balius
Douglas Goodwin
Sam Robertson
Jerrod Pitts
25
<PAGE>
SCHEDULE II
-----------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
NAME ADDRESS
---- -------
- ----------------------------------------------------------------
<S> <C>
Premier Venture Capital 451 Florida Street
Corporation P.O. Box 1511
Baton Rouge, LA 70821-1511
Attention: Thomas J. Adamek
- ----------------------------------------------------------------
Advantage Capital Partners, LL&E Tower
Limited Partnership 909 Poydras Street, Suite 2230
New Orleans, LA 70112
Attention: Steven Stull
- ----------------------------------------------------------------
Advantage Capital Partners II, LL&E Tower
Limited Partnership 909 Poydras Street, Suite 2230
New Orleans, LA 70112
Attention: Steven Stull
- ----------------------------------------------------------------
First Commerce Capital, Inc. 821 Gravier Street, #1027
New Orleans, LA 70112
Attention: Michael P. Kirby
- ----------------------------------------------------------------
</TABLE>
26
<PAGE>
SCHEDULE III
------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------
NAME ADDRESS
---- -------
- ---------------------------------------------------------
<S> <C>
Chase Manhattan Capital 380 Madison Avenue, 12th Fl.
Corporation New York, NY 10017
Attention: Arnold Chavkin
- ---------------------------------------------------------
Baseball Partners c/o Chase Capital
380 Madison Avenue, 12th Fl.
New York, NY 10017
Attention: Arnold Chavkin
- ---------------------------------------------------------
Chase Venture Capital 380 Madison Avenue, 12th Floor
Associates L.P. New York, New York 10017
Attention: Arnold Chavkin
- ---------------------------------------------------------
</TABLE>
in each case with a copy (which copy will
-----------------------------------------
not constitute notice to such
-----------------------------
stockholder) to:
---------------
Samuel A. Fishman
Latham & Watkins
885 Third Avenue
Suite 100
New York, New York 10022
Telecopy: (212) 751-4864
27
<PAGE>
SCHEDULE IV
-----------
For Mississippi Wireless TV, L.P., or Vision Communications, Inc.
- -----------------------------------------------------------------
c/o TruVision Wireless, Inc.
1080 River Oaks Drive
Suite A150
Jackson, Mississippi 39208
Attention: Henry M. Burkhalter
Telecopy: (601) 936-1517
with a copy (which copy will not
---------------------------------
constitute notice to such stockholder) to:
-----------------------------------------
Samuel A. Fishman
Latham & Watkins
885 Third Avenue
Suite 100
New York, New York 10022
Telecopy: (212) 751-4864
For VanCom, Inc.:
- ----------------
P.O. Box 5327
Jackson, Mississippi 39296
Attention: William Van Devender
Telecopy: (601) 354-0904
with a copy (which copy will not constitute notice
--------------------------------------------------
to such Stockholder) to:
-----------------------
Brunini Grantham Grower & Hewes
1400 Trustmark Building
248 E. Capitol Street
Jackson, Mississippi 39201
Telecopy: (601) 960-6902
28
<PAGE>
EXHIBIT 20.1
WIRELESS ONE, INC.
11301 INDUSTRIPLEX, SUITE 4
BATON ROUGE, LOUISIANA 70809-4115
TELEPHONE: (504) 293-5000
July 9, 1996
Dear Wireless One Stockholder:
You are cordially invited to attend the 1996 Annual Meeting of
Stockholders of Wireless One, Inc. ("Wireless One" or the "Company"), which is
currently scheduled to be held on July 26, 1996, at 10:00 a.m. at the Company's
corporate headquarters, 11301 Industriplex, Suite 4, Baton Rouge, Louisiana
70809-4115 (together with any postponement or adjournment thereof, the "Annual
Meeting"). A Notice of the Annual Meeting, a Proxy Statement containing
information about the matters to be acted upon at the Annual Meeting, a proxy
card, the Company's 1995 Annual Report for the fiscal year ended December 31,
1995 and the Company's Quarterly Report for the fiscal quarter ended March 31,
1996 are enclosed.
At the Annual Meeting, you will be asked to consider and vote upon the
following proposals:
(1) To approve the issuance of up to 3,553,333 shares of the Company's
common stock, par value $.01 per share (the "Common Stock") pursuant to the
terms of the Agreement and Plan of Merger among the Company, TruVision Wireless,
Inc. ("TruVision") and Wireless One MergerSub, Inc. (the "Merger Agreement").
Upon consummation of the merger pursuant to the Merger Agreement, shareholders
of TruVision common stock will beneficially own up to 21.7% of the Company's
Common Stock and Chase Manhattan Capital Corporation (currently a holder of
17.7% of the Company's Common Stock), together with its affiliates, will own
23.4% of the Company's Common Stock;
(2) To elect three (3) directors to serve until the annual meeting of
stockholders in 1999 and until their successors are duly elected and qualified;
(3) To approve the adoption of the Company's 1996 Non-Employee
Directors' Stock Option Plan which was adopted by the Company's Board of
Directors subject to shareholder approval and authorizes the grant of options
with respect to 100,000 shares of Common Stock under such plan;
(4) To approve the appointment of the independent certified public
accountants of the Company for the fiscal year ending December 31, 1996;
and
(5) To transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
The Board of Directors has unanimously approved the issuance of
Common Stock and recommends that stockholders vote FOR approval of the issuance
of Common Stock. The accompanying Proxy Statement provides a detailed
description of each of the proposals. You are urged to read this material in
its entirety and consider it carefully.
<PAGE>
It is important that your shares be represented and voted at the
Annual Meeting, regardless of the size of your holdings. Accordingly, please
complete, sign and date the enclosed proxy card and return it promptly in the
enclosed envelope to ensure your shares will be represented. If you do attend
the Annual Meeting, you may, of course, withdraw your proxy should you wish to
vote in person.
On behalf of the Board of Directors and management of Wireless One, I
would like to thank you for choosing to invest in our Company. We are very
excited about the future of the Company and are looking forward to our first
annual meeting since the successful completion of our initial public offering in
October 1995.
Sincerely,
Hans J. Sternberg
Chairman of the Board
<PAGE>
WIRELESS ONE, INC.
11301 INDUSTRIPLEX, SUITE 4
BATON ROUGE, LOUISIANA 70809-4115
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JULY 26, 1996
The Annual Meeting of Stockholders of Wireless One, Inc., a Delaware
corporation (the "Company"), is currently scheduled to be held on July 26, 1996,
at 10:00 a.m. (the "Annual Meeting"), at the Company's corporate headquarters,
11301 Industriplex, Suite 4, Baton Rouge, Louisiana, for the following
purposes:
(1) To approve the issuance of up to 3,553,333 shares of the Company's common
stock, par value $.01 per share (the "Common Stock") pursuant to the terms
of the Agreement and Plan of Merger among the Company, TruVision Wireless,
Inc. ("TruVision") and Wireless One MergerSub, Inc. ("MergerSub"). Upon
consummation of the merger (the "Merger") of TruVision and MergerSub,
shareholders of TruVision will own up to 21.7% of the Company's Common
Stock and Chase Manhattan Capital Corporation (currently a holder of 17.7%
of the Company's Common Stock), together with its affiliates, will own
23.4% of the Company's Common Stock;
(2) To elect three (3) Directors to serve until the annual meeting of
stockholders in 1999 and until their successors are duly elected and
qualified;
(3) To approve the adoption of the Company's 1996 Directors' Stock Option Plan
which was adopted by the Company's Board of Directors subject to
stockholders approval and authorizes the grant of options with respect to
100,000 shares of Common Stock under such plan;
(4) To approve the appointment of the independent certified public accountants
of the Company for the fiscal year ending December 31, 1996; and
(5) To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
The Board of Directors has unanimously approved the issuance of the
Common Stock and recommends that stockholders vote FOR approval of the issuance
of Common Stock.
The Board of Directors has fixed the close of business on June 25,
1996 as the record date for determining the holders of Common Stock entitled to
notice of, and to vote at, the Annual Meeting (the "Record Date"). Only holders
of record at the close of business on the Record Date are entitled to notice of,
and to vote at, the Annual Meeting.
Approval of the issuance of up to 3,553,333 shares of Common Stock
requires the affirmative vote of the holders of a majority of the outstanding
shares of Common Stock entitled to vote thereon. Chase Manhattan Capital
Corporation, Baseball Partners, Heartland Wireless Communications, Inc., Hans J.
<PAGE>
Sternberg, Sean Reilly, Premier Venture Capital Corporation and Lamar
Advertising are parties to the Wireless One Voting Agreement (the "Voting
Agreement") pursuant to which they have agreed to vote their shares to approve
and adopt actions related to the Merger. Collectively, the parties to the Voting
Agreement hold approximately 52.7% of the shares of Common Stock outstanding as
of the Record Date. Therefore, assuming that the shares owned by such parties
are voted in accordance with the Voting Agreement, sufficient votes will be cast
for approval of the proposal to issue shares of Common Stock without the vote of
any other stockholder. Consummation of the Merger is conditioned upon, among
other things, stockholder approval and the receipt of certain other approvals
and consents. There can be no assurance that the conditions to the Merger will
be satisfied or, where permissible, waived, or that the Merger will be
consummated. The Annual Meeting may be postponed or adjourned from time to time
until such conditions are satisfied. See "The Merger Agreement-Conditions to the
Merger."
This Notice, the Proxy Statement, the proxy card, the 1995 Annual
Report for the fiscal year ended December 31, 1995 and the Quarterly Report for
the fiscal quarter ended March 31, 1996 are sent to you by order of the Board of
Directors. If you plan to attend the Annual Meeting, please check the
appropriate box on your proxy card. You may attend the Annual Meeting whether
or not you have previously returned your proxy card.
July 9, 1996
By Order of the Board of Directors
William C. Norris, Jr.
Secretary
- --------------------------------------------------------------------------------
EVEN IF YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE PROMPTLY COMPLETE, SIGN,
DATE AND MAIL THE ENCLOSED PROXY CARD. A SELF-ADDRESSED ENVELOPE IS ENCLOSED
FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
STOCKHOLDERS WHO ATTEND THE ANNUAL MEETING MAY REVOKE THEIR PROXIES AND VOTE IN
PERSON IF THEY SO DESIRE.
- --------------------------------------------------------------------------------
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WIRELESS ONE, INC.
11301 INDUSTRIPLEX, SUITE 4
BATON ROUGE, LOUISIANA 70809-4115
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
On JULY 26, 1996
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Wireless One, Inc., a Delaware corporation (the
"Company"), of proxies to be used at the annual meeting of stockholders of the
Company currently scheduled to be held on July 26, 1996 (the "Annual Meeting").
This Proxy Statement and the related proxy card are being mailed to holders of
the Company's common stock, par value $.01 per share (the "Common Stock"),
commencing on or about July 11, 1996.
At the Annual Meeting, holders of Common Stock will be asked to
approve the issuance of up to 3,553,333 shares of Common Stock pursuant to the
Agreement and Plan of Merger, dated as of April 25, 1996 (the "Merger
Agreement") among the Company, Wireless One MergerSub, Inc. ("MergerSub") and
TruVision Wireless, Inc. ("TruVision"). The Merger Agreement provides for the
merger (the "Merger") of MergerSub with and into TruVision, with TruVision
continuing as the surviving corporation and as a wholly owned subsidiary of the
Company. Upon consummation of the Merger, shareholders of TruVision common stock
will beneficially own up to 21.7% of the Company's Common Stock and Chase
Manhattan Capital Corporation (currently a holder of 17.7% of the Company's
Common Stock), together with its affiliates, will own 23.4% of the Company's
Common Stock. At the Annual Meeting, holders of Common Stock will also be asked
to (i) elect three directors, (ii) approve the adoption of the Company's 1996
Non-Employee Directors' Stock Option Plan, (iii) approve the appointment of the
independent certified public accountants, and (iv) transact such other business
as may properly come before the Annual Meeting.
Stockholders of record of the Company's Common Stock at the close of
business on June 25, 1996 will be entitled to vote at the Annual Meeting. A
list of the Company's stockholders will be open to the examination of any
stockholder for any purpose germane to the meeting at the Company's headquarters
for a period of ten days prior to the Annual Meeting. At the Annual Meeting,
inspectors of election shall determine the presence of a quorum and shall
tabulate the results of the stockholders' voting. The presence, either in
person or by proxy, of the holders of a majority of the shares of Common Stock
entitled to vote is necessary to constitute a quorum to transact business at the
Annual Meeting. Abstentions of shares that are present at the Annual Meeting
and broker non-votes (i.e., proxies held in street name by brokers that are not
voted on all proposals to come before the Annual Meeting) are counted for the
purpose of determining the presence of a quorum for the transaction of business.
If the enclosed proxy card is executed and returned, the shares
represented by it will be voted as directed on all matters properly coming
before the Annual Meeting for a vote. Returning your completed proxy will not
prevent you from voting in person at the Annual Meeting should you be present
and desire to do so. PROPERLY EXECUTED PROXIES CONTAINING NO INSTRUCTION
REGARDING THE SHARE ISSUANCE WILL BE VOTED "FOR" THE SHARE ISSUANCE.
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THE ANNUAL MEETING
DATE, TIME AND PLACE; PURPOSE OF THE ANNUAL MEETING
This Proxy Statement is being furnished to the holders of Common Stock
as of the Record Date in connection with the solicitation of proxies by the
Board of Directors of the Company (the "Board of Directors") for use at the
Annual Meeting to be held on July 26, 1996 at 10:00 a.m. at the Company's
headquarters, 11301 Industriplex, Suite 4, Baton Rouge, Louisiana 70809-4115,
and at any adjournment or postponement thereof.
At the Annual Meeting, the holders of Common Stock as of the Record
Date will be asked to consider and vote upon the following proposals:
(1) To approve the issuance of up to 3,553,333 shares of Common Stock
pursuant to the Merger Agreement (the "Share Issuance Proposal"). Upon
consummation of the Merger, shareholders of TruVision common stock will
beneficially own up to 21.7% of the Company's Common Stock and Chase Manhattan
Capital Corporation (currently a holder of 17.7% of the Company's Common Stock),
together with its affiliates, will own 23.4% of the Company's Common Stock;
(2) To elect three (3) directors to serve until the annual meeting of
stockholders in 1999 and until their successors are duly elected and qualified;
(3) To approve the adoption of the Company's 1996 Non-Employee
Directors' Stock Option Plan which was adopted by the Company's Board of
Directors subject to stockholder approval and authorizes the grant of options
with respect to 100,000 shares of Common Stock under such plan;
(4) To approve the appointment of the independent certified public
accountants of the Company for the fiscal year ending December 31, 1996;
and
(5) To transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
The Board of Directors has unanimously approved the Share Issuance
Proposal and recommends that stockholders vote FOR approval of the Share
Issuance Proposal.
RECORD DATE, VOTING RIGHTS AND VOTE REQUIRED
The Board of Directors has fixed the close of business on June 25,
1996 as the Record Date for the determination of the holders of Common Stock
entitled to notice of, and to vote at, the Annual Meeting. Only holders of
record of Common Stock at the close of business on the Record Date will be
entitled to notice of, and to vote at, the Annual Meeting. On the Record Date,
13,498,752 shares of Common Stock were outstanding and held by approximately
100 holders of record. On the Record Date, approximately 52.7% were held owned
by the parties to the Voting Agreement. Accordingly, such parties can approve
the Share Issuance Proposal without the vote of any other stockholder. The
Common Stock is the only outstanding class of voting security of the Company,
and each share of Common Stock is entitled to one vote on each matter to be
acted upon or which may come before the Annual Meeting. Stockholders have no
right to cumulative voting as to any matter. Votes may be cast at the Annual
Meeting in person or by properly executed proxy. See "-Proxies."
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The presence, either in person or by proxy, of the holders of a
majority of the shares of Common Stock entitled to vote is necessary to
constitute a quorum to transact business at the Annual Meeting. Abstentions of
shares that are present at the Annual Meeting and broker non-votes (i.e.,
proxies held in street name by brokers that are not voted on all proposals to
come before the Annual Meeting) are counted for the purpose of determining the
presence of a quorum for the transaction of business.
Approval of the Share Issuance Proposal requires the affirmative vote
of the holders of a majority of the outstanding shares of Common Stock entitled
to vote thereon and approval of the adoption of the Company's 1996 Non-Employee
Directors' Stock Option Plan requires the affirmative vote of the holders of a
majority of the shares present in person or represented by proxy and entitled to
vote thereon. In determining whether the Share Issuance Proposal has received
the requisite number of votes under applicable Delaware law, abstentions and
broker non-votes will be counted and will have the same effect as a vote against
approval of such proposals. Chase Manhattan Capital Corporation, Baseball
Partners, Heartland Wireless Communications, Inc., Hans J. Sternberg, Sean
Reilly, Premier Venture Capital Corporation and Lamar Advertising are parties to
the Voting Agreement (the "Voting Agreement") pursuant to which they have agreed
to vote their shares to approve and adopt actions related to the Merger,
including the Share Issuance Proposal. Collectively, the parties to the Voting
Agreement hold approximately 52.7% of the shares of Common Stock outstanding as
of the Record Date. Therefore, assuming that the shares owned by such parties
are voted in accordance with the Voting Agreement, sufficient votes will be cast
for approval of the Share Issuance Proposal without the vote of any other
stockholder.
The three nominees for Director receiving the greatest number of votes
cast at the Annual Meeting in person or by proxy shall be elected.
Consequently, any shares of Common Stock present in person or by proxy at the
Annual Meeting but not voted for any reason have no impact in the election of
Directors, except to the extent that the failure to vote for an individual may
result in another individual receiving a larger number of votes.
PROXIES
This Proxy Statement is being furnished to holders of Common Stock as
of the Record Date in connection with the solicitation of proxies by the Board
of Directors for use at the Annual Meeting. If a stockholder does not return a
properly executed proxy, and does not attend the Annual Meeting, such
stockholder's shares will not be voted, which will have the same effect as a
vote against any proposal requiring a specific percentage of favorable votes,
including the Share Issuance Proposal. If signed and returned, the proxy will
authorize the persons named as proxy to vote on matters referred to therein.
Shares of Common Stock represented by properly executed proxies received prior
to or at the Annual Meeting and not revoked will be voted in accordance with the
instructions indicated in such proxies. Executed proxies that contain no
instructions to the contrary will be voted: (i) for the three nominees for
Director named in this Proxy Statement; (ii) for approval of the Share Issuance
Proposal as described in this Proxy Statement; (iii) for approval of the
adoption of the Company's 1996 Non-Employee Directors' Stock Option Plan which
authorizes the grant of options with respect to 100,000 shares of Common Stock;
(iv) for approval of the appointment of KPMG Peat Marwick LLP as independent
certified public accountants; and (v) in accordance with the judgment of the
persons named in the enclosed proxy, or their substitutes, for any other matters
which properly come before the Annual Meeting or any adjournment or postponement
thereof.
Any stockholder who executes and returns a proxy may revoke it at any
time before it is voted at the Annual Meeting by (i) delivering to the Secretary
of the Company at the Company's principal executive offices before the Annual
Meeting an instrument of revocation bearing a later date or time than the date
or time of the proxy being revoked; (ii) submitting a duly executed proxy
bearing a later date or time than the
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date or time of the proxy being revoked; or (iii) voting in person at the Annual
Meeting. A stockholder's attendance at the Annual Meeting will not by itself
revoke a proxy given by such stockholder.
The Company will bear the costs of soliciting proxies from its
stockholders. In addition to the use of the mails, proxies may be solicited by
the Directors, officers and employees of the Company by personal interview,
telephone or telegram. Such Directors, officers and employees will not be
additionally compensated for such solicitation, but may be reimbursed for out-
of-pocket expenses incurred in connection therewith. Arrangements will also be
made with brokerage houses and other custodians, nominees and fiduciaries for
the forwarding of solicitation materials to the beneficial owners of Common
Stock held of record by such persons, and the Company will reimburse such
brokerage houses, custodians, nominees and fiduciaries for reasonable out-of-
pocket expenses incurred in connection therewith.
THE MERGER
On April 25, 1996, pursuant to the Merger Agreement, the Company
agreed to acquire all of the outstanding capital stock of TruVision through the
merger of a wholly owned subsidiary of the Company, MergerSub, with TruVision.
Pursuant to the Merger Agreement, the Company will issue to the TruVision
shareholders up to 3,373,333 shares of Common Stock, assuming all of the
conditions to the Merger are met prior to the Effective Time (as defined herein)
of the Merger, and TruVision will become the wholly owned subsidiary of the
Company. The aggregate number of shares of Common Stock to be issued to the
TruVision shareholders will be reduced and such shares will be placed in escrow
if TruVision has not consummated certain acquisitions by the Effective Time. The
TruVision shareholders will receive the shares placed in escrow upon the closing
of certain acquisitions and the satisfaction of certain conditions relating to
the ownership of certain assets by TruVision. Shares of Common Stock placed in
escrow and not distributed to the former TruVision shareholders will be returned
to the Company. See "The Merger Agreement--Merger Consideration." Based on
closing market price of the Company's Common Stock as of July 8, 1996, the
value of the shares of Common Stock to be issued to the TruVision shareholders
is $59,876,661. Upon consummation of the Merger, as a result of the issuance of
shares of Common Stock, (1) shareholders of TruVision will own up to 21.7% of
the Company's Common Stock, (2) Chase Manhattan Capital Corporation ("CMCC")
(currently a holder of 17.7% of the Company's Common Stock), together with its
affiliates, will own 23.4% of the Company's Common Stock, and (3) Mr. Burkhalter
and Mississippi Wireless TV, L.P. will become the beneficial owners of more than
5% of the Company's Common Stock.
In connection with the Merger, the Company will issue to Vision
Communications, Inc. ("VCI") 180,000 shares of Common Stock and will pay to VCI
$1.8 million in cash, in each case in satisfaction of certain obligations of
TruVision. See "-Interests of Certain Persons in the Merger." The shares of
Common Stock issued to the TruVision shareholders will not be registered under
the Securities Act of 1933, as amended (the "Securities Act") and will be
subject to certain transfer restrictions. However, the TruVision shareholders
will be granted certain rights to register such shares of Common Stock pursuant
to the Amended and Restated Registration Rights Agreement. See "Other
Agreements-Registration Agreements." In connection with the execution of the
Merger Agreement, the Company and certain other persons amended the Stockholders
Agreement to increase the size of the Board of Directors from seven to eight.
See "Other Agreements-Stockholders Agreements."
On June 3, 1996, the Company filed a Registration Statement on Form
S-1 with the Securities and Exchange Commission (the "SEC") relating to an
offering (the "Offering") of certain senior notes of the Company. The Company
intends to apply a portion of the proceeds from the Offering to repay $18.0
million of indebtedness of TruVision consisting of $12.0 million under the
Interim Facility (as defined herein) and
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$6.0 million under the Revolving Credit Facility. See "--Interests of Certain
Persons." The Company intends to apply the remaining proceeds from the Offering
to finance the launch, initial development and expansion of the wireless
cable markets of the Company, including wireless cable markets acquired from
TruVision. Other than the $18.0 million repayment of certain of TruVision's
indebtedness and the financing of the wireless cable markets acquired from
TruVision in the Merger, none of the proceeds from the Offering will be used for
matters related to the Merger.
BACKGROUND OF THE MERGER
The Board of Directors, as part of their ongoing oversight and
planning, have from time to time considered strategic alternatives and possible
acquisitions that might be available to increase the value of the Company to its
stockholders. On February 27, 1996, the Board of Directors met and discussed the
development of its wireless cable markets which were under construction, the
expansion of its wireless cable markets in operation, the geographical scope of
its wireless cable markets, and the opportunities to add through acquisitions
additional wireless cable markets. As part of the discussions, the Board of
Directors explored the possibility of acquiring a number of wireless cable
companies in the southeastern United States, including TruVision and Applied
Video Technologies. TruVision is the second largest operator of wireless cable
systems in the southeastern United States on a line-of-sight household basis
covering markets that do not substantially overlap with the Company's markets.
The Board of Directors was familiar with TruVision through the Company's
operating markets in Mississippi, where TruVision has a large market presence.
At the meeting, the Board of the Directors decided to initiate discussions with
and to explore merger opportunities with TruVision, Applied Video Technologies
and certain other wireless cable companies after the day down payments were made
in connection with the BTA Auctions (as defined herein).
Chase Venture Capital Associates, L.P. ("CVCA") is the beneficial
owner of 46.5% of the TruVision common stock, and an affiliate of CVCA, CMCC, is
the beneficial owner of 17.7% of the Company's Common Stock. As a result, the
Merger may be considered a transaction between affiliates and, consequently, not
an arm's length transaction. See "--Interests of Certain Persons in the Merger."
On April 5, 1996, John Bailey, the Chief Financial Officer of
Heartland Wireless Communications, Inc. ("Heartland"), David E. Webb, a Director
of the Company and a co-founder of Heartland, met with Arnold L. Chavkin, a
Director of TruVision, and Michael Hannon, a Director of TruVision, (Heartland
beneficially owns 24.9%. of the Company's Common Stock; Mr. Bailey was not an
employee of the Company and attended the meeting as a representative of
Heartland.) Messrs. Bailey, Webb, Chavkin and Hannon discussed a possible merger
of the two companies where the consideration for such a merger would be the
Company's Common Stock and the valuation of the two companies would be based on
the number of line of sight households ("LOS") in their respective markets. The
TruVision representatives indicated that they were in the process of arranging
financing for TruVision and that they were not presently interested in pursuing
a transaction with the Company. The parties, however, agreed to keep the lines
of communication open and to exchange information on their respective markets
and financial position. TruVision representatives delivered to the Company
updated information with respect to its balance sheet, its cash position and the
number of subscribers in each of its markets.
Thereafter, Sean Reilly, Chief Executive Officer, President and
Director of the Company, Hans Sternberg, Chairman of the Board of Directors of
the Company, Robert Gary, then Chief Financial Officer of the Company, William
Luby, John Bailey, and James Collis, then a Director of the Company, reviewed
the market and financial information provided by TruVision and discussed
valuation methods which could provide a basis to compare the Company and
TruVision. Among the valuation methods discussed were valuing the two companies
based on a multiple of the number of LOS in the respective company's markets and
a multiple of LOS less a discount to account for the comparatively smaller size
of TruVision on an LOS basis. LOS is generally recognized as a standard
valuation measure for companies in the wireless cable industry. The parties
determined that the Company's implied LOS value resulted in a price of TruVision
of approximately $71.1 million or $15 per share.
At a meeting of the Board of Directors on April 8, 1996, Messrs.
Bailey and Webb presented to the Board of Directors an oral report on the
discussions with TruVision. In the report, Messrs. Bailey and Webb stated that
they and the TruVision representatives had agreed to exchange information
and
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keep open the lines of communication regarding a possible merger. The Board of
Directors discussed the potential benefits of a merger, including the
establishment of a contiguous geographic cluster of markets, the resolution of
overlapping market positions, the ease of combining the two companies due to
their similar operating philosophies and the compatability of the two companies
cultures, and the addition of management depth due to the collective experience
of TruVision's management. The Board of Directors also acknowledged the ability
to better expand TruVision's markets due to greater capital resources and access
to capital. The Board of Directors discussed the structure of acquiring
TruVision and concluded that the terms of the Company's outstanding indebtedness
precluded making an all cash offer for TruVision. Additionally, the Board of
Directors concluded that a stock-for-stock transaction would result in a tax
free exchange and would address TruVision's desire to have an ongoing interest
in the industry and the combined entity.
The Board of Directors also discussed the LOS valuation methods
previously explored by Messrs. Reilly, Sternberg, Gary, Luby, Bailey and Collis.
The Board of Directors determined that valuing TruVision on the Company's
implied LOS value resulted in a price of TruVision of approximately $71.1
million or $15 per share. The Board of Directors discussed the valuation of
TruVision implied by the range of values that TruVision was seeking in its
initial public offering. The Board of Directors noted that TruVision's range of
values of $10 to $12 per share of TruVision common stock was lower than the $15
per share of TruVision common stock obtained from an LOS valuation and decided
that valuing the companies on an equal LOS basis resulted in a valuation of
TruVision in excess of its offering price range. The Board of Directors
concluded that valuing TruVision on an LOS basis less a discount was appropriate
because the Company had a higher number of LOS and was better capitalized to
develop its LOS. Based on the discussions of the benefits of a combination and
the valuations of the two companies, the Board of Directors approved making an
offer for TruVision for up to $51 million in Common Stock based on a valuation
of $11 per share of TruVision common stock and $15 per share of the Company's
Common Stock, the approximate current market price of the Company's Common
Stock.
During the week of April 15, 1996, Mr. Bailey discussed with Mr.
Chavkin the terms of the merger, including the relative valuation of the two
companies. Mr. Chavkin indicated that TruVision would be willing to proceed
with a merger based on a valuation of $14 per share of Common Stock to $11 per
share of TruVision Common Stock.
On April 19, 1996, at the direction of the Board of Directors, Mr.
Collis met with Mr. Hannon to restate the Board of Directors' position that the
Company would be willing to proceed with a merger based on a valuation of $15
per share of the Company's Common Stock to $11 per share of TruVision common
stock. Mr. Hannon agreed with the Board of Directors' valuation of $15 per share
of Company Common Stock to $11 per share of TruVision common stock. The Company
and TruVision agreed to explore further the details of a merger, and the Company
initiated the preparation of a draft merger agreement and other agreements
related to the merger.
Representatives of the Company and their legal advisors held a
telephonic conference to discuss the terms of the merger and the draft
transaction agreements. After the conference call, Messrs. Reilly and Burkhalter
met in New York to discuss the operations and organizational structure of a
combined company.
From April 21 through April 23, 1996, representatives of the Company,
TruVision and their respective legal advisors met to negotiate the terms of the
draft transaction documents.
On April 24, 1996, the Company held a telephonic meeting of the Board
of Directors. Messrs. Luby, Reilly and Sternberg and the Company's legal
advisors apprised the Board of Directors on the status of the negotiations and
the proposed terms of the merger agreement and other transaction documents.
During the meeting, the Company's financial advisor, Gerard Klauer Mattison &
Co., LLC ("GKM"), orally presented to the Board of Directors its opinion that
the consideration to be paid by the Company in the Merger was fair from a
financial point of view to the stockholders of the Company. In its presentation
to the Board of Directors, GKM considered and discussed the following financial
and
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comparative analyses, which are summarized below: (i) a comparison of the
historical stock prices and trading activity of the Company's Common Stock
relative to various stock indices, (ii) a comparable public company analysis,
(iii) an analysis of selected comparable acquisition transactions in the
wireless cable industry, (iv) a discounted cash flow analysis and (v) an
analysis of the relative contributions of the Company and TruVision to the
proposed combined entity in terms of LOS, net sales, EBITDA (as defined herein)
and net income to common equity, in each case for the years ending December 31,
1996-2001 (as projected by the Company).
On April 25, 1996, the Board of Directors unanimously approved by
written consent the Merger Agreement and the transactions contemplated thereby.
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors believes that the Merger is fair to and in the
best interests of the Company and its stockholders. In reaching its
determination the Board of Directors consulted with the Company's management and
financial and legal advisors and considered, among others, the factors discussed
below.
Contiguous Geographic Cluster. The Company owns rights to at least 12
channels in each of 51 markets located in Texas, Louisiana, Tennessee,
Kentucky, Alabama, Georgia, South Carolina and Florida. TruVision owns rights to
at least 12 channels in each of 21 markets principally arranged in
clusters in the state of Mississippi, western Tennessee and western Alabama and
nearby markets in Alabama, Arkansas, Tennessee and North Carolina. By combining
the market positions of the Company and TruVision, the Company will be able to
form large contiguous geographic clusters which will enable the Company to
achieve significant cost savings through centralization of operations. In
addition, the Company believes that the resulting contiguous geographic clusters
will simplify the launch of additional markets by facilitating the movement of
skilled personnel from one launch market to another. Further, the Company
believes the contiguous geographic cluster formed will be more attractive to
regional advertisers and offer greater opportunities for telecommunications and
other sources of revenue.
Management Team. The combination of the Company and TruVision will
increase the experience of the Company's management team and allow it to further
achieve its operating goals.
Elimination of Interference Conflicts; Mutually Exclusive ITFS
Licenses. TruVision enjoys the right to lease instructional television fixed
service ("ITFS") channel capacity and is the licensee or has rights to become
the licensee of multipoint distribution service ("MDS") channel capacity in
various markets that are geographically close to or within the markets targeted
by the Company. Because of the requirements of the Federal Communications
Commission (the "FCC") interference protection rules, a significant number of
those TruVision channels and expected channels block the licensing of channels
the Company seeks to use in the Company's markets. Certain of the Acquisitions
(as defined herein) include rights to the capacity of channels which similarly
interfere with the ability of the Company and its channel capacity lessors to
engineer its and their channels so that their utility is maximized. The merger
of the Company and TruVision will bring TruVision's channel rights within the
Company's control, thus facilitating efforts by the Company and its channel
capacity lessors to engineer its and their channels in accordance with the plans
of the Company and such lessors.
In the course of the negotiations and analysis of the Merger, the
Company reviewed and considered the following additional factors: (i) the
financial and other terms and conditions of the Merger Agreement, including the
establishment of an escrow for certain of TruVision's pending acquisitions; (ii)
information regarding the Company's and TruVision's respective businesses,
prospects, financial performance, financial condition and operations; (iii) the
current and prospective economic and competitive
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environment facing the Company; (iv) the compatibility of the respective
managements and corporate cultures of the Company and TruVision; and (v) GKM's
opinion as to the fairness from a financial point of view to the stockholders of
the Company of the consideration to be paid by the Company in the Merger.
The Board of Directors also considered the risks related to the
Merger. In determining the consideration to paid in connection with Merger and
the recommendation of the Board of Directors to the stockholders of the Company,
the Board of Directors weighed the potential benefits of the Merger, including
those mention above, against factors such as the limited operating history of
TruVision, the possible inability of TruVision to consummate certain pending
acquisitions and the need to obtain additional financing to develop the markets
acquired from TruVision. In view of the wide variety of information and factors
considered in connection with the Board of Directors' evaluation of the proposed
merger, the Board of Directors did not quantify or otherwise attempt to assign
relative weights to the foregoing factors or determine that any factor was of
particular importance. Rather, the Board of Directors viewed the consideration
to be paid its position and recommendation as being based on the totality of the
information presented to and considered by it. In light of the foregoing
factors, the Board of Directors concluded that the Merger was in the best
interests of the Company and its stockholders.
OPINION OF FINANCIAL ADVISOR
General. GKM was retained by the Company to render an opinion to the
Board of Directors as to the fairness from a financial point of view to the
stockholders of the Company of the consideration to be paid by the Company in
the Merger.
On April 24, 1996, GKM delivered an oral opinion to the Board of
Directors to the effect that, as of such date and based upon the assumptions
made, matters considered and limitations on the scope of review, each as set
forth in such opinion, the consideration to be paid by the Company in the Merger
is fair from a financial point of view to the stockholders of the Company. GKM
confirmed such oral opinion by delivery of a written opinion dated as of the
date of July 10, 1996 (the "GKM Opinion").
A copy of the GKM Opinion, which includes certain assumptions made,
matters considered and limitations on the scope of review, is attached to this
Proxy Statement as Annex A. Stockholders are urged to read the GKM Opinion in
its entirety. Each of the oral opinion delivered by GKM and the GKM Opinion is
directed only to the fairness from a financial point of view to the Stockholders
of the Company, as of the date thereof, of the consideration to be paid by the
Company in the Merger and does not address any other aspect of the Merger or
constitute a recommendation to any holder of Common Stock as to how such holder
should vote on the Share Issuance Proposal. The summary in this Proxy Statement
of each of the oral opinion delivered by GKM and the GKM Opinion is qualified in
its entirety by reference to the full text of each of the opinions.
In arriving at the conclusion contained in each of the oral opinion
delivered April 24, 1996 and GKM Opinion, GKM: (i) analyzed certain publicly
available financial statements and other information of the Company and
TruVision; (ii) reviewed certain internal business, operating and financial
information of the Company and TruVision, including financial forecasts of the
combined entity, furnished to GKM by the Company; (iii) discussed the past and
current operations and financial condition and the prospects of the Company,
TruVision and the combined entity with members of senior management of the
Company, including their view of the strategic rationale for the Merger and the
economic benefits of the Merger; (iv) reviewed the reported prices and trading
activity for the Common Stock and compared the historical
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prices and trading activity of the Common Stock to the movement of both the
Standard & Poor's 500 Index and a composite index of certain other comparable
publicly traded companies; (v) analyzed the pro forma impact of the Merger on
the Company's earnings per share, consolidated capitalization and financial
ratios and the relative contributions of the Company and TruVision to the
combined entity in terms of subscribers, LOS, net sales and earnings before
interest, taxes, depreciation and amortization ("EBITDA") based on information
provided by the Company; (vi) reviewed the financial terms, to the extent
publicly available, of certain comparable acquisition transactions; (vii)
compared the financial and stock performance of the Company with that of certain
comparable companies; and (viii) conducted such other analyses, performed such
other investigations and considered such other matters as GKM deemed necessary
to arrive at the conclusion contained in each of the oral opinion and the GKM
Opinion.
In addition to the foregoing, in arriving at the conclusion contained
in each of the oral opinion and the GKM Opinion and making its presentation to
the Board of Directors at a meeting held on April 24, 1996, GKM considered and
discussed the following financial and comparative analyses, which are summarized
below: (i) a comparison of the historical stock prices and trading activity of
the Company's Common Stock relative to various stock indices; (ii) a comparable
public company analysis; (iii) an analysis of selected comparable acquisition
transactions in the wireless cable industry; (iv) a discounted cash flow
analysis and (v) an analysis of the relative contributions of the Company and
TruVision to the proposed combined entity in terms of LOS, net sales, EBITDA and
net income to common equity, in each case for the years ending December 31,
1996-2001 (as projected by the Company).
In preparing each of the oral opinion and the GKM Opinion, GKM relied
upon the accuracy and completeness of all information supplied or otherwise made
available to it by the Company and assumed that financial forecasts and
estimates of operating efficiencies and potential synergies reflected the best
currently available estimates and judgments of the management of the Company as
to the expected future financial performance of the combined entity. GKM did
not independently verify such information or assumptions, conduct a physical
inspection of the properties or facilities of the Company or TruVision or
undertake an independent appraisal or evaluation of the assets or liabilities of
the Company or TruVision. GKM expressed no opinion as to the price at which the
Common Stock will trade subsequent to the Merger. Neither the oral opinion
delivered by GKM or the GKM Opinion presents a discussion of the relative merits
of the Merger as compared to any other business plan or opportunity that might
be presented to the Company or the effect of any other arrangement in which the
Company might engage.
Historical Stock Price. GKM reviewed the performance of the per share
daily closing market price of Common Stock over the period from October 19, 1995
to April 22, 1996 for purposes of delivering the oral opinion and for the period
from October 19, 1995 to July 9, 1996 for purposes of delivering the GKM
Opinion, and compared the movement of such daily closing prices with the
movement of the Standard & Poor's 500 index and a composite index of certain
other publicly traded wireless cable companies. The companies included in the
composite index were American Telecasting, Inc., CAI Wireless Systems, Inc.,
Heartland Wireless Communications, Inc., People's Choice TV Corp. and Wireless
One, Inc. (collectively, the "Industry Comparables").
Comparable Public Company Analysis. Comparable company analysis
analyzes a company's financial and operating performance relative to a group of
publicly traded peers. Such analysis assisted GKM in evaluating implied equity
and enterprise values for the Company based on industry means and medians. GKM
compared certain publicly available financial and operating data and projected
financial performance (reflecting a composite of research analysts' estimates)
of the Industry Comparables with similar financial and operating data and
projected financial performance of the Company, in each case as of March 31,
1996. Specifically, GKM compared (A) the equity market capitalization as a
multiple of book common equity and compared (B) enterprise value as a multiple
of (i) publicly reported latest twelve months ("LTM") EBITDA, (ii) publicly
reported LTM
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earnings before interest and taxes ("EBIT") and (iii) publicly reported LTM
sales. For such purposes, "equity market capitalization" is equal to the closing
price per share on the relevant date, multiplied by the number of shares
outstanding, and "enterprise value" is equal to the equity market capitalization
plus total debt plus liquidation value of preferred stock plus minority
interests minus cash and minus cash equivalents. The multiples as of April 23,
1996 and July 9, respectively, were as follows: (i) equity market
capitalization to book common equity was 3.31x and 4.98x for the Company,
whereas the multiples of the Industry Comparables ranged from 1.29x and 1.44x to
10.46x and 8.68x (with a mean of 4.38x and 4.61x and a median of 3.31x and
4.98x), (ii) enterprise value to LTM EBITDA and enterprise value to LTM EBIT
were negative for the Company and the Industry Comparables; and (iii) enterprise
value to LTM sales was 167.47x and 142.46x for the Company, whereas the
multiples of the Industry Comparables ranged from 9.06x and 8.12x to 167.47x and
142.46x (with a mean of 62.20x and 42.09x and a median of 43.10x and
19.02x).
GKM compared the LOS value of the Industry Comparables with that of
the Company. "LOS value" is defined as a quotient where the dividend (X) is (A)
the "adjusted enterprise value" (defined to be equity market capitalization plus
net debt adjusted for unbuilt headends and non-utilized wireless cable channel
rights for non-operating markets) minus (B) the "Existing Subscriber Value"
(defined as (a) the number of existing subscribers at the time of the
acquisition multiplied by (b) the theoretical purchase price of $1,500 per
subscriber) and the divisor (Y) is the number of Net Line-of-Sight Households
purchased. For such purposes, "Net Line-of-Site Households" is defined as (i)
the gross number of Line-of-Sight Households purchased minus (ii) the number of
subscribers at the time of the acquisition divided by 20% (to account for an
assumed maximum penetration rate of 20% for wireless cable services). The
LOS value of the Industry Comparables ranged from $17.14 to $46.95 on April 23,
1996 and from $23.49 to $60.34 on July 9, 1996 (with a weighted mean of $27.25
on April 23, 1996 and $29.76 on July 9, 1996) compared to a LOS value for
the Company of $39.15 as of April 23, 1996 and $66.34 as of July 9, 1996.
Selected Comparable Acquisition Analysis. GKM reviewed certain
publicly available information regarding 41 selected acquisitions of wireless
cable operations and assets announced since May 1993 (the "Acquisition
Comparables") to obtain a valuation range for certain transactions comparable to
the Merger.
GKM compared the LOS value of each transaction, defined as a
quotient where the dividend (x) is (a) the "adjusted aggregate purchase price"
(defined as the total acquisition consideration in the form of cash, securities
and the assumption of existing debt adjusted for unbuilt headends and non-
utilized wireless cable channel rights for non-operating markets) minus (b) the
Existing Subscriber Value and the divisor (y) is the number of Net Line-of-Sight
Households purchased. The LOS value of Acquisition Comparables ranged from
$58.11 to $11.58 (excluding, due to the price per LOS, the American Telecasting,
Inc./Rapid Choice deal and including only deals consummated after March 24,
1995). The mean per LOS value of Acquisition Comparables was $30.51 and the
median per LOS value was $30.42. As of April 23, 1996, the consideration to be
paid by the Company in the Merger was $38.59 per LOS which falls within the
range of the Acquisition Comparables.
Discounted Cash Flow Analysis. GKM performed a discounted cash flow
analysis of the Company, on a stand alone basis, and the combination of the
Company and TruVision giving effect to the Merger based upon estimates of
projected financial performance of the Company and the combined entity prepared
by the Company for the years 1996-2001. Utilizing these projections, GKM
calculated a range of implied values based upon the discounted net present value
of the sum of (i) the projected stream of unlevered free cash flows to the year
2001, (ii) the projected terminal value of the Company at such year based upon a
range of multiples of projected EBITDA and (iii) an assumed cash balance
(including other investments) net of debt.
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<PAGE>
GKM applied several discount rates (ranging from 13% to 17%) and multiples of
EBITDA (ranging from 9.0x to 11.0x). Utilizing this methodology, the implied
present value per share of Common Stock on a stand-alone basis ranged from
$11.46 to $22.41 compared to an implied present value per share of the combined
entity ranging from $10.40 to $22.30 on April 23, 1996 and from $10.36 to
$22.23 on July 9, 1996.
Contribution Analysis. GKM also compared the relative ownership of
the holders of outstanding shares of Common Stock and the holders of TruVision
Common Stock in the combined entity to their respective contributions of net
sales, EBITDA and net income to common equity of the combined company for the
years ending 1996-2001 (as projected by the Company). This analysis indicated,
for the year ending 1996, the Company and TruVision would have contributed,
respectively, 54.9% and 45.1% of the net sales of the combined entity, 82.7% and
17.3% of the EBITDA of the combined entity and 73.9% and 26.1% of the net income
to common equity of the combined entity. With respect to net sales of the
combined entity, the Company and TruVision would have contributed, respectively,
67.6% and 32.4% in 1997, 69.0% and 31.0% in 1998, 69.5% and 30.5% in 1999, 69.9%
and 30.1% in 2000, and 70.3% and 29.7% in 2001. With respect to EBITDA of the
combined entity, the Company and TruVision would have contributed, respectively,
60.9% and 39.1% in 1997, 77.8% and 22.2% in 1998, 73.9% and 26.1% in 1999, 73.4%
and 26.6% in 2000, and 73.1% and 26.9% in 2001. With respect to net income to
common equity of the combined entity, the Company and TruVision would have
contributed, respectively, 68.7% and 31.3 in 1997, 63.4% and 36.6% in 1998,
57.6% and 42.4% in 1999, 42.7% and 57.3% in 2000, and (64.7%) and 164.7% in
2001. As a result of this analysis, GKM determined that the relative ownership
of holders of Common Stock in the combined entity would be greater than the
Company's contribution to net sales, EBITDA and net income of the combined
entity for substantially all projected periods.
To evaluate the fairness from a financial point of view to the
stockholders of the Company of the consideration to be paid by the Company in
connection with the Merger, GKM performed a variety of financial analyses,
including, without limitation, historical stock price, comparable public company
analysis, selected comparable acquisition analysis, discounted cash flow
analysis and contribution analysis, the material portions of which are
summarized above. Although the summary set forth above does not purport to be a
complete description of the analyses performed by GKM, it does contain a
description of each of the material analyses upon which GKM relied in reaching
its opinion. GKM believes that its analyses must be considered as a whole and
that selecting portions of its analyses and of the factors considered by it,
without considering all such factors and analyses, could create a misleading
view of the process underlying its conclusion. The matters considered by GKM in
arriving at the conclusions that, as of the respective dates of the oral opinion
and the GKM Opinion, the consideration to be paid by the Company in connection
with the Merger is fair from a financial point of view to the stockholders of
the Company, are based on numerous macroeconomic, operating and financial
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond the Company's or
TruVision's control. Any estimates incorporated in the analyses performed by GKM
are not necessarily indicative of actual past or future results or values, which
may be significantly more or less favorable than such estimates. Estimated
values do not purport to be appraisals and do not necessarily reflect the prices
at which businesses or companies may be sold in the future, and such estimates
are inherently subject to uncertainty. Arriving at a fairness opinion is a
complex process not necessarily susceptible to partial or summary description.
No public company utilized as a comparison is identical to the Company,
TruVision or the business segment for which a comparison is being made and none
of the Acquisition Comparables or other business combinations utilized as a
comparison is identical to the Merger. Accordingly, an analysis of publicly
traded comparable companies and comparable business combinations resulting from
the transactions is not mathematical; rather, it involves complex considerations
and judgments concerning differences in financial and operating characteristics
of the comparable companies and other factors that could affect the public
trading value of the comparable companies or company to which they are being
compared. None of the analyses performed by GKM was assigned a greater
significance than any other.
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<PAGE>
The Board of Directors selected GKM to render a fairness opinion
because GKM has substantial experience in wireless cable transactions and
because it is familiar with the Company and its business. As part of its
investment banking business, GKM is continually engaged in the valuation of
businesses and their securities in connection with (i) mergers and acquisitions,
(ii) negotiated underwritings, (iii) secondary distributions of listed and over-
the-counter securities, (iv) private placements and (v) valuations for corporate
and other purposes.
Forward-Looking Information. Certain of the statements set forth
above and the information (including projections) relied upon by GKM in
connection with the oral opinion and the GKM Opinion constitute forward-looking
statements that are subject to risks and uncertainties. As a result, actual
results, events or conditions, financial or otherwise, could differ materially
from those contained in such statements. Such risks and uncertainties include,
without limitation, the need for substantial additional financing to launch and
expand service in the Company's and TruVision's markets, the substantial
leverage and debt service requirements of the Company and the need to use
substantial cash flow to meet such requirements, competition from other
television services and entertainment providers, the need to successfully expand
management resources (including personnel and systems) and manage growth,
changes in applicable laws and regulations, the need to generate substantial
growth in the subscriber base by successfully launching, marketing and providing
service in those markets, and the factors mentioned under "The Merger--Certain
Considerations Related to the Merger" and elsewhere in this Proxy Statement and
in the Company's other filings with the Commission.
Prior Dealings Between GKM and the Company or TruVision. In the
ordinary course of business, GKM may actively trade the securities of the
Company for its own account or the accounts of its customers and, accordingly,
may at any time hold a long or short position in such securities. As of the
date of the GKM Opinion, GKM held warrants to purchase an aggregate of 300,000
shares of Common Stock, at an exercise price of $12.60 per share (120% of the
initial public offering price in the initial public offering of the Common
Stock), which are exercisable over a four-year period commencing on October 18,
1996.
In October 1995, GKM performed certain investment banking services for
the Company, including acting as lead manager for the initial public offering of
Common Stock and as co-manager for the unit offering of notes and warrants. GKM
has received compensation for such services. In addition, GKM has been hired to
act as co-manager for the Company's anticipated note offering which is expected
to be consummated in the third quarter of 1996. The Company has granted GKM a
right of first refusal to act on behalf of the Company in connection with any
sale, offer, or placement of Company securities. With respect to the Company's
equity securities such right of first refusal continues until October 1997 and
with respect to the Company's debt securities such right of first refusal
continues until April 1997.
GKM Fees. Under the terms of a letter agreement between the Company
and GKM relating to the services to be provided by GKM in connection with the
Merger, GKM earned $175,000 upon delivery of the oral opinion and additional
fees in the amount of $25,000 in connection with the delivery of the GKM Opinion
to the Board of Directors. In addition, the Company agreed to reimburse GKM for
reasonable fees and disbursements of GKM's legal counsel and all of GKM's
reasonable travel and out-of-pocket expenses incurred in connection with the
Merger. The Company has also agreed to indemnify GKM against certain
liabilities, including liabilities arising under federal securities laws.
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<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain Relationships Among the Company, TruVision, CVCA and CMCC. On
March 31, 1996, Chase Manhattan Corporation and Chemical Banking Corporation
merged. As a result of this merger, Chase Manhattan Corporation became the
ultimate parent corporation of both a large stockholder of TruVision, CVCA, and
a large stockholder of the Company, CMCC. CVCA is the beneficial owner of 45.1%
of TruVision common stock, and CMCC is the beneficial owner of 17.7% of the
Company's Common Stock.
Certain current and former Directors of the Company are employees of
Chase Capital Partners ("CCP"), the general partner of CVCA. Mr. Collis, a
Director of the Company and an employee of CMCC prior to the execution of the
Merger Agreement, is an employee of CCP. Mr. Luby, a Director of the Company, is
a former employee of CMCC. In addition, Mr. Chavkin, a general partner of CCP,
and Mr. Hannon, a principal of CCP, are Directors of TruVision.
CMCC has the right to designate two members of the Company's Board of
Directors pursuant to the Stockholders Agreement (as defined herein). In
connection with the execution of the Merger Agreement, Messrs. Burkhalter and
Chavkin were elected to the Board of Directors as the designees of CMCC. See
"Other Agreements-Stockholders Agreements."
Stockholders of Both the Company and TruVision. CVCA is the beneficial
owner of 45.1% of TruVision common stock, and an affiliate of CVCA, CMCC, is the
beneficial owner of 17.7% of the Company's Common Stock. CVCA is the only
stockholder of TruVision that has an affiliate that is a stockholder of the
Company. Persons not affiliated with the Chase Manhattan Corporation, CVCA or
CMCC own 82.3% of the Company's Common Stock. Mr. Burkhalter, Mississippi
Wireless TV, L.P. ("MWTV"), VanCom, Inc., Mr. William J. Van Devender and Mr.
Byer are not affiliated with the Chase Manhattan Corporation, CVCA or CMCC and
beneficially own 54.9% of TruVision common stock. Mr. Burkhalter is the
President and controlling stockholder of a corporation which is the general
partner of MWTV. Mr. Van Devender is the President and controlling stockholder
of VanCom, Inc.
Set forth below are the beneficial owners of TruVision common stock,
the shares and percentage of TruVision common stock beneficially owned by such
persons and the shares and percentage of the Company's Common Stock beneficially
owned by such persons.
<TABLE>
<CAPTION>
Tru Vision Common Stock Company's Common Stock
TruVision _______________________ ______________________
Beneficial Owners Number Percent Number Percent
_______________________ _________ ________ _________ ________
<S> <C> <C> <C> <C>
CVCA............................... 2,140,000 46.5% - -
CVCA and CMCC, as a group.......... 2,140,000 46.5% 2,384,916 17.7%
Henry M. Burkhalter................ 2,506,384 53.3% - -
Mississippi Wireless TV, L.P....... 2,400,000 52.2% - -
VanCom, Inc........................ 60,000 1.3% - -
William J. Van Devender............ 60,000 1.3% - -
Bill R. Byer....................... 34,042 0.7% - -
</TABLE>
Certain Transaction. In February 1996, CVCA and TruVision entered
into an agreement whereby CVCA agreed to provide TruVision interim financing
(the "Interim Facility") in an amount up to $12.0 million at an annual interest
rate of 10% in order to fund certain operating and acquisition costs. Such
borrowing is payable by TruVision on demand after December 31, 1996.
In connection with the execution of the Merger Agreement, on May 6,
1996 the Company extended to TruVision two short-term lines of credit, a $9.0
million line of credit to be used to fund acquisition needs (the "Acquisition
Line of Credit") and a $1.5 million line of credit (the "Working Capital Line of
Credit" and, together with the Acquisition Line of Credit, the "Lines of
Credit"). A portion of the proceeds of the Working Capital Line of Credit was
used to repay borrowings under a working capital facility which was guaranteed
by Mr. Burkhalter and Mr. Van Devender, and that guarantee was terminated and
released. In addition, $1.8 million of the Acquisition Line of Credit must be
reserved to pay dividends on TruVision's preferred stock to CVCA and VanCom,
Inc., which is controlled by Mr. Van Devender. The Acquisition Line of Credit
will increase to $15.0 million upon repayment of the Working Capital Line of
Credit. The Lines of Credit are secured by substantially all of the assets of
TruVision and accrue interest at a rate of 13% per annum; principal and interest
on the Lines of Credit are due on the tenth business day following the earliest
of (1) the date of the consummation of the Merger, (2) December 31, 1996, or (3)
the date the Merger Agreement is terminated.
In connection with the Merger, the Company will issue to VCI, a
corporation controlled by Mr. Burkhalter, 180,000 shares of Common Stock and
will pay to VCI $1.8 million in cash, in each case in satisfaction of certain
obligations of TruVision. In addition, approximately 52.2% of the outstanding
TruVision Common Stock, on a fully-diluted basis, is owned by MWTV, a
partnership the general partner of which is a Mississippi corporation that is
majority owned by Mr. Burkhalter.
EMPLOYMENT AGREEMENTS. Upon the consummation of the Merger, the Company
will enter into employment agreements with Mr. Burkhalter and Mr. Bill R. Byer,
Jr., the Executive Vice President and Chief Operating Officer of
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<PAGE>
TruVision, which will provide, among other things, that Mr. Burkhalter and Mr.
Byer will become the President and Executive Vice President-Operations of the
Company, respectively. See "Compensation of Executive Officers--Employment
Agreements." In addition, upon the consummation of the Merger, the Company will
assume the non-qualified stock options issued by TruVision. As assumed by the
Company, such options will cover the following number of shares at the weighted
average exercise prices indicated: Mr. Burkhalter-78,105 shares of Common Stock,
$6.82 per share; Mr. Byer-62,411 of Common Stock, $6.82 per share; all other
persons-36,467 shares of Common Stock, $6.82 per share. All such options will be
fully vested. The present shareholders of TruVision, the persons who will
receive such options and VCI are collectively referred to as the "TruVision
Stockholders."
RISK FACTORS RELATED TO THE MERGER
Set forth below are certain risks related to the acquisition of
TruVision. The following description assumes consummation of the Merger.
Limited Operating History; Lack of Profitable Operations. Other than
TruVision's limited operating history with the Operating Markets (as defined
herein), it has no cable operations in the markets (as defined herein) where it
intends to operate wireless cable systems. Since inception, TruVision has
sustained substantial net losses and negative consolidated System EBITDA (as
defined below), due primarily to start-up costs, interest expense and charges
for depreciation and amortization arising from the development of its wireless
cable systems. TruVision's accumulated deficit as of March 31, 1996 was $4.4
million. TruVision currently has only two Operating Systems which generate
positive System EBITDA. After consummation of the Merger, the Company expects to
continue to experience negative cash flow through at least the second quarter of
1998, and may continue to do so thereafter while it develops and expands its
wireless cable systems, even if additional individual systems of TruVision
become profitable and generate positive System EBITDA.
"System EBITDA" means net income (loss) plus interest expense, income
tax expense, depreciation and amortization expense and all other non-cash
charges, less any non-cash items which have the effect of increasing net income
or decreasing net loss, for a system and includes all selling, general and
administrative expenses attributable to employees employed in that system. For
the periods discussed herein there are no such non-cash items. EBITDA is not
intended to represent cash flows, as determined in accordance with generally
accepted accounting principles, nor has it been presented as an alternative to
operating income or as an indicator or operating performance and should not be
considered as a substitute for measures of performance prepared in accordance
with generally accepted accounting principles.
Inability to Consummate Pending Acquisitions. The consummation of
each of the pending acquisitions is subject to certain conditions the
satisfaction of which, in some cases, is beyond control of the Company or
TruVision, including obtaining FCC approvals and third-party consents. In
particular, consummation of the acquisition of (i) the Jackson and Lawrenceburg,
Tennessee Markets, (ii) the Huntsville and Gadsden, Alabama Markets, (iii)
Jacksonville, North Carolina and (iv) the Hot Springs, Arkansas Market, are
conditioned upon obtaining consents of channel lessors. Consummation of the
acquisition of (i) the Jackson and Chattanooga, Tennessee markets and (ii) the
Huntsville, Alabama market are contingent upon being able to obtain certain
consents from the FCC and, the acquisition of the Huntsville, Alabama market is
contingent upon obtaining a waiver of and exemption from FCC regulations that
prohibit operation by a single operator of both wireless and hard-wire cable
television systems in a single market. There can be no assurance that the
Company or TruVision will be able to obtain such approvals and consents and
failure to do so could have a material adverse effect on the ability to
consummate the pending acquisitions or on operations in the affected markets.
In addition, there can be no assurance that the FCC will approve the pending
applications relating to the lease rights that the Company is acquiring in its
Acquisition Markets (as defined herein) through consummation of the Merger,
although the approval of such applications is not a condition
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<PAGE>
to completing the acquisitions. The Merger is not conditioned upon consummation
of the pending acquisitions and there can be no assurance that, in the case of
Lawrenceberg, Tennessee, a binding agreement will be entered into, or that in
the case of purchase and sale agreements, such transactions will be consummated.
See "--Uncertainty of Ability to Obtain FCC Authorizations."
Need for Additional Financing for Growth. The growth of TruVision's
business will require substantial investment on a continuing basis to finance
capital expenditures and the related expenses for expansion of TruVision's
subscriber base and system development, and TruVision will require additional
financing in the second half of 1998. The Company expects to meet its funding
needs for future capital requirements, including TruVision's, through the
issuance of additional debt and/or equity capital, joint ventures or other
arrangements. There can be no assurance that the expansion of TruVision's
subscriber base and system development will occur or that debt or equity capital
financing on satisfactory terms, or at all, can be obtained.
Uncertainty of Ability to Obtain FCC Authorizations. Wireless cable
systems transmit programming over some or all of the 33 MDS and ITFS channels
that are licensed by the FCC. Generally, the Company believes that a minimum of
12 wireless cable channels is necessary to offer a commercially viable wireless
cable service in a Market. All of the channels comprising a wireless cable
system must operate from the same transmitter site so that subscribers may
receive a clear picture on all channels offered. In some of its Markets,
TruVision does not currently have the right to operate a sufficient number of
channels from the same transmitter site, and in certain other markets, TruVision
contemplates relocating all of its channels to a new transmitter site. In these
markets, assuming consummation of the Merger, the Company will be dependent upon
(i) the grant of pending applications for new licenses or for modification of
existing licenses, and (ii) the grant of applications for new licenses and
license modification applications which have not yet been filed with the FCC.
Certain pending applications cannot be granted by the FCC until interference
agreements with nearby license holders are secured. Certain other license
applications are also the subject of competing applications. There can be no
assurance that all of these applications will be granted by the FCC. Although
the Company does not believe that the denial of any single application will
adversely affect TruVision, the denial of several of such applications,
particularly if concentrated in one or a few of TruVision's Markets, could have
a material adverse effect on the ability to serve such market or markets.
In certain cases, FCC approval may be dependent upon the Company's
ability to engineer its use of a wireless cable channel to avoid interference
with the reception of another channel that has been licensed or for which an
application is pending. In addition, intervening license grants and/or auctions
of MDS channels may adversely affect some of TruVision's planned applications
due to interference considerations. No assurance can be given that TruVision
will be able to engineer all of its channels so as to avoid interference. See
"--Interference Issues."
In addition, there is no limit on the time that may elapse between the
filing of an application with the FCC for a modification or a new license and
action thereon by the FCC. Delay by the FCC in processing applications could
delay or materially adversely affect TruVision's plans with respect to one or
more of its Markets. If modification of an unbuilt station license is
anticipated, it is frequently necessary to obtain from the FCC an extension of
the period specified in the license for construction of the station. In such
case, absent FCC grant of such an extension, the license will expire. There can
be no assurance that the FCC will grant an extension in any particular instance.
In addition, FCC licenses must be renewed every ten years and, while such
renewals generally have been granted on a routine basis in the past, there is no
assurance that licenses will continue to be renewed routinely in the future.
The failure of TruVision's channel lessors to renew their respective licenses or
of the FCC to grant such extensions with respect to the Markets could have a
material adverse effect on TruVision.
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<PAGE>
The FCC recently concluded an auction for each of 493 Basic Trading
Areas ("BTAs"). Auction winners obtained the exclusive right to apply for all
available MDS channels in such BTAs, subject to compliance with interference
standards and other rules. TruVision was the highest bidder for 27 BTA's (the
"BTA Markets"). TruVision filed initial applications for a BTA authorization
for channel rights in each BTA Market by May 10, 1996. Such applications are
not subject to competing applications. As is the case with other MDS and ITFS
applications, in some of the BTA Markets TruVision presently lacks the right to
use a site for the location of a transmission facility. In some instances, it
may be necessary for TruVision to obtain the consent of other parties to the
acceptance of interference. There can be no assurance that TruVision will be
able to secure a transmission site, obtain all necessary interference consents
or secure FCC approval of its applications. See "--Interference Issues."
Furthermore, even though TruVision was the successful bidder in the
BTA Markets, TruVision may not acquire sufficient channel rights to have a
viable system in each of those markets.
Interference Issues. Under current FCC regulations, a wireless cable
operator may install receive-site equipment and serve any point where its signal
can be received. Interference from other wireless cable systems can limit the
ability of a wireless cable system to serve any particular point. In licensing
ITFS and MDS stations, a primary concern of the FCC is avoiding situations where
proposed station signals are predicted to cause interference to the reception of
previously proposed station signals. TruVision's business plan involves moving
the authorized transmitter sites of various of its MDS and ITFS licensed
stations and obtaining the grant of licenses for new stations that the Company
will use in its wireless cable systems. The FCC's interference protection
standards may make one or more of those proposed relocations or new grants
unavailable. In that event, it may be necessary to negotiate interference
agreements with the licensees of the stations which would otherwise block such
relocations or grants. There can be no assurance that the Company will be able
to obtain all necessary interference agreements at all or on terms acceptable to
the Company. In the event that the Company cannot obtain interference
agreements required to complement the Company's plans for a market, the Company
may have to curtail or modify operations in the market, which could have a
material adverse effect on the growth of the Company. In addition, while the
Company's leases with MDS and ITFS licensees require their cooperation, it is
possible that one or more of the Company's channel lessors may hinder or delay
the Company's efforts to use the channels in accordance with the Company's plans
for the particular market.
Dependence on Program Suppliers. In connection with its distribution
of television programming, TruVision, like the Company, is dependent on fixed-
term contracts with various program suppliers such as CNN, ESPN and HBO.
Although the Company has no reason to believe that any such contracts will be
canceled or will not be renewed upon expiration, if such contracts are canceled
or not renewed, TruVision will have to seek program material from other sources.
There can be no assurance that other program material will be available to
TruVision on acceptable terms or at all or, if so available, that such material
will be acceptable to the Company's subscribers. The likelihood that program
material will be unavailable to the Company is significantly mitigated by the
Cable Television Consumer Protection and Competition Act of 1992 (the "1992
Cable Act") and various FCC regulations issued thereunder which, among other
things, impose limits on exclusive programming contracts and generally prohibit
cable programmers in which a cable operator has an attributable interest (a
"vertically integrated cable operator") from discriminating against cable
competitors with respect to the price, terms and conditions of the sale of
programming. Only a few of the major cable television programming services
carried by TruVision are not directly or indirectly owned by a vertically
integrated cable operator. The program access provisions of the 1992 Cable Act
are the subject of a legal challenge and, if the challenged provisions were
found to be unconstitutional or unlawful, program suppliers might raise their
prices or make their program material unavailable to TruVision.
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Dependence on Channel Leases; Need for License Extensions. TruVision
contracts with Mississippi EdNet Institute, Inc. ("EdNet") for the commercial
use of 20 ITFS channels in each of its Markets in the state of Mississippi. The
term of the EdNet Agreement is 10 years from the date of issuance of certain
construction permits, each of which was granted in 1992. TruVision anticipates
that, pursuant to the EdNet Agreement, the lease term will terminate on or about
April 1, 2002, unless renewed prior thereto. After giving effect to the Merger,
the commercial use of these channels would represent the majority of TruVision's
channels in Mississippi and the termination of, or inability to renew, the EdNet
Agreement would have a material adverse effect on TruVision's operations in its
Mississippi markets. Under the EdNet Agreement, TruVision would, at its sole
expense, (i) install, operate and maintain a system sufficient to serve 95% of
the population of the licensed geographic area of Mississippi, (ii) provide,
install and maintain up to 1,100 standard receive sites, up to 11 studio
transmitter links, up to 11 electronic classrooms (each at a cost of up to
$20,000) and pay up to $1.5 million for 11 duplex, two-channel links, (iii)
acquire and install a minimum of five 10-watt transmitters per transmit site and
(iv) apply for CARS Band microwave authorizations for EdNet use, among other
obligations. To date, TruVision has built out three of the required transmit
sites, installed a studio-to-transmitter link connecting the EdNet studio with
TruVision's transmit facility in the Jackson System and has begun to install
receive-site equipment. TruVision and, upon consummation of the Merger,
TruVision must complete and have operational such system by July 1, 1998.
TruVision has granted EdNet a security interest in all of its Mississippi
equipment, transmitters and rights to use certain wireless cable channels (the
"EdNet System") in order to secure TruVision's performance under the EdNet
Agreement. After consummation of the Merger, the Company will grant EdNet a
security interest in the EdNet System and in the event of a default by TruVision
under the EdNet Agreement, EdNet will have the right to operate the EdNet System
and derive all income from its operation. If EdNet assumes the operation of the
EdNet System, TruVision will be required to assign its interest in the EdNet
Agreement and the EdNet System or to forfeit its interests in such assets.
Although TruVision does not believe that the termination of or failure to renew
a single channel lease, other than that with EdNet, would materially adversely
affect TruVision, several of such terminations or failures to renew in one or
more Markets that TruVision actively serves could have a material adverse
effect on TruVision. In addition, the termination, forfeiture, revocation or
failure to renew or extend an authorization or license held by TruVision's
lessors could have a material adverse effect on TruVision.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Neither the Company nor its shareholders will recognize gain or loss
for federal income tax purposes as a result of the Merger.
ACCOUNTING TREATMENT
The Merger will be accounted for under the "purchase" method of
accounting in accordance with generally accepted accounting principles.
Therefore, the aggregate consideration paid by the Company in connection with
the Merger will be allocated to the Company's assets and liabilities based on
their fair market values, with any excess being treated as goodwill.
REGULATORY MATTERS
Certain federal and state regulatory requirements must be complied
with before the Merger is consummated. The Company is not aware of any other
material governmental consents or approvals that are required prior to the
parties consummation of the Merger other than those described below. It is
presently contemplated that if such governmental consents and approvals are
required, such consents and approvals will be sought. There can be no
assurance, however, that any such additional consents or approvals will be
obtained.
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COMMUNICATIONS ACT
The FCC regulates the channels used to provide wireless cable service.
Under the Communications Act of 1934, as amended (the "Communications Act"),
certain FCC consents are required to consummate the Merger because TruVision, or
its subsidiaries, hold FCC-issued licenses. Under the Communications Act, a
transaction, such as the Merger, which would result in the transfer of control
of a FCC licensee may not be consummated until the FCC has granted its consent
to the transfer of control. The issuance of those consents by the FCC is a
condition precedent to the Company's requirement to consummate the Merger
Agreement. Certain FCC rules would be violated by the Merger or could result in
the forfeiture of rights to apply for certain channel licenses. To avoid those
violations and losses, the Company's duty to consummate the Merger Agreement
also is conditioned upon the issuance by the FCC of rule waivers which (i) will
allow the Company to control both a cable television system and a wireless cable
system in Huntsville, Alabama; and (ii) will allow the Company to assume control
of TruVision's rights it acquired in an FCC-conducted auction to apply for
vacant MDS channels in various areas of the southeastern United States.
The Company has joined with or will join with TruVision in seeking
such FCC consents and waivers through the filing of applications and written
waiver requests with the FCC.
HSR ACT
The Merger is expected to be subject to the requirements of the Hart-
Scott-Rodino Antitrust Improvements Act of 1976 Act ("HSR Act") and the rules
and regulations thereunder, which provide that certain acquisition transactions
may not be consummated until certain information has been furnished to the
Antitrust Division of the Department of Justice (the "Antitrust Division") and
the Federal Trade Commission (the "FTC") and until certain waiting periods have
been terminated or have expired.
The expiration of the HSR Act waiting period does not preclude the
Antitrust Division, the FTC or any state from challenging the Merger on
antitrust grounds either before or after the waiting period. Accordingly, at any
time before or after the Effective Time, the Antitrust Division, the FTC or any
state could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, or certain other persons, including private
parties, could take action under the antitrust laws. Based on information
available to the Company, the Company believes that the Merger can be effected
in compliance with federal and state antitrust laws. There can be no assurance,
however, that a challenge to the Merger will not be made or that, if such a
challenge is made, the Company will prevail.
STATE REGULATORY MATTERS
The consummation of the purchase of the Huntsville, Alabama, cable
system, because it involves the purchase of a franchised cable television
system, requires the consent of the franchisor, the Madison County Commission,
to the transfer of control of the system to the Company. There are no other
material state regulatory requirements to the consummation of the Merger.
BUSINESS OF TRUVISION
TruVision acquires, develops, owns and operates wireless cable
television systems within the southeastern United States. TruVision's existing
markets and pending acquisition markets principally are distributed in a large,
contiguous cluster including the state of Mississippi, western Tennessee and
western
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Alabama and nearby markets in Alabama, Arkansas and Tennessee. Upon
completion of its pending acquisitions, it is estimated that TruVision's markets
will cover approximately 2.6 million total households, of which approximately
2.0 million will have a direct, unobstructed transmission path from one of the
TruVision's existing or planned transmitting antennas to an antenna that may be
placed at the location of each household (a "line-of-sight" or "LOS" household).
TruVision operates in and targets primarily rural and small to mid-
size markets with topographical features and customer demographics which it
believes are well-suited for wireless cable. TruVision currently (i) operates
wireless cable systems in four markets located in Jackson, Mississippi, the
Delta and the Gulf Coast regions of Mississippi, and Demopolis, Alabama
(collectively, the "Operating Markets"), (ii) holds wireless cable channel
rights for the other areas of Mississippi, for Tuscaloosa, Alabama and for
Memphis and Flippin, Tennessee (the "Pre-Launch Markets"), (iii) has
acquisition transactions pending in a number of additional markets including
Jackson, Chattanooga and Lawrenceburg, Tennessee; Huntsville and Gadsden,
Alabama, Jacksonville, North Carolina and Hot Springs, Arkansas (the
"Acquisition Markets" and, together with the Operating Markets and Pre-Launch
Markets, the "Markets").
The principal office of TruVision is located at 1080 River Oaks Drive,
Suite A150, Jackson, Mississippi, and its telephone number is (601)
936-1515.
OPERATING MARKETS
Jackson System. TruVision launched service in the Jackson,
Mississippi System in June 1994. The Jackson System serves the metropolitan
area of Jackson, Mississippi, including all or parts of Rankin, Hinds, Madison,
Copiah, Simpson, Scott, Yazoo, Warren and Claiborne counties in Mississippi.
The Jackson System had approximately 10,333 subscribers on April 30, 1996,
primarily in single-family homes.
TruVision leases 29 of the 32 wireless cable channels available for
the Jackson market. The Jackson System currently offers a 26 channel basic
package, including five local off-air VHF/UHF channels which are being
retransmitted, for $19.95 per month. In addition, a subscriber may purchase HBO
and Showtime for $8.95 each per month and The Disney Channel for $4.95 per
month. In the Jackson System, TruVision also offers its subscribers event pay-
per-view service on one channel shared with WMVT, a local independent television
station. The Jackson System began to generate positive System EBITDA (as
defined below) in March 1995, approximately 10 months after commencement of
service. The Jackson System transmits at 50 watts of power from a height of
1,040 feet above ground level and its signal pattern covers a radius of
approximately 40 miles, encompassing approximately 211,500 households, of which
TruVision believes approximately 179,000 can be served by LOS transmissions.
The principal hardwire cable competitor in the city of Jackson is Capitol
Cablevision, a Time Warner Cable affiliate.
Delta System. TruVision launched service in the Delta, Mississippi
System in July 1995. The Delta System serves that portion of the Delta region
which includes all or parts of Humphreys, Holmes, Sunflower, Washington and
Yazoo counties in Mississippi. The Delta System had approximately 3,958
subscribers on April 30, 1996, primarily in single-family homes.
TruVision leases 20 of the 32 wireless cable channels available for
use in the Delta market, owns three of the channels and operates an additional
eight channels pursuant to a special temporary FCC authorization. The Delta
System currently offers a 27 channel basic package, including five local off-air
VHF/UHF channels which are being retransmitted, for $19.95 per month. In
addition, a subscriber may purchase HBO and Showtime for $8.95 each per month
and The Disney Channel for $4.95 per month. In the Delta System, TruVision also
offers its subscribers an event pay-per-view channel and intends to offer its
subscribers a full-time pay-per-view channel beginning in the fourth quarter of
1996. The Delta System
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began to generate positive System EBITDA in February 1996, seven months after
commencement of service. The Delta System and the Jackson System are the only
two TruVision operating systems that currently generate positive System EBITDA.
The Delta System transmits at 50 watts of power from a height of 805 feet above
ground level and its signal pattern covers a radius of approximately 40 miles,
encompassing approximately 100,800 households, of which TruVision believes
approximately 92,800 can be served by LOS transmissions. The hardwire cable
competitors in the Delta region are generally smaller operators, unaffiliated
with large multiple system cable operators ("MSOs").
Gulf Coast System. TruVision launched service in the Gulf Coast,
Mississippi System in January 1996. The Gulf Coast System serves the entire
Gulf Coast of Mississippi, including all or parts of Harrison, Hancock, Jackson,
Stone and Pearl River counties. The Gulf Coast System had approximately 991
subscribers on April 30, 1996, primarily in single-family homes.
TruVision leases 24 of the 32 wireless cable channels available for
the Gulf Coast market. The Gulf Coast System currently offers a 22 channel
basic package, including five local off-air VHF/UHF channels which are being
retransmitted, for $19.95 per month (currently discounted to $18.00 per month as
part of an introductory offer). In addition, a subscriber may purchase two
premium service channels, HBO and The Disney Channel, for $8.95 and $4.95 per
month, respectively. The Gulf Coast System transmits at 50 watts of power from
a height of 1,285 feet above ground level. The Gulf Coast System's cardioid or
heart-shaped signal pattern, designed to maximize coverage of the population
densities along the coast, encompasses approximately 132,300 households, of
which TruVision believes approximately 121,700 can be served by LOS
transmissions. The principal hardwire cable competitor in the Gulf Coast region
is Post-Newsweek Cable, Inc.
Demopolis System. TruVision commenced commercial operations of the
wireless cable system in the Demopolis, Alabama area in April 1996. The
Demopolis System serves Marengo, Sunter and Hote counties and portions of Pessy,
Choctow, Green, Dallas and Wilcox counties. As a result of signal tests
conducted earlier in 1996, the Demopolis System had approximately 153
subscribers on April 30, 1996, primarily in single-family homes.
TruVision leases 28 of the wireless cable channels available for the
Demopolis market. The Demopolis System offers a 25 channel basic package,
including five local off-air VHF/UHF channels which are being retransmitted, for
$19.95 per month. In addition, a subscriber may purchase HBO and Showtime for
$8.95 each per month and The Disney Channel for $4.95 per month. The Demopolis
System transmits at 25 watts of power from a height of 943 feet above ground
level. The Demopolis System's signal pattern covers a radius of approximately
40 miles, encompassing approximately 17,500 households, of which TruVision
believes approximately 15,600 can be served by LOS transmissions. The Demopolis
region is currently served by several relatively small hardwire cable franchise
operators each serving less than 2,000 subscribers.
ACQUISITION MARKETS
TruVision has entered into several definitive agreements with holders
of wireless cable channel rights to expand TruVision's markets in the
southeastern United States from Mississippi to western Tennessee and portions of
Alabama and Arkansas. The agreements relating to the Acquisition Markets
include (i) a purchase and sale agreement with Madison Communications, Inc. and
Beasley Communications, Inc. to acquire a wireless cable system and a hard-wire
cable system currently operating in the Huntsville, Alabama market (the "Madison
Purchase") for approximately $3.0 million cash plus a $3.0 million five-year
promissory note (which will be due and payable upon consummation of the Merger);
(ii) a purchase and sale agreement with SkyView Wireless Cable, Inc. to acquire
rights to 22 wireless cable channels and a substantially completed
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transmission facility in the Jackson, Tennessee market for approximately $2.7
million cash and to acquire rights to 20 wireless cable channels in the Hot
Springs, Arkansas market for approximately $1.5 million cash (the "SkyView
Purchase"); (iii) a purchase and sale agreement with Gadsden Wireless Cable
Corporation, Inc. to acquire rights to 20 wireless cable channels in the
Gadsden, Alabama market for approximately $950,000 cash (the "Gadsden
Purchase"); (iv) a purchase and sale agreement with Arden Cable, Ltd. ("Arden")
to acquire rights to 16 wireless cable channels in the Jacksonville, North
Carolina market for approximately $820,000 cash (the "Jacksonville Purchase");
(v) a purchase and sale agreement with Arden to acquire rights to 12 wireless
cable channels in the Chattanooga, Tennessee market for $517,000 cash (the
"Chattanooga Purchase") and (vi) a letter of intent with Shoal Wireless, Inc. to
acquire a wireless cable system in the Lawrenceburg, Tennessee market for
approximately $1.2 million cash (the "Shoal Purchase"). See "The Merger--Certain
Considerations Related to the Merger."
TruVision recently consummated the acquisition of (i) rights to
wireless cable channels and certain equipment in the Memphis, Tennessee market
for aggregate consideration of $3.9 million in cash (the "AWS Purchase"), which
acquisition closed on May 6, 1996, (ii) the acquisition of rights to wireless
cable channels and certain other related assets in the Flippin, Tennessee
market, for aggregate consideration of $1.5 million in cash (the "Flippin
Purchase"), which acquisition closed on May 6, 1996 and (iii) all the
outstanding shares of BarTel, Inc., ("BarTel") which held rights to wireless
cable channels in the Demopolis, Alabama and Tuscaloosa, Alabama markets for
aggregate consideration of $1.7 million in cash and a $652,000 five-year 8% per
annum promissory note (the "BarTel Purchase"), which acquisition closed on
February 20, 1996.
PROPERTIES
TruVision currently leases approximately 10,400 square feet for its
centralized administrative offices and regional offices in Jackson, Mississippi,
which lease expires on April 30, 1998. In addition, TruVision leases
approximately 10,000 square feet for its Delta System offices in Indianola,
Mississippi, and 7,300 square feet of office space for its Gulf Coast System
offices in Biloxi, Mississippi, which leases expire on March 30, 2000, and
November 30, 2000, respectively. TruVision currently leases approximately 4,400
square feet for its executive offices in Jackson, Mississippi, which lease
expires on January 31, 2001. TruVision expects to purchase or lease additional
office space in other cities when it expands or launches other wireless cable
systems. In addition to office space, TruVision leases space for its
transmitters, related buildings, or transmission towers located in the markets
where it operates its wireless cable systems. TruVision believes that office
space and space on buildings or transmission towers currently is readily
available on acceptable terms in the markets where TruVision intends to operate
wireless cable systems.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION OF TRUVISION
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1996
TruVision believes the quarters ended March 31, 1996 and March 31,
1995 are not comparable. While the period to period changes may be of
significant magnitude in certain cases, TruVision believes that the limited
operating history, startup nature and rapid growth in the number of systems and
the number of subscribers in each operating system of TruVision negate any value
which otherwise may be derived from providing comparisons between such periods.
Revenues. Revenues were $1.3 million for the quarter ended March 31,
1996 which consisted of $1.1 million of television subscription revenue and $0.2
million of installation and other revenue.
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The average monthly television subscription revenue per Jackson and
Delta System subscriber for the quarter ended March 31, 1996 were $30.14 and
$29.38, respectively. Television subscription revenues consists of monthly fees
paid by subscribers for the Jackson and Delta System's basic programming
package, for premium programming services, rental income charges for multiple
set-top converter boxes and for pay-per-view special events programming. The
Jackson System had approximately 10, 100 subscribers at March 31, 1996, while
the Delta System had approximately 3,600 subscribers.
The Gulf Coast System was launched in January 1996 with 24 channels
(including five off-air VHF/UHF channels which are being retransmitted). The
average monthly television subscription revenue per Gulf Coast subscriber for
the quarter ended March 31, 1996 was $21.25. Average revenue was negatively
impacted during the period due to introductory discounts offered during the
initial start-up months. The Gulf Coast System had approximately 500
subscribers at the quarter ended March 31, 1996.
Installation fees for the quarter ended March 31, 1996 averaged $46.11
and $42.74 per new subscriber in the Jackson and Delta Systems, respectively.
Installation revenue in the Gulf Coast System averaged $33.48 for the period,
primarily due to introductory discounts offered during the start-up period.
Installation fees are recognized upon origination of service to new subscribers.
TruVision experienced average monthly churn of 2.0% in the first three months of
1996 compared to 2.6% for the year 1995. TruVision's churn improved in the last
six months of 1995 due to the institution in late 1994 of credit checks on (and,
if necessary, deposits from) potential subscribers and a more stringent
disconnect policy for subscribers with delinquent accounts.
System Operating Expenses. System operating expenses totaled $0.9
million for the quarter ended March 31, 1996. System operating expenses
included programming, customer service and engineering support costs related to
the increasing number of subscribers. Programming costs (with the exception of
certain minimum payments) and channel lease payments (with the exception of
certain fixed payments) are variable expenses which increase as the number of
subscribers and launched systems increase.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the quarter ended March 31, 1996 totaled $0.9
million. Selling, general and administrative expenses included cost related to
operating and maintaining additional offices, associated administrative costs,
and marketing and sales expenses related to the increasing number of subscribers
in the Jackson and Delta Systems, commencement of operations in the Gulf Coast
System and start-up expenses associated with preparing the Demopolis System for
launch in April 1996.
Depreciation and Amortization. Depreciation and amortization expenses
totaled $0.6 million for the quarter ended March 31, 1996. Depreciation and
amortization expense included depreciation of transmission equipment and
subscriber equipment added in the Jackson, Delta and Gulf Coast markets, and
amortization expense on organizational and system development expenses related
to the Operating Markets.
Interest Expense. Interest expense of $0.2 million was principally
related to interest expense on short-term borrowing.
Net Loss. TruVision had a net loss of $1.3 million for the quarter
ended March 31, 1996, primarily due to the startup nature of TruVision's
operations.
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RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1995
The Company's first system, the Jackson System, was launched in June
1994. Revenues for the quarter ended March 31, 1995 were $0.5 million, which
consisted of $0.4 million of television subscription revenue and $0.1 million of
installation and other revenue. The Jackson System had approximately 4,900
subscribers on March 31, 1995.
The average monthly television subscription revenue per subscriber for
the quarter ended March 31, 1995 was $28.53. Television subscription revenues
consist of monthly fees paid by subscribers for basic programming package, for
premium programming services, rental income charges for multiple set-top
converter boxes and for pay-per-view special events programming. Installation
fees for the quarter ended March 31, 1995 averaged $57.50 per new subscriber.
System Operating Expenses. System operating expenses totaled $0.4
million for the quarter ended March 31, 1995. System operating expenses
included programming, customer service and engineering support costs related to
the increasing number of subscribers.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the quarter ended March 31, 1995 totaled $0.2
million. The primary expenses associated with selling, general and
administrative expenses for this period include sales and marketing expenses
(including advertising expenses and commissions), personnel costs and related
corporate overhead costs and start-up expenses associated with preparing the
Delta System for launch in July 1995.
Depreciation and Amortization. Depreciation and amortization expenses
totaled $0.2 million for the quarter ended March 31, 1995. Depreciation and
amortization expense included depreciation of transmission equipment and
subscriber equipment in the Jackson System and amortization expense on
organizational and system development expenses.
Net Loss. The Company had a net loss of $0.3 million for the quarter
ended March 31, 1995, primarily due to the startup nature of the Company's
operations.
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995
TruVision believes the years ended December 31, 1995 and December 31,
1994 are not comparable as TruVision did not commence commercial operations
until June 1994. While the period to period changes may be of significant
magnitude in certain cases, TruVision believes that the limited operating
history, startup nature and rapid growth of TruVision negate any value which
otherwise may be derived from providing comparisons between such periods.
Revenues. Revenues were $3.1 million for the year ended December 31,
1995 which consisted of $2.6 million of television subscription revenue and $0.5
million of installation and other revenue.
The average monthly television subscription revenue per Jackson System
subscriber for the year ended December 31, 1995 was $30.12. Television
subscription revenues consist of monthly fees paid by subscribers for the
Jackson System's basic programming package, for premium programming services,
rental income charges for multiple set-top converter boxes and for pay-per-view
special events programming. The Jackson System had approximately 9,200
subscribers at December 31,1995.
The Delta System was launched in July 1995 with 28 channels (including
five off-air VHF/UHF channels which are being retransmitted). Two additional
channels currently held by TruVision in this market
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will be utilized in the second quarter of 1996 for dedicated pay-per-view
programming and additional basic channel offering. The average monthly
television subscription revenue per Delta System subscriber for the year ended
December 31, 1995 was $29.86. The Delta System had approximately 2,500
subscribers at December 31, 1995.
Installation fees for the year ended December 31, 1995 averaged $48
and $40 per new subscriber in the Jackson and Delta Systems, respectively.
Installation fees declined as a percentage of revenues in the year ended
December 31, 1995 due primarily to a larger installed subscriber base.
Installation fees are recognized upon origination of service to new subscribers.
TruVision experienced an average monthly churn in 1995 and the last six months
of 1995 of approximately 2.6% and 2.0%, respectively. TruVision experienced
higher churn in the first six months of 1995 due to the institution in late 1994
of a more stringent disconnect policy for subscribers with delinquent accounts.
TruVision's churn improved in the last six months of 1995 due to the institution
in late 1994 of credit checks on (and, if necessary, deposits from) potential
subscribers.
System Operating Expenses. System operating expenses totaled $2.1
million for the year ended December 31, 1995. System operating expenses
included programming, customer service and engineering support costs related to
the increasing number of subscribers. Programming costs (with the exception of
certain minimum payments) and channel lease payments (with the exception of
certain fixed payments) are variable expenses which increase as the number of
subscribers and launched systems increase.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the year ended December 31, 1995 totaled $2.1
million. Selling, general and administrative expenses included costs related to
operating and maintaining additional offices, associated administrative costs,
and marketing and sales expenses related to the increasing number of subscribers
in the Jackson System and commencement of operations in the Delta System. The
primary expenses associated with selling, general and administrative expenses
for this period include sales and marketing expenses (including advertising
expenses and commissions), personnel costs and related corporate overhead costs.
TruVision believes such selling, general and administrative costs will not
stabilize until at the earliest the first quarter of 1998, when all Markets are
expected to be launched. At that time, administration expenses should remain
constant with selling and general expenses stabilizing when desired penetration
rates are achieved. In order for such stabilization to occur within this time
period, however, the current system launch schedule must be met and desired
penetration rates must be achieved. There can be no assurance that TruVision
will meet the current launch schedule or that desired penetration rates will be
achieved or consequently that such selling, general and administrative expenses
will stabilize within this time period.
Depreciation and Amortization. Depreciation and amortization expenses
totaled $1.3 million for the year ended December 31, 1995. Depreciation and
amortization expense included depreciation of transmission equipment and
subscriber equipment added in both the Jackson and Delta markets, and
amortization expense on organizational and system development expenses related
to the Operating Markets other than the Demopolis System. TruVision anticipates
that depreciation and amortization expense will increase as additional systems
are launched and more subscribers are added.
Interest Expense. Interest expense of $0.1 million was principally
related to interest expense on short-term borrowings.
Net Loss. TruVision had a net loss of $2.5 million for the year ended
December 31, 1995, primarily due to the startup nature of TruVision's
operations. As a startup entity, TruVision's subscriber base had not reached
levels sufficient to generate revenues to fully offset system operating and
administrative expenses incurred in connection with the development of
TruVision's present systems and systems under development, as well as
depreciation and amortization and interest expense.
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RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1994
Revenues. The operating results for the year ended December 31, 1994
include the operating results of TruVision's predecessor, MWTV, from January 1,
1994 through August 24, 1994 and the operating results of TruVision from August
25, 1994 through December 31, 1994. TruVision's first system, the Jackson
System, was launched in June 1994. For the year ended December 31, 1994,
revenues from the Jackson System were $0.5 million which consisted principally
of television subscription revenues of $0.3 million and $0.2 million of
installation and other revenues. The Jackson System had approximately 3,300
subscribers at December 31, 1994.
Television subscription revenues consist of monthly fees paid by
subscribers for the Jackson System's basic programming package, for premium
programming services, rental income charges for multiple set-top convertor boxes
and for pay-per-view special events programming. The average monthly television
subscription revenue per Jackson System subscriber for the year ended December
31, 1994 was $28.50.
Installations and service revenues represent installation fees charged
by TruVision to new subscribers and service income. Installation fees are
recognized upon origination of service to a customer and averaged $64 per
installation for the year ended December 31, 1994.
System Operating Expenses. System operating expenses for the year
ended December 31, 1994 totaled $0.7 million. System operating expenses consist
of programming, customer service and engineering support costs.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the year ended December 31, 1994 totaled $1.2
million. Selling, general and administrative expenses of TruVision since its
inception are due to expenses associated with the Jackson System, including
costs related to the initial operation of the Jackson System. Certain of such
costs were also attributable to the additional expense of establishing central
administration facilities and certain other expenses applicable to initial
operations in markets not then launched by TruVision.
Depreciation and Amortization. Depreciation and amortization expenses
for the year ended December 31, 1994 totaled $0.3 million. Depreciation and
amortization expenses include depreciation of transmission and subscriber
equipment and amortization of organizational and system development costs.
Net Loss. TruVision had a net loss of $1.6 million for the year ended
December 31, 1994 primarily due to the factors described above.
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1993
TruVision's predecessor, MWTV, was formed on November 2, 1993. Due to
the startup nature of the business, operations during the year ended December
31, 1993 were limited to the establishment of administrative offices and certain
system development activities.
LIQUIDITY AND CAPITAL RESOURCES
The wireless cable television business is a capital intensive
business. Since inception, TruVision has expended funds to construct the
Jackson, Delta and Gulf Coast Systems and to finance initial operating losses.
TruVision's operations will require substantial amounts of capital for the
installation of equipment at subscribers' locations, the construction of
additional transmission and headend facilities, signal repeaters and related
equipment purchases, the development and establishment of administrative and
field
24
<PAGE>
offices, the funding of start-up losses, and other working capital requirements.
For these reasons, TruVision will require funds in excess of the funds currently
available to it.
TruVision believes that the launch of a new analog wireless cable
system by TruVision in a typical market requires the expenditures of
approximately $1.3 million of start-up costs, consisting of approximately $0.9
million for system headed and transmission equipment and approximately $0.4
million for preoperation and start-up costs. Expenditures for the headed and
transmission facility construction and installation must be made before
programming can be delivered to subscribers. Installation costs per subscriber
for an analog system are approximately $375 to $475 for equipment and labor.
This amount consists of, on average, $240 to $340 of subscriber receive-site
equipment (depending upon whether a subscriber receives a set-top converter or a
less costly all-house down converter) and $135 of installation labor and
overhead charges. TruVision charges subscribers installation fees.
For the year ended December 31, 1994, cash flows used by operating
activities were $(0.6) million, consisting primarily of a net loss of $(1.6)
million and offset by an increase in accounts payable of $0.8 million and
depreciation and amortization of $0.2 million. For the year ended December 31,
1994, cash flows used by investing activities were $(5.2) million, consisting
primarily of capital expenditures and payments for licenses and organizational
costs of approximately $5.2 million. These capital expenditures principally
related to the development of the Jackson System, the partial construction of
the Delta System, the acquisition and installation of subscriber receive-site
equipment in the Jackson System and certain license and organization costs. For
the year ended December 31, 1994, cash flows from financing activities were $7.8
million, consisting primarily of the proceeds from the issuance of $8.0 million
investment in Series A Convertible Preferred Stock of TruVision to CVCA and
proceeds from partners' contributions to the Partnership of $0.6 million, less
preferred stock issuance costs of approximately $(0.8) million.
For the year ended December 31, 1995, cash flows used by operating
activities were $(1.7) million, consisting primarily of a net loss of $(2.5)
million and an increase in accounts receivable of $(0.4) million and offset by
an increase in depreciation and amortization of $1.3 million. For the year
ended December 31, 1995, cash flows used by investing activities were $(8.4)
million, consisting primarily of capital expenditures and payments for licenses
and organizational costs of approximately $6.7 million, an increase in deferred
costs of $1.3 million and a deposit for the Basic Trading Area Auction (the "BTA
Auction") of $0.5 million. The capital expenditures principally related to the
completion of construction and launch of the Delta System, partial construction
of the Gulf Coast System, installation of subscriber receive-site equipment
associated with the expansion of the Operating Markets and organization and
system development costs. For the year ended December 31, 1995, cash flows from
financing activities were $7.5 million, consisting primarily of the proceeds
from the issuance of $3.0 million investment in Series B Convertible Preferred
Stock of TruVision to CVCA and VanCom and proceeds from borrowings under the
Revolving Credit Facility and other short-term borrowings of $4.4 million.
For the quarter ended March 31, 1996, cash provided by operating
activities were $1.9 million, consisting primarily of a net loss of $(1.3)
million offset by an increase in accounts payable of $2.6 million. and an
increase in depreciation and amortization expense of $0.6 million. For the
quarter ended March 31, 1996, cash used by investing activities were $(7.1)
million, consisting primarily of capital expenditures and payments for licenses
and organizational costs of approximately $4.6 million, and an increase in
deferred costs of $2.4 million. Capital expenditures principally related to the
completion of construction and launch of the Gulf Coast System, installation of
subscriber receive-site equipment associated with the expansion of the Operating
Markets and organization and system development costs. License and
organizational cost consisted principally of the acquisition in February 1996 of
BarTel, Inc., a company with wireless cable channel rights in Demopolis and
Tuscaloosa, Alabama for $2.3 million. The increase in deferred costs were
primarily expenses related to a proposed public debt and equity offering and
deposits for certain acquisitions.
25
<PAGE>
For the quarter ended March 31, 1996, cash flows from financing activities were
$5.6 million, consisting primarily of $6.0 million in proceeds from an Interim
Facility of up to $12 million provided to the Company by CVCA in the form of a
10% note payable and other short-term borrowing of $0.7 million, less repayments
of $1.1 million on borrowings under the Revolving Credit Facility.
TruVision has experienced negative cash flow from operations in each
applicable period since formation. Although the Jackson System and the Delta
System each currently generate positive System EBITDA, TruVision expects to
continue to experience negative consolidated cash flow from operations due to
operating costs associated with newly launched systems with insufficient
subscribers to generate positive System EBITDA. Until sufficient cash flow is
generated from operations, TruVision will be required to utilize its current
capital resources or external sources of funding to satisfy its capital needs.
During the period between March 31, 1996 and the consummation of the
Merger, cash requirements will be funded out of borrowings under the Revolving
Credit Facility, the Interim Facility, the Lines of Credit and additional
short-term borrowings. TruVision expects that under its current plans it will
incur capital expenditures of approximately $20.5 million in 1996 for
development, launch and expansion activities associated with the Markets.
TruVision currently expects to launch an aggregate of approximately eight new
systems comprising approximately 565,600 LOS households during 1996. TruVision
expects to spend approximately $38.1 million for capital expenditures in 1997,
in connection with subscriber additions, system construction, development,
launch and expansion activities, including the expected launch of 12 markets
comprising approximately 1,054,000 LOS households in 1997. In addition,
TruVision expects to spend $2.1 million for signal repeaters in 1996 and 1997.
TruVision's material commitments for capital expenditures, relate to
obligations with respect to acquisition related purchase agreements in the
following amounts: (i) $4.2 million related to the SkyView Purchase, (ii) the
Chattanooga Purchase ($0.5 million), (iii) the Gadsden Purchase ($1.0 million),
(iv) the Jacksonville Purchase ($0.8 million), (v) the Madison Purchase ($6.0
million) and (vi) if a purchase agreement is executed, the Shoal Purchase ($1.2
million). TruVision expects to utilize funds from the Acquisition Line of Credit
to fulfill any of these commitments coming due prior to the consummation of the
Merger. In addition, TruVision has other acquisition related purchase agreements
not eligible for payment under the Acquisition Line of Credit, including the
Chattanooga Purchase and the Jacksonville Purchase. With respect to its
obligations under channels leased pursuant to the EdNet Agreement, TruVision is
required, in addition to paying certain monthly fees to EdNet on a per
subscriber basis, to fund certain infrastructure build-out costs associated with
completing the EdNet System and certain other facilities costs, presently
estimated by TruVision to be approximately $2.2 million. In addition, TruVision
expects to spend $2.1 million for signal repeaters in 1996 and 1997.
In connection with the BTA Auctions, TruVision estimates that it will
incur approximately $11 million of indebtedness to the United States government.
TruVision does not believe it will incur other indebtedness to the United States
government.
The growth of TruVision's business will require substantial investment
on a continuing basis to finance capital expenditures and the related expenses
for expansion of TruVision's subscriber base and system development. TruVision
will require significant additional financing to achieve its targeted subscriber
levels in its current business plan.
INCOME TAX MATTERS
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TruVision has had no material state or Federal income tax expenses
since inception. At December 31, 1995, TruVision had approximately $4.7 million
in net operating losses for tax purposes which, unless utilized, will expire in
2010.
INFLATION
Inflation has not had and is not likely to have any significant impact
on TruVision's operations. In addition, if necessary subscriber rates may be
increased to keep pace with inflationary increases in costs.
OTHER
TruVision does not provide post-retirement or post-employment benefits
requiring charges under Statement of Financial Accounting Standards Nos. 106 and
112.
Statement of Financial Accounting Standards No. 121-"Accounting for
the Impairment of Long lived Assets and for Long-Lived Assets to be Disposed Of"
is effective for fiscal years beginning after December 15, 1995. TruVision
adopted this statement on January 1, 1996. It is not expected that this
statement will have a material effect on its financial position or results of
operations.
In October 1995, the FASB issued SFAS No. 123-"Accounting for Stock
Based Compensation," which generally requires disclosure of the impact on
earnings of stock based employee compensation arrangements. TruVision plans to
adopt SFAS No. 123 effective January 1, 1996.
SELECTED HISTORICAL FINANCIAL DATA OF TRUVISION
The selected financial data presented below as of August 24, 1994 and
for the period January 1, 1994 through August 24, 1994 were derived from the
financial statements of TruVision's predecessor, MWTV, and the selected
financial data presented below as of December 31, 1994 and December 31, 1994 and
December 31, 1995 and for the period August 25, 1994 through December 31, 1994
and the year ended December 31, 1995 were derived from the financial statements
of TruVision, which in each case were audited by Arthur Andersen LLP,
independent public accountants, and which are included elsewhere in this Proxy
Statement. The selected financial data presented below as of March 31, 1996 and
for the three months then ended were derived from the unaudited consolidated
financial statements of TruVision, which are included elsewhere in this Proxy
Statement and which, in the opinion of management of TruVision, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results for such unaudited interim periods. The
statement of operations data for interim periods are not necessarily indicative
of results for subsequent periods or for the full year. This selected financial
data should be read in conjunction with the financial statements (including the
notes thereto) of TruVision contained elsewhere in this Proxy Statement. See
"Annex D."
<TABLE>
<CAPTION>
MWTV TRUVISION
------------------------ -------------------------------------------------------------------------
AUGUST 25, 1994 THREE MONTHS ENDED
JANUARY 1, 1994 THROUGH THROUGH YEAR ENDED -------------------------------
AUGUST 24, 1994 DECEMBER 31, 1994 DECEMBER 31, 1995 MARCH 31, 1995 MARCH 31, 1996
------------------------ ------------------- ----------------- -------------- --------------
(unaudited)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATION:
Total revenues $ 73,370 $ 430,534 $ 3,081,814 $ 501,869 $ 1,286,026
System operating expenses 278,000 425,603 2,103,053 380,551 885,712
Selling, general and 668,009 534,431 2,086,200 233,275 911,024
administrative
Depreciation and amortization 82,196 167,990 1,266,301 193,796 584,544
Total operating expenses 1,028,205 1,128,024 5,455,554 807,622 2,381,280
Operating loss (954,835) (697,490) (2,373,940) (305,753) (1,095,254)
Interest income (expense), net 6,632 55,728 (128,442) -- (163,997)
Net (loss) (948,203) (641,762) (2,502,382) (305,753) (1,259,251)
Net (loss) per share N/A (0.36) (1.33) (0.19) (0.62)
BALANCE SHEET DATA
Working capital (deficit) $(2,696,905) $1,948,892 $(4,770,468) $(12,504,381)
Total assets 4,252,114 7,983,059 12,877,217 19,751,653
Current portion of long-term 3,308,000 -- 4,531,464 10,084,894
debt
Long-term debt -- -- -- --
Convertible preferred stock N/A 8,000 11,000 11,000
Total stockholders' equity 495,040 7,091,917 7,589,535 6,330,284
</TABLE>
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MARKET PRICES AND DIVIDENDS
The Common Stock is quoted through the Nasdaq National Market under the
symbol "WIRL." On July 9, 1996, the last trading day before the initiation of
the mailing of this Proxy Statement, the high and low sales prices of the Common
Stock were $17.75 and $17.00, respectively. On April 24, 1996, the last trading
day prior to the public announcement of the entering into of the Merger
Agreement, the high and low sales prices of the Common Stock were $13.75 and
$13.00, respectively. There is no established public trading market for
TruVision common stock. As of May 30, 1996 there were six holders of record of
TruVision Common Stock. TruVision has never declared or paid any cash dividends
on its TruVision common stock. The Company did not pay dividends on its Common
Stock during the most two recent fiscal years and the first quarter of fiscal
1996.
THE MERGER AGREEMENT
The following is a brief summary of certain aspects of the Merger
Agreement. This Summary does not purport to be complete and is qualified in its
entirety by reference to the Merger Agreement, a copy of which is attached to
this Proxy Statement as Annex B and is incorporated herein by reference.
EFFECTIVE TIME
The Merger will become effective, and the Effective Time will occur, on the
date of the filing of a Certificate of Merger with the Secretary of State of the
State of Delaware as required by Delaware General Corporation Law. Such filing
will be made on or as promptly as practicable following the closing date (the
"Closing Date") under the Merger Agreement, which will take place not later than
the fifth business day after the satisfaction or waiver of the conditions
contained in the Merger Agreement, unless another date is agreed to in writing
by the parties thereto. See "--Conditions to the Merger."
MERGER CONSIDERATION
Pursuant to the Merger Agreement, the Company will issue to the TruVision
shareholders up to 3,373,333 shares of Common Stock. Upon consummation of the
Merger, stockholders of TruVision will beneficially own up to 21.7% of the
Company's Common Stock. The aggregate number of shares of Common Stock to be
issued to the TruVision shareholders will be reduced and such shares will be
placed in escrow if TruVision has not consummated certain acquisitions by the
Effective Time. The TruVision shareholders will receive the shares placed in
escrow upon the closing of certain acquisitions and the satisfaction of certain
conditions relating to the ownership of certain assets by TruVision. Based on
closing market price of the Company's Common Stock as of July 9, 1996, the value
of the shares to be issued to the TruVision shareholders is $59,876,661. Upon
consummation of the Merger, as a result of the issuance of shares of the
Company's Common Stock, (1) shareholders of TruVision will own up to 21.7% of
the Company's Common Stock, (2) CMCC (currently a holder of 17.7% of the
Company's Common Stock), together with its affiliates, will own 23.4% of the
Company's Common Stock, and (3) Mr. Burkhalter and MWTV will become the
beneficial owners of more than 5% of the Company's Common Stock.
In the paragraph below is a more detailed discussion of the consideration
to be issued in connection with the Merger. The number of shares of Common Stock
set forth below in (A) represents 5% of the aggregate number of shares of Common
Stock to be issued to the TruVision shareholders. The number of shares set forth
below in (B)-(D) are based on an LOS valuation of $43 per LOS household (implied
by the consideration paid by the Company to the TruVision shareholders in the
Merger). To calculate the number of shares in (B)-(D), the Company (i)
multiplied the number of LOS households by $43, (ii) subtracted from that
product the amount paid by TruVision to acquire the market and (iii) dividing
the number from (ii) by $15. The number of shares in (F) represent the aggregate
number of shares payable to TruVision
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<PAGE>
shareholders should all the conditions be met prior to the Effective
Time, the general escrow amount of 5% of the aggregate number of shares to be
issued to the TruVision shareholders, and sum of the acquisition contigent
amounts, respectively. On the Closing Date, the outstanding shares of TruVision
Common Stock, in the aggregate, shall be converted into the right to receive the
number of shares of Common Stock equal to the "Merger Shares," which shall
consist of the aggregate of (i) the Non-Contingent Amount, (ii) upon the
expiration of the Escrow arrangements, the General Contingent Amount, (iii) if
the Gadsden Purchase has not been consummated prior to the Effective Time, then
the Gadsden Contingent Amount, if and when the Gadsden Purchase is consummated
and the Market Delivery Requirement is satisfied with respect to the Gadsden,
Alabama market, (iv) if the Madison Purchase has not been consummated prior to
the Effective Time, the Huntsville Contingent Amount, if and when the Madison
Purchase is consummated and the Market Delivery Requirement is satisfied with
respect to the Huntsville, Alabama market, (v) if the SkyView Purchase has not
been consummated prior to the Effective Time, then the Jackson Contingent
Amount, if and when the SkyView Purchase is consummated and the Market Delivery
Requirement is satisfied with respect to the Jackson, Tennessee market, and
(vi) as and when additional shares of Common Stock become issuable pursuant to
indemnification obligations described under "--Indemnification", the WOI
Contingent Amount. As used herein:
(A) the "General Contingent Amount" shall mean 168,667 shares of Common
Stock, subject to reduction as provided herein and in accordance with the terms
of the General Escrow Agreement;
(B) if the Gadsden Purchase is consummated prior to the Effective Time,
then the "Gadsden Contingent Amount" shall mean zero (0) shares of Common Stock,
and if the Gadsden Purchase is not consummated prior to the Effective Time, then
the "Gadsden Contingent Amount" shall mean 258,793 shares of Common Stock;
(C) if the Madison Purchase is consummated prior to the Effective Time,
then the "Huntsville Contingent Amount" shall mean zero (0) shares of Common
Stock, and if the Madison Purchase is not consummated prior to the Effective
Time, then the "Huntsville Contingent Amount" shall mean 121,447 shares of
Common Stock;
(D) if the SkyView Purchase is consummated prior to the Effective Time,
then the "Jackson Contingent Amount" shall mean zero (0) shares of Common Stock,
and if the SkyView Purchase is not consummated prior to the Effective Time, then
the "Jackson Contingent Amount" shall mean 36,633 shares of Common Stock;
(E) the "Non-Contingent Amount" shall means (1) 3,373,333 shares of Common
Stock subject to adjustment for TruVision subscribers, TruVision net debt and
certain other payments and expenses, minus (2) 168,667 shares, minus (3) the
aggregate of the Acquisition Contingent Amounts;
(F) the "Acquisition Contingent Amounts" means the Gadsden Contingent
Amount, the Huntsville Contingent Amount, and the Jackson Contingent Amount and
the Memphis Contingent Amount; and
(G) the "Market Delivery Requirement" shall be deemed to have been
satisfied with respect to any Market at the time of question if, at such time,
at least 12 channels licensed by the FCC to, or leased to, TruVision or any of
its subsidiaries in such Market are both granted channels and good channels.
29
<PAGE>
Notwithstanding the foregoing, if at the Effective Time the Market Delivery
Requirement has not been satisfied with respect to any Owned Market (a "Non-
Delivery Market"), then there shall be withheld from the Non-Contingent Amount a
number of shares of Common Stock which is equal to the number of shares
specified in the following sentence for such Owned Market (the "Market Delivery
Contingent Shares" for such Owned Market). The Market Delivery Contingent
Shares for any Non-Delivery Market shall be restored to the Non-Contingent
Amount if and when, after the Effective Time, the Market Delivery Requirement is
satisfied with respect to such Non-Delivery Market. Owned Market -Shares of
Common Stock: Jackson, Mississippi-513,133; Delta, Mississippi-266,027; Gulf
Coast, Mississippi-348,873; Tupelo, Mississippi-259,720; Hattiesburg,
Mississippi-254,560; Natchez, Mississippi-172,000; Meridan, Mississippi-128,427;
Starkville, Mississippi-186,907; Oxford, Mississippi-153,653; Memphis,
Tennessee-1,092,773; Huntsville, Alabama-521,447; Jackson, Tennessee-276,633;
Flippin, Tennessee-118,393; Demopolis, Alabama-44,720; Hot Springs, Arkansas-
191,780; and Gadsden, Alabama-382,127.
CERTAIN REPRESENTATIONS AND WARRANTIES
Pursuant to the Merger Agreement, each of the Company, MergerSub and
TruVision have made representations and warranties regarding, among other
things, (i) the organization, existence and qualification to do business and
similar corporate matters, (ii)the authority to enter into and perform its
obligations under the Merger Agreement, (iii) its capital stock, (iv) the
absence of conflict of the Merger Agreement and the transactions contemplated
thereby with its certificate of incorporation, bylaws, certain agreements and
applicable laws, (v) employee benefits matters, (vi) brokers' fees, (vii) the
accuracy of information contained in filings with SEC, (viii) FCC matters and
(ix) in the case of TruVision only, certain labor matters and the accredited
investor status of its stockholders.
CONDUCT OF TRUVISION PRIOR TO THE MERGER
The Merger Agreement provides that after the date of the Merger Agreement
and prior to the Effective Time, TruVision will conduct its operations only in
the ordinary course of business. However, TruVision is permitted to consummate
the acquisitions of certain Acquisition Markets pursuant to the acquisition
agreements related thereto.
CERTAIN COVENANTS
The Merger Agreement provides that TruVision will (a) use reasonable
efforts to keep its business substantially intact, (b) pay its debts when due,
(c) not take any action which would cause the breach of a representation and
warranty, (d) use reasonable efforts to protect its rights in channel leases,
FCC licenses and material contracts, (e) not declare or pay any dividends or
sell any capital stock, (f) not increase the base compensation of, or enter into
any new incentive agreement with any directors, officers or employees or pay
bonuses to any such director, officer or employee in the aggregate in excess of
$50,000, (g) not transfer any interest in any subsidiary, (h) use reasonable
efforts to obtain all consents, governmental authorizations, approvals and
filings necessary by virtue of the Merger to ensure that (i) the surviving
corporation will as of the Effective Time enjoy all rights and privileges
currently enjoyed by TruVision under each of the channel leases to which
TruVision is a party, (ii) the FCC has consented to the transfer of control to
the Company with respect to each cable antenna relay service license held by
TruVision, (iii) the FCC has consented to the transfer or control to the Company
of each other FCC license held by TruVision, (iv) the franchising
30
<PAGE>
authorities with jurisdiction over the matters have consented to the transfer of
control to the Company of all cable franchises of TruVision, and (v) the FCC has
waived FCC Rule 21.952(c)(3) so that consummation of the transactions
contemplated by the Merger Agreement will not cause TruVision's BTA applications
to be dismissed, (i) timely file all applications and other submissions to
assure that all channels licensed or authorized to TruVision remain in full
force and effect, (j) use reasonable efforts to assure that licensees or
permitees under TruVision channel leases timely file all applications and other
submissions in such form and with such information as may be required by the FCC
and (k) use reasonable efforts to prosecute its FCC Form 175-M application for
MDS licenses to the extent that it was the high bidder in the MDS BTA Auction.
The Merger Agreement provides that each of the Company and TruVision will
(a) take all action necessary in accordance with applicable legal requirements
and in accordance with its certificates of incorporation and bylaws to convene a
stockholders meeting as promptly as practicable and vote upon the approval of
the Merger Agreement, (b) through its board of directors, recommend to its
stockholders approval of the Merger Agreement, (c) use reasonable efforts to
take any action required to be taken under any applicable state securities laws
in connection with the issuance of shares of Common Stock in the Merger (d) use
reasonable efforts to take and to assist and cooperate with the other parties to
the Merger Agreement in doing all things necessary, proper and advisable to
consummate and make effective, the Merger and the other transactions
contemplated thereby and (e) permit each other and certain of their agents
reasonable access to facilities, corporate offices, books and records, financial
and other operating data and other information, and directors, officers,
employees, counsel and accountants.
NO SOLICITATION
TruVision will not, and will not authorize any of its subsidiaries or
officers, directors, employees, agents and other representatives or those of any
subsidiary of TruVision (collectively, "TruVision Representatives") to, solicit,
initiate or encourage (including by way of furnishing information) any inquiries
or the making of any proposal which constitutes, or may reasonably be expected
to lead to, an Acquisition Proposal (as defined herein) from any person or
engage in any discussion or negotiations relating thereto, or accept any
Acquisition Proposal. TruVision shall immediately cease and cause to be
terminated any existing solicitation, discussion or negotiation with any parties
conducted heretofore by TruVision or any TruVision Representatives with respect
to any of the foregoing. To the extent permitted by applicable legal
requirements, TruVision will promptly notify the Company of any such discussion
or negotiations, requests for such information or the receipt of any Acquisition
Proposal, including the identity of the person or group engaging in such
discussions or negotiations requesting such information or making such
Acquisition Proposal, and the material terms and conditions of any Acquisition
Proposal. As used in the Merger Agreement, "Acquisition Proposal" shall mean
any proposal or offer considered by the Board of Directors of TruVision to be
bona fide, other than a proposal or offer by the Company or any of its
affiliates, for a tender or exchange offer, a merger, consolidation or other
business combination involving TruVision or any subsidiary of TruVision or any
proposal to acquire in any manner (a) a substantial equity interest in TruVision
or any subsidiary of TruVision, (b) any rights of TruVision or any subsidiary of
TruVision to any channels or (c) any wireless cable television system.
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<PAGE>
CONDITIONS TO THE MERGER
The Merger is subject to the following conditions: (a) all necessary state
securities or blue sky authorizations shall have been received, (b) no
government authority or court of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any law, rule, regulation, executive
order, decree or other legal requirement which is then in effect and has the
effect of prohibiting the Merger or any of the transactions contemplated
thereby, (c) any applicable waiting period with respect to the Merger under the
HSR Act shall have expired or been terminated prior to the Effective Time, and
all consents, approvals, permits and authorizations required to be obtained
prior to the Effective Time from any governmental entity in connection with the
execution and delivery of the Merger Agreement and the consummation of the
transactions contemplated thereby shall have been made or obtained without
restrictions.
The Company's obligations under the Merger Agreement to consummate the
Merger are subject to the following additional conditions: (a) the Merger shall
have been approved by the requisite vote of the holders of Common Stock in
accordance with applicable legal requirements, the Company's certificate of
incorporation and bylaws or any rule or regulation of any securities exchange or
market upon which the Company's securities are traded, (b) each of the
representations and warranties of TruVision under the Merger Agreement shall be
true and correct in all respects as if originally made on and as of the Closing
Date, except as to such matters which in the aggregate do not reflect a material
adverse effect, (c) TruVision shall have delivered certain documents, (d) no
change shall have occurred with respect to TruVision or any subsidiary of
TruVision, or their respective assets, from the date of the Merger Agreement
through the Closing Date which would have a material adverse effect, (e) all
obligations of TruVision to be performed under the Merger Agreement through and
including the Closing Date shall have been performed in all material respects,
(f) all necessary and appropriate governmental and third party consents and
approvals for the consummation of the transactions contemplated by the Merger
Agreement shall have been received, (g) options held by TruVision employees
shall have been surrendered, exercised, canceled or otherwise terminated and (h)
the TruVision preferred stock held by Van Com, Inc. and CVCA shall have been
converted into TruVision Common Stock prior to the Effective Time.
TruVision's obligations under the Merger Agreement to consummate the Merger
are subject to the following additional conditions: (a) the Merger shall have
been approved by the requisite vote of the holders of TruVision Common Stock in
accordance with applicable legal requirements, TruVision's certificate of
incorporation and bylaws or any rule or regulation of any securities exchange or
market upon which the Company's securities are traded, (b) each of the
representations and warranties of the Company under the Merger Agreement shall
be true and correct in all respects as if originally made on and as of the
Closing Date, except as to such matters which in the aggregate do not reflect a
material adverse effect, (c) the Company shall have delivered certain documents,
(d) all obligations of the Company to be performed under the Merger Agreement
through and including the closing date shall have been performed in all material
respects and (e) no change shall have occurred with respect to TruVision or any
subsidiary of TruVision, or their respective assets, from the date of the Merger
Agreement through the Closing Date which would have a material adverse effect.
INDEMNIFICATION
TruVision will indemnify and hold the Company and MergerSub and their
respective officers and directors harmless from any and all damages relating to
or arising from any material breach or material non-performance of any
representation or warranty or covenant of TruVision contained in the Merger
Agreement. The Company will indemnify and hold the TruVision Stockholders
harmless from any and all damages relating to or arising from any material
breach or material non-performance of any representation or
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<PAGE>
warranty or covenant of the Company or MergerSub contained in the Merger
Agreement. The statements, certifications, representations and warranties made
by either the Company or MergerSub or TruVision in the Merger Agreement, and any
schedule or in any exhibit, certificate, or other instrument delivered by either
the Company, MergerSub or TruVision pursuant to the Merger Agreement shall
survive the Merger Agreement for a period of six months from the Closing Date.
The indemnification obligations of TruVision shall be limited to and satisfied
solely from the General Contingent Amount in accordance with terms of the
general escrow agreement (the "General Escrow Agreement"). The indemnification
obligations of the Company shall be limited to and satisfied solely by the
issuance by the Company of no more than 168,667 shares of Common Stock.
TERMINATION
The Merger Agreement may be terminated (a) at any time prior to the
Effective Time by the mutual consent of the Company, MergerSub and TruVision,
and (b) and the Merger may be abandoned by each of the Company and TruVision, if
the conditions to such parties' obligations to consummate the transactions
contemplated by the Merger Agreement, shall not have been satisfied in full or
waived by December 31, 1996.
In the event the Merger Agreement is terminated solely as a result of
the failure of one or more of conditions relating to certain of TruVision's
obligation to close the Merger, then TruVision shall deliver to the Company
204,545 shares of TruVision Common Stock (subject to adjustment for any stock
split, recapitalization, or related event) plus the IPO Adjustment Shares. The
"IPO Adjustment Shares" means additional TruVision Common Stock to be issued
upon consummation of any initial public offering of TruVision Common Stock
effected following the termination of the Merger Agreement or such failure to
consummate the Merger and prior to the third anniversary of the date of the
Merger Agreement at a price ("IPO Price") less than $11.00 per share (adjusted
for stock splits, recapitalizations and other events) determined as follows:
the product of (a)(i) $11.00 divided by the IPO Price, minus (ii) $1.00,
multiplied by (b) 204,545.
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<PAGE>
OTHER AGREEMENTS
REGISTRATION AGREEMENTS
Registration Agreement. In connection with the Heartland Transaction,
the Company entered into a registration agreement (the "Registration Agreement")
with Heartland, the contributing Heartland subsidiaries and all of the former
stockholders of the Company's predecessor ("Old Wireless One"). For a
description of the Heartland Transaction, see "Election of Directors-Certain
Relationships and Related Transactions." Under the Registration Agreement, at
any time after the second anniversary of the Heartland Transaction, the holders
of a majority of the Common Stock issued to the former stockholders of Old
Wireless One in the Heartland Transaction and the holders of a majority of the
Common Stock issued to certain of Heartland's subsidiaries in the Heartland
Transaction shall each have the right, subject to certain conditions, to require
the Company to register any or all of such Common Stock under the Securities Act
on Form S-1 on three occasions at the Company's expense and on Form S-2 or S-3
on an additional three occasions at the Company's expense. Heartland and its
subsidiaries and the stockholders of Old Wireless One are also entitled to
request the inclusion of any Common Stock subject to the Registration Agreement
in any registration statement at the Company's expense whenever the Company
proposes to register any of its securities under the Securities Act, subject to
certain conditions.
New Registration Agreement. In connection with the Merger, the
Registration Agreement will be restated with the TruVision Stockholders becoming
parties thereto. Under such amended and restated Registration Agreement (the
"New Registration Agreement"), (a) at any time after October 24, 1997, any of
(i) the holders of a majority of the Common Stock issued to the former
stockholders of Old Wireless One (other than CMCC and Baseball Partners) in the
Heartland Transaction, (ii) the holders of a majority of the Common Stock issued
to Heartland and/or certain of its subsidiaries in the Heartland Transaction,
(iii) the holders of a majority of the Common Stock to be issued to TruVision
Stockholders (other than CVCA) in the Merger, or (iv) the holders of a majority
of the Common Stock issued to CMCC and Baseball Partners in the Heartland
Transaction or to be issued to CVCA in the Merger, shall each have the right,
subject to certain conditions, to require the Company to register any or all of
such Common Stock under the Securities Act of 1933, as amended (the "Securities
Act") on Form S-1 on three occasions at the Company's expense and on Form S-2 or
S-3 on an additional three occasions at the Company's expense, and (b) at any
time after October 24, 1996, the holders of a majority of the Common Stock
issued to VCI shall have the right, subject to certain conditions, to require
the Company to register any or all of such Common Stock under the Securities Act
on Form S-3 on one occasion at the Company's expense. The holders of any such
shares of Common Stock also will be entitled to request the inclusion of any
Common Stock subject to the New Registration Agreement in any registration
statement at the Company's expense whenever the Company proposes to register any
of its securities under the Securities Act, subject to certain conditions.
STOCKHOLDERS AGREEMENTS
Stockholders Agreement. In connection with the Heartland Transaction,
CMCC, Baseball Partners, Premier Venture Capital Corporation, affiliates of
Advantage Capital Corporation ("ACC"), Mr. Sternberg and Mr. Reilly, each of
whom was a former stockholder of Old Wireless One, and Heartland and certain of
its subsidiaries entered into a stockholders agreement (the "Stockholders
Agreement"). As amended in connection with the execution of the Merger
Agreement, the Stockholders Agreement requires, among other things, that the
parties thereto vote their Common Stock so that the Board of Directors of the
Company will have up to eight members, one of whom will be Sean Reilly (so long
as he is Chief Executive Officer of the Company), up to three of whom will be
designated by Heartland (at least one of whom must be independent of Heartland,
the Company and the Old Wireless One stockholders who are parties to the
Stockholders
34
<PAGE>
Agreement), up to two of whom will be designated by a majority of the Old
Wireless One stockholders who are parties to the Stockholders Agreement other
than CMCC and Baseball Partners (at least one of whom must be independent of
Heartland, the Company and such stockholders), and up to two of whom will be
designated by CMCC and Baseball Partners. The Stockholders Agreement also
provides that, without the prior approval of the Board and until October 24,
1998, the parties to the Stockholders Agreement may not, without the approval of
a majority of the Directors, (i) acquire equity securities of the Company (or
rights or options to acquire equity securities of the Company other than equity
securities issued or issuable with respect to such Common Stock, securities
issued to them pursuant to Board-approved option plans and the acquisition of up
to 250,000 shares of Common Stock by Heartland or ACC), (ii) solicit proxies or
consents in opposition to solicitations made by or on behalf of the Board or
(iii) other than in connection with the Stockholders Agreement, act together
with any other person to acquire, hold, vote or dispose of securities of the
Company.
Based upon certain filings made by the parties to the Stockholders
Agreement with the SEC, the Company believes that the parties to the
Stockholders Agreement collectively beneficially own an aggregate of 7,607,159
shares of Common Stock (including 171,074 shares of Common Stock issuable upon
the exercise of presently exercisable stock options held by Messrs. Sternberg
and Reilly), which represents approximately 55.6% of the outstanding Common
Stock. As a result, such stockholders are able to control the election of the
members of the Company's Board of Directors. The current Directors proposed by
Heartland are Messrs. Holland, Shimer and Webb; the current Directors proposed
by the Old Wireless One stockholders are Messrs. Sternberg and Luby; the current
Directors proposed by CMCC and Baseball Partners are Messrs. Burkhalter and
Chavkin.
New Stockholders Agreement. In connection with the Merger, the
Stockholders Agreement will be amended and restated with the TruVision
Stockholders becoming parties thereto. In such amended and restated agreement
(the "New Stockholders Agreement"), the parties thereto, among other things,
will agree to vote their Common Stock so that the Board of Directors will have
up to nine members, up to three of whom will be designated by Heartland (at
least one of whom must be independent of Heartland, the Company and the Old
Wireless One stockholders who are parties to the Stockholders Agreement), up to
three of whom will be designated by a majority of the Old Wireless One
stockholders who are parties to the Stockholders Agreement other than CMCC and
Baseball Partners (at least one of whom must be independent of Wireless One, the
Company and such stockholders), up to two of whom will be designated by CMCC,
Baseball Partners and CVCA, collectively, and one of whom may be designated by
the TruVision Stockholders other than CVCA. Other provisions of the
Stockholders Agreement will not be materially affected by the amendment and
restatement.
ELECTION OF DIRECTORS
The Board of Directors is currently comprised of eight Directors
divided into three classes. The term of each class expires in different years.
The Board of Directors has nominated and recommends the election for the class
of Directors up for election at the Annual Meeting ("Class I") the three
nominees set forth below. Each nominee currently serves as Director of the
Company. If any nominee becomes unavailable for any reason or should a vacancy
occur before the election (which events are not anticipated), the persons named
on the enclosed proxy card may substitute another person as a nominee or may add
or reduce the number of nominees to such extent as they shall deem advisable.
At the Annual Meeting, three Directors are to be elected as members of Class I
to serve until the annual meeting in 1999 and until their successors are elected
and qualified or until their earlier removal or resignation. Newly created
directorships resulting from an increase in the authorized number of Directors
or any vacancies on the Board of Directors resulting from death, resignation,
disqualification or removal for cause may be filled by a vote of a majority of
the total number of the remaining Directors then in office. All of the current
Directors were elected to the Board of
35
<PAGE>
Directors pursuant to the Stockholders Agreement. See "Other Agreements-
Stockholders Agreements." Mr. Shimer was appointed to the Board of Directors in
February 1996 to fill a vacancy on the Board. Messrs. Burkhalter and Chavkin
were appointed to the Board of Directors by CMCC pursuant to CMCC's right under
the Stockholders' Agreement to appoint two of the eight Directors of the
Company. CMCC appointed Messrs. Burkhalter and Chavkin to the Board of Directors
because of their experience on the Board of Directors of TruVision. See "Other
Agreements-Stockholders Agreements." At present, non-employee Directors of the
Company receive an annual fee of $5,000 and a meeting fee of $500 per meeting
attended, plus reimbursement of out-of-pocket expenses, for their services as
Directors of the Company. In addition, each non-employee Director of the Company
who does not serve on the Compensation Committee of the Board of Directors is
eligible to receive stock options under the Company's 1995 Directors' Option
Plan. Directors who are also employees of the Company do not receive any
additional compensation for serving on the Board of Directors. In addition, the
Directors do not receive any additional compensation for committee
participation.
Information regarding the nominees for Director of the Company is
set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----- ---- --------
<S> <C> <C>
Hans J. Sternberg(1) 60 Chairman of the Board
Arnold L. Chavkin(1)(3) 44 Director
David E. Webb(1) 49 Director
</TABLE>
Information regarding Directors of the Company not subject to reelection
at the Annual Meeting is set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Sean E. Reilly 34 Chief Executive Officer,
President and Director
Henry M. Burkhalter 48 Director
J. R. Holland, Jr.(1)(2)(3) 52 Director
William K. Luby(1)(2)(3) 36 Director
Daniel L. Shimer(2) 51 Director
</TABLE>
- -----------------
(1) Member of the Operating Committee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
There are no family relationships between or among any Directors
or executive officers of the Company.
DIRECTOR NOMINEES (CLASS I DIRECTORS) (TERM EXPIRING AT THE 1999 ANNUAL MEETING)
Hans J. Sternberg has served as Chairman of the Company since its
founding in June 1995 and as Chairman of the Board of Old Wireless One since its
founding in late 1993. He has also served as the
36
<PAGE>
Chairman and Chief Executive Officer of Starmount Life Insurance Company
("Starmount") since 1983. He is a former owner and President and Chief Executive
Officer of Maison Blanche Department Stores, a chain of 24 department stores
which had annual revenues of approximately $480 million prior to its 1992 sale.
He invested in cellular telephones in the early 1980s, began in cable television
in 1972 as a founding partner and director of Cablesystems of Hammond, Inc., and
later helped found Cablesystems of Alabama, Inc. He was an owner and a director
of radio stations WQXY, KOXY, WLCS and WWUN.
Arnold L. Chavkin became a Director of the Company in April 1996. He
has been a General Partner of Chase Capital Partners ("CCP"), an affiliate of
CMCC and the general partner of CVCA, since January 1992 and has served as the
President of Chemical Investments, Inc. since March 1991. Prior to joining CCP,
Mr. Chavkin was a member of Chemical Bank's merchant banking group and a
generalist in its corporate finance group specializing in mergers and
acquisitions and private placements for the energy industry. His experience
prior to Chemical Bank included corporate development for Freeport McMoRan as
well as positions with Gulf and Western Industries and Arthur Young & Company.
Mr. Chavkin has been a director TruVision Wireless, Inc. since August 1994 and
is also a director of Reading & Bates Corporation, American Radio Systems
Corporation, Inc., Bell Sports, Inc., Envirotest Systems, Forcenergy Gas
Exploration, Inc. and several privately held firms.
David E. Webb became a Director of the Company in June 1995. He is a
co-founder of Heartland Wireless Communications, Inc., and has been President
and Chief Executive Officer and a director of Heartland since its founding in
September 1990. During 1989 and 1990, Mr. Webb began acquiring rights to
wireless cable channels. From 1979 to January 1989, Mr. Webb was a shareholder,
director and manager of Durant Cablevision, Inc. and its predecessor, a
traditional hard-wire cable system company. Mr. Webb has been a shareholder and
director of several media/communications companies involved in network and
independent television stations, AM and FM radio stations, paging and telephony.
CLASS II DIRECTORS (TERM EXPIRING AT THE 1997 ANNUAL MEETING)
William K. Luby became a Director of the Company in June 1995 and a
director of Old Wireless One in April 1995. From June 1992 to March 1996, Mr.
Luby was a managing director at CMCC. From 1985 to 1992, Mr. Luby held various
positions in the Leveraged Lending and Restructuring groups at The Chase
Manhattan Bank, N.A. He is currently a director of numerous private companies.
J. R. Holland, Jr. became a Director of the Company in June 1995. He
began advising Heartland as a consultant in October 1992 and became Chairman of
the Board of Directors of Heartland in October 1993. Mr. Holland has been
employed as President of Unity Hunt, Inc. since September 1991. Unity Hunt is a
large international, private holding company with interests in entertainment,
cable television, retail, investments, real estate, natural resources and energy
businesses. Mr. Holland is also the President of Hunt Capital, a principal
stockholder of Heartland. From November 1988 to September 1991, Mr. Holland was
Chairman of the Board and Chief Executive Officer of Nedinco, Inc., a large
diversified international holding company. Prior to that, Mr. Holland was
President and a director of KSA Industries, Inc., a private, diversified company
involved in entertainment, retail, transportation and energy businesses, and
President and a director of Western Services International, Inc., a company
involved in energy services, equipment and chemicals. Mr. Holland began his
career with Booz-Allen & Hamilton, Inc., a major management consulting firm. In
addition, Mr. Holland is currently a director of Placid Refining Company,
Optical Securities Group, Inc., TNP Enterprises, Inc. and several private
companies.
37
<PAGE>
CLASS III DIRECTORS (TERM EXPIRING AT THE 1998 ANNUAL MEETING)
Sean E. Reilly has served as Chief Executive Officer, President and
Director of the Company since its founding in June 1995 and as Chief Executive
Officer and President of Old Wireless One since its founding in late 1993. Upon
the consummation of the Merger, Mr. Reilly will no longer serve as the President
of the Company. Prior to joining Old Wireless One, Mr. Reilly served as Vice-
President of Real Estate/Mergers and Acquisitions for Lamar Advertising Company
("Lamar"), an outdoor advertising company, and continues to serve as a member of
the Lamar board of directors. Mr. Reilly served in the Louisiana Legislature as
a State Representative from March 1988 to January 1996.
Henry M. Burkhalter became a Director in April 1996 and will become
President and Vice Chairman upon the consummation of the Merger. Mr. Burkhalter
has served as Chairman of the Board of Directors, President and Chief Executive
Officer of TruVision Wireless, Inc. since its incorporation in April 1994. Since
1993, he has been a Director, President and Chief Executive Officer of Wireless
TV, Inc. He has been the Chairman of Pacific Coast Paging, Inc. From 1974
through 1992, Mr. Burkhalter was the President and founder of Burkhalter &
Company, a certified public accounting firm.
Daniel L. Shimer became a Director of the Company in February 1996.
Mr. Shimer has served as Executive Vice President and Chief Financial Officer of
COREStaff, Inc. since April 1994. Formed in late 1993, COREStaff has rapidly
grown, principally through acquisitions, to a $400 million top ten provider of
staffing services in the United States. From March 1991 to March 1994, Mr.
Shimer served as the Executive Vice-President, Chief Financial Officer, and
President of National Accounts for Brice Foods, Inc. From February 1983 to
March 1991, he was associated with Bard & Company, Inc. in various senior
financial capacities among its publicly traded affiliates, including Foxmeyer
Corporation, Coast America Corporation, and Computerland Corporation. Mr.
Shimer, a certified public accountant, began his career at KPMG Peat Marwick LLP
and has over 25 years of financial management experience.
COMMITTEES AND DIRECTORS' MEETINGS
The Board of Directors has three standing committees: the Audit
Committee, the Compensation Committee and the Operating Committee. These
committees were established in October 1995 in connection with the Company's
initial public offering.
The Audit Committee is authorized to oversee the activities of the
Company's independent auditors, including approving the scope of the annual
audit activities of the independent auditors, and review such audit results and
the internal audit controls of the Company. The Audit Committee did not conduct
any meetings in 1995.
The Compensation Committee is authorized to make recommendations to
the Board with respect to general employee benefit levels, determine the
compensation and benefits of the Company's executive officers and administer the
Company's stock option plans. The Compensation Committee held two meetings in
1995.
The Operating Committee is authorized to oversee the operations
of the Company and to make reports to the full Board.
The Board of Directors held three meetings during the Company's
preceding fiscal year. All of the Directors attended 75% or more of the total
number of meetings of the Board of Directors and of the total number of meetings
held by all committees of the Board on which he served as a member conducted
during the period in which each served as a Director and as a member of such
committee.
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<PAGE>
The Company does not have a nominating committee. The entire Board of
Directors currently is responsible for filling vacancies on the Board as they
occur and recommending candidates for election as Directors at the annual
meetings of stockholders. The Board will consider individuals recommended for
nominations by stockholders of the Company. Such recommendations should be
submitted in writing to the Chairman of the Board, who will submit them to the
entire Board for its consideration. The recommendation must be accompanied by
the consent of the individual nominated to be elected and to serve.
In addition, the By-Laws of the Company (the "By-Laws") require that
advance notice of nominations for the election of Directors to be made by a
stockholder (as distinguished from a stockholder's recommendation to the Board)
be given to the Secretary of the Company in the case of an annual meeting, no
later than 130 days prior to the first anniversary of the preceding year's
annual meeting of stockholders, provided, that in the event that the date of the
annual meeting is changed from 30 days from such anniversary date, notice by
stockholders must be received no later than the close of business on the tenth
(10th) day following the earlier of the date on which this notice was mailed or
public announcement of the meeting was made and, in the case of a special
meeting, not later than the tenth (10th) day following the earlier of the day on
which notice of the date of the meeting was mailed or public disclosure of the
meeting was made. Such notice must include (i) as to each person whom the
stockholder proposes to nominate for election as a Director at such meeting all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (including such person's written consent to
being named in the proxy statement as a nominee and to serving as a director if
elected); (ii) as to the stockholder giving the notice, (A) the name and
address, as they appear on the Company's books, of such stockholder and (B) the
class and number of shares of the Company which are beneficially owned by such
stockholder and also which are owned of record by such stockholder; and (iii) as
to the beneficial owner, if any, on whose behalf the nomination is made, (A) the
name and address of such person and (B) the class and number of shares of the
Company which are beneficially owned by such person.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation Committee are Messrs.
Holland, Luby and Shimer. No officers or employees of the Company serve on the
Compensation Committee. The Compensation Committee was established in October
1995 in connection with the Company's initial public offering. Previous
compensation levels for Messrs. Sternberg, Reilly and William C. Norris, Senior
Vice President--System Launches and Secretary, were established pursuant to the
terms of their respective employment agreements. See "--Employment Agreements."
The compensation for Messrs. J. Robert Gary and Alton C. Rye, the other
executive officers of the Company, was approved by the full Board of Directors
upon the recommendation of the Compensation Committee. Executive officers who
are also Directors of the Company did not participate in discussions relating to
their individual compensation arrangements.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Preferred Stock Investments. In April 1995, certain investors
purchased redeemable convertible preferred stock and warrants to acquire common
stock of Old Wireless One in a private placement resulting in net proceeds of
approximately $14 million to Old Wireless One. The following investors
purchased redeemable convertible preferred stock and warrants to acquire common
stock in the amounts indicated: CMCC--8,000 preferred shares and warrants to
purchase 320,000 shares of common stock ($8.0 million); Premier Venture Capital
Corporation--2,500 preferred shares and warrants to purchase 100,000 shares of
common stock ($2.5 million); affiliates of Advantage Capital Corporation--2,000
preferred shares and warrants to purchase 80,000 shares of common stock ($2.0
million); and certain members of Mr. Sternberg's immediate family--252 preferred
shares and warrants to purchase 8,400 shares of common stock. All such
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<PAGE>
preferred shares and warrants to purchase shares of common stock were converted
into shares of Common Stock in the Heartland Transaction (defined below).
Heartland Transaction. In October 1995, Heartland and all the
stockholders of Old Wireless One consummated a transaction (the "Heartland
Transaction"), whereby the Company acquired (i) all of the outstanding capital
stock of Old Wireless One (which retained all of its assets and liabilities
except its wireless cable television assets and certain related liabilities with
respect to the Springfield, Missouri market which Heartland acquired) through
the merger of a subsidiary of the Company with Old Wireless One and (ii) the
wireless cable television assets and all related liabilities of certain
subsidiaries of Heartland with respect to certain of Heartland's markets located
in Texas, Louisiana, Alabama, Georgia and Florida. In connection with the
Heartland Transaction, the contributing subsidiaries of Heartland and the
stockholders of Old Wireless One received an aggregate of approximately 3.5
million and approximately 6.5 million shares of Common Stock, respectively, with
an aggregate of 200,000 of such shares of Common Stock placed in escrow to be
distributed to either the Old Wireless One stockholders and/or the contributing
subsidiaries of Heartland, but not to the Company. The distribution of the
shares of Common Stock held in escrow will depend upon certain working capital
post-closing adjustments. Upon consummation of the Heartland Transaction, the
contributing subsidiaries of Heartland received a promissory note for $3 million
and a promissory note for $7 million, which notes were repaid from the proceeds
of the Company's debt and equity offerings.
In connection with the Heartland Transaction, Heartland and the
Company entered into an agreement whereby (i) the Company agreed not to compete
with Heartland or any of Heartland's subsidiaries in the wireless cable
television business in specified markets in which Heartland and its subsidiaries
operate or have significant channel rights, (ii) Heartland agreed not to compete
with the Company in the wireless cable television business in specified markets,
including all of the markets described herein and (iii) if at any time a
wireless cable television system operated by the Company interferes with the
signal transmission of a wireless cable television system operated by Heartland
or one of Heartland's subsidiaries (or vice versa), then the Company, Heartland
and their respective subsidiaries will use their best efforts to negotiate and
enter into an appropriate non-interference agreement.
In connection with the Heartland Transaction, the Company entered into
a registration agreement with Heartland, the contributing Heartland subsidiaries
and all of the former stockholders of Old Wireless One. See "Other Agreements-
Registration Agreements."
In connection with the Heartland Transaction, the Company, Heartland
and certain of the Old Wireless One stockholders entered into a stockholders
agreement. See "Other Agreements-Stockholders Agreements."
Other Transactions. The Company leased approximately 2,500 square
feet of office space for its corporate headquarters in Baton Rouge, Louisiana,
under a lease from Starmount. Mr. Sternberg is Chairman, Chief Executive
Officer and owner of Starmount. The Company paid approximately $25,000 to
Starmount annually for such space. The Company believes the lease was entered
into on terms reflecting then current market rates. The lease with Starmount
expired on April 30, 1997. The Company moved into larger corporate
headquarters and terminated such lease on April 30, 1996 without further payment
or penalty.
The terms of the transactions described above were determined by the
parties thereto, and the Company believes that such transactions involving
affiliates were on terms no less favorable to the Company than could have been
obtained from unaffiliated third parties in arms-length transactions. The
Company expects that all future transactions between the Company and its
officers, Directors, principal stockholders
40
<PAGE>
and affiliates will be on terms no less favorable to the Company than could be
obtained from unaffiliated third parties.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's officers,
Directors and persons who beneficially own more than ten percent of the
Company's Common Stock to file reports of securities ownership and changes in
such ownership with the SEC. Officers, Directors and greater than ten percent
beneficial owners also are required by rules promulgated by the SEC to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely upon a review of the copies of such forms furnished to
the Company, or written representations that no Form 5 filings were required,
the Company believes that during the period from October 19, 1995 (the date the
Company's Common Stock became registered under the Exchange Act) through
December 31, 1995, all Section 16(a) filing requirements applicable to its
officers, Directors and greater than ten percent beneficial owners were complied
with other than by Messrs. Gary and Rye, each of whom filed a late Form 4
disclosing the purchase of shares of Common Stock.
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<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
Except as otherwise noted, the following table sets forth certain
information as of May 30, 1996 prior to the Merger and pro forma to account for
the Merger as to the security ownership of those persons owning of record or
known to the Company to be the beneficial owner of more than five percent of the
voting securities of the Company and the security ownership of equity securities
of the Company by (i) each of the Directors of the Company, (ii) each of the
Director nominees, (iii) each of the executive officers named in the Summary
Compensation Table, and (iv) all Directors and executive officers as a group.
All information with respect to beneficial ownership has been furnished by the
respective Director, Director nominees, executive officer or five percent
beneficial owner, as the case may be. Unless otherwise indicated, the persons
named below have sole voting and investment power with respect to the number of
shares set forth opposite their names. Beneficial ownership of the Common Stock
has been determined for this purpose in accordance with the applicable rules and
regulations promulgated under the Exchange Act.
Upon consummation of the Merger, as a result of the issuance of shares
of the Company's Common Stock, (1) shareholders of TruVision will own up to
21.7% of the Company's Common Stock, (2) CMCC (currently a holder of 17.7% of
the Company's Common Stock), together with its affiliates, will own 23.4% of
the Company's Common Stock, and (3) Mr. Burkhalter and MWTV will become the
beneficial owners of more than 5% of the Company's Common Stock.
<TABLE>
<CAPTION>
COMMON STOCK (1) PRO FORMA FOR THE MERGER
---------------------------- ------------------------------
DIRECTORS, OFFICERS AND NUMBER OF PERCENT NUMBER OF PERCENT
5% STOCKHOLDERS SHARES OF CLASS SHARES OF CLASS
- ------------------------ ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Heartland Wireless 3,361,538 24.9% 3,361,538 19.9%
Communications, Inc. (2)(3)
Chase Manhattan Capital 2,384,916 17.7% 2,384,916 14.1%
Corporation (2)(4)
Chase Venture Capital 3,954,249 23.4%
Associates, LP(4)
Premier Venture Capital 754,268 5.6% 754,268 4.5%
Corporation (2)(6)
Advantage Capital 630,489 4.7% 630,489 3.7%
Corporation (2)(7)
Hans J. Sternberg (2)(8) 374,193 2.7% 374,193 2.2%
Sean E. Reilly (2)(9) 101,755 * 101,755 *
Henry M. Burkhalter -- -- 2,018,015 11.9%
Arnold L. Chavkin (10) 2,384,916 17.7% 3,954,249 23.4%
J. R. Holland, Jr. (5) 3,361,538 24.9% 3,361,538 19.9%
William K. Luby (11) 393,226 2.9% 393,226 2.3%
Daniel L. Shimer 4,800 * 4,800 *
David E. Webb (12) 3,361,538 24.9% 3,361,538 19.9%
Mississippi Wireless TV. L.P. 1,760,000 10.4%
All Directors and executive
officers as a group
(11 persons, including
those listed above) 4,376,222 32.4% 10,496,879 59.1%
</TABLE>
- ----------------------
* Less than one percent.
(1) Does not include an aggregate of 200,000 of such shares currently being held
in escrow. Such shares will be distributed to either the Old Wireless One
stockholders or the Heartland subsidiaries. The distribution of shares held
in escrow will depend upon certain working capital post-closing adjustments
relating to the Heartland Transaction.
(2) Heartland and certain of its subsidiaries, CMCC, Baseball Partners, Premier
Venture Capital Corporation, Advantage Capital Partners Limited Partnership
and Advantage Capital Partners II Limited Partnership, Mr. Sternberg and Mr.
Reilly, each of whose ownership of Common Stock is disclosed in the table,
are parties to Stockholders Agreement. See "Other Agreements--Stockholders
Agreements." Each of the parties to the Stockholders Agreement disclaims
beneficial ownership of the shares of Common Stock owned by the other
parties to such agreement.
42
<PAGE>
(3) Heartland reported on a Schedule 13G filed with the SEC, as of December 31,
1995, shared voting and dispositive power with respect to an aggregate of
3,361,538 shares of Common Stock owned by certain direct and indirect
subsidiaries of Heartland. The address for Heartland is 903 North Bowser,
Suite 140, Richardson, Texas 75081.
(4) Reflects ownership of CMCC, CVCA and Baseball Partners. CMCC, CVCA and
Baseball Partners are affiliates. In the Merger CVCA will receive
approximately 1,569,333 shares of Common Stock. CMCC reported on a Schedule
13G filed with the SEC, as of December 31, 1995, shared voting and
dispositive power with respect to 1,991,690 shares of Common Stock, together
with The Chase Manhattan Bank (National Association), the direct parent of
CMCC, and The Chase Manhattan Corporation, the ultimate parent of CMCC.
Baseball Partners has agreed to grant CMCC an irrevocable proxy to vote all
of the 393,226 shares of Common Stock owned by Baseball Partners. The
address for CMCC, CVCA and Baseball Partners is 380 Madison Avenue, 12th
Floor, New York, New York 10017.
(5) Includes 3,361,538 shares beneficially owned by Heartland. Mr. Holland is
the Manager and President of Hunt Capital Group, L.L.C., a principal
stockholder of Heartland. Mr. Holland is the Chairman of the Board of
Heartland. Mr. Holland disclaims beneficial ownership of shares owned by
Heartland.
(6) As reported on a Schedule 13G filed with the SEC with respect to the shares
of Common Stock held by Premier Venture Capital Corporation ("PVCC") as of
December 31, 1995. PVCC is an indirect wholly owned subsidiary of Premier
Bancorp, Inc., which is a publicly-traded corporation. The address for PVCC
is 451 Florida Street, Baton Rouge, Louisiana 70821.
(7) Advantage Capital Corporation ("ACC"), as the sole general partner of
Advantage Capital Partners Limited Partnership and Advantage Capital Limited
Partners II Limited Partnership, reported on a Schedule 13G filed with the
SEC, as of December 31, 1995, sole voting and dispositive power with respect
to the shares held by such partnerships. Mr. Steven T. Stull is the majority
stockholder of ACC. The address for ACC is LL&E Tower, 909 Poydras Street,
Suite 2230, New Orleans, Louisiana 70112.
(8) Includes 12,520 shares owned by Mr. Sternberg's wife and 85,537 shares
issuable upon the exercise of presently exercisable options.
(9) Includes 85,537 shares issuable upon the exercise of presently exercisable
options.
(10) Reflects 393,226 shares of Common Stock which are beneficially owned by
Baseball Partners and 1,991,690 shares of Common Stock which are
beneficially owned by CMCC. Mr. Chavkin is a general partner of CVCA, which
is a general partner of Baseball Partners and an affiliate of CMCC, and
therefore may be deemed to be a beneficial owner of such shares. Mr.
Chavkin disclaims beneficial ownership of all of the shares of Common Stock
owned by Baseball Partners and CMCC.
(11) Reflects shares of Common Stock which are beneficially owned by Baseball
Partners. Mr. Luby is a general partner of Baseball Partners and therefore
may be deemed to be a beneficial owner of such shares. Mr. Luby disclaims
beneficial ownership of all of the shares of Common Stock owned by Baseball
Partners in which Mr. Luby has no pecuniary interest. Certain affiliates of
CMCC, including CVCA, are general partners of Baseball Partners.
(12) Includes 3,361,538 shares beneficially owned by Heartland. Mr. Webb is
President and Chief Executive Officer and a director and principal stock
Mr. Webb disclaims beneficial ownership of the shares of Common Stock owned
by Heartland and in which Mr. Webb has no pecuniary interest.
43
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The table below provides information relating to compensation for the
Company's last two fiscal years for the Chief Executive Officer. No other
executive officers of the Company received compensation in excess of $100,000 in
either of those years. The amounts shown include compensation for services in
all capacities that were provided to the Company or Old Wireless One and their
respective subsidiaries.
<TABLE>
<CAPTION>
Long-Term
Compensation
---------------------------
Awards
---------------------------
Annual Compensation Restricted Securities
Name and -------------------------------- Stock Underlying All Other
Principal Position Year Salary($) Bonus ($) Awards($) Options(#) Compensation
- ------------------- ----- --------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sean E. Reilly 1995 $87,692 -- -- 201,395(1) --
President and Chief 1994 $35,000(2) -- -- 113,144(3) --
Executive Officer
</TABLE>
- --------------------
(1) Such options were originally issued in April 1995 and were to purchase
shares of common stock of Old Wireless One. Such options were assumed by
the Company under its 1995 Long-Term Performance Incentive Plan (the
"Incentive Plan") in October 1995 in connection with the Heartland
Transaction.
(2) Mr. Reilly began receiving compensation from Old Wireless One on June 1,
1994.
(3) Such options were originally issued in September 1994 and were to purchase
shares of common stock of Old Wireless One. Such options were assumed by
the Company under its Incentive Plan in October 1995 in connection with the
Heartland Transaction.
STOCK OPTION GRANTS
The following table provides information relating to the stock options
awarded to the Chief Executive Officer during the Company's last fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Price
Appreciation for Option Term
Individual Grants (1)
- -------------------------------------------------------------------------------------------- -----------------------------
Number of
Securities Percent of
Underlying Total Exercise
Options Options Granted Price Expiration
Name Granted (#)(2) in Fiscal Year ($) Date(3) 5% ($) 10% ($)
- -------------------------------------------------------------------------------------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sean E. Reilly 201,395(4) 36.3% (5) 4/14/01 $57,196 $199,784
</TABLE>
- -----------------
(1) Amounts reflect certain assumed rates of appreciation set forth in the
SEC's executive compensation disclosure rules. Actual gains, if any, on
stock options exercises depend on future performance of the Company's
Common Stock and overall market conditions. The fair market value of the
Common Stock on the date of grant was estimated to be $4.16 per share. See
Note (4). At an annual rate of appreciation of 5% per year for the option
term, the stock price would be $5.57 per share. At an annual rate of
appreciation of 10% per year for the option term, the stock price would be
$7.37 per share.
44
<PAGE>
(2) All options vest in five equal installments, with accelerated vesting in
the event of a change in control of the Company.
(3) All options listed in the table also expire one year following the
termination of employment with the Company of such holder for any reason.
(4) Such options were originally issued in April 1995 and were to purchase
shares of common stock of Old Wireless One. Such options were assumed by
the Company under its Incentive Plan in October 1995 in connection with the
Heartland Transaction.
(5) The exercise price of such options varies depending upon the date such
options become exercisable. The exercise price with respect to the first
20% installment of options is $4.16 per share, which is increased 35% per
year for each of the remaining four installments.
STOCK OPTION HOLDINGS
The following table sets forth information with respect to the Chief
Executive Officer concerning the stock options held as of December 31, 1995.
There were no stock options exercised during the last fiscal year of the
Company.
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options at Fiscal Year- In-the-Money
End (#) Options at Fiscal Year-End ($)
------------------------------------ ------------------------------
Name Exercisable/Unexercisable Exercisable/Unexercisable(2)
- ----- ------------------------------------ ------------------------------
<S> <C> <C>
Sean E. Reilly (1) 62,908/251,631 $729,893/$2,088,212
</TABLE>
- -----------------------
(1) Of these shares underlying the options held by Mr. Reilly, options for
113,144 shares are exercisable at a price of $6.21 per share and options
for 201,395 shares are exercisable at various prices depending upon the
date such options became exercisable. The first 20% installment of options
are exercisable at $4.16 per share, which is increased 35% per year for
each of the remaining four installments.
(2) The closing sale price of the Common Stock on December 29, 1995 was $16.50
as reported by the Nasdaq National Market. The value of such options at the
fiscal year end is calculated on the basis of the difference between the
option exercise price and $16.50 multiplied by the number of shares of
Common Stock underlying the option.
EMPLOYMENT AGREEMENTS
In connection with the consummation of the Heartland Transaction, the
Company entered into employment agreements with Messrs. Sternberg, Reilly and
Norris. The employment agreements provide for payment of a specified base
salary indexed to inflation and bonuses in the sole discretion of the
Compensation Committee based upon the executive's performance and the Company's
operating results. The term of each agreement is for two years, subject to
automatic annual renewal until the tenth anniversary of the date of such
agreement. Each employment agreement provides that each executive may be
terminated with or without cause, and provided that the executive will not
compete with the Company or its subsidiaries within a specified area during the
period of employment and for the two years thereafter. Each executive will be
entitled to receive a severance payment in the event of a resignation caused by
the relocation of the Company's executive offices to a location more than 60
miles from its present location.
Upon consummation of the Merger, the Company will enter into
employment agreements with Messrs. Burkhalter and Byer and will make certain
amendments to its employment agreements with Messrs. Sternberg, Reilly and
Norris to conform to Messrs. Burkhalter's and Byer's employment agreement. The
employment agreements provide for payment of a base salary indexed
to
45
<PAGE>
inflation and bonuses awarded at the sole discretion of the Company's
Compensation Committee based upon the executive's performance and the Company's
operating results. The term of each agreement will end on April 14, 1998,
subject to automatic annual renewal through April 14, 2005. Each employment
agreement will provide that each executive may be terminated with or without
cause, and will provide that the executive will not compete with the Company or
its subsidiaries within a specified area during the period of employment and for
the two years thereafter. Each executive will be entitled to receive a severance
payment in the event of a resignation caused by the relocation of the Company's
office at which the executive is employed to a location more than 60 miles from
its present location.
1995 LONG-TERM INCENTIVE PLAN
Background and Purpose. Set forth below is a description of the
Wireless One, Inc. 1995 Long-Term Performance Incentive Plan. The Incentive
Plan was adopted by the Board of Directors of the Company on October 17, 1995
and approved by the stockholders of the Company and became effective on October
18, 1995. The Incentive Plan is not subject to the Employee Retirement Income
Security Act of 1974, as amended, and is not qualified under Section 401(a) of
the Internal Revenue Code of 1986, as amended (the "Code"). The purpose of the
Incentive Plan is to provide incentives to certain employees of the Company and
any of its subsidiaries and other key individuals.
Administration. The Incentive Plan is administered solely by the
Compensation Committee (the "Committee") of the Company's Board of Directors;
provided that the Committee may, at any time or from time to time, delegate the
administration of the Incentive Plan in whole or in part, on such terms and
conditions, to such other person or persons as it may determine in its
discretion, if and to the extent that both (a) Rule 16b-3 or any successor rule
("Rule 16b-3") under the Exchange Act, so permits without adversely affecting
the ability of the Incentive Plan to comply with the conditions for exemption
from Section 16 of the Exchange Act (or any successor provision), and (b)
Section 162(m) (or any successor provision) of the Code, and any implementing
regulations (or any successor provisions), so permits without adversely
affecting the deductibility of certain executive compensation. No member of the
Committee may have within one year prior to his appointment received awards
under the Incentive Plan ("Awards") or under any other plan, program or
arrangement of the Company or any of its affiliates if such receipt would cause
such member to cease to be a "disinterested person" under Rule 16b-3.
The Committee has the powers vested in it by the terms of the
Incentive Plan, such powers to include exclusive authority (except as may be
delegated as permitted herein) (i) to select the employees of the Company or any
subsidiary of the Company and other key individuals to be granted Awards under
the Incentive Plan, (ii) to determine the type, size and terms of the Award to
be made to each individual selected, subject to certain limitations, (iii) to
modify the terms of any Award that has been granted, (iv) to determine the time
when Awards will be granted, (v) to establish performance objectives, (vi) to
make any adjustments necessary or desirable as a result of the granting of
Awards to eligible individuals located outside the United States and (vii) to
prescribe the form of the instruments embodying Awards made under the Incentive
Plan. In addition, the Committee is authorized (A) to interpret the Incentive
Plan and the Awards granted under the Incentive Plan, (B) to establish, amend
and rescind any rules and regulations relating to the Incentive Plan, and (C) to
make any other determinations which it deems necessary or desirable for the
administration of the Incentive Plan.
Eligibility. Consistent with the purposes of the Incentive Plan, the
Committee has exclusive power (except as may be delegated as permitted herein)
to select the key employees of the Company or any subsidiary of the Company and
other key individuals performing services for the Company or any of its
subsidiaries who may participate in the Incentive Plan and be granted Awards
under the Incentive Plan. Eligible individuals may be selected individually or
by groups or categories, as determined by the Committee in its discretion. No
non-employee director of the Company shall be eligible to receive an Award under
the
46
<PAGE>
Incentive Plan. The term "subsidiary" as used in this Incentive Plan means any
corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing fifty percent or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
Awards under the Incentive Plan. Awards under the Incentive Plan may
include, but need not be limited to, one or more of the following types, either
alone or in any combination thereof: (i) "Stock Options," (ii) "Stock
Appreciation Rights," (iii) "Restricted Stock," (iv) "Performance Grants" and
(v) any other type of Award deemed by the Committee in its discretion to be
consistent with the purposes of the Incentive Plan (including, but not limited
to, Awards of or options or similar rights granted with respect to unbundled
stock units or components thereof, and Awards to be made to participants who are
foreign nationals or are employed or performing services outside the United
States). Stock Options, which include "Nonqualified Stock Options" (which may
be awarded to participants or sold at a price determined by the Committee
("Purchased Options")) and "Incentive Stock Options" or combinations thereof,
are rights to purchase common shares of the Company having a par value of $.01
per share and stock of any other class into which such shares may thereafter be
changed (the "Common Shares").
There may be issued under the Incentive Plan (as Restricted Stock, in
payment of Performance Grants, pursuant to the exercise of Stock Options or
Stock Appreciation Rights, or in payment of or pursuant to the exercise of such
other Awards as the Committee, in its discretion, may determine) an aggregate of
not more than 1,300,000 Common Shares, subject to adjustment as provided in the
Incentive Plan. The maximum number of Common Shares with respect to which Stock
Options, Stock Appreciation Rights, Restricted Stock, Performance Grants or any
other Award may be granted to any one participant in any one taxable year of the
Company may not exceed 325,000 Common Shares (the "Participant Limitation").
Common Shares issued pursuant to the Incentive Plan may be authorized but
unissued shares, treasury shares, reacquired shares, or any combination thereof.
If any Common Shares issued as Restricted Stock or otherwise subject to
repurchase or forfeiture rights are reacquired by the Company pursuant to such
rights, or if any Award is canceled, terminates or expires unexercised, any
Common Shares that would otherwise have been issuable pursuant thereto will be
available for issuance under new Awards. Unless otherwise determined by the
Committee in its discretion, a participant to whom an Award of Restricted Stock
has been made (and any person succeeding to such a participant's rights pursuant
to the Incentive Plan) shall have, after issuance of a certificate for the
number of Common Shares awarded and prior to the expiration of any restrictions
thereon, ownership of such Common Shares, including the right to vote the same
and to receive dividends or other distributions made or paid with respect to
such Common Shares, subject, however, to the options, restrictions and
limitations imposed thereon pursuant to the Incentive Plan. Notwithstanding the
foregoing, a participant with whom an Award agreement is made to issue Common
Shares in the future, shall have no rights as a stockholder with respect to
Common Shares related to such agreement until issuance of a certificate to him.
Unless otherwise determined by the Committee in its discretion, a participant to
whom a grant of Stock Options, Stock Appreciation Rights, Performance Grants or
any other Award is made (and any person succeeding to such a participant's
rights pursuant to the Incentive Plan) shall have no rights as a stockholder
with respect to any Common Shares or as a holder with respect to other
securities, if any, issuable pursuant to any such Award until the date of the
issuance of a stock certificate to him for such Common Shares or other
instrument of ownership, if any.
Stock Options. The Committee may grant or sell Stock Options either
-------------
alone, or in conjunction with Stock Appreciation Rights, Performance Grants or
other Awards, either at the time of grant or by amendment thereafter; provided,
that (A) an Incentive Stock Option may be granted only to an eligible employee
of the Company or of any parent or Subsidiary of the Company; (B) no Incentive
Stock Option shall be issued in conjunction with or include an alternative right
if the exercise of either such alternative right or the Incentive Stock Option
would affect the right to exercise the other or would otherwise permit the
avoidance of the requirements of Code (S)422(b); and (C) any arrangement under
which a Stock Appreciation
47
<PAGE>
Right is issued in conjunction with an Incentive Stock Option shall meet the
requirements of applicable Temporary Treasury regulations. Each Stock Option
(referred to herein as an "Option") granted or sold under the Incentive Plan
must be evidenced by an instrument in such form as the Committee shall prescribe
from time to time in accordance with the Incentive Plan (an "Award Instrument")
and shall comply with certain terms and conditions set forth in the Incentive
Plan, and with such other terms and conditions, including, but not limited to,
restrictions upon the Option or the Common Shares issuable upon exercise
thereof, as the Committee, in its discretion, shall establish. Among other
things, the Incentive Plan provides that the exercise price of an Incentive
Stock Option may not be less than 100% of the fair market value of the Common
Stock on the date of grant and the term of any such Option may not exceed 10
years from the date of grant.
Stock Appreciation Rights. The Committee may grant Stock Appreciation
-------------------------
Rights either alone, or in conjunction with Stock Options, Performance Grants or
other Awards, either at the time of grant or by amendment thereafter. Each
Award of Stock Appreciation Rights granted under the Incentive Plan shall be
evidenced by an Award Instrument and shall comply with the certain terms and
conditions set forth in the Incentive Plan, and with such other terms and
conditions, including, but not limited to, restrictions upon the Award of Stock
Appreciation Rights or the Common Shares issuable upon exercise thereof, as the
Committee, in its discretion, shall establish.
Restricted Stock. Each Award of Restricted Stock under the Incentive
----------------
Plan shall be evidenced by an Award Instrument in such form as the Committee
shall prescribe from time to time in accordance with the Incentive Plan and
shall comply with the certain terms and conditions set forth in the Incentive
Plan, and with such other terms and conditions as the Committee, in its
discretion, shall establish.
Performance Grants. The Award of a Performance Grant to a participant
------------------
will entitle him to receive a specified amount determined by the Committee (the
"Actual Value"), if the terms and conditions specified herein and in the Award
are satisfied. Each Award of a Performance Grant shall be subject to certain
terms and conditions set forth in the Incentive Plan, and to such other terms
and conditions, including but not limited to, restrictions upon any cash, Common
Shares, other securities of the Company or property, other forms of payment, or
any combination thereof, issued in respect of the Performance Grant, as the
Committee, in its discretion, shall establish, and shall be embodied in an Award
Instrument in such form and substance as is determined by the Committee.
Deferral of Compensation. The Committee is authorized to determine
whether or not an Award shall be made in conjunction with deferral of the
participant's salary, bonus or other compensation, or any combination thereof,
and whether or not such deferred amounts may be (i) forfeited to the Company, to
other participants or any combination thereof, under certain circumstances
(which may include, but need not be limited to, certain types of termination of
employment or performance of services for the Company), (ii) subject to increase
or decrease in value based upon the attainment of or failure to attain,
respectively, certain performance measures, and/or (iii) credited with income
equivalents (which may include, but need not be limited to, interest, dividends
or other rates of return) until the date or dates of payment of the Award, if
any.
Deferred Payment of Awards. The Committee may specify that the
payment of all or any portion of cash, Common Shares, other securities of the
Company or property, any other form of payment, or any combination thereof,
under an Award shall be deferred until a later date. Deferrals shall be for
such periods or until the occurrence of such events, and upon such terms, as the
Committee shall determine in its discretion. Deferred payments of Awards may be
made by undertaking to make payment in the future based upon the performance of
certain investment equivalents (which may include, but need not be limited to,
government securities, Common Shares, other securities, property or
consideration, or any combination thereof), together with such additional
amounts of income equivalents (which may be compounded and may include, but need
not be limited to, interest, dividends or other rates of return, or any
combination thereof)
48
<PAGE>
as may accrue thereon until the date or dates of payment, such investment
equivalents and such additional amounts of income equivalents to be determined
by the Committee in its discretion.
Amendment or Substitution of Awards under the Incentive Plan. The
terms of any outstanding Award under the Incentive Plan may be amended from time
to time by the Committee in its discretion in any manner that it deems
appropriate (including, but not limited to, acceleration of the date of exercise
of any Award and/or payments thereunder); provided that no such amendment shall
adversely affect in a material manner any right of a participant under the Award
without his written consent, unless (except as otherwise provided in an Award
Instrument) the Committee determines in its discretion that there have occurred
or are about to occur significant changes in the participant's position, duties
or responsibilities, or significant changes in economic, legislative,
regulatory, tax, accounting or cost/benefit conditions which are determined by
the Committee in its discretion to have or to be expected to have a substantial
effect on the performance of the Company, or any Subsidiary, affiliate, division
or department thereof, on the Incentive Plan or on any Award under the Incentive
Plan. The Committee may, in its discretion, permit holders of Awards under the
Incentive Plan to surrender outstanding Awards in order to exercise or realize
rights under other Awards, or in exchange for the grant of new Awards, or
require holders of Awards to surrender outstanding Awards as a condition
precedent to the grant of new Awards under the Incentive Plan.
Death and Disability. Unless otherwise specifically provided in an
Award Instrument, if a participant to whom an Award has been granted under the
Incentive Plan shall die or suffer a total and permanent disability while
employed by the Company or any of its Subsidiaries, such Award may be exercised,
to the extent that the participant was entitled to do so at the termination of
employment, as set forth herein, by the participant, legal guardian of the
participant (unless such exercise would disqualify an option as an Incentive
Stock Option), a legatee or legatees of the participant under the participant's
last will, or by the participant's legal representatives or distributees,
whichever is applicable, at any time within one (1) year after the date of the
participant's death or total disability, but in no event later than the date on
which the Award terminates. Notwithstanding the above, if a participant whose
employment terminates by reason of total and permanent disability shall die, a
legatee or legatees of such participant under the participant's last will, or
the legal representative of such participant's estate, shall have the right to
exercise such Award to the extent that the participant was entitled to do so at
the termination of employment, only during the period ending one (1) year after
the date of the participant's termination of employment by reason of disability.
For purposes of the Incentive Plan, "total and permanent disability" has the
meaning set forth in Code Section 22(e)(3), or any successor provision thereto.
Termination of a Participant. For all purposes under the Incentive
Plan, the Committee shall determine whether a participant has terminated
employment with, or the performance of services for, the Company (or parent or
any Subsidiary of the Company).
Dilution and Other Adjustments. Unless otherwise specifically
provided in an Award Instrument, in the event of any change in the outstanding
Common Shares of the Company by reason of any stock split, dividend, split-up,
split-off, spin-off, recapitalization, merger, consolidation, rights offering,
reorganization, combination or exchange of shares, a sale by the Company of all
of its assets, any distribution to stockholders other than a normal cash
dividend, or other extraordinary or unusual event, if the Committee shall
determine, in its discretion, that such change equitably requires an adjustment
in the terms of any Award or the number of Common Shares available for Awards,
such adjustment may be made by the Committee and shall be final, conclusive and
binding for all purposes of the Incentive Plan.
In the event of the proposed dissolution or liquidation of the
Company, all outstanding Awards shall terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Committee. In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, all restrictions on any outstanding Awards shall
49
<PAGE>
lapse and participants shall be entitled to the full benefit of all such Awards
immediately prior to the closing date of such sale or merger, unless otherwise
provided by the Committee.
Designation of Beneficiary by Participant. Unless otherwise
specifically provided in an Award Instrument, a participant may name a
beneficiary to receive any payment to which he may be entitled in respect of any
Award under the Incentive Plan in the event of his death, on a written form to
be provided by and filed with the Committee, and in a manner determined by the
Committee in its discretion. The Committee has the right to review and approve
beneficiary designations. A participant may change his beneficiary from time to
time in the same manner, unless such participant has made an irrevocable
designation. Any designation of beneficiary under the Incentive Plan (to the
extent it is valid and enforceable under applicable law) shall be controlling
over any other disposition, testamentary or otherwise, as determined by the
Committee in its discretion. If no designated beneficiary survives the
participant and is living on the date on which any amount becomes payable to
such a participant's beneficiary, such payment will be made to the legal
representatives of the participant's estate, and the term "beneficiary" as used
in the Incentive Plan shall be deemed to include such person or persons. If
there are any questions as to the legal right of any beneficiary to receive a
distribution under the Incentive Plan, the Committee in its discretion may
determine that the amount in question be paid to the legal representatives of
the estate of the participant, in which event the Company, the Board and the
Committee and the members thereof, will have no further liability to anyone with
respect to such amount.
Financial Assistance. Unless otherwise specifically provided in an
Award Instrument, if the Committee determines that such action is advisable, the
Company may assist any person to whom an Award has been granted in obtaining
financing from the Company (or under any program of the Company approved
pursuant to applicable law), or from a bank or other third party, on such terms
as are determined by the Committee, and in such amount as is required to
accomplish the purposes of the Incentive Plan, including, but not limited to, to
permit the exercise of an Award, the participation therein, and/or the payment
of any taxes in respect thereof. Such assistance may take any form that the
Committee deems appropriate, including, but not limited to, a direct loan from
the Company, a guarantee of the obligation by the Company, or the maintenance by
the Company of deposits with such bank or third party.
Withholding Taxes. The Company is granted the right to deduct from
any payment made under the Incentive Plan any federal, state, local or foreign
income or other taxes required by law to be withheld with respect to such
payment. It shall be a condition to the obligation of the Company to issue
Common Shares, other securities of the Company or property, other securities or
property, or other forms of payment, or any combination thereof, upon exercise,
settlement or payment of any Award under the Incentive Plan, that the
participant (or any beneficiary or person entitled to act) pay to the Company,
upon its demand, such amount as may be required by the Company for the purpose
of satisfying any liability to withhold federal, state, local or foreign income
or other taxes. If the amount requested is not paid, the Company may refuse to
issue Common Shares, other securities of the Company or property, other
securities or property, other forms of payment, or any combination thereof.
Notwithstanding anything in the Incentive Plan to the contrary, the Committee
may, in its discretion, permit an eligible participant (or any beneficiary or
person entitled to act) to elect to pay a portion or all of the amount requested
by the Company for such taxes with respect to such Award, at such time and in
such manner as the Committee shall deem to be appropriate (including, but not
limited to, by authorizing the Company to withhold, or agreeing to surrender to
the Company on or about the date such tax liability is determinable, Common
Shares, other securities of the Company or property, other securities or
property, other forms of payment, or any combination thereof, owned by such
person or a portion of such forms of payment that would otherwise be
distributed, or have been distributed, as the case may be, pursuant to such
Award to such person, having a fair market value equal to the amount of such
taxes).
Incentive Plan Amendment or Suspension. The Incentive Plan may be
amended or suspended in whole or in part at any time and from time to time by
the Board, but no amendment shall be effective unless
50
<PAGE>
and until the same is approved by stockholders of the Company where the failure
to obtain such approval would adversely affect the compliance of the Incentive
Plan with Rule 16b-3 under the Exchange Act or with other applicable law. No
amendment of the Incentive Plan shall adversely affect in a material manner any
right of any participant with respect to any Award theretofore granted without
such participant's written consent.
Incentive Plan Termination. This Incentive Plan terminates upon the
earlier of the following dates or events to occur: (a) upon the adoption of a
resolution of the Board terminating the Incentive Plan; or (b) ten years from
the date the Incentive Plan is initially approved and adopted by the
stockholders of the Company (October 18, 2005); provided, however, that the
Board may, prior to the expiration of such ten-year period, extend the term of
the Incentive Plan for an additional period of up to five years for the grant of
Awards other than Incentive Stock Options. No termination of the Incentive Plan
shall materially alter or impair any of the rights or obligations of any person,
without his consent, under any Award theretofore granted under the Incentive
Plan, except that subsequent to termination of the Incentive Plan, the Committee
may make those amendments permitted under the plan.
Federal Income Tax Consequences. The following is a brief summary of
the principal federal income tax consequences to participants of the grant and
exercise of certain Awards under the Incentive Plan. This summary does not
purport to address all aspects of federal income taxes that may affect
participants in light of their individual circumstances. Moreover, this summary
is based upon the current provisions of the Code, Treasury Regulations
(including proposed Treasury Regulations) promulgated thereunder, rulings,
administrative pronouncements and court interpretations thereof in effect as of
the date hereof. It is possible that future legislative, regulatory, judicial
or administrative changes or interpretations could modify such tax consequences
and the conclusions reached below and that any such change could apply
retroactively. This summary applies only to participants who acquire options
under the Incentive Plan in connection with their employment by the Company or
one of its Affiliates and exercise such options during their lifetimes. Because
federal income tax consequences will vary as a result of individual
circumstances, each option holder is urged to consult a tax advisor with respect
to the tax consequences (including those under state and local tax laws) of the
grant and exercise of stock options under the Incentive Plan. Moreover, the
following summary relates only to option holders' federal income tax treatment.
The state, local and foreign tax consequences may be substantially different
from the federal income tax consequences described herein.
Taxation of Ordinary Income and Capital Gains. The ordinary income of
----------------------------------------------
an individual taxpayer currently is generally subject to a maximum federal
income tax rate of 39.6%, while long-term capital gains of an individual
currently are generally subject to a maximum tax rate of 28%. The effective
marginal rates of some taxpayers may be higher to the extent that they are
subject to the phase-out of personal exemptions or the reduction of itemized
deductions that occur at certain income levels. The classification of income as
capital or ordinary is also relevant for taxpayers who have capital losses or
investment interest.
Restricted Stock. A participant who is granted restricted stock may,
-----------------
if the restrictions constitute a "substantial risk of forfeiture" as defined in
Section 83 of the Code, make a Section 83(b) election to have the grant taxed as
compensation income at the date of grant in an amount equal to the fair market
value on the date of grant of the shares subject to such award less any amount
paid by the participant for the shares. If the participant does not make a
timely Section 83(b) election, the grant is generally taxed to him or her as
compensation income at the date(s) that the restrictions imposed on the shares
expire, in an amount on each such date equal to the fair market value on such
date of the shares as to which the restrictions expire less any amount paid by
the participant for the shares. Unless a participant makes a timely Section
83(b) election, any dividends paid on the shares subject to the award while such
shares remain subject to the restrictions are compensation income to the
participant. Provided such compensation income is, or is deemed to be, included
in the holder's gross income, the Company is generally entitled to a deduction
for any compensation income taxed to the participant.
51
<PAGE>
Upon a participant's sale of shares received pursuant to a grant of
restricted stock, the difference between the selling price and the tax basis of
the shares (generally, if a timely Section 83(b) election is made, the fair
market value of the shares on the date of grant or, if a timely Section 83(b)
election is not made, the fair market value of the shares on the date(s) on
which the restrictions on the shares expire) is a capital gain or loss (long- or
short-term, depending on the participant's holding period for the shares). A
participant's holding period beings on the date of grant if a timely Section
83(b) election is made or on the date(s) on which the restrictions on the shares
expire if no timely Section 83(b) election is made.
An exception to the foregoing treatment may occur in the event that
the participant is subject to Section 16(b) of the Exchange Act. In certain
circumstances, the fair market value of particular shares may be determined, and
the participant's holding period for such shares may commence, on a date other
than the date of grant or the date on which the restrictions on such shares
lapse unless the participant makes a timely Section 83(b) election with respect
to such shares.
Options. Under the Incentive Plan, a participant may be granted
--------
options that qualify as incentive stock options under Section 422 of the Code
("ISO") or options that do not so qualify (nonqualified options or "NQOs") or
both. Generally, the tax consequences to an option holder with respect to ISOs
will be different from the tax consequences with respect to NQOs, as more fully
explained below. In addition, the discussion below assumes that at the time an
NQO is exercised, the shares received are either fully vested or the holder
makes a timely election under Section 83(b).
Nonqualified Options. The holder of an NQO does not recognize
---------------------
taxable income upon the grant of the NQO, nor is the Company entitled, for
income tax purposes, to a deduction upon such a grant. The option holder
recognizes ordinary compensation income (subject to withholding taxes) on the
exercise of an NQO equal to the excess of the fair market value of the shares
received on exercise over the option exercise price. The fair market value of
the shares is measured on the exercise date. If such taxable compensation is
properly included in the holder's gross income by the holder or is deemed to
have been properly included as a result of the timely satisfaction of certain
reporting requirements by the Company, the Company should be entitled to a
deduction in computing its federal income taxes in an amount equal to the
ordinary income recognized by the option holder on the exercise of the NQO.
If an option holder sells shares acquired pursuant to the exercise of an
NQO, the option holder will recognize capital gain or loss equal to the
difference between the selling price of the shares and their fair market value
on the exercise date. The capital gain is long-term or short-term, depending on
whether the option holder has held the option shares for more than one year
after the exercise date. The Company is not entitled to any deduction with
respect to any capital gain recognized by the option holder.
The previous paragraph assumes, for simplicity, that the option holder's
tax basis in the option shares sold is equal to the fair market value of such
shares on the exercise date. While this would be the case if the option holder
had paid the exercise price for such shares in cash, it would not normally be
the case if the option holder paid the exercise price in whole or in part by
delivery of other Company Common Stock. In the latter case, the option holder's
tax basis in, and holding period for, the previously acquired shares surrendered
carries over to an equal number of the option shares received on a share-for-
share basis. Shares received in excess of the shares surrendered have a tax
basis equal to the fair market value of those received shares on the exercise
date and the option holder's holding period for such received shares begins on
the exercise date. The option holder's capital gain or loss on a sale of option
shares would be determined based on the option holder's actual basis in the
shares sold and the long-term or short-term nature of any gain would be based on
the option holder's actual holding period.
Incentive Stock Options. The holder of an ISO does not realize
------------------------
taxable income upon the grant or exercise of the ISO and the Company is not
entitled to any deduction with respect to such grant or exercise.
52
<PAGE>
However, upon exercise of an ISO, the excess of the fair market value on the
exercise date of the shares acquired pursuant to the exercise of the ISO over
the exercise price will be included in the option holder's alternative minimum
taxable income and may cause or increase a liability for alternative minimum
tax. Such alternative minimum tax may be payable even though the option holder
receives no cash upon the exercise of the ISO with which to pay such tax.
The income tax treatment of any gain or loss realized upon an option
holder's disposition of option shares depends on the timing of the disposition.
If the option shares have been held for at least one year and if at least two
years have elapsed since the date of grant of the ISO (the "Required Holding
Periods"), then the option holder recognizes (i) long-term capital gain to the
extent that the selling price exceeds the exercise price or (ii) long-term
capital loss to the extent that the exercise price exceeds the selling price.
In either case, no deduction is allowed to the Company.
If an option holder disposes of option shares before the expiration of the
Required Holding Period ( "Disqualifying Disposition"), then (i) if the selling
price exceeds the fair market value of the option shares on the date the ISO was
exercised, the excess of such fair market value over the exercise price is
taxable to the option holder as ordinary income and the excess of the selling
price over such fair market value is taxable to the option holder as capital
gain (long-term or short-term depending on whether the option holder has held
the shares for more than one year), (ii) if the selling price exceeds the
exercise price but does not exceed the fair market value of the option shares on
the date the ISO was exercised, the excess of the selling price over the
exercise price is taxable to the option holder as ordinary income and (iii) if
the selling price is less than the exercise price, the difference is treated as
capital loss to the option holder. If, however, the disposition is a sale to a
related party (as defined in Section 267(b) of the Code to include, for example,
a member of the option holder's family or a corporation majority-owned by the
option holder) or a gift, then the ordinary income recognized by the option
holder will not be less than the excess of the fair market value of the option
shares on the exercise date over the option exercise price. In each case, the
Company is entitled to a deduction equal to the amount of ordinary income (but
not capital gain) recognized by the option holder on the Disqualifying
Disposition, provided such taxable amount is, or is deemed to be, included in
the gross income of the option holder.
The previous paragraphs assume, for simplicity, that the option holder's
tax basis in the option shares disposed of is equal to the option exercise
price. While this would be the case if the option holder had paid the option
exercise price for such shares in cash, it would not normally be the case if the
option holder paid the option exercise price in whole or in part by delivery of
the Common Stock. If an option holder delivers previously acquired Common Stock
(other than shares acquired upon exercise of an ISO and not held for the
Required Holding Periods) in payment of all or part of the option exercise price
of an ISO, the option holder's tax basis in, and holding period for, the
previously acquired shares surrendered carries over to an equal number of the
option shares received (for capital gain purposes, but not for purposes of
determining whether a Disqualifying Disposition occurs) on a share-for-share
basis. Shares received in excess of the shares surrendered have a tax basis
equal to the amount paid (if any) by the option holder to exercise the ISO in
addition to the previously acquired shares, and such shares' holding period
begins on the exercise date. Proposed regulations provided that where an ISO is
exercised using previously acquired shares, a later Disqualifying Disposition of
the shares received will be deemed to have been a disposition of the shares
having the lowest basis first. The option holder's capital gain or loss on a
sale of option shares would be determined based on the option holder's actual
basis in such shares (increased by any ordinary income on such disposition) and
the long-term or short-term nature of any gain would be based on the option
holder's actual holding period.
If an option holder pays the exercise price of an ISO in whole or in part
with previously acquired Common Stock that was acquired upon the exercise of an
ISO and that has not been held for the Required Holding Periods, the option
holder will recognize ordinary income (but not capital gain) with respect to the
53
<PAGE>
surrendered shares under the rules applicable to Disqualifying Dispositions.
The Company will be entitled to a corresponding deduction. The option holder's
basis in the shares received in exchange for the shares surrendered will be
increased by the amount of ordinary income the option holder recognizes.
Under the Incentive Plan, the Committee may allow options to be exercised
after the termination of an option holder's employment. However, if an ISO is
exercised more than three months after the termination of an option holder's
employment other than because of the option holder's death (or more than one
year after the termination of an option holder's employment because of
disability) the option holder will be taxed on the exercise as if the ISO were
an NQO.
Effect of Section 16(b) of the Securities Exchange Act of 1934. The
---------------------------------------------------------------
tax consequences to an option holder of the exercise of either an ISO or an NQO
may vary from those described above if the option holder is a person who is
subject to liability under Section 16(b) of the Exchange Act (typically,
officers, directors and major shareholders of a company) for certain dealings in
the Common Stock (a "16(b) Person"). In general, an option holder who is a 16(b)
Person will not recognize income on receipt of the Common Stock until such
holder is no longer subject to a liability under Section 16(b) with respect to
the disposition of such Common Stock. However, the option holder may elect to
be taxed based on the fair market value of the shares on the exercise date (and
have a holding period beginning on the exercise date) by filing an election
under Section 83(b) of the Code within 30 days of the exercise date.
Other Awards. Because other awards may take many forms, as determined
-------------
by the Committee, it is not possible to describe generally what their tax
treatment will be.
Effect of Section 162(m) of the Internal Revenue Code. Starting with
------------------------------------------------------
tax years beginning after January 1, 1994, a publicly held corporation may not
deduct compensation paid to its CEO and its four other most-highly compensated
officers in excess of $1 million per officer during a corporate taxable year
except to the extent such amounts in excess of $1 million qualify for an
exception to this limitation. To qualify for this exception, such amounts must
be determined on the basis of preestablished, objective, nondiscretionary
formulae that meet certain shareholder and outside director approval
requirements. For this purpose, "compensation" is broadly defined and would
include, for example, income realized on the exercise of non-qualified options
or SARs, disqualifying dispositions of ISO shares, and the receipt (if a timely
Section 83(b) election is made) or vesting (if no Section 83(b) election is
made) of restricted stock. Thus, to the extent awards granted to the Chief
Executive Officer and the four other most highly compensated officers do not
qualify for the performance based-exception, the Company's deductions with
respect to such awards may be subject to the $1 million per executive deduction
limitation.
Incentive Plan Benefits. The following table sets forth the number of
nonqualified stock options that have been granted under the Incentive Plan as of
the date of the Proxy Statement to (i) the Chief Executive Officer, (ii) all
current executive officers as a group, (iii) all current Directors who are not
executive officers as a group, and (iv) all employees, including all current
officers who are not executive officers, as a group.
54
<PAGE>
1995 LONG-TERM PERFORMANCE INCENTIVE PLAN
<TABLE>
<CAPTION>
NUMBER OF
NONQUALIFIED STOCK
NAME AND POSITION OPTIONS GRANTED
- ---------------------- -------------------
<S> <C>
Sean E. Reilly, President and Chief Executive Officer 314,539
Executive Group (5 persons) 746,987
Non-Executive Director Group --
Non-Executive Officer Employee Group 63,200
</TABLE>
No other Awards have been granted under the Incentive Plan to date. The
type or number of future Awards that will be granted under the Incentive Plan to
the above-named individuals and groups in the future is not determinable at this
time.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This Compensation Committee report shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act or under the Exchange Act,
except to the extent that the Company specifically incorporates this information
by reference, and shall not otherwise be deemed filed under such Acts.
The following report has been submitted by the Compensation Committee of
the Board of Directors:
The Compensation Committee was established in connection with the Company's
initial public offering in October 1995. The Compensation Committee is
authorized to make recommendations to the Board of Directors with respect to
general employee benefit levels, determine the compensation and benefits of the
Company's officers and key employees and administer the Company's stock option
plans. At the time of its creation, Messrs. J.R. Holland, Jr. and William K.
Luby were appointed to the Committee. In February 1996, Mr. Daniel L. Shimer
was added to the Committee. None of the members of the Committee is an officer
or employee of the Company.
At the time of the Heartland Transaction, the Company's existing executive
officers (Messrs. Sternberg, Reilly and Norris) all entered into employment
agreements with the Company. Such employment agreements were based in large
part upon the terms of each executive's then existing employment agreement with
Old Wireless One, each of which was executed in April 1995 at the time of Old
Wireless One's sale of preferred stock and warrants to an investor group led by
CMCC. The terms of such agreements were the result of arms-length negotiations
between each executive and CMCC, as the principal investors in Old Wireless One.
The terms of the new agreements were subject to the approval of the Compensation
Committee.
In general, these employment agreements establish the base salary for each
executive during the term of the agreement, which is subject to adjustment based
upon increases in the Consumers Price Index. Further, the agreements establish
that such executives are eligible to receive performance bonuses if granted by
the Compensation Committee in its sole discretion based upon the operating
performance of the Company. In determining whether to grant bonuses to these
executives, the Compensation Committee intends to consider the financial
condition and operational performance of the Company during the last completed
fiscal year and
55
<PAGE>
the specific contributions of the individual executive officer to the Company's
performance and the achievement of strategic business objectives.
The Company's remaining executive officers, Messrs. Alton C. Rye and J.
Robert Gary, were each hired by the Company in September 1995. The compensation
arrangements for such executives were approved by the full Board upon the
recommendation of the Compensation Committee. The salary levels for such
executives were determined by the Compensation Committee based upon a review of
salaries for similar positions at comparable companies and over-all competitive
and market conditions. The compensation arrangements for such executives will
be reviewed annually by the Compensation Committee.
At the time of the Heartland Transaction, the Company adopted its Incentive
Plan, which authorizes the granting of options or other equity-based awards to
eligible employees with respect to an aggregate of 1,300,000 shares of Common
Stock. At such time, the Company assumed on the same terms and conditions the
nonqualified options previously issued to Messrs. Sternberg, Reilly and Norris
with respect to shares of common stock of Old Wireless One. As a result of the
Heartland Transaction, Old Wireless One became a wholly owned subsidiary of the
Company. In addition, the Compensation Committee approved the issuance of
nonqualified stock options for the following number of shares of Common Stock
with an exercise price of the initial public offering price of the Common Stock
to the following executive officers: Alton C. Rye -- 30,000 shares and J.
Robert Gary -- 25,000 shares. In determining the relative number of options
awarded, the Compensation Committee considered the position and responsibilities
of such executive. Such options were awarded as part of the overall
compensation package offered to Messrs. Rye and Gary at the time of their
hiring.
For the immediate future, the Compensation Committee intends to rely on
options granted under the Incentive Plan as a means to compensate key members of
management while the Company uses its reserves to develop its operating systems.
The Committee believes that stock options are a cost-effective method of
providing management with long-term compensation. In addition, the Committee
believes that stock options are a particularly appropriate long-term incentive
since they align the interests of the optionee with those of the stockholders by
providing value to the optionee tied directly to stock price increases. In the
future, the Compensation Committee intends also to rely on cash bonuses as a
means to compensate key members of management.
The foregoing report has been approved by all members of the Compensation
Committee.
J. R. Holland, Jr., Chairman
William K. Luby
Daniel L. Shimer
56
<PAGE>
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder
return since the Common Stock became publicly traded on October 19, 1995 with
the Nasdaq Total Return Index and an index of certain companies selected by the
Company as comparative to the Company in that each is a wireless cable company.
The graph assumes that the value of the investment in the Company's Common Stock
at its initial public offering price of $10.50 per share and each index was
$100.00 on October 19, 1995.
Comparison of the Company's Common Stock,
The Nasdaq Total Return Index and a Peer Group Index(1)
[Performance Chart Appears Here]
<TABLE>
<CAPTION>
October 19, 1995 December 29, 1995
---------------- -----------------
<S> <C> <C>
Wireless One, Inc. 100 157
Nasdaq Total Return Index 100 100
Peer Group Index 100 95
</TABLE>
- -----------------------
(1) The companies selected to form the Company's industry peer group index are
American Telecasting Development, Inc., CAI Wireless Systems, Inc.,
Heartland Wireless Communications, Inc. and People's Choice TV Corp. Total
returns are based on market capitalization.
57
<PAGE>
APPROVAL OF ISSUANCE OF COMMON STOCK
The Company proposes to issue up to an additional 3,553,333 shares of
Common Stock in connection with the Merger. Upon consummation of the Merger,
as a result of the issuance of shares of the Company's Common Stock, (1)
shareholders of TruVision will own up to 21.7% of the Company's Common Stock,
(2) CMCC (curently a holder of 17.7% of the Company's Common Stock), together
with its affiliates, will own 23.4% of the Company's Common Stock, and (3) Mr.
Burkhalter and MWTV will become the beneficial owners of more than 5% of the
Company's Common Stock. See "The Merger."
A vote for this proposal would permit the Company to consummate the Merger
in accordance with the terms of the Merger Agreement. The Merger Agreement is
subject to certain conditions, including: (i) the receipt of the approval of
holders of a majority of Common Stock, (ii) the receipt of certain third party
consent and approvals, (iii) the absence of any material adverse change in the
business of TruVision and (iv) other customary conditions. Accordingly, there
is no assurance that the Merger will be consummated. If the Merger is not
consummated and this proposal is approved, the Company will not issue any
additional Common Stock.
CMCC, Baseball Partners, Heartland Wireless Communications, Inc., Hans J.
Sternberg, Sean Reilly, Premier Venture Capital Corporation and Lamar
Advertising are parties to the Voting Agreement, pursuant to which they have
agreed to vote their shares to approve and adopt actions related to the
consummation of the Merger. Collectively, the parties to the Voting Agreement
own 52.7% of the Common Stock. Accordingly, this proposal will be adopted by the
Company if the shares owned by such parties are voted in accordance with the
Voting Agreement. Attached as Annex E are pro forma financial statements of the
Company which give effect to the issuance of the Common Stock and the
consummation of the Merger.
Proxies will be voted for and against approval of this proposal in
accordance with the specification marked thereon, and will be noted in favor of
approval if no specification is made. Approval requires a favorable vote of the
holders of the majority of the shares of Common Stock present at the Annual
Meeting in person or by proxy, assuming a quorum. Neither the Delaware General
Corporation Law nor the Company's Certificate of Incorporation provides that
stockholders of the Company have cumulative voting rights. Stockholders of the
Company have no preemptive rights.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
APPROVAL OF THE ADOPTION OF THE COMPANY'S
1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
As of July 1, 1996, the Board of Directors adopted a resolution to
terminate the Company's 1995 Directors' Option Plan (the "Old Plan") and to
adopt, subject to stockholder approval, the Company's 1996 Non-Employee
Directors' Stock Option Plan (the "New Plan"). The New Plan, if authorized, will
authorize the granting of options on shares of Common Stock based on a set
formula.
The material difference between the Old Plan and the New Plan is that under
the Old Plan, the Committee determined, among other items, to whom options were
granted, the number of shares subject to each option, the number of options
awarded and the time at which each option was granted. Under the New Plan, each
of these items will be non-discretionary and fixed upon the adoption of the New
Plan.
The table set forth below shows the number of shares of Common Stock with
respect to which options will be awarded annually under the New Plan. The
options to be issued will have an exercise price of 100% of the fair market
value of the Company's Common Stock at the time the options are granted.
58
<PAGE>
<TABLE>
<CAPTION>
NEW PLAN BENEFITS
1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
ANNUAL NUMBER OF SHARES
OF COMMON STOCK UPON WHICH OPTIONS
GROUP ARE GRANTED
------- ------------------------
<S> <C>
Outside Director Group 10,000
</TABLE>
The purpose in adopting the New Plan is to permit all of the non-employee
Directors of the Company to participate in the Company's Option Plan. Under the
Old Plan, certain non-employee Directors of the Company were disqualified from
receiving options. The Company believes that it is important to attract and
retain the services of persons serving as non-employee directors of the Company
and to provide incentives for such persons to exert maximum efforts to promote
the success of the Company. The Board of Directors accordingly recommends that
stockholders vote FOR approval of the New Plan.
The following is a description of the proposed New Plan. The description
which follows is qualified in its entirety by the complete text of the New Plan
attached as Annex C hereto.
Shares Subject to the New Plan. The total number of shares (the "Shares")
of Common Stock for which options may be granted under the New Plan shall not
exceed 100,000 in the aggregate, subject to adjustment. Within the foregoing
limitations, Shares for which options have been granted pursuant to the New Plan
but which options have lapsed or otherwise terminated shall become available for
the grant of additional options.
Administration of New Plan. The New Plan shall be administered by the
Board of Directors. The Board of Directors shall have the power to construe the
New Plan, to determine all questions arising thereunder and to adopt and amend
such rules and regulations for the administration of the New Plan as it may deem
desirable.
Eligibility; Grant of Option. Each director of the Company who is not, and
has not been during the immediately preceding 12-month period, an officer or
employee of the Company or any subsidiary of the Company (a "Participant") shall
automatically be a participant in the New Plan. Options will be granted in the
following manner: (a) each Participant who is in office on the Effective Plan
Date (as hereinafter defined) shall, on the Effective Plan Date, automatically
be granted an option to acquire 4,000 Shares under the New Plan; (b) each
Participant who is in office on November 15, 1996, but who was not in office on
the Effective Date, shall, on January 1, 1997, automatically be granted an
option to acquire 2,000 Shares under the New Plan; (c) each Participant who is
in office on November 15 of any year (commencing with November 15, 1997) shall,
on the immediately succeeding January 1, automatically be granted an option to
acquire 2,000 Shares under the New Plan.
Option Plan. Each option granted under the New Plan shall be evidenced by
an option agreement (the "Agreement") duly executed on behalf of the Company and
by the Participant to whom such option is granted, which Agreement may but need
not be identical and which shall (i) comply with and be subject to the terms and
conditions of the New Plan and (ii) provide that the Participant agrees to
continue to serve as a director of the Company during the term for which he or
she was elected. Any Agreement may contain such other terms, provisions and
conditions not inconsistent with the New Plan as may be determined by the Board
of Directors. No option shall be deemed granted within the meaning of the New
Plan and no purported grant of any option shall be effective until such
Agreement
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shall have been duly executed on behalf of the Company and the Participant to
whom the option is to be granted.
Option Exercise Price. The option exercise price for an option granted
under the New Plan shall be the fair market value of the Shares covered by the
option on the date on which such option is granted or, if such date is not a
business day on which Shares are traded, the next immediately preceding business
day (the "Pricing Date"). For purposes hereof, the fair market value of the
Shares covered by an option shall be the average of the high and low sales
prices of the Shares on the Pricing Date as reported on the National Association
of Securities Dealers, Inc. Automated Quotation System - National Market System
or on the principal national securities exchange on which the Shares are then
listed for trading.
Time and Manner of Exercise of Option. (a) Options granted under the New
Plan shall become exercisable in installments of 25 percent upon each
anniversary of the date of grant; (b) to the extent that the right to exercise
an option has accrued and is in effect, the option may be exercised from time to
time, by giving written notice, signed by the person or persons exercising the
option, to the Company, stating the number of Shares with respect to which the
option is being exercised, accompanied by payment in full for such Shares in
cash, check, delivery of Shares or other method determined by the Board of
Directors; (c) upon exercise of the option, delivery of a certificate for fully
paid and non-assessable Shares shall be made at the principal office of the
Company to the person or persons exercising the option an soon as practicable
(but in no event more than 30 days) after the date of receipt of the notice of
exercise by the Company, or at such time, place and manner as may be agreed upon
by the Company and the person or persons exercising the option.
Term of Options. Each option shall expire seven years from the date of the
granting thereof, but shall be subject to earlier termination as follows: (a)
the event of the death of a Participant, the option granted to such Participant
may be exercised, to the extent exercisable on the date of death by the estate
of such Participant, or by any person or persons who acquired the right to
exercise such option by will or by the laws of descent and distribution. Such
option may be exercised at any time within 180 days after the date of each such
Participant or prior to the date on which the option expires by its terms,
whichever is earlier; (b) in the event that a Participant ceases to be a
director of the Company, other than by reason of his or her death, the option
granted to such Participant may be exercised, to the extent exercisable on the
date the Participant ceases to be a director, for a period of 30 days after such
date, or prior to the date on which the option expires by its terms, whichever
is earlier.
Merger, Consolidation, Sale of Assets, Etc., Resulting in Changing of
Control. (a) In the event of a Change in Control (as hereinafter defined), an
option granted to a Participant shall become fully exercisable if, within one
year of such Change in Control, such Participant shall cease for any reason to
be a member of the Board of Directors. For purposes hereof, a Change in Control
of the Company shall be deemed to have occurred if (i) there shall be
consummated (x) any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which shares of
common stock of the Company would be converted into cash, securities or other
property, other than a merger of the Company in which the holders of Common
Stock of the Company immediately prior to the merger have the same proportionate
ownership of common stock of the surviving corporation immediately after the
merger, or (y) 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 (ii) the stockholders of the Company approve any plan or
proposal for the liquidation or dissolution of the Company; or (iii) any person
(as such term in used in Sections 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), shall become the beneficial
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owner (within the meaning of Rule 13d-3 under the Exchange Act) of 30% or more
of the Company's outstanding Common Stock; or (iv) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the entire Board of Director shall cease for any reason to constitute a majority
thereof unless the election, or the nomination for election by the Company's
stockholders, of each now director was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of the
period; any exercise of an option permitted shall be made within 180 days of
the-relevant Participant's termination as a director of the Company.
Options Not Transferable. The right of any Participant to exercise an
option granted to him or her under the New Plan shall not be assignable or
transferable by such Participant otherwise than by will or the laws of descent
and distribution, and any such option shall be exercisable during the lifetime
of such Participant only by him or her.
No Rights as Stockholder Until Exercise. Neither the recipient of an
option under the New Plan nor his or her successors in interest shall have any
rights as a stockholder of the Company with respect to any Shares subject to an
option granted to such person until such person becomes a holder of record of
such Shares.
Adjustments Upon Changes in Capitalization. In the event that the
outstanding shares of the Common Stock are changed into or exchanged for a
different number or kind of shares or other securities of the Company or of
another corporation by reason of any reorganization, merger, consolidation,
recapitalization, reclassification, stock splitup, combination of shares or
dividend payable in capital stock, appropriate adjustment shall to made in the
number and kind of shares subject to and reserved for issuance or transfer under
the New Plan and as to which outstanding options (or portions thereof then
unexercised) shall be exercisable, to the end that the proportionate interest of
Participants and prospective Participants, with respect to options theretofore
granted and to be granted, shall be maintained as before the occurrence of such
event. Such adjustment in outstanding options shall be made without change in
the total price applicable to the unexercised portion of such options, but with
a corresponding adjustment in the option price per share.
Restrictions on Issue of Shares. Anything contained in this New Plan to
the contrary notwithstanding, the Company may delay the issuance of Shares
covered by the exercise of any option and the delivery of a certificate for such
Shares until one of the following conditions shall be satisfied: (i) Shares with
respect to which an option has been exercised are at the time of the issuance or
transfer of such Shares effectively registered under applicable federal
securities laws now in force or hereafter amended; or (ii) counsel for the
Company shall have given an opinion, which opinion shall not be unreasonably
conditioned or withheld, that such Shares are exempt from the registration under
applicable federal securities laws now in force or hereafter amended.
It is intended that all exercises of options shall be effective.
Accordingly, the Company shall use its best efforts to bring about compliance
with the above conditions within a reasonable time, except that the Company
shall be under no obligation to cause a registration statement or a post-
effective amendment to any registration statement to be prepared at its expense
solely for the purpose of covering the issuance or transfer from the Company's
treasury of Shares in respect of which any option may be exercised.
Purchase for Investment. Unless the Shares to be issued upon exercise of
an option granted under the New Plan have been effectively registered under the
Securities Act, as now in force or hereafter amended, the Company shall be under
no obligation to issue or transfer any Shares covered by any option unless the
person or persons who exercise such option, in whole or in part, shall give
a
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written representation and undertaking to the Company, which is satisfactory in
form and scope to counsel to the Company and upon which, in the opinion of such
counsel, the Company may reasonably rely, that he or she in acquiring the Shares
issued or transferred to him or her pursuant to such exercise of the option for
his or her own account as an investment and not with a view to, or for sale in
connection with, the distribution for any such Shares, and that he or she will
make no transfer of the same except in compliance with any rules and regulations
in force at the time of such transfer under the Securities Act, or any other
applicable law, and that if Shares are issued or transferred without such
registration a legend to such effect may be endorsed upon the certificates
representing the Shares.
Effective Date. The effective date (the "Effective Plan Date") of this
New Plan shall be the date on which the New Plan is approved by the stockholders
of the Company.
Expenses of the New Plan. All costs and expenses of the adoption and
administration of the New Plan shall be borne by the Company and none of such
expenses shall be charged to any Participant.
Termination and Amendment of New Plan. Unless sooner terminated as
herein provided, the New Plan shall terminate ten years from the Effective Date.
The Board of Directors may at any time terminate the New Plan or make such
modification or amendment thereof as it deems advisable; provided, however, that
the New Plan may not be amended more than once every six months, other than to
comport with changes in the Internal Revenue Code of 1986, as amended, the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder; and provided further, however, that, except as provided in Section
12, the Board of Directors may not, without the approval of the stockholders of
the Company, increase the maximum aggregate number of shares for which options
may be granted under the New Plan or the number of Shares for which an option
may be granted to any Participant. Termination or any modification or amendment
of the New Plan shall not, without the consent of a Participant, affect his or
her rights under an option previously granted to him or her.
Federal Income Tax Consequences. The following is a brief summary of the
principal federal income tax consequences to participants of the grant and
exercise of certain options under the New Plan. This summary does not purport
to address all aspects of federal income taxes that may affect participants in
light of their individual circumstances. Moreover, this summary is based upon
the current provisions of the Code, Treasury Regulations (including proposed
Treasury Regulations) promulgated thereunder, rulings, administrative
pronouncements and court interpretations thereof in effect as of the date
hereof. It is possible that future legislative, regulatory, judicial or
administrative changes or interpretations could modify such tax consequences and
the conclusions reached below and that any such change could apply
retroactively. This summary applies only to participants who acquire options
under the New Plan in connection with their service as a member of the Board of
Directors and exercise such options during their lifetimes. Because federal
income tax consequences will vary as a result of individual circumstances, each
option holder is urged to consult a tax advisor with respect to the tax
consequences (including those under state and local tax laws) of the grant and
exercise of stock options under the New Plan. Moreover, the following summary
relates only to option holders' federal income tax treatment. The state, local
and foreign tax consequences may be substantially different from the federal
income tax consequences described herein.
Taxation of Ordinary Income and Capital Gains. The ordinary income of an
----------------------------------------------
individual taxpayer currently is generally subject to a maximum federal income
tax rate of 39.6%, while long-term capital gains of an individual currently are
generally subject to a maximum tax rate of 28%. The effective marginal rates of
some taxpayers may be higher to the extent that they are subject to the phase-
out of personal exemptions or the reduction of itemized deductions that occur at
certain income levels. The
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classification of income as capital or ordinary is also relevant for taxpayers
who have capital losses or investment interest.
Nonqualified Options. Under the New Plan, a participant may only be
---------------------
granted options that do not qualify as incentive stock options under Section 422
of the Code (nonqualified options or "NQOs"). The holder of an NQO does not
recognize taxable income upon the grant of the NQO, nor is the Company entitled,
for income tax purposes, to a deduction upon such a grant. The option holder
recognizes ordinary compensation income (subject to withholding taxes) on the
exercise of an NQO equal to the excess of the fair market value of the shares
received on exercise over the option exercise price. The fair market value of
the shares is measured on the exercise date. If such taxable compensation is
properly included in the holder's gross income by the holder or is deemed to
have been properly included as a result of the timely satisfaction of certain
reporting requirements by the Company, the Company should be entitled to a
deduction in computing its federal income taxes in an amount equal to the
ordinary income recognized by the option holder on the exercise of the NQO.
If an option holder sells shares acquired pursuant to the exercise of an
NQO, the option holder will recognize capital gain or loss equal to the
difference between the selling price of the shares and their fair market value
on the exercise date. The capital gain is long-term or short-term, depending on
whether the option holder has held the option shares for more than one year
after the exercise date. The Company is not entitled to any deduction with
respect to any capital gain recognized by the option holder.
The previous paragraph assumes, for simplicity, that the option holder's
tax basis in the option shares sold is equal to the fair market value of such
shares on the exercise date. While this would be the case if the option holder
had paid the exercise price for such shares in cash, it would not normally be
the case if the option holder paid the exercise price in whole or in part by
delivery of other Common Stock. In the latter case, the option holder's tax
basis in, and holding period for, the previously acquired shares surrendered
carries over to an equal number of the option shares received on a share-for-
share basis. Shares received in excess of the shares surrendered have a tax
basis equal to the fair market value of those received shares on the exercise
date and the option holder's holding period for such received shares begins on
the exercise date. The option holder's capital gain or loss on a sale of option
shares would be determined based on the option holder's actual basis in the
shares sold and the long-term or short-term nature of any gain would be based on
the option holder's actual holding period.
Effect of Section 16(b) of the Securities Exchange Act of 1934. The tax
---------------------------------------------------------------
consequences to an option holder of the exercise of an NQO may vary from those
described above if the option holder is a person who is subject to liability
under Section 16(b) of the Exchange Act (typically, officers, directors and
major stockholders of a company) for certain dealings in the Common Stock (a
"16(b) Person"). In general, an option holder who is a 16(b) Person will not
recognize income on receipt of the Common Stock until such holder is no longer
subject to a liability under Section 16(b) with respect to the disposition of
such Common Stock. However, the option holder may elect to be taxed based on
the fair market value of the shares on the exercise date (and have a holding
period beginning on the exercise date) by filing an election under Section 83(b)
of the Code within 30 days of the exercise date.
Effect of Section 162(m) of the Internal Revenue Code. Starting with tax
------------------------------------------------------
years beginning after January 1, 1994, a publicly held corporation may not
deduct compensation paid to its chief executive officer and its four other most-
highly compensated officers in excess of $1 million per officer during a
corporate taxable year except to the extent such amounts in excess of $1 million
qualify for an exception to this limitation. To qualify for this exception,
such amounts must be determined on the
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basis of preestablished, objective, nondiscretionary formulae that meet certain
stockholder and outside director approval requirements. For this purpose,
"compensation" is broadly defined and would include, for example, income
realized on the exercise of nonqualified options or SARs disqualifying
dispositions of ISO shares, and the receipt (if a timely Section 83(b) election
is made) or vesting (if no Section 83(b) election is made) of restricted stock.
Thus, to the extent awards granted to the Chief Executive Officer and the four
other most highly compensated officers do not qualify for the performance based-
exception, the Company's deductions with respect to such awards may be subject
to the $1 million per executive deduction limitation.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
APPROVAL OF APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors recommends a vote for approval of the
appointment of KPMG Peat Marwick LLP as the independent certified public
accountants of the Company and its subsidiaries to audit the books and accounts
for the Company and its subsidiaries for the fiscal year ended December 31,
1996. During fiscal 1995, KPMG Peat Marwick LLP examined the financial
statements of the Company and its subsidiaries. It is expected that
representatives of KPMG Peat Marwick LLP will attend the Annual Meeting, with
the opportunity to make a statement if they so desire, and will be available to
answer appropriate questions.
SUBMISSION OF STOCKHOLDERS' PROPOSALS AND ADDITIONAL INFORMATION
Proposals of stockholders intended to be eligible for inclusion in the
Company's proxy statement and proxy card relating to the 1997 annual meeting of
stockholders of the Company must be received by the Company on or before the
close of business December 24, 1996. Such proposals should be submitted by
certified mail, return receipt requested.
The Company's By-Laws provide that a stockholder wishing to present a
nomination for election of a director or to bring any other matter before an
annual meeting of stockholders must give written notice to the Company's
Secretary not less than 130 days prior to the meeting; provided, however, that
in the event that less than 70 days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice must be received
prior to the close of business on the 10th day following such notice of the date
of the annual meeting was mailed and public disclosure was made. In addition,
such notice must meet certain other requirements. Any stockholder interested in
making such a nomination or proposal should request a copy of the By-Laws
provisions from the Secretary of the Company.
The Company will furnish without charge to each person whose proxy is
being solicited, upon written request of any such person, a copy of the Annual
Report on Form 10-K of the Company for the fiscal year ended December 31, 1995,
as filed with the SEC, including the financial statements and schedules thereto.
Requests for copies of such Annual Report on Form 10-K should be directed to the
Chief Financial Officer, Wireless One, Inc., 11301 Industriplex, Suite 4, Baton
Rouge, Louisiana 70809-4115.
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OTHER MATTERS
It is not expected that any matter other than those referred to herein
will be brought before the Annual Meeting; however, if other matters are
properly presented, the persons named as proxies, or their substitutes, will
vote in accordance with their judgment with respect to such matters.
By Order of the Board of Directors
William C. Norris
Secretary
July 9, 1996
IT IS IMPORTANT THAT THE PROXIES BE RETURNED PROMPTLY. EVEN IF YOU
EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE PROMPTLY COMPLETE, SIGN, DATE AND
MAIL THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE
IF MAILED IN THE UNITED STATES.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's 1995 Annual Report for fiscal year ended December 31,
1995 is incorporated in this Proxy Statement by reference and made a part
hereof.
INFORMATION FURNISHED HEREWITH
The following information is furnished herewith and made a part of
this Proxy Statement; (a) the financial statements of TruVision attached hereto
as Annex D, (b) the pro forma financial statements attached hereto as Annex E,
and (c) the Company's Quarterly Report for the fiscal quarter ended March 31,
1996 attached hereto as Annex F.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
THE ANNUAL MEETING 1
Date, Time and Place; Purpose of the Annual Meeting 1
Record Date, Voting Rights and Vote Required 1
Proxies 2
THE MERGER 3
Background of the Merger 4
Reasons for the Merger; Recommendation of the Board of Directors 6
Opinion of Financial Advisor 7
Interests of Certain Persons in the Merger 12
Risk Factors Related to the Merger 13
Federal Income Tax Consequences of the Merger 16
Accounting Treatment 16
REGULATORY MATTERS 16
Communications Act 17
HSR Act 17
State Regulatory Matters 17
BUSINESS OF TRUVISION 17
Operating Markets 18
Acquisition Markets 19
Properties 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION OF TRUVISION 20
Results of Operations for the Quarter Ended March 31, 1996 20
Results of Operations for the Quarter Ended March 31, 1995 22
Results of Operations for the Year Ended December 31, 1995 22
Results of Operations for the Year Ended December 31, 1994 24
Results of Operations for the Year Ended December 31, 1993 24
Liquidity and Capital Resources 24
Income Tax Matters 26
Inflation 27
Other 27
SELECTED HISTORICAL FINANCIAL DATA OF TRUVISION 27
MARKET PRICES AND DIVIDENDS 28
THE MERGER AGREEMENT 28
Effective Time 28
Merger Consideration 28
Certain Representations and Warranties 30
Conduct of TruVision Prior to the Merger 30
Certain Covenants 30
No Solicitation 31
Conditions to the Merger 32
Indemnification 32
Termination 32
OTHER AGREEMENTS 33
Registration Agreements 34
Stockholders Agreements 34
ELECTION OF DIRECTORS 35
Director Nominees (Class I Directors) (term expiring at the 1999 annual meeting) 36
</TABLE>
i
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<TABLE>
<S> <C>
Class II Directors (term expiring at the 1997 annual meeting) 37
Class III Directors (term expiring at the 1998 annual meeting) 38
Committees and Directors' Meetings 38
Compensation Committee Interlocks and Insider Participation 39
Certain Relationships and Related Transactions 39
Compliance with Section 16(a) of the Securities Exchange Act of 1934 41
BENEFICIAL OWNERSHIP OF COMMON STOCK 42
COMPENSATION OF EXECUTIVE OFFICERS 44
Summary Compensation Table 44
Stock Option Grants 44
Option Grants in Last Fiscal Year 44
Stock Option Holdings 45
Aggregated Fiscal Year-End Option Values 45
Employment Agreements 45
1995 Long-Term Incentive Plan 46
Compensation Committee Report on Executive Compensation 55
PERFORMANCE GRAPH 57
APPROVAL OF ISSUANCE OF COMMON STOCK 58
APPROVAL OF THE ADOPTION OF THE COMPANY'S 1996 DIRECTORS' OPTION PLAN 58
APPROVAL OF APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 64
SUBMISSION OF STOCKHOLDERS' PROPOSALS AND ADDITIONAL INFORMATION 64
OTHER MATTERS 65
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 65
INFORMATION FURNISHED HEREWITH 65
Annex A GKM Opinion
Annex B Agreement and Plan of Merger
Annex C The Company's 1996 Non-Employee Director's Stock Option Plan
Annex D TruVision Financial Statements
Annex E Pro Forma Financial Data
Annex F The Company's Quarterly Report for the fiscal quarter ended March 31, 1996
</TABLE>
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ANNEX A
[LETTERHEAD OF GKM APPEARS HERE]
July 10, 1996
The Board of Directors
Wireless One, Inc.
11301 Industriplex Boulevard, Suite 4
Baton Rouge, LA 70809-4115
Members of the Board:
Wireless One, Inc. ("Wireless One"), TruVision Wireless, Inc.
("TruVision") and Wireless One MergerSub Inc. ("MergerSub"), a wholly owned
subsidiary of Wireless One, have entered into an Agreement and Plan of Merger,
dated as of April 25, 1996 (the "Merger Agreement"), pursuant to which, among
other things, (i) TruVision will be merged with and into MergerSub (the
"Merger") and (ii) Wireless One will issue to the holders of TruVision common
stock, par value $0.01 per share (the "TruVision Common Stock"), up to 3,373,333
shares of common stock of Wireless One, par value $0.01 per share (the "Wireless
One Common Stock"), subject to certain adjustments and escrow arrangements.
You have requested the opinion of Gerard Klauer Mattison & Co., LLC
("GKM") as to the fairness, from a financial point of view, to the stockholders
of Wireless One of the consideration to be paid by Wireless One.
In arriving at our opinion set forth below, we have:
(i) Analyzed certain publicly available financial statements and other
information of Wireless One and TruVision;
(ii) Reviewed certain internal business, operating and financial information of
Wireless One and TruVision, including financial forecasts of the combined
entity, furnished to us by Wireless One;
(iii) Discussed the past and current operations and financial condition and the
prospects of Wireless One, TruVision and the combined entity with members
of senior management of Wireless One, including their view of the
strategic rationale for the Merger and the economic benefits of the Merger
to Wireless One;
(iv) Reviewed the reported prices and trading activity for the Wireless One
Common Stock;
A-1
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The Board of Directors
Wireless One, Inc.
July 10, 1996
(v) Analyzed the pro forma impact of the Merger on Wireless One's earnings per
share, consolidated capitalization and financial ratios and the relative
contributions of Wireless One and TruVision to the combined entity in terms
of subscribers, line-of-sight households, net sales and earnings before
interest, taxes, depreciation and amortization based on information
provided to us by Wireless One.
(vi) Reviewed the financial terms, to the extent publicly available, of certain
comparable acquisition transactions;
(vii) Compared the financial and stock performance of Wireless One to that of
certain other comparable public companies; and
(viii) Conducted such other analyses, performed such other investigations and
considered such other matters as we deemed necessary to arrive at our opinion,
including our assessment of general economic, market and monetary conditions.
In rendering our opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all financial and
other information, including representations and warranties in the Merger
Agreement and financial forecasts and forward-looking information, provided to
or otherwise reviewed by or discussed with us. In addition, with respect to
financial forecasts and other forward-looking information provided to or
otherwise reviewed by or discussed with us, we have relied upon, without
independent verification, the assurance of the management of Wireless One that
such forecasts and other information, and the underlying assumptions, are
reasonable and are based on the best currently available estimates as to the
most likely future financial performance of TruVision, Wireless One and the
combined entity, including the most likely actions to be taken by management,
future economic, industry and relevant business events and conditions, and cost
savings and other synergies anticipated to result from the Merger. We have been
provided only limited information, such as limited financial forecasts or other
forward-looking information, by Wireless One regarding TruVision, and our
opinion is necessarily subject to change based on information regarding
TruVision which has not been made available to us. We have not made or been
provided with an independent evaluation or appraisal of the assets and
liabilities of TruVision or Wireless One nor have we made any physical
inspection of the properties or assets of TruVision or Wireless One. GKM has not
been asked to opine to, and our opinion does not in any manner address, Wireless
One's underlying business decision to effect the Merger or any other transaction
in which Wireless One might engage. GKM's opinion is necessarily based upon
economic, market and other conditions as in effect, and information provided to
or otherwise reviewed by or discussed with us, as of the date hereof. We
express no opinion as to what the value to Wireless One Common Stock actually
will be when issued to the holders of TruVision Common Stock pursuant to the
Merger or the price at which Wireless One Common Stock will trade any time in
the future.
A-2
<PAGE>
The Board of Directors
Wireless One, Inc.
July 10, 1996
GKM has been engaged to render financial advisory services to the Board of
Directors of Wireless One in connection with the Merger and will receive a fee
for its services. GKM will also receive a fee upon the delivery of this opinion
and additional fees for certain additional or updated opinions delivered in
connection with the Merger. In addition, Wireless One has agreed to indemnify
GKM for certain liabilities, losses and damages which may arise out of the
rendering of financial advisory services to Wireless One in connection with the
Merger. In the ordinary course of our business, GKM may actively trade the
securities of Wireless One for GKM's own account or for the account of GKM's
customers and, accordingly, may at any time hold a long or short position in
such securities. In addition, in connection with Wireless One's initial public
offering, GKM acquired warrants to purchase an aggregate of 300,000 shares of
Wireless One Common Stock.
In October 1995, GKM performed certain investment banking services for
Wireless One, including, acting as lead manager for the initial public offering
of Wireless One Common Stock and co-manager for the unit offering of Wireless
One notes and warrants, and received compensation for such services. In
addition, Wireless One has granted to GKM, subject to certain conditions, a
right of first refusal to act on behalf of Wireless One in connection with any
sale, offer or placement of Wireless One securities. With respect to the sale,
offer or placement of equity securities, such right of first refusal continues
until October 1997 and with respect to the sale, offer or placement of debt
securities, such right of first refusal continues until April 1997. GKM has
been engaged to act as co-manager for Wireless One's anticipated note offering
which is expected to be consummated in the third quarter of 1996. GKM may
provide additional investment banking services to Wireless One in the future.
Based upon and subject to the foregoing, GKM is of the opinion that, as of
the date hereof, the consideration to be paid by Wireless One in the Merger is
fair to the stockholders of Wireless One from a financial point of view.
Very truly yours,
GERARD KLAUER MATTISON & CO., LLC
A-3
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ANNEX B
AGREEMENT AND PLAN OF MERGER
DATED AS OF APRIL 25, 1996
AMONG
TRUVISION WIRELESS, INC.
(A DELAWARE CORPORATION)
AND
WIRELESS ONE MERGERSUB, INC.
(A DELAWARE CORPORATION)
AND
WIRELESS ONE, INC.
(A DELAWARE CORPORATION)
<PAGE>
ANNEX.B
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), is made and entered
into as of the 25th day of April, 1996, by and among TRUVISION WIRELESS, INC., a
Delaware corporation ("TWI"), WIRELESS ONE MERGERSUB, INC., a Delaware
corporation ("MergerSub") and WIRELESS ONE, INC., a Delaware corporation
("WOI").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of TWI, MergerSub and WOI have
approved the merger of MergerSub with and into TWI pursuant and subject to the
terms and conditions of this Agreement (the "Merger"), whereby each issued and
outstanding share of common stock, par value $0.01 per share, of TWI at the
Effective Time ("TWI Common Share") will be converted into the right to receive
the Per-Share Portion of the Conversion Amount for such TWI Common Share; and
WHEREAS, TWI, MergerSub and WOI contemplate that the Merger will be
classified as a tax-free reorganization pursuant to Section 368(a)(i)(B) of the
Code; and
WHEREAS, TWI, MergerSub and WOI desire to make certain representations,
warranties and agreements in connection with the Merger and also to set forth
the various conditions to the Merger; and
WHEREAS, the respective Boards of Directors of TWI, MergerSub and WOI have
adopted resolutions approving this Agreement; and
WHEREAS, the terms used in this Agreement shall have the meanings
respectively ascribed to them in Article 11.1 hereof.
NOW, THEREFORE, the parties hereto hereby adopt the above recitals and
agree as follows:
ARTICLE 1. THE MERGER
1.1 THE MERGER. At the Effective Time, MergerSub will merge with and
into TWI in accordance with the terms and conditions of this Agreement. TWI
shall be the corporation surviving the Merger (the "Surviving Corporation") and
shall continue to be governed by the laws of the State of Delaware. The Merger
shall have the effects specified under the Delaware General Corporation Law
("DGCL").
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ANNEX.B
1.2 EFFECT OF THE MERGER.
(A) EFFECTIVE TIME. At the Effective Time, subject in all instances
to each of the terms, conditions, provisions and limitations contained in this
Agreement, (i) MergerSub will merge with and into TWI by the filing with the
Secretary of the State of Delaware of a Certificate of Merger; (ii) each TWI
Common Share outstanding at the Effective Time, by said occurrence and with no
further action on the part of the holder thereof, shall be transformed and
converted into the right to receive, upon surrender of the certificate for such
TWI Common Share, the Per-Share Portion of the Merger Shares for such TWI Common
Share without interest or any similar payment thereon or with respect thereto;
(iii) each share of common stock of MergerSub outstanding prior to the Merger
will, by said occurrence and with no further action on the part of the holder
thereof, be transformed and converted into one share of common stock of the
Surviving Corporation, so that thereafter WOI will be the sole and exclusive
owner of all equity securities of the Surviving Corporation; and (iv) the
Surviving Corporation shall be the owner of all of the business, assets, rights
and other attributes thereto of, or held by, either TWI or MergerSub.
(B) MERGER SHARES. On the Closing Date, the Outstanding TWI Shares,
in the aggregate, shall be converted into the right to receive the number of WOI
Common Shares equal to the "Merger Shares," which shall consist of the aggregate
of (i) the Non-Contingent Amount, (ii) upon the expiration of the General Escrow
Period, the General Contingent Amount, (iii) if the Gadsden Acquisition has not
been consummated prior to the Effective Time, then the Gadsden Contingent
Amount, if and when the Gadsden Acquisition is consummated and the Market
Delivery Requirement is satisfied with respect to the Gadsden, Alabama market,
(iv) if the Huntsville Acquisition has not been consummated prior to the
Effective Time, the Huntsville Contingent Amount, if and when the Huntsville
Acquisition is consummated and the Market Delivery Requirement is satisfied with
respect to the Huntsville, Alabama market, (v) if the Jackson Acquisition has
not been consummated prior to the Effective Time, then the Jackson Contingent
Amount, if and when the Jackson Acquisition is consummated and the Market
Delivery Requirement is satisfied with respect to the Jackson, Tennessee market,
(vi) if the Memphis Acquisition has not been consummated prior to the Effective
Time, then the Memphis Contingent Amount, if and when the Memphis Acquisition is
consummated and the Market Delivery Requirement is satisfied with respect to the
Memphis, Tennessee Market, and (vii) as and when additional WOI Common Shares
become issuable pursuant to Section 10.3, the WOI Contingent Amount. As used
herein:
(A) the "General Contingent Amount" shall mean 168,667 WOI Common
Shares, subject to reduction as provided herein and in accordance with the terms
of the General Escrow Agreement;
(B) if the Gadsden Acquisition is consummated prior to the Effective
Time, then the "Gadsden Contingent Amount" shall mean zero (0) WOI Common
Shares,
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ANNEX.B
and if the Gadsden Acquisition is not consummated prior to the Effective Time,
then the "Gadsden Contingent Amount" shall mean 258,793 WOI Common Shares;
(C) if the Huntsville Acquisition is consummated prior to the
Effective Time, then the "Huntsville Contingent Amount" shall mean zero (0) WOI
Common Shares, and if the Huntsville Acquisition is not consummated prior to the
Effective Time, then the "Huntsville Contingent Amount" shall mean 121,447 WOI
Common Shares;
(D) if the Jackson Acquisition is consummated prior to the Effective
Time, then the "Jackson Contingent Amount" shall mean zero (0) WOI Common
Shares, and if the Jackson Acquisition is not consummated prior to the Effective
Time, then the "Jackson Contingent Amount" shall mean 36,633 WOI Common Shares;
(E) if the Memphis Acquisition is consummated prior to the Effective
Time, then the "Memphis Contingent Amount" shall mean zero (0) WOI Common
Shares, and if the Memphis Acquisition is not consummated prior to the Effective
Time, then the "Memphis Contingent Amount" shall mean 731,167 WOI Common Shares;
(F) the "Non-Contingent Amount" shall mean (1) the number of Base
Shares, reduced by (2) 168,667, and further reduced by (3) the aggregate of the
Acquisition Contingent Amounts;
(G) the "Acquisition Contingent Amounts" means the Gadsden Contingent
Amount, the Huntsville Contingent Amount, the Jackson Contingent Amount and the
Memphis Contingent Amount;
(H) the "Market Delivery Requirement" shall be deemed to have been
satisfied with respect to any Market at the time in question if, at such time,
at least 12 Channels licensed by the FCC to, or leased to, TWI or any of its
Subsidiaries in such Market are both Granted Channels and Good Channels;
(I) A "Granted Channel" means a Channel authorized by conditional
license, license or construction authorization (in each case, other than a STA,
experimental or developmental authorization) which is in full force and effect,
validly issued, not subject to a pending revocation proceeding, not in jeopardy
of cancellation under FCC Rule 21.303 for removal of equipment, and not subject
to forfeiture for any failure to meet a condition of the instrument; and
(J) A "Good Channel" means a Channel as to which at the time in
question (1) if such Channel has been authorized pursuant to a construction
authorization, either the last date for construction printed on such
construction authorization has not occurred or such Channel is the subject of a
pending application for the extension of such last date which was filed prior to
such last date, (2) each Consent, if any, which is required
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ANNEX.B
with respect to such Channel (including under the related TWI Channel Lease, if
any) has been obtained and is in effect, (3) if such Channel is the subject of a
TWI Channel Lease, then such Channel Lease is in full force and effect, such TWI
Channel Lease is not subject to termination at the option of the TWI Lessor, and
no party to such TWI Channel Lease is in default or breach in any material
respect under such Channel Lease, (4) if such Channel is an MDS Channel, then
TWI or a Subsidiary of TWI has full-time use of the capacity of such Channel,
and (5) in the case of a Channel which is the subject of a Specified
Acquisition, such Specified Acquisition has been consummated and there have been
obtained all consents, approvals, authorizations and waivers of any public,
government or regulatory body, authority, agency or unit and any and all
consents, approvals, authorizations and waivers from parties to any contract or
agreement related thereto or any other person that are required for the lawful
consummation of such Specified Acquisition or are necessary for TWI and its
Subsidiaries to conduct their operations with respect to such Channel after the
consummation of such Specified Acquisition.
Notwithstanding the foregoing, if at the Effective Time the Market Delivery
Requirement has not been satisfied with respect to any Owned Market (a "Non-
Delivery Market"), then there shall be withheld from the Non-Contingent Amount a
number of WOI Common Shares which is equal to the number of shares specified on
the attached Exhibit 1.2(b) for such Owned Market (the "Market Delivery
Contingent Shares" for such Owned Market). The Market Delivery Contingent
Shares for any Non-Delivery Market shall be restored to the Non-Contingent
Amount if and when, after the Effective Time, the Market Delivery Requirement is
satisfied with respect to such Non-Delivery Market.
Except as set forth in Section 7.3(d), the fact that any Channel or Channels are
not Granted Channels or Good Channels shall not (i) constitute a breach of any
representation, warranty, covenant or agreement set forth herein or failure of
any condition set forth herein to be satisfied, (ii) be considered in
determining whether or not there has been a Material Adverse Effect with respect
to TWI or (iii) constitute the basis or part of the basis for any right of WOI
not to proceed with the Closing.
The respective quantities of WOI Common Shares which constitute the General
Contingent Amount, the Gadsden Contingent Amount, the Huntsville Contingent
Amount, the Jackson Contingent Amount, the Memphis Contingent Amount and any
Market Delivery Contingent Amount will be (x) proportionately increased to
reflect any stock dividend, stock split or other subdivision of the WOI Common
Shares effected after the date of this Agreement and prior to the Effective
Time, and (y) proportionately decreased to reflect any reverse stock split or
other combination of the WOI Common Shares which is effected after the date of
this Agreement and prior to the Effective Time.
(C) BASE SHARES; ADJUSTMENTS. As used herein, the "Base Shares" means
the number of WOI Common Shares equal to the Aggregate Initial Share Amount
minus the Adjustment Shares, and the "Adjustment Shares" means the number of WOI
Common Shares,
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<PAGE>
ANNEX.B
equal to the Adjustment Amount divided by the Exchange Price. As used herein,
the term "Adjustment Amount" means
(i) the product of (A) 14,200 minus the number of Bona Fide
Subscribers in the Existing Markets on March 31, 1996 multiplied by (B) $1,275;
plus
(ii) the amount of the Net GAAP Debt as of March 31, 1996 in excess of
the amount of the Permitted Net GAAP Debt; plus
(iii) the excess of the aggregate amount of all Prior Offering
Expenses over $1,000,000; plus
(iv) the aggregate amount of any payments to TWI's officers,
directors, employees or any of TWI's or their Affiliates in violation of the
terms of this Agreement; and
(v) the aggregate amount of any payments made or required to be made
pursuant to the terms of all TWI Channel Leases by reason of the Merger (other
than the acceleration of any scheduled amount which would otherwise be payable
pursuant to any TWI Channel Lease) in excess of $60,000.
(D) OUTSTANDING TWI SHARES. As used herein, the "Outstanding TWI
Shares" means the TWI Common Shares which are outstanding immediately prior to
the Effective Time.
(E) CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION. The
certificate of incorporation of the Surviving Corporation shall be the
certificate of incorporation of MergerSub immediately prior to the Effective
Time.
(F) BYLAWS OF THE SURVIVING CORPORATION. The bylaws of the Surviving
Corporation shall be the bylaws of MergerSub immediately prior to the Effective
Time.
(G) BOARD OF DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The
board of directors and officers of MergerSub immediately prior to the Effective
Time shall be the board of directors and the officers of the Surviving
Corporation, respectively, immediately upon the Effective Time, and such persons
shall serve in such positions for the respective terms provided by applicable
Legal Requirements or in the bylaws of the Surviving Corporation and until their
respective successors are elected and qualified.
(H) WOI TO ESTABLISH ESCROWS.
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ANNEX.B
(i) United States Trust Company of New York, or another person who is
selected prior to the Effective Time by TWI and WOI, shall act as the General
Escrow Agent, the Acquisition Escrow Agent and the Market Delivery Escrow Agent
for purposes of administering the distribution of the General Contingent
Amount, the Acquisition Contingent Amounts, if any, and the Market Delivery
Contingent Shares, if any, respectively. In the event United States Trust
Company of New York or any other person so selected is unable or unwilling to
act as the General Escrow Agent, the Acquisition Escrow Agent or the Market
Delivery Escrow Agent, then TWI and WOI shall, upon mutual agreement, seek to
select a comparable party to act as such. Neither WOI nor TWI will unreasonably
withhold its approval of any financial institution proposed by the other of
them to act as the General Escrow Agent, the Acquisition Escrow Agent or the
Market Delivery Escrow Agent.
(ii) WOI Common Shares representing the General Contingent Amount
shall be held by the General Escrow Agent pursuant to the terms of an Escrow
Agreement (the "General Escrow Agreement") in the form attached hereto as
Exhibit 1.2(h).
(iii) WOI Common Shares representing the Acquisition Contingent
Amounts, if any, shall be held by the Acquisition Escrow Agent pursuant to the
terms of an escrow agreement (the "Acquisition Escrow Agreement") which will
provide for the release of the WOI Common Shares constituting the Acquisition
Contingent Amount for any Specified Acquisition upon the later of the
consummation after the Effective Time of such Specified Acquisition and the
satisfaction of the Market Delivery Requirement with respect to the related
Market, in accordance with procedural, dispute and resolution mechanism and
other provisions comparable to those set forth in the General Escrow Agreement.
(iv) WOI Common Shares representing the Market Delivery Contingent
Share for the Non-Delivery Market(s), if any, shall be held by the Market
Delivery Escrow Agent pursuant to the terms of an escrow agreement (the "Market
Delivery Escrow Agreement") which will provide for the release of the WOI
Common Shares constituting the Market Delivery Contingent Shares for each Non-
Delivery Market upon the satisfaction of the Market Delivery Requirement with
respect to such Non-Delivery Market, in accordance with procedural, dispute and
resolution mechanism and other provisions comparable to those set forth in the
General Escrow Agreement.
(I) EXCHANGE PROCEDURES. At or prior to the Effective Time, each
holder of record of Outstanding TWI Shares shall deliver to WOI for
cancellation the certificates representing such Outstanding TWI Shares (the
"Certificates"). Upon surrender of a Certificate for cancellation, together
with an investment letter in the form attached hereto as Exhibit 1.2(i)
("Stockholder Letter"), duly executed as of such time, (i) the holder of such
Certificate shall receive in exchange therefor the Per-Share Portion of the
Non-Contingent Amount, and shall be
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<PAGE>
ANNEX.B
entitled to receive (A) upon the expiration of the General Escrow Period, the
Per-Share Portion of the General Contingent Amount (to the extent not released
to WOI pursuant to the General Escrow Agreement), (B) the Per-Share Portion of
the Acquisition Contingent Amount(s), if any, pursuant to the Acquisition Escrow
Agreement, (C) the Per-Share Portion of the Market Delivery Contingent Shares,
if any, pursuant to the Market Delivery Escrow Agreement, and (D) to the extent
issued or issuable pursuant to Section 10.3, the Per-Share Portion of the WOI
Contingent Amount, in each case for the Outstanding TWI Shares represented by
such Certificate, and (ii) the Certificate so surrendered shall forthwith be
canceled. Until surrendered as contemplated by this Section 1.2(i), each
Certificate shall, at and after the Effective Time, be deemed to represent only
the right to receive, upon surrender of such Certificate, the Per-Share Portion
of the Merger Shares with respect to each Outstanding TWI Share represented
thereby in accordance with the terms of this Agreement, as follows:
(I) Upon the Closing Date (or, if later, on the date of the surrender
of such Certificate), the holder of the Outstanding TWI Shares represented by
such Certificate shall receive the Per-Share Portion of the Non-Contingent
Amount for the Outstanding TWI Shares represented by such Certificate;
(II) Subject to the terms of the General Escrow Agreement, the holder
of the Outstanding TWI Shares represented by such Certificate shall be entitled
to receive the Per-Share Portion of the General Contingent Amount for the
Outstanding TWI Shares represented by such Certificate;
(III) Subject to the terms of the Acquisition Escrow Agreement,
the holder of the Outstanding TWI Shares represented by such Certificate shall
be entitled to receive the Per-Share Portion of the Acquisition Contingent
Amount(s), if any, for the Outstanding TWI Shares represented by such
Certificate;
(IV) Subject to the terms of the Market Delivery Escrow Agreement, the
holder of the Outstanding TWI Shares represented by such Certificate shall be
entitled to receive the Market Delivery Contingent Shares, if any, for the
Outstanding TWI Shares represented by such Certificate; and
(V) As and when issued pursuant to Section 10.3 (or, if later, on the
date of the surrender of such Certificate), the holder of the Outstanding TWI
Shares represented by such Certificate shall be entitled to receive the Per-
Share Portion of the WOI Contingent Amount for the Outstanding TWI Shares
represented by such Certificate.
(J) REGISTRATION RIGHTS AND STOCKHOLDERS AGREEMENT. The WOI shares to
be received by the TWI Stockholders will be offered and sold in reliance upon
an exemption from the Securities Act of 1933, as amended, and will bear the
restrictive legend set forth in Exhibit 1.2(j)-1 hereto. On the Closing Date,
(i) WOI shall amend and restate that
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ANNEX.B
certain Registration Agreement dated October 24, 1995 among WOI and the WOI
stockholders who are parties thereto (collectively, the "WOI Initial
Stockholders"), as provided in the Amended and Restated Registration Agreement
attached in the form of Exhibit 1.2(j)-2 hereto, and each TWI Stockholder upon
his or its counter signature thereto shall be bound by and entitled to the
benefits of such agreement; and (ii) WOI shall amend and restate that certain
Stockholders Agreement dated October 24, 1995 among WOI and certain of the WOI
Initial Stockholders, as provided in the Amended and Restated Stockholders
Agreement attached in the form of Exhibit 1.2(j)-3 hereto, and each TWI
Stockholder upon his or its counter signature thereto shall be bound by and
entitled to the benefits of such agreement (such Amended and Restated
Registration Agreement and such Amended and Restated Stockholders Agreement
being collectively referred to as the "Amended Agreements").
(K) DIVIDENDS; TRANSFER TAXES. No dividends or other distributions
that are declared on or after the Effective Time on WOI Common Shares or are
payable to the holders of record of WOI Common Shares on or after the Effective
Time will be paid to persons entitled by reason of the Merger to receive WOI
Common Shares until such persons surrender their Certificates, as provided in
this Article 1. Subject to the effect of applicable Legal Requirements, there
shall be paid to the record holder of such WOI Common Shares (i) at the time of
such surrender or as promptly as practicable thereafter, the amount of any
dividends or other distributions theretofore paid with respect to whole WOI
Common Shares and having a record date on or after the Effective Time and a
payment date prior to such surrender and (ii) at the appropriate payment date or
as promptly as practicable thereafter, the amount of dividends or other
distributions payable with respect to whole WOI Common Shares and having a
record date on or after the Effective Time but prior to surrender and a payment
date subsequent to surrender. In no event shall the person entitled to receive
such dividends or other distributions be entitled to receive interest on such
dividends or other distributions. If any dividends, cash in lieu of fractional
shares or WOI Common Shares are to be paid to or issued in a name other than
that in which the Certificate surrendered in exchange therefor is registered, it
shall be a condition of such exchange that the Certificate so surrendered shall
be properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange shall pay to Wireless One any transfer or other
taxes required by reason of the issuance of WOI Common Shares in a name other
than that of the registered holder of the Certificate surrendered or shall
establish to the satisfaction of Wireless One that such tax has been paid or is
not applicable.
(L) NO FRACTIONAL SHARES. No certificates or scrip representing
fractional WOI Common Shares shall be issued upon the surrender for exchange of
Certificates pursuant to this Article 1, and, except as provided in this Section
1.2(l), no dividend or other distribution, stock split or interest shall relate
to any such fractional security, and such fractional interests shall not entitle
the owner thereof to vote or to any rights of a security holder of WOI. In lieu
of any fractional security, each holder of Outstanding TWI Shares who would
otherwise have been entitled to a fraction of a WOI Common Share upon surrender
of Certificates for exchange pursuant to this Article 1 will be paid an amount
in cash (without interest) equal to the value of the fractional share based upon
the Exchange Price. WOI shall repurchase any
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<PAGE>
ANNEX.B
fractional shares at the Exchange Price, and the proceeds thereof shall be
disbursed to the former holders of Outstanding TWI Shares at the time of the
distribution of the Non-Contingent Amount, the General Contingent Amount, the
Acquisition Contingent Amount(s), if any, the Market Delivery Contingent Shares,
if any, and/or the WOI Contingent Amount, as the case may be.
(M) RETURN OF SHARES. Any portion of the Merger Shares and any
dividends or distributions with respect to WOI Common Shares which remain
undistributed to the former holders of Outstanding TWI Shares for three (3)
months after the expiration of the General Escrow Period (as it may be extended
pursuant to the General Escrow Agreement) shall be delivered to WOI, upon demand
of WOI, and any former holders of Outstanding TWI Shares who have not
theretofore complied with this Article 1 shall thereafter look only to the
Surviving Corporation and WOI for payment of their claim for the Merger Shares
into which such Outstanding TWI Shares are convertible, any cash in lieu of
fractional WOI Common Shares, and any dividends or distributions with respect to
WOI Common Shares.
(N) NO FURTHER OWNERSHIP RIGHTS IN COMMON STOCK. All WOI Common
Shares issued, and any cash paid pursuant to this Section 1.2, upon the
surrender for exchange of Certificates in accordance with the terms hereof,
shall be deemed to have been issued or paid, as the case may be, in full
satisfaction of all rights pertaining to the Outstanding TWI Shares.
(O) CLOSING OF TWI TRANSFER BOOKS. At the Effective Time, the stock
transfer books of TWI shall be closed and no transfer of TWI Common Shares shall
thereafter be made. If, after the Effective Time, Certificates are presented to
the Surviving Corporation, they shall be cancelled and exchanged as provided in
this Article 1.
(P) FURTHER ASSURANCES. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (i) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation, its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of TWI, or (ii)
otherwise to carry out the purposes of this Agreement, the Surviving Corporation
and its proper officers and directors or their designees shall be authorized to
execute and deliver, in the name and on behalf of each such corporation, all
such deeds, bills of sale, assignments and assurances and do, in the name and on
behalf of each of such corporations, all such other acts and things necessary,
desirable or proper to vest, perfect or confirm its right, title or interest in,
to or under any of the rights, privileges, powers, franchises, properties or
assets of such corporations and otherwise to carry out the purposes of this
Agreement.
1.3 CLOSING. The Closing of the Merger (the "Closing") shall take place
at 10:00 a.m. on a date (the "Closing Date") to be specified by the parties,
which shall be no later than the fifth (5th) business day after the satisfaction
or waiver of the conditions set forth in Articles
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ANNEX.B
6, 7 and 8 hereof, unless another date or place is agreed to in writing by the
parties hereto, at the offices of Kirkland & Ellis, 153 East 53rd Street, New
York, New York, or some other mutually agreeable location in New York, New York.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF TWI.
TWI hereby represents and warrants to WOI and MergerSub, that as of the
date hereof:
2.1 ORGANIZATION; GOOD STANDING. TWI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
TWI and each of its Subsidiaries is qualified as a foreign corporation in all
jurisdictions in which it is required to qualify as a result of the conduct of
its business or ownership of its properties, other than any jurisdiction in
which the failure of any such person(s) to be so qualified would not have a
Material Adverse Effect on TWI.
2.2 SUBSIDIARIES. [LIST SUBSIDIARIES] are the only Subsidiaries of TWI.
Except as set forth on Schedule 2.2 or as disclosed in the TWI SEC Filings, TWI
owns directly, free and clear of Liens, all outstanding shares or equity
interests of each Subsidiary of TWI, and all such shares are validly issued,
fully paid, non-assessable and not subject to preemptive rights. Except as set
forth on Schedule 2.2 or as disclosed in the TWI SEC Filings, there are no
outstanding subscriptions, options, warrants, calls, conversion or exchange
rights, commitments or agreements of any character obligating any Subsidiary of
TWI to issue, deliver or sell additional shares of its capital stock or equity
interests of any class or any securities convertible into or exchangeable for
any such capital stock or equity interests, and there are no rights of first
refusal, transfer restrictions or similar rights or obligations with respect to
the ownership interests of TWI in any Subsidiary of TWI. Except as set forth on
Schedule 2.2 or as disclosed in the TWI SEC Filings, TWI does not own, directly
or indirectly, any shares of stock or any other equity or long-term debt
securities of any corporation or have any equity interest in any firm,
partnership, Joint Venture, association or other Person.
2.3 CAPITALIZATION. The authorized capital stock of TWI as of the date of
this Agreement consists of (i) 8,077,778 shares of common stock, $0.01 par value
per share, of which 2,400,000 are issued and outstanding, and (ii) 2,077,778
shares of preferred stock, $0.01 per share, consisting of 800,000 shares of
Series A Preferred Stock and 300,000 shares of Series B Preferred Stock,
(collectively, "TWI Preferred Stock"), of which 1,100,000 shares ("TWI Preferred
Shares") have been issued and are convertible into 2,200,000 TWI Common Shares.
There are no outstanding options, warrants, calls, puts, commitments or other
rights to purchase, or securities or other rights convertible into or
exercisable or exchangeable for, capital stock of TWI other than as set forth on
Schedule 2.3 or as disclosed in the TWI SEC Filings, which in each case
indicates the record and the beneficial owner thereof, the exercise, conversion
or exchange price and period thereof, the term and any vesting or other
conditions thereof. Except as set forth on Schedule 2.3 or as disclosed in the
TWI SEC Filings, no Person has rights to the registration of any securities of
TWI or any Subsidiary of TWI. All securities issued by TWI
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<PAGE>
ANNEX.B
have been paid for and delivered in accordance with the terms of applicable
agreements or instruments, duly authorized and validly issued and are fully paid
and non-assessable; the holders thereof have no rights of rescission with
respect thereto and are not subject to personal liability by reason of being
such holders; none of such securities were issued in violation of the preemptive
rights of any holder of any security of TWI or any similar rights granted by TWI
or applicable Legal Requirements.
2.4 AUTHORITY; ENFORCEABILITY; NON-CONTRAVENTION. TWI has the corporate
power and authority to conduct the business and activities conducted by it and
to own or lease the assets owned or leased by it. TWI has the corporate power
and authority (subject to stockholder approval as set forth in Section 8.1 and
obtaining all required Consents as set forth in Section 4.2) to execute and
deliver this Agreement and all other documents required to be executed and
delivered by TWI hereunder, to consummate the transactions hereby contemplated,
and to take all other actions required to be taken by TWI pursuant to the
provisions hereof. This Agreement and all other documents required to be
executed and delivered by TWI hereunder have been duly authorized by all
corporate action necessary on the part of TWI (subject to stockholder approval
as set forth in Section 8.1 and obtaining all required Consents as set forth in
Section 4.2) and have been duly or will when executed and delivered be duly
executed and delivered by TWI and constitute the legal, valid and binding
obligations of TWI, enforceable against TWI in accordance with their terms.
Except as disclosed in Schedule 2.4, neither the execution nor the delivery of
this Agreement and all other documents required to be executed and delivered by
TWI hereunder or the consummation of the transactions hereby contemplated by TWI
(i) conflicts with or constitutes any violation or breach of the Certificate of
Incorporation or the Bylaws of TWI; (ii) constitutes any violation or breach of,
or gives any other Person any rights (including any right of acceleration,
termination or cancellation) under, any Material Contract; (iii) constitutes a
violation of any Order or Legal Requirement; or (iv) may result in the creation
of any Lien on any of the assets or properties of TWI or any of its
Subsidiaries.
2.5 CERTAIN ACTIVITIES AND SERVICES. Except with respect to the
Huntsville Wired System (as that term is defined in the TWI SEC Filings),
neither TWI nor any Subsidiary of TWI engages in any business other than the
Wireless Cable Business.
2.6 EMPLOYEE PLANS.
(A) Schedule 2.6 sets forth a true and complete list of each "employee
benefit plan," as such term is defined in section 3(3) of the ERISA, whether or
not subject to ERISA, and each bonus, incentive or deferred compensation,
severance, termination, retention, change of control, stock option, stock
appreciation, stock purchase, phantom stock or other equity-based, performance
or other employee or retiree benefit or compensation plan, program, arrangement,
agreement, policy or understanding, whether written or unwritten, that provides
benefits or compensation in respect of any employee or former employee of TWI or
any Subsidiary of TWI or the beneficiaries or dependents of any such employee or
former employee (such employees, former employees, beneficiaries and dependents
collectively, the "TWI
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ANNEX.B
Employees") or under which any TWI Employee is or may become eligible to
participate or derive a benefit and that is or has been maintained or
established by TWI or to which TWI or any Subsidiary of TWI contributes or is or
has been obligated or required to contribute or with respect to which TWI or any
Subsidiary of TWI may have any liability or obligation (collectively, the "TWI
Plans"). TWI has not communicated to any TWI Employee any intention or
commitment to modify any TWI Plan or to establish or implement any other
employee or retiree benefit or compensation arrangement other than in a manner
which would conform the terms of such TWI Plan or arrangement with any
description set forth in the TWI SEC Filings.
(B) All TWI Plans conform (and at all times within the five years
preceding the date hereof have conformed) in all material respects to, and are
being administered and operated (and have at all times within the five years
preceding the date hereof been administered and operated) in material compliance
with, the requirements of ERISA, the Code and all other applicable Legal
Requirements. All returns, reports and disclosure statements required to be
made under ERISA and the Code with respect to all TWI Plans have been timely
filed or delivered. There have not been any "prohibited transactions," as such
term is defined in Section 4975 of the Code or Section 406 of ERISA, involving
any of the TWI Plans that could subject TWI or any Subsidiary of TWI to any
material penalty or tax imposed under the Code or ERISA. Neither TWI nor any
Subsidiary of TWI maintains or has maintained any TWI Plan qualified under
Section 401(a) of the Code and exempt from tax under Section 501(a) of the Code.
Neither TWI nor any Subsidiary of TWI has any announced plan or legally binding
commitment to create any TWI Plans or to materially amend or modify any existing
TWI Plan.
(C) There are no pending or threatened claims asserted or instituted
against
(i) any TWI Plan or its assets,
(ii) any fiduciary with respect to any such TWI Plan, or
(iii) TWI or any Subsidiary of TWI or any of its officers, directors
or employees,
under ERISA or any other applicable Legal Requirements and rules and regulations
promulgated thereunder, or claiming benefit payments other than those made in
the ordinary operation of such plans, nor is there any basis for such claim. To
the knowledge of TWI, the TWI Plans are not the subject of any investigation,
audit or action by any governmental agency, including, but not limited to, the
IRS, the Department of Labor, the Equal Employment Opportunity Commission or the
Pension Benefit Guaranty Corporation ("PBGC").
2.7 FINDER'S FEES. Except as set forth on Schedule 2.7, neither TWI nor
any Subsidiary of TWI has taken any action which would impose upon TWI, any
Subsidiary of TWI, MergerSub or WOI any obligation or liability to any person
for finder's fees, agent's
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<PAGE>
ANNEX.B
commissions or like payments in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.
2.8 SEC FILINGS. TWI has previously delivered to WOI the TWI SEC Filings.
No TWI SEC Filing contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (i) as of the time such
document was filed and (ii) as of the date of this Agreement, in each case
except as set forth on Schedule 2.8 or in a TWI SEC Filing of a subsequent date.
2.9 DIRECTORS, OFFICERS AND EMPLOYEES. Other than as set forth on
Schedule 2.9 or as described in any TWI SEC Filing, neither TWI nor any
Subsidiary of TWI has any outstanding loans or extension of credit to, or any
contracts, agreements or understandings with, any executive officer or director
or member of their immediate family or any person with which any such person has
a material relationship. Schedule 2.9 sets forth a list of (a) the names and
positions of each employee of TWI and each Subsidiary of TWI who was paid an
aggregate compensation for the fiscal year ended December 31, 1995 in excess of
$50,000, together with the amount thereof; and (b) any agreement or arrangement
with any current or former employees, officers or directors of such parties that
would entitle such person to receive any compensation or other payment upon or
arising from (i) the termination of such person's services as an employee,
officer or director, or (ii) the consummation of the Merger, together with the
amount thereof (such aggregate amount is referred to herein as "Severance
Obligations"). TWI has made available to WOI a true and correct copy of the
current payroll which lists all employees of TWI and each Subsidiary of TWI by
category of employment and salary.
2.10 TWI FCC REPRESENTATIONS.
(A) Except for agreements executed after the date of this Agreement,
Schedule 2.10(a) hereto sets forth a true and correct list of the TWI Channel
Leases. Except as stated on Schedule 2.10(a), no TWI Channel Lease (i) requires
the consent of the lessor thereunder (a "TWI Lessor") to the Merger, (ii) will
terminate or allow the lessor thereunder to terminate it as a result of the
Merger, or (iii) will require a change in the compensation payable to the lessor
thereunder, or the formula for determining that compensation as a result of the
Merger. Except as stated on Schedule 2.10(a), each such TWI Channel Lease which
is not pending acquisition by TWI or a Subsidiary of TWI is in full force and
effect and, to the knowledge of TWI, each other TWI Channel Lease is in full
force and effect. Except as set forth on Schedule 2.10(a), neither TWI nor any
Subsidiary of TWI has received, or has knowledge that any other party has
received, any notice from a TWI Lessor that a TWI Channel Lease is in default or
is terminated, except for such notices of default which have been cured prior to
termination and for such notices of termination which have been withdrawn.
(B) Schedule 2.10(b) lists (i) each application to the FCC for
commercial ITFS, MDS, MMDS, cable antenna relay service or low power commercial
television FCC Licenses
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<PAGE>
ANNEX.B
pending before the FCC in the name of TWI or any of its Subsidiaries or
Affiliates and proposing facilities which are within the State of Mississippi or
any of the Target Markets, (ii) each FCC License held by TWI or any of its
Subsidiaries or Affiliates (or pending acquisition by TWI or any of its
Subsidiaries or Affiliates) and authorizing facilities which are within the
State of Mississippi or any of the Target Markets, and (iii) each cable
television franchise which is held by TWI or any of its Subsidiaries or
Affiliates (or pending acquisition by TWI or any of its Subsidiaries or
Affiliates) and authorizing facilities which are within the State of Mississippi
or any of the Target Markets.
(C) Schedule 2.10(c)-1 hereto lists each Rand McNally Basic Trading
Area ("BTA") for which TWI or a Subsidiary of TWI is the highest bidder in the
FCC's MDS auction. Neither TWI nor any Subsidiary of TWI is in default of its
payment obligations to the U.S. Treasury for any such BTA, as such obligations
are imposed under the FCC's small business payment regulations. Except as set
forth on Schedule 2.10(c)-2 or as described in any TWI SEC Filing, neither TWI
nor any Subsidiary of TWI has agreed to sell or otherwise transfer the whole or
any part of the MDS channel rights accorded to the MDS BTA authorization holder
for any of those BTAs.
2.11 ACCREDITED INVESTORS. Each TWI Stockholder is, and VCI is, an
"accredited investor," as such term is defined in Rule 501(a) of Regulation D
promulgated under the Securities Act of 1933, as amended.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF MERGERSUB AND WOI.
WOI and MergerSub each hereby represent and warrant to TWI and to the
stockholders of TWI, the following:
3.1 ORGANIZATION AND GOOD STANDING. WOI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
MergerSub is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. WOI and each of its Subsidiaries is
qualified as a foreign corporation in all jurisdictions in which it is required
to qualify as a result of the conduct of its business or ownership of its
properties, other than any jurisdiction in which the failure of any such
person(s) to be so qualified would not have a Material Adverse Effect on WOI.
3.2 AUTHORITY; ENFORCEABILITY; NON-CONTRAVENTION. WOI has the corporate
power and authority to conduct the business and activities conducted by it and
to own or lease the assets owned or leased by it. WOI has corporate power and
authority (subject to stockholder approval and obtaining lenders' Consents as
set forth in Sections 7.1 and 7.6) to execute and deliver this Agreement and all
other documents required to be executed by WOI hereunder, to consummate the
transactions hereby contemplated, and to take all other actions required to be
taken by WOI pursuant to the provisions hereof. This Agreement and all other
documents required to be
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<PAGE>
ANNEX.B
executed and delivered by WOI hereunder have been duly authorized by all
corporate action necessary on the part of WOI (subject to stockholder approval
and obtaining lenders' Consents as set forth in Sections 7.1 and 7.6) and have
been duly or will when executed and delivered be duly executed and delivered by
WOI, and constitute the legal, valid and binding obligations of WOI enforceable
against WOI in accordance with their terms. Neither the execution nor the
delivery of this Agreement and all the documents required to be executed and
delivered by WOI hereunder or the consummation of the transactions hereby
contemplated by WOI (i) conflicts with or constitutes any violation or breach of
the Certificate of Incorporation or the Bylaws of WOI; (ii) constitutes any
violation or breach of, or gives any other Person any rights (including any
right of acceleration, termination or cancellation) under, any Material Contract
to which WOI is a party; (iii) constitutes a violation of any Order or Legal
Requirement; or (iv) may result in the creation of any Lien on any of the assets
or properties of WOI or any of its Subsidiaries. MergerSub has the corporate
power and authority to conduct the business and activities conducted by it and
to own or lease the assets owned or leased by it. MergerSub has corporate power
and authority (subject to stockholder approval and obtaining lenders' Consents
as set forth in Sections 7.1 and 7.6) to execute and deliver this Agreement and
all other documents required to be executed by MergerSub, to consummate the
transactions hereby contemplated, and to take all other actions required to be
taken by MergerSub pursuant to the provisions hereof. This Agreement and all
other documents required to be executed and delivered by MergerSub hereunder
have been duly authorized by all corporate action necessary on the part of
MergerSub (subject to stockholder approval and obtaining lenders' Consents as
set forth in Sections 7.1 and 7.6) and have been duly or will when executed and
delivered be duly executed and delivered by MergerSub, and constitute the legal,
valid and binding obligations of MergerSub enforceable against MergerSub in
accordance with their terms. Neither the execution nor delivery of this
Agreement and all other documents required to be executed and delivered by
MergerSub hereunder or the consummation of the transactions hereby contemplated
by MergerSub conflict with or constitute a violation or breach of the
Certificate of Incorporation or the Bylaws of MergerSub.
3.3 CAPITALIZATION. The authorized capital stock of WOI as of the date
hereof consists of 50,000,000 shares of common stock, par value $.01 per share,
of which 13,498,752 shares are issued and outstanding, and 10,000,000 of
preferred stock, par value $.01 per share, of which no shares have been issued.
WOI Common Shares to be issued pursuant to this Agreement will be, upon
issuance, validly issued, fully paid and non-assessable. There are no
outstanding options, warrants, calls, puts, commitments or other rights to
purchase, or securities or other rights convertible into or exercisable or
exchangeable for, capital stock of WOI other than as described in the WOI SEC
Filings. Except as disclosed in the WOI SEC Filings, no Person has rights to
the registration of any securities of WOI or any Subsidiary or WOI. All
securities issued by WOI have been paid for and delivered in accordance with the
terms of applicable agreements or instruments, duly authorized and validly
issued and are fully paid and non-assessable; the holders thereof have no rights
of rescission with respect thereto and are not subject to personal liability by
reason of being such holders; none of such securities were issued
B-15
<PAGE>
ANNEX.B
in violation of the preemptive rights of any holder of any security of WOI or
any similar rights granted by WOI or applicable Legal Requirements.
3.4 SEC FILINGS. WOI has previously delivered to TWI copies of (i) its
Form 10-K for the period ended December 31, 1995, (ii) its Registration
Statement on Form S-1 (File No. 33-94942) declared effective by the SEC on
October 18, 1995, and (iii) its Registration Statement on Form S-1 (File No. 33-
95106) declared effective by the SEC on October 18, 1995 ("WOI SEC Filings").
Each such filing was timely filed with the SEC, and did not contain any untrue
statement of material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading (i) as of the time such document was filed and (ii) except
as does not reflect a Material Adverse Effect on WOI, as of the date of this
Agreement, in each case except as set forth in a WOI SEC Filing of a subsequent
date or as set forth on Schedule 3.4.
3.5 WOI FCC REPRESENTATIONS.
(A) Except for agreements executed after the date of this Agreement,
Schedule 3.5(a) hereto sets forth a true and correct list of the WOI Channel
Leases. Except as stated on Schedule 3.5(a), no WOI Channel Lease (i) requires
the consent of the lessor thereunder (a "WOI Lessor") to the Merger, (ii) will
terminate or allow the lessor thereunder to terminate it as a result of the
Merger, or (iii) will require a change in the compensation payable to the lessor
thereunder, or the formula for determining that compensation as a result of the
Merger. Except as stated on Schedule 3.5(a), each such WOI Channel Lease which
is not pending acquisition by WOI or a Subsidiary of WOI is in full force and
effect and, to the knowledge of WOI, each other WOI Channel Lease is in full
force and effect. Except as set forth on Schedule 3.5(a), neither WOI nor any
of its Subsidiaries has received, or has knowledge that any other party has
received, any notice from a WOI Lessor that a WOI Channel Lease is in default or
is terminated, except for such notices of default which have been cured prior to
termination and for such notices of termination which have been withdrawn.
(B) [Reserved.]
(C) Schedule 3.5(c)-1 hereto lists each BTA for which WOI or any of
its Subsidiaries is the highest bidder in the FCC's MDS auction. WOI is not in
default of its payment obligations to the U.S. Treasury for any such BTA, as
such obligations are imposed under the FCC's small business payment regulations.
Except as set forth on Schedule 3.5(c)-2 or as described in any WOI SEC Filing,
neither WOI nor any of its Subsidiaries has agreed to sell or otherwise transfer
the whole or any part of the MDS channel rights accorded to the MDS BTA
authorization holder for any of those BTAs.
3.6 FINDER'S FEES. Neither MergerSub nor WOI has taken any action which
would impose upon TWI, MergerSub, WOI or any Subsidiary of WOI any obligation or
liability to any
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<PAGE>
ANNEX.B
person for finder's fees, agent's commissions or like payments in connection
with the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
3.7 EMPLOYEE PLANS.
(A) For purposes of this Agreement, "WOI Plan" shall mean each
"employee benefit plan" as such term is defined in section 3(3) of the ERISA,
whether or not subject to ERISA, and each bonus, incentive or deferred
compensation, severance, termination, retention, change of control, stock
option, stock appreciation, stock purchase, phantom stock or other equity-based,
performance or other employee or retiree benefit or compensation plan, program,
arrangement, agreement, policy or understanding, whether written or unwritten,
that provides benefits or compensation in respect of any employee or former
employee of WOI or any Subsidiary of WOI or the beneficiaries or dependents of
any such employee or former employee (such employees, former employees,
beneficiaries and dependents collectively, the "WOI Employees") or under which
any WOI Employee is or may become eligible to participate or derive a benefit
and that is or has been maintained or established by WOI or to which WOI or any
Subsidiary of WOI contributes or is or has been obligated or required to
contribute or with respect to which WOI or any Subsidiary of WOI may have any
liability or obligation.
(B) All WOI Plans conform (and at all times within the five years
preceding the date hereof have conformed) in all material respects to, and are
being administered and operated (and have at all times within the five years
preceding the date hereof been administered and operated) in material compliance
with, the requirements of ERISA, the Code and all other applicable Legal
Requirements. All returns, reports and disclosure statements required to be
made under ERISA and the Code with respect to all WOI Plans have been timely
filed or delivered. There have not been any "prohibited transactions," as such
term is defined in Section 4975 of the Code or Section 406 of ERISA, involving
any of the WOI Plans that could subject WOI or any Subsidiary of WOI to any
material penalty or tax imposed under the Code or ERISA. Neither WOI nor any
Subsidiary of WOI maintains or has maintained any WOI Plan qualified under
Section 401(a) of the Code and exempt from tax under Section 501(a) of the Code.
Neither WOI nor any Subsidiary of WOI has any announced plan or legally binding
commitment to create any WOI Plans or to materially amend or modify any existing
WOI Plan.
(C) There are no pending or threatened claims asserted or instituted
against
(i) any WOI Plan or its assets,
(ii) any fiduciary with respect to any such WOI Plan, or
(iii) WOI or any Subsidiary of WOI or any of its officers, directors
or employees,
under ERISA or any other applicable Legal Requirements and rules and regulations
promulgated thereunder, or claiming benefit payments other than those made in
the ordinary operation of such
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<PAGE>
ANNEX.B
plans, nor is there any basis for such claim. To the knowledge of WOI, the WOI
Plans are not the subject of any investigation, audit or action by any
governmental agency, including, but not limited to, the IRS, the Department of
Labor, the Equal Employment Opportunity Commission or the PBGC.
ARTICLE 4. COVENANTS OF TWI.
TWI hereby agrees to perform as follows:
4.1 OPERATION PRIOR TO THE CLOSING DATE. From the date hereof through the
Closing Date:
(A) Other than consummating the acquisitions of the Target Markets
pursuant to the Target Market Existing Agreements, neither TWI nor any
Subsidiary of TWI shall engage in any practice, take any action or enter into
any transaction other than in the customary and ordinary course of business.
(B) TWI will, and will cause each Subsidiary of TWI to, use reasonable
efforts to keep its business, properties and business relationships
substantially intact.
(C) TWI will, and will cause each Subsidiary of TWI to, (i) pay and
perform all of its debts, liabilities and obligations as and when due, except to
the extent either (A) being contested in good faith or (B) as to which adequate
liabilities have been accrued and recorded (determined in accordance with GAAP),
(ii) perform its material obligations under all Authorizations and Material
Contracts, and (iii) comply in all material respects with all Governmental
Rules.
(D) TWI agrees that (i) TWI will not take any action or cause or
permit any of its Subsidiaries to take any action, and will endeavor in good
faith not to permit any event to occur, which would cause or constitute one or
more breaches of the representations or warranties of TWI set forth in Article
2, if such representations and warranties were made at the time of the taking of
such action or the occurrence of such event, which breaches individually or in
the aggregate would reflect a Material Adverse Effect on TWI as compared with
the state of affairs which would exist if all such representations and
warranties were true and correct in all respects at such time; (ii) TWI will,
and will cause its Subsidiaries to, in the event of, and promptly after the
occurrence of, or promptly after becoming aware of the occurrence of or the
impending or threatened occurrence of, any event which would cause or constitute
such a breach or would, if it had occurred immediately prior to the date hereof,
have caused or constituted such a breach of any of the representations and
warranties set forth in said Article 2, give notice thereof to WOI; and (iii)
TWI shall and shall cause its Subsidiaries to use reasonable efforts to prevent
or promptly to remedy any such breach.
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<PAGE>
ANNEX.B
(E) TWI will, and will cause each of its Subsidiaries to, use
reasonable efforts to preserve, protect and maintain its and their rights and
interests in the TWI Channel Leases, FCC Licenses, and Material Contracts,
including, but not limited to, filing or having licensees or permittees file
with the FCC any and all reports, applications or other documents necessary to
preserve the FCC Licenses in full force and effect.
(F) Other than in the ordinary course of business, without WOI's
consent (which consent will not be unreasonably withheld or delayed, with such
reasonableness to be adjudged with respect to the maintenance and development of
TWI's business), TWI will not, and will not cause or permit any of its
Subsidiaries to, enter into, amend in any material respect or terminate, or
agree to enter into, amend in any material respect or terminate, except to
comply with this Agreement, any TWI Channel Lease, FCC License, Application or
Material Contract; provided that TWI or any of its Subsidiaries may enter into
any TWI Channel Lease or make any Application as may be required by the terms
and conditions of any Target Market Existing Agreement.
(G) TWI shall not repurchase, declare or pay any dividends (other than
the amount payable with respect to accrued and unpaid dividends on the TWI
Preferred Shares upon the conversion thereof into TWI Common Shares in
accordance with the terms of the TWI Preferred Stock), or make any other
distributions with respect to its shares of capital stock (including, without
limitation, the TWI Preferred Shares) consisting of cash or marketable
securities or any contribution thereof, nor shall TWI or any of its Subsidiaries
issue, sell or agree to sell any shares of its capital stock, or any securities
convertible into, or options with respect to, or warrants to purchase or rights
to subscribe for, any shares of its capital stock (other than upon conversion of
the TWI Preferred Stock into TWI Common Shares in accordance with the terms of
the TWI Preferred Stock).
(H) TWI will not, and will not cause or permit any of its Subsidiaries
to, sell, lease, transfer or otherwise dispose of any of its assets, except as
provided for by, or contemplated in, this Agreement, or in the ordinary course
of business, or as it may be required to do so as described in any TWI SEC
Filing.
(I) TWI will not, and will not cause any of its Subsidiaries to,
increase in any manner the base compensation of, or enter into any new bonus or
incentive agreement or arrangement with, any of its directors, officers or
employees, pay bonuses to any such director, officer of employee, to the extent
the aggregate of the foregoing for all such persons exceeds $50,000, or pay any
salaries except in the ordinary course of business, except as required under any
existing written employment agreement with any officer, director or employee of
TWI or any Subsidiary of TWI, except with respect to new employees who are
compensated at a rate of less than $50,000 per annum.
(J) TWI shall not transfer, or cause or permit any Subsidiary of TWI
to transfer, any interest in any Subsidiary.
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ANNEX.B
4.2 ESTOPPEL CERTIFICATES AND CONSENTS. Except as otherwise provided
herein, TWI shall use reasonable efforts to obtain or cause to be made, all
consents, governmental authorizations, approvals and filings necessary by virtue
of the Merger contemplated by this Agreement on or before the Closing Date, so
as to endeavor to ensure (a) that the Surviving Corporation will as of the
Effective Time enjoy all of the rights and privileges currently enjoyed by TWI
and each Subsidiary of TWI under each of the TWI Channel Leases (including,
without limitation, those listed on Schedule 2.10(a)), Licenses and Material
Contracts, (b) that the FCC has consented to the transfer of control to WOI with
respect to each cable antenna relay service license held by TWI or any of its
Subsidiaries or listed on Schedule 2.10(b), (c) that the FCC has consented to
the transfer of control to WOI of each other FCC License held by TWI or any of
its Subsidiaries or listed on Schedule 2.10(b), (d) that the franchising
authorities with jurisdiction over the matters have consented to the transfer of
control to WOI of all cable television franchises of TWI or any of its
Subsidiaries or listed on Schedule 2.10(b), and (e) that the FCC has waived FCC
Rule 21.952(c)(3) so that the consummation of the transactions contemplated by
this Agreement will not cause TWI's or any its Subsidiaries' BTA applications to
be dismissed. WOI will use reasonable efforts to join in and cooperate with the
filing and prosecution of applications for the consents and waivers described in
clauses (b) through (e) above. Upon request of WOI, TWI shall use reasonable
efforts to assist WOI to obtain from each of the other respective parties to
each of such Channel Leases and Material Contracts estoppel certificates in the
form of Exhibit 4.2 ("Estoppel Certificates"), certifying that TWI or a
Subsidiary of TWI, as applicable, is not in breach or violation of or in default
under any of such Channel Leases or Material Contracts and that it will not be
by virtue of the transaction contemplated hereby, and other matters specified
therein.
4.3 RENEWAL OR EXTENSION OF FCC AUTHORIZATIONS. TWI shall, and shall
cause each Subsidiary of TWI to:
(A) timely file, or cause to be filed, all applications, reports and
other submissions in such form and with such information as may be required by
the FCC, including but not limited to renewal applications, applications for
extensions of time to complete construction and Annual FCC Reports, to assure
that all Channels licensed or authorized to either TWI or any Subsidiary of TWI
remain in full force and effect without material adverse alteration or
modification, except to the extent that such alteration or modification results
from changes in the FCC's rules or policies of general applicability. TWI shall
utilize reasonable efforts to prosecute in good faith all applications, reports
and submissions submitted in accordance with this Section 4.3. TWI shall
promptly disclose to WOI any information TWI or any of its Subsidiaries receives
regarding any conditions or circumstances that would cause the FCC to decline to
accept such applications, reports and submissions as may be necessary or
desirable to keep the Licenses in full force and effect.
(B) use reasonable efforts to assure that the licensees or permittees
under the TWI Channel Leases timely file all applications, reports, and other
submissions in such form and with such information as may be required by the
FCC, including, but not limited to, renewal
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<PAGE>
ANNEX.B
applications, applications for extensions of time to complete construction and
Annual FCC Reports, to assure that the FCC Licenses subject to such TWI Channel
Leases remain in full force and effect without material adverse alteration or
modification, except to the extent that such alteration or modification results
from changes in the FCC's rules or policies of general applicability. TWI shall
use its reasonable efforts to assure that the licensees or permittees under the
TWI Channel Leases diligently prosecute in good faith all such applications,
reports and submissions. TWI shall promptly disclose to WOI any information TWI
or any of its Subsidiaries receives regarding any conditions or circumstances
that would cause, or could reasonably be expected cause, the FCC to decline to
issue such authorizations as may be necessary or desirable to keep the Licenses
in full force and effect.
(C) use reasonable efforts to prosecute its FCC Form 175-M application
for MDS Licenses to the extent that it was the high bidder in the MDS BTA
auction, including, without limitation, making all payments with respect thereto
to the United States Treasury, when and as required by applicable Legal
Requirements, and in filing applications for initial BTA authorizations or
statements of intention when and as required by applicable Legal Requirements to
preserve its rights as the high bidder in such BTAs.
4.4 NO SOLICITATION. From and after the date hereof, TWI will not, and
will not authorize any of its Subsidiaries or officers, directors, employees,
agents and other representatives or those of any Subsidiary of TWI
(collectively, "TWI Representatives") to, solicit, initiate or encourage
(including by way of furnishing information) any inquiries or the making of any
proposal which constitutes, or may reasonably be expected to lead to, an
Acquisition Proposal (as defined herein) from any Person or engage in any
discussion or negotiations relating thereto, or accept any Acquisition Proposal.
TWI shall immediately cease and cause to be terminated any existing
solicitation, discussion or negotiation with any parties conducted heretofore by
TWI or any TWI Representatives with respect to any of the foregoing. To the
extent permitted by applicable Legal Requirements, TWI will promptly notify WOI
of any such discussion or negotiations, requests for such information or the
receipt of any Acquisition Proposal, including the identity of the person or
group engaging in such discussions or negotiations requesting such information
or making such Acquisition Proposal, and the material terms and conditions of
any Acquisition Proposal. As used in this Agreement, "Acquisition Proposal"
shall mean any proposal or offer considered by the Board of Directors of TWI to
be bona fide, other than a proposal or offer by WOI or any of its affiliates,
for a tender or exchange offer, a merger, consolidation or other business
combination involving TWI or any Subsidiary of TWI or any proposal to acquire in
any manner (a) a substantial equity interest in TWI or any Subsidiary of TWI,
(b) any rights of TWI or any Subsidiary of TWI to any Channels or (c) any
Wireless Cable Television System.
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ANNEX.B
4.5 RESIGNATION OF DIRECTORS OF TWI. TWI shall deliver to WOI on the
Closing Date, except as otherwise requested by WOI, the written resignation of
all directors of TWI and each Subsidiary of TWI.
ARTICLE 5. ADDITIONAL AGREEMENTS.
5.1 SHAREHOLDERS MEETING. TWI and WOI shall each take all action
necessary in accordance with applicable Legal Requirements and in accordance
with their respective certificates of incorporation and bylaws to convene a
meeting of their respective stockholders (in the case of WOI, the "WOI
Stockholders Meeting") as promptly as practicable to consider and vote upon the
approval of this Agreement. TWI and WOI each, through its board of directors,
shall recommend to its stockholders (and, if applicable, its lenders) approval
of this Agreement and shall use best efforts to obtain approval and adoption of
this Agreement by such stockholders. Without limiting the foregoing, promptly
following the date of this Agreement, WOI shall prepare and file with the
Securities Exchange Commission (i) a proxy statement relating to the WOI
Stockholders Meeting (as amended from time to time, the "Proxy Statement"). The
Proxy Statement shall include the recommendation of WOI's board of directors
that this Agreement be approved and shall comply with all applicable laws and
regulations. WOI shall use its best efforts to cause the Proxy Statement to be
mailed to the Company's stockholders as promptly as practicable after the date
of this Agreement. WOI and TWI each shall also use its reasonable efforts to
take any action required to be taken under any applicable state securities laws
in connection with the issuance of WOI Common Shares in the Merger. WOI shall
cause all information included in the Proxy Statement to be true and correct in
all material respects and not omit to state any material fact required to be
stated therein or necessary in order to make such information not misleading in
light of the circumstances in which they are made, and WOI agrees to correct any
information in the Proxy Statement as may be required by applicable laws and
regulations. All costs of preparing, distributing and filing the Proxy
Statement and all other incremental costs incurred in obtaining the consent of
WOI's stockholders to the Merger shall be borne in full by WOI. All incremental
costs incurred in obtaining the consent of TWI's stockholders to the Merger
shall be borne in full by TWI. In addition, WOI shall use its best efforts to
obtain the WOI Bondholder Consent (as defined in Section 7.6) as promptly as
practicable, including, without limitation, preparing, obtaining and filing all
necessary documentation, complying with all applicable Legal Requirements and
requirements under the applicable indenture, and paying any consent fees or
other fees or premiums reasonably required by the holders of WOI's 13% Senior
Notes due 2003.
5.2 ACCESS.
(A) WOI and its officers, employees and representatives (including
independent public accountants, investment bankers, environmental consultants
and counsel), as applicable, will at all reasonable times during regular
business hours be permitted reasonable access to the Facilities and TWI's
corporate offices; will be permitted to make copies of or abstracts from all of
the books and records, financial and operating data and other information
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ANNEX.B
of TWI and each Subsidiary of TWI; and will be permitted to discuss the affairs
and accounts of TWI and each Subsidiary of TWI with the directors, officers,
employees, counsel, and accountants of TWI and each Subsidiary of TWI. Such
investigation shall not, however, affect the representations and warranties of
TWI set forth in Article 2 hereof.
(B) TWI and its officers, employees and representatives (including
independent public accountants, investment bankers, environmental consultants
and counsel), as applicable, will at all reasonable times during regular
business hours be permitted reasonable access to the facilities of WOI and its
Subsidiaries and WOI's corporate offices; will be permitted to make copies of or
abstracts from all of the books and records, financial and operating data and
other information of WOI and each Subsidiary of WOI; and will be permitted to
discuss the affairs and accounts of WOI and each Subsidiary of WOI with the
directors, officers, employees, counsel, and accountants of WOI and each
Subsidiary of WOI. Such investigation shall not, however, affect the
representations and warranties of WOI set forth in Article 3 hereof.
5.3 STOCK OPTIONS.
(A) All TWI Stock Option Plans shall terminate as of the Effective
Time and the provisions in any other plan, program or arrangement providing for
the issuance or grant of any other interest in respect of the capital stock of
TWI or any Subsidiary shall be deleted as of the Effective Time, and TWI shall
take all action necessary to ensure that following the Effective Time no
participant in any TWI Stock Option Plan or other plans, programs or
arrangements shall have any right thereunder to acquire equity securities of
TWI, the Surviving Corporation or any subsidiary thereof, and to terminate all
such rights. A "TWI Stock Option Plan" means any TWI stock option plan for its
directors or employees or the directors or employees of any Subsidiary or any
other person.
(B) At the Closing, upon and in consideration for the surrender,
cancellation and exchange of the Existing Burkhalter Options, WOI will issue to
Henry M. Burkhalter fully-vested options which will entitle him to acquire an
aggregate of 78,015 WOI Common Shares for an exercise price of $6.82 per WOI
Common Share and which will have substantially the same other terms and
conditions as are described in the TWI SEC Filings for the options to acquire
TWI Common Shares which are presently held by Burkhalter (the "Existing
Burkhalter Options").
(C) At the Closing, upon and in consideration for the surrender,
cancellation and exchange of the Existing Byer Options, WOI will issue to Bill
R. Byer, Jr. fully-vested options which will entitle him to acquire an aggregate
of 62,411 WOI Common Shares for an exercise price of $6.82 per WOI Common Share
and which will have substantially the same other terms and conditions as are
described in the TWI SEC Filings for the options to acquire TWI Common Shares
which are presently held by Byer (the "Existing Byer Options").
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ANNEX.B
(D) At the Closing, upon and in consideration for the surrender,
cancellation and exchange of the Existing Woolhiser Options, WOI will issue to
Laurence O. Woolhiser, Jr. fully-vested options which will entitle him to
acquire an aggregate of 22,000 WOI Common Shares for an exercise price of $6.82
per WOI Common Share and which will have substantially the same other terms and
conditions as are described in the TWI SEC Filings for the options to acquire
TWI Common Shares which are presently held by Woolhiser (the "Existing Woolhiser
Options").
(E) At the Closing, upon and in consideration for the surrender,
cancellation and exchange of the Existing Eilers Options, WOI will issue to
Walter Eilers fully-vested options which will entitle him to acquire an
aggregate of 14,467 WOI Common Shares for an exercise price of $6.82 per WOI
Common Share and which will have substantially the same other terms and
conditions as are described in the TWI SEC Filings for the options to acquire
TWI Common Shares which are presently held by Eilers (the "Existing Eilers
Options").
(F) At the Effective Time, the Existing Burkhalter Options, the
Existing Byer Options, the Existing Woolhiser Options and the Existing Eilers
Options will be canceled. The number of WOI Common Shares covered by the
options described in clauses (b), (c), (d) and (e) above will be proportionately
increased, and the exercise price per share thereunder will be proportionately
reduced, to reflect any stock dividend, stock split or other subdivision of the
WOI Common Shares effected after the date of this Agreement and prior to the
Effective Time. The number of WOI Common Shares covered by the options
described in clauses (b), (c), (d) and (e) above will be proportionately
reduced, and the exercise price per share thereunder will be proportionately
increased, to reflect any reverse stock split or other combination of the WOI
Common Shares effected after the date of this Agreement and prior to the
Effective Time.
5.4 EFFORTS TO CONSUMMATE SPECIFIED ACQUISITIONS. If at the Effective
Time any of the Specified Acquisition has not been consummated and the related
Target Market Existing Agreement has not been terminated, then after the
Effective Time WOI will use, and will cause the Surviving Corporation to use,
reasonable efforts to consummate such Specified Acquisition and to cause the
Market Delivery Requirement to be satisfied with respect to such specified
Acquisition.
5.5 REASONABLE EFFORTS. Upon the terms and subject to the conditions set
forth in this Agreement, each of the parties agrees to use its reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including (a) the obtaining of all necessary
actions or non-actions, waivers, consents and approvals from Governmental
Authorities and the making of all necessary registrations and filings (including
filings with Governmental Entities) and the taking of all reasonable steps as
may be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by any Governmental Entity (including, without limitation, the TWI
BTA Waiver); (b) the obtaining of all necessary consents, approvals or waivers
from third parties
B-24
<PAGE>
ANNEX.B
(including, without limitation, the WOI Bondholder Consent); (c) the defending
of any lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions contemplated
hereby including seeking to have any stay or temporary restraining order entered
by any court or other Governmental Entity vacated or reversed; and (d) the
execution and delivery of any additional instruments necessary to consummate the
transactions contemplated by this Agreement.
5.6 PUBLIC ANNOUNCEMENTS. WOI and MergerSub, on the one hand, and TWI, on
the other hand, will consult with each other before issuing any press release
with respect to the transactions contemplated by this Agreement, and shall not
issue any such press release prior to such consultation, unless otherwise
required under applicable Legal Requirements.
5.7 NOTIFICATION OF CERTAIN MATTERS. TWI shall give to WOI prompt notice
of: (i) any notice of, or other communication relating to, a default or event
that, with notice or lapse of time or both, would become a default, received
subsequent to the date of this Agreement and prior to the Effective Time under
any note, license, agreement or other instrument or obligation other than in
respect of defaults which, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect on TWI; and (ii) any Material
Adverse Effect on TWI or the occurrence of any event which, so far as reasonably
can be foreseen at the time of its occurrence, is reasonably likely to result in
a Material Adverse Effect on TWI. WOI shall give to TWI prompt notice of: (i)
any notice of, or other communication relating to, a default or event that, with
notice or lapse of time or both, would become a default, received subsequent to
the date of this Agreement and prior to the Effective Time under any note,
license, agreement or other instrument or obligation other than in respect of
defaults which, individually or in the aggregate, could reasonably be expected
to result in a Material Adverse Effect on WOI; and (ii) any Material Adverse
Effect on WOI or the occurrence of any event which, so far as reasonably can be
foreseen at the time of its occurrence, is reasonably likely to result in a
Material Adverse Effect on WOI. Each party shall give the other prompt notice
of any written notice or other written communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement.
5.8 HART-SCOTT-RODINO ACT FILING. The parties will cooperate in preparing
and filing any Notification and Report Forms and related material that it may be
required to file with the Federal Trade Commission and the Antitrust Division of
the United States Department of Justice under the HSR Act, and will use their
respective best efforts to obtain an early termination of the applicable waiting
period, and will make any further filings pursuant thereto that may be
necessary, proper, or advisable with respect to the transactions contemplated
hereby.
5.9 ACQUISITION OF TARGET MARKETS. Notwithstanding any provisions
contained herein to the contrary, TWI shall have the right to acquire the
Wireless Cable Television System and related assets servicing the Target Markets
pursuant to the terms of the Target Markets' Existing Agreements, as the same
may be amended; provided that (i) TWI shall keep WOI fully informed regarding
the status of any negotiations regarding the acquisition of the Target Markets,
and (ii)
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ANNEX.B
WOI shall have the right to approve any material amendment or waiver of any
matter regarding or material condition of any Target Market Existing Agreement.
5.10 TERMINATION OF CERTAIN AGREEMENTS. On the Closing Date and at the
request of WOI, TWI shall terminate any items described on Schedule 2.9
Affiliate Agreements and employment or other management agreements designated by
WOI.
5.11 EXCESS CONSENTS. If on the date which is six months after the Closing
Date any Channel described in the TWI SEC Filings for any Owned Market is not a
Good Channel (any such Channel being an "Adjustment Channel"), then WOI shall
have recourse to the WOI Common Shares held pursuant to the General Escrow
Agreement (the "General Escrow Shares") in accordance with the terms of the
General Escrow Agreement. In such event, General Escrow Shares having an
aggregate Exchange Price equal to the Stipulated Consent Amount for such
Adjustment Channel shall be delivered to WOI, as further provided in the General
Escrow Agreement.
5.12 WOI LOAN. Promptly after the date of this Agreement, TWI and WOI will
enter into a loan agreement having terms and conditions, and in a form,
reasonably acceptable to TWI and WOI providing for loans (collectively, the
"Bridge Loan") to TWI and its Subsidiaries and having material terms which
include those set forth on the attached Exhibit 5.11.
5.13 PAYMENT OF CERTAIN AMOUNTS. Immediately following the Effective Time,
WOI or the Surviving Corporation shall satisfy TWI's present obligation to pay
$4.5 million to Vision Communications, Inc. ("VCI") by delivery of (i)
$1,800,000 in cash and (ii) 180,000 WOI Common Shares (the "VCI WOI Shares").
WOI's obligations set forth in this Section 5.13 shall be subject to VCI
executing on the Closing Date (i) a Stockholder Letter, and (ii) the Amended
Agreements, with respect to the VCI WOI Shares so issued.
5.14 CAPITAL STRUCTURE. Prior to the Effective Time, TWI shall not alter
its capital structure by stock split, stock dividend, recapitalization or other
event. This Section 5.14 shall not be deemed to prohibit the conversion of the
TWI Preferred Shares into TWI Common Shares in accordance with the terms of the
TWI Preferred Stock.
5.15 GUARANTY OF INTERIM FACILITY. From and after the Effective Time, WOI
hereby guarantees the payment in full by the Surviving Corporation of the
principal amount of, and interest in respect of, the "Interim Facility," as that
term is defined in the TWI SEC Filings. Chase Venture Capital Associates is an
express, third-party beneficiary of the agreement of WOI set forth in this
Section 5.15.
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<PAGE>
ANNEX.B
ARTICLE 6. CONDITIONS PRECEDENT TO MERGER.
The obligation of the parties hereto to consummate the Merger is subject to
fulfillment, or written waiver signed by all parties hereto, of each of the
following conditions precedent on or prior to the Closing Date or the date
specified therein.
6.1 SECURITIES MATTERS. All necessary state securities or blue sky
authorizations shall have been received.
6.2 NO ORDER. No Governmental Authority or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order or
Legal Requirement (whether temporary, preliminary or permanent) which is then in
effect and has the effect of prohibiting the Merger or any of the transactions
contemplated hereby or otherwise making the consummation of the Merger or any of
the transactions contemplated hereby illegal.
6.3 OTHER APPROVALS. The waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been terminated and all
filings required to be made prior to the Effective Time with, and all consents,
approvals, permits and authorizations required to be obtained prior to the
Effective Time from, any Governmental Authority in connection with the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby by TWI, WOI and MergerSub, shall have been made or obtained
(as the case may be) without restrictions.
ARTICLE 7. CONDITIONS PRECEDENT TO CLOSING BY WOI AND MERGERSUB.
The obligations of WOI and MergerSub to consummate the Merger are subject
to fulfillment, or written waiver signed by WOI and MergerSub, of each of the
following conditions precedent on or prior to the Closing Date.
7.1 STOCKHOLDER APPROVAL. The Merger shall have been approved by the
requisite vote of the holders of WOI Common Shares in accordance with applicable
Legal Requirements, its Certificate of Incorporation and Bylaws or any rule or
regulation of any securities exchange or market upon which WOI's securities are
traded or quoted.
7.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by TWI shall be true and correct in all material respects when made and
shall be true and correct in all respects as if originally made on and as of the
Closing Date (except as to such matters which have arisen or occurred, or any
actions taken, since the date of this Agreement and which, in the aggregate, do
not reflect a Material Adverse Effect on TWI as compared with the state of
affairs which would exist if all such representations and warranties were true
and correct in all respects as if originally made on and as of the Closing
Date).
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<PAGE>
ANNEX.B
7.3 TWI DOCUMENTS. TWI shall have delivered the following to WOI in form
and substance satisfactory to WOI and its counsel:
(A) A certificate signed by the chief executive officer of TWI, on
behalf of and in his capacity as an officer of TWI, confirming, on and as of the
Closing Date, that each representation and warranty set forth in Article 2
hereof was true and correct on the date made and is true and correct on and as
of the Closing Date (in each case, other than as set forth in such certificate)
and that TWI is in compliance with the applicable covenants set forth in
Articles 4 and 5 (other than as set forth in such certificate).
(B) An opinion of corporate and FCC counsel to TWI and each Subsidiary
of TWI in form reasonably acceptable to WOI.
(C) The minute books, bylaws, certificate of incorporation and other
organizational documents of TWI and each Subsidiary of TWI.
(D) An Estoppel Certificate from Mississippi EdNet Institute, Inc.
with respect to the "EdNet Agreement" referred to in the TWI SEC Filings.
(E) (i) Waiver of Rule 21.952(c)(3) of the FCC with respect to TWI's
BTA Applications (the "TWI BTA Waiver"); and
(ii) A "final" order by the FCC consenting, without any
materially adverse or onerous condition, to the transfers of control of FCC
Licenses described in Section 4.2. For purposes of this Section, the term
"final" shall mean an order of the FCC which has not been stayed and, by lapse
of time or otherwise, is no longer subject to administrative or judicial
reconsideration, review, appeal or stay.
(F) The resignations described in Section 4.5.
7.4 NO MATERIAL ADVERSE CHANGE. No change shall have occurred with
respect to TWI or any Subsidiary of TWI, or their respective assets, from the
date hereof through the Closing Date which would have a Material Adverse Effect
on TWI.
7.5 ABSENCE OF DISSENTERS' RIGHTS. The Merger shall be approved by all of
the holders of TWI Common Shares issued and outstanding at the Effective Time.
7.6 BONDHOLDERS' CONSENTS. WOI shall have obtained on or before the
Effective Time written consent and/or approval of the Merger, and the related
transactions contemplated by this Agreement, by the holders of the $150,000,000
of 13% Senior Notes due 2003 of WOI (the "WOI Bondholder Consent").
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<PAGE>
ANNEX.B
7.7 TWI OBLIGATIONS PERFORMED. All obligations of TWI to be performed
hereunder through and including the Closing Date shall have been performed in
all material respects.
7.8 STOCK OPTIONS. Each of the Existing Burkhalter Options, the Existing
Byer Options, the Existing Eilers Options and the Existing Woolhiser Options
shall have been surrendered as provided in Section 5.3, and each other stock
option and warrant to purchase TWI Common Shares that has not been exercised
prior to the Effective Time shall have been exercised, canceled or otherwise
terminated.
7.9 TWI PREFERRED STOCK. Each TWI Preferred Share shall have been
converted into TWI Common Shares prior to the Effective Time.
7.10 [RESERVED.]
7.11 STOCKHOLDER DOCUMENTS. Each holder of TWI Common Shares at the
Effective Time (the "TWI Stockholders") shall have executed and delivered to WOI
(a) the General Escrow Agreement, (b) a Stockholder Letter, (c) the Amended
Agreements, (d) the Acquisition Escrow Agreement, if there is any Acquisition
Contingent Amount, and (e) the Market Delivery Escrow Agreement, if the Market
Delivery Requirement is not satisfied with respect to any Owed Market as of the
Effective Time. VCI shall have executed and delivered to WOI the Amended
Agreements and a Stockholder Letter.
7.12 [RESERVED.]
7.13 [RESERVED.]
7.14 [RESERVED.]
7.15 EMPLOYMENT AGREEMENTS. Henry Burkhalter and Bill R. Byer, Jr. shall
have executed employment agreements in the form attached hereto as Exhibit
7.15(a) and 7.15(b), respectively, which agreements shall supersede (and
terminate) any prior employment agreements between such parties and TWI and its
Subsidiaries (collectively, the "Amended Employment Agreements").
ARTICLE 8. CONDITIONS PRECEDENT TO CLOSING BY TWI.
The obligation of TWI to consummate the Merger is subject to fulfillment,
or written waiver signed by TWI, of each of the following conditions precedent
on or prior to the Closing Date.
8.1 STOCKHOLDER APPROVAL. The Merger shall have been approved by the
requisite vote of the holders of the TWI Common Shares in accordance with
applicable Legal Requirements and its Certificate of Incorporation and Bylaws.
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ANNEX.B
8.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by WOI and/or MergerSub shall be true and correct in all material respects
when made and shall be true and correct in all respects as if originally made on
and as of the Closing Date (except as to such matters which have arisen or
occurred, or any actions taken, since the date of this Agreement and which, in
the aggregate, do not reflect a Material Adverse Effect on WOI as compared with
the state of affairs which would exist if all such representations and
warranties were true and correct in all respects as if originally made on and as
of the Closing Date).
8.3 WOI AND/OR MERGERSUB DOCUMENTS. WOI and/or MergerSub, as the
applicable case may be, shall have executed and delivered to TWI in form and
substance satisfactory to TWI and to counsel:
(A) A certificate signed by the chief executive officer of WOI and
MergerSub, on behalf of and in his respective capacity as an officer of WOI or
MergerSub, confirming, on and as of the Closing Date, that each of the
representations and warranties set forth in Article 3 hereof was true and
correct on the date made and is true and correct on and as of the Closing Date
(in each case, other than as set forth in such certificate), and that WOI and
MergerSub are in compliance with their respective covenants set forth in
Articles 4 and 5 (other than as set forth in such certificate).
(B) An opinion of corporate counsel to WOI and/or MergerSub in forms
reasonably acceptable to TWI.
(C) The General Escrow Agreement (and the Acquisition Escrow
Agreement, if there is any Acquisition Contingent Amount, and the Market
Delivery Escrow Agreement, if the Market Delivery Requirement is not satisfied
with respect to any Owned Market as of the Effective Time), executed by WOI or
the Acquisition Escrow Agent, as the case may be.
(D) The Amended Agreements, executed by WOI and each WOI Initial
Stockholder.
(E) The Amended Employment Agreements, executed by WOI.
(F) A certificate substantially in the form of the attached Exhibit
8.3, executed by WOI.
8.4 WOI AND MERGERSUB OBLIGATIONS PERFORMED. All obligations of WOI and
MergerSub to be performed hereunder through and including the Closing Date shall
have been performed in all material respects.
8.5 NO MATERIAL ADVERSE CHANGE. No change shall have occurred with
respect to WOI or any Subsidiaries of WOI, or their respective assets, from the
date hereof through the
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<PAGE>
ANNEX.B
Closing Date which could reasonably be expected to have a Material Adverse
Effect on WOI or any Subsidiaries of WOI.
ARTICLE 9. TERMINATION.
9.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated and
may be abandoned at any time prior to the Effective Time, before or after the
approval of this Agreement by the stockholders of TWI and WOI, by the mutual
consent of WOI, MergerSub and TWI.
9.2 TERMINATION BY TWI. This Agreement may be terminated and the Merger
may be abandoned by TWI if the Closing conditions set forth in Articles 6 and 8
shall not have been satisfied in full or waived on or before December 31, 1996.
9.3 TERMINATION BY WOI OR MERGERSUB. This Agreement may be terminated and
the Merger may be abandoned by WOI or MergerSub if the Closing conditions set
forth in Articles 6 and 7 shall not have been satisfied in full or waived on or
before December 31, 1996.
9.4 EFFECT OF TERMINATION AND ABANDONMENT.
(A) In the event of the termination of this Agreement and the
abandonment of the Merger pursuant to this Article 9, the remedies set forth
below shall constitute the minimum Damages payable by a party hereunder with
regard to the circumstances set forth therein. The amounts set forth below are
minimum amounts payable hereunder, and nothing contained herein shall preclude
any party from pursuing Damages in excess of the amounts set forth below or
pursuing any equitable remedies.
(B) In the event that this Agreement is terminated solely as a result
of the failure of one or more of the conditions set forth in Sections 7.2, 7.3,
7.5, 7.7, 7.8, 7.9, 7.11, 7.15 or 8.1, or if TWI is obligated to, but does not,
consummate the Merger, then TWI shall deliver to WOI the TWI Default Shares.
The TWI Default Shares shall mean 204,545 TWI Common Shares (subject to
adjustment for any stock split, recapitalization, or related event) plus an
additional number of TWI Common Shares equal to the TWI IPO Adjustment Shares.
The "TWI IPO Adjustment Shares" shall mean additional TWI Common Shares to be
issued upon consummation of any initial public offering of TWI Common Shares
effected following the termination of this Agreement or such failure to
consummate the Merger and prior to the third anniversary of the date of this
Agreement at a price ("IPO Price") less than $11.00 per share (adjusted for
stock splits, recapitalizations and other events) determined as follows: the
product of (a)(i) $11.00 divided by the IPO Price, minus (ii) $1.00, multiplied
by (b) 204,545. The TWI Default Shares shall be issued in a private placement,
with one long-form, and (when, as and if available under applicable Legal
Requirements) one short-form, demand registration right similar to those set
forth in the Stockholders Agreement described in the TWI SEC Filings.
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ANNEX.B
(C) In the event that this Agreement is terminated solely as a result
of the failure of one or more of the conditions set forth in Sections 7.1, 7.6,
8.2, 8.3 or 8.4, or if WOI is obligated to, but does not, cause MergerSub to
consummate the Merger, then WOI shall deliver to TWI a number of WOI Common
Shares which is equal to $2,250,000 divided by the lesser of (i) the Exchange
Price and (ii) the WOI Market Price determined as of the last day prior to such
delivery. Such shares shall be issued in a private placement, with demand
registration rights similar to those set forth in the Amended Agreements for the
"TruVision Registrable Securities" described therein.
ARTICLE 10. CONDITIONS FOR RELEASE OR ISSUANCE OF GENERAL CONTINGENT AMOUNT
AND WOI CONTINGENT AMOUNT.
10.1 PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES; INDEMNIFICATIONS.
The statements, certifications, representations and warranties made by
TWI in this Agreement, and any schedule or in any exhibit, certificate, or other
instrument delivered by or on behalf of TWI or any Subsidiary of TWI pursuant to
this Agreement shall survive the Merger for a period of six (6) months from the
Closing Date. TWI shall indemnify and hold WOI and Merger Sub and their
respective officers and directors ("WOI Indemnitees") harmless from any and all
Damages relating to or arising from any material breach or material non-
performance of any representation or warranty or covenant of TWI contained in
this Agreement. The statements, certifications, representations and warranties
made by WOI and MergerSub in this Agreement, and any schedule or in any exhibit,
certificate, or other instrument delivered by or on behalf of WOI or any
Subsidiary of WOI pursuant to this Agreement shall survive the Merger for a
period of six (6) months from the Closing Date. WOI shall indemnify and hold
the TWI Stockholders and their respective officers, partners and directors ("TWI
Indemnitees") harmless from any and all Damages relating to or arising from any
material breach or material non-performance of any representation or warranty or
covenant of WOI or MergerSub contained in this Agreement.
10.2 GENERAL CONTINGENT AMOUNT; CONSENTS. The General Contingent Amount
shall be held by the General Escrow Agent pursuant to the terms of the General
Escrow Agreement, which shall remain in effect until the expiration of the
General Escrow Period. The indemnification obligations of TWI shall be limited
to and satisfied solely from the General Contingent Amount in accordance with
the terms of the General Escrow Agreement. Upon the expiration of the General
Escrow Period, the General Contingent Amount to be received by each former
holder of TWI Common Shares shall be proportionately reduced by the amount of
the Claims properly charged against the General Contingent Amount in accordance
with the terms of the General Escrow Agreement and by the Stipulated Consent
Amount for all Adjustment Channels. WOI acknowledges and agrees that there
shall be no remedy or other recourse by WOI or MergerSub, or its successors or
assigns, against TWI or its shareholders, or their successors and assigns of any
nature whatsoever, including, but not limited to breaches of
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ANNEX.B
representations, warranties or covenants of this Agreement, other than the
General Contingent Amount and other than for fraud, and that the General
Contingent Amount shall be the sole remedy and recourse by WOI or MergerSub
against TWI or its shareholders.
10.3 WOI CONTINGENT AMOUNT. The indemnification obligations of WOI
shall be limited to and satisfied solely by the issuance by WOI of WOI Common
Shares in quantities such that the aggregate Exchange Price of the shares so
issued is equal to the aggregate amount of the Damages deemed paid or satisfied
thereby; provided that in no event will WOI be required to issue pursuant to
this Section 10.3 WOI Common Shares having an aggregate Exchange Price in excess
of $2,530,000. Any dispute as to the indemnity obligations of WOI pursuant to
this Section 10.3 which cannot be resolved by WOI and the "Stockholder
Representative" referred to in General Escrow Agreement (any which resolution
will be binding upon WOI and the TWI Stockholders) will be resolved in the
manner provided in Section 3.3(c) of the General Escrow Agreement. There shall
be no remedy or other recourse by any TWI Stockholder, or of its successors or
assigns, against WOI or its shareholders, or their successors and assigns of any
nature whatsoever, including, but not limited to breaches of representations,
warranties or covenants of this Agreement to be performed by WOI prior to the
Effective Time, other than the WOI Contingent Amount and other than for fraud,
and the WOI Contingent Amount shall be the sole remedy and recourse by the TWI
Stockholders against WOI, MergerSub or their respective shareholders.
ARTICLE 11. DEFINITIONS.
11.1 The terms used in this Agreement have the respective meanings
specified or referred to in this Article 12:
"ACQUISITION CONTINGENT AMOUNTS" shall have the meaning set forth in
Section 1.2(b).
"ACQUISITION ESCROW AGENT" means the "Escrow Agent" referred to in the
Acquisition Escrow Agreement.
"ACQUISITION ESCROW AGREEMENT" shall have the meaning set forth in Section
1.2(h).
"ACQUISITION PROPOSAL" shall have the meaning set forth in Section 4.4.
"ACT" means The Communications Act of 1934, as amended.
"ADJUSTMENT AMOUNT" shall have the meaning set forth in Section 1.2(c).
"ADJUSTMENT SHARES" shall have the meaning set forth in Section 1.2(c).
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ANNEX.B
"AFFILIATE" means with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such Person, and any other Person who or which, directly or indirectly, has any
equity interest in such Person, is a director, officer or employee of such
Person, or a member of the immediate family of any of the foregoing Persons,
whether or not living under the same roof with such Person.
"AGGREGATE INITIAL SHARE AMOUNT" means 3,373,333, as such amount may be
proportionately increased to reflect any stock dividend, stock split or other
subdivision of the WOI Common Shares which may be effected after the date of
this Agreement and prior to the Effective Time, and as such amount may be
proportionately decreased to reflect any reverse stock split or other
combination of the WOI Common Shares which may be effected after the date of
this Agreement and prior to the Effective Time.
"AMENDED AGREEMENTS" shall have the meaning set forth in Section 1.2(j).
"AMENDED EMPLOYMENT AGREEMENTS" shall have the meaning set forth in Section
7.15.
"ANNUAL FCC REPORT" means the reports which a licensee in the MDS service
is required to file annually with the FCC pursuant to Section 21.911 of the FCC
Rules.
"APPLICATION" means a pending application by TWI or any Subsidiary of TWI
or Institution or other Person to the FCC for a License in any Market.
"AUTHORIZATION" means any license, permit, authorization, franchise, grant,
registration, certificate, consent and waiver awarded to a Person (or which a
Person has the right to acquire in any market) by a Governmental Authority which
is used, useable or held for use in or in conjunction with or otherwise
associated with the provision of wireless cable services.
"BASE SHARES" shall have the meaning set forth in Section 1.2(c).
"BONA FIDE SUBSCRIBER" means a customer or subscriber receiving and paying
for (either as an individual subscriber or as an "equivalent subscriber")
regular monthly basic wireless cable television services of TWI or a Subsidiary
of TWI in an Existing Market, who has paid for at least one month of basic
service at the normal rate applicable to such customer or subscriber, and whose
account receivable for such service does not include any amount overdue (and for
which a bill has been or should have been received by such subscriber) for more
than a total of 75 days' subscription service, except for (i) customers or
subscribers repaying such balances in accordance with a reasonable repayment
arrangement with the Company or (ii) institutional customers or subscribers that
the Company has reasonably determined are not credit risks. Any
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ANNEX.B
inactive subscriber or active subscriber whose accounts receivable balance
included any amount overdue in excess of 75 days as of March 31, 1996 who
becomes current and (if disconnected) whose service is reconnected prior to
Closing will also be considered a Bona Fide Subscriber. For purposes of this
definition, the number of "equivalent subscribers" in a given multiple dwelling
unit means (i) the number of subscribers in such multiple dwelling unit, times
(ii) the basic bulk rate for such subscribers, divided by (iii) the basic
service rate for individual subscribers in the applicable market.
"BRIDGE LOAN" shall have the meaning set forth in Section 5.12.
"BTA" shall have the meaning set forth in Section 2.10(c).
"CERTIFICATES" shall have the meaning set forth in Section 1.2(i).
"CHANNEL" means a frequency band which may be licensed by the FCC to an
eligible Person for the provision of ITFS, MDS or MMDS service in any Market.
"CHANNEL LEASE" means an agreement pursuant to which the channel capacity
licensed or to be licensed under an Authorization has been leased to TWI, WOI or
a Subsidiary of TWI or WOI or which TWI or a Subsidiary of TWI otherwise has
rights to acquire in any Market.
"CLOSE" OR "CLOSING" means the consummation of the transactions
contemplated in Article 1 hereof as provided for in Section 1.3.
"CLOSING DATE" means the date on which the Closing shall occur as provided
for in Section 1.3.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONSENTS" means the consents (including, without limitation, FCC
Consents), approvals, authorizations, and waivers of any public, government, or
regulatory body, authority, agency, or unit and any and all consents, approvals,
authorizations and waivers from parties to any of the Material Contracts or any
other Person that are (i) required for the lawful consummation of this Agreement
and/or any other transaction contemplated by this Agreement, or (ii) necessary
for WOI and its Subsidiaries to conduct the operations currently conducted by
TWI and its Subsidiaries or to consummate the acquisition of the Target Markets
and fulfill their other obligations after the Closing.
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ANNEX.B
"COPYRIGHT ACT" means the Copyright Act of 1976, as amended.
"COPYRIGHT OFFICE" means the United States Copyright Office of the Library
of Congress.
"COPYRIGHT RULES" means the rules and regulations promulgated by the
Copyright Office under authority of the Copyright Act, as set forth in Part 201,
Volume 37 of the Code of Federal Regulations.
"DAMAGES" means all losses, obligations, liabilities, settlement payments,
awards, judgments, fines, penalties, damages, deficiencies, court costs, costs
of arbitration or administrative proceedings, attorneys' fees and other
reasonable expenses and costs.
"DGCL" means the Delaware General Corporation Law.
"EFFECTIVE TIME" shall mean the date and time of the filing of the
applicable certificate of merger in the State of Delaware.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESTOPPEL CERTIFICATE" shall have the meaning set forth in Section 4.2.
"EXCHANGE PRICE" means $15.00, as such amount may be proportionately
decreased to reflect any stock dividend, stock split or other subdivision of the
WOI Common Shares which may be effected after the date of this Agreement and
prior to the Effective Time, and as such amount may be proportionately increased
to reflect any reverse stock split or other combination of the WOI Common Shares
which may be effected after the date of this Agreement and prior to the
Effective Time.
"EXISTING MARKETS" shall mean Jackson, Delta, Gulf Coast, Tupelo,
Hattiesburg, Natchez, Meridian, Starkville and Oxford, Mississippi and Demopolis
and Tuscaloosa, Alabama.
"FAA" means the Federal Aviation Administration or any successor
agency(ies) with jurisdiction over towers and other antenna structures.
"FAA RULES" means the rules promulgated by the FAA and applicable to
antenna towers and other structures.
"FCC" means the Federal Communications Commission.
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ANNEX.B
"FCC CONSENT" shall mean the consent of the FCC to the transfer of
control or assignment of any MDS and MMDS License.
"FCC LICENSE" shall mean an FCC-issued Authorization to construct and/or
operate a MDS, MMDS, low power television or ITFS facility, including any
special temporary authority.
"FCC PROCEEDING" means a Proceeding relating to Applications or Licenses.
"FCC RULES" means the rules and regulations promulgated by the FCC under
authority of the Act, as set forth in Volume 47 of the Code of Federal
Regulations.
"FLIPPIN ACQUISITION" means the purchase and sale of assets relating to the
Flippin, Tennessee market pursuant to the Flippin Purchase Agreement.
"FLIPPIN PURCHASE AGREEMENT" means the Purchase and Sale Agreement dated as
of November 7, 1995 between TWI and Heartland Wireless Communications, Inc., as
such Agreement may be amended or otherwise modified after the date of this
Agreement as permitted by this Agreement and prior to the Effective Time or
after the Effective Time.
"GAAP" means generally accepted accounting principles in effect as of the
applicable time or the date of any financial statements in the United States of
America. The term "generally accepted accounting principles" shall mean
accounting principles which are (a) consistent with the principles promulgated
or adopted by the Financial Accounting Standards Board and its predecessors as
generally accepted accounting principles, and (b) such that a certified public
accountant would, insofar as the use of accounting principles is pertinent, be
in a position to deliver an unqualified opinion as to financial statements in
which such principles have been properly applied.
"GAAP DEBT" means indebtedness for borrowed money (other than indebtedness
to the United States government incurred in connection with the "BTA Auction"
referred to in the TWI SEC Filings) on March 31, 1996 which would be properly
reportable as such on a consolidated balance sheet for TWI and its Subsidiaries
prepared in accordance with GAAP.
"GADSDEN ACQUISITION" means the purchase and sale of assets relating to the
Gadsden, Alabama market pursuant to the Flippin Purchase Agreement.
"GADSDEN CONTINGENT AMOUNT" shall have the meaning set forth in Section
1.2(b).
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ANNEX.B
"GADSDEN PURCHASE AGREEMENT" means the Purchase and Sale Agreement
dated as of February 15, 1996 between TWI and Gadsden Wireless Cable
Corporation, Inc., as such Agreement may be amended or otherwise modified after
the date of this Agreement as permitted by this Agreement and prior to the
Effective Time or after the Effective Time.
"GENERAL CONTINGENT AMOUNT" shall have the meaning set forth in Section
1.2(b).
"GENERAL ESCROW AGENT" means the "Escrow Agent" referred to in the General
Escrow Agreement.
"GENERAL ESCROW AGREEMENT" shall have the meaning set forth in Section
1.2(h).
"GENERAL ESCROW PERIOD" means the "Escrow Period," as that term is defined
in the General Escrow Agreement.
"GENERAL ESCROW SHARES" has the meaning set forth in Section 5.11.
"GOOD CHANNEL" has the meaning set forth in Section 1.2(b).
"GOVERNMENTAL AUTHORITY" means any federal, state, local, municipal,
foreign or other government or any federal, state or local regulatory authority.
"GRANTED LICENSE" has the meaning set forth in Section 1.2(b).
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976.
"HUNTSVILLE ACQUISITION" means the purchase and sale of assets relating to
the Huntsville, Alabama market pursuant to the Huntsville Purchase Agreement.
"HUNTSVILLE CONTINGENT AMOUNT" shall have the meaning set forth in Section
1.2(b).
"HUNTSVILLE PURCHASE AGREEMENT" means the Purchase and Sale Agreement dated
as of February 6, 1996 among TWI, Madison Communications, Inc. and Beasley
Communications, Inc., as such Agreement may be amended or otherwise modified
after the date of this Agreement and prior to the Effective Time as permitted by
this Agreement or after the Effective Time.
"INSTITUTION" shall mean an accredited institution or a governmental
organization engaged in the formal education of enrolled students, or a non-
profit organization whose
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ANNEX.B
purposes are educational, which is a qualified applicant for any Channel and has
entered into a Channel Lease.
"IRS" means the Internal Revenue Service.
"ITFS" means Instructional Television Fixed Service.
"JACKSON ACQUISITION" means the purchase and sale of assets relating to the
Jackson, Tennessee market pursuant to the Jackson Purchase Agreement.
"JACKSON CONTINGENT AMOUNT" shall have the meaning set forth in Section
1.2(b).
"JACKSON PURCHASE AGREEMENT" means the Purchase and Sale Agreement dated
February 7, 1996 between TWI and SkyView Wireless Cable, Inc., as such Agreement
may be amended or otherwise modified after the date of this Agreement as
permitted by this Agreement and prior to the Effective Time or after the
Effective Time.
"JOINT VENTURE" means a joint venture, partnership, limited liability
company or other similar arrangement, whether in corporate, partnership or other
legal form; provided that in no event shall any corporate Subsidiary of any
Person be considered a Joint Venture to which such Person is a party.
"LEGAL REQUIREMENT" means any federal, state, local, municipal, foreign or
other law, statute, legislation, act, constitution, ordinance, code, treaty,
rule, regulation or FCC guideline applicable to or against TWI or any Subsidiary
of TWI, or to which TWI will become subject upon the acquisition of any Target
Market or Other Market.
"LIABILITIES" means damages, obligations, claims, demands, judgments or
settlements of any nature or kind, known or unknown, fixed, accrued, absolute or
contingent, liquidated or unliquidated, including all costs and expenses (legal,
accounting or otherwise).
"LICENSES" means all FCC licenses, conditional licenses, construction
permits, authorizations and approvals which are required to transmit commercial
programming, educational programming or any other use currently authorized by
any legal requirement.
"LIENS" means any lien, pledge, hypothecation, charge, mortgage, deed of
trust, security interest or encumbrance against any assets or properties of any
Person or any of its Subsidiaries (or assets or properties that any Person or
any of its Subsidiaries has rights to acquire).
"MARKETS" means the Existing Markets and Target Markets, or any of them.
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ANNEX.B
"MARKET DELIVERY CONTINGENT SHARES" shall have the meaning set forth
in Section 1.2(b).
"MARKET DELIVERY ESCROW AGENT" shall have the meaning set forth in Section
1.2(h).
"MARKET DELIVERY ESCROW AGREEMENT" shall have the meaning set forth in
Section 1.2(h).
"MARKET DELIVERY REQUIREMENT" shall have the meaning set forth in Section
1.2(b).
"MATERIAL ADVERSE EFFECT" with respect to any Person means any event or
circumstance which results in or is reasonably likely to result in a material
adverse change in (i) the financial condition, business, operations or
properties of such person and its Subsidiaries, taken as a whole, other than
general economic change over which neither such person nor any Subsidiary of
such person has control; (ii) the ability of such person or any Subsidiary of
such person prior to the Effective Time to perform its obligations under this
Agreement, or (iii) the validity or enforceability of this Agreement.
"MATERIAL CONTRACTS" shall mean the Target Market Existing Agreements, the
"EdNet Agreement" referred to in the TWI SEC Filings, and any agreement the
termination of which prior to the end of its stated term, or the breach or
default under which by any person, could reasonably be expected to have a
Material Adverse Effect on TWI.
"MDS" shall mean a Multipoint Distribution Service, including (unless
otherwise specified) the former Operational Fixed Service ("OFS") H-channels.
"MEMPHIS ACQUISITION" means the purchase and sale of assets relating to the
Memphis, Tennessee market pursuant to the Memphis Purchase Agreement.
"MEMPHIS CONTINGENT AMOUNT" shall have the meaning set forth in Section
1.2(b).
"MEMPHIS PURCHASE AGREEMENT" means the Purchase and Sale Agreement dated as
of November 7, 1995 between TWI and American Wireless Systems, Inc., as such
Agreement may be amended or otherwise modified after the date of this Agreement
as permitted by this Agreement and prior to the Effective Time or after the
Effective Time.
"MERGER" means the merger described in the recitals.
"MERGER SHARES" shall have the meaning set forth in Section 1.2(c).
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<PAGE>
ANNEX.B
"MMDS" means the Multichannel Multipoint Distribution Service.
"NET GAAP DEBT" means (i) GAAP Debt minus (ii) cash of TWI and its
Subsidiaries as of March 31, 1996 on a consolidated basis in accordance with
GAAP.
"NON-CONTINGENT AMOUNT" shall have the meaning set forth in Section 1.2(b).
"ORDER" means any order, judgment, injunction, or FCC ruling issued, made,
entered or rendered by any court, administrative agency or other Governmental
Authority or by any arbitrator as to which a person or any Subsidiary of such
person is a party or will become a party upon this consummation of any
acquisition in a Target Market or Other Market.
"OTHER MARKETS" shall mean Chattanooga, Tennessee; Hot Springs, Arkansas;
Lawrenceburg, Tennessee; and Jacksonville, North Carolina.
"OUTSTANDING TWI SHARES" shall have the meaning set forth in Section
1.2(d).
"OWNED MARKET" means each Existing Market (other than Tuscaloosa, Alabama)
and (a) Flippin, Tennessee, if the Flippin Acquisition is consummated prior to
the Effective Time, (b) Gadsden, Alabama, if the Gadsden Acquisition is
consummated prior to the Effective Time, (c) Huntsville, Alabama, if the
Huntsville Acquisition is consummated prior to the Effective Time, (d) Jackson,
Tennessee, if the Jackson Acquisition is consummated prior to the Effective
Time, and (e) Memphis, Tennessee, if the Memphis Acquisition is consummated
prior to the Effective Time.
"PBGC" shall have the meaning set forth in Section 2.6.
"PERMITTED NET GAAP DEBT" means $10,050,000.
"PERSON" OR "PERSON" means any individual, corporation, partnership, joint
venture, estate, trust, cooperative, foundation, union, syndicate, league,
consortium, coalition, committee, society, firm, company or other enterprise,
association, organization or other entity or Governmental Authority.
"PER-SHARE PORTION" for any Outstanding TWI Share means 1.0 divided by the
number of Outstanding TWI Shares.
"PRIOR OFFERING EXPENSES" means all costs and expenses of TWI paid or
accrued through the date hereof associated with the preparation of the TWI SEC
Filings and the proposed sale of securities of TWI to be registered thereunder,
other than accounting and engineering costs.
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<PAGE>
ANNEX.B
"PROCEEDING" means any suit, litigation, arbitration, proceeding
(including any civil, criminal, administrative, investigative or appellate
proceeding or FCC Proceeding).
"PROXY STATEMENT" shall have the meaning set forth in Section 5.1.
"REQUIRED CONSENTS" means, with respect to each Wireless Cable Television
System, Consents with respect to twelve (12) authorized Channels in the
applicable Market.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SEVERANCE OBLIGATIONS" shall have the meaning set forth in Section 2.9.
"SITE" means a wireless cable television site with respect to which TWI is
operating or has rights to acquire a Wireless Cable Business and transmitting
programming to subscribers in connection therewith.
"SPECIFIED ACQUISITIONS" means the Flippin Acquisition, the Gadsden
Acquisition, the Huntsville Acquisition, the Jackson Acquisition and the Memphis
Acquisition.
"SITE LEASE" shall mean an agreement for the lease of real estate or tower
space permitting the construction of a transmitter on a Site.
"SITE OPTION" shall mean an option or right to obtain a Site Lease.
"SPECIFIED MARKETS" shall mean Flippin, Tennessee, Memphis, Tennessee,
Huntsville, Alabama, Jackson, Tennessee and Gadsden, Alabama.
"STIPULATED CONSENT AMOUNT" for any Adjustment Channel means the product of
(a) a fraction, the numerator of which is one and the denominator of which is
the number of "Channels" set forth for the Market to which such Adjustment
Channel relates on the attached Schedule A, multiplied by (b) $43.00, and
further multiplied by (c) the number of "LOS Households" set forth for such
Market on the attached Schedule A.
"STOCKHOLDER LETTER" shall have the meaning set forth in Section 1.2(i).
"SUBSIDIARY" of any person means any other person, of which a majority of
the capital stock or other equity interests is owned directly or indirectly by
such first person.
"SURVIVING CORPORATION" shall have the meaning set forth in Section 1.1.
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ANNEX.B
"TARGET MARKETS" means the Specified Markets and the Other Markets.
"TARGET MARKET EXISTING AGREEMENTS" shall mean the agreements between TWI,
as purchaser, and the owners of the Wireless Cable Television Systems (or of the
capital stock of such owners) in the Target Markets, as described in the TWI SEC
Filings, copies of which agreements are appended hereto, as the same may be
amended or otherwise modified in accordance with this Agreement.
"TWI BTA WAIVER" shall have the meaning set forth in Section 7.3.
"TWI CHANNEL LEASE" means any Channel Lease under which TWI or any of its
Subsidiaries is the lessee or which TWI or any of its Subsidiaries has the right
to acquire.
"TWI COMMON SHARES" shall mean all of the issued and outstanding capital
stock of TWI immediately before the Merger.
"TWI EMPLOYEES" shall have the meaning set forth in Section 2.6(a).
"TWI LESSOR" shall have the meaning set forth in Section 2.10(a).
"TWI PLAN" shall have the meaning set forth in Section 2.6(a).
"TWI LESSOR APPLICATION" shall have the meaning set forth in Section
2.10(b).
"TWI PREFERRED SHARES" shall have the meaning set forth in Section 2.3.
"TWI PREFERRED STOCK" shall have the meaning set forth in Section 2.3.
"TWI REPRESENTATIVES" shall have the meaning set forth in Section 4.4.
"TWI SEC FILINGS" means Form S-1 Registration Statements (File Nos. 333-
1282 and 333-01284) filed with the SEC on April 11, 1996.
"TWI STOCK OPTION PLANS" shall have the meaning set forth in Section 5.3.
"TWI STOCKHOLDERS" shall have the meaning set forth in Section 7.11.
"VCI" shall have the meaning set forth in Section 5.13.
"VCI WOI SHARES" shall have the meaning set forth in Section 5.13.
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ANNEX.B
"WIRELESS CABLE BUSINESS" means the business of transmitting
programming to subscribers through the use of MMDS, MDS or ITFS channels.
"WIRELESS CABLE TELEVISION SYSTEMS" means all wireless cable television
systems or prospective wireless cable television systems, whether or not
operational or constructed, and all assets relating thereto relative to the
Markets.
"WOI" shall have the meaning set forth in the Recitals.
"WOI BONDHOLDER CONSENT" shall have the meaning set forth in Section 7.6.
"WOI CHANNEL LEASE" means any Channel Lease under which WOI or any of its
Subsidiaries is the lessee or which WOI or any of its Subsidiaries has the right
to acquire.
"WOI COMMON SHARES" means shares of common stock, $.01 par value per share,
WOI.
"WOI CONTINGENT AMOUNT" shall have the meaning set forth in Section 1.2(b).
"WOI EMPLOYEE" shall have the meaning set forth in Section 3.7(a).
"WOI LESSOR" shall have the meaning set forth in Section 3.5(a).
"WOI LESSOR APPLICATION" shall have the meaning set forth in Section
3.5(b).
"WOI MARKET PRICE" for any day means the average of the closing prices for
WOI shares as reported on the NASDAQ NMS on the 20 trading days prior to such
day. If WOI Common Shares do not trade on any trading day during such 20-
trading-day-period, the closing price for such day will be deemed to be the
closing price on the trading day preceding such trading day.
"WOI PLAN" shall have the meaning set forth in Section 3.7(a).
"WOI SEC FILINGS" shall have the meaning set forth in Section 4.7.
"WOI STOCKHOLDERS MEETING" shall have the meaning set forth in Section 5.1.
11.2 DEFINED TERMS. In this Agreement, all definitions shall be
equally applicable to both the singular and the plural forms.
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ANNEX.B
ARTICLE 12. MISCELLANEOUS.
12.1 EXPENSES OF THE TRANSACTION. Each of TWI, WOI and MergerSub
agrees to pay its own fees and expenses in connection with this Agreement and
the transactions hereby contemplated.
12.2 FURTHER ASSURANCES. Each of TWI, WOI and MergerSub agrees that
it will, at any time and from time to time after the Closing Date, upon the
request of the other party, do, execute, acknowledge and deliver, or will cause
to be done, executed, acknowledged and delivered, all such further acts,
assignments, transfers, conveyances, powers of attorney and assurances as may be
reasonably required from time to time in order to effectuate the provisions and
purposes of this Agreement.
12.3 NOTICES. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given or delivered
(a) when delivered personally or by private courier, (b) when actually delivered
by registered United States mail, return receipt requested, or (c) when sent by
telecopy (provided, however, that, it is telephonically or electronically
confirmed), addressed as follows:
If to WOI, to:
11301 Industriplex Boulevard
Suite 4
Baton Rouge, LA 70809-5400
Attention: Hans J. Sternberg
Sean Reilly
Telecopy: (504) 293-5400
With copy (which copy will not constitute notice to WOI) to:
John Kuehn, Esq.
Kirkland & Ellis
153 E. 53rd Street
New York, New York 10022
Telecopy: (212) 446-4900
If to TWI, to:
181 Kroger Drive
Suite H
Jackson, MS 39218
Attention: Henry M. Burkhalter
Telecopy: (601) 936-1517
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<PAGE>
ANNEX.B
With copy (which copy will not constitute notice to TWI) to:
Samuel A. Fishman
Latham & Watkins
885 Third Avenue
Suite 1000
New York, New York 10022
Telecopy: (212) 751-4864
or such other address as such party may indicate by a notice delivered to the
other parties hereto in the manner herein provided.
12.4 NO MODIFICATION EXCEPT IN WRITING. This Agreement shall not be
changed, modified, or amended except by a writing signed by the party to be
charged and this Agreement may not be discharged except by performance in
accordance with its terms or by a writing signed by the party to which
performance is to be rendered.
12.5 ENTIRE AGREEMENT. This Agreement, together with the Schedules
and Exhibits hereto, sets forth the entire agreement and understanding among the
parties as to the subject matter hereof. The execution and delivery of this
Agreement shall have no effect on the confidentiality agreements executed as of
April 19, 1996, among WOI, TWI and Heartland Wireless Communications, Inc.
12.6 SEVERABILITY. If any provision of this Agreement or the
application of any provision hereof to any person or in any circumstances is
held invalid, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected unless the
provision held invalid shall substantially impair the benefits of the remaining
portions of this Agreement.
12.7 ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns. This Agreement may not be assigned by any party hereto except with the
prior written consent of the other parties. Any purported assignment contrary to
the terms of this Agreement shall be void.
12.8 CHOICE OF LAW. This Agreement shall be deemed to have been made
in, and shall be construed in accordance with the laws of the State of Delaware,
and its validity, construction, interpretation and legal effect shall be
governed by the laws of the State of Delaware applicable to contracts entered
into and performed entirely therein.
12.9 CAPTIONS; CONSTRUCTION. The captions appearing in this Agreement
are inserted only as a matter of convenience and for reference and in no way
define, limit or describe the scope and intent of this Agreement or any of the
provisions hereof. All uses of the term
B-46
<PAGE>
ANNEX.B
"including" shall be construed as descriptive and not a limitation of the item
described. All words used herein shall be construed to be of such gender as the
circumstances require.
12.10 SPECIFIC PERFORMANCE. In the event of a breach of any obligations
under this Agreement, each party hereto, in addition to being entitled to
exercise all rights provided herein or granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The parties hereto agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach of any of the
provisions of this Agreement.
12.11 SCHEDULES AND EXHIBITS. The Schedules and Exhibits referred to
herein attached hereto are hereby made a part of this Agreement.
12.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original. This Agreement may
also be executed by facsimile signature.
[SIGNATURE PAGE(S) FOLLOWS]
B-47
<PAGE>
ANNEX.B
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the day and year first above written.
TWI:
TRUVISION WIRELESS, INC.
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
-------------------------------------------
WOI:
WIRELESS ONE, INC.
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
-------------------------------------------
MERGERSUB:
WIRELESS ONE MERGERSUB, INC.
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
-------------------------------------------
B-48
<PAGE>
ANNEX.B
SCHEDULE A
----------
<TABLE>
<CAPTION>
Market Channels LOS Households
- ------ -------- --------------
<S> <C> <C>
Jackson, MS 32 179,000
Delta, MS 32 92,800
Gulf Coast, MS 32 121,700
Tupelo, MS 32 90,600
Hattiesburg, MS 32 88,800
Natchez, MS 32 60,000
Meridian, MS 32 44,800
Starkville, MS 32 65,200
Oxford, MS 32 53,600
Memphis, TN 33 381,200
Huntsville, AL 32 181,900
Jackson, TN 32 96,500
Flippin, TN 32 41,300
Demopolis, AL 32 15,600
Gadsden, AL 32 133,300
</TABLE>
B-49
<PAGE>
ANNEX C
WIRELESS ONE, INC.
1996 Stock Option Plan for Non-Employee Directors
-------------------------------------------------
1. PURPOSE
-------
The purpose of the WIRELESS ONE, INC. 1996 STOCK OPTION PLAN FOR NON-
EMPLOYEE DIRECTORS (the "Plan") is to attract and retain the services of
experienced and knowledgeable independent directors of Wireless One, Inc. (the
"Corporation"), for the benefit of the Corporation and its stockholders and to
provide additional incentive for such directors to continue to work for the beat
interests of the Corporation and its stockholders through continuing ownership
of its Common Stock, $.01 par value (the "Common Stock").
2. SHARES SUBJECT TO THE PLAN
--------------------------
The total number of shares (the "Shares") of Common Stock for which options
may be granted under the Plan shall not exceed 100,000 in the aggregate, subject
to adjustment in accordance with Section 12 hereof. Within the foregoing
limitations, Shares for which options have been granted pursuant to the Plan but
which options have lapsed or otherwise terminated shall become available for the
grant of additional options. There will initially be reserved for issuance or
transfer from the Corporation's treasury upon the exercise of options granted
under the Plan 100,000 Shares, subject to adjustment in accordance with Section
12 hereof.
3. ADMINISTRATION OF PLAN
----------------------
The Plan shall be administered by the Board of Directors of the Corporation
(the "Board"). The Board shall have the power to construe the Plan, to
determine all questions arising thereunder and to adopt and amend such rules and
regulations for the administration of the Plan as it may deem desirable.
4. ELIGIBILITY; GRANT OF OPTION
----------------------------
Each director of the Corporation who is not, and has not been during the
immediately preceding 12-month period, an officer or employee of the Corporation
or any subsidiary of the Corporation (a "Participant") shall automatically be a
participant in the Plan. Options will be granted in the following manner:
(a) Each Participant who is in office on the Effective Date
C-1
<PAGE>
(as hereinafter defined) shall, on the Effective Date, automatically be granted
an option to acquire 4,000 Shares under the Plan.
(b) Each Participant who is in office on November 15, 1996, but who was not
in office on the Effective Date, shall, on January 1, 1997, automatically be
granted an option to acquire 2,000 Shares under the Plan.
(c) Each Participant who is in office on November 15 of any year
(commencing with November 15, 1997) shall, on the immediately succeeding January
1, automatically be granted an option to acquire 2,000 Shares under the Plan.
5. OPTION AGREEMENT
----------------
Each option granted under the Plan shall be evidenced by an option
agreement (the "Agreement") duly executed on behalf of the Corporation and by
the Participant to whom such option is granted, which Agreement may but need not
be identical and which shall (i) comply with and be subject to the terms and
conditions of the Plan and (ii) provide that the Participant agrees to continue
to serve as a director of the Corporation during the term for which he or she
was elected. Any Agreement my contain such other terms, provisions and
conditions not inconsistent with the Plan as may be determined by the Board. No
option shall be deemed granted within the meaning of the Plan and no purported
grant of any option shall be effective until such Agreement shall have been duly
executed on behalf of the Corporation and the Participant to whom the option is
to be granted.
6. OPTION EXERCISE PRICE
---------------------
The option exercise price for an option granted under the Plan shall be the
fair market value of the Shares covered by the option on the date on which such
option is granted or, if such date is not a business day on which Shares are
traded, the next immediately preceding business day (the "Pricing Date"). For
purposes hereof, the fair market value of the Shares covered by an option shall
be the average of the high and low sales prices of the Shares on the Pricing
Date as reported on the National Association of Securities Dealers, Inc.
Automated Quotation System - National Market System or on the principal national
securities exchange on which the Shares are then listed for trading.
7. TIME AND MANNER OF EXERCISE OF OPTION
-------------------------------------
(a) Options granted under the Plan shall become exercisable
C-2
<PAGE>
in installments of 25 percent upon each anniversary of the date of grant.
(b) To the extent that the right to exercise an option has accrued and is
in effect, the option may be exercised from time to time, by giving written
notice, signed by the person or persons exercising the option, to the
Corporation, stating the number of Shares with respect to which the option is
being exercised, accompanied by payment in full for such Shares in cash, check,
delivery of Shares or other method determined by the Board.
(c) Upon exercise of the option, delivery of a certificate for fully paid
and non-assessable Shares shall be made at the principal office of the
Corporation to the person or persons exercising the option an soon as
practicable (but in no event more than 30 days) after the date of receipt of the
notice of exercise by the Corporation, or at such time, place and manner as may
be agreed upon by the Corporation and the person or persons exercising the
option.
8. TERM OF OPTIONS
---------------
Each option shall expire seven years from the date of the granting thereof,
but shall be subject to earlier termination as follows:
(a) In the event of the death of a Participant, the option granted to
such Participant may be exercised, to the extent exercisable on the date of
death pursuant to Section 7(a), by the estate of such Participant, or by any
person or persons who acquired the right to exercise such option by will or by
the laws of descent and distribution. Such option may be exercised at any time
within 180 days after the date of each such Participant or prior to the date on
which the option expires by its terms, whichever is earlier.
(b) In the event that a Participant ceases to be a director of the
Corporation, other than by reason of his or her death, the option granted to
such Participant may be exercised, to the extent exercisable on the date the
Participant ceases to be a director, for a period of 30 days after such date, or
prior to the date on which the option expires by its terms, whichever is
earlier.
9. MERGER, CONSOLIDATION, SALE OF ASSETS, ETC., RESULTING IN CHANGING OF
CONTROL
(a) In the event of a Change in Control (as hereinafter
C-3
<PAGE>
defined), notwithstanding the provisions of Sections 7(a) and 8, an option
granted to a Participant shall become fully exercisable if, within one year of
such Change in Control, such Participant shall cease for any reason to be a
member of the Board. For purposes hereof, a Change in Control of the
Corporation shall be deemed to have occurred if (i) there shall be consummated
(x) any consolidation or merger of the Corporation in which the Corporation is
not the continuing or surviving corporation or pursuant to which shares of
common stock of the Corporation would be converted into cash, securities or
other property, other than a merger of the Corporation in which the holders of
common stock of the Corporation immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation immediately
after the merger, or (y) 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 Corporation; or (ii) the stockholders of the Corporation
approve any plan or proposal for the liquidation or dissolution of the
Corporation; or (iii) any person (as such term in used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the -Exchange
Act")), shall become the beneficial owner (within the meaning of Rule 13d-3
under the Exchange Act) of 30% or more of the Corporation's outstanding common
stock; or (iv) during any period of two consecutive years, individuals who at
the beginning of such period constitute the entire Board shall cease for any
reason to constitute a majority thereof unless the election, or the nomination
for election by the Corporation's stockholders, of each now director was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period.
(b) Any exercise of an option permitted pursuant to Section 9(a) shall
be made within 180 days of the relevant Participant's termination as a director
of the Corporation.
10. OPTIONS NOT TRANSFERABLE
------------------------
The right of any Participant to exercise an option granted to him or her
under the Plan shall not be assignable or transferable by such Participant
otherwise than by will or the laws of descent and distribution, and any such
option shall be exercisable during the lifetime of such Participant only by him
or her.
11. NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE
---------------------------------------
Neither the recipient of an option under the Plan nor his or her
successors in interest shall have any rights as a stockholder
C-4
<PAGE>
of the Corporation with respect to any Shares subject to an option granted to
such person until such person becomes a holder of record of such Shares.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
------------------------------------------
In the event that the outstanding shares of the Common Stock are changed
into or exchanged for a different number or kind of shares or other securities
of the Corporation or of another corporation by reason of any reorganization,
merger, consolidation, recapitalization, reclassification, stock splitup,
combination of shares or dividend payable in capital stock, appropriate
adjustment shall to made in the number and kind of shares subject to and
reserved for issuance or transfer under the Plan and as to which outstanding
options (or portions thereof then unexercised) shall be exercisable, to the end
that the proportionate interest of Participants and prospective Participants,
with respect to options theretofore granted and to be granted, shall be
maintained as before the occurrence of such event. Such adjustment in
outstanding options shall be made without change in the total price applicable
to the unexercised portion of such options, but with a corresponding adjustment
in the option price per share.
13. RESTRICTIONS ON ISSUE OF SHARES
-------------------------------
Anything contained in this Plan to the contrary notwithstanding, the
Corporation may delay the issuance of Shares covered by the exercise of any
option and the delivery of a certificate for such Shares until one of the
following conditions shall be satisfied:
(i) the Shares with respect to which an option has been exercised are at
the time of the issuance or transfer of such Shares effectively registered under
applicable federal securities laws now in force or hereafter amended; or
(ii) counsel for the Corporation shall have given an opinion, which
opinion shall not be unreasonably conditioned or withheld, that such Shares are
exempt from the registration under applicable federal securities laws now in
force or hereafter amended.
It is intended that all exercises of options shall be effective. Accordingly,
the Corporation shall use its best efforts to bring about compliance with the
above conditions within a reasonable time, except that the Corporation shall be
under no obligation to cause a registration statement or a post-effective
amendment to any registration statement to be prepared at its expense solely for
the
C-5
<PAGE>
purpose of covering the issuance or transfer from the Corporation's treasury of
Shares in respect of which any option may be exercised.
14. PURCHASE FOR INVESTMENT
-----------------------
Unless the Shares to be issued upon exercise of an option granted under
the Plan have been effectively registered under the Securities Act of 1933, as
amended (the "Securities Act"), as now in force or hereafter amended, the
Corporation shall be under no obligation to issue or transfer any Shares covered
by any option unless the person or persons who exercise such option, in whole or
in part, shall give a written representation and undertaking to the Corporation,
which is satisfactory in form and scope to counsel to the Corporation and upon
which, in the opinion of such counsel, the Corporation may reasonably rely, that
he or she in acquiring the Shares issued or transferred to him or her pursuant
to such exercise of the option for his or her own account as an investment
and not with a view to, or for sale in connection with, the distribution for any
such Shares, and that he or she will make no transfer of the same except in
compliance with any rules and regulations in force at the time of such transfer
under the Securities Act, or any other applicable law, and that if Shares are
issued or transferred without such registration a legend to such effect may be
endorsed upon the certificates representing the Shares.
15. EFFECTIVE DATE
--------------
The effective date (the "Effective Date") of this Plan shall be the date
on which the Plan is approved by the stockholders of the Corporation.
16. EXPENSES OF THE PLAN
--------------------
All costs and expenses of the adoption and administration of the Plan
shall be borne by the Corporation and none of such expenses shall be charged to
any Participant.
17. TERMINATION AND AMENDMENT OF PLAN
---------------------------------
Unless sooner terminated as herein provided, the Plan shall terminate ten
years from the Effective Date. The Board may at any time terminate the Plan or
make such modification or amendment thereof as it deems advisable; provided,
however, that the Plan may not be amended more than once every six months, other
than to comport with changes in the Internal Revenue Code of 1986, as amended,
the Employee Retirement Income Security Act of 1974, as
C-6
<PAGE>
amended, or the rules thereunder; and provided further, however, that, except as
provided in Section 12, the Board may not, without the approval of the
stockholders of the Corporation, increase the maximum aggregate number of shares
for which options may be granted under the Plan or the number of Shares for
which an option may be granted to any Participant. Termination or any
modification or amendment of the Plan shall not, without the consent of a
Participant, affect his or her rights under an option previously granted to him
or her.
C-7
<PAGE>
ANNEX D
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of TruVision Wireless, Inc.:
We have audited the accompanying balance sheets of TruVision Wireless, Inc.
(a Delaware corporation formerly named TruVision Cable, Inc.) as of December
31, 1994 and 1995, and the related statements of operations, changes in
stockholders' equity and cash flows for the period from inception (August 25,
1994) through December 31, 1994 and for the year ended December 31, 1995. We
have also audited the statements of operations, partners' capital and cash
flows of Mississippi Wireless TV L. P. (the predecessor entity to TruVision
Wireless, Inc.) for the period from inception (November 2, 1993) to December
31, 1993 and the period from January 1, 1994 through August 24, 1994.
TruVision Wireless, Inc. and Mississippi Wireless TV L. P. are hereinafter
together referred to as "the Company." These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of TruVision Wireless, Inc.
as of December 31, 1994 and 1995, and the results of its operations and its
cash flows for the period from inception (August 25, 1994) through December
31, 1994 and for the year ended December 31, 1995, and the results of
operations and cash flows of Mississippi Wireless TV L. P. for the period from
inception (November 2, 1993) through December 31, 1993 and the period from
January 1, 1994 through August 24, 1994, all in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Jackson, Mississippi,
March 26, 1996 (except with respect
to the matter discussed in Note 11,
as to which the date is April 25,
1996).
D-1
<PAGE>
TRUVISION WIRELESS, INC.
BALANCE SHEETS
(DATA WITH RESPECT TO MARCH 31, 1996 ARE UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- MARCH 31,
1994 1995 1996
---------- ----------- -----------
<S> <C> <C> <C>
ASSETS (UNAUDITED)
Current assets:
Cash and cash equivalents.......... $2,712,851 $ 88,882 $ 500,111
Short-term investments............. 75,000 36,300 36,300
Accounts receivable (less allowance
for doubtful accounts of $34,000,
$150,426 and $187,060,
respectively)..................... 41,178 283,656 237,644
Other current assets............... 11,005 108,376 142,933
---------- ----------- -----------
Total current assets............. 2,840,034 517,214 916,988
---------- ----------- -----------
Property, plant and equipment:
Transmission equipment............. 1,197,425 3,029,214 3,419,840
Subscriber premises equipment and
installation costs................ 1,841,868 6,866,806 8,476,038
Office furniture and equipment..... 263,743 437,169 610,224
Vehicles........................... 223,996 215,344 216,144
Buildings and improvements......... 204,340 326,090 348,654
---------- ----------- -----------
3,731,372 10,874,623 13,070,900
Less: accumulated depreciation..... (217,676) (1,375,402) (1,905,355)
---------- ----------- -----------
3,513,696 9,499,221 11,165,545
Uninstalled subscriber premises
equipment......................... 1,006,854 546,316 696,493
---------- ----------- -----------
4,520,550 10,045,537 11,862,038
---------- ----------- -----------
License costs, net--Notes 2 and 3.... 157,480 179,592 2,447,387
Organizational costs, net............ 374,654 285,318 253,370
Deferred costs, net and other
assets--Note 7...................... 90,341 1,849,556 4,271,870
---------- ----------- -----------
Total assets..................... $7,983,059 $12,877,217 $19,751,653
========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable............. $ 813,471 $ 713,218 $3,302,800
Accrued expenses................... 77,671 43,000 33,675
Short-term debt.................... -- 4,531,464 10,084,894
---------- ----------- -----------
Total current liabilities........ 891,142 5,287,682 13,421,369
---------- ----------- -----------
Commitments and contingencies
Stockholders' equity--Notes 5 and 6:*
Series A, Convertible Preferred
Stock, $.01 par value; 800,000
authorized, issued and
outstanding; (liquidation
preference of $8,000,000)......... 8,000 8,000 8,000
Series B, Convertible Preferred
Stock, $.01 par value; 300,000
authorized, issued and outstanding
in 1995 and 1996 (liquidation
preference of $3,000,000)......... -- 3,000 3,000
Common Stock, $.01 par value;
6,000,000 shares authorized,
2,400,000 shares issued and
outstanding....................... 24,000 24,000 24,000
Additional paid-in capital......... 7,701,679 10,698,679 10,698,679
Accumulated deficit................ (641,762) (3,144,144) (4,403,395)
---------- ----------- -----------
Total stockholders' equity....... 7,091,917 7,589,535 6,330,284
---------- ----------- -----------
Total liabilities and
stockholders' equity............ $7,983,059 $12,877,217 $19,751,653
========== =========== ===========
</TABLE>
- --------
* Restated to reflect the 2-for-1 common stock split. See Note 2.
The accompanying notes are an integral part of these financial statements.
D-2
<PAGE>
TRUVISION WIRELESS, INC.
STATEMENTS OF OPERATIONS (NOTE 1)
(DATA WITH RESPECT TO MARCH 31, 1995 AND 1996 ARE UNAUDITED)
<TABLE>
<CAPTION>
MISSISSIPPI WIRELESS TV L.P. TRUVISION WIRELESS, INC.
--------------------------------------- -----------------------------------------------------------
PERIOD FROM
INCEPTION
(NOVEMBER 2, 1993) JANUARY 1, 1994 TO AUGUST 25, 1994 TO YEAR ENDED THREE MONTHS ENDED
TO DECEMBER 31, 1993 AUGUST 24, 1994 DECEMBER 31, 1994 DECEMBER 31, 1995 MARCH 31,
-------------------- ------------------ ------------------ ----------------- ----------------------
1995 1996
--------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Service revenues... $ -- $ 16,233 $ 264,491 $ 2,595,514 $ 379,561 $ 1,107,275
Installation -- 57,137 166,043 486,100 122,308 178,751
revenues.......... --------- ---------- ---------- ----------- --------- -----------
Total revenues.. -- 73,370 430,534 3,081,614 501,869 1,286,026
--------- ---------- ---------- ----------- --------- -----------
Expenses:
System operating
expenses.......... 116,733 278,000 425,603 2,103,053 380,551 885,712
Selling, general
and
administrative
expenses.......... 111,186 668,009 534,431 2,086,200 233,275 911,024
Depreciation and -- 82,196 167,990 1,266,301 193,796 584,544
amortization...... --------- ---------- ---------- ----------- --------- -----------
Total operating 227,919 1,028,205 1,128,024 5,455,554 807,622 2,381,280
expenses........ --------- ---------- ---------- ----------- --------- -----------
Loss from
operations......... (227,919) (954,835) (697,490) (2,373,940) (305,753) (1,095,254)
Interest income..... -- 6,632 55,728 15,063 -- --
Interest expense.... -- -- -- (143,505) -- (163,997)
--------- ---------- ---------- ----------- --------- -----------
Net loss............ (227,919) (948,203) (641,762) (2,502,382) (305,753) (1,259,251)
Preferred dividend -- -- (227,000) (687,000) (160,000) (220,000)
requirement........ --------- ---------- ---------- ----------- --------- -----------
Net loss
attributable to
common $(227,919) $ (948,203) $ (868,762) $(3,189,382) $(465,753) $(1,479,251)
stockholders....... ========= ========== ========== =========== ========= ===========
Loss per common N/A N/A $ (0.36) $ (1.33) $ (0.19) $ (0.62)
share*............. ========= ========== ========== =========== ========= ===========
Weighted average
shares N/A N/A 2,400,000 2,400,000 2,400,000 2,400,000
outstanding*....... ========= ========== ========== =========== ========= ===========
</TABLE>
- --------
* Restated to reflect the 2-for-1 common stock split. See Note 2.
The accompanying notes are an integral part of these financial statements.
D-3
<PAGE>
MISSISSIPPI WIRELESS TV L.P.
STATEMENTS OF PARTNERS' CAPITAL (NOTE 1)
FOR THE PERIOD FROM INCEPTION (NOVEMBER 2, 1993) THROUGH DECEMBER 31, 1993 AND
THE PERIOD FROM JANUARY 1, 1994 THROUGH AUGUST 24, 1994
<TABLE>
<CAPTION>
TOTAL
GENERAL LIMITED PARTNERS'
PARTNER PARTNER CAPITAL
--------- ---------- ----------
<S> <C> <C> <C>
Initial investment........................... $ -- $1,081,000 $1,081,000
Net loss..................................... (2,279) (225,640) (227,919)
--------- ---------- ----------
Balance, December 31, 1993................... (2,279) 855,360 853,081
Net loss..................................... (170,677) (777,526) (948,203)
Partners' contributions...................... 229,162 361,000 590,162
--------- ---------- ----------
Balance, August 24, 1994..................... $ 56,206 $ 438,834 $ 495,040
========= ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
D-4
<PAGE>
TRUVISION WIRELESS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (NOTE 1)
(DATA WITH RESPECT TO MARCH 31, 1996 ARE UNAUDITED)
<TABLE>
<CAPTION>
SERIES A SERIES B
CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK COMMON STOCK* ADDITIONAL
--------------- --------------- ------------------ PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL* DEFICIT
-------- ------ -------- ------ ---------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Exchange of the net
assets of Mississippi
Wireless TV L.P. for
common stock of the
Company................ -- $ -- -- $ -- 2,400,000 $24,000 $ 471,040 $ --
Sale of preferred stock,
net of issuance costs
of $761,361 ........... 800,000 8,000 -- -- -- -- 7,230,639 --
Net loss for the period
from inception through -- -- -- -- -- -- -- (641,762)
December 31, 1994...... -------- ------ -------- ------ ---------- ------- ----------- -----------
*BALANCE, DECEMBER 31,
1994................... 800,000 8,000 -- -- 2,400,000 24,000 7,701,679 (641,762)
Net loss................ -- -- -- -- -- -- -- (2,502,382)
Sale of preferred
stock.................. -- -- 300,000 3,000 -- -- 2,997,000 --
-------- ------ -------- ------ ---------- ------- ----------- -----------
BALANCE, DECEMBER 31,
1995................... 800,000 8,000 300,000 3,000 2,400,000 24,000 10,698,679 (3,144,144)
Net loss................ -- -- -- -- -- -- -- (1,259,251)
-------- ------ -------- ------ ---------- ------- ----------- -----------
BALANCE, MARCH 31, 800,000 $8,000 300,000 $3,000 2,400,000 $24,000 $10,698,679 $(4,403,395)
1996................... ======== ====== ======== ====== ========== ======= =========== ===========
</TABLE>
- --------
* Restated to reflect the 2-for-1 common stock split. See Note 2.
The accompanying notes are an integral part of these financial statements.
D-5
<PAGE>
TRUVISION WIRELESS, INC.
STATEMENTS OF CASH FLOWS (NOTE 1)
(DATA WITH RESPECT TO MARCH 31, 1995 AND 1996 ARE UNAUDITED)
<TABLE>
<CAPTION>
MISSISSIPPI WIRELESS TV L.P. TRUVISION WIRELESS, INC.
---------------------------------- -----------------------------------------------------------
PERIOD FROM
INCEPTION
(NOVEMBER 2, 1993) JANUARY 1, 1994 AUGUST 25, 1994 THREE MONTHS ENDED
THROUGH TO TO YEAR ENDED MARCH 31,
DECEMBER 31, 1993 AUGUST 24, 1994 DECEMBER 31, 1994 DECEMBER 31, 1995 1995 1996
------------------ --------------- ----------------- ----------------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss............. $ (227,919) $ (948,203) $ (641,762) $(2,502,382) $ (305,753) $(1,259,252)
Adjustments to
reconcile net loss
to net cash provided
by operating
activities:
Depreciation and
amortization........ -- 82,196 167,990 1,266,301 193,796 584,544
Provision for losses
on accounts
receivable.......... -- -- 34,000 126,370 8,563 36,634
Changes in operating
assets and
liabilities:
Decrease (increase)
in accounts
receivable......... -- (105,395) (23,783) (368,848) (20,375) 9,378
Decrease (increase)
in other current
assets............. -- (76,969) 63,014 (97,371) (10,161) (34,557)
Increase (decrease)
in accounts
payable............ 17,785 431,319 364,367 (100,254) 79,784 2,589,582
Increase (decrease)
in accrued -- -- 77,671 (34,671) (77,671) (9,325)
liabilities........ ---------- ----------- ----------- ----------- ---------- -----------
Cash provided by (used
in) operating (210,134) (617,052) 41,497 (1,710,855) (131,817) 1,917,004
activities: ......... ---------- ----------- ----------- ----------- ---------- -----------
Cash flows from
investing activities:
Capital
expenditures........ (177,000) (2,555,318) (1,896,615) (6,682,712) (1,337,884) (2,346,453)
Payments for license
and organizational
costs............... -- (541,823) (165,505) -- (17,707) (2,290,438)
Increase in deferred
costs and other
assets.............. -- -- -- (1,250,566) (287,263) (2,422,314)
Deposits for
acquisitions........ -- -- -- (100,000) -- --
Deposit for FCC
auction............. -- -- -- (450,000) -- --
Proceeds from short-
term investments.... -- -- -- 38,700 -- --
Purchase of short- -- -- (75,000) -- -- --
term investments.... ---------- ----------- ----------- ----------- ---------- -----------
Net cash used in
investing (177,000) (3,097,141) (2,137,120) (8,444,578) (1,642,854) (7,059,205)
activities.......... ---------- ----------- ----------- ----------- ---------- -----------
Cash flows from
financing activities:
Proceeds from
issuance of
preferred stock..... -- -- 8,000,000 3,000,000 -- --
Preferred stock
issuance costs...... -- -- (761,361) -- -- --
Principal payments on
notes payable....... -- -- (3,308,000) -- -- --
Proceeds from
issuance of short-
term debt........... -- 3,308,000 -- 4,531,464 -- 5,553,430
Proceeds from
partners' 1,081,000 590,162 -- -- -- --
contributions....... ---------- ----------- ----------- ----------- ---------- -----------
Net cash provided by
financing 1,081,000 3,898,162 3,930,639 7,531,464 -- 5,553,430
activities........... ---------- ----------- ----------- ----------- ---------- -----------
Net increase
(decrease) in cash
and cash
equivalents.......... 693,866 183,969 1,835,016 (2,623,969) (1,774,671) 411,229
Cash and cash
equivalents at -- 693,866 877,835 2,712,851 2,712,851 88,882
beginning of period.. ---------- ----------- ----------- ----------- ---------- -----------
Cash and cash
equivalents at end of $ 693,866 $ 877,835 $2,712,851 $ 88,882 $ 938,180 $ 500,111
period............... ========== =========== =========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
D-6
<PAGE>
TRUVISION WIRELESS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1: THE COMPANY
HISTORY AND ORGANIZATION
TruVision Cable, Inc. ("TruVision" or the "Company"), a Delaware
corporation, was incorporated in April 1994, and began business activities on
August 25, 1994. The Company's name was changed to TruVision Wireless, Inc. on
February 6, 1996. The Company is engaged in building, managing and owning
wireless cable systems which retransmit television and programming received at
a head-end via encryptic microwave signals from multichannel broadcast towers
to subscribers within an approximate 40 mile radius of each tower. The Company
has exclusive lease rights to substantially all of the ITFS wireless cable
channels in the State of Mississippi licensed by the Federal Communications
Commission ("FCC").
Mississippi Wireless TV L. P. ("MWTV"), a Mississippi limited partnership,
was formed on November 2, 1993. For the period from inception through August
24, 1994, MWTV's business activities consisted primarily of development and
initial operational activities related to certain of its wireless cable rights
which had been assigned to it by an affiliate.
TruVision began business activities upon the contribution of all of the net
assets of MWTV in exchange for 1,200,000 shares (2,400,000 after the 2-for-1
common stock split--see Note 2) of common stock in the Company. At the same
time, an unrelated party, Chase Venture Capital Associates ("CVCA") (formerly
Chemical Venture Capital Associates), a California limited partnership,
contributed $8,000,000 cash in exchange for 800,000 shares of Series A
Convertible Preferred Stock. This transfer of the net assets of MWTV to
TruVision has been accounted for as a transfer of net assets between related
parties, and accordingly, the Company has recorded the net assets received in
the exchange at MWTV's historical carrying values.
The Company is developing its Mississippi wireless cable operations in two
phases. Phase I will consist of five markets which cover West, Central and
South Mississippi. In May 1994, the Company placed its first market in
operation in the Jackson, Mississippi area. In July 1995, the Company placed
its second market in operation in the Delta area. A third market, serving
portions of the Gulf Coast, is expected to begin operations in the first
quarter of 1996. Construction plans call for the development of the additional
markets within the Phase I area.
Plans for the development of Phase II, which consists of four markets
primarily in North Mississippi, have not been finalized. Pursuant to a
stockholders' agreement between CVCA and MWTV, the Company has the option to
complete development of Phase II within a five-year period. Under the terms of
the option, each of the parties to the agreement will contribute their
respective portions of the development costs in cash. In the event the Company
participates in an initial public offering or sale prior to commencing
development of each cell of Phase II, Vision Communications, Inc. ("VCI"), an
entity owned primarily by the general partner of MWTV, will be eligible to
receive a payment (the "Phase II Payment") for its contribution of frequency
rights equal to $1,125,000 per market (total of $4.5 million), payable in cash
or in shares of Common Stock of the Company based on the fair value of such
shares at the time of the Phase II Payment. See Note 10.
RISKS AND OTHER FACTORS
The Company has recorded net losses in each period of its operations. At
December 31, 1995, the Company's accumulated deficit was approximately
$3,144,000 ($4,403,000 at March 31, 1996). Losses incurred since inception are
attributable primarily to start-up costs, marketing and sales costs and
depreciation of assets used in the Company's wireless cable systems in various
markets. The Company expects to continue to experience net losses while it
develops and expands its wireless cable systems, although mature individual
D-7
<PAGE>
TRUVISION WIRELESS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
systems of the Company may reach profitability sooner than the Company on a
consolidated basis. In the opinion of management, the Company will ultimately
achieve positive cash flow and net income sufficient to realize its investment
in its assets; however, there can be no assurance that the Company will
generate sufficient operating revenues to achieve positive cash flow or net
income.
The growth of the Company's business requires substantial investment on a
continuing basis to finance capital expenditures and related expenses for
expansion of the Company's customer base and system development. Management
expects that the Company will require significant additional financings,
through debt or equity financings, joint ventures or other arrangements, to
achieve its targeted subscriber levels in its current business plans in its
operating systems and target markets and to cover ongoing operating losses.
Additional debt or equity also may be required to finance future acquisitions
of wireless cable companies, wireless cable systems or channel rights. While
management believes the Company will be able to obtain additional debt or
equity capital on satisfactory terms to meet its future financing needs, there
can be no assurance that either additional debt or equity capital will be
available.
The Company is dependent on leases with unaffiliated third parties for
substantially all of its wireless cable channel rights. ITFS licenses
generally are granted for a term of 10 years and are subject to renewal by the
FCC. MDS licenses generally will expire on May 1, 2001 unless renewed. FCC
licenses also specify construction deadlines which, if not met by the Company
or extended by the FCC, could result in the loss of the license. There can be
no assurance that the FCC will grant any particular extension request or
license renewal request. The remaining initial terms of most of the Company's
ITFS channel leases are approximately five to 10 years. The Company's MDS
leases generally are for substantially longer terms and the Company has
acquired options to purchase a majority of the underlying MDS licenses. The
use of wireless cable channels by the license holders is subject to regulation
by the FCC and the Company is dependent upon the continuing compliance by
channel license holders with applicable regulations. The termination or non-
renewal of a channel lease or of a channel license, or the failure to grant an
application for an extension of the time to construct an authorized station,
would result in the Company being unable to deliver programming on the
channels authorized pursuant thereto. Although the Company does not believe
that the termination of or failures to renew a single channel lease other than
that with EdNet would materially adversely affect the Company, several of such
terminations or failure to renew in one or more markets that the Company
actively serves or intends to serve could have a material adverse effect on
the Company. In addition, the termination, forfeiture, revocation or failure
to renew or extend an authorization or license held by the Company's lessors
could have a material adverse effect on the Company.
The Company contracts for the commercial use of 20 ITFS channels in various
markets throughout the state of Mississippi with EdNet. The commercial use of
these channels represents the majority of the Company's channels in
Mississippi and the loss of, or inability to renew, the EdNet Agreement would
have a material adverse effect on the Company's operations. See Note 3.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
D-8
<PAGE>
TRUVISION WIRELESS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
REVENUE RECOGNITION
Revenues from monthly service charges are recognized as the service is
provided to the customer. Customers are billed in the month services are
rendered. Installation fees are recognized as income to the extent the Company
has incurred direct selling costs.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company recognizes an allowance for doubtful accounts to the extent it
believes receivables are not collectible. The provision for doubtful accounts
was approximately $34,000 and $126,000 for 1994 and 1995, respectively. No
writeoffs were made in 1994. Writeoffs of accounts receivable were
approximately $45,000 in 1995.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities
of 90 days or less to be cash equivalents.
SHORT-TERM INVESTMENTS
Short-term investments represent certificates of deposit of approximately
$75,000 in 1994 and $36,000 in 1995 and 1996 restricted for use under a
programming contract.
SYSTEM OPERATING EXPENSES
System operating expenses consist principally of programming fees, license
fees, tower rental, maintenance, engineering and other costs incidental to
providing service to customers. Administrative and marketing expenses incurred
by systems during their launch period are expensed as incurred.
SYSTEM LAUNCH COSTS
The costs incurred to prepare a market for launch (marketing, pre-opening
administration, training, etc.) are expensed in the period incurred.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is recorded
on the straight-line basis for financial reporting purposes. Costs incurred
for repair and maintenance of property, plant and equipment are charged to
expense when incurred. Costs incurred for renewals and improvements are
capitalized. Costs of subscriber equipment, including installation labor and
other direct installation costs, are capitalized. Subscriber premises
equipment and installation costs are depreciated using a composite method over
five years which factors in the Company's estimates of useful lives of
recoverable equipment and average subscriber lives of nonrecoverable
installation costs. Materials and supplies used to provide service to
customers are included in office furniture and equipment and are valued at the
lower of cost or market.
Depreciation is recorded over the estimated useful lives as follows:
<TABLE>
<S> <C>
Transmission equipment......................................... 5-10 years
Subscriber premises equipment and installation costs........... 5 years
Office furniture and equipment................................. 10 years
Vehicles....................................................... 5 years
Buildings and improvements..................................... 31 years
</TABLE>
D-9
<PAGE>
TRUVISION WIRELESS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
LICENSE AND ORGANIZATIONAL COSTS
License costs include the costs of acquiring the rights to use certain FCC
frequencies to broadcast programming to the Company's customers. These costs,
net of amortization of $6,000 and $25,000 at December 31, 1994, and 1995,
respectively, and $48,000 at March 31, 1996, are being amortized over a ten-
year period beginning with inception of service in a market. The Company from
time to time reevaluates the carrying amounts of the licenses based on
estimated undiscounted future cash flows as well as the amortization period to
determine whether current events or circumstances warrant adjustments to the
carrying amounts or a revised estimate of the useful life.
Organizational costs include legal fees and other professional fees and
expenses incident to organizing the Company. These costs, net of amortization
of $28,000 and $118,000 at December 31, 1994 and 1995, respectively, and
$150,000 at March 31, 1996, are being amortized over a five-year period.
INCOME TAXES
Income taxes are provided using an asset and liability approach. The current
provision for income taxes represents actual or estimated amounts payable or
refundable on tax returns filed or to be filed for each year. Deferred tax
assets and liabilities are recorded for the estimated future tax effects of
(a) temporary differences between the tax basis of assets and liabilities and
amounts reported in balance sheets, and (b) operating loss and tax credit
carry forwards. The overall change in deferred tax assets and liabilities for
the period measures the deferred tax expense for the period. Effects of
changes in enacted tax laws on deferred tax assets and liabilities are
reflected as adjustments to tax expense in the period of enactment. The
measurement of deferred tax assets may be reduced by a valuation allowance
based on judgmental assessment of available evidence if deemed more likely
than not that some or all of the deferred tax assets will not be realized.
The following summarizes the Company's deferred tax assets and liabilities
as of December 31, 1994 and 1995:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
-------- ----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards......................... $287,820 $1,827,540
Allowance for bad debt................................... 13,260 62,400
-------- ----------
Total tax assets....................................... 301,080 1,889,940
Valuation allowance.................................... 249,990 1,224,210
-------- ----------
51,090 665,730
-------- ----------
Deferred tax liabilities:
Depreciation............................................. 25,350 540,150
Deferred cost............................................ 25,740 125,580
-------- ----------
Total deferred tax liabilities......................... 51,090 665,730
-------- ----------
Net deferred tax asset..................................... $ -- $ --
======== ==========
</TABLE>
The Company recognizes a deferred tax asset to the extent such amounts
offset deferred tax liabilities. The $974,000 change in the valuation
allowance from December 31, 1994 to December 31, 1995 is due primarily to the
increase in the net operating loss carryforwards, which gives rise to deferred
tax assets, over the increase in the temporary differences related to
depreciation, which gives rise to deferred tax liabilities.
D-10
<PAGE>
TRUVISION WIRELESS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company has net operating loss carryforwards for Federal income tax
purposes of approximately $4,686,000 as of December 31, 1995. The
carryforwards expire in years 2009 and 2010.
STOCK SPLIT
On March 26, 1996, the Board of Directors authorized a 2-for-1 stock split
in the form of a 100% stock dividend which will be distributed on April 15,
1996 to shareholders of record on March 15, 1996. Unless otherwise indicated,
all per share data, number of common shares and the statements of
stockholders' equity have been retroactively adjusted to reflect this stock
split.
NET LOSS PER COMMON SHARE
Net loss per common share is based on the net loss attributable to the
weighted average number of common shares outstanding during the period
presented (2,400,000 as of December 31, 1994 and 1995 and March 31, 1995 and
1996.) Conversion of the Series A and B Convertible Preferred Stock into
Common Stock is not assumed because the impact is antidilutive. Shares
issuable upon exercise of stock options are antidilutive and have been
excluded from the calculation. For all periods presented, fully diluted loss
per common share and primary loss per common share are the same.
STATEMENT OF CASH FLOWS
In 1994, the Company issued 2,400,000 shares of Class B Common Stock to MWTV
in exchange for assets with a carrying amount of $4,252,144 and liabilities of
$3,757,104. This exchange has been treated as a non-cash transaction except
for the cash balances of $877,835 acquired from MWTV. No interest or income
taxes were paid in 1994. Interest of $137,385 was paid during the year ended
December 31, 1995 of which approximately $65,000 was capitalized. For the
three months ended March 31, 1996 interest of $85,072 was paid. No interest
was paid for the three months ended March 31, 1995 and no interest was
capitalized for the three month periods ended March 31, 1995 and 1996. No
income taxes were paid for any period presented.
DISCLOSURE ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments (which consist of
cash, accounts receivable and payable, and short-term debt) approximate their
carrying amounts.
RECENTLY ISSUED ACCOUNTING STANDARDS
In 1995, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of.
The Statement does not apply to deferred acquisition costs or deferred tax
assets. The Company plans to adopt this statement effective January 1, 1996;
however, management believes that its adoption will not have a material effect
on the Company's financial statements.
In October 1995, the FASB issued SFAS No. 123, Accounting for Stock Based
Compensation, which generally requires disclosure of additional information
concerning stock based employee compensation arrangements. The Company plans
to adopt SFAS No. 123 effective January 1, 1996.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and Rule 10.01 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting
D-11
<PAGE>
TRUVISION WIRELESS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three
months ended March 31, 1996 are not necessarily indicative of the results that
will be expected for the year ending December 31, 1996.
NOTE 3: LICENSE CONTRACTS
In August 1993, VCI signed a renewable long-term agreement with the
Mississippi EdNet Institute, Inc. ("EdNet"), a non-profit, quasi-governmental
body which manages the licenses designated to various state educational
entities. Subsequently, VCI assigned its rights under the EdNet agreement to
the Company. See Note 1. This lease gives the Company exclusive rights to
utilize excess air time (that portion of a channel's airtime available for
commercial broadcasting according to FCC regulations) on the 20 ITFS channels
in Mississippi. The terms of the channel leases are 10 years, commencing in
1992. The contract provides for the monthly payment of $0.05 per subscriber
per channel or, beginning one year after operating the first market, a minimum
of $7,500 per month. Expense for 1994 and 1995 related to this agreement was
$9,300 and $69,000, respectively.
The contract also requires TruVision to make advances to EdNet during the
first 24 months of operations in the amount of $6,000 per month. These
advances are being recovered as a credit against license fees owed to EdNet.
The agreement with EdNet contains the following major provisions and
requirements to be met by TruVision:
. The system is to ultimately cover at least 95% of the population of the
licensed Mississippi geographic coverage area (including the areas
designated as Phase II by the Company).
. The system must be interconnected by a two-way audio/video link between
TruVision/EdNet transmission sites and Mississippi Authority for
Educational Television headquarters in Jackson, Mississippi. The cost of
this interconnection must be borne by TruVision within certain limits.
. TruVision will provide standard installations at locations as EdNet may
designate.
. TruVision will install and equip an electronic classroom in each of its
Mississippi Markets.
. TruVision will complete the network by July 1, 1998.
The Company capitalizes the cost incurred to comply with the facility
installation and interconnection requirements of the EdNet Agreement and
depreciates such cost over the estimated life of the related equipment.
NOTE 4: SHORT-TERM DEBT
Short-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- MARCH 31,
1994 1995 1996
----- ---------- ----------
<S> <C> <C> <C>
Borrowings under $6,000,000 revolving line of
credit with a bank, due June 30, 1996, with
interest due monthly at 1% above the bank's
prime rate (9.50% at December 31, 1995)...... $ -- $4,531,464 $3,400,156
Borrowings under the Interim Credit Facility
with CVCA, due on demand after June 30, 1996,
with interest of 10% due at maturity. See
Note 10. .................................... -- -- 6,000,000
Other......................................... -- -- 684,738
</TABLE>
D-12
<PAGE>
TRUVISION WIRELESS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The borrowings under the revolving line of credit are secured by
substantially all of the assets of the Company, including licenses, accounts
receivable, inventory, property and equipment, and contract rights.
Additionally, the borrowings are guaranteed by the Company's president and a
stockholder. The Company may prepay its obligations without penalty at any
time.
NOTE 5: STOCK OPTION PLANS AND EMPLOYMENT CONTRACTS
The Company has established a stock option plan for executives and other key
employees. The plan provides for a maximum of 250,000 shares of Common Stock
to be reserved for such options. Terms and conditions of the Company's options
generally are at the discretion of the board of directors; however, no options
are exercisable after June 8, 2004.
In August 1994, the Company granted options totaling 191,490 shares to two
key employees at an exercise price of $5.00 per share. In June 1995 and August
1995, options to purchase shares of 30,000 and 20,000, respectively, were
granted to two additional key employees at a price of $5.00 per share. The
options granted in 1995 vest over a five-year period. As of December 31, 1995,
options for 140,426 shares are exercisable. No compensation expense has been
recorded on these options granted since the option price was equal to the
estimated fair market value of the option shares on the date the options were
granted.
NOTE 6: PREFERRED AND COMMON STOCK RIGHTS
In October 1995, the Company issued 300,000 shares of Series B Convertible
Preferred Stock for gross proceeds of $3,000,000. Pursuant to a prior
commitment, CVCA acquired 270,000 shares and 30,000 shares were issued to a
common stockholder. MWTV has pledged its shares of the Company's Common Stock
to CVCA.
Series A and Series B Convertible Preferred Stock is senior to all other
shares of stock. Convertible Preferred Stock dividend rights are cumulative at
8% per annum based on a stated value of $10 per share. As of December 31, 1994
and 1995, the aggregate amount of Convertible Preferred Stock dividends in
arrears was approximately $227,000 and $914,000, respectively ($387,000 and
$1,134,000, respectively, at March 31, 1995 and 1996). No preferred dividends
have been declared. See Note 11.
In the event of any liquidation, holders of Series A and Series B
Convertible Preferred Stock would first be entitled to receive the greater of
(i) the total $11,000,000 liquidation preference ($8,000,000 for Series A and
$3,000,000 for Series B) plus all accrued but unpaid dividends, or (ii) the
amount that would have been paid, or the value of property that would have
been distributed if, prior to liquidation, the shares had been converted to
Common Stock plus all accrued but unpaid dividends.
Each share of Convertible Preferred Stock carries voting rights as if
converted into shares of Common Stock and, at the option of the holder, is
convertible at any point in time into one fully paid, nonassessable share (two
shares after the 2-for-1 common stock split--see Note 2) of Common Stock plus
cash equal to accrued but unpaid dividends. If the conversion is not made
pursuant to an initial public offering, TruVision may, at its option, issue a
promissory note in lieu of paying the dividends.
The holders of Convertible Preferred Stock are also entitled to elect two of
the five member Board of Directors of the Company. Pursuant to the terms of a
stockholder's agreement certain restrictions have been placed on the
stockholders' ability to vote on specified matters.
In October 1995, the corporate charter was amended to combine Class A and
Class B Common Stock into a single class of $0.01 par value, Common Stock.
D-13
<PAGE>
TRUVISION WIRELESS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Holders of Common Stock are not eligible to receive dividends as long as any
shares of Convertible Preferred Stock are outstanding.
In the event of liquidation, after distribution in full of preferential
amounts to be distributed to holders of Convertible Preferred Stock, the
holders of Common Stock would receive distributions in proportion to the
number of shares held.
NOTE 7: DEFERRED COSTS AND OTHER ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
MARCH 31,
1994 1995 1996
------- ---------- ----------
<S> <C> <C> <C>
Deferred costs and other assets consist of:
Deferred financing and acquisition costs
--Note 11................................... $ -- $1,027,216 $2,586,178
Advances to EdNet--Note 3.................... 84,000 132,000 120,924
Deposits for future acquisitions--Note 10.... -- 100,000 562,650
FCC auction deposit.......................... -- 450,000 450,000
Other........................................ 6,341 140,340 552,118
------- ---------- ----------
$90,341 $1,849,556 $4,271,870
======= ========== ==========
</TABLE>
Deferred acquisition costs consist primarily of professional fees,
engineering costs, travel costs and other related costs associated with the
acquisition of channel rights, licenses and related cable systems which are
currently subject to letters of intent or definitive agreements (see Note 10).
Such costs will be amortized over periods ranging from five to 10 years,
beginning when each acquisition is consummated, or, if the acquisition is not
consummated, written off.
NOTE 8: COMMITMENTS AND CONTINGENCIES
The Company leases office space, antenna space and certain channel broadcast
rights under noncancelable operating leases with remaining terms ranging from
four to eight and one-half years. The following is a schedule by years of
future minimum rentals due under the leases at December 31, 1995:
<TABLE>
<S> <C>
1996............................................................. $369,920
1997............................................................. 397,744
1998............................................................. 309,657
1999............................................................. 190,228
2000............................................................. 132,502
Thereafter....................................................... 225,711
</TABLE>
Rent under these leases was $55,004 for the period August 25, 1994 to
December 31, 1994 and $254,512 for the year ended December 31, 1995.
The Company is participating in an auction conducted by the FCC for rights
to obtain use of available MDS commercial channels in certain basic trading
areas. The Company's outstanding bids for these rights aggregate approximately
$16 million. If the Company is the highest bidder in any, or all, of the
areas, the Company will be required to pay up to $14 million (net of a small
business bidding credit), a portion of which will be financed by the U.S.
government.
D-14
<PAGE>
TRUVISION WIRELESS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company is involved in certain legal proceedings generally incidental to
its business. While the results of any litigation contain an element of
uncertainty, management believes that the outcome of any known or threatened
legal proceeding will not have a material effect on the Company's financial
position or results of operations.
NOTE 9: CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially expose the Company to concentrations
of credit risk, consist primarily of cash and accounts receivable. The Company
has not experienced any losses on its deposits. Subscriber accounts receivable
collectibility is impacted by economic trends in each of the Company's
markets. Such receivables are typically collected within 30 days, and the
Company has provided an allowance which it believes is adequate to absorb
losses from uncollectible accounts.
NOTE 10: BUSINESS COMBINATIONS AND PROPOSED FINANCING TRANSACTIONS
In February 1996, TruVision acquired all the outstanding common stock of
BarTel, Inc., a company holding wireless cable license rights in the Demopolis
and Tuscaloosa, Alabama Markets for cash of approximately $1.7 million and, if
certain conditions are met, notes payable of $652,000. Accordingly, BarTel,
Inc.'s financial position at March 31, 1996 and the results of its operations
for the period from the date of the consummation of the acquisition to March
31, 1996, are reflected in the Company's results for the three months ended
March 31, 1996. Additionally, TruVision has entered into a definitive
agreement to purchase substantially all of the assets of Madison
Communications, Inc. and Beasley Communications, Inc. ("Madison"), a wired and
wireless cable provider located near Huntsville, Alabama, for approximately
$6.0 million.
In March 1996, the Company entered into a letter of intent to acquire
substantially all of the assets of Shoal Wireless, Inc., a wireless cable
provider located in Lawrenceburg, Tennessee, for $1,180,000 in cash.
TruVision has also entered into agreements to purchase licenses, channel
rights and equipment in several other markets for cash of approximately $11.9
million. None of these markets is currently operating and no significant
liabilities are expected to be assumed in connection with these asset
acquisitions.
The Company expects to finance the acquisitions described above with the
short-term line of credit discussed in Note 4 and with an Interim Facility of
up to $12.0 million provided by CVCA in the form of a 10% note payable (due on
demand after June 30, 1996). See Note 4.
NOTE 11: SUBSEQUENT EVENTS
On April 25, 1996, the Company entered into an agreement and plan of merger
(the "Agreement") with Wireless One, Inc. ("Wireless One"), in which Wireless
One will exchange approximately 3.4 million shares of its common stock for all
of the Company's outstanding shares in a transaction valued at $45 million.
The transaction is expected to close by late July 1996. In connection with the
consummation of the Agreement it is expected that all of the Shares of Series
A and B Convertible Preferred Stock will be converted into shares of Common
Stock and all accrued and unpaid preferred dividends ($1,134,000 at March 31,
1996) will be paid.
On May 6, 1996, Wireless One issued the Company two short-term lines of
credit, a $1.5 million line of credit which is to be used to fund working
capital purposes and pay off the borrowings under the bank revolving line of
credit ("Working Capital Line of Credit") and a $9 million line of credit to
be used to fund acquisition needs ("Acquisition Line of Credit"), together the
"Lines of Credit". The Acquisition Line of Credit will increase to $15 million
upon repayment of the Working Capital Line of Credit. The Lines of Credit are
secured by substantially all of the assets of the Company and accrue interest
at Wireless One's borrowing rate of 13%.
D-15
<PAGE>
TRUVISION WIRELESS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Principal and interest are due on the tenth business day following the
earliest of (1) the date of the consummation of the Agreement, (2) December
31, 1996, or (3) the date the Agreement is rescinded.
Prior to the Agreement, the Company was pursuing a public offering of Common
Stock and Senior Discount Notes (the "Offerings"). Concurrent with the
Agreement, the Company withdrew the Offerings. Certain costs related to the
Offerings of approximately $643,000 were deferred at March 31, 1996. The
Company intends to write off a portion of those costs in the period ended June
30, 1996, after management evaluates the applicability of the specific costs
to the proposed merger and the related public offering by Wireless One.
D-16
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Madison Communications, Inc. and
Beasley Communications, Inc.:
We have audited the accompanying combined balance sheets of Madison
Communications, Inc. and Beasley Communications, Inc. (Alabama corporations)
as of December 31, 1994 and 1995 and the related combined statements of
operations and accumulated deficit and cash flows for the years ended December
31, 1993, 1994 and 1995. These combined financial statements are the
responsibility of the Companies' management. Our responsibility is to express
an opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Madison
Communications, Inc. and Beasley Communications, Inc. as of December 31, 1994
and 1995 and the combined results of their operations and their combined cash
flows for the years ended December 31, 1993, 1994 and 1995, in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
Jackson, Mississippi,
January 19, 1996 (except with
respect to the matter discussed in
Note 6, as to which the date is
February 6, 1996).
D-17
<PAGE>
MADISON COMMUNICATIONS, INC. AND BEASLEY COMMUNICATIONS, INC.
COMBINED BALANCE SHEETS (NOTE 1)
(DATA WITH RESPECT TO MARCH 31, 1996 ARE UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------ -----------
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash.................................. $ 5,705 $ 39,711 $ 63,946
Accounts receivable (less allowance
for doubtful accounts of $16,302,
$13,888 and $19,673, respectively)... 1,068 3,513 300
Other current assets.................. 7,804 13,401 6,518
----------- ----------- -----------
Total current assets................ 14,577 56,625 70,764
----------- ----------- -----------
Property, plant and equipment:
Cable system--wireless................ 2,337,362 2,462,318 2,475,403
Cable system--wired................... 1,042,923 1,062,824 1,065,176
Machinery and equipment............... 155,753 130,494 130,494
Buildings, leasehold improvements,
office furniture and equipment....... 34,605 40,071 40,071
Land.................................. 50,000 50,000 50,000
----------- ----------- -----------
3,620,643 3,745,707 3,761,144
Less: accumulated depreciation........ (1,944,781) (2,499,752) (2,627,219)
----------- ----------- -----------
1,675,862 1,245,955 1,133,925
Uninstalled subscriber premises
equipment.............................. 18,195 10,431 13,902
----------- ----------- -----------
1,694,057 1,256,386 1,147,827
----------- ----------- -----------
License costs, net--Note 2.............. 73,333 66,666 65,000
Other assets............................ 1,835 1,835 1,835
----------- ----------- -----------
Total assets........................ $ 1,783,802 $ 1,381,512 $ 1,285,426
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................... $ 84,042 $ 64,874 $ 55,691
Accrued expenses, primarily
programming costs.................... 275,294 319,424 321,462
Deferred income....................... 28,055 20,576 20,576
Borrowings under line of credit (Note
3)................................... 275,000 125,000 100,000
----------- ----------- -----------
Total current liabilities........... 662,391 529,874 497,729
----------- ----------- -----------
Commitments and contingencies (Note 4)
Stockholders' equity
Common Stock; $1 par value; 1,000
shares authorized issued and
outstanding.......................... 1,000 1,000 1,000
Additional paid-in capital............ 2,475,192 2,475,192 2,475,192
Accumulated deficit................... (1,354,781) (1,624,554) (1,688,495)
----------- ----------- -----------
Total stockholders' equity.......... 1,121,411 851,638 787,697
----------- ----------- -----------
Total liabilities and stockholders'
equity............................. $ 1,783,802 $ 1,381,512 $ 1,285,426
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
D-18
<PAGE>
MADISON COMMUNICATIONS, INC. AND BEASLEY COMMUNICATIONS, INC.
COMBINED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(DATA WITH RESPECT TO MARCH 31, 1995 AND 1996 ARE UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------- ------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Service revenues...... $ 1,426,971 $ 1,493,337 $ 1,543,470 $ 388,811 $ 384,706
Installation reve-
nues................. 68,026 63,400 38,677 11,325 7,923
----------- ----------- ----------- ----------- -----------
Total revenues...... 1,494,997 1,556,737 1,582,147 400,136 392,629
----------- ----------- ----------- ----------- -----------
Expenses:
System operating
expenses............. 727,124 814,715 888,707 146,783 152,554
General and
administrative
expenses............. 386,911 402,897 404,804 152,046 191,675
Depreciation and
amortization......... 578,739 626,531 577,240 148,678 129,134
----------- ----------- ----------- ----------- -----------
Total operating
expenses........... 1,692,774 1,844,143 1,870,751 447,507 473,363
----------- ----------- ----------- ----------- -----------
Loss from operations.... (197,777) (287,406) (288,604) (47,371) (80,734)
Other income (expense):
Other income.......... 40,793 43,180 43,414 -- 19,703
Gain (loss) on sale of
assets............... 103,583 -- (7,143) -- --
Interest (expense).... (55,465) (31,090) (17,440) (6,009) (2,910)
----------- ----------- ----------- ----------- -----------
Net loss................ (108,866) (275,316) (269,773) (53,380) (63,941)
Accumulated deficit--
beginning of period.... (970,599) (1,079,465) (1,354,781) (1,354,781) (1,624,554)
----------- ----------- ----------- ----------- -----------
Accumulated deficit--end
of period.............. $(1,079,465) $(1,354,781) $(1,624,554) $(1,408,161) $(1,688,495)
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
D-19
<PAGE>
MADISON COMMUNICATIONS, INC. AND BEASLEY COMMUNICATIONS, INC.
COMBINED STATEMENTS OF CASH FLOWS
(DATA WITH RESPECT TO MARCH 31, 1995 AND 1996 ARE UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------- ------------------
1993 1994 1995 1995 1996
--------- --------- --------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows provided by
operating activities:
Net loss................. $(108,866) $(275,316) $(269,773) $(53,380) $(63,941)
Adjustments to reconcile
net loss to net cash
provided by operating
activities:
Depreciation and
amortization.......... 578,739 626,531 577,240 148,678 129,134
(Gain) loss on sale of
assets................ (103,583) -- 7,143 -- --
Provision for losses on
accounts receivable... 22,500 18,000 15,505 4,500 4,500
(Increase) in other
assets................ (125) (65) -- -- --
Changes in operating
assets and
liabilities:
(Increase) decrease
in accounts
receivable.......... (17,720) (10,184) (17,950) 8,700 (1,287)
(Increase) decrease
in other current
assets.............. (8,110) 16,418 (5,597) 77 6,883
Increase (decrease)
in accounts
payable............. 3,170 39,575 (19,168) (21,995) (9,183)
Increase in accrued
expenses............ 127,134 91,610 44,130 45,680 2,038
Increase (decrease) 65 5,165 (7,479) (7,921) --
in deferred income.. --------- --------- --------- -------- --------
Cash flows provided by 493,204 511,734 324,051 124,339 68,144
operating activities..... --------- --------- --------- -------- --------
Cash flows used in
investing activities:
Capital expenditures..... (329,640) (220,778) (143,545) (39,797) (18,909)
Proceeds from sale of 180,000 -- 3,500 -- --
assets.................. --------- --------- --------- -------- --------
Net cash used in (149,640) (220,778) (140,045) (39,797) (18,909)
investing activities.... --------- --------- --------- -------- --------
Cash flows used in
financing activities:
Payment on bank
overdraft............... (21,815) -- -- -- --
Payments on line of (300,000) (307,000) (150,000) (50,000) (25,000)
credit.................. --------- --------- --------- -------- --------
Net cash used by financing (321,815) (307,000) (150,000) (50,000) (25,000)
activities............... --------- --------- --------- -------- --------
Net increase (decrease) in
cash and cash
equivalents.............. 21,749 (16,044) 34,006 34,542 24,235
Cash and cash equivalents -- 21,749 5,705 5,705 39,711
at beginning of period... --------- --------- --------- -------- --------
Cash and cash equivalents $ 21,749 $ 5,705 $ 39,711 $ 40,247 $ 63,946
at end of period......... ========= ========= ========= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
D-20
<PAGE>
MADISON COMMUNICATIONS, INC. AND BEASLEY COMMUNICATIONS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1: THE COMPANIES
HISTORY AND ORGANIZATION
Madison Communications, Inc. ("Madison"), an Alabama corporation, was formed
and began operations on July 26, 1989. Beasley Communications, Inc.
("Beasley"), an Alabama corporation, was formed on June 16, 1994. The
shareholders of Madison and Beasley are the same and the business operations
are generally conducted as if Madison and Beasley were a single entity.
Accordingly, the financial statements of Madison and Beasley are presented on
a combined basis. Madison and Beasley are hereafter referred to as "The
Company."
The Company is engaged in building, managing and owning wired and wireless
cable systems. Wired cable systems retransmit television signals to
subscribers over coaxial cable networks from a head-end facility where the
signals are received and processed. Wireless cable systems retransmit
television programming received at the head-end via encrypted microwave
signals from multi-channel broadcast towers to subscribers within an
approximate 40 mile radius of each tower. The Company has licenses for
contractual control over 27 wireless cable channels in Madison and Limestone
Counties of North Alabama licensed by the Federal Communications Commission
("FCC").
FCC LICENSES
The Company is dependent on leases with unaffiliated third parties for
substantially all of its wireless cable channel rights. ITFS licenses
generally are granted for a term of 10 years and are subject to renewal by the
FCC. MDS licenses generally will expire on May 1, 2001 unless renewed. FCC
licenses also specify construction deadlines which, if not met by the Company
or extended by the FCC, could result in the loss of the license. There can be
no assurance that the FCC will grant any particular extension request or
license renewal request. The use of wireless cable channels by the license
holders is subject to regulation by the FCC and the Company is dependent upon
the continuing compliance by channel license holders with applicable
regulations. The termination or non-renewal of a channel lease or of a channel
license, or the failure to grant an application for an extension of the time
to construct an authorized station, would result in the Company being unable
to deliver programming on the channels authorized pursuant thereto. Although
the Company does not believe that the termination of or failure to renew a
single channel lease would materially adversely affect the Company, several of
such terminations or failures to renew in one or more Markets that the Company
actively serves or intends to serve could have a material adverse effect on
the Company. In addition, the termination, forfeiture, revocation or failure
to renew or extend an authorization or license held by the Company's lessors
could have a material adverse effect on the Company.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is recorded
on the straight-line basis for financial reporting purposes. Costs incurred
for repair and maintenance of property, plant and equipment are charged to
expense when incurred. Costs incurred for renewals and improvements are
capitalized. The costs of subscriber equipment, including installation labor
and other direct installation costs, is capitalized. Subscriber
D-21
<PAGE>
MADISON COMMUNICATIONS, INC. AND BEASLEY COMMUNICATIONS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
premises equipment and installation costs are depreciated using a composite
method over five years which factors in the Company's estimates of useful
lives of recoverable equipment and average subscriber lives of nonrecoverable
installation costs.
Depreciation is recorded over the estimated useful lives as follows:
<TABLE>
<S> <C>
Cable systems--wireless........................................... 3-10 years
Cable systems--wired.............................................. 5-10 years
Machinery and equipment........................................... 5-10 years
Office furniture and equipment.................................... 7 years
Buildings and improvements........................................ 31 years
</TABLE>
LICENSE COSTS
License costs include the costs of acquiring the rights to use certain FCC
frequencies to broadcast programming to the Company's customers. These costs,
net of amortization of $20,001, $26,668 and $33,334 at December 31, 1993, 1994
and 1995 and $35,001 at March 31, 1996, are being amortized over a 15 year
period beginning with inception of service in a market. The Company from time
to time reevaluates the carrying value of the licenses based on estimated
undiscounted cash flows as well as the amortization period to determine
whether current events or circumstances warrant adjustments to the carrying
amounts or a revised estimate of the useful life. In 1993, broadcast licenses
to certain Markets outside of the Company's area of interests were sold to a
third party, resulting in a gain of approximately $100,000.
REVENUE RECOGNITION
Revenues from monthly service charges are recognized as the service is
provided to the customer. Customers are billed in the month services are
rendered.
OPERATING EXPENSES
Operating expenses consist principally of programming fees, license fees,
tower rental, maintenance, engineering and other costs incident to providing
service to customers.
INCOME TAXES
Effective March 15, 1990, the Company elected to be taxed as an S
Corporation under provisions of the Internal Revenue Code. As a result, the
Company does not pay federal corporate income taxes or Alabama corporate
income taxes on its taxable income. Instead, the stockholders are liable for
individual federal income taxes and Alabama income taxes on the Company's
taxable income. No distributions of earnings to stockholders have been made or
are planned to be made for payment of income taxes as the Company had a loss
for income tax purposes in 1995.
STATEMENT OF CASH FLOWS
The Company considers all highly liquid investments with remaining
maturities of 90 days or less to be cash equivalents. The Company paid
interest of $55,465, $31,090 and $17,440, for the years ended December 31,
1993, 1994 and 1995, respectively and $5,953 for the three months ended March
31, 1996. No interest was paid in the three months ended March 31, 1995. No
income taxes were paid in any of the periods presented.
D-22
<PAGE>
MADISON COMMUNICATIONS, INC. AND BEASLEY COMMUNICATIONS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of the Company's financial instruments (which consist of
cash, accounts receivable, accounts payable and borrowings under the line of
credit) approximate their carrying value.
RECENTLY ISSUED ACCOUNTING STANDARDS
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 ("SFAS 121"), Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of.
The Statement does not apply to deferred acquisition costs, or deferred tax
assets. The Company has adopted this statement effective January 1, 1995, and
its adoption did not have a material effect on the Company's financial
statements.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and Rule10-01 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 1996 are not
necessarily indicative of the results that will be expected for the year
ending December 31, 1996.
NOTE 3: LINE OF CREDIT AGREEMENT
On April 8, 1992 the Company obtained a $1,000,000 revolving credit facility
(the "Revolver") for working capital and other general corporate purposes.
Borrowings under the Revolver bear interest at the prime rate plus 1.0% (9.5%
at December 31, 1995). Interest is payable quarterly and the Revolver is
renewable on an annual basis. Substantially all of the assets of the Company
are pledged as collateral under the Revolver and the stock of the Company is
pledged as collateral under the guarantee of the Revolver. Total borrowings
outstanding under the Revolver were $125,000 at December 31, 1995.
NOTE 4: COMMITMENTS AND CONTINGENCIES
The Company leases office space, antenna space and certain equipment under
noncancelable operating leases with remaining terms ranging from one to five
years. The following is a schedule by years of future minimum rentals due
under the leases at December 31, 1995:
<TABLE>
<S> <C>
1996................................................................. $26,407
1997................................................................. 10,560
1998................................................................. 6,600
1999................................................................. 2,640
2000................................................................. 1,540
</TABLE>
Rent expense for the years ended December 31, 1993, 1994 and 1995 was
approximately $13,200, $24,800 and $37,200, respectively.
In addition to the noncancelable leases above, the Company has entered into
agreements with certain area schools and colleges to use the ITFS licenses
awarded them. These contracts give the Company exclusive rights to utilize 16
channels awarded as educational frequencies to broadcast commercial
programming. The Company
D-23
<PAGE>
MADISON COMMUNICATIONS, INC. AND BEASLEY COMMUNICATIONS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
is obligated to reserve a certain number of hours per week for broadcasting of
educational programming for these institutions and to provide the equipment
necessary in the institutions to receive the Company's transmission. The
Company fulfills its educational programming obligation through assignment of
four channels for full-time educational programming. The contracts provide
monthly payments of $0.05 to $0.10 per subscriber per channel. License expense
for the years ended December 31, 1993, 1994 and 1995 was $44,300, $46,900 and
$54,300, respectively.
The Company is involved in certain legal proceedings generally incidental to
its business. While the results of any litigation contain an element of
uncertainty, management believes that the outcome of any known or threatened
legal proceeding will not have a material effect on the Company's financial
position or results of operations.
NOTE 5: CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially expose the Company to concentrations
of credit risk, consist primarily of cash and accounts receivable. The Company
has not experienced any losses on its deposits. Subscriber accounts receivable
collectibility is impacted by economic trends in each of the Company's
Markets. Such receivables are typically collected within thirty days, and the
Company has provided an allowance which it believes is adequate to absorb
losses from uncollectible accounts.
NOTE 6: SALE OF THE COMPANY
On February 6, 1996, the Company signed a definitive agreement to sell
substantially all of the assets of Madison and Beasley to TruVision Wireless,
Inc., for $6.0 million in a combination of cash and notes receivable. The
sale, which is contingent upon FCC approval, is expected to be consummated in
the second quarter of 1996.
D-24
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of BarTel, Inc.:
We have audited the accompanying balance sheet of BarTel, Inc. (an Alabama
corporation) as of December 31, 1995, and the related statements of income and
retained earnings and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of BarTel, Inc. as of
December 31, 1995, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Jackson, Mississippi,
March 26, 1996.
D-25
<PAGE>
BARTEL, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
ASSETS
Current assets:
Accounts receivable............................................. $27,816
Other current assets............................................ 500
-------
Total current assets.......................................... 28,316
-------
Property and equipment, net--Note 2............................... 655
Other assets--Note 2.............................................. 38,299
-------
Total assets.................................................... $67,270
=======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable................................................ $ 1,722
Accrued expenses................................................ 3,145
-------
Total current liabilities..................................... 4,867
-------
Other liabilities--Note 2......................................... 37,828
Deferred tax liability............................................ 4,583
-------
Total liabilities............................................... 47,278
-------
Stockholder's equity
Common Stock, $1.00 par value; 1,500 shares authorized, 1,000
shares issued and outstanding.................................. 1,000
Retained earnings............................................... 18,992
-------
Total stockholder's equity...................................... 19,992
-------
Total liabilities and stockholder's equity...................... $67,270
=======
</TABLE>
The accompanying notes are an integral part of this financial statement.
D-26
<PAGE>
BARTEL, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1995
------------------
<S> <C>
Revenues:
Consulting fees............................................ $150,000
--------
Total revenues........................................... 150,000
--------
Expenses:
Operating expenses......................................... 67,720
General and administrative expenses........................ 59,485
Depreciation............................................... 42
--------
Total operating expenses................................. 127,247
--------
Income from operations....................................... 22,753
Provision for income taxes--Note 2........................... 5,039
--------
Net income................................................... 17,714
Retained earnings, beginning of year......................... 1,278
--------
Retained earnings, end of year............................... $ 18,992
========
</TABLE>
The accompanying notes are an integral part of this financial statement.
D-27
<PAGE>
BARTEL, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1995
------------------
<S> <C>
Cash flows from operating activities:
Net income................................................ $17,714
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation............................................ 42
Provision for deferred income tax....................... 4,583
Changes in operating assets and liabilities:
Increase in accounts receivable....................... (25,100)
Increase in other assets.............................. (500)
Increase in accounts payable and accrued expenses..... 629
Increase in other liabilities......................... 37,828
-------
Cash provided by operating activities....................... 35,196
-------
Cash flows from investing activities:
Capital expenditures...................................... (697)
Deposit for FCC auction................................... (38,169)
-------
Cash used in investing activities........................... (38,866)
-------
Net decrease in cash and cash equivalents................... (3,670)
-------
Cash and cash equivalents, beginning of year................ 3,670
-------
Cash and cash equivalents, end of year...................... $ --
=======
</TABLE>
The accompanying notes are an integral part of this financial statement.
D-28
<PAGE>
BARTEL, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1: THE COMPANY--HISTORY AND ORGANIZATION
BarTel, Inc. ("BarTel" or the "Company"), an Alabama corporation, was
incorporated on April 14, 1993, to, among other things, develop, construct,
operate and maintain wireless cable systems. A wireless cable system
retransmits programming received at a head-end receiver via encryptic
microwave signals from multichannel broadcast towers to subscribers within an
approximate 40 mile radius of each tower. In February 1996, the Company's sole
stockholder signed a definitive agreement to sell the stock of BarTel to
TruVision Wireless, Inc. See Note 4.
DEMOPOLIS MARKET AREA
The Company has entered into lease agreements with various educational
institutions (the "Educational Institutions") whereby it has the exclusive
rights to the excess airtime capacity of 20 Instructional Television Fixed
Service ("ITFS") wireless cable channels in the Demopolis, Alabama, market and
through agreements with various individuals, the rights to 8 Multipoint
Distribution Service ("MDS") channels in the same area. Through the lease
agreements with the Educational Institutions, BarTel agreed to assist in
obtaining government grants to fund equipment and construction costs, and to
operate and maintain, at its own cost, a wireless cable system which would
broadcast commercial and educational programming to the Educational
Institutions free of charge.
In October 1993, the Educational Institutions pooled certain ITFS licenses
awarded by the FCC into a single entity, Black Warrior Telecommunications
Consortium (the "Consortium") and agreed to provide the funding for
constructing and equipping the wireless cable system with BarTel operating and
maintaining the system. The Consortium permitted BarTel the right to use the
equipment to operate a commercial wireless system, but the equipment remains
the property of the educational institutions. The Consortium has also allowed
BarTel to combine the ITFS and MDS channels to enhance the wireless cable
system in order to attract potential subscribers. See Note 3.
The Company has successfully tested its broadcasting system to limited test
sites in the Demopolis area but has not solicited or installed any customers.
EUTAW/TUSCALOOSA MARKET AREA
The Company also has agreements with various educational and health-care
service institutions (the "Institutions") in the Eutaw/Tuscaloosa, Alabama,
broadcast market area. Under these agreements, BarTel has exclusive rights to
the excess airtime capacity of 20 ITFS wireless cable channels of which the
individual Institutions hold licenses. The Company is required to assist in
obtaining government grants to fund the equipment and construction of an ITFS
system, as well as operate and maintain the system, at its own cost. The
equipment will then become the property of the individual Institutions with
BarTel maintaining the right to its use for broadcasting programming to the
general public. See Note 3.
GADSDEN/ANNISTON MARKET AREA
The Company has entered into an agreement with Gadsden Wireless Cable
Corporation, Inc. ("Gadsden") whereby it will act as a consultant and
contractor, from development through operation, for purposes of establishing a
wireless cable system in the Gadsden/Anniston, Alabama, broadcast market area.
Under this agreement, Gadsden will fully fund all expenses related to this
endeavor including consulting fees to be paid to BarTel. Upon successful
completion of this wireless cable system in accordance with the agreement,
BarTel will be granted an amount of stock in Gadsden equivalent to that of its
two owners/shareholders. See Notes 3 and 4.
D-29
<PAGE>
BARTEL, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company acts as an agent for Gadsden for purposes of bidding at an FCC
auction on the rights to acquire several MDS channel licenses. Gadsden has
advanced the Company the deposit necessary to bid on these licenses.
RISKS AND OTHER FACTORS
The Company has not marketed its product to potential customers in the
Demopolis area and the construction of the wireless cable system transmission
facilities has not commenced in the Eutaw/Tuscaloosa market area. The Company
expects to incur significant costs in advertising to the Demopolis market area
and in increased manpower to handle a customer base. Additionally, the cost of
developing a system in the Eutaw/Tuscaloosa market area will require outside
financing sources. The growth of the Company's business also requires
substantial investment on a continuing basis to finance subscriber premises
equipment. There can be no assurance that the Company will generate revenues
or obtain other sources of financing sufficient to cover these costs and
achieve positive cash flow. See Note 4.
The Company is dependent on leases with third parties for all of its
wireless cable channel rights. Most of these licenses are granted for a term
of 10 years and are subject to renewal by the lessor. There can be no
assurance that the lessors will grant a license renewal request. The use of
wireless cable channels by the license holders is subject to regulation by the
FCC and the Company is dependent upon the continuing compliance of channel
license holders with applicable regulations. The termination or non-renewal of
a channel lease or of a channel license would result in the Company being
unable to deliver programming on the channels authorized pursuant thereto. In
addition, the termination, forfeiture, revocation or failure to renew or
extend an authorization or license held by the Company's lessors could have a
material adverse effect on the Company.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Revenue recognized to date is for consulting work performed by the Company's
employees for the benefit of the holders of the channel licenses described in
Note 3 and related to the design and construction of the broadcast equipment
to be leased by the Company. This revenue is recognized as the service is
provided and the holders are billed in the month the service is performed.
STATEMENT OF CASH FLOWS
The Company considers all demand and interest-bearing accounts to be cash
equivalents. In 1995, income taxes of $240 were paid. No interest was paid in
1995.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is recorded on the
straight-line basis for financial reporting purposes. Costs incurred for
repair and maintenance of property and equipment are charged to expense when
incurred. All equipment is depreciated over an estimated useful life of 7
years.
OTHER ASSETS AND LIABILITIES
Other assets and other liabilities consist of a deposit to the FCC for the
wireless cable auction and a liability for the same amount as this deposit was
advanced to the Company by Gadsden.
D-30
<PAGE>
BARTEL, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
INCOME TAXES
Income taxes are provided using an asset and liability approach. The current
provision for income taxes represents actual or estimated amounts payable on
tax returns to be filed for each year. Deferred tax assets and liabilities are
recorded for the estimated future tax effects of temporary differences between
the tax basis of assets and liabilities and amounts reported in the balance
sheet. The Company pays taxes on the cash basis. Accordingly, deferred tax
assets and liabilities have been recorded for the difference between the cash
basis and accrual basis for the Company's yearly activity. As of December 31,
1995, the Company had a deferred income tax liability of $4,583.
DISCLOSURE ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments (which consists of
accounts receivable and payable) approximate their carrying amounts.
NOTE 3: LICENSE CONTRACTS
DEMOPOLIS MARKET AREA:
BLACK WARRIOR TELECOMMUNICATIONS CONSORTIUM
In September 1994, the Company was awarded a contract with the Consortium to
act as a "facilitator" in the construction, operation and maintenance of a
wireless cable transmission facility. Under the agreement, the Company will be
paid a monthly fee for services as well as reimbursements for expenses related
to construction of the facility. The Educational Institutions have leased the
Company exclusive rights to the excess airtime under the 20 ITFS licenses
awarded them. The Company is allowed to use the Consortium system, equipment
and leased tower to operate a commercial wireless cable operation. In return
for the use of the excess airtime (that portion of channel's airtime available
for commercial broadcasting according to FCC regulations) under each of these
channel licenses, the Company agrees to pay the Consortium 20% of the
Company's annual gross subscription revenues received from residential and
commercial customers. The Consortium also granted BarTel the right to link
other MDS channels to the system in order to enhance the offering of programs
and to attract potential subscribers. The Company will pay all costs
associated with the operation and maintenance of the transmission facility as
well as all reception equipment required for the general public or any
Consortium members to view the programs to be transmitted. For the ITFS
channels, the Company agrees to reserve for each channel licensed a minimum of
20 hours of airtime each week for broadcasting educational programming. The
terms of the ITFS channel leases are 10 years, running concurrent with the
licenses, commencing June 29, 1994. All leases are renewable at the Company's
option and with approval from the FCC.
POWELL, HYATT & CAROLINE WIRELESS CABLE, INC.
On May 22, 1994, the Company entered into an agreement with Louis F. Powell,
Arvol M. Hyatt, and Caroline Wireless Cable, Inc. ("Caroline"). Powell and
Hyatt are the holders of separate MDS channel licenses granted by the FCC and
authorizing the licensees to construct a transmission facility in Demopolis,
Alabama. Caroline had entered into a service agreement with both Powell and
Hyatt for use of these licenses in exchange for constructing the facility and
providing royalties upon commencement of commercial operations. Caroline also
entered into an agreement with the Wilcox County Board of Education
("Wilcox"), a holder of an ITFS license, for the use of excess channel
capacity. Under that contract, Caroline was to construct, maintain and operate
a transmission facility and pay royalties to Wilcox once subscribers to a
commercial wireless cable system were installed.
D-31
<PAGE>
BARTEL, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Caroline assigned BarTel all of its rights to the contracts with Powell,
Hyatt and Wilcox. The Company agreed to complete the Powell license to
construct the facility and use reasonable efforts to assume and carry out the
obligations to Wilcox County. In the event that the Powell and Hyatt licenses
are implemented and that the Wilcox application to construct and operate a
transmission facility is successful, the Company agrees to assume the same
obligations in respect to the various agreements listed above. The term of the
Wilcox agreement is for two years, running concurrent with the license date,
with four automatically renewable terms of two years unless either party gives
notice of cancellation for cause.
In addition, Powell and Hyatt agreed to transfer their licenses to the
Company for $.10 per channel per month per commercial subscriber with payment
to begin after BarTel has reached 4,000 subscribers. Payment will continue for
40 months or until the cumulative payments reach $100,000. If, at the end of
this term, the aggregate payments do not exceed $100,000, the monthly payments
are to continue until the aggregate is $100,000. If the Company has less than
4,000 subscribers, it may withhold payment. However, if after three years
BarTel does not have 4,000 subscribers it must begin monthly payments of $.10
per customer until the aggregate of payments exceeds $100,000.
At no time will the Company be obligated to pay after reaching payments of
$100,000.
EUTAW/TUSCALOOSA MARKET AREA:
On October 12, 1992, Stuart Barron, sole stockholder of BarTel, contracted
with five institutions in separate agreements. The Institutions had applied
for licenses from the FCC to build and operate ITFS channels in the Eutaw,
Alabama area. The Company reached agreements with each institution to have
exclusive rights to the excess channel capacity on these ITFS channels. The
initial term of the agreements is 10 years from the date of the FCC grant of
licenses to the Institutions.
Under these agreements, the Company is to prepare applications for a federal
grant on behalf of the Institutions which will be used to "procure, arrange
for, and pay all costs associated with engineering, purchasing, constructing
and installing ITFS equipment which shall become the property of the
institution." BarTel must pay all costs to provide suitable space and to
operate and maintain the ITFS equipment so that it meets FCC standards. The
Company may, at its own expense, install reception equipment necessary for the
general public to view the programs transmitted.
The Institutions have leased excess capacity time to BarTel and have
reserved 20 hours per channel per week for educational programming. The
contract also allows the institution to reserve an additional 20 hours each
week. Airtime is to be available free of charge to the Institutions.
GADSDEN/ANNISTON MARKET AREA:
GADSDEN WIRELESS CABLE CORPORATION, INC.
On June 17, 1995, the Company entered into a service agreement with Gadsden.
Under this agreement, the Company will assist in assessing the needs of
Gadsden to establish a 20-channel wireless cable system in the
Gadsden/Anniston, Alabama market area and act as a consultant for completing
the project, including applying for FCC licenses.
The Company will acquire and purchase on behalf of Gadsden all materials and
equipment needed to construct the system and arrange for necessary labor to
perform the construction work. It is also required to determine the work to be
done and supervise all activities to meet FCC requirements for placing the
system in operation.
D-32
<PAGE>
BARTEL, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Gadsden agrees to fully fund the project, including the prompt payment of
all labor and materials upon requisition by the Company and approval by
Gadsden. Gadsden will pay the Company $8,000 per month and out of pocket
expenses, up to $1,000 per month, from the execution of this agreement until
the project broadcasts a test signal, or 12 months, whichever occurs first. If
the project is not operational after 12 months, the project may be continued
if it is determined that it is still viable. However, monthly fees paid to the
Company will decline by $1,000 for each month after the twelfth month.
If the Company is successful in placing a 20-channel wireless cable system
into operation, the two shareholders of Gadsden will transfer to BarTel an
amount of stock in Gadsden equal to that which they themselves hold. See Note
4.
NOTE 4: SUBSEQUENT EVENT
On February 20, 1996, the Company's sole stockholder sold his stock in the
Company to TruVision Wireless, Inc. ("TruVision") for $1.7 million cash and a
promissory note for $652,000 subject to the terms of the purchase agreement.
TruVision expects to renegotiate the obligations under the leases discussed in
Note 3 to (1) reduce the payments to the Consortium and (2) remove the
provisions for the Company obtaining government grants on behalf of the
Consortium. TruVision also anticipates to renegotiate the lease agreements
with the four Eutaw ITFS groups and to transfer ownership of transmission
equipment from the Consortium to TruVision.
Also in February 1996, TruVision entered into a purchase and sale agreement
with Gadsden pursuant to which TruVision will acquire assets that include the
rights to the 20-channel wireless cable system that Gadsden had planned to
establish with the Company's assistance.
D-33
<PAGE>
ANNEX E
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial information
consists of an Unaudited Pro Forma Condensed Combined Balance Sheet as of
March 31, 1996 and Unaudited Pro Forma Condensed Combined Statements of
Operations for the year ended December 31, 1995 and the three months ended
March 31, 1996 (collectively, the "Pro Forma Statements"). The Unaudited Pro
Forma Condensed Combined Statements of Operations give effect to (i) the
TruVision Purchase, (ii) the Madison Purchase, (iii) the Shoal Purchase, (iv)
the BarTel Purchase and (v) the conversion of the TruVision Convertible
Preferred Stock into TruVision common stock, in each case as if such
transactions had occurred on January 1, 1995. The Unaudited Pro Forma
Condensed Combined Balance Sheet gives effect to (i) the events referred to in
the previous sentence, (ii) the AWS Purchase, (iii) the Flippin Purchase, (iv)
the Jacksonville Purchase, (v) the Chattanooga Purchase, (vi) the Gadsden
Purchase, (vii) the Skyview Purchase, (viii) the Applied Video Acquisition and
(ix) the channel rights to be purchased by both TruVision and Wireless One via
the BTA Auction. All transactions are accounted for under the purchase method
of accounting.
The Pro Forma Statements and accompanying notes should be read in
conjunction with Wireless One's consolidated financial statements incorporated
by reference into this Proxy and TruVision's financial statements included
herein. The Pro Forma Statements do not purport to represent what the
Company's results of operations or financial position would actually have been
if the aforementioned transactions or events occurred on the dates specified
or to project the Company's results of operations or financial position for
any future periods or at any future date. The pro forma adjustments are based
upon available information and certain adjustments that management believes
are reasonable. In the opinion of management, all adjustments have been made
that are necessary to present fairly the Pro Forma Statements.
E-1
<PAGE>
PRO FORMA BALANCE SHEET
THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
ADJUSTMENTS FOR
ACQUISITIONS,
TRUVISION LICENSE AND
WIRELESS ONE TRUVISION MADISON SHOAL PROFORMA CHANNEL RIGHTS PROFORMA
HISTORICAL HISTORICAL HISTORICAL HISTORICAL ADJUSTMENTS PURCHASES COMBINED
------------ ---------- ---------- ---------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash
equivalents........... $ 98,964,157 536,411 63,946 -- (4,620,000)(1) (29,378,220)(3) 65,502,348
(63,946)(4)
Marketable investment
securities-restricted. 17,735,150 -- -- -- -- -- 17,735,150
Other current assets... 1,540,727 380,577 6,818 630 -- 32,000 (5) 1,960,752
------------ ---------- ---------- ------- ----------- ----------- -----------
Total current assets... 118,240,034 916,988 70,764 630 (4,620,000) (29,410,166) 85,198,250
Property and equipment,
net.................... 22,912,095 11,862,038 1,147,827 390,000 -- 580,000 (5) 36,891,960
Intangibles............. 28,491,658 2,447,387 65,000 21,107 33,978,096 (1) 68,268,443 (5) 140,177,025
6,905,334 (2)
Marketable investment
securities-restricted.. 35,946,439 -- -- -- -- -- 35,946,439
Other assets............ 7,703,873 4,525,240 1,835 -- (744,186)(1) (1,350,000)(6) 10,136,762
------------ ---------- ---------- ------- ----------- ----------- -----------
Total assets............ $213,294,099 19,751,653 1,285,426 411,737 35,519,244 38,088,277 308,350,436
============ ========== ========== ======= =========== =========== ===========
Current liabilities:
Short-term debt........ $ 384,366 10,084,894 100,000 -- -- (100,000)(4) 10,469,260
Other current
liabilities........... 12,346,619 3,336,475 345,245 53,028 -- (398,273)(4) 15,683,094
------------ ---------- ---------- ------- ----------- ----------- -----------
Total current
liabilities........... 12,730,985 13,421,369 445,245 53,028 -- (498,273) 26,152,354
Deferred income taxes... -- -- -- -- 6,905,334 (2) -- 6,905,334
BTA Auction
indebtedness........... -- -- -- -- -- 23,712,880 (6) 23,712,880
Long-term debt.......... 150,993,259 -- -- 432,089 -- (432,089)(4) 150,993,259
Stockholders' equity:
Preferred stock........ -- 11,000 -- -- (11,000)(1) -- --
Common stock........... 134,988 24,000 1,000 300 24,053 11,480 (7) 170,521
(24,000)(1) (1,300)(7)
Additional paid-in
capital................ 65,631,596 10,698,679 2,475,192 17,604 33,650,049 (1) 16,061,080 (7) 116,612,817
(10,698,679)(1) (2,492,796)(7)
1,270,092 (7)
Accumulated deficit..... (16,196,729) (4,403,395) (1,636,011) (91,284) 4,403,395 (1) 1,727,295 (7) (16,196,729)
------------ ---------- ---------- ------- ----------- ----------- -----------
Total stockholders'
equity................. 49,569,855 6,330,284 840,181 (73,380) 28,613,910 15,305,759 100,586,609
------------ ---------- ---------- ------- ----------- ----------- -----------
$213,294,099 19,751,653 1,285,426 411,737 35,519,244 38,088,277 308,350,436
============ ========== ========== ======= =========== =========== ===========
</TABLE>
E-2
<PAGE>
NOTES TO PRO FORMA BALANCE SHEET
THREE MONTHS ENDED MARCH 31, 1996
(1) Represents the elimination of TruVision's historical equity and the
issuance of 2,405,293 shares (excludes the 1,148,040 shares of Common
Stock described in Note 7 below) of Common Stock at $14 per share, by the
Company for the purchase of all outstanding common stock of TruVision,
including the payment of $1,800,000 to VCI and other expenses related to
the merger including but not limited to Bond Holder consent fees. The
Company will issue options to certain TruVision employees in exchange for
the TruVision options as set forth in the TruVision Merger Agreement. A
value of $1,270,092 has been assigned to these options. For purposes of
the Pro Forma Statements the Company has tentatively considered the fair
value of the acquired tangible assets to approximate their historical
carrying value, with the excess acquisition costs being attributable to
channel rights and license agreements. It is the Company's intention,
subsequent to the acquisition, to more fully evaluate the acquired assets
and as a result, the allocation of the acquisition costs among tangible
and intangible assets acquired may change.
(2) This adjustment reflects the recognition of deferred income taxes at an
estimated 35% effective tax rate on excess book value over tax basis
relating to the TruVision net assets acquired. The related increase in
intangibles will be amortized over an estimated useful life of 20 years.
(3) Reflects cash (in millions) to be paid in the Madison Purchase $5.7, the
Shoal Purchase $1.2, the Applied Video Purchase $6.5, the TruVision
acquisition including Memphis $3.9, Jackson $2.7, Flippin $1.5, Hot
Springs $1.5, Gadsden $1, and Jacksonville $.8, and the cash portion of
the purchase price channel rights to be obtained via the BTA auction $4.6.
(4) These adjustments reflect the elimination of certain assets and
liabilities that the Company will not acquire as part of the Madison
Purchase and the Shoal Purchase as set forth in the respective agreements.
(5) This adjustment represents the estimated fair value (in millions) of the
equipment and the other assets acquired and the excess of cost over
tangible assets acquired as part of the TruVision Purchase $10.8, the
Applied Video Purchase $6.5, the Madison and Shoals Purchases $6.9, the
Gadsden, Jackson, and Memphis Purchases $14.3, and the License and Channel
Rights purchases $29.6. For purposes of the Pro Forma Financial
Statements, the Company has tentatively considered the fair value of the
acquired tangible assets to approximate their historical carrying value,
with the excess acquisition costs being attributable to channel rights and
license agreements. It is the Company's intention, subsequent to the
acquisition, to more fully evaluate the acquired assets and, as a result,
the allocation of the acquisition costs among tangible and intangible
assets acquired may change.
(6) These adjustments represent debt to the United States government to
finance approximately $23.7 million of the purchase price and the
utilization of the $1,350,000 deposit for the channel rights obtained via
the BTA auction.
(7) Represents the elimination of Madison's and Shoal's historical equity and
the issuance of 1,148,040 shares of Common Stock, at $14 per share to be
issued in connection with the Madison Purchase, Shoal Purchase and certain
other license and channel rights purchases.
E-3
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
HEARTLAND
TRANSACTION
HEARTLAND AND THE OLD
WIRELESS ONE DIVISION TRUVISION MADISON BARTEL SHOAL OFFERINGS TRUVISION
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL ADJUSTMENTS ADJUSTMENTS
------------ ---------- ---------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues......... $ 1,343,969 632,173 3,081,614 1,582,147 150,000 83,867 -- (486,100)(1)
Expenses.........
Systems
operations..... 841,819 397,574 2,103,053 888,707 67,720 53,015 194,541(8) (134,787)(1)
Selling, general
and
administrative. 4,431,839 348,447 2,086,200 404,804 59,485 49,915 -- --
Depreciation and
amortization... 1,783,066 193,962 1,266,301 577,240 42 61,306 -- (35,131)(2)
421,354
545,267 (5)
----------- -------- ---------- --------- ------- -------- -------- ----------
Total operating
expenses....... 7,056,724 939,983 5,455,554 1,870,751 127,247 164,236 194,541 796,703
----------- -------- ---------- --------- ------- -------- -------- ----------
Operating income
(loss).......... (5,712,755) (307,810) (2,373,940) (288,604) 22,753 (80,369) (194,541) (1,282,803)
----------- -------- ---------- --------- ------- -------- -------- ----------
Interest income.. 2,024,116 -- 15,063 -- -- -- -- --
Interest expense. (4,070,184) -- (143,505) (17,440) -- (35,137) (668,427)(9) --
Other............ 66,349 -- -- 36,271 -- -- -- --
----------- -------- ---------- --------- ------- -------- -------- ----------
Losses before
income taxes... (7,692,474) (307,810) (2,502,382) (269,773) 22,753 (115,506) (862,968) (1,282,803)
Income tax
(expense)
benefit......... -- 113,890 -- -- (5,039) -- (113,890)(10) 4,481,520 (7)
----------- -------- ---------- --------- ------- -------- -------- ----------
Net Income
(loss)......... (7,692,474) (193,920) (2,502,382) (269,773) 17,714 (115,506) (976,858) 3,198,717
Preferred stock
dividends and
discount
accretion....... (786,389) -- (687,000) -- -- -- 786,389 (11) 687,000 (3)
----------- -------- ---------- --------- ------- -------- -------- ----------
Net loss
applicable to
common stock... $(8,478,863) (193,920) (3,189,382) (269,773) 17,714 (115,506) (190,469) 3,885,717
=========== ======== ========== ========= ======= ======== ======== ==========
Net loss per
common share... $ (2.02)
===========
Weighted average
common shares
outstanding.... $ 4,187,736 2,405,293
=========== ==========
<CAPTION>
ADJUSTMENTS
FOR ACQUISITIONS,
LICENSE AND
CHANNEL RIGHTS PROFORMA
PURCHASES COMBINED
----------------- ----------------
<S> <C> <C>
Revenues......... -- 6,387,670
Expenses.........
Systems
operations..... -- 4,411,642
Selling, general
and
administrative. -- 7,380,690
Depreciation and
amortization... 338,642(4) 5,152,049
----------------- ----------------
Total operating
expenses....... 338,642 16,944,381
----------------- ----------------
Operating income
(loss).......... (338,642) (10,556,711)
----------------- ----------------
Interest income.. -- 2,039,179
Interest expense. -- (4,934,693)
Other............ -- 102,620
----------------- ----------------
Losses before
income taxes... (338,642) (13,349,605)
Income tax
(expense)
benefit......... 5,039 (6) 4,481,520 (12)
----------------- ----------------
Net Income
(loss)......... (333,603) (8,868,085)
Preferred stock
dividends and
discount
accretion....... -- --
----------------- ----------------
Net loss
applicable to
common stock... (333,603) (8,868,085)
================= ================
Net loss per
common share... (1.15)
================
Weighted average
common shares
outstanding.... 1,148,040 7,741,069
================= ================
</TABLE>
E-4
<PAGE>
NOTES TO PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(1) Represents the elimination of TruVision's installation revenue and direct
commissions in order to conform accounting policies for the costs of
subscriber installations.
(2) Represents the reduction in depreciation expense as a result of the
conforming adjustments in note 1.
(3) Reflects the elimination of Truvision's preferred dividends as a result of
the conversion of Truvision's convertible preferred stock into Truvision
common stock.
(4) Reflects amortization of the intangible assets acquired from TruVision,
Madison and Shoal and certain other channel rights purchases. For purposes
of these Pro Forma Financial Statements, lives of 20 years have been used
for licenses and channel rights. Amortization of intangible assets has only
been recorded in those Markets acquired which are Operating Systems.
(5) Reflects the incremental amortization of excess purchase price over the
fair value of net identifiable assets acquired in the Truvision acquisition
over 20 years.
(6) Reflects the adjustment of income tax benefit as a result of the BarTel
purchase.
(7) Reflects adjustment to income tax benefit related to the pro forma
adjustments. Income tax benefit reflects the recognition of deferred tax
assets to the extent such assets can be realized through reversals of
existing taxable temporary differences.
(8) Reflects the additional channel lease expense associated with the Heartland
Transaction.
(9) Reflects additional interest expense on the Existing Notes at a rate of
13%, amortization of debt issuance costs and amortization of debt discount
associated solely with the portion of the proceeds of the Old Offerings
utilized to pay $7 million of notes payable to Heartland.
(10) Reflects the adjustment of income tax benefit as a result of the Heartland
Transaction and the BarTel Purchase.
(11) Reflects the elimination of the preferred stock dividends and discount
accretion related to the redeemable convertible preferred stock of Old
Wireless One which was converted to Common Stock at the time of the Old
Offerings.
(12) Reflects adjustment to income tax benefit related to the pro forma
adjustments. Income tax benefit reflects the recognition of deferred tax
assets to the extent such assets can be realized through reversals of
existing taxable temporary differences.
E-5
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR
ACQUISITIONS,
WIRELESS ONE TRUVISION MADISON BARTEL SHOAL TRUVISION LICENSE AND PROFORMA
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL ADJUSTMENTS CHANNEL RIGHTS COMBINED
------------ ---------- ---------- ---------- ---------- ----------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............. 940,777 1,286,026 392,629 8,500 20,967 (138,197)(1) -- 2,510,702
Expenses.............
Systems operations.. 555,942 885,711 152,554 5,090 13,254 (36,668)(1) -- 1,575,883
Selling, general and
administrative..... 2,637,553 911,024 191,675 3,351 12,479 -- -- 3,756,082
Depreciation and
amortization....... 964,005 584,544 129,134 17 15,327 (17,566)(2) 84,662(4) 2,097,871
201,431 (4)
136,317 (5)
---------- ---------- ------- ----- ------- --------- --------- ----------
Total operating
expenses........... 4,157,500 2,381,279 473,363 8,458 41,060 283,514 84,662 7,429,836
---------- ---------- ------- ----- ------- --------- --------- ----------
Operating income
(loss).............. (3,216,723) (1,095,253) (80,734) 42 (20,093) (421,711) (84,662) (4,919,134)
---------- ---------- ------- ----- ------- --------- --------- ----------
Interest income...... 2,126,360 -- -- -- -- -- -- 2,126,360
Interest expense..... (5,009,893) (163,998) (2,910) -- (8,784) -- -- (5,185,585)
Other................ 20,424 -- 19,703 -- -- -- -- 40,127
---------- ---------- ------- ----- ------- --------- --------- ----------
Loss before income
taxes.............. (6,079,832) (1,259,251) (63,941) 42 (28,877) (421,711) (84,662) (7,938,232)
Income tax benefit... -- -- -- -- -- 2,730,670 (7) -- 2,730,670
---------- ---------- ------- ----- ------- --------- --------- ----------
Net Loss............ (6,079,832) (1,259,251) (63,941) 42 (28,877) 2,308,959 (84,662) (5,207,562)
Preferred stock
dividends and
discount accretion.. -- (220,000) -- -- -- 220,000 (3) -- --
---------- ---------- ------- ----- ------- --------- --------- ----------
Net loss applicable
to common stock..... (6,079,832) (1,479,251) (63,941) 42 (28,877) 2,528,959 (84,662) (5,207,562)
========== ========== ======= ===== ======= ========= ========= ==========
Net loss per common
share.............. (0.45) (0.30)
========== ==========
Weighted average
common shares
outstanding........ 13,498,752 2,405,293 1,148,040 17,052,085
========== ========= ========= ==========
</TABLE>
E-6
<PAGE>
NOTES TO PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
(1) Represents the elimination of TruVision's installation revenue and direct
commissions in order to conform accounting policies for the costs of
subscriber installations.
(2) Represents the reduction in depreciation expense as a result of the
conforming adjustments in note 1.
(3) Reflects the elimination of TruVision's preferred dividends as a result of
the conversion of TruVision's convertible preferred stock into TruVision
common stock.
(4) Reflects amortization of the intangible assets acquired from TruVision,
Madison and Shoal and certain other channel rights purchases. For purposes
of these Pro Forma Financial Statements, lives of 20 years have been used
for licenses and channel rights. Amortization of intangible assets has only
been recorded in those Markets acquired which are Operating Systems.
(5) Reflects the incremental amortization of excess purchase price over the
fair value of net identifiable assets acquired in the TruVision acquisition
over 20 years.
(6) Reflects the adjustment of income tax benefit as a result of the BarTel
purchase.
(7) Reflects adjustment to income tax benefit related to the pro forma
adjustments. Income tax benefit reflects the recognition of deferred tax
assets to the extent such assets can be realized through reversals of
existing taxable temporary differences.
E-7
<PAGE>
ANNEX F
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 2 TO
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1996
Commission file number: 0-26836
WIRELESS ONE, INC.
(Exact name of registrant specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
72-1300837
(I.R.S. Employer Identification No.)
11301 Industriplex Blvd., Suite 4
Baton Rouge, Louisiana
(Address of principal executive office)
70809-4115
(Zip code)
(504) 293-5000
(Registrant's telephone number, including area code)
5551 Corporate Blvd., Suite 2G
Baton Rouge, Louisiana 70808
(Registrant's former address)
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 proceeding 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
-------- --------
Number of shares of common stock outstanding as of May 8, 1996.
13,498,752
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements Page No.
<S> <C> <C>
Condensed Consolidated Balance Sheets as of
March 31, 1996 and December 31, 1995............. 2
Condensed Consolidated Statements of Operations
for the three months ended March 31, 1996
and 1995......................................... 3
Condensed Consolidated Statements of Cash
Flows for the three months ended March 31, 1996
and 1995......................................... 4
Notes to Condensed Consolidated Financial
Statements....................................... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 6
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................. 11
</TABLE>
F-1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WIRELESS ONE, INC.
Condensed Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
Assets 1996 1995
----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 98,964,157 110,380,329
Marketable investment 17,735,150 17,637,839
securities-restricted
Subscriber receivables, net 159,819 143,633
Accrued interest and other receivables 793,176 405,241
Prepaid expenses 587,732 796,389
------------ -----------
Total current assets 118,240,034 129,363,431
Property and equipment, net 22,912,095 14,266,755
Leased license investment, net 28,491,658 26,724,238
Marketable investment securities - 35,946,439 35,755,505
restricted
Other assets 7,703,873 7,689,945
------------ -----------
213,294,099 213,799,874
============ ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable 2,627,827 2,356,707
Accrued expenses 1,160,459 862,100
Accrued interest 8,558,333 3,683,333
Current maturities of long-term debt 384,366 376,780
------------ -----------
Total current liabilities 12,730,985 7,278,920
Long-term debt 150,993,259 150,871,267
------------ -----------
163,724,244 158,150,187
------------ -----------
Stockholders' equity:
Preferred stock, $.01 par value,
10,000,000 shares
authorized, no shares issued or
outstanding - -
Common stock, $0.01 par value,
50,000,000 shares
authorized, and 13,498,752 shares
issued and outstanding 134,988 134,988
Additional paid-in capital 65,631,596 65,631,596
Accumulated deficit (16,196,729) (10,116,897)
------------ -----------
Total stockholders' equity 49,569,855 55,649,687
------------ -----------
$213,294,099 213,799,874
============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-2
<PAGE>
WIRELESS ONE, INC.
Condensed Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
-----------------------
1996 1995
----------- ----------
<S> <C> <C>
Revenues $ 940,777 238,825
----------- ---------
Operating expenses:
Systems operations 555,942 169,981
Selling, general and administrative 2,637,553 461,129
Depreciation and amortization 964,005 199,519
----------- ---------
4,157,500 830,629
----------- ---------
Operating loss (3,216,723) (591,804)
----------- ---------
Other income (expense):
Interest expense (5,009,893) (114,090)
Interest income 2,126,360 3,122
Other 20,424 (520)
----------- ---------
Total other income (expense) (2,863,109) (111,488)
----------- ---------
Net loss $(6,079,832) (703,292)
=========== =========
Net loss per common share $ (.45) (.35)
=========== =========
Weighted average common shares
outstanding 13,498,752 2,013,950
=========== =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-3
<PAGE>
WIRELESS ONE, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------------
1996 1995
------------ ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (6,079,832) (703,292)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 964,005 199,519
Amortization of debt discount 130,897 73,671
Non-cash interest income (288,245) -
Bad debt expense 23,694 -
Changes in assets and liabilities:
Subscriber receivables (427,815) 884
Prepaid expenses 208,657 11,631
Accounts payable and
accrued expenses 5,444,480 279,448
------------ ---------
Net cash used in
operating activities (24,159) (138,139)
------------ ---------
Cash flows from investing activities:
Capital expenditures (9,195,283) (654,945)
Purchase of investments and
other assets (209,021) (25,943)
Expenditures for leased
licenses (1,986,390) (19,902)
------------ ---------
Net cash used in
investing activities (11,390,694) (700,790)
------------ ---------
Cash flows from financing activities:
Proceeds from issuance of
long-term debt - 37,472
Issuance of common stock - 1,077,622
Principal payments on
long-term debt (1,319) -
------------ ---------
Net cash (used in)
provided by
financing activities (1,319) 1,115,094
------------ ---------
Net (decrease)
increase in cash (11,416,172) 276,165
Cash and cash equivalents at beginning
of period 110,380,329 24,481
------------ ---------
Cash and cash equivalents at end of
period $ 98,964,157 300,646
</TABLE> ============ =========
See accompanying notes to condensed consolidated financial statements.
F-4
<PAGE>
WIRELESS ONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(1) Description of Business and Summary of Significant Accounting Policies
----------------------------------------------------------------------
(a) Description of Organization
---------------------------
Wireless One, Inc. (the "Company") was formed in June 1995 to combine the
operations of a predecessor company ("Old Wireless One") with certain
wireless cable television assets and all related liabilities of certain
subsidiaries of Heartland Wireless Communications, Inc. ("Heartland") for
the purpose of further developing, owning, and operating wireless cable
television systems primarily in select southern and southeastern markets.
Old Wireless One had been formed on December 23, 1993, in conjunction
with the merger of its predecessor, Wireless One, L.L.C., a Limited
Liability Company (LLC). LLC had been formed on February 4, 1993 with six
members and on December 23, 1993, Old Wireless One acquired all of the
net assets and outstanding interests of LLC in a tax free reorganization.
Accordingly, the accompanying consolidated financial statements include
results of operations of Wireless One, Inc. and its subsidiaries and its
predecessor companies since February 4, 1993. Unless otherwise indicated,
references to the Company include Wireless One, Inc. and its subsidiaries
and its predecessors. See the Company's December 31, 1995 Annual Report
on Form 10-K for further comments regarding Heartland and the Heartland
Transaction.
(b) Consolidation Policy
--------------------
The condensed consolidated financial statements include the accounts of
the Company and its majority-owned subsidiaries. All significant
intercompany balances and transactions are eliminated in consolidation.
(c) Interim Financial Information
-----------------------------
The accompanying unaudited interim financial statements have been
prepared pursuant to the rules and regulations for reporting on Form 10-
Q. Accordingly, certain information and footnotes required by generally
accepted accounting principles for complete financial statements are not
included herein. The interim statements should be read in conjunction
with the financial statements and notes thereto included in the Company's
December 31, 1995 Annual Report on Form 10-K.
Interim statements are subject to possible adjustments in connection with
the annual audit of the Company's accounts for full year 1996. In the
Company's opinion, all adjustments necessary for a fair presentation of
these interim statements have been included and are of a normal and
recurring nature.
(d) Marketable Investment Securities
--------------------------------
Investments in marketable securities consist of U.S. Treasury securities
which mature periodically through October 1998. The Company has the
ability and intent to hold these investments until maturity and,
accordingly, has classified these investments as held-to-maturity
investments. Held-to-maturity investments are recorded at amortized
cost, adjusted for amortization of premiums or discounts. Premiums and
discounts are amortized over the life of the related held-to-maturity
investment as an adjustment to yield using the effective interest method.
A decline in market value of the Company's
(Continued)
F-5
<PAGE>
WIRELESS ONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
investments below cost that is deemed other than temporary results in a
reduction in carrying amount to fair value. The impairment is charged to
earnings and a new cost basis for the investment is established.
(e) Net Loss Per Common Share
-------------------------
Net loss per common share is based on the net loss applicable to common
stock divided by the weighted average number of common shares outstanding
during the period presented. Shares issuable upon exercise of stock
options and warrants are antidilutive and have been excluded from the
calculation.
All share and per share data for the period ended March 31, 1995,
including the weighted average number of common shares outstanding, have
been restated for the Heartland Transaction consummated in October of
1995 giving retroactive effect to the exchange of approximately one share
of Old Wireless One common stock for 4 shares of Wireless One, Inc.
common stock. See the Company's December 31, 1995 Annual Report on Form
10-K for further description of the Heartland Transaction.
(2) Subsequent Event
----------------
On April 25, 1996, the Company entered into a definitive merger agreement
with Jackson, MS based TruVision Wireless, Inc. ("TruVision"). Under
terms of the transaction, the Company will exchange approximately 3.4
million of its common shares in exchange for all of TruVision's
outstanding shares. Additionally, the Company has committed to provide a
bridge loan of up to $15 million which will be secured by certain assets
of TruVision and its subsidiaries. Consummation of this transaction is
subject to the satisfaction of certain closing conditions including the
receipt of bondholder consents and FCC/Hart Scott approval. This
transaction is expected to close by the end of August 1996.
F-6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THE SAME PERIOD ENDED 1995
The table below sets forth for each of the Operating Systems the later of the
date of launch or acquisition by the Company and the approximate number of
subscribers at March 31, 1996 and March 31, 1995.
<TABLE>
<CAPTION>
Approximate Approximate
Launch or Subscribers at Subscribers at
Market Acquisition Date 03/31/96 03/31/95
- ------ ---------------- -------------- --------------
<S> <C> <C> <C>
Brenham, Tx February 1996 268 -
Bryan/College Station, Tx May 1995 2,080 -
Milano, Tx October 1995 1,501 -
Wharton, Tx June 1994 1,881 1,601
Bunkie, La December 1995 667 -
Lafayette, La January 1994 625 436
Lake Charles, La April 1994 490 573
Monroe, La October 1995 1,206 -
Gainesville, Fl January 1996 261 -
Panama City, Fl September 1995 1,362 -
Pensacola, Fl July 1995 1,287 -
Jeffersonville, Ga (a) March 1996 - -
Tullahoma, Tn November 1995 661 -
-------- -----
TOTAL 12,289 2,610
</TABLE>
(a) System launched at the end of March 1996.
F-7
<PAGE>
<TABLE>
<CAPTION>
Revenue Information
For the Three Months Ended Approximate
March 31, Average Revenue
-------------------------- Per Subscriber at
1996 1995 March 31, 1996
------------ ------------ -----------------
<S> <C> <C> <C>
Subscription Revenues:
- ----------------------
Brenham, Tx $ 8,526 $ - $33.83
Bryan/College Station, Tx 171,891 - 34.88
Milano, Tx 140,578 - 32.24
Wharton, Tx 178,988 167,062 35.69
Bunkie, La 34,686 - 33.10
Lafayette, La 41,207 23,475 23.22
Lake Charles, La 42,408 48,288 29.86
Monroe, La 89,861 - 30.17
Gainesville, Fl 6,009 - 27.72
Panama City, Fl 82,456 - 31.40
Pensacola, Fl 110,282 - 38.87
Jeffersonville, Ga - - -
Tullahoma, Tn 33,885 - 33.41
-------- --------
TOTAL $940,777 $238,825
======== ========
</TABLE>
Revenues. Revenues consist primarily of subscription revenues which principally
consist of monthly fees paid by subscribers for the basic programming package
and for premium programming services. Subscription revenues for the three months
ended March 31, 1996 were $940,777 as compared to $238,825 for the comparable
period of 1995, an increase of $701,952 or 294%. This increase is principally
attributable to the increase in the average number of subscribers for the three
months ended March 31, 1996 compared to the same period ended in 1995. The
increase in the average number of subscribers is due to the launch of 8 new
systems during the remaining nine months of 1995 and during the first quarter
of 1996. In addition, the contributions of two Operating Systems from
Heartland in October 1995, attributed to this increase in the average number of
subscribers for the first three months of 1996.
Systems Operations Expenses. Systems operations expense include programming
costs, channel lease payments, tower site rentals, and repairs and maintenance.
Programming costs and channel lease payments (with the exception of minimum
payments) are variable expenses which increase as the number of subscribers
increases. Systems operations expense for the three months ended March 31, 1996
was $555,942 as compared to $169,981 for the same period of 1995, reflecting an
increase of $385,961 or 227%. This increase is attributable primarily to the
increase in the number of subscribers for such period in 1996 compared to such
period in 1995 as a result of the new markets launched as described above.
Selling, General and Administrative. Selling, general and administrative
expenses for the three months ended March 31, 1996 expense $2,637,553 compared
to $461,129 for the same period of 1995, an increase of $2,176,424 or 471%. The
Company has experienced increasing selling, general and
F-8
<PAGE>
administrative expenses as a result of its increased wireless cable activities
and associated administrative costs including costs related to opening and
maintaining additional offices and additional compensation expense. The increase
is due primarily to increases in personnel costs, advertising and marketing
expenses and other overhead expenses required to support the expansion of the
Company's operations.
The Company believes such selling, general and administrative costs will not
stabilize until 1998 when all Markets are expected to be launched. At that time,
administration expenses should remain constant with selling and general expense
stabilizing when desired penetration rates are achieved. In order for such
stabilization to occur within this time period, however, the current system
launch schedule must be met and desired penetration rates must be achieved.
There can be no assurance that the Company will meet the current launch schedule
or that desired penetration rates will be achieved or consequently that such
selling, general and administrative expenses will stabilize within this time
period.
Depreciation and Amortization Expense. Depreciation and amortization expense for
the three months ended March 31, 1996 was $964,005 versus $199,519 for the same
period of 1995, an increase of $764,486 or 383%. This increase is due to
additional amortization of channel rights from systems launched plus
amortization of amounts related to systems acquired from Heartland. In addition,
depreciation increased due to costs associated with the increase in subscribers
and purchase of equipment for newly launched markets.
Interest Expense. Interest expense increased to $5,009,893 from $114,090 as
compared to the same period ended in 1995. This large increase in interest
expense is due to the issuance in October of 1995 of 150,000 units (the
"Units") consisting of $150,000,000 aggregate principal amounts of 13% Senior
Notes due 2003.
Interest Income. Interest income of $2,126,360 consists of interest earned on
the proceeds from the Offerings (as described below).
LIQUIDITY AND CAPITAL RESOURCES
The wireless cable television business is a capital intensive business. The
Company's operations require substantial amounts of capital for (i) the
installation of equipment at subscribers' location (ii) the construction of
additional transmission and headend facilities and related equipment purchases,
(iii) the funding of start-up losses and other working capital requirements,
(iv) the acquisition of additional wireless cable channel rights and systems and
(v) investments in, and, maintenance of, vehicles and administrative offices.
Since inception, the Company has expended funds to lease or otherwise acquire
channel rights in various markets, to the construct or acquire its Operating
Systems, to commence construction of Operating Systems in different markets and
to finance initial operating losses.
In order to finance the expansion of its Operating Systems and finance the
launch of additional markets, in October 1995, the Company consummated its
initial public offering of 3,450,000 shares of common stock, $0.01 par value
(the "Common Stock") at $10.50 per share (the "Common Stock Offering"). The
Company received approximately $32.3 million in net proceeds from the Common
Stock Offering. Concurrent with the Common Stock Offering, the Company issued
the Units consisting of $150 million aggregate principal amount of Senior
Notes and 450,000 warrants to purchase an equal number of shares of Common
Stock at an exercise price of $11.55 per share to the initial purchasers (the
"Unit Offering" and together with the Common Stock Offering, the "Offerings").
The Company placed approximately $53.2 million of the approximately $143.8
million of net proceeds realized from the sale of the Units into an escrow
account to cover the first three years' interest payments on the Senior Notes as
required by terms of the Indenture.
For the three months ended March 31, 1996 and 1995, the Company's capital
expenditures were approximately $9,195,283 and $654,945 respectively. These
expenditures primarily related to the acquisition of equipment in certain of the
Company's operating markets, as well as those markets under construction or
near-term launches. The Company estimates that approximately $44.4 million in
capital expenditures will be required in 1996 to continue to fund growth in the
Operating Systems and the systems under construction and to complete the
construction and finance the addition of subscribers to 12 additional markets.
For the three months ended March 31, 1995, cash used in operating activities was
$.14 million consisting primarily of a net loss of $.7 million and offset by an
increase in accounts payable and accrued expenses of $.27 million, non-cash
expenses of $.07 million and depreciation and amortization of $.2 million. For
the three months ended March 31, 1995, cash used in investing activities was $.7
million, consisting primarily of capital expenditures and payments for licenses
and organizational costs of approximately $.68 million and $.02 million
respectively. These capital expenditures were principally related to the
construction of new markets and certain license and organization costs. For the
three months ended March 31, 1995 cash flows provided by financing activities
was $1.1 million, consisting primarily of $1 million in proceeds from the
subscription of common stock and $.04 million in proceeds from the issuance of
long-term debt.
For the three months ended March 31, 1996, cash used in operating activities was
$.02 million consisting primarily of a net loss of $6 million and offset by an
increase in accounts payable and accrued expenses of $5.4 million, an increase
in receivables and prepaids of $.2 million, depreciation and amortization of
$.96 million, non-cash income of $.29 million and non-cash expenses of $.15
million. For the three months ended March 31, 1996, cash used in investing
activities was $11.4 million, consisting primarily of capital expenditures and
payments for licenses and organizational costs of approximately $9.4 million and
$1.9 million, respectively. These investing activities were principally related
to the acquisition of equipment in certain of the Company's operating markets,
as well as those markets under construction or near term launch markets and
certain license and organization costs related to those markets. For the three
months ended March 31, 1996, cash flows provided by financing activities was
$1,319, consisting of $1,319 from the repayments of long-term debt.
During March 1996, the Federal Communications Commission (the "FCC") completed
an auction program designed to award initial licenses for MDS channels.
Successful bidders will receive a blanket authorization to serve an entire Basic
Trading Area ("BTA") on all MDS channels within that BTA. The Company had
successful bids totaling approximately $16 million for BTA's. The Company is
presently preparing applications,
F-9
<PAGE>
which will be filed with the FCC by May 10, 1996, to secure these BTA's. Should
no petitions be filed by other parties against the Company's BTA applications,
it is expected that the grant by the FCC of these BTA authorizations will be
made during the second quarter of 1996. Assuming all BTA authorizations are
granted to the Company, the Company will be required to make total down payments
of 20% of the $16 million bid with the remaining 80% being financed over a 10
year term. During this ten-year period, the Company will be required to make
quarterly interest payments for the first two years and then quarterly principal
and interest payments for the remaining term. The interest rate charged will be
equal to the 10 year U.S. Treasury rate at the time of the issuance of the BTA
authorization plus 2-1/2%.
On April 25, 1996, the Company entered into a definitive merger agreement with
Jackson, MS based TruVision Wireless, Inc. ("TruVision"). Under terms of the
transaction, the Company will exchange approximately 3.4 million of its shares
of Common Stock in exchange for all of TruVision's outstanding shares.
Additionally, the Company has committed to provide a bridge loan to TruVision of
up to $15 million, which will be secured by certain assets of TruVision and its
subsidiaries. Consummation of this is subject to the satisfaction of
a number of closing conditions, including the receipt of the consent of
the Company's bondholders and FCC/Hart Scott approval. No assurance can be given
such closing conditions will be satisfied and that the TruVision transaction
will be completed. This transaction is expected to close by the end of August
1996.
The Company has experienced negative cash flow from operations in each year
since its formation, and the Company expects to continue to experience negative
consolidated cash flow from operations due to operating costs associated with
system development and costs associated with expansion and acquisition
activities. Until sufficient cash flow is generated from operations, the
Company will be required to utilize its current capital resources or external
sources of funding to satisfy its capital needs. The Company currently believes
that the aggregate net proceeds from the Company's Offerings will be sufficient
to meet its expected capital needs at least over the next twelve months.
Historically, the Company has generated operating and net losses and can be
expected to do so for at least the foreseeable future as it continues to develop
additional operating systems. Such losses may increase as operations in
additional systems are commenced or acquired. There can be no assurance that the
Company will be able to achieve or sustain positive net income in the future. As
the Company continues to develop systems, positive System EBITDA from more
mature systems is expected to be partially or completely offset by operating
losses from less developed systems and from development costs associated with
establishing systems in new markets. This trend is expected to continue until
the Company has sufficiently large subscriber base to absorb operating and
development costs of recently launched systems. Based on its current system
launch schedule and targeted penetration and subscriber revenue rates, the
Company believes it will reach a subscriber level in its more mature systems
(those systems with positive System EBITDA) in the second half of 1997 to
generate revenues sufficient to offset these operating and development costs.
There can be no assurance, however, that the Company will meet its system launch
schedule or achieve the penetration and subscriber revenue rates necessary to
acquire this subscriber base or that revenues will be sufficient to offset such
costs by that time. EBITDA is a commonly used measure of performance in the
wireless cable industry. However, EBITDA does not purport to represent cash
provided by or used by operating activities and should not be considered in
isolation or as a substitute for measures of performance prepared in accordance
with generally accepted accounting principles.
Subject to the limitations of the Company's indenture relating to the Senior
Notes, in order to accelerate its growth rate and to finance general corporate
activities and the launch or build-out of additional systems, the Company may
supplement its existing sources of funding with financing arrangements at the
operating system level or through additional borrowings, the sale of additional
debt or equity securities, including a sale to strategic investor, joint
ventures or other arrangements, if such financing is available to the Company
on satisfactory terms.
As a result of the Unit Offering, and the possible incurrence of additional
indebtedness, the Company will be required to satisfy certain debt service
requirements. Following the disbursement of all of the funds in the escrow
account in October 1998, a substantial portion of the Company's cash flow will
be devoted to debt service on the Senior Notes and the ability of the Company to
make payments of principal and interest will be largely dependent upon its
future performance. Many factors, some of which will be beyond the Company's
control (such as prevailing economic conditions), may affect its performance.
There can be no assurance that the Company will be able to generate sufficient
cash flow to cover required interest and principal payment when due on the
Senior Notes or other indebtedness of the Company. If the Company is unable to
meet interest and principal payments in the future, it may, depending upon
circumstances which then exist, seek additional equity or debt financing,
attempt to refinance its existing indebtedness or sell all or part of its
business or assets to raise funds to repay its indebtedness. The incurrence of
additional indebtedness is restricted by the Indenture.
In managing its wireless cable assets, the Company may, at its option, exchange
or trade existing wireless cable channel rights for channel rights in markets
that have a greater strategic value to the Company. The Company continually
evaluates opportunities to acquire, either directly or indirectly through the
acquisition of other entities, wireless cable channel rights. There is no
assurance that the Company will not pursue any such opportunities that may
utilize capital currently expected to be available for its current markets.
F-10
<PAGE>
PART II. - OTHER INFORMATION
- ----------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None
(b) No reports on Form 8-K were filed during the periods presented.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WIRELESS ONE, INC.
Date: July 5, 1996 /s/ Sean Reilly
------------ -------------------------------------
Sean Reilly
President and Chief Executive Officer
Date: July 5, 1996 /s/ Michael C. Ellis
------------ -------------------------------------
Michael C. Ellis
Vice President and
Controller (Principal
Accounting Officer)
F-11
<PAGE>
WIRELESS ONE, INC.
PROXY
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JULY 26, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Sean E. Reilly, William K. Luby
and William C. Norris, and each or any of them, proxies of the undersigned, with
full power of substitution, to vote all of the shares of Wireless One, Inc., a
Delaware corporation (the "Company"), which the undersigned may be entitled to
vote at the Annual Meeting of Stockholders of the Company to be held at the
Company's corporate headquarters, 11301 Industriplex, Suite 4, Baton Rouge,
Louisiana 70809-4115 on July 26, 1996 at 10:00 a.m. or at any adjournment
or postponement thereof, as shown on the voting side of this card.
See Reverse
Side
<PAGE>
Please mark your votes as in this example.
[X]
This proxy will be voted as specified. If a choice is not specified, this
proxy will be voted FOR the nominees for Class I Directors, FOR Proposal 2,
FOR Proposal 3 and FOR Proposal 4.
1. Election of All Nominees for Class I Directors Listed FOR Withheld
Hereon. [_] [_]
Nominees: Arnold L. Chavkin
Hans J. Sternberg
David E. Webb
For all nominees listed hereon, except vote withheld from the following
nominee(s):
____________________________________
2. Approval of the Issuance of up to 3,553,333 FOR AGAINST ABSTAIN
shares of Common Stock pursuant to the terms [_] [_] [_]
of the Merger Agreement. Upon the consummation
of the Merger, stockholders of TruVision will
own up to 21.7% of the Company's Common Stock
and Chase Manhattan Capital Corporation (currently
a holder of 17.7% of the Company's Common Stock),
together with its afiliates, will own 23.4% of the
Company's Common Stock. The Board of Directors
recomments a vote FOR this proposal.
3. To approve the adoption of the Company's 1996 FOR AGAINST ABSTAIN
Non-Employee Directors' Stock Option Plan which [_] [_]
was adopted by the Company's Board of Directors
subject to stockholder approval and authorizes
the grant of options with respect to 100,000
shares of Common Shares under such plan. The
Board of Directors recommends a vote FOR
this proposal.
4. Approval of the appointment of KPMG Peat FOR AGAINST ABSTAIN
Marwick LLP as the independent certified public [_] [_] [_]
accountants for the Company's 1996 fiscal year.
The Board of Directors recommends a vote FOR
this proposal.
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting or any adjournment
or postponement thereof.
This proxy should be dated, signed by the stockholder exactly as the
stockholder's name appears hereon and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate.
Please sign exactly as name(s) appear hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
________________________________________
________________________________________
Signature(s) Date
