-----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, VfKvYY0eeJhaAp6P6SPurIm/m1z8g0kW1qUt7X1wJZs+ZEhWKiv1vB/+U5Y6PGCd umuUkYzj0ZjO9M3nfDo7gg== 0000914749-97-000001.txt : 19970107 0000914749-97-000001.hdr.sgml : 19970107 ACCESSION NUMBER: 0000914749-97-000001 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19961125 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970106 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAI WIRELESS SYSTEMS INC CENTRAL INDEX KEY: 0000914749 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 061324691 STATE OF INCORPORATION: CT FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-22888 FILM NUMBER: 97501095 BUSINESS ADDRESS: STREET 1: 18 CORPORATE WOODS BLVD STREET 2: THIRD FLOOR CITY: ALBANY STATE: NY ZIP: 12211 BUSINESS PHONE: 5184622632 MAIL ADDRESS: STREET 1: 18 CORPORATE WOODS BLVD STREET 2: 3RD FLOOR CITY: ALBANY STATE: NY ZIP: 12211 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ____________________________________ FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) January 3, 1997 (November 25, 1996) CAI WIRELESS SYSTEMS, INC. (Exact name of registrant as specified in its charter)
Connecticut 0-22888 06-1324691 (State or other (Commission File (IRS Employer jurisdiction of Number) Identification No.) incorporation)
18 CORPORATE WOODS BLVD., ALBANY, NY 12211 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (518) 462-2632 (Former name or former address, if changed since last report) Item 5 - OTHER EVENTS (A) CAI Wireless Systems, Inc. ("CAI") entered into a Modification Agreement dated December 12, 1996 (the "Modification Agreement") with affiliates of Bell Atlantic Corporation and NYNEX Corporation (the "RBOCs"). The Modification Agreement suspends the Business Relationship Agreement (the "BR Agreement") among the parties for one year and gives CAI or its designee an option to purchase the $100 million RBOC investment in CAI. MODIFICATION AGREEMENT The BR Agreement originally provided the RBOCs with the ability to elect to become the marketer and provider of wireless cable services within various markets located in the RBOCs' operating territory using CAI's wireless delivery platform. For the one-year suspension period, the Modification Agreement suspends the right of the RBOCs to option these markets, and, therefore, relieves CAI of its obligations to reserve its Multichannel Multipoint Distribution Service (MMDS) spectrum for imminent use by the RBOCs as a video delivery platform and related construction obligations. All deadlines for construction and other obligations are tolled for one year and will be reinstated in the event that the BR Agreement is not terminated in accordance with its terms or the terms of the Modification Agreement. The Modification Agreement also enables CAI to use its MMDS spectrum in markets subject to the BR Agreement during the suspension period for businesses in addition to video transmission, subject to appropriate regulatory approvals, and to enter new strategic relationships with third parties through the one- year suspension of certain covenants contained in the CAI Securities (as defined below). CAI intends to seek regulatory approval for full flexible use of the MMDS spectrum, including video, voice and data transmission in several of these markets. In addition to suspending CAI's obligations under the BR Agreement for one year, the Modification Agreement provides CAI or its designee the right to acquire all, but not less than all, of the $100 million in CAI Securities held by the RBOCs. If notice to purchase the CAI Securities is received by the RBOCs within the first 120 days, the purchase price is $121,000,000; if received in the next 120 days, the purchase price is $100,000,000, together with accrued interest and dividends, plus $10 million, and if notice is received in the balance of the year, the purchase price is $100,000,000, together with accrued interest and dividends, plus $20 million. The RBOCs' $100 million investment in CAI includes convertible debt and preferred stock and warrants all of which, if fully converted and exercised, would result in the right to acquire up to 45% of the equity of CAI warrants (as more fully described below, the "CAI Securities"). In connection with the arrangement, the average per share exercise/conversion price of the CAI Securities is reduced from $8.19 to $5.31, on full conversion and exercise. The exercise price is subject to readjustment in certain events. In connection with the closing of any such purchase, the RBOCs have agreed to return to the Company their shares in CS Wireless Systems, Inc. ("CS Wireless"), representing almost 10% of the outstanding stock of this CAI majority-owned joint venture with Heartland Wireless Communications, Inc. In the event that CAI does not purchase the CAI Securities or cannot locate a third party purchaser to do so within the first 270 days, the RBOCs have the right to sell the CAI Securities. If, after one year, the CAI Securities have not been purchased by CAI or a third party, the BR Agreement is reinstated. Upon the purchase of the CAI Securities, the BR Agreement terminates. VERSATILITY OF MMDS SPECTRUM CAI indicated that in connection with the one-year suspension it will expand the markets for which it is currently seeking regulatory approval for flexible use of its MMDS spectrum. To date, CAI has begun exploring mixed use of the spectrum for video, voice and data, including a commercial trial of a high speed Internet access service in Rochester, NY, where FCC has granted authority for a market trial of up to 500 customers and the submission to the FCC of an application for flexible use of the spectrum in the Hartford, CT market. (See Item 5(C)(iii) for update on status of Hartford application.) In addition, CAI has been granted authority to conduct a commercial market trial of up to 1,000 subscribers for high speed Internet access service in its New York City market. In addition, CS Wireless has applied to the FCC for authority to conduct a market trial of a high speed Internet access service, combined with a digital subscription television service in Dallas, TX with an anticipated roll-out, subject to regulatory approval, in 1997. There can be no assurance that the Company will be granted permanent authority with respect to any of its pending applications or market trials, that any of the tests currently being conducted by the Company will be successful or that the commercial deployment of any new products will be commercially successful. The Company intends to expand its applications for such use of its MMDS spectrum in other markets and to seek strategic relationships with companies in aligned industries in these markets, although there can be no assurance that such applications will be granted or that such relationships will materialize. The Company's digital video transport systems in Boston and Virginia Beach are two of the first state-of-the-art digital MMDS systems. CAI believes that 75% or better line-of-sight (LOS) targets can be obtained with minor modifications to these systems, including relocation of boosters and adjustments to the height of certain antennas. CAI does not have a present timetable during which it may deploy a digital video service in Boston or Virginia Beach and may re- deploy portions of the equipment in Boston to other markets. The Company is vacating certain of its booster transmitter locations in Boston. In connection with such action, the Company is removing certain transmission and other portable equipment from such locations and abandoning certain leasehold improvements. Excess equipment will be held for other CAI markets to be built out where permitted pursuant to duly received regulatory approval or made available for sale. CAI anticipates that it will incur a loss, not expected to exceed $1 million, through the abandonment of leasehold improvements, lease terminations, installation costs and removal costs, however, there can be no assurance that such loss will not exceed $1 million. Further, there can be no assurance that the Company will apply for and receive any and all regulatory approvals necessary for the build out of other CAI markets. BACKGROUND BUSINESS RELATIONSHIP AGREEMENT. At the inception of the arrangement in the spring of 1995, the BR Agreement was considered a strategic path to allow the RBOCs to enter the subscription television market. It provides them the right to option digital transport systems constructed by CAI and CAI's MMDS spectrum in their respective operating territories as their delivery platform for digital video services. In anticipation of an option exercise and pursuant to the requirements of the BR Agreement, CAI constructed digital transport systems in Boston and Virginia Beach; however, no markets have been optioned to date. SPECTRUM ACQUISITION. In anticipation of the BR Agreement and in furtherance of CAI's corporate objectives, CAI acquired MMDS spectrum in a number of principal RBOC markets, including the acquisition of ACS Enterprises, Inc., with analog subscription television businesses in Philadelphia, PA, Cleveland, OH and Bakersfield, CA, and wireless properties in Stockton/Modesto, CA. CAI also acquired analog wireless subscription television businesses in New York City and Washington, D.C., and access to MMDS spectrum in Baltimore, MD, Boston, MA and Pittsburgh, PA. Combined with its analog systems in Virginia Beach, VA and Albany, NY, and other MMDS spectrum in various Upstate New York markets, these acquisitions made CAI the largest wireless cable company in terms of LOS households. FINANCING. To finance the MMDS spectrum acquisitions and build-out of digital transport systems, among other things, the RBOCs invested $100 million in CAI and the Company raised $275 million in an offering of its 12 1/4 % Senior Notes due 2002 in a public offering in September 1995. The RBOC investment consists of $30 million in Term Notes, $70 million Senior Preferred Stock and warrants to purchase convertible preferred stock (collectively, the "CAI Securities"), which, when combined with the conversion features of the Term Notes and Senior Preferred Stock, result in the right to acquire up to 45% of the equity of CAI. To date, none of the conversion features have been exercised by the RBOCs. (B) CAI has recently announced that it has retained J.P. Morgan Securities Inc. and Smith Barney Inc. to act as financial advisors to CAI in connection with exploring strategic alternatives for the Company. (C) The following news releases were issued by the Company: (i) CAI WIRELESS SYSTEMS, INC. RESPONDS TO CLASS ACTION LAWSUIT, issued on November 25, 1996 (See Exhibit 99.1). (ii) CAI WIRELESS SYSTEMS, INC. RESPONDS TO RECENT NEWS, issued on December 6, 1996 (See Exhibit 99.2). (iii) CAI WIRELESS SYSTEMS, INC. RECEIVES FIRST FCC MARKET TRIAL APPROVAL TO USE WIRELESS CABLE SPECTRUM FOR TWO-WAY SERVICES, issued on December 16, 1996 (See Exhibit 99.3) (D) CAI has been named in a class action lawsuit alleging various violations of the federal securities laws filed in the United State District Court for the Northern District of New York. The complaint, served upon the Company on December 8, 1996, names the Company, CAI's Chairman, Jared E. Abbruzzese and a director, Alan Sonnenberg, as well as The Corotoman Company, L.L.C., a significant shareholder in the Company, and its members. Plaintiffs allege that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") during the period from May 23, 1996 to October 29, 1996 (the "Class Period"). Plaintiffs claims arise out of alleged material misstatements and omissions in the Company's public disclosures during the Class Period, which produced a scheme to inflate the price of CAI securities enabling the individual defendants to sell CAI securities at such inflated prices. Plaintiffs are seeking to be declared a plaintiff class action, unspecified damages and fees and expenses. The Company has denied the allegations in the Complaint, does not believe that the lawsuit has merit and intends to vigorously defend the action. Forward Looking Statements The statements contained in this Form 8-K relating to the Company's operating results, and plans and objectives of management for future operations, including plans or objectives relating to the Company's products and services, constitute forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Actual results of the Company may differ materially from those in the forward looking statements and may be affected by a number of factors including the receipt of regulatory approvals, the availability of new strategic partners and their willingness to enter into arrangements with the Company, the terms of such arrangements, the success of the Company's trials in Rochester and New York, NY and Hartford, CT, subscriber equipment availability, tower space availability, absence of interference and the ability of the Company to redeploy or sell excess equipment, as well as other factors contained herein and in the Company's securities filings. Item 7 - FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS C. Exhibits EXHIBIT NO. EXHIBIT DESCRIPTION LOCATION 99.1 Media Release - CAI Wireless Page 8 Systems, Inc. Responds To Class Action Lawsuit. 99.2 Media Release - CAI Wireless Pages 9-10 Systems, Inc. Responds To Recent News. 99.3 Media Release - CAI Wireless Pages 11-12 Receives First FCC Market Trial Approval To Use Wireless Cable Spectrum For Two-Way Services On December 16, 1996 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
SIGNATURE TITLE DATE /S/ JARED E. ABBRUZZESE Chairman, Chief Executive Officer, January 3, 1997 Jared E. Abbruzzese and Director (Principal Executive Officer) /S/ JAMES P. ASHMAN Executive Vice President, Chief January 3, 1997 James P. Ashman Financial Officer and Director (Principal Financial Officer) /S/ CRAIG J. KESSLER Vice President and Controller January 3, 1997 Craig J. Kessler (Principal Accounting Officer)
EX-1 2 Exhibit 99.1 FOR IMMEDIATE RELEASE Investor Contact: Jason Thompson Lippert/Heilshorn & Associates, Inc. 212-838-3777 Company Contact: James P. Ashman CFO, CAI Wireless Systems, Inc. 518-462-2632 CAI WIRELESS SYSTEMS, INC. RESPONDS TO CLASS ACTION LAWSUIT ALBANY, N.Y., November 25, 1996 - CAI Wireless Systems, Inc. ("CAI") (NASDAQ NM: CAWS) today announced that it believes that the class action lawsuit filed in the United States District Court for the Northern District of New York on November 22, 1996 is totally baseless and without merit. The lawsuit was announced after the close of business on Friday, November 22, 1996. CAI has not yet been served with the complaint, but does not believe that the allegations summarized in the November 22{nd} press release can be sustained or will result in any liability to CAI whatsoever. "CAI has always taken a very conservative approach to its disclosure obligations, and we are confident that the facts will bear this out," said Jared E. Abbruzzese, Chairman and Chief Executive Officer of CAI. "As CAI has repeatedly expressed in its Securities and Exchange Commission filings and otherwise, this is an emerging technology, subject to various regulatory and other constraints, all of which CAI has worked within since its inception. It is unfortunate that corporate resources must be wasted defending lawsuits such as these, instead of being put to more productive uses." CAI expects that it will be served with the lawsuit today, and intends to vigorously defend the action. EX-2 3 EXHIBIT 99.2 FOR IMMEDIATE RELEASE Investor Relations Contact: Company Contact: Jason Thompson James P. Ashman Lippert/Heilshorn & Associates CFO, CAI Wireless Systems, Inc. 212/838-3777 518/462-2632 CAI WIRELESS SYSTEMS, INC. RESPONDS TO RECENT NEWS ALBANY, N.Y., DECEMBER 6, 1996 -- CAI WIRELESS SYSTEMS, INC. ("CAI") (NASDAQ NM: CAWS) has responded to the recent reports that its strategic partners, Bell Atlantic Corporation and NYNEX Corporation (the "RBOCs"), are retreating from the use of Multichannel Multipoint Distribution Service ("MMDS") spectrum due to alleged flaws in the technology. Citing preliminary test results of digital systems built by CAI in Boston and Virginia Beach for delivery to the RBOCs pursuant to the Business Relationship Agreement among CAI, Bell Atlantic and NYNEX, the reports indicate that the RBOCs are scaling back their ambitious video delivery strategies. CAI has repeatedly dismissed reports that the MMDS spectrum is a flawed delivery platform for digital subscription television service on the basis that the tests conducted to date were preliminary tests of a new technology, and that adjustments would be made in the design demonstrating continued improvement in the coverage, enabling CAI to reach the required coverage levels when CAI was required to do so. The coverage limitations of MMDS technology, as well as other radio frequency-based technologies such as PCS and cellular telephone, have been well publicized. CAI has endeavored to design and build a digital system that minimizes, to the fullest extent possible, such limitations. Initial test results indicate that the 75% coverage pattern required by the RBOCs is met in Boston and Virginia Beach in highly-populated areas served from towers of approximately 400 feet in height, while shorter towers produce less coverage. Overall, the 75% coverage pattern in these markets can be achieved through relatively minor modifications to the system, such as relocating some boosters to such taller towers, which CAI believes are available. The CAI system in Boston currently is capable of delivering service to approximately 1,000,000 homes, while the system in Virginia Beach is capable of delivering service to more than approximately 300,000 homes. - more - CAI, Page 2 "I find it curious that 1.3 million homes is not viewed as satisfactory initial coverage for video service organizations that do not yet have any subscribers," said Jared E. Abbruzzese, Chairman and Chief Executive Officer of CAI. "The current coverage achieved in Boston is comparable to the homes- passed coverage of the two largest wireline providers in that market. The same holds true in Virginia Beach. We believe these systems demonstrate that digital MMDS technology is a legitimate delivery system for subscription television services." "CAI continues to stand behind MMDS technology as a delivery platform for video," said John J. Prisco, President and Chief Operating Officer of CAI. "It is extremely unfortunate not only for CAI, but also the entire MMDS industry, that some have taken preliminary and incomplete data to malign the entire MMDS delivery platform. CAI hopes that those marketing video subscription services using CAI's spectrum are as successful in their initial marketing efforts as CAI has been in its initial efforts to deliver digital signal." As CAI has previously announced, it is engaged in wide-ranging discussions with Bell Atlantic and NYNEX relating to its entire relationship with the RBOCs, and hopes to reach agreement with the RBOCs in the near future. CAI has also previously announced that it is exploring mixed use of the spectrum for video, voice and data in markets not governed by its current relationship with the RBOCs, including a commercial trial of a high speed Internet access service in Rochester, NY, where FCC has granted permission for service of up to 500 customers. In addition, CAI has applied for flexible use of the spectrum in the Hartford, CT market. Also, through CS Wireless Systems, Inc., CAI's majority-owned joint venture with Heartland Wireless Communications, Inc., a high speed Internet access service is to be combined with a digital subscription television service in Dallas, Texas, with an anticipated roll-out in 1997. In addition, CAI has been granted authority to enroll up to 1,000 subscribers for one-way Internet service in its New York market. "We believe that the regulatory approvals CAI has been granted to date will give CAI the ability to demonstrate the flexible use of MMDS spectrum and, if permanent authority by the FCC is given, could afford CAI the opportunity to generate additional revenue streams," continued Mr. Prisco. # # # EX-3 4 Exhibit 99.3 FOR IMMEDIATE RELEASE Investor Relations Contact: Company Contact: Jason Thompson James P. Ashman Lippert/Heilshorn & Associates CFO, CAI Wireless Systems, Inc. 212/838-3777 518/462-2632 CAI WIRELESS SYSTEMS, INC. RECEIVES FIRST FCC MARKET TRIAL APPROVAL TO USE WIRELESS CABLE SPECTRUM FOR TWO-WAY SERVICES ALBANY, N.Y., December 16, 1996 -- CAI Wireless Systems, Inc. ("CAI") (NASDAQ NM: CAWS) announced today that it has received authority from the Federal Communications Commission ( FCC ) to conduct a market trial of one and two-way fixed voice, video and data services over its Multichannel Multipoint Distribution Service (MMDS) spectrum in Hartford, Connecticut. The FCC also invited CAI to apply for permanent authorization for two-way fixed flexible use of MMDS spectrum following the conclusion of a successful market trial. Never before has the FCC granted the authority to a wireless cable operator to charge customers for two-way services, and CAI believes that the FCC s invitation to follow up with a request for permanent authorization is a very positive signal from the agency. The FCC s approval contemplates an initial phase during which CAI would conduct technical and commercial market trials of two-way services. Upon the submission by CAI of test results that demonstrate an absence of harmful interference to neighboring stations, the FCC may grant CAI permanent authorization for these services. Based on its analysis, CAI anticipates that it will be able to demonstrate to the FCC that it can implement two-way services consistent with all applicable technical rules and policies. John Prisco, CAI s President and Chief Operating Officer, stated , We at CAI are quite pleased with the FCC s decision, and applaud the agency for its responsiveness and pro-competitive attitude. By this action, CAI believes that the FCC has recognized that the wireless cable industry must have the ability to respond to market forces. If and when permanent authority is granted, CAI expects to take full advantage of this opportunity by developing innovative, varied and, above all else, responsive consumer-based services. -more- CAI has previously received FCC authority to conduct market trials for its one-way wireless Internet access service in Rochester and New York, N.Y. In addition to the Hartford market, CAI is preparing applications for two-way market trial authority for several of its primary markets. Based in Albany, N.Y., CAI operates analog-based wireless systems in New York City, Rochester, and Albany, N.Y., Philadelphia, PA, Washington, D.C. and Norfolk/Virginia Beach, VA, and has a portfolio of wireless cable channel rights in eight additional markets, including Long Island, Buffalo and Syracuse, N.Y., Providence, RI, Hartford, CT, Boston, MA, Baltimore, MD, and Pittsburgh, PA. -----END PRIVACY-ENHANCED MESSAGE-----