-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BLKU4W1DO7ovTXSDEUFhROJfotMU3L61fNBMXHmaTT5Kyh51cQQKI0taf4HhrNuw ag80KHzz3qZ74ZyCF/M1vQ== 0000912057-97-017893.txt : 19970520 0000912057-97-017893.hdr.sgml : 19970520 ACCESSION NUMBER: 0000912057-97-017893 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CS WIRELESS SYSTEMS INC CENTRAL INDEX KEY: 0001011744 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 232751747 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-03288 FILM NUMBER: 97607021 BUSINESS ADDRESS: STREET 1: 200 CHISHOLM PLACE STREET 2: SUITE 200 CITY: PLANO STATE: TX ZIP: 75075 BUSINESS PHONE: 2145092634 MAIL ADDRESS: STREET 1: 200 CHISHOLM PLACE STREET 2: SUITE 200 CITY: PLANO STATE: TX ZIP: 75075 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------- FORM 10-Q (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 ------------------------------------------------- OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------------- -------------------------- Commission file number 333-03288 ----------- CS Wireless Systems, Inc. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) Delaware 23-2751747 (State or Other Jurisdiction of I.R.S. Employer Incorporation or Organization) Identification No.) 200 Chisholm Place, Suite 202, Plano, Texas 75075 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code (972) 509-2634 ----------------------------- N/A - -------------------------------------------------------------------------------- Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report. Indicate by check /X/ whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No ----------- ---------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Shares Outstanding Class as of May 15, 1997 ----- ------------------ Common Stock, $.001 par value 10,702,609 Part I - FINANCIAL INFORMATION Item 1. - FINANCIAL STATEMENTS CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
MARCH 31, DECEMBER 31, 1997 1996 --------- --------- (Unaudited) ASSETS Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . $ 107,185 $ 13,072 Subscriber receivables, net . . . . . . . . . . . . . . . . . . 998 1,079 Notes receivable . . . . . . . . . . . . . . . . . . . . . . . 250 1,510 Prepaid expenses and other . . . . . . . . . . . . . . . . . . 727 689 --------- --------- Total current assets. . . . . . . . . . . . . . . . . . . . 109,160 116,350 Plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . 41,240 42,955 License and leased license investment, net . . . . . . . . . . . . . 172,828 172,953 Goodwill, net . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,040 52,011 Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . 20,368 19,366 Debt issuance costs and other assets, net . . . . . . . . . . . . . 10,504 10,602 --------- --------- $ 405,140 $ 414,237 --------- --------- --------- --------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses . . . . . . . . . . . . . $ 6,124 $ 5,440 Accounts payable to affiliates . . . . . . . . . . . . . . . . 736 1,215 Current portion of long-term debt . . . . . . . . . . . . . . . 444 3,194 Current portion of BTA auction payable. . . . . . . . . . . . . 658 646 Other current liabilities . . . . . . . . . . . . . . . . . . . 660 1,043 --------- --------- Total current liabilities . . . . . . . . . . . . . . . . . 8,622 11,538 Long-term debt, less current portion . . . . . . . . . . . . . . . . 275,724 268,180 BTA auction payable, less current portion. . . . . . . . . . . . . . 4,494 4,256 Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . 4,072 5,429 --------- --------- Total liabilities . . . . . . . . . . . . . . . . . . . . . 292,912 289,403 --------- --------- Stockholders' equity: Preferred stock, $.01 par value; authorized 5,000,000 shares, no shares issued and outstanding . . . . . . . . . . . . . . . -- -- Common stock, $.001 par value; authorized 40,000,000 shares, issued and outstanding 10,702,609 shares in 1997 and 10,445,408 shares in 1996. . . . . . . . . . . . . . . . . . . 11 10 Additional paid-in capital. . . . . . . . . . . . . . . . . . . . 154,557 154,558 Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . (42,340) (29,734) --------- --------- Total stockholders' equity. . . . . . . . . . . . . . . . . 112,228 124,834 --------- --------- $ 405,140 $ 414,237 --------- --------- --------- ---------
See accompanying notes to condensed consolidated financial statements 2 CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share data) THREE MONTHS ENDED ------------------------- MARCH 31, MARCH 31, 1997 1996 --------- --------- (Unaudited) (Unaudited) Revenue. . . . . . . . . . . . . . . . . . . . . $ 6,678 $ 3,856 --------- --------- Operating expenses: Systems operations. . . . . . . . . . . . . . 3,695 2,301 Selling, general and administrative . . . . . 3,815 1,427 Depreciation and amortization . . . . . . . . 6,585 2,506 --------- --------- Total operating expenses . . . . . . . . . 14,095 6,234 --------- --------- Operating loss . . . . . . . . . . . . . . (7,417) (2,378) Other income (expense): Interest income . . . . . . . . . . . . . . . 1,450 899 Interest expense. . . . . . . . . . . . . . . (7,996) (3,023) --------- --------- Total other expense, net . . . . . . . . . (6,546) (2,124) --------- --------- Loss before income taxes . . . . . . . . . (13,963) (4,502) Income tax benefit . . . . . . . . . . . . . . . 1,357 1,439 --------- --------- Net loss . . . . . . . . . . . . . . . . . $ (12,606) $ (3,063) --------- --------- --------- --------- Net loss per common share. . . . . . . . . . . . $ (1.21) $ (0.51) --------- --------- --------- --------- See accompanying notes to condensed consolidated financial statements 3 CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
THREE MONTHS ENDED --------------------- MARCH 31, MARCH 31, 1997 1996 --------- --------- (Unaudited) (Unaudited) Cash flows from operating activities: Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (12,606) $ (3,063) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . 6,585 2,506 Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . (1,357) (1,439) Accretion on discount notes and amortization of debt issuance costs. . 7,250 2,873 Non-cash interest expense on other long-term debt. . . . . . . . . . . 699 140 Changes in assets and liabilities, net of effects of contributions: Subscriber receivables . . . . . . . . . . . . . . . . . . . . . . . 81 (79) Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . (116) (233) Accounts payable, accrued expenses and other liabilities . . . . . . 263 1,737 --------- --------- Net cash provided by operating activities. . . . . . . . . . . . . 799 2,442 --------- --------- Cash flows from investing activities: Purchases of plant and equipment. . . . . . . . . . . . . . . . . . . . . . (1,737) (905) Additions to license and leased license investment. . . . . . . . . . . . . (1,669) (16) Investment in assets held for sale. . . . . . . . . . . . . . . . . . . . . (1,002) -- Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (175) 258 --------- --------- Net cash used in investing activities. . . . . . . . . . . . . . . (4,583) (663) --------- --------- Cash flows from financing activities:. . . . . . . . . . . . . . . . . . . . . Payments on notes payable . . . . . . . . . . . . . . . . . . . . . . . . . (2,103) (25,024) Proceeds from unit offering . . . . . . . . . . . . . . . . . . . . . . . . -- 229,484 Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (9,703) Cash distributed pursuant to contributions. . . . . . . . . . . . . . . . . -- (31,648) --------- --------- Net cash provided by (used in) financing activities. . . . . . . . (2,103) 163,109 --------- --------- Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . $ (5,887) $ 164,888 Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . 113,072 184 --------- --------- Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . $ 107,185 $ 165,072 --------- --------- --------- ---------
See accompanying notes to condensed consolidated financial statements 4 CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 1997 (Unaudited) (1) GENERAL (a) DESCRIPTION OF BUSINESS CS Wireless Systems, Inc. and subsidiaries (the "Company" or "CS Wireless") develop, own and operate a network of wireless cable television systems providing subscription television services. The Company has a portfolio of wireless cable channel rights (or wireless spectrum) in various markets in the United States. As of March 31, 1997, the Company had systems in operation in ten markets. Systems in other markets are currently under construction and development by the Company. The Company is also exploring the use of a portion of its wireless spectrum for high-speed Internet access. (b) BASIS OF PRESENTATION The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial information for the period from January 1, 1996 through February 23, 1996 reflects the combined financial position and results of operations for the Company's wireless cable system serving the Cleveland, Ohio metropolitan area. The combined financial information for the period from January 1, 1996 through February 23, 1996 includes the accounts of the Company and certain assets of Atlantic Microsystems, Inc. For the period subsequent to February 23, 1996, the Company's consolidated financial statements include the results of operations of the entities and assets contributed to the Company on February 23, 1996 (see note 2). (c) INTERIM FINANCIAL INFORMATION In the opinion of management, the accompanying unaudited condensed consolidated financial information of the Company contains all adjustments, consisting only of those of a normal recurring nature, necessary to present fairly the Company's financial position as of March 31, 1997, and the results of operations and cash flows for the three months ended March 31, 1997 and 1996. These results are not necessarily indicative of the results to be expected for the full fiscal year. (d) COMMON SHARES OUTSTANDING AND NET LOSS PER COMMON SHARE Net loss per common share is based on the net loss applicable to the weighted average number of common shares outstanding of approximately 10,448,000 and 6,042,000 for the three month periods ended March 31, 1997 and 1996, respectively. For purposes of the accompanying condensed consolidated financial information, the Company has retroactively adjusted all references to the number of outstanding shares prior to February 23, 1996 to reflect the number of shares issued on February 23, 1996 (see note 2) related to the wireless cable television system in Cleveland, Ohio. Fully-diluted loss per common share is not presented as it would not materially differ from primary loss per common share. (2) COMPLETED TRANSACTIONS On February 23, 1996, CAI Wireless Systems, Inc. ("CAI") and Heartland Wireless Communications, Inc. ("Heartland") contributed to the Company (the "February 23, 1996 Contributions") certain wireless cable television assets comprising various markets in the United States. In connection with the February 23, 1996 Contributions, CAI and Heartland received approximately 5.4 million and 3.6 million shares, respectively, of the Company's newly-issued common stock. In addition, CAI received approximately $750,000 in cash and Heartland received approximately $30.9 million in cash, a nine-month note for $25 million (subsequently repaid) and a 10-year note for $15 million (the "Heartland Long-Term Note"). On November 8, 1996, the Company distributed an additional $5.0 million to Heartland as a part of the equity true-up per the provisions of the agreement governing the February 23, 1996 Contributions. On March 31, 1997, an additional 257,201 shares of common stock of the Company were issued to Heartland in satisfaction of certain post-closing adjustments. 5 CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) March 31, 1997 (Unaudited) On October 11, 1996, the Company acquired all of the issued and outstanding common stock ("USA Common Stock") of USA Wireless Cable, Inc. ("USA") (the "USA Wireless Acquisition"). USA provided wireless cable service in certain Midwest markets, including but not limited to the Effingham, Kansas; Wellsville, Kansas; Radcliffe, Iowa; Scottsbluff, Nebraska; Kalispell, Montana; and Rochester, Minnesota markets (the "USA Markets"). At the effective time of the USA Wireless Acquisition, the outstanding shares of USA Common Stock were converted into rights to receive an aggregate $17.6 million of which approximately $6.3 million was paid in the form of CS Wireless common stock and approximately $11.3 million of indebtedness and payables assumed by the Company. Approximately $7.2 million of such indebtedness was paid upon consummation of the USA Wireless Acquisition, $800,000 attributed to assumed accounts payable was paid in the normal course of business and the remaining $3.4 million (including accrued interest payable) was off-set against a note receivable of $1.3 million, extended by the Company as part of the transaction, with the difference being paid in cash in February 1997. In connection with this acquisition, the Company also extended a note receivable to an affiliate of USA with a principal amount of $250,000 and an interest rate of 12%. This note receivable is due in August 1997. (3) PENDING TRANSACTIONS The Company has entered into an agreement dated as of November 6, 1996 with People's Choice TV Corp. ("PCTV"), pursuant to which the Company will exchange its Salt Lake City, Utah market for PCTV's Kansas City, Missouri market. The PCTV transaction is expected to close during the second quarter of 1997. The Company has agreed to sell to BellSouth (i) certain leases and licenses for wireless cable channel rights in the Atlanta (suburbs) markets and leases to four tower sites in such markets for approximately $7.3 million subject to adjustment, plus reimbursement of certain expenses and (ii) the BTA (as defined) license relating to Atlanta, Georgia for approximately $6.0 million, subject to adjustment. Accordingly, the carrying amount of the leases and licenses and the BTA license related to the Atlanta market of $13.2 million and certain purchased equipment in the amount of $2.5 million has been classified as assets held for sale in the accompanying condensed consolidated balance sheet. This transaction is expected to close during the second quarter of 1997. The Company has entered into a letter of intent with Heartland, pursuant to which Heartland will acquire the wireless cable operating system in Radcliffe, Iowa and wireless cable channel rights in Scottsbluff, Nebraska and Kalispell, Montana currently held by the Company for an aggregate of approximately $3.9 million. Accordingly, the carrying amount of such assets of $3.9 million has been classified as assets held for sale in the accompanying condensed consolidated balance sheet. The purchase price to be paid by Heartland for these assets will be paid by an equivalent reduction of the principal balance of the Heartland Long-Term Note. This transaction is expected to close during the second quarter of 1997. (4) RECENT ACCOUNTING PRONOUNCEMENTS Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per Share," which superseded APB Opinion No. 15, "Earnings per Share," was issued in February 1997. SFAS 128 requires dual presentation of basic and diluted earning per share ("EPS") for complex capital structures on the face of the statements of operations. Basic EPS is computed by dividing income (loss) by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution from the exercise or conversion of securities into common stock, such as stock options. SFAS 128 is required to be adopted for year-end 1997; earlier application is not permitted. After adoption, all prior period data presented will be restated to conform with SFAS 128. The Company will present both EPS measures on the face of the statement of operations. The Company does not expect that basic and diluted EPS measured under SFAS 128 will be materially different from the presentation of primary and fully-diluted loss per common share measured under APB No. 15. 6 CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) March 31, 1997 (Unaudited) Statement of Financial Accounting Standards No. 129 ("SFAS 129"), "Disclosure of Information about Capital Structure," was issued in February, 1997. The Company does not expect SFAS 129 to result in any substantive change in its disclosure. (5) CONTINGENCIES The Company is a party to legal preceedings incidental to its business which, in the opinion of management, are not expected to have a material adverse effect on the Company's consolidated financial position, operating results or liquidity. 7 Part I - Financial Information Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS OVERVIEW. CS Wireless Systems, Inc. and subsidiaries (the "Company" or "CS Wireless") develop, own and operate a network of wireless cable television systems providing subscription television services. The Company has a portfolio of wireless cable channel rights (or wireless spectrum) in various markets in the United States. As of March 31, 1997, the Company had systems in operation in ten markets. Systems in other markets are currently under construction and development by the Company. The Company is also exploring the use of a portion of its wireless spectrum for high-speed Internet access. STRATEGY. The Company intends to conserve capital in anticipation of the expected availability of digital compression technology. This technology is expected to be available in 1997. The Company believes that the implementation of this technology, for subscription video and Internet access services, will increase its ability to attract and retain customers and implement its growth strategy, although there can be no assurance that it will be able to successfully compete with existing or new competitors. In addition, the Company will only develop its analog, subscription television customer base as local market conditions dictate. RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996 With respect to the discussion of the results of operations, the results presented are comprised of financial information of the Company and ACS Ohio, Inc. ("ASC Ohio"). ACS Ohio owned and operated the wireless cable television system serving the Cleveland, Ohio metropolitan area. Financial information for the period January 1, 1996 through February 23, 1996 reflects the combined financial position and results of operations for the Company's wireless cable system serving the Cleveland, Ohio metropolitan area. The combined financial information for the period from January 1, 1996 through February 23, 1996 includes the accounts of the Company and certain assets of Atlantic Microsystems, Inc. For the period subsequent to February 23, 1996, the Company's consolidated financial statements include the results of operations of the entities and assets contributed to the Company on February 23, 1996 as part of the February 23, 1996 Contributions. Period-to-period comparisons of financial results are not necessarily meaningful and should not be relied upon as an indication of future performance due to the February 23, 1996 Contributions and the USA Wireless Acquisition. REVENUE. The Company's revenue primarily consists of monthly fees paid by subscribers for basic programming, premium programming and equipment rental. The Company's revenue was $6.7 million for the first quarter of 1997 compared to $3.9 million for the first quarter of 1996, an increase of 73.2%. The increase in revenue for the first quarter of 1997 was primarily due to average subscribers increasing to approximately 65,400 for the first quarter of 1997 compared to approximately 37,200 for the first quarter of 1996, an increase of 75.8%. The increase in subscriber levels is attributed to the February 23, 1996 Contributions and the USA Wireless Acquisition. The Company had ten systems in operation at March 31, 1997 compared to nine systems in operation at March 31, 1996, including eight markets relating to the February 23, 1996 Contributions. SYSTEMS OPERATIONS. Systems operations primarily include programming costs, channel lease payments, transmitter site and tower rentals, and other costs of providing service. Programming costs (with the exception of minimum payments) and channel lease payments (with the exception of certain fixed payments) are variable expenses which generally increase as the number of subscribers increase. Systems operations expense was $3.7 million for the first quarter of 1997 compared to $2.3 million for the first quarter of 1996. The increase in systems operations expense from the first quarter of 1996 to the first quarter of 1997 is principally due to the increase in the subscriber base 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued) brought about by the February 23, 1996 Contributions. As a percentage of revenue, systems operations expense was 55.3% for the first quarter of 1997 compared to 59.7% for the first quarter of 1996. SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative expense ("SG&A") was $3.8 million for the first quarter of 1997 and $1.4 million for the first quarter of 1996. The increase in SG&A of $2.4 million is principally due to an increase in the Company's corporate and executive staff to support the Company's launch of digital video and Internet access services and costs attributed to the increase in the subscriber base brought about by the February 23, 1996 Contributions. DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense includes depreciation of systems and equipment and amortization of licenses and leased license investment and goodwill. Depreciation and amortization expense was $6.6 million for the first quarter of 1997 compared to $2.5 million for the first quarter of 1996. The increase in depreciation and amortization expense is related to the additional plant and equipment contributed to the Company in connection with the February 23, 1996 Contributions. OPERATING LOSS. The Company generated operating losses of $7.4 million for the first quarter of 1997 and $2.4 million for the first quarter of 1996. The increase in the company's operating loss was primarily due to increased SG&A expense and depreciation and amortization expense, partially offset by an increase in revenue. Consolidated earnings before interest, taxes, depreciation and amortization ("EBITDA") was a negative $832,000 for the first quarter of 1997 compared to a positive $128,000 for the first quarter of 1996. The decrease in EBITDA was principally due to increased SG&A brought about by the February 23, 1996 Contributions. INTEREST INCOME. Interest income was $1.5 million for the first quarter of 1997 and $0.9 million for the first quarter of 1996. The Company consummated a private placement of $400.0 million of 11 3/8% Senior Discount Notes (the "Senior Discount Notes") on February 23, 1996, resulting in net proceeds of $163.1 million (net of debt issuance costs, payment on notes and distributions pursuant to the February 23, 1996 Contributions). The increase in interest income is due to the cash equivalents being invested for a longer period in 1997 compared to 1996, partially offset by a decrease in the average invested balance. INTEREST EXPENSE. The Company incurred interest expense of $8.0 million during the first quarter of 1997 and $3.0 million during the first quarter of 1996. Interest expense during the first quarter of 1997 included non-cash interest and accretion of deferred debt issuance costs of $7.3 million related to the Senior Discount Notes and non-cash interest of $0.7 million relating to the Heartland Long-Term Note and the BTA auction payable. Interest expense during the first quarter of 1996 included non-cash interest and accretion of deferred debt issuance costs of $2.9 million related to the Senior Discount Notes and $0.1 million relating to the Heartland Long-Term Note. INCOME TAX BENEFIT. The Company recognized income tax benefits related to the Company's losses before income taxes of $1.4 million for the first quarter of 1997 and $1.4 million for the first quarter of 1996. The Company recognized income tax benefits to the extent of future reversals of existing taxable temporary differences. NET LOSS. The Company has recorded net losses since inception. The Company incurred net losses of $12.6 million, or $1.21 per share, during the first quarter of 1997 compared to $3.1 million, or $0.51 per share, during the first quarter of 1996. Although the Company's total revenue increased 73.2% from the first quarter of 1996 to the first quarter of 1997, due to increased SG&A, depreciation and amortization expense and interest expense, the Company's net losses have increased from the first quarter of 1996 to the first quarter of 1997. 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued) LIQUIDITY AND CAPITAL RESOURCES Companies within the wireless cable industry require significant capital. Funds are required for the lease or acquisition of channel rights, the acquisition of wireless cable systems, the construction of system head-end and transmission equipment, start-up costs related to the commencement of operations and subscriber installation costs. The Company intends to finance its capital requirements through a combination of the issuance of debt and equity securities, the disposition of wireless cable systems that are inconsistent with the Company's business strategy, the incurrence of loans and the assumption of debt and other liabilities in connection with acquisitions. Each of the operating systems that has been contributed to the Company in connection with the February 23, 1996 Contributions has incurred operating losses since inception. The Company has incurred operating losses since inception and its cash flows from operating activities at the system level to date have been insufficient to cover operating expenses at the system level. The Company expects to incur operating and net losses for the foreseeable future due to the expenditures associated with its growth strategy. The Company estimates that the launch of a new digital wireless cable system in a typical market will require capital expenditures of approximately $8.0 to $10.0 million of start-up expenses for head-end and transmission equipment and booster sites. The Company estimates that the conversion of an existing analog wireless cable system in a typical market to a digital wireless cable system will require the expenditure of approximately $6.0 to $8.0 million. These costs reflect the Company's good faith estimates; however, such estimates are speculative because to date there are no operating digital wireless cable systems, and the Company's estimates assume the efficacy and ready availability of digital technology. The Company estimates that the launch of a new analog wireless cable system in a typical market requires the aggregate capital expenditure of approximately $2.2 million. Incremental installation costs are estimated by the Company to be approximately $750 to $1,000 per subscriber in the case of a digital wireless system and approximately $350 to $700 per subscriber in the case of an analog or analog converting to digital system. The head-end and transmission expenditures must be made before programming can be delivered to subscribers and in certain instances, booster sites will be required to increase LOS households. Labor installation costs for a subscriber are incurred only after that subscriber signs up for services. For 1997, the Company has budgeted approximately $58.0 million in capital expenditures, including approximately $32.0 million for subscriber installation costs, $10.0 million for digital head-end and transmission equipment and approximately $5.0 million for build-out of several markets to accommodate a new line of business, internet access. The buildout of the Dallas market is budgeted to cost $45.0 million in total. For 1998, the Company has budgeted approximately $120.0 million of additional capital expenditures. Based upon the Company's current operating plans, it believes that cash on hand will provide sufficient funds to meet its needs for at least the next 12 months. Capital expenditures in excess of available cash may be financed, in whole or in part, by the Company through debt or equity financings, subscriber equipment lease financings, joint ventures or other arrangements. In the event the Company is unable to arrange equity financing or place debt in amounts and on terms satisfactory to the Company and consistent with its budgeted financing requirements, the ability of the Company to develop and expand its operations and to satisfy its fixed obligations, including its debt service and principal payment obligations in respect of the Senior Discount Notes, would be materially, adversely affected. The ability of the Company to take any of the foregoing steps or enter into other significant transactions will likely require the unanimous approval of CAI and Heartland. Net cash provided by operating activities during the first quarter of 1997 was $800,000 versus $2.4 million during the first quarter of 1996. The decrease in cash provided by operating activities from the first quarter of 1996 to the first quarter of 1997 was primarily due to increased SG&A and, to a lesser extent, certain costs associated with the activities preparing for launch of the Dallas, Texas market. 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued) Net cash used in investing activities was $4.6 million during the first quarter of 1997 versus $0.7 million during the first quarter of 1996. Cash used in investing activities primarily relates to the acquisition and installation of subscriber receive-site equipment and the acquisition of certain wireless cable channel rights. The increase in cash used in investing activities in the first quarter of 1997 is primarily due to investments in licenses and leased license investment and assets held for sale, with no comparable amounts in the first quarter of 1996. Additionally, the acquisition and installation of subscriber equipment increased to $1.7 million in the first quarter of 1997 from $0.9 million in the first quarter of 1996 principally due to increased subscriber levels resulting from the February 23, 1996 Contributions. Net cash used in financing activities was $2.1 million during the first quarter of 1997 compared to cash provided by financing activities of $163.1 million during the first quarter of 1996. Cash used in financing activities during the first quarter of 1997 is attributed to the repayment of $2.1 million of indebtedness related to the USA Wireless Acquisition. Net cash provided by financing activities during the first quarter of 1996 primarily represents the net proceeds from the Company's sale of the Senior Discount Notes reduced by cash distributed pursuant to the February 23, 1996 Contributions and the repayment of a $25.0 million note to Heartland. FUTURE OPERATING RESULTS; FORWARD LOOKING STATEMENTS The Company's future revenues and profitability are difficult to predict due to a variety of risks and uncertainties, including (i) business conditions and growth in the Company's existing markets, (ii) the costs and level of consumer acceptance associated with the launch of systems in new markets, (iii) the availability and performance of digital compression equipment, (iv) the Company's existing indebtedness and the need for additional financing to fund subscriber growth and system development, (v) government regulation, including FCC regulations, (vi) the Company's dependence on channel leases, (vii) the successful integration of potential future acquisitions and (viii) numerous competitive factors, including alternative methods of distributing and receiving video transmissions. The Company intends to conserve capital in anticipation of the expected availability of digital compression technology. This technology is expected to be available in 1997. The Company believes that the implementation of this technology will increase its ability to attract and retain customers and implement a growth strategy, although there can be no assurance that it will be able to successfully compete with existing or new competitors. In addition, the Company will only develop its analog customer base as local market conditions dictate. Because of the foregoing uncertainties affecting the Company's future operating results, past performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods. In addition, the Company's participation in a highly dynamic industry often results in significant volatility in the price of the Company's bonds. In addition to the matters noted above, certain other statements made in this report are forward looking. Such statements are based on an assessment of a variety of factors, contingencies and uncertainties deemed relevant by management, including technological changes, competitive products and services, management issues as well as those matters discussed specifically elsewhere herein. As a result, the actual results realized by the Company could differ materially from the statements made herein. Readers of this report are cautioned not to place undue reliance on the forward looking statements made in this report. A comprehensive listing of risk factors and a more detailed description of the Company's business are available in the Company's 1996 Annual Report on Form 10-K. 11 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS As previously reported in Item 3 of the Company's Annual Report on Form 10-K for the year ended December 31, 1996, the Company is involved in a dispute with San Antonio Wireless, Inc. ("SAW") over the Company's lease rights to eight ITFS channels for San Antonio. On February 12, 1997, SAW filed a lawsuit seeking injunctive relief against the Company. The Company believes the lawsuit is without merit and intends to defend it vigorously. ITEM 6. EXHIBITS AND REPORTS ON FORM 8 K (a) Exhibits 10.1 Employment Agreement dated as of April 2, 1997 between David Webb and CS Wireless Systems, Inc. 10.2 Employment Agreement dated as of April 2, 1997 between Frank H. Hosea and CS Wireless Systems, Inc. 10.3 Employment Agreement dated as of April 2, 1997 between Jeffrey A. Kupp and CS Wireless Systems, Inc. *27 Financial Data Schedule - ------------------ *Filed herewith. (b) Reports on Form 8 K None 12 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: May 15, 1997 CS WIRELESS SYSTEMS, INC. By: /s/Jeffrey A. Kupp ---------------------------- Jeffrey A. Kupp Senior Vice President-Finance and Chief Financial Officer (Principal Financial Officer) 13 EX-10.1 2 EXHIBIT 10.1 EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT (this "Agreement") is made as of the 2ND day of APRIL, 1997 by and between the undersigned employee (hereinafter referred to as "Employee") residing at the address indicated following Employee's signature below and CS WIRELESS SYSTEMS, INC., a Delaware corporation having its principal place of business at 200 Chisholm Place, Suite 202, Plano, Texas 75075 (hereinafter referred to as the "Company"). 1. EMPLOYMENT. The Company hereby employs Employee and Employee agrees to work for the Company in the capacity set forth on SCHEDULE A hereto during the Term (as defined below) of and upon the terms and conditions set forth in this Agreement. 2. COMPENSATION/BENEFITS. (a) BASE SALARY. During the Term of this Agreement (as defined below) the Company agrees to pay Employee the base annual salary set forth on SCHEDULE A ("Base Salary"). Such Base Salary shall be reviewed no less frequently than annually during the Term and may be increased but not decreased by the Board of Directors. Such Base Salary shall be payable in accordance with the Company's normal business practices or in such other amounts and at such other times as the parties may mutually agree. (b) INCENTIVE COMPENSATION. During the Term of this Agreement, Employee shall be entitled to such incentive program, pursuant to the terms of a separate plan of the Company, as may be in effect from time to time. Such incentive program shall be based on the following three (3) components: (i) the achievement of Company performance targets; (ii) the achievement of Employee performance targets; and (iii) discretionary bonuses. These performance targets will be revised annually by the Board of Directors. (c) STOCK OPTIONS. Employee shall be granted stock options (the "Stock Options") to purchase shares of Company common stock, $.001 par value per share, as set forth on SCHEDULE A, pursuant to the Company's 1996 Incentive Stock Plan, as amended, and subject to the terms and conditions thereof and the stock option agreement in the form attached as EXHIBIT A hereto. (d) BENEFITS/VACATION. During the Term, the Company shall provide Employee with such other benefits, including executive incentive and bonus plans and medical and disability plans, as are made generally available to executive employees of the Company from time to time. Employee shall be entitled to that amount of paid vacation during each year of the Term as set forth on SCHEDULE A. In addition, Employee shall be entitled to those benefits set forth on Schedule A. 3. SERVICES. Employee agrees to devote substantially all his working time, attention and energies to the business of the Company and its Affiliates (as defined below) under the general direction of the Management Group of the Company and Chief Executive Officer and hereby agrees to abide by and implement Company Policies, Strategy Principles and Governance Parameters as may be adopted from time to time by the Management Group of the Company in its sole discretion. Employee shall not directly or indirectly, during the Term of this Agreement, render services, for compensation or otherwise, to or for any other person or firm in direct competition with the business of the Company in any market served by the Company or its Affiliates without the written consent of the Board of Directors. In performing his duties hereunder, Employee shall be available for reasonable travel as the needs of the Company's business require. Employee shall work in the Company's Plano, Texas office, unless otherwise indicated on SCHEDULE A. 4. TERM. The term of this Agreement (the "Term" or the "Term of this Agreement") shall be for the period set forth on SCHEDULE A. 5. EARLY TERMINATION. (a) GENERAL. The Employee's employment hereunder is at will and shall be terminated and the Company's obligations hereunder shall cease, including the obligation to pay compensation for any period after the date of termination, (i) immediately upon notice, in the sole discretion of the Company, (ii) without the necessity of notice, upon the death of the Employee, or (iii) upon written notice of a finding by at least 60% of the members of the Board of Directors that the Employee has (a) acted with gross negligence or willful misconduct in connection with the performance of his duties hereunder, (b) engaged in a material act of insubordination or of common law fraud against the Company or its employees, or (c) acted against the best interests of the Company in a manner that has or could have an adverse affect on the financial condition of the Company (death of an Employee or any such findings is referred to herein as "Cause"). Upon the Company's termination of Employee for any reason other than Cause, the Company shall pay Employee: (i) severance in an amount (the "Severance Amount") equal to the greater of (x) his then Base Salary under PARAGRAPH 2, payable in twelve equal monthly installments and (y) the Base Salary that would have been payable for the balance of the Term, payable in equal monthly installments; and (ii) any accrued and unpaid bonuses due Employee in accordance with the Company's incentive program then in effect. (b) DISABILITY. If Employee shall become unable efficiently to perform the essential functions of his job, even with reasonable accommodation, as a result of a disability or illness, as such terms are defined by the Americans with Disabilities Act, he shall be entitled to his regular compensation until the total period of disability or illness (whether or not continuous and whether or not the same disability or illness) shall exceed sixty (60) days during any calendar year in the Term. This Agreement may thereafter be terminated by the Company and the Company's obligations hereunder shall cease, including the obligation to pay compensation for any period after the date of termination. Any amounts payable as compensation during the period of disability or illness shall be reduced by any amounts paid during such period under any disability plan or similar insurance of the Company. (c) EMPLOYEE'S RIGHT TO TERMINATE. Employee may, at any time during the Term, resign and shall be entitled to all accrued rights with respect to compensation and benefits in accordance with the Company's Policies then in effect. (d) ARBITRATION IN THE EVENT OF A DISPUTE REGARDING THE NATURE OF TERMINATION. In the event that the Company terminates Employees' employment for Cause (as defined above), and Employee contends that Cause did not exist, the Company's only obligation shall be to submit such claim to arbitration before the American Arbitration Association ("AAA"). In such a proceeding, the only issue before the arbitrator will be whether Employee was in fact terminated for Cause. If the arbitrator determines that Employee was not terminated for Cause, the only remedy that the arbitrator may award is an amount equal to the severance payment specified in PARAGRAPH 5(a), the costs of arbitration, and Employee's attorneys' fees. If the arbitrator finds that the Employee was terminated for Cause, the arbitrator will be without authority to award Employee anything, and the parties will each be responsible for their own attorneys' fees, and they will divide the costs of arbitration equally. 6. EMPLOYER'S AUTHORITY. Employee agrees to observe and comply with the rules and regulations of the Company as adopted by the Management Group of the Company or by the Board of Directors respecting the performance of his duties and to carry out and perform orders, directions and policies communicated to him from time to time. 7. EXPENSES. During the Term, the Company shall reimburse Employee for all reasonable business expenses which are approved in advance and incurred by Employee in the course of performing his duties for the Company hereunder in accordance with the procedures then in place for such reimbursement. 8. NON-DISCLOSURE AGREEMENT/NON-COMPETITION. (a) Employee will execute the Nondisclosure Agreement of the Company attached as EXHIBIT B hereto and made a part hereof. Said agreement shall survive termination of Employee's employment hereunder. (b) Because Employee's services to the Company are special and because Employee has access to the company's confidential information, Employee covenants and agrees that if (i)(x) Employee's employment is terminated, or not renewed, by the Company for Cause or (y) Employee voluntarily terminates his employment relationship hereunder with the Company or Employee elects not to renew his employment with the Company following the expiration of this Agreement, for a period of twelve (12) months following the termination of this Agreement, or (ii) Employee's employment is terminated and Employee is receiving the Severance Amount, for the period during which Employee is receiving such Severance Amount under PARAGRAPH 5 hereof, whichever is applicable, he will not, directly or indirectly, either on his own behalf or on behalf of any person, partnership, corporation or otherwise, (A) engage in any business or undertaking directly competitive with the wireless cable television, cable television, subscription television, direct broadcast satellite, direct-to-home, wired video programming, non-wired video programming, wireless Internet access, wireless fixed telephony or other fixed wireless information businesses (the "Related Business") being carried on by the Company or any Affiliate in any market serviced by the Company or any Affiliate, at the time of Employee's termination, (B) be employed by or provide consulting services to or be an investor, limited partner or shareholder in, any entity or other person in any Related Business within 25 miles of any city in which the Company or any Affiliate does business at time of execution of this Agreement or has rights to broadcast or transmit television programming or in which the Company has a transmission license at the time of Employee's termination, without the prior written consent of the Board of Directors. The parties agree that the time period and geographical area of non-competition specified above are reasonable and necessary in light of the transactions entered into in this Agreement. If, however, it shall be determined at any time by a court of competent jurisdiction that either the time period restriction or the geographical area restriction, or both, are invalid or unenforceable, the parties agree that any such invalid restriction shall be amended and reformed to the extent necessary to make same valid and enforceable in the determination of said court, and such restriction, as so amended, shall be enforceable between the parties to the same extent as if such amendment had been made as of the date of this Agreement. This SUBPARAGRAPH 8(b) shall survive the termination of this Agreement and shall not apply to investments constituting not more than 5% of the common equity of a publicly traded company. 9. INDEMNIFICATION. As a material inducement for Employee to enter into this Agreement, the Company hereby covenants and agrees to indemnify Employee to the fullest extent permitted under applicable law with respect to any and all damages, expenses (including reasonable attorney's fees), and other liability suffered as a result of any and all claims, causes of action, proceedings or other actions which may be asserted against Employee in connection with Employee's service as an employee of the Company or any of its Affiliates. 10. NOTICES. Any notice permitted or required hereunder shall be deemed sufficient when hand-delivered or mailed by certified mail, postage prepaid, and addressed if to the Company at the address indicated above and if to Employee at the address indicated below (or such other address as may be provided by notice). 11. MISCELLANEOUS. This Agreement, together with all schedules, exhibits and collateral documents referenced herein, (i) constitutes the entire agreement between the parties concerning the subjects hereof and supersedes any and all prior agreements or understandings, (ii) may not be assigned by Employee without the prior written consent of the Company and (iii) may be assigned by the Company and shall be binding upon, and inure to the benefit of, the Company's successors and assigns. Headings herein are for convenience of reference only and shall not define, limit or interpret the contents hereof. 12. AMENDMENT. This Agreement may be amended, modified or supplemented by the mutual consent of the parties in writing, but no oral amendment, modification or supplement shall be effective. 13. SPECIFIC PERFORMANCE. The parties acknowledge that the Company would be irreparably damaged and there would be no adequate remedy at law for Employee's breach of PARAGRAPH 8 of this Agreement, and accordingly, the terms thereof shall be specifically enforced. Employee hereby consents to the entry of any temporary restraining order or preliminary or ex parte injunction, in addition to any other remedies available at law or in equity, to enforce the provisions hereof. 14. AFFILIATES. As used herein, the term "Affiliate" shall mean any individual or entity controlling, controlled by or under common control with the Company, now or in the future, including without limitation, partnerships in which the Company or any Affiliate may invest as a limited or general partner and limited liability companies in which the Company or any Affiliate may become a member. 15. SEVERABILITY. The provisions of this Agreement are severable. The invalidity of any provision shall not affect the validity of any other provision. 16. GOVERNING LAW. This Agreement shall be constructed and regulated in all respects under the laws of the State of Delaware; provided, however, venue for any action under this Agreement shall lie with a court of competent jurisdiction in the State of Texas. [BALANCE OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, this Agreement is entered into as of the date and year first above written. CS WIRELESS SYSTEMS, INC. By /s/ Jared E. Abbruzzese ----------------------- Jared E. Abbruzzese Chairman EMPLOYEE: By /s/ David E. Webb ----------------- David E. Webb SCHEDULE A Employee's Title: President and Chief Executive Officer Employee's Base Salary: $150,000 Stock Options: 200,000 Vacation: 4 weeks Term: The term of this Agreement shall be for a period beginning on the date hereof and continuing until the thirty-six month anniversary of this Agreement, and shall be automatically renewed annually thereafter unless either party gives notice to the other of its intention not to renew this Agreement not less than sixty (60) days prior to the expiration of the term or unless this Agreement shall be terminated prior thereto pursuant to PARAGRAPH 5 of this Agreement. Automobile: During the Term, Employee shall be entitled to a automobile allowance of $600.00 per month, payable monthly in arrears. Life Insurance: Subject to Employee submitting to any required physical examinations and provided such policy can be obtained at customary premiums, the Company shall purchase, at its sole cost and expense, a term insurance policy with the face amount of two (2) times Employee's Base Salary on the life of Employee and shall permit Employee to designate the beneficiary thereof. Representation: The Company represents to Employee that, to the best of its knowledge as of the date hereof, it is unaware of any grounds or potential causes of action arising out of the Company's past accounting practices and procedures, any securities offerings by the Company or its Affiliates, or any other transactions that may expose Employee, as an officer of the Company, to potential liability. Furthermore, the Company covenants it will promptly notify Employee should it become aware of any such potential causes of action. EXHIBIT A CS WIRELESS SYSTEMS, INC. NO. 016 NON-QUALIFIED STOCK OPTION THIS AGREEMENT, IS MADE AS OF THE GRANT DATE INDICATED IN SCHEDULE A ATTACHED, AND BETWEEN CS WIRELESS SYSTEMS, INC. (THE "COMPANY"), AND THE UNDERSIGNED INDIVIDUAL (THE "OPTIONEE"), PURSUANT TO THE 1996 CS WIRELESS SYSTEMS, INC. INCENTIVE STOCK PLAN AS AMENDED (THE "PLAN"). (TERMS NOT DEFINED HEREIN SHALL HAVE THE SAME MEANING AS IN THE PLAN.) WHEREAS, THE OPTIONEE IS AN ELIGIBLE EMPLOYEE OF THE COMPANY AND THE COMPANY THROUGH THE PLAN'S COMMITTEE HAS APPROVED THE GRANT OF NON-QUALIFIED STOCK OPTIONS ("OPTIONS") UNDER THE PLAN TO THE OPTIONEE. NOW, THEREFORE, IN CONSIDERATION OF THE TERMS AND CONDITIONS OF THIS AGREEMENT AND PURSUANT TO THE PLAN, THE PARTIES AGREE AS FOLLOWS: 1. GRANT OF OPTIONS. THE COMPANY HEREBY GRANTS TO THE OPTIONEE THE RIGHT AND OPTION TO PURCHASE FROM THE COMPANY, AT THE EXERCISE PRICE SET FORTH IN SCHEDULE A, ALL OR ANY PART OF THE AGGREGATE NUMBER OF COMMON SHARES OF THE COMPANY, AS SUCH COMMON SHARES ARE PRESENTLY CONSTITUTED (THE "COMMON SHARES"), SET FORTH IN SCHEDULE A. 2. TERMS AND CONDITIONS. IT IS UNDERSTOOD AND AGREED THAT THE OPTION EVIDENCED HEREBY IS SUBJECT TO THE PROVISIONS OF THE PLAN (WHICH ARE INCORPORATED HEREIN BY REFERENCE) AND THE FOLLOWING TERMS AND CONDITIONS: A. EXPIRATION DATE: THE OPTION EVIDENCED HEREBY SHALL EXPIRE ON THE DATE SPECIFIED IN SCHEDULE A. EXCEPT FOR UNVESTED OPTIONS PURSUANT TO THE VESTING SCHEDULE BELOW, WHICH SHALL EXPIRE IMMEDIATELY ON A TERMINATION OF EMPLOYMENT, THE OPTION SHALL NOT EXPIRE AT AN EARLIER DATE UPON TERMINATION OF OPTIONEE'S EMPLOYMENT, UNLESS SUCH TERMINATION IS FOR CAUSE, AS DEFINED IN THE PLAN. B. EXERCISE OF OPTION. THE OPTION EVIDENCED HEREBY SHALL BE EXERCISABLE FROM TIME TO TIME BY SUBMITTING THE APPROPRIATE NOTICE OF EXERCISE FORM REFERRED TO BELOW TEN DAYS PRIOR TO THE DATE OF EXERCISE SPECIFYING THE NUMBER OF SHARES FOR WHICH THE OPTION IS BEING EXERCISED, ADDRESSED AS FOLLOWS: CS WIRELESS SYSTEMS, INC. 200 CHISHOLM PLACE, SUITE 200 PLANO, TEXAS 75075 ATTENTION: CHIEF FINANCIAL OFFICER (1) CASH ONLY EXERCISE -- SUBMITTING A "NOTICE OF CASH EXERCISE" ACCOMPANIED BY THE FULL CASH PURCHASE PRICE OF THE EXERCISED SHARES; OR (2) CASHLESS EXERCISE -- PROVIDED THE COMPANY HAS ADOPTED SUCH A PROCEDURE AT THIS TIME, SUBMITTING AN "IRREVOCABLE LETTER OF INSTRUCTION" AND "CASHLESS EXERCISE AND SALE FORM" AUTHORIZING THE DELIVERY FOR SALE OF THE EXERCISED COMMON SHARES, OR (3) COMBINATION -- TENDERING A COMBINATION OF (1) AND (2) ABOVE. WITHHOLDING TAXES. WITHOUT REGARD TO THE METHOD OF EXERCISE AND PAYMENT, THE OPTIONEE SHALL PAY TO THE COMPANY, UPON NOTICE OF THE AMOUNT DUE, ANY WITHHOLDING TAXES PAYABLE WITH RESPECT TO SUCH EXERCISE. VESTING SCHEDULE. THE OPTIONS WILL BECOME VESTED AND EXERCISABLE AS SET FORTH ON SCHEDULE A HERETO OR, IF NOT SPECIFICALLY SET FORTH THEREIN, ON THE YEARLY ANNIVERSARY OF THIS AGREEMENT, IN EQUAL ANNUAL INSTALLMENTS OVER FOUR YEARS. NOTWITHSTANDING THE FOREGOING THRESHOLD REQUIREMENTS, THE OPTIONS SHALL BECOME VESTED AND EXERCISABLE IN FULL EARLIER UPON THE HAPPENING OF AN "ACCELERATION EVENT", AS DEFINED IN EXHIBIT A. C. COMPLIANCE WITH LAWS AND REGULATIONS. THE OPTION EVIDENCED HEREBY IS SUBJECT TO RESTRICTIONS IMPOSED AT ANY TIME ON THE EXERCISE OR DELIVERY OF SHARES IN VIOLATION OF THE BYLAWS OF THE COMPANY OR OF ANY LAW OR GOVERNMENTAL REGULATION THAT THE COMPANY MAY FIND TO BE VALID AND APPLICABLE. D. INTERPRETATION. OPTIONEE HEREBY ACKNOWLEDGES THAT THIS AGREEMENT IS GOVERNED BY THE PLAN, A COPY OF WHICH OPTIONEE HEREBY ACKNOWLEDGES HAVING RECEIVED, AND BY SUCH ADMINISTRATIVE RULES AND REGULATIONS RELATIVE TO THE PLAN AND NOT INCONSISTENT THEREWITH AS MAY BE ADOPTED AND AMENDED FROM TIME BY THE COMMITTEE (THE "RULES"). OPTIONEE AGREES TO BE BOUND BY THE TERMS AND PROVISIONS OF THE PLAN AND THE RULES. E. TRANSFER RESTRICTIONS. IN ADDITION TO THE RESTRICTIONS ON TRANSFERABILITY IMPOSED BY THE PLAN AND THE INCENTIVE PLAN, THIS OPTION IS NOT TRANSFERABLE OTHER THAN BY WILL OR THE LAWS OF DESCENT AND DISTRIBUTION. IN WITNESS WHEREOF, THE COMPANY HAS CAUSED THIS INSTRUMENT TO BE EXECUTED BY ITS AUTHORIZED OFFICER, AS OF THE GRANT DATE IDENTIFIED IN SCHEDULE A. AGREED TO: CS WIRELESS SYSTEMS, INC. /s/ DAVID E. WEBB BY: /s/ JARED E. ABBRUZZESE - ----------------- ----------------------- OPTIONEE: DAVID E. WEBB JARED E. ABBRUZZESE CHAIRMAN SCHEDULE A OPTION DATA OPTIONEE'S NAME: DAVID E. WEBB NUMBER OF COMMON SHARES SUBJECT TO THIS OPTION: 200,000 GRANT DATE: JANUARY 22, 1997 EXERCISE PRICE PER SHARE: $6.50 EXPIRATION DATE: JANUARY 22, 2007 VESTING PROVISIONS: NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THE PLAN OR THIS AGREEMENT, INCLUDING SECTION 2 OF THIS AGREEMENT, IF OPTIONEE'S EMPLOYMENT IS TERMINATED FOR ANY REASON OTHER THAN FOR CAUSE (AS DEFINED BY OPTIONEE'S EMPLOYMENT AGREEMENT WITH THE COMPANY), THEN ALL OPTIONS SHALL BECOME IMMEDIATELY VESTED AND OPTIONEE SHALL HAVE THOSE RIGHTS WITH RESPECT TO THE OPTIONS AS PROVIDED IN THIS AGREEMENT WITHOUT REGARD TO SUCH TERMINATION. EXHIBIT A For purposes of this Agreement, an Acceleration Event shall be deemed to have occurred if after the date of the closing of the initial public offering by the Company (i) a report on Schedule 13D shall be filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Act"), disclosing that any person other than the Company or any employee benefit plan sponsored by the Company, is the beneficial owner (as the term is defined in Rule 13d-3 under the Act) directly or indirectly, of thirty-five percent or more of the total voting power represented by the Company's then outstanding Voting Securities (calculated as provided in paragraph (d) of Rule 13d-3 under the Act in the case of rights to acquire Voting Securities); or (ii) any person, other than the Company or any employee benefit plan sponsored by the Company, shall purchase shares pursuant to a tender offer or exchange offer to acquire any voting Securities of the Company (or securities convertible into such Voting Securities) for cash, securities or any other consideration, provided that after consummation of the offer, the person in question is the beneficial owner directly of indirectly, of thirty- five percent or more of the total voting power represented by the Company's then outstanding Voting Securities (all as calculated under clause (i)); or (iii) the stockholders of the Company shall approve (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation (other than a merger of the Company in which holders of Common Shares of the Company immediately prior to the merger have the same proportionate ownership of Common Shares of the surviving corporation immediately after the merger as immediately before), or pursuant to which Common Shares of the Company would be converted into cash, securities or other property, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) or all or substantially all the assets of the Company; or (iv) there shall have been a change in the composition of the Board of Directors of the Company at any time during any consecutive twenty-four month period such that "continuing directors" cease for any reason to constitute at least a 51% majority of the Board. For purposes of this clause, "continuing directors" means those members of the Board who either were directors at the beginning of such consecutive twenty-four month period or were elected by or on the nomination or recommendation of at least a 51% majority of the then-existing Board. So long as there has not been an Acceleration Event within the meaning of clause (iv), the Board of Directors may adopt a 51% majority vote of the "continuing directors" a resolution to the effect that an event described in clauses (i) or (ii) shall not constitute an Acceleration Event. EXHIBIT B NONDISCLOSURE AGREEMENT AGREEMENT made as of the 2ND day of APRIL, 1997, by and between the undersigned individual residing at the address indicated following his signature below (hereinafter referred to as "Employee") and CS WIRELESS SYSTEMS, INC., a Delaware corporation, having its principal place of business at 200 Chisholm Place, Suite 202, Plano, Texas 75075 (hereinafter referred to as "Employer"). WHEREAS, Employee is being employed by Employer in a capacity wherein Employee will come into possession of material of a confidential, sensitive or proprietary nature concerning the business, plans and trade secrets of Employer and its Affiliates (as defined below) and of third parties; and WHEREAS, the continued confidential treatment of such information is vital to the success of Employer's business, NOW THEREFORE, the parties agree as follows: 1. Employee acknowledges that his work as an employee of Employer will bring him into close contact with the Confidential Information (as defined below) of Employer and of third parties. Employee acknowledges that such Confidential Information is reposed in him in trust. 2. Employee hereby agrees that he shall, both during and after his employment, maintain such Confidential Information in confidence and neither disclose to others (nor cause to be disclosed) nor use personally (nor cause to be used) such Confidential Information without the prior written permission of Employer unless required or compelled to do so by a court order; provided, that in the event that Employee becomes legally required or compelled to disclose Confidential Information, Employee will, to the extent practicable under the circumstances, provide Employer with written notice thereof so that Employer may seek a protective order or other appropriate remedy; provided further, that in any such event, Employee will disclose only such information as is legally required and will exercise reasonable efforts to obtain confidential treatment for any Confidential Information being disclosed. Employee will also take reasonable precautions to prevent the inadvertent exposure of Confidential Information to unauthorized persons or entities. 3. Employee acknowledges that he may, during his employment, add to Employer's Confidential Information and he agrees that any such additions shall fall within the strictures of this Agreement. 4. Employee agrees that upon any termination of his employment with Employer or any Affiliate thereof, or upon request if sooner, he shall forthwith return to Employer all reports, correspondence, notes, financial statements, computer printouts and other documents and recorded material of every nature (including all copies thereof) which may be in his possession or under his control dealing with Confidential Information. 5. All inventions, discoveries, improvements, computer software, firmware, programs, documentation, manuals and other works of authorship (collectively referred to as "Intellectual Property"), whether or not copyrightable or patentable, made, created, developed, written or conceived by Employee during the course of Employee's employment by the Employer and within the scope of Employee's employment will be deemed work made for hire, whether made solely or jointly with another. All such Intellectual Property will be the property of the Employer. Employee hereby assigns to the Employer all right, title and interest in and to all Intellectual Property. 6. Employee will, without charge to the Employer but at its expense, execute a specific assignment of title to Employer and do anything else reasonably necessary to enable the Employer to secure a patent, copyright or other form of protection for said Intellectual Property anywhere in the world. 7. Employee acknowledges that the covenants in this Agreement have existed since the commencement of his employment with Employer. These covenants are expressions of his duty as an employee not to use the Confidential Information to the detriment of Employer. In addition, Employee acknowledges that he shall benefit from entry into this Agreement as Employer shall be willing to continue to provide access to Confidential Information to Employee. 8. EMPLOYEE ACKNOWLEDGES THAT EMPLOYER WOULD BE IRREPARABLY DAMAGED AND THERE WOULD BE NO ADEQUATE REMEDY AT LAW FOR EMPLOYEES'S BREACH OF THIS AGREEMENT, AND ACCORDINGLY, THE TERMS OF THIS AGREEMENT SHALL BE SPECIFICALLY ENFORCED. EMPLOYEE HEREBY CONSENTS TO THE ENTRY OF ANY TEMPORARY RESTRAINING ORDER OR PRELIMINARY OR EX PARTE INJUNCTION, IN ADDITION TO ANY OTHER REMEDIES AVAILABLE AT LAW OR IN EQUITY, TO ENFORCE THE PROVISIONS HEREOF. 9. This Agreement is not an agreement of employment and nothing herein shall be construed to obligate Employer to employ Employee for any definite duration or upon any specific terms. 10. As used herein, "Confidential Information" shall mean all confidential information and trade secrets of Employer or any of its Affiliates, whether now existing or hereafter acquired or developed, including, without limitation, financial statements, business plans, working methods, investments, materials, processes, programs, designs, drawings, names of and relationships with current or potential vendors and lenders and other third parties, contractual arrangements, profit formulas, experimental investigations, studies, current or potential customer names and requirements, current or potential professional associations or contacts, information submitted to Employer or its Affiliates by third parties on a confidential basis and similar other non-public or otherwise confidential, sensitive or proprietary information. "Confidential Information" shall not include information that is generally within the public domain, or has become generally known within the wireless cable industry without breach of any obligation of confidentiality of Employee or any third party. 11. As used herein, the term "Affiliates" shall mean any individual or entity controlling, controlled by or under common control with the Employer, now or in the future, including without limitation, partnerships in which Employer or any Affiliate may invest as a limited or general partner and limited liability companies in which Employer or any Affiliate may become a member. 12. This Agreement shall survive the termination of the employment of Employee and shall not be amended except by a writing signed by the parties hereto. This Agreement shall be binding upon the Employee and his heirs, legal representatives, successors and assigns. 13. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware. [BALANCE OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. CS WIRELESS SYSTEMS, INC. By /s/ Jared E. Abbruzzese ----------------------- Jared E. Abbruzzese Chairman EMPLOYEE: /s/ David E. Webb ----------------- David E. Webb EX-10.2 3 EXHIBIT 10.2 EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT (this "Agreement") is made as of the 2nd day of April, 1997 by and between the undersigned employee (hereinafter referred to as "Employee") residing at the address indicated following Employee's signature below and CS WIRELESS SYSTEMS, INC., a Delaware corporation having its principal place of business at 200 Chisholm Place, Suite 202, Plano, Texas 75075 (hereinafter referred to as the "Company"). 1. EMPLOYMENT. The Company hereby employs Employee and Employee agrees to work for the Company in the capacity set forth on SCHEDULE A hereto during the Term (as defined below) of and upon the terms and conditions set forth in this Agreement. 2. COMPENSATION/BENEFITS. (a) BASE SALARY. During the Term of this Agreement (as defined below) the Company agrees to pay Employee the base annual salary set forth on SCHEDULE A ("Base Salary"). Such Base Salary shall be reviewed no less frequently than annually during the Term and may be increased but not decreased by the Board of Directors. Such Base Salary shall be payable in accordance with the Company's normal business practices or in such other amounts and at such other times as the parties may mutually agree. (b) INCENTIVE COMPENSATION. During the Term of this Agreement, Employee shall be entitled to such incentive program, pursuant to the terms of a separate plan of the Company, as may be in effect from time to time. Such incentive program shall be based on the following three (3) components: (i) the achievement of Company performance targets; (ii) the achievement of Employee performance targets; and (iii) discretionary bonuses. These performance targets will be revised annually by the Board of Directors. (c) STOCK OPTIONS. Employee shall be granted stock options (the "Stock Options") to purchase shares of Company common stock, $.001 par value per share, as set forth on SCHEDULE A, pursuant to the Company's 1996 Incentive Stock Plan, as amended, and subject to the terms and conditions thereof and the stock option agreement in the form attached as Exhibit A hereto. (d) BENEFITS/VACATION. During the Term, the Company shall provide Employee with such other benefits, including executive incentive and bonus plans and medical and disability plans, as are made generally available to executive employees of the Company from time to time. Employee shall be entitled to that amount of paid vacation during each year of the Term as set forth on SCHEDULE A. In addition, Employee shall be entitled to those benefits set forth on SCHEDULE A. 3. SERVICES. Employee agrees to devote substantially all his working time, attention and energies to the business of the Company and its Affiliates (as defined below) under the general direction of the Management Group of the Company and Chief Executive Officer and hereby agrees to abide by and implement Company Policies, Strategy Principles and Governance Parameters as may be adopted from time to time by the Management Group of the Company in its sole discretion. Employee shall not directly or indirectly, during the Term of this Agreement, render services, for compensation or otherwise, to or for any other person or firm in direct competition with the business of the Company in any market served by the Company or its Affiliates without the written consent of the Board of Directors. In performing his duties hereunder, Employee shall be available for reasonable travel as the needs of the Company's business require. Employee shall work in the Company's Plano, Texas office, unless otherwise indicated on SCHEDULE A. 4. TERM. The term of this Agreement (the "Term" or the "Term of this Agreement") shall be for the period set forth on SCHEDULE A. 5. EARLY TERMINATION. (a) GENERAL. The Employee's employment hereunder is at will and shall be terminated and the Company's obligations hereunder shall cease, including the obligation to pay compensation for any period after the date of termination, (i) immediately upon notice, in the sole discretion of the Company, (ii) without the necessity of notice, upon the death of the Employee, or (iii) upon written notice of a finding by at least 60% of the members of the Board of Directors that the Employee has (a) acted with gross negligence or willful misconduct in connection with the performance of his duties hereunder, (b) engaged in a material act of insubordination or of common law fraud against the Company or its employees, or (c) acted against the best interests of the Company in a manner that has or could have an adverse affect on the financial condition of the Company (death of an Employee or any such findings is referred to herein as "Cause"). Upon the Company's termination of Employee for any reason other than Cause, the Company shall pay Employee: (i) severance in an amount (the "Severance Amount") equal to the greater of (x) his then Base Salary under PARAGRAPH 2, payable in twelve equal monthly installments and (y) the Base Salary that would have been payable for the balance of the Term, payable in equal monthly installments; and (ii) any accrued and unpaid bonuses due Employee in accordance with the Company's incentive program then in effect. (b) DISABILITY. If Employee shall become unable efficiently to perform the essential functions of his job, even with reasonable accommodation, as a result of a disability or illness, as such terms are defined by the Americans with Disabilities Act, he shall be entitled to his regular compensation until the total period of disability or illness (whether or not continuous and whether or not the same disability or illness) shall exceed sixty (60) days during any calendar year in the Term. This Agreement may thereafter be terminated by the Company and the Company's obligations hereunder shall cease, including the obligation to pay compensation for any period after the date of termination. Any amounts payable as compensation during the period of disability or illness shall be reduced by any amounts paid during such period under any disability plan or similar insurance of the Company. (c) EMPLOYEE'S RIGHT TO TERMINATE. Employee may, at any time during the Term, resign and shall be entitled to all accrued rights with respect to compensation and benefits in accordance with the Company's Policies then in effect. (d) ARBITRATION IN THE EVENT OF A DISPUTE REGARDING THE NATURE OF TERMINATION. In the event that the Company terminates Employees' employment for Cause (as defined above), and Employee contends that Cause did not exist, the Company's only obligation shall be to submit such claim to arbitration before the American Arbitration Association ("AAA"). In such a proceeding, the only issue before the arbitrator will be whether Employee was in fact terminated for Cause. If the arbitrator determines that Employee was not terminated for Cause, the only remedy that the arbitrator may award is an amount equal to the severance payment specified in PARAGRAPH 5(a), the costs of arbitration, and Employee's attorneys' fees. If the arbitrator finds that the Employee was terminated for Cause, the arbitrator will be without authority to award Employee anything, and the parties will each be responsible for their own attorneys' fees, and they will divide the costs of arbitration equally. 6. EMPLOYER'S AUTHORITY. Employee agrees to observe and comply with the rules and regulations of the Company as adopted by the Management Group of the Company or by the Board of Directors respecting the performance of his duties and to carry out and perform orders, directions and policies communicated to him from time to time. 7. EXPENSES. During the Term, the Company shall reimburse Employee for all reasonable business expenses which are approved in advance and incurred by Employee in the course of performing his duties for the Company hereunder in accordance with the procedures then in place for such reimbursement. 8. NON-DISCLOSURE AGREEMENT/NON-COMPETITION. (a) Employee will execute the Nondisclosure Agreement of the Company attached as EXHIBIT B hereto and made a part hereof. Said agreement shall survive termination of Employee's employment hereunder. (b) Because Employee's services to the Company are special and because Employee has access to the company's confidential information, Employee covenants and agrees that if (i)(x) Employee's employment is terminated, or not renewed, by the Company for Cause or (y) Employee voluntarily terminates his employment relationship hereunder with the Company or Employee elects not to renew his employment with the Company following the expiration of this Agreement, for a period of twelve (12) months following the termination of this Agreement, or (ii) Employee's employment is terminated and Employee is receiving the Severance Amount, for the period during which Employee is receiving such Severance Amount under PARAGRAPH 5 hereof, whichever is applicable, he will not, directly or indirectly, either on his own behalf or on behalf of any person, partnership, corporation or otherwise, (A) engage in any business or undertaking directly competitive with the wireless cable television, cable television, subscription television, direct broadcast satellite, direct-to-home, wired video programming, non-wired video programming, wireless Internet access, wireless fixed telephony or other fixed wireless information businesses (the "Related Business") being carried on by the Company or any Affiliate in any market serviced by the Company or any Affiliate, at the time of Employee's termination, (B) be employed by or provide consulting services to or be an investor, limited partner or shareholder in, any entity or other person in any Related Business within 25 miles of any city in which the Company or any Affiliate does business at time of execution of this Agreement or has rights to broadcast or transmit television programming or in which the Company has a transmission license at the time of Employee's termination, without the prior written consent of the Board of Directors. The parties agree that the time period and geographical area of non-competition specified above are reasonable and necessary in light of the transactions entered into in this Agreement. If, however, it shall be determined at any time by a court of competent jurisdiction that either the time period restriction or the geographical area restriction, or both, are invalid or unenforceable, the parties agree that any such invalid restriction shall be amended and reformed to the extent necessary to make same valid and enforceable in the determination of said court, and such restriction, as so amended, shall be enforceable between the parties to the same extent as if such amendment had been made as of the date of this Agreement. This SUBPARAGRAPH 8(b) shall survive the termination of this Agreement and shall not apply to investments constituting not more than 5% of the common equity of a publicly traded company. 9. INDEMNIFICATION. As a material inducement for Employee to enter into this Agreement, the Company hereby covenants and agrees to indemnify Employee to the fullest extent permitted under applicable law with respect to any and all damages, expenses (including reasonable attorney's fees), and other liability suffered as a result of any and all claims, causes of action, proceedings or other actions which may be asserted against Employee in connection with Employee's service as an employee of the Company or any of its Affiliates. 10. NOTICES. Any notice permitted or required hereunder shall be deemed sufficient when hand-delivered or mailed by certified mail, postage prepaid, and addressed if to the Company at the address indicated above and if to Employee at the address indicated below (or such other address as may be provided by notice). 11. MISCELLANEOUS. This Agreement, together with all schedules, exhibits and collateral documents referenced herein, (i) constitutes the entire agreement between the parties concerning the subjects hereof and supersedes any and all prior agreements or understandings, (ii) may not be assigned by Employee without the prior written consent of the Company and (iii) may be assigned by the Company and shall be binding upon, and inure to the benefit of, the Company's successors and assigns. Headings herein are for convenience of reference only and shall not define, limit or interpret the contents hereof. 12. AMENDMENT. This Agreement may be amended, modified or supplemented by the mutual consent of the parties in writing, but no oral amendment, modification or supplement shall be effective. 13. SPECIFIC PERFORMANCE. The parties acknowledge that the Company would be irreparably damaged and there would be no adequate remedy at law for Employee's breach of PARAGRAPH 8 of this Agreement, and accordingly, the terms thereof shall be specifically enforced. Employee hereby consents to the entry of any temporary restraining order or preliminary or ex parte injunction, in addition to any other remedies available at law or in equity, to enforce the provisions hereof. 14. AFFILIATES. As used herein, the term "Affiliate" shall mean any individual or entity controlling, controlled by or under common control with the Company, now or in the future, including without limitation, partnerships in which the Company or any Affiliate may invest as a limited or general partner and limited liability companies in which the Company or any Affiliate may become a member. 15. SEVERABILITY. The provisions of this Agreement are severable. The invalidity of any provision shall not affect the validity of any other provision. 16. GOVERNING LAW. This Agreement shall be constructed and regulated in all respects under the laws of the State of Delaware; provided, however, venue for any action under this Agreement shall lie with a court of competent jurisdiction in the State of Texas. [BALANCE OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, this Agreement is entered into as of the date and year first above written. CS WIRELESS SYSTEMS, INC. By: /s/ Jared E. Abbruzzese ------------------------- Jared E. Abbruzzese Chairman EMPLOYEE: By: /s/ Frank Hosea ----------------- Frank Hosea SCHEDULE A Employee's Title: Senior Vice President Operations & Chief Operating Officer Employee's Base Salary: $140,000 Stock Options: 10,000 24,000 32,000 Vacation: 4 weeks Term: The term of this Agreement shall be for a period beginning on the date hereof and continuing until the thirty-six month anniversary of this Agreement, and shall be automatically renewed annually thereafter unless either party gives notice to the other of its intention not to renew this Agreement not less than sixty (60) days prior to the expiration of the term or unless this Agreement shall be terminated prior thereto pursuant to PARAGRAPH 5 of this Agreement. Automobile: During the Term, Employee shall be entitled to a automobile allowance of $600.00 per month, payable monthly in arrears. Life Insurance: Subject to Employee submitting to any required physical examinations and provided such policy can be obtained at customary premiums, the Company shall purchase, at its sole cost and expense, a term insurance policy with the face amount of two (2) times Employee's Base Salary on the life of Employee and shall permit Employee to designate the beneficiary thereof. Representation: The Company represents to Employee that, to the best of its knowledge as of the date hereof, it is unaware of any grounds or potential causes of action arising out of the Company's past accounting practices and procedures, any securities offerings by the Company or its Affiliates, or any other transactions that may expose Employee, as an officer of the Company, to potential liability. Furthermore, the Company covenants it will promptly notify Employee should it become aware of any such potential causes of action. Exhibit A CS WIRELESS SYSTEMS, INC. NO. 005 NON-QUALIFIED STOCK OPTION THIS AGREEMENT, IS MADE AS OF THE GRANT DATE INDICATED IN SCHEDULE A ATTACHED, AND BETWEEN CS WIRELESS SYSTEMS, INC. (THE "COMPANY"), AND THE UNDERSIGNED INDIVIDUAL (THE "OPTIONEE"), PURSUANT TO THE 1996 CS WIRELESS SYSTEMS, INC. INCENTIVE STOCK PLAN AS AMENDED (THE "PLAN"). (TERMS NOT DEFINED HEREIN SHALL HAVE THE SAME MEANING AS IN THE PLAN.) WHEREAS, THE OPTIONEE IS AN ELIGIBLE EMPLOYEE OF THE COMPANY AND THE COMPANY THROUGH THE PLAN'S COMMITTEE HAS APPROVED THE GRANT OF NON-QUALIFIED STOCK OPTIONS ("OPTIONS") UNDER THE PLAN TO THE OPTIONEE. NOW, THEREFORE, IN CONSIDERATION OF THE TERMS AND CONDITIONS OF THIS AGREEMENT AND PURSUANT TO THE PLAN, THE PARTIES AGREE AS FOLLOWS: 1. GRANT OF OPTIONS. THE COMPANY HEREBY GRANTS TO THE OPTIONEE THE RIGHT AND OPTION TO PURCHASE FROM THE COMPANY, AT THE EXERCISE PRICE SET FORTH IN SCHEDULE A, ALL OR ANY PART OF THE AGGREGATE NUMBER OF COMMON SHARES OF THE COMPANY, AS SUCH COMMON SHARES ARE PRESENTLY CONSTITUTED (THE "COMMON SHARES"), SET FORTH IN SCHEDULE A. 2. TERMS AND CONDITIONS. IT IS UNDERSTOOD AND AGREED THAT THE OPTION EVIDENCED HEREBY IS SUBJECT TO THE PROVISIONS OF THE PLAN (WHICH ARE INCORPORATED HEREIN BY REFERENCE) AND THE FOLLOWING TERMS AND CONDITIONS: A. EXPIRATION DATE: THE OPTION EVIDENCED HEREBY SHALL EXPIRE ON THE DATE SPECIFIED IN SCHEDULE A. EXCEPT FOR UNVESTED OPTIONS PURSUANT TO THE VESTING SCHEDULE BELOW, WHICH SHALL EXPIRE IMMEDIATELY ON A TERMINATION OF EMPLOYMENT, THE OPTION SHALL NOT EXPIRE AT AN EARLIER DATE UPON TERMINATION OF OPTIONEE'S EMPLOYMENT, UNLESS SUCH TERMINATION IS FOR CAUSE, AS DEFINED IN THE PLAN. B. EXERCISE OF OPTION. THE OPTION EVIDENCED HEREBY SHALL BE EXERCISABLE FROM TIME TO TIME BY SUBMITTING THE APPROPRIATE NOTICE OF EXERCISE FORM REFERRED TO BELOW TEN DAYS PRIOR TO THE DATE OF EXERCISE SPECIFYING THE NUMBER OF SHARES FOR WHICH THE OPTION IS BEING EXERCISED, ADDRESSED AS FOLLOWS: CS WIRELESS SYSTEMS, INC. 200 CHISHOLM PLACE, SUITE 200 PLANO, TEXAS 75075 ATTENTION: CHIEF FINANCIAL OFFICER (1) CASH ONLY EXERCISE -- SUBMITTING A "NOTICE OF CASH EXERCISE" ACCOMPANIED BY THE FULL CASH PURCHASE PRICE OF THE EXERCISED SHARES; OR (2) CASHLESS EXERCISE -- PROVIDED THE COMPANY HAS ADOPTED SUCH A PROCEDURE AT THIS TIME, SUBMITTING AN "IRREVOCABLE LETTER OF INSTRUCTION" AND "CASHLESS EXERCISE AND SALE FORM" AUTHORIZING THE DELIVERY FOR SALE OF THE EXERCISED COMMON SHARES, OR (3) COMBINATION -- TENDERING A COMBINATION OF (1) AND (2) ABOVE. WITHHOLDING TAXES. WITHOUT REGARD TO THE METHOD OF EXERCISE AND PAYMENT, THE OPTIONEE SHALL PAY TO THE COMPANY, UPON NOTICE OF THE AMOUNT DUE, ANY WITHHOLDING TAXES PAYABLE WITH RESPECT TO SUCH EXERCISE. VESTING SCHEDULE. THE OPTIONS WILL BECOME VESTED AND EXERCISABLE AS SET FORTH ON SCHEDULE A HERETO OR, IF NOT SPECIFICALLY SET FORTH THEREIN, ON THE YEARLY ANNIVERSARY OF THIS AGREEMENT, IN EQUAL ANNUAL INSTALLMENTS OVER FOUR YEARS. NOTWITHSTANDING THE FOREGOING THRESHOLD REQUIREMENTS, THE OPTIONS SHALL BECOME VESTED AND EXERCISABLE IN FULL EARLIER UPON THE HAPPENING OF AN "ACCELERATION EVENT", AS DEFINED IN EXHIBIT A. C. COMPLIANCE WITH LAWS AND REGULATIONS. THE OPTION EVIDENCED HEREBY IS SUBJECT TO RESTRICTIONS IMPOSED AT ANY TIME ON THE EXERCISE OR DELIVERY OF SHARES IN VIOLATION OF THE BYLAWS OF THE COMPANY OR OF ANY LAW OR GOVERNMENTAL REGULATION THAT THE COMPANY MAY FIND TO BE VALID AND APPLICABLE. D. INTERPRETATION. OPTIONEE HEREBY ACKNOWLEDGES THAT THIS AGREEMENT IS GOVERNED BY THE PLAN, A COPY OF WHICH OPTIONEE HEREBY ACKNOWLEDGES HAVING RECEIVED, AND BY SUCH ADMINISTRATIVE RULES AND REGULATIONS RELATIVE TO THE PLAN AND NOT INCONSISTENT THEREWITH AS MAY BE ADOPTED AND AMENDED FROM TIME BY THE COMMITTEE (THE "RULES"). OPTIONEE AGREES TO BE BOUND BY THE TERMS AND PROVISIONS OF THE PLAN AND THE RULES. E. TRANSFER RESTRICTIONS. IN ADDITION TO THE RESTRICTIONS ON TRANSFERABILITY IMPOSED BY THE PLAN AND THE INCENTIVE PLAN, THIS OPTION IS NOT TRANSFERABLE OTHER THAN BY WILL OR THE LAWS OF DESCENT AND DISTRIBUTION. IN WITNESS WHEREOF, THE COMPANY HAS CAUSED THIS INSTRUMENT TO BE EXECUTED BY ITS AUTHORIZED OFFICER, AS OF THE GRANT DATE IDENTIFIED IN SCHEDULE A. AGREED TO: CS WIRELESS SYSTEMS, INC. /S/ FRANK HOSEA BY: /S/ JARED E. ABBRUZZESE - --------------- ----------------------- OPTIONEE: FRANK HOSEA JARED E. ABBRUZZESE CHAIRMAN SCHEDULE A OPTION DATA ----------- OPTIONEE'S NAME: FRANK HOSEA NUMBER OF COMMON SHARES SUBJECT TO THIS OPTION: 10,000 GRANT DATE: JUNE 3, 1996 EXERCISE PRICE PER SHARE: $9.40 EXPIRATION DATE: JUNE 3, 2006 VESTING PROVISIONS: NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THE PLAN OR THIS AGREEMENT, THE OPTIONS WILL BECOME VESTED AND EXERCISABLE ON THE LAST DAY OF THE MONTH, IN EQUAL MONTHLY INSTALLMENTS OVER 36 MONTHS; PROVIDED, HOWEVER, UPON THE HAPPENING OF AN "ACCELERATION EVENT," AS DEFINED ON EXHIBIT A, THE OPTIONS SHALL BECOME IMMEDIATELY VESTED AND EXERCISABLE IN FULL. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THE PLAN OR THIS AGREEMENT, INCLUDING SECTION 2 OF THIS AGREEMENT, THEN IF OPTIONEE'S EMPLOYMENT IS TERMINATED FOR ANY REASON OTHER THAN FOR CAUSE (AS DEFINED BY OPTIONEE'S EMPLOYMENT AGREEMENT WITH THE COMPANY), THEN ALL OPTIONS SHALL BECOME IMMEDIATELY VESTED AND OPTIONEE SHALL HAVE THOSE RIGHTS WITH RESPECT TO THE OPTIONS AS PROVIDED IN THIS AGREEMENT WITHOUT REGARD TO SUCH TERMINATION. EXHIBIT A For purposes of this Agreement, an Acceleration Event shall be deemed to have occurred if after the date of the closing of the initial public offering by the Company (i) a report on Schedule 13D shall be filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Act"), disclosing that any person other than the Company or any employee benefit plan sponsored by the Company, is the beneficial owner (as the term is defined in Rule 13d-3 under the Act) directly or indirectly, of thirty-five percent or more of the total voting power represented by the Company's then outstanding Voting Securities (calculated as provided in paragraph (d) of Rule 13d-3 under the Act in the case of rights to acquire Voting Securities); or (ii) any person, other than the Company or any employee benefit plan sponsored by the Company, shall purchase shares pursuant to a tender offer or exchange offer to acquire any voting Securities of the Company (or securities convertible into such Voting Securities) for cash, securities or any other consideration, provided that after consummation of the offer, the person in question is the beneficial owner directly of indirectly, of thirty-five percent or more of the total voting power represented by the Company's then outstanding Voting Securities (all as calculated under clause (i)); or (iii) the stockholders of the Company shall approve (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation (other than a merger of the Company in which holders of Common Shares of the Company immediately prior to the merger have the same proportionate ownership of Common Shares of the surviving corporation immediately after the merger as immediately before), or pursuant to which Common Shares of the Company would be converted into cash, securities or other property, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) or all or substantially all the assets of the Company; or (iv) there shall have been a change in the composition of the Board of Directors of the Company at any time during any consecutive twenty-four month period such that "continuing directors" cease for any reason to constitute at least a 51% majority of the Board. For purposes of this clause, "continuing directors" means those members of the Board who either were directors at the beginning of such consecutive twenty-four month period or were elected by or on the nomination or recommendation of at least a 51% majority of the then-existing Board. So long as there has not been an Acceleration Event within the meaning of clause (iv), the Board of Directors may adopt a 51% majority vote of the "continuing directors" a resolution to the effect that an event described in clauses (i) or (ii) shall not constitute an Acceleration Event. Exhibit A CS WIRELESS SYSTEMS, INC. NO. 007 NON-QUALIFIED STOCK OPTION THIS AGREEMENT, IS MADE AS OF THE GRANT DATE INDICATED IN SCHEDULE A ATTACHED, AND BETWEEN CS WIRELESS SYSTEMS, INC. (THE "COMPANY"), AND THE UNDERSIGNED INDIVIDUAL (THE "OPTIONEE"), PURSUANT TO THE 1996 CS WIRELESS SYSTEMS, INC. INCENTIVE STOCK PLAN AS AMENDED (THE "PLAN"). (TERMS NOT DEFINED HEREIN SHALL HAVE THE SAME MEANING AS IN THE PLAN.) WHEREAS, THE OPTIONEE IS AN ELIGIBLE EMPLOYEE OF THE COMPANY AND THE COMPANY THROUGH THE PLAN'S COMMITTEE HAS APPROVED THE GRANT OF NON-QUALIFIED STOCK OPTIONS ("OPTIONS") UNDER THE PLAN TO THE OPTIONEE. NOW, THEREFORE, IN CONSIDERATION OF THE TERMS AND CONDITIONS OF THIS AGREEMENT AND PURSUANT TO THE PLAN, THE PARTIES AGREE AS FOLLOWS: 1. GRANT OF OPTIONS. THE COMPANY HEREBY GRANTS TO THE OPTIONEE THE RIGHT AND OPTION TO PURCHASE FROM THE COMPANY, AT THE EXERCISE PRICE SET FORTH IN SCHEDULE A, ALL OR ANY PART OF THE AGGREGATE NUMBER OF COMMON SHARES OF THE COMPANY, AS SUCH COMMON SHARES ARE PRESENTLY CONSTITUTED (THE "COMMON SHARES"), SET FORTH IN SCHEDULE A. 2. TERMS AND CONDITIONS. IT IS UNDERSTOOD AND AGREED THAT THE OPTION EVIDENCED HEREBY IS SUBJECT TO THE PROVISIONS OF THE PLAN (WHICH ARE INCORPORATED HEREIN BY REFERENCE) AND THE FOLLOWING TERMS AND CONDITIONS: A. EXPIRATION DATE: THE OPTION EVIDENCED HEREBY SHALL EXPIRE ON THE DATE SPECIFIED IN SCHEDULE A. EXCEPT FOR UNVESTED OPTIONS PURSUANT TO THE VESTING SCHEDULE BELOW, WHICH SHALL EXPIRE IMMEDIATELY ON A TERMINATION OF EMPLOYMENT, THE OPTION SHALL NOT EXPIRE AT AN EARLIER DATE UPON TERMINATION OF OPTIONEE'S EMPLOYMENT, UNLESS SUCH TERMINATION IS FOR CAUSE, AS DEFINED IN THE PLAN. B. EXERCISE OF OPTION. THE OPTION EVIDENCED HEREBY SHALL BE EXERCISABLE FROM TIME TO TIME BY SUBMITTING THE APPROPRIATE NOTICE OF EXERCISE FORM REFERRED TO BELOW TEN DAYS PRIOR TO THE DATE OF EXERCISE SPECIFYING THE NUMBER OF SHARES FOR WHICH THE OPTION IS BEING EXERCISED, ADDRESSED AS FOLLOWS: CS WIRELESS SYSTEMS, INC. 200 CHISHOLM PLACE, SUITE 200 PLANO, TEXAS 75075 ATTENTION: CHIEF FINANCIAL OFFICER (1) CASH ONLY EXERCISE -- SUBMITTING A "NOTICE OF CASH EXERCISE" ACCOMPANIED BY THE FULL CASH PURCHASE PRICE OF THE EXERCISED SHARES; OR (2) CASHLESS EXERCISE -- PROVIDED THE COMPANY HAS ADOPTED SUCH A PROCEDURE AT THIS TIME, SUBMITTING AN "IRREVOCABLE LETTER OF INSTRUCTION" AND "CASHLESS EXERCISE AND SALE FORM" AUTHORIZING THE DELIVERY FOR SALE OF THE EXERCISED COMMON SHARES, OR (3) COMBINATION -- TENDERING A COMBINATION OF (1) AND (2) ABOVE. WITHHOLDING TAXES. WITHOUT REGARD TO THE METHOD OF EXERCISE AND PAYMENT, THE OPTIONEE SHALL PAY TO THE COMPANY, UPON NOTICE OF THE AMOUNT DUE, ANY WITHHOLDING TAXES PAYABLE WITH RESPECT TO SUCH EXERCISE. VESTING SCHEDULE. THE OPTIONS WILL BECOME VESTED AND EXERCISABLE AS SET FORTH ON SCHEDULE A HERETO OR, IF NOT SPECIFICALLY SET FORTH THEREIN, ON THE YEARLY ANNIVERSARY OF THIS AGREEMENT, IN EQUAL ANNUAL INSTALLMENTS OVER FOUR YEARS. NOTWITHSTANDING THE FOREGOING THRESHOLD REQUIREMENTS, THE OPTIONS SHALL BECOME VESTED AND EXERCISABLE IN FULL EARLIER UPON THE HAPPENING OF AN "ACCELERATION EVENT", AS DEFINED IN EXHIBIT A. C. COMPLIANCE WITH LAWS AND REGULATIONS. THE OPTION EVIDENCED HEREBY IS SUBJECT TO RESTRICTIONS IMPOSED AT ANY TIME ON THE EXERCISE OR DELIVERY OF SHARES IN VIOLATION OF THE BYLAWS OF THE COMPANY OR OF ANY LAW OR GOVERNMENTAL REGULATION THAT THE COMPANY MAY FIND TO BE VALID AND APPLICABLE. D. INTERPRETATION. OPTIONEE HEREBY ACKNOWLEDGES THAT THIS AGREEMENT IS GOVERNED BY THE PLAN, A COPY OF WHICH OPTIONEE HEREBY ACKNOWLEDGES HAVING RECEIVED, AND BY SUCH ADMINISTRATIVE RULES AND REGULATIONS RELATIVE TO THE PLAN AND NOT INCONSISTENT THEREWITH AS MAY BE ADOPTED AND AMENDED FROM TIME BY THE COMMITTEE (THE "RULES"). OPTIONEE AGREES TO BE BOUND BY THE TERMS AND PROVISIONS OF THE PLAN AND THE RULES. E. TRANSFER RESTRICTIONS. IN ADDITION TO THE RESTRICTIONS ON TRANSFERABILITY IMPOSED BY THE PLAN AND THE INCENTIVE PLAN, THIS OPTION IS NOT TRANSFERABLE OTHER THAN BY WILL OR THE LAWS OF DESCENT AND DISTRIBUTION. IN WITNESS WHEREOF, THE COMPANY HAS CAUSED THIS INSTRUMENT TO BE EXECUTED BY ITS AUTHORIZED OFFICER, AS OF THE GRANT DATE IDENTIFIED IN SCHEDULE A. AGREED TO: CS WIRELESS SYSTEMS, INC. /S/ FRANK HOSEA BY: /S/ JARED E. ABBRUZZESE - --------------- ----------------------- OPTIONEE: FRANK HOSEA JARED E. ABBRUZZESE CHAIRMAN SCHEDULE A OPTION DATA ----------- OPTIONEE'S NAME: FRANK HOSEA NUMBER OF COMMON SHARES SUBJECT TO THIS OPTION: 24,000 GRANT DATE: JANUARY 1, 1997 EXERCISE PRICE PER SHARE: $6.50 EXPIRATION DATE: JANUARY 1, 2007 VESTING PROVISIONS: NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THE PLAN OR THIS AGREEMENT, INCLUDING SECTION 2 OF THIS AGREEMENT, IF OPTIONEE'S EMPLOYMENT IS TERMINATED FOR ANY REASON OTHER THAN FOR CAUSE (AS DEFINED BY OPTIONEE'S EMPLOYMENT AGREEMENT WITH THE COMPANY), THEN ALL OPTIONS SHALL BECOME IMMEDIATELY VESTED AND OPTIONEE SHALL HAVE THOSE RIGHTS WITH RESPECT TO THE OPTIONS AS PROVIDED IN THIS AGREEMENT WITHOUT REGARD TO SUCH TERMINATION. EXHIBIT A For purposes of this Agreement, an Acceleration Event shall be deemed to have occurred if after the date of the closing of the initial public offering by the Company (i) a report on Schedule 13D shall be filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Act"), disclosing that any person other than the Company or any employee benefit plan sponsored by the Company, is the beneficial owner (as the term is defined in Rule 13d-3 under the Act) directly or indirectly, of thirty-five percent or more of the total voting power represented by the Company's then outstanding Voting Securities (calculated as provided in paragraph (d) of Rule 13d-3 under the Act in the case of rights to acquire Voting Securities); or (ii) any person, other than the Company or any employee benefit plan sponsored by the Company, shall purchase shares pursuant to a tender offer or exchange offer to acquire any voting Securities of the Company (or securities convertible into such Voting Securities) for cash, securities or any other consideration, provided that after consummation of the offer, the person in question is the beneficial owner directly of indirectly, of thirty-five percent or more of the total voting power represented by the Company's then outstanding Voting Securities (all as calculated under clause (i)); or (iii) the stockholders of the Company shall approve (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation (other than a merger of the Company in which holders of Common Shares of the Company immediately prior to the merger have the same proportionate ownership of Common Shares of the surviving corporation immediately after the merger as immediately before), or pursuant to which Common Shares of the Company would be converted into cash, securities or other property, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) or all or substantially all the assets of the Company; or (iv) there shall have been a change in the composition of the Board of Directors of the Company at any time during any consecutive twenty-four month period such that "continuing directors" cease for any reason to constitute at least a 51% majority of the Board. For purposes of this clause, "continuing directors" means those members of the Board who either were directors at the beginning of such consecutive twenty-four month period or were elected by or on the nomination or recommendation of at least a 51% majority of the then-existing Board. So long as there has not been an Acceleration Event within the meaning of clause (iv), the Board of Directors may adopt a 51% majority vote of the "continuing directors" a resolution to the effect that an event described in clauses (i) or (ii) shall not constitute an Acceleration Event. Exhibit A CS WIRELESS SYSTEMS, INC. NO. 022 NON-QUALIFIED STOCK OPTION THIS AGREEMENT, IS MADE AS OF THE GRANT DATE INDICATED IN SCHEDULE A ATTACHED, AND BETWEEN CS WIRELESS SYSTEMS, INC. (THE "COMPANY"), AND THE UNDERSIGNED INDIVIDUAL (THE "OPTIONEE"), PURSUANT TO THE 1996 CS WIRELESS SYSTEMS, INC. INCENTIVE STOCK PLAN AS AMENDED (THE "PLAN"). (TERMS NOT DEFINED HEREIN SHALL HAVE THE SAME MEANING AS IN THE PLAN.) WHEREAS, THE OPTIONEE IS AN ELIGIBLE EMPLOYEE OF THE COMPANY AND THE COMPANY THROUGH THE PLAN'S COMMITTEE HAS APPROVED THE GRANT OF NON-QUALIFIED STOCK OPTIONS ("OPTIONS") UNDER THE PLAN TO THE OPTIONEE. NOW, THEREFORE, IN CONSIDERATION OF THE TERMS AND CONDITIONS OF THIS AGREEMENT AND PURSUANT TO THE PLAN, THE PARTIES AGREE AS FOLLOWS: 1. GRANT OF OPTIONS. THE COMPANY HEREBY GRANTS TO THE OPTIONEE THE RIGHT AND OPTION TO PURCHASE FROM THE COMPANY, AT THE EXERCISE PRICE SET FORTH IN SCHEDULE A, ALL OR ANY PART OF THE AGGREGATE NUMBER OF COMMON SHARES OF THE COMPANY, AS SUCH COMMON SHARES ARE PRESENTLY CONSTITUTED (THE "COMMON SHARES"), SET FORTH IN SCHEDULE A. 2. TERMS AND CONDITIONS. IT IS UNDERSTOOD AND AGREED THAT THE OPTION EVIDENCED HEREBY IS SUBJECT TO THE PROVISIONS OF THE PLAN (WHICH ARE INCORPORATED HEREIN BY REFERENCE) AND THE FOLLOWING TERMS AND CONDITIONS: A. EXPIRATION DATE: THE OPTION EVIDENCED HEREBY SHALL EXPIRE ON THE DATE SPECIFIED IN SCHEDULE A. EXCEPT FOR UNVESTED OPTIONS PURSUANT TO THE VESTING SCHEDULE BELOW, WHICH SHALL EXPIRE IMMEDIATELY ON A TERMINATION OF EMPLOYMENT, THE OPTION SHALL NOT EXPIRE AT AN EARLIER DATE UPON TERMINATION OF OPTIONEE'S EMPLOYMENT, UNLESS SUCH TERMINATION IS FOR CAUSE, AS DEFINED IN THE PLAN. B. EXERCISE OF OPTION. THE OPTION EVIDENCED HEREBY SHALL BE EXERCISABLE FROM TIME TO TIME BY SUBMITTING THE APPROPRIATE NOTICE OF EXERCISE FORM REFERRED TO BELOW TEN DAYS PRIOR TO THE DATE OF EXERCISE SPECIFYING THE NUMBER OF SHARES FOR WHICH THE OPTION IS BEING EXERCISED, ADDRESSED AS FOLLOWS: CS WIRELESS SYSTEMS, INC. 200 CHISHOLM PLACE, SUITE 200 PLANO, TEXAS 75075 ATTENTION: CHIEF FINANCIAL OFFICER (1) CASH ONLY EXERCISE -- SUBMITTING A "NOTICE OF CASH EXERCISE" ACCOMPANIED BY THE FULL CASH PURCHASE PRICE OF THE EXERCISED SHARES; OR (2) CASHLESS EXERCISE -- PROVIDED THE COMPANY HAS ADOPTED SUCH A PROCEDURE AT THIS TIME, SUBMITTING AN "IRREVOCABLE LETTER OF INSTRUCTION" AND "CASHLESS EXERCISE AND SALE FORM" AUTHORIZING THE DELIVERY FOR SALE OF THE EXERCISED COMMON SHARES, OR (3) COMBINATION -- TENDERING A COMBINATION OF (1) AND (2) ABOVE. WITHHOLDING TAXES. WITHOUT REGARD TO THE METHOD OF EXERCISE AND PAYMENT, THE OPTIONEE SHALL PAY TO THE COMPANY, UPON NOTICE OF THE AMOUNT DUE, ANY WITHHOLDING TAXES PAYABLE WITH RESPECT TO SUCH EXERCISE. VESTING SCHEDULE. THE OPTIONS WILL BECOME VESTED AND EXERCISABLE AS SET FORTH ON SCHEDULE A HERETO OR, IF NOT SPECIFICALLY SET FORTH THEREIN, ON THE YEARLY ANNIVERSARY OF THIS AGREEMENT, IN EQUAL ANNUAL INSTALLMENTS OVER FOUR YEARS. NOTWITHSTANDING THE FOREGOING THRESHOLD REQUIREMENTS, THE OPTIONS SHALL BECOME VESTED AND EXERCISABLE IN FULL EARLIER UPON THE HAPPENING OF AN "ACCELERATION EVENT", AS DEFINED IN EXHIBIT A. C. COMPLIANCE WITH LAWS AND REGULATIONS. THE OPTION EVIDENCED HEREBY IS SUBJECT TO RESTRICTIONS IMPOSED AT ANY TIME ON THE EXERCISE OR DELIVERY OF SHARES IN VIOLATION OF THE BYLAWS OF THE COMPANY OR OF ANY LAW OR GOVERNMENTAL REGULATION THAT THE COMPANY MAY FIND TO BE VALID AND APPLICABLE. D. INTERPRETATION. OPTIONEE HEREBY ACKNOWLEDGES THAT THIS AGREEMENT IS GOVERNED BY THE PLAN, A COPY OF WHICH OPTIONEE HEREBY ACKNOWLEDGES HAVING RECEIVED, AND BY SUCH ADMINISTRATIVE RULES AND REGULATIONS RELATIVE TO THE PLAN AND NOT INCONSISTENT THEREWITH AS MAY BE ADOPTED AND AMENDED FROM TIME BY THE COMMITTEE (THE "RULES"). OPTIONEE AGREES TO BE BOUND BY THE TERMS AND PROVISIONS OF THE PLAN AND THE RULES. E. TRANSFER RESTRICTIONS. IN ADDITION TO THE RESTRICTIONS ON TRANSFERABILITY IMPOSED BY THE PLAN AND THE INCENTIVE PLAN, THIS OPTION IS NOT TRANSFERABLE OTHER THAN BY WILL OR THE LAWS OF DESCENT AND DISTRIBUTION. IN WITNESS WHEREOF, THE COMPANY HAS CAUSED THIS INSTRUMENT TO BE EXECUTED BY ITS AUTHORIZED OFFICER, AS OF THE GRANT DATE IDENTIFIED IN SCHEDULE A. AGREED TO: CS WIRELESS SYSTEMS, INC. /S/ FRANK HOSEA BY: /S/ JARED E. ABBRUZZESE - --------------- ----------------------- OPTIONEE: FRANK HOSEA JARED E. ABBRUZZESE CHAIRMAN SCHEDULE A OPTION DATA ----------- OPTIONEE'S NAME: FRANK HOSEA NUMBER OF COMMON SHARES SUBJECT TO THIS OPTION: 32,000 GRANT DATE: APRIL 2, 1997 EXERCISE PRICE PER SHARE: $6.50 EXPIRATION DATE: APRIL 2, 2007 VESTING PROVISIONS: NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THE PLAN OR THIS AGREEMENT, INCLUDING SECTION 2 OF THIS AGREEMENT, IF OPTIONEE'S EMPLOYMENT IS TERMINATED FOR ANY REASON OTHER THAN FOR CAUSE (AS DEFINED BY OPTIONEE'S EMPLOYMENT AGREEMENT WITH THE COMPANY), THEN ALL OPTIONS SHALL BECOME IMMEDIATELY VESTED AND OPTIONEE SHALL HAVE THOSE RIGHTS WITH RESPECT TO THE OPTIONS AS PROVIDED IN THIS AGREEMENT WITHOUT REGARD TO SUCH TERMINATION. EXHIBIT A For purposes of this Agreement, an Acceleration Event shall be deemed to have occurred if after the date of the closing of the initial public offering by the Company (i) a report on Schedule 13D shall be filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Act"), disclosing that any person other than the Company or any employee benefit plan sponsored by the Company, is the beneficial owner (as the term is defined in Rule 13d-3 under the Act) directly or indirectly, of thirty-five percent or more of the total voting power represented by the Company's then outstanding Voting Securities (calculated as provided in paragraph (d) of Rule 13d-3 under the Act in the case of rights to acquire Voting Securities); or (ii) any person, other than the Company or any employee benefit plan sponsored by the Company, shall purchase shares pursuant to a tender offer or exchange offer to acquire any voting Securities of the Company (or securities convertible into such Voting Securities) for cash, securities or any other consideration, provided that after consummation of the offer, the person in question is the beneficial owner directly of indirectly, of thirty-five percent or more of the total voting power represented by the Company's then outstanding Voting Securities (all as calculated under clause (i)); or (iii) the stockholders of the Company shall approve (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation (other than a merger of the Company in which holders of Common Shares of the Company immediately prior to the merger have the same proportionate ownership of Common Shares of the surviving corporation immediately after the merger as immediately before), or pursuant to which Common Shares of the Company would be converted into cash, securities or other property, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) or all or substantially all the assets of the Company; or (iv) there shall have been a change in the composition of the Board of Directors of the Company at any time during any consecutive twenty-four month period such that "continuing directors" cease for any reason to constitute at least a 51% majority of the Board. For purposes of this clause, "continuing directors" means those members of the Board who either were directors at the beginning of such consecutive twenty-four month period or were elected by or on the nomination or recommendation of at least a 51% majority of the then-existing Board. So long as there has not been an Acceleration Event within the meaning of clause (iv), the Board of Directors may adopt a 51% majority vote of the "continuing directors" a resolution to the effect that an event described in clauses (i) or (ii) shall not constitute an Acceleration Event. EXHIBIT B NONDISCLOSURE AGREEMENT AGREEMENT made as of the 2nd day of April, 1997, by and between the undersigned individual residing at the address indicated following his signature below (hereinafter referred to as "Employee") and CS WIRELESS SYSTEMS, INC., a Delaware corporation, having its principal place of business at 200 Chisholm Place, Suite 202, Plano, Texas 75075 (hereinafter referred to as "Employer"). WHEREAS, Employee is being employed by Employer in a capacity wherein Employee will come into possession of material of a confidential, sensitive or proprietary nature concerning the business, plans and trade secrets of Employer and its Affiliates (as defined below) and of third parties; and WHEREAS, the continued confidential treatment of such information is vital to the success of Employer's business, NOW THEREFORE, the parties agree as follows: 1. Employee acknowledges that his work as an employee of Employer will bring him into close contact with the Confidential Information (as defined below) of Employer and of third parties. Employee acknowledges that such Confidential Information is reposed in him in trust. 2. Employee hereby agrees that he shall, both during and after his employment, maintain such Confidential Information in confidence and neither disclose to others (nor cause to be disclosed) nor use personally (nor cause to be used) such Confidential Information without the prior written permission of Employer unless required or compelled to do so by a court order; provided, that in the event that Employee becomes legally required or compelled to disclose Confidential Information, Employee will, to the extent practicable under the circumstances, provide Employer with written notice thereof so that Employer may seek a protective order or other appropriate remedy; provided further, that in any such event, Employee will disclose only such information as is legally required and will exercise reasonable efforts to obtain confidential treatment for any Confidential Information being disclosed. Employee will also take reasonable precautions to prevent the inadvertent exposure of Confidential Information to unauthorized persons or entities. 3. Employee acknowledges that he may, during his employment, add to Employer's Confidential Information and he agrees that any such additions shall fall within the strictures of this Agreement. 4. Employee agrees that upon any termination of his employment with Employer or any Affiliate thereof, or upon request if sooner, he shall forthwith return to Employer all reports, correspondence, notes, financial statements, computer printouts and other documents and recorded material of every nature (including all copies thereof) which may be in his possession or under his control dealing with Confidential Information. 5. All inventions, discoveries, improvements, computer software, firmware, programs, documentation, manuals and other works of authorship (collectively referred to as "Intellectual Property"), whether or not copyrightable or patentable, made, created, developed, written or conceived by Employee during the course of Employee's employment by the Employer and within the scope of Employee's employment will be deemed work made for hire, whether made solely or jointly with another. All such Intellectual Property will be the property of the Employer. Employee hereby assigns to the Employer all right, title and interest in and to all Intellectual Property. 6. Employee will, without charge to the Employer but at its expense, execute a specific assignment of title to Employer and do anything else reasonably necessary to enable the Employer to secure a patent, copyright or other form of protection for said Intellectual Property anywhere in the world. 7. Employee acknowledges that the covenants in this Agreement have existed since the commencement of his employment with Employer. These covenants are expressions of his duty as an employee not to use the Confidential Information to the detriment of Employer. In addition, Employee acknowledges that he shall benefit from entry into this Agreement as Employer shall be willing to continue to provide access to Confidential Information to Employee. 8. EMPLOYEE ACKNOWLEDGES THAT EMPLOYER WOULD BE IRREPARABLY DAMAGED AND THERE WOULD BE NO ADEQUATE REMEDY AT LAW FOR EMPLOYEES'S BREACH OF THIS AGREEMENT, AND ACCORDINGLY, THE TERMS OF THIS AGREEMENT SHALL BE SPECIFICALLY ENFORCED. EMPLOYEE HEREBY CONSENTS TO THE ENTRY OF ANY TEMPORARY RESTRAINING ORDER OR PRELIMINARY OR EX PARTE INJUNCTION, IN ADDITION TO ANY OTHER REMEDIES AVAILABLE AT LAW OR IN EQUITY, TO ENFORCE THE PROVISIONS HEREOF. 9. This Agreement is not an agreement of employment and nothing herein shall be construed to obligate Employer to employ Employee for any definite duration or upon any specific terms. 10. As used herein, "Confidential Information" shall mean all confidential information and trade secrets of Employer or any of its Affiliates, whether now existing or hereafter acquired or developed, including, without limitation, financial statements, business plans, working methods, investments, materials, processes, programs, designs, drawings, names of and relationships with current or potential vendors and lenders and other third parties, contractual arrangements, profit formulas, experimental investigations, studies, current or potential customer names and requirements, current or potential professional associations or contacts, information submitted to Employer or its Affiliates by third parties on a confidential basis and similar other non-public or otherwise confidential, sensitive or proprietary information. "Confidential Information" shall not include information that is generally within the public domain, or has become generally known within the wireless cable industry without breach of any obligation of confidentiality of Employee or any third party. 11. As used herein, the term "Affiliates" shall mean any individual or entity controlling, controlled by or under common control with the Employer, now or in the future, including without limitation, partnerships in which Employer or any Affiliate may invest as a limited or general partner and limited liability companies in which Employer or any Affiliate may become a member. 12. This Agreement shall survive the termination of the employment of Employee and shall not be amended except by a writing signed by the parties hereto. This Agreement shall be binding upon the Employee and his heirs, legal representatives, successors and assigns. 13. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware. [BALANCE OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. CS WIRELESS SYSTEMS, INC. By: /s/ Jared E. Abbruzzese ------------------------ Jared E. Abbruzzese Chairman EMPLOYEE: By: /s/ Frank Hosea -------------------- Frank Hosea EX-10.3 4 EXHIBIT 10.3 EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT (this "Agreement") is made as of the 2ND day of APRIL, 1997 by and between the undersigned employee (hereinafter referred to as "Employee") residing at the address indicated following Employee's signature below and CS WIRELESS SYSTEMS, INC., a Delaware corporation having its principal place of business at 200 Chisholm Place, Suite 202, Plano, Texas 75075 (hereinafter referred to as the "Company"). 1. EMPLOYMENT. The Company hereby employs Employee and Employee agrees to work for the Company in the capacity set forth on SCHEDULE A hereto during the Term (as defined below) of and upon the terms and conditions set forth in this Agreement. 2. COMPENSATION/BENEFITS. (a) BASE SALARY. During the Term of this Agreement (as defined below) the Company agrees to pay Employee the base annual salary set forth on SCHEDULE A ("Base Salary"). Such Base Salary shall be reviewed no less frequently than annually during the Term and may be increased but not decreased by the Board of Directors. Such Base Salary shall be payable in accordance with the Company's normal business practices or in such other amounts and at such other times as the parties may mutually agree. (b) INCENTIVE COMPENSATION. During the Term of this Agreement, Employee shall be entitled to such incentive program, pursuant to the terms of a separate plan of the Company, as may be in effect from time to time. Such incentive program shall be based on the following three (3) components: (i) the achievement of Company performance targets; (ii) the achievement of Employee performance targets; and (iii) discretionary bonuses. These performance targets will be revised annually by the Board of Directors. (c) STOCK OPTIONS. Employee shall be granted stock options (the "Stock Options") to purchase shares of Company common stock, $.001 par value per share, as set forth on SCHEDULE A, pursuant to the Company's 1996 Incentive Stock Plan, as amended, and subject to the terms and conditions thereof and the stock option agreement in the form attached as EXHIBIT A hereto. (d) BENEFITS/VACATION. During the Term, the Company shall provide Employee with such other benefits, including executive incentive and bonus plans and medical and disability plans, as are made generally available to executive employees of the Company from time to time. Employee shall be entitled to that amount of paid vacation during each year of the Term as set forth on SCHEDULE A. In addition, Employee shall be entitled to those benefits set forth on SCHEDULE A. 3. SERVICES. Employee agrees to devote substantially all his working time, attention and energies to the business of the Company and its Affiliates (as defined below) under the general direction of the Management Group of the Company and Chief Executive Officer and hereby agrees to abide by and implement Company Policies, Strategy Principles and Governance Parameters as may be adopted from time to time by the Management Group of the Company in its sole discretion. Employee shall not directly or indirectly, during the Term of this Agreement, render services, for compensation or otherwise, to or for any other person or firm in direct competition with the business of the Company in any market served by the Company or its Affiliates without the written consent of the Board of Directors. In performing his duties hereunder, Employee shall be available for reasonable travel as the needs of the Company's business require. Employee shall work in the Company's Plano, Texas office, unless otherwise indicated on SCHEDULE A. 4. TERM. The term of this Agreement (the "Term" or the "Term of this Agreement") shall be for the period set forth on SCHEDULE A. 5. EARLY TERMINATION. (a) GENERAL. The Employee's employment hereunder is at will and shall be terminated and the Company's obligations hereunder shall cease, including the obligation to pay compensation for any period after the date of termination, (i) immediately upon notice, in the sole discretion of the Company, (ii) without the necessity of notice, upon the death of the Employee, or (iii) upon written notice of a finding by at least 60% of the members of the Board of Directors that the Employee has (a) acted with gross negligence or willful misconduct in connection with the performance of his duties hereunder, (b) engaged in a material act of insubordination or of common law fraud against the Company or its employees, or (c) acted against the best interests of the Company in a manner that has or could have an adverse affect on the financial condition of the Company (death of an Employee or any such findings is referred to herein as "Cause"). Upon the Company's termination of Employee for any reason other than Cause, the Company shall pay Employee: (i) severance in an amount (the "Severance Amount") equal to the greater of (x) his then Base Salary under PARAGRAPH 2, payable in twelve equal monthly installments and (y) the Base Salary that would have been payable for the balance of the Term, payable in equal monthly installments; and (ii) any accrued and unpaid bonuses due Employee in accordance with the Company's incentive program then in effect. (b) DISABILITY. If Employee shall become unable efficiently to perform the essential functions of his job, even with reasonable accommodation, as a result of a disability or illness, as such terms are defined by the Americans with Disabilities Act, he shall be entitled to his regular compensation until the total period of disability or illness (whether or not continuous and whether or not the same disability or illness) shall exceed sixty (60) days during any calendar year in the Term. This Agreement may thereafter be terminated by the Company and the Company's obligations hereunder shall cease, including the obligation to pay compensation for any period after the date of termination. Any amounts payable as compensation during the period of disability or illness shall be reduced by any amounts paid during such period under any disability plan or similar insurance of the Company. (c) EMPLOYEE'S RIGHT TO TERMINATE. Employee may, at any time during the Term, resign and shall be entitled to all accrued rights with respect to compensation and benefits in accordance with the Company's Policies then in effect. (d) ARBITRATION IN THE EVENT OF A DISPUTE REGARDING THE NATURE OF TERMINATION. In the event that the Company terminates Employees' employment for Cause (as defined above), and Employee contends that Cause did not exist, the Company's only obligation shall be to submit such claim to arbitration before the American Arbitration Association ("AAA"). In such a proceeding, the only issue before the arbitrator will be whether Employee was in fact terminated for Cause. If the arbitrator determines that Employee was not terminated for Cause, the only remedy that the arbitrator may award is an amount equal to the severance payment specified in PARAGRAPH 5(a), the costs of arbitration, and Employee's attorneys' fees. If the arbitrator finds that the Employee was terminated for Cause, the arbitrator will be without authority to award Employee anything, and the parties will each be responsible for their own attorneys' fees, and they will divide the costs of arbitration equally. 6. EMPLOYER'S AUTHORITY. Employee agrees to observe and comply with the rules and regulations of the Company as adopted by the Management Group of the Company or by the Board of Directors respecting the performance of his duties and to carry out and perform orders, directions and policies communicated to him from time to time. 7. EXPENSES. During the Term, the Company shall reimburse Employee for all reasonable business expenses which are approved in advance and incurred by Employee in the course of performing his duties for the Company hereunder in accordance with the procedures then in place for such reimbursement. 8. NON-DISCLOSURE AGREEMENT/NON-COMPETITION. (a) Employee will execute the Nondisclosure Agreement of the Company attached as EXHIBIT B hereto and made a part hereof. Said agreement shall survive termination of Employee's employment hereunder. (b) Because Employee's services to the Company are special and because Employee has access to the company's confidential information, Employee covenants and agrees that if (i)(x) Employee's employment is terminated, or not renewed, by the Company for Cause or (y) Employee voluntarily terminates his employment relationship hereunder with the Company or Employee elects not to renew his employment with the Company following the expiration of this Agreement, for a period of twelve (12) months following the termination of this Agreement, or (ii) Employee's employment is terminated and Employee is receiving the Severance Amount, for the period during which Employee is receiving such Severance Amount under PARAGRAPH 5 hereof, whichever is applicable, he will not, directly or indirectly, either on his own behalf or on behalf of any person, partnership, corporation or otherwise, (A) engage in any business or undertaking directly competitive with the wireless cable television, cable television, subscription television, direct broadcast satellite, direct-to-home, wired video programming, non-wired video programming, wireless Internet access, wireless fixed telephony or other fixed wireless information businesses (the "Related Business") being carried on by the Company or any Affiliate in any market serviced by the Company or any Affiliate, at the time of Employee's termination, (B) be employed by or provide consulting services to or be an investor, limited partner or shareholder in, any entity or other person in any Related Business within 25 miles of any city in which the Company or any Affiliate does business at time of execution of this Agreement or has rights to broadcast or transmit television programming or in which the Company has a transmission license at the time of Employee's termination, without the prior written consent of the Board of Directors. The parties agree that the time period and geographical area of non-competition specified above are reasonable and necessary in light of the transactions entered into in this Agreement. If, however, it shall be determined at any time by a court of competent jurisdiction that either the time period restriction or the geographical area restriction, or both, are invalid or unenforceable, the parties agree that any such invalid restriction shall be amended and reformed to the extent necessary to make same valid and enforceable in the determination of said court, and such restriction, as so amended, shall be enforceable between the parties to the same extent as if such amendment had been made as of the date of this Agreement. This SUBPARAGRAPH 8(b) shall survive the termination of this Agreement and shall not apply to investments constituting not more than 5% of the common equity of a publicly traded company. 9. INDEMNIFICATION. As a material inducement for Employee to enter into this Agreement, the Company hereby covenants and agrees to indemnify Employee to the fullest extent permitted under applicable law with respect to any and all damages, expenses (including reasonable attorney's fees), and other liability suffered as a result of any and all claims, causes of action, proceedings or other actions which may be asserted against Employee in connection with Employee's service as an employee of the Company or any of its Affiliates. 10. NOTICES. Any notice permitted or required hereunder shall be deemed sufficient when hand-delivered or mailed by certified mail, postage prepaid, and addressed if to the Company at the address indicated above and if to Employee at the address indicated below (or such other address as may be provided by notice). 11. MISCELLANEOUS. This Agreement, together with all schedules, exhibits and collateral documents referenced herein, (i) constitutes the entire agreement between the parties concerning the subjects hereof and supersedes any and all prior agreements or understandings, (ii) may not be assigned by Employee without the prior written consent of the Company and (iii) may be assigned by the Company and shall be binding upon, and inure to the benefit of, the Company's successors and assigns. Headings herein are for convenience of reference only and shall not define, limit or interpret the contents hereof. 12. AMENDMENT. This Agreement may be amended, modified or supplemented by the mutual consent of the parties in writing, but no oral amendment, modification or supplement shall be effective. 13. SPECIFIC PERFORMANCE. The parties acknowledge that the Company would be irreparably damaged and there would be no adequate remedy at law for Employee's breach of PARAGRAPH 8 of this Agreement, and accordingly, the terms thereof shall be specifically enforced. Employee hereby consents to the entry of any temporary restraining order or preliminary or ex parte injunction, in addition to any other remedies available at law or in equity, to enforce the provisions hereof. 14. AFFILIATES. As used herein, the term "Affiliate" shall mean any individual or entity controlling, controlled by or under common control with the Company, now or in the future, including without limitation, partnerships in which the Company or any Affiliate may invest as a limited or general partner and limited liability companies in which the Company or any Affiliate may become a member. 15. SEVERABILITY. The provisions of this Agreement are severable. The invalidity of any provision shall not affect the validity of any other provision. 16. GOVERNING LAW. This Agreement shall be constructed and regulated in all respects under the laws of the State of Delaware; provided, however, venue for any action under this Agreement shall lie with a court of competent jurisdiction in the State of Texas. [BALANCE OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, this Agreement is entered into as of the date and year first above written. CS WIRELESS SYSTEMS, INC. By: /s/ Jared E. Abbruzzese -------------------------- Jared E. Abbruzzese Chairman EMPLOYEE: By: /s/ Jeffrey A. Kupp -------------------------- Jeffrey A. Kupp SCHEDULE A Employee's Title: Senior Vice President & Chief Financial Officer Employee's Base Salary: $120,000 Stock Options: 32,000 16,000 Vacation: 4 weeks Term: The term of this Agreement shall be for a period beginning on the date hereof and continuing until the thirty-six month anniversary of this Agreement, and shall be automatically renewed annually thereafter unless either party gives notice to the other of its intention not to renew this Agreement not less than sixty (60) days prior to the expiration of the term or unless this Agreement shall be terminated prior thereto pursuant to PARAGRAPH 5 of this Agreement. Automobile: During the Term, Employee shall be entitled to a automobile allowance of $600.00 per month, payable monthly in arrears. Life Insurance: Subject to Employee submitting to any required physical examinations and provided such policy can be obtained at customary premiums, the Company shall purchase, at its sole cost and expense, a term insurance policy with the face amount of two (2) times Employee's Base Salary on the life of Employee and shall permit Employee to designate the beneficiary thereof. Representation: The Company represents to Employee that, to the best of its knowledge as of the date hereof, it is unaware of any grounds or potential causes of action arising out of the Company's past accounting practices and procedures, any securities offerings by the Company or its Affiliates, or any other transactions that may expose Employee, as an officer of the Company, to potential liability. Furthermore, the Company covenants it will promptly notify Employee should it become aware of any such potential causes of action. Exhibit A CS WIRELESS SYSTEMS, INC. NO. 015 NON-QUALIFIED STOCK OPTION THIS AGREEMENT, IS MADE AS OF THE GRANT DATE INDICATED IN SCHEDULE A ATTACHED, AND BETWEEN CS WIRELESS SYSTEMS, INC. (THE "COMPANY"), AND THE UNDERSIGNED INDIVIDUAL (THE "OPTIONEE"), PURSUANT TO THE 1996 CS WIRELESS SYSTEMS, INC. INCENTIVE STOCK PLAN AS AMENDED (THE "PLAN"). (TERMS NOT DEFINED HEREIN SHALL HAVE THE SAME MEANING AS IN THE PLAN.) WHEREAS, THE OPTIONEE IS AN ELIGIBLE EMPLOYEE OF THE COMPANY AND THE COMPANY THROUGH THE PLAN'S COMMITTEE HAS APPROVED THE GRANT OF NON-QUALIFIED STOCK OPTIONS ("OPTIONS") UNDER THE PLAN TO THE OPTIONEE. NOW, THEREFORE, IN CONSIDERATION OF THE TERMS AND CONDITIONS OF THIS AGREEMENT AND PURSUANT TO THE PLAN, THE PARTIES AGREE AS FOLLOWS: 1. GRANT OF OPTIONS. THE COMPANY HEREBY GRANTS TO THE OPTIONEE THE RIGHT AND OPTION TO PURCHASE FROM THE COMPANY, AT THE EXERCISE PRICE SET FORTH IN SCHEDULE A, ALL OR ANY PART OF THE AGGREGATE NUMBER OF COMMON SHARES OF THE COMPANY, AS SUCH COMMON SHARES ARE PRESENTLY CONSTITUTED (THE "COMMON SHARES"), SET FORTH IN SCHEDULE A. 2. TERMS AND CONDITIONS. IT IS UNDERSTOOD AND AGREED THAT THE OPTION EVIDENCED HEREBY IS SUBJECT TO THE PROVISIONS OF THE PLAN (WHICH ARE INCORPORATED HEREIN BY REFERENCE) AND THE FOLLOWING TERMS AND CONDITIONS: A. EXPIRATION DATE: THE OPTION EVIDENCED HEREBY SHALL EXPIRE ON THE DATE SPECIFIED IN SCHEDULE A. EXCEPT FOR UNVESTED OPTIONS PURSUANT TO THE VESTING SCHEDULE BELOW, WHICH SHALL EXPIRE IMMEDIATELY ON A TERMINATION OF EMPLOYMENT, THE OPTION SHALL NOT EXPIRE AT AN EARLIER DATE UPON TERMINATION OF OPTIONEE'S EMPLOYMENT, UNLESS SUCH TERMINATION IS FOR CAUSE, AS DEFINED IN THE PLAN. B. EXERCISE OF OPTION. THE OPTION EVIDENCED HEREBY SHALL BE EXERCISABLE FROM TIME TO TIME BY SUBMITTING THE APPROPRIATE NOTICE OF EXERCISE FORM REFERRED TO BELOW TEN DAYS PRIOR TO THE DATE OF EXERCISE SPECIFYING THE NUMBER OF SHARES FOR WHICH THE OPTION IS BEING EXERCISED, ADDRESSED AS FOLLOWS: CS WIRELESS SYSTEMS, INC. 200 CHISHOLM PLACE, SUITE 200 PLANO, TEXAS 75075 ATTENTION: CHIEF FINANCIAL OFFICER (1) CASH ONLY EXERCISE -- SUBMITTING A "NOTICE OF CASH EXERCISE" ACCOMPANIED BY THE FULL CASH PURCHASE PRICE OF THE EXERCISED SHARES; OR (2) CASHLESS EXERCISE -- PROVIDED THE COMPANY HAS ADOPTED SUCH A PROCEDURE AT THIS TIME, SUBMITTING AN "IRREVOCABLE LETTER OF INSTRUCTION" AND "CASHLESS EXERCISE AND SALE FORM" AUTHORIZING THE DELIVERY FOR SALE OF THE EXERCISED COMMON SHARES, OR (3) COMBINATION -- TENDERING A COMBINATION OF (1) AND (2) ABOVE. WITHHOLDING TAXES. WITHOUT REGARD TO THE METHOD OF EXERCISE AND PAYMENT, THE OPTIONEE SHALL PAY TO THE COMPANY, UPON NOTICE OF THE AMOUNT DUE, ANY WITHHOLDING TAXES PAYABLE WITH RESPECT TO SUCH EXERCISE. VESTING SCHEDULE. THE OPTIONS WILL BECOME VESTED AND EXERCISABLE AS SET FORTH ON SCHEDULE A HERETO OR, IF NOT SPECIFICALLY SET FORTH THEREIN, ON THE YEARLY ANNIVERSARY OF THIS AGREEMENT, IN EQUAL ANNUAL INSTALLMENTS OVER FOUR YEARS. NOTWITHSTANDING THE FOREGOING THRESHOLD REQUIREMENTS, THE OPTIONS SHALL BECOME VESTED AND EXERCISABLE IN FULL EARLIER UPON THE HAPPENING OF AN "ACCELERATION EVENT", AS DEFINED IN EXHIBIT A. C. COMPLIANCE WITH LAWS AND REGULATIONS. THE OPTION EVIDENCED HEREBY IS SUBJECT TO RESTRICTIONS IMPOSED AT ANY TIME ON THE EXERCISE OR DELIVERY OF SHARES IN VIOLATION OF THE BYLAWS OF THE COMPANY OR OF ANY LAW OR GOVERNMENTAL REGULATION THAT THE COMPANY MAY FIND TO BE VALID AND APPLICABLE. D. INTERPRETATION. OPTIONEE HEREBY ACKNOWLEDGES THAT THIS AGREEMENT IS GOVERNED BY THE PLAN, A COPY OF WHICH OPTIONEE HEREBY ACKNOWLEDGES HAVING RECEIVED, AND BY SUCH ADMINISTRATIVE RULES AND REGULATIONS RELATIVE TO THE PLAN AND NOT INCONSISTENT THEREWITH AS MAY BE ADOPTED AND AMENDED FROM TIME BY THE COMMITTEE (THE "RULES"). OPTIONEE AGREES TO BE BOUND BY THE TERMS AND PROVISIONS OF THE PLAN AND THE RULES. E. TRANSFER RESTRICTIONS. IN ADDITION TO THE RESTRICTIONS ON TRANSFERABILITY IMPOSED BY THE PLAN AND THE INCENTIVE PLAN, THIS OPTION IS NOT TRANSFERABLE OTHER THAN BY WILL OR THE LAWS OF DESCENT AND DISTRIBUTION. IN WITNESS WHEREOF, THE COMPANY HAS CAUSED THIS INSTRUMENT TO BE EXECUTED BY ITS AUTHORIZED OFFICER, AS OF THE GRANT DATE IDENTIFIED IN SCHEDULE A. AGREED TO: CS WIRELESS SYSTEMS, INC. /S/ JEFFREY A. KUPP BY: /S/ JARED E. ABBRUZZESE - ------------------- ----------------------- OPTIONEE: JEFFREY A. KUPP JARED E. ABBRUZZESE CHAIRMAN SCHEDULE A OPTION DATA OPTIONEE'S NAME: JEFFREY A. KUPP NUMBER OF COMMON SHARES SUBJECT TO THIS OPTION: 32,000 GRANT DATE: JANUARY 6, 1997 EXERCISE PRICE PER SHARE: $6.50 EXPIRATION DATE: JANUARY 6, 2007 VESTING PROVISIONS: NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THE PLAN OR THIS AGREEMENT, INCLUDING SECTION 2 OF THIS AGREEMENT, IF OPTIONEE'S EMPLOYMENT IS TERMINATED FOR ANY REASON OTHER THAN FOR CAUSE (AS DEFINED BY OPTIONEE'S EMPLOYMENT AGREEMENT WITH THE COMPANY), THEN ALL OPTIONS SHALL BECOME IMMEDIATELY VESTED AND OPTIONEE SHALL HAVE THOSE RIGHTS WITH RESPECT TO THE OPTIONS AS PROVIDED IN THIS AGREEMENT WITHOUT REGARD TO SUCH TERMINATION. EXHIBIT A For purposes of this Agreement, an Acceleration Event shall be deemed to have occurred if after the date of the closing of the initial public offering by the Company (i) a report on Schedule 13D shall be filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Act"), disclosing that any person other than the Company or any employee benefit plan sponsored by the Company, is the beneficial owner (as the term is defined in Rule 13d-3 under the Act) directly or indirectly, of thirty-five percent or more of the total voting power represented by the Company's then outstanding Voting Securities (calculated as provided in paragraph (d) of Rule 13d-3 under the Act in the case of rights to acquire Voting Securities); or (ii) any person, other than the Company or any employee benefit plan sponsored by the Company, shall purchase shares pursuant to a tender offer or exchange offer to acquire any voting Securities of the Company (or securities convertible into such Voting Securities) for cash, securities or any other consideration, provided that after consummation of the offer, the person in question is the beneficial owner directly of indirectly, of thirty- five percent or more of the total voting power represented by the Company's then outstanding Voting Securities (all as calculated under clause (i)); or (iii) the stockholders of the Company shall approve (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation (other than a merger of the Company in which holders of Common Shares of the Company immediately prior to the merger have the same proportionate ownership of Common Shares of the surviving corporation immediately after the merger as immediately before), or pursuant to which Common Shares of the Company would be converted into cash, securities or other property, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) or all or substantially all the assets of the Company; or (iv) there shall have been a change in the composition of the Board of Directors of the Company at any time during any consecutive twenty-four month period such that "continuing directors" cease for any reason to constitute at least a 51% majority of the Board. For purposes of this clause, "continuing directors" means those members of the Board who either were directors at the beginning of such consecutive twenty-four month period or were elected by or on the nomination or recommendation of at least a 51% majority of the then-existing Board. So long as there has not been an Acceleration Event within the meaning of clause (iv), the Board of Directors may adopt a 51% majority vote of the "continuing directors" a resolution to the effect that an event described in clauses (i) or (ii) shall not constitute an Acceleration Event. Exhibit A CS WIRELESS SYSTEMS, INC. NO. 023 NON-QUALIFIED STOCK OPTION THIS AGREEMENT, IS MADE AS OF THE GRANT DATE INDICATED IN SCHEDULE A ATTACHED, AND BETWEEN CS WIRELESS SYSTEMS, INC. (THE "COMPANY"), AND THE UNDERSIGNED INDIVIDUAL (THE "OPTIONEE"), PURSUANT TO THE 1996 CS WIRELESS SYSTEMS, INC. INCENTIVE STOCK PLAN AS AMENDED (THE "PLAN"). (TERMS NOT DEFINED HEREIN SHALL HAVE THE SAME MEANING AS IN THE PLAN.) WHEREAS, THE OPTIONEE IS AN ELIGIBLE EMPLOYEE OF THE COMPANY AND THE COMPANY THROUGH THE PLAN'S COMMITTEE HAS APPROVED THE GRANT OF NON-QUALIFIED STOCK OPTIONS ("OPTIONS") UNDER THE PLAN TO THE OPTIONEE. NOW, THEREFORE, IN CONSIDERATION OF THE TERMS AND CONDITIONS OF THIS AGREEMENT AND PURSUANT TO THE PLAN, THE PARTIES AGREE AS FOLLOWS: 1. GRANT OF OPTIONS. THE COMPANY HEREBY GRANTS TO THE OPTIONEE THE RIGHT AND OPTION TO PURCHASE FROM THE COMPANY, AT THE EXERCISE PRICE SET FORTH IN SCHEDULE A, ALL OR ANY PART OF THE AGGREGATE NUMBER OF COMMON SHARES OF THE COMPANY, AS SUCH COMMON SHARES ARE PRESENTLY CONSTITUTED (THE "COMMON SHARES"), SET FORTH IN SCHEDULE A. 2. TERMS AND CONDITIONS. IT IS UNDERSTOOD AND AGREED THAT THE OPTION EVIDENCED HEREBY IS SUBJECT TO THE PROVISIONS OF THE PLAN (WHICH ARE INCORPORATED HEREIN BY REFERENCE) AND THE FOLLOWING TERMS AND CONDITIONS: A. EXPIRATION DATE: THE OPTION EVIDENCED HEREBY SHALL EXPIRE ON THE DATE SPECIFIED IN SCHEDULE A. EXCEPT FOR UNVESTED OPTIONS PURSUANT TO THE VESTING SCHEDULE BELOW, WHICH SHALL EXPIRE IMMEDIATELY ON A TERMINATION OF EMPLOYMENT, THE OPTION SHALL NOT EXPIRE AT AN EARLIER DATE UPON TERMINATION OF OPTIONEE'S EMPLOYMENT, UNLESS SUCH TERMINATION IS FOR CAUSE, AS DEFINED IN THE PLAN. B. EXERCISE OF OPTION. THE OPTION EVIDENCED HEREBY SHALL BE EXERCISABLE FROM TIME TO TIME BY SUBMITTING THE APPROPRIATE NOTICE OF EXERCISE FORM REFERRED TO BELOW TEN DAYS PRIOR TO THE DATE OF EXERCISE SPECIFYING THE NUMBER OF SHARES FOR WHICH THE OPTION IS BEING EXERCISED, ADDRESSED AS FOLLOWS: CS WIRELESS SYSTEMS, INC. 200 CHISHOLM PLACE, SUITE 200 PLANO, TEXAS 75075 ATTENTION: CHIEF FINANCIAL OFFICER (1) CASH ONLY EXERCISE -- SUBMITTING A "NOTICE OF CASH EXERCISE" ACCOMPANIED BY THE FULL CASH PURCHASE PRICE OF THE EXERCISED SHARES; OR (2) CASHLESS EXERCISE -- PROVIDED THE COMPANY HAS ADOPTED SUCH A PROCEDURE AT THIS TIME, SUBMITTING AN "IRREVOCABLE LETTER OF INSTRUCTION" AND "CASHLESS EXERCISE AND SALE FORM" AUTHORIZING THE DELIVERY FOR SALE OF THE EXERCISED COMMON SHARES, OR (3) COMBINATION -- TENDERING A COMBINATION OF (1) AND (2) ABOVE. WITHHOLDING TAXES. WITHOUT REGARD TO THE METHOD OF EXERCISE AND PAYMENT, THE OPTIONEE SHALL PAY TO THE COMPANY, UPON NOTICE OF THE AMOUNT DUE, ANY WITHHOLDING TAXES PAYABLE WITH RESPECT TO SUCH EXERCISE. VESTING SCHEDULE. THE OPTIONS WILL BECOME VESTED AND EXERCISABLE AS SET FORTH ON SCHEDULE A HERETO OR, IF NOT SPECIFICALLY SET FORTH THEREIN, ON THE YEARLY ANNIVERSARY OF THIS AGREEMENT, IN EQUAL ANNUAL INSTALLMENTS OVER FOUR YEARS. NOTWITHSTANDING THE FOREGOING THRESHOLD REQUIREMENTS, THE OPTIONS SHALL BECOME VESTED AND EXERCISABLE IN FULL EARLIER UPON THE HAPPENING OF AN "ACCELERATION EVENT", AS DEFINED IN EXHIBIT A. C. COMPLIANCE WITH LAWS AND REGULATIONS. THE OPTION EVIDENCED HEREBY IS SUBJECT TO RESTRICTIONS IMPOSED AT ANY TIME ON THE EXERCISE OR DELIVERY OF SHARES IN VIOLATION OF THE BYLAWS OF THE COMPANY OR OF ANY LAW OR GOVERNMENTAL REGULATION THAT THE COMPANY MAY FIND TO BE VALID AND APPLICABLE. D. INTERPRETATION. OPTIONEE HEREBY ACKNOWLEDGES THAT THIS AGREEMENT IS GOVERNED BY THE PLAN, A COPY OF WHICH OPTIONEE HEREBY ACKNOWLEDGES HAVING RECEIVED, AND BY SUCH ADMINISTRATIVE RULES AND REGULATIONS RELATIVE TO THE PLAN AND NOT INCONSISTENT THEREWITH AS MAY BE ADOPTED AND AMENDED FROM TIME BY THE COMMITTEE (THE "RULES"). OPTIONEE AGREES TO BE BOUND BY THE TERMS AND PROVISIONS OF THE PLAN AND THE RULES. E. TRANSFER RESTRICTIONS. IN ADDITION TO THE RESTRICTIONS ON TRANSFERABILITY IMPOSED BY THE PLAN AND THE INCENTIVE PLAN, THIS OPTION IS NOT TRANSFERABLE OTHER THAN BY WILL OR THE LAWS OF DESCENT AND DISTRIBUTION. IN WITNESS WHEREOF, THE COMPANY HAS CAUSED THIS INSTRUMENT TO BE EXECUTED BY ITS AUTHORIZED OFFICER, AS OF THE GRANT DATE IDENTIFIED IN SCHEDULE A. AGREED TO: CS WIRELESS SYSTEMS, INC. /S/ JEFFREY A. KUPP BY: /S/ JARED E. ABBRUZZESE - --------------------- ----------------------- OPTIONEE: JEFFREY A. KUPP JARED E. ABBRUZZESE CHAIRMAN SCHEDULE A OPTION DATA OPTIONEE'S NAME: JEFFREY A. KUPP NUMBER OF COMMON SHARES SUBJECT TO THIS OPTION: 16,000 GRANT DATE: APRIL 2, 1997 EXERCISE PRICE PER SHARE: $6.50 EXPIRATION DATE: APRIL 2, 2007 VESTING PROVISIONS: NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THE PLAN OR THIS AGREEMENT, INCLUDING SECTION 2 OF THIS AGREEMENT, IF OPTIONEE'S EMPLOYMENT IS TERMINATED FOR ANY REASON OTHER THAN FOR CAUSE (AS DEFINED BY OPTIONEE'S EMPLOYMENT AGREEMENT WITH THE COMPANY), THEN ALL OPTIONS SHALL BECOME IMMEDIATELY VESTED AND OPTIONEE SHALL HAVE THOSE RIGHTS WITH RESPECT TO THE OPTIONS AS PROVIDED IN THIS AGREEMENT WITHOUT REGARD TO SUCH TERMINATION. EXHIBIT A For purposes of this Agreement, an Acceleration Event shall be deemed to have occurred if after the date of the closing of the initial public offering by the Company (i) a report on Schedule 13D shall be filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Act"), disclosing that any person other than the Company or any employee benefit plan sponsored by the Company, is the beneficial owner (as the term is defined in Rule 13d-3 under the Act) directly or indirectly, of thirty-five percent or more of the total voting power represented by the Company's then outstanding Voting Securities (calculated as provided in paragraph (d) of Rule 13d-3 under the Act in the case of rights to acquire Voting Securities); or (ii) any person, other than the Company or any employee benefit plan sponsored by the Company, shall purchase shares pursuant to a tender offer or exchange offer to acquire any voting Securities of the Company (or securities convertible into such Voting Securities) for cash, securities or any other consideration, provided that after consummation of the offer, the person in question is the beneficial owner directly of indirectly, of thirty- five percent or more of the total voting power represented by the Company's then outstanding Voting Securities (all as calculated under clause (i)); or (iii) the stockholders of the Company shall approve (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation (other than a merger of the Company in which holders of Common Shares of the Company immediately prior to the merger have the same proportionate ownership of Common Shares of the surviving corporation immediately after the merger as immediately before), or pursuant to which Common Shares of the Company would be converted into cash, securities or other property, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) or all or substantially all the assets of the Company; or (iv) there shall have been a change in the composition of the Board of Directors of the Company at any time during any consecutive twenty-four month period such that "continuing directors" cease for any reason to constitute at least a 51% majority of the Board. For purposes of this clause, "continuing directors" means those members of the Board who either were directors at the beginning of such consecutive twenty-four month period or were elected by or on the nomination or recommendation of at least a 51% majority of the then-existing Board. So long as there has not been an Acceleration Event within the meaning of clause (iv), the Board of Directors may adopt a 51% majority vote of the "continuing directors" a resolution to the effect that an event described in clauses (i) or (ii) shall not constitute an Acceleration Event. Exhibit B NONDISCLOSURE AGREEMENT AGREEMENT made as of the 2ND day of APRIL, 1997, by and between the undersigned individual residing at the address indicated following his signature below (hereinafter referred to as "Employee") and CS WIRELESS SYSTEMS, INC., a Delaware corporation, having its principal place of business at 200 Chisholm Place, Suite 202, Plano, Texas 75075 (hereinafter referred to as "Employer"). WHEREAS, Employee is being employed by Employer in a capacity wherein Employee will come into possession of material of a confidential, sensitive or proprietary nature concerning the business, plans and trade secrets of Employer and its Affiliates (as defined below) and of third parties; and WHEREAS, the continued confidential treatment of such information is vital to the success of Employer's business, NOW THEREFORE, the parties agree as follows: 1. Employee acknowledges that his work as an employee of Employer will bring him into close contact with the Confidential Information (as defined below) of Employer and of third parties. Employee acknowledges that such Confidential Information is reposed in him in trust. 2. Employee hereby agrees that he shall, both during and after his employment, maintain such Confidential Information in confidence and neither disclose to others (nor cause to be disclosed) nor use personally (nor cause to be used) such Confidential Information without the prior written permission of Employer unless required or compelled to do so by a court order; provided, that in the event that Employee becomes legally required or compelled to disclose Confidential Information, Employee will, to the extent practicable under the circumstances, provide Employer with written notice thereof so that Employer may seek a protective order or other appropriate remedy; provided further, that in any such event, Employee will disclose only such information as is legally required and will exercise reasonable efforts to obtain confidential treatment for any Confidential Information being disclosed. Employee will also take reasonable precautions to prevent the inadvertent exposure of Confidential Information to unauthorized persons or entities. 3. Employee acknowledges that he may, during his employment, add to Employer's Confidential Information and he agrees that any such additions shall fall within the strictures of this Agreement. 4. Employee agrees that upon any termination of his employment with Employer or any Affiliate thereof, or upon request if sooner, he shall forthwith return to Employer all reports, correspondence, notes, financial statements, computer printouts and other documents and recorded material of every nature (including all copies thereof) which may be in his possession or under his control dealing with Confidential Information. 5. All inventions, discoveries, improvements, computer software, firmware, programs, documentation, manuals and other works of authorship (collectively referred to as "Intellectual Property"), whether or not copyrightable or patentable, made, created, developed, written or conceived by Employee during the course of Employee's employment by the Employer and within the scope of Employee's employment will be deemed work made for hire, whether made solely or jointly with another. All such Intellectual Property will be the property of the Employer. Employee hereby assigns to the Employer all right, title and interest in and to all Intellectual Property. 6. Employee will, without charge to the Employer but at its expense, execute a specific assignment of title to Employer and do anything else reasonably necessary to enable the Employer to secure a patent, copyright or other form of protection for said Intellectual Property anywhere in the world. 7. Employee acknowledges that the covenants in this Agreement have existed since the commencement of his employment with Employer. These covenants are expressions of his duty as an employee not to use the Confidential Information to the detriment of Employer. In addition, Employee acknowledges that he shall benefit from entry into this Agreement as Employer shall be willing to continue to provide access to Confidential Information to Employee. 8. EMPLOYEE ACKNOWLEDGES THAT EMPLOYER WOULD BE IRREPARABLY DAMAGED AND THERE WOULD BE NO ADEQUATE REMEDY AT LAW FOR EMPLOYEES'S BREACH OF THIS AGREEMENT, AND ACCORDINGLY, THE TERMS OF THIS AGREEMENT SHALL BE SPECIFICALLY ENFORCED. EMPLOYEE HEREBY CONSENTS TO THE ENTRY OF ANY TEMPORARY RESTRAINING ORDER OR PRELIMINARY OR EX PARTE INJUNCTION, IN ADDITION TO ANY OTHER REMEDIES AVAILABLE AT LAW OR IN EQUITY, TO ENFORCE THE PROVISIONS HEREOF. 9. This Agreement is not an agreement of employment and nothing herein shall be construed to obligate Employer to employ Employee for any definite duration or upon any specific terms. 10. As used herein, "Confidential Information" shall mean all confidential information and trade secrets of Employer or any of its Affiliates, whether now existing or hereafter acquired or developed, including, without limitation, financial statements, business plans, working methods, investments, materials, processes, programs, designs, drawings, names of and relationships with current or potential vendors and lenders and other third parties, contractual arrangements, profit formulas, experimental investigations, studies, current or potential customer names and requirements, current or potential professional associations or contacts, information submitted to Employer or its Affiliates by third parties on a confidential basis and similar other non-public or otherwise confidential, sensitive or proprietary information. "Confidential Information" shall not include information that is generally within the public domain, or has become generally known within the wireless cable industry without breach of any obligation of confidentiality of Employee or any third party. 11. As used herein, the term "Affiliates" shall mean any individual or entity controlling, controlled by or under common control with the Employer, now or in the future, including without limitation, partnerships in which Employer or any Affiliate may invest as a limited or general partner and limited liability companies in which Employer or any Affiliate may become a member. 12. This Agreement shall survive the termination of the employment of Employee and shall not be amended except by a writing signed by the parties hereto. This Agreement shall be binding upon the Employee and his heirs, legal representatives, successors and assigns. 13. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware. [BALANCE OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. CS WIRELESS SYSTEMS, INC. By: /s/ Jared E. Abbruzzese ------------------------ Jared E. Abbruzzese Chairman EMPLOYEE: /s/ Jeffrey A. Kupp ------------------- Jeffrey A. Kupp EX-27 5 EXHIBIT 27 - FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES 1ST QTR 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1997 MAR-31-1997 107185 0 998 0 0 109160 54537 13297 405140 8622 0 0 0 11 112,217 405,140 6678 6678 0 14095 0 0 7996 (13963) (1357) (12606) 0 0 0 (12606) (1.21) (1.21)
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