-----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, I0AmEE6i738YX3Kz4orDycSANGk9UrZeXpSG9vOtvpAQVYR3PEQKAnKREuoQNWuA fEKx0D0Dnx2mLi4mMcXrGw== 0000950134-99-005336.txt : 20020715 0000950134-99-005336.hdr.sgml : 19990610 ACCESSION NUMBER: 0000950134-99-005336 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19990609 SUBJECT COMPANY: 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: 0331 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-45035 FILM NUMBER: 99643237 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 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MCI WORLDCOM INC CENTRAL INDEX KEY: 0000723527 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 581521612 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 515 EAST AMITE ST CITY: JACKSON STATE: MS ZIP: 39201-2702 BUSINESS PHONE: 6013608600 FORMER COMPANY: FORMER CONFORMED NAME: WORLDCOM INC /GA/ DATE OF NAME CHANGE: 19970127 FORMER COMPANY: FORMER CONFORMED NAME: LDDS COMMUNICATIONS INC /GA/ DATE OF NAME CHANGE: 19930916 FORMER COMPANY: FORMER CONFORMED NAME: RESURGENS COMMUNICATIONS GROUP INC DATE OF NAME CHANGE: 19920703 SC 13D 1 SCHEDULE 13D 1 =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------- SCHEDULE 13D (RULE 13D-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO 13D-1(A) AND AMENDMENTS THERETO FILED PURSUANT TO 13D-2(a) CAI WIRELESS SYSTEMS, INC. - -------------------------------------------------------------------------------- (Name of Issuer) COMMON STOCK - -------------------------------------------------------------------------------- (Title of Class of Securities) 12476P 20 3 - -------------------------------------------------------------------------------- (CUSIP Number) CHARLES T. CANNADA Senior Vice President, Corporate Development MCI WORLDCOM, Inc. 500 Clinton Center Drive Clinton, Mississippi 39056 (601) 460-5600 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) with copies to: P. Bruce Borghardt MCI WORLDCOM, Inc. 10777 Sunset Office Drive Suite 330 St. Louis, Missouri 63127 (314) 909-4100 MAY 30, 1999 (SEE ITEMS 4 AND 5 HEREIN) - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box: [ ] (Continued on following pages) (Page 1 of 38 Pages) =============================================================================== 2 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 2 OF 38 PAGES 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) MCI WORLDCOM, INC. 58-1521612 - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC & BK - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT [ ] TO ITEM 2(d) OR 2(e) - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION GEORGIA - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES 8,284,425 (SEE ITEM 5) ------------------------------------------------------------------ BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 0 ------------------------------------------------------------------ EACH 9 SOLE DISPOSITIVE POWER REPORTING 8,284,425 (SEE ITEM 5) ------------------------------------------------------------------ PERSON WITH 10 SHARED DISPOSITIVE POWER 0 ------------------------------------------------------------------ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 8,284,425 SHARES OF COMMON STOCK (SEE ITEM 5) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN [ ] SHARES* - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 48.0% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! 3 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 3 OF 38 PAGES ITEM 1. SECURITY AND ISSUER This Statement on Schedule 13D (the "Schedule 13D") relates to shares of common stock, par value $0.01 per share (the "Shares"), of CAI Wireless Systems, Inc. ("CAI"), a Connecticut corporation. The principal executive offices of CAI are located at 18 Corporate Woods Boulevard, Albany, New York 12211. ITEM 2. IDENTITY AND BACKGROUND (a)-(c), (f) The name, state of incorporation and business address of the person filing this statement is MCI WORLDCOM, Inc., a Georgia corporation 500 Clinton Center Drive, Clinton, MS 39056, U.S.A. MCI WORLDCOM, Inc., a Georgia corporation ("MCI WorldCom" or the "Purchaser"), is one of the largest telecommunications companies in the United States, serving local, long distance and Internet customers domestically and internationally. MCI WorldCom provides telecommunications services to business, government, telecommunications companies and consumer customers through its networks of primarily fiber optic cables, digital microwave, and fixed and transportable satellite earth stations. The Purchaser is one of the first major facilities-based telecommunications companies with the capability to provide consumers and businesses with high quality local, long distance, Internet, data and international communications services over its global networks. With service to points throughout the nation and the world, the Purchaser provides telecommunications products and services including: switched and dedicated long distance and local products, dedicated and dial-up Internet access, wireless services, 800 services, calling cards, private lines, broadband data services, debit cards, conference calling, messaging and mobility services, advanced billing systems, enhanced fax and data connections, high speed data communications, facilities management, local access to long distance companies, local access to asynchronous transfer mode-based backbone service, Web server hosting and integration services, dial-up networking services and interconnection via Network Access Points to Internet service providers. Information relating to the directors and executive officers of the Purchaser is contained in Appendix A attached hereto and is incorporated herein by reference. (d) and (e) Neither the Purchaser nor, to the best knowledge of the Purchaser, any of the persons listed in Appendix A has, during the last five years, (i) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction which has resulted in a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, Federal or State securities laws or finding any violation with respect to such laws. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION The Purchaser obtained and will obtain the funds for the purchase of the Shares of CAI described herein from its cash on hand and from borrowings under its commercial paper program and a related credit facility. A description of the terms and conditions of the agreements to acquire such Shares is contained in Items 4 and 6 hereof, which descriptions are incorporated herein by reference. The credit facility was not established specifically to fund the acquisition of the Shares. The facility is a $7 billion 364-Day Revolving Credit Agreement and Term Loan Agreement (the "Facility C Loans") (the "Credit Facility"). There are no unusual or material conditions to be satisfied prior to drawdown under the Credit Facility. The parties to the Credit Facility are the Purchaser and NationsBank, N.A. (Arranging 4 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 4 OF 38 PAGES Agent and Administrative Agent), NationsBanc Montgomery Securities LLC (Lead Arranger), Bank of America NT & SA, Barclays Bank PLC, The Chase Manhattan Bank, Citibank, N.A., Morgan Guaranty Trust Company of New York, and Royal Bank of Canada (Co-Syndication Agents) and the lenders named in the 364-Day Revolving Credit and Term Loan Agreement dated August 6, 1998. The Credit Facility provides liquidity support for the Purchaser's commercial paper program and is used for other general corporate purposes. The Facility C Loans have a 364-day term, which may be extended for up to two successive 364-day terms thereafter to the extent of the committed amounts from those lenders consenting thereto, with a requirement that lenders holding at least 51% of the committed amounts consent. Additionally, effective as of the end of such 364-day term, the Purchaser may elect to convert up to $4 billion of the principal debt outstanding under the Facility C Loans from revolving loans to term loans with a maturity date no later than one year after the conversion. The Credit Facility bears interest payable in varying periods, depending on the interest period, not to exceed six months, or, with respect to any Eurodollar Rate borrowing, 12 months if available to all lenders, at rates selected by the Purchaser under the terms of the Credit Facility, including a Base Rate or Eurodollar Rate, plus the applicable margin. The applicable margin for the Eurodollar Rate borrowing varies from 0.225% to 0.450% as to Facility C Loans based upon the better of certain debt ratings. The Credit Facility is unsecured but includes a negative pledge of the assets of the Purchaser and its subsidiaries (subject to certain exceptions). The Credit Facility requires compliance with a financial covenant based on the ratio of total debt to total capitalization, calculated on a consolidated basis. The Credit Facility requires compliance with certain operating covenants which limit, among other things, the incurrence of additional indebtedness by the Purchaser and its subsidiaries, sales of assets and mergers and dissolutions, which covenants are generally less restrictive than those contained in the prior credit facilities and which do not restrict distributions to shareholders, provided the Purchaser is not in default under the Credit Facility. The Facility C Loans are subject to annual commitment fees not to exceed 0.12% of any unborrowed portion of the facility. This description of the Credit Facility is a summary only and is not intended to be a complete description of the all of the terms thereof. Reference is made to the full text thereof, copies of which are filed as exhibits hereto and incorporated by reference herein. The Purchaser currently plans to repay borrowings under the Credit Facility out of operating cash flow and future financings, although the Purchaser has no current specific plan with respect thereto. Such decisions when made will be based on the Purchaser's review from time to time of the advisability of particular actions, as well as on prevailing interest rates and financial and other economic conditions. ITEM 4. PURPOSE OF TRANSACTION The Purchaser entered into two separate purchase and sale agreements with respect to the Shares. One purchase and sale agreement is between the Purchaser and certain sellers (the "First Agreement Parties"), dated as of March 23, 1999 (the "First Agreement"). Under the First Agreement, on June 4, 1999, following expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 on May 30, 1999, the Purchaser acquired from the First Agreement Parties, among other securities already purchased under the First Agreement, 8,284,425 Shares. The other purchase and sale agreement is between Purchaser and certain sellers (the "Second Agreement Parties"), dated as of March 23, 1999 (the "Second Agreement"). Under the Second Agreement, the Purchaser has agreed, subject to certain material conditions, to purchase from the Second Agreement Parties, among other securities, 2,270,715 Shares. The purchase price for the shares under these agreements is less than the $28 price per share in the merger, described below. See Item 6 for a description of the terms of these agreements. Copies of the First Agreement and Second Agreement are attached hereto as Exhibits to this Schedule 13D and are incorporated herein by reference. 5 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 5 OF 38 PAGES On April 26, 1999, CAI and the Purchaser and Cardinal Acquisition Subsidiary, Inc., a Connecticut corporation and wholly-owned subsidiary of the Purchaser ("Acquisition"), entered into an Agreement and Plan of Merger (the "Merger Agreement"), a copy of which is attached as an exhibit hereto and hereby expressly incorporated herein by reference. The Purchaser entered into the Merger Agreement with the intent of acquiring control of, and the entire equity interest in, CAI and replacing the Board of Directors of CAI. The Merger Agreement provides for the merger of a wholly-owned subsidiary of Purchaser with and into CAI, with CAI becoming a wholly-owned subsidiary of Purchaser. The affirmative vote of at least two-thirds (2/3) of the outstanding CAI common shares is required to approve the Merger Agreement. As a result of the merger, each CAI common share issued and outstanding when the merger becomes effective (other than shares held by CAI, Purchaser, Acquisition and shareholders, if any, who properly exercise their dissenters' rights under Connecticut law) will be converted into the right to receive $28.00 in cash, without interest. CAI has advised the Purchaser that, as of April 26, 1999, there were 17,241,379 shares of CAI common stock outstanding, including the 8,284,425 shares subsequently acquired by the Purchaser, as described herein, and the 2,270,715 shares subject to agreement to be acquired, as described herein. Accordingly, if the 2,270,715 shares are acquired as contemplated thereby, the Purchaser would pay $187,214,692 for the remaining 6,686,239 shares. Additionally, as described in Appendix B attached hereto ("Summary of the Merger Agreement - Treatment of Stock Options"), CAI has agreed to cause outstanding options to become payable for cash, subject to any applicable withholding tax, equal to the difference between $28 and the per share exercise price of such options to the extent such difference is a positive number. CAI has advised the Purchaser that the aggregate amount to be paid for outstanding stock options, if not exercised prior to closing, is $42,755,438. CAI has also advised the Purchaser that the aggregate amount to be paid for outstanding warrants, if not exercised earlier, is $2,374,802. On the same date, Purchaser, CAI and Acquisition entered into a Stock Option Agreement (the "Stock Option Agreement") providing Purchaser the option to purchase, under certain circumstances, 6,090,481 authorized but unissued shares of CAI Common Stock at a price of $28 per share, subject to certain adjustments, a copy of which agreement is attached as an exhibit hereto and hereby expressly incorporated herein by reference. The Purchaser entered into the Stock Option Agreement with the purpose of facilitating its efforts to consummate the merger. If the Option were exercised, the Purchaser would pay $170,533,468 to CAI in exchange for the shares. Summaries of the Merger Agreement and Stock Option Agreement are contained in Appendix B and Appendix C, respectively, attached hereto and are incorporated herein by reference. In connection with the execution of a letter of intent on April 16, 1999, CAI adopted a Shareholders' Rights Plan and declared a dividend of a right to buy one one-hundredth of a share of a new Series A Preferred Stock distributed to holders of each share of CAI's common stock. Under the Rights Plan, if a person (other than certain exempted persons, including MCI WorldCom), without first obtaining the prior approval of the CAI Board of Directors, becomes the beneficial owner of more than 15% of the CAI common stock (an "Acquiring Person"), then the rights distributed to holders of CAI's common stock would be exercisable for shares of CAI's common stock at a price that is 50% of the then current price of the CAI common stock. If, after a person becomes an Acquiring Person, CAI is acquired in a merger or other business combination or 50% or more of its consolidated assets or earning power are sold, then each right would be exercisable for shares of the acquiring party's common stock at a price that is 50% of the then current market price of such common stock. CAI may, in certain circumstances, exchange each right for a share of CAI common stock or redeem the rights for $0.001 per right. 6 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 6 OF 38 PAGES Upon consummation of the transactions contemplated by the Merger Agreement, CAI's shares of common stock will cease to be authorized to be traded on the over the counter market. MCI WorldCom understands that on April 29, 1999, CAI filed a Form 15 to terminate the registration of CAI's shares of common stock to under Section 12(g) of the Securities Exchange Act of 1934, which will become effective within 90 days thereafter unless withdrawn or denied. MCI WorldCom expects that the business and operations of CAI will be continued substantially as they are currently being conducted, although it plans to evaluate and review their businesses, operations and properties and make such changes as are deemed appropriate in light of the increasing demand for high speed Internet access and additional phone line services and other circumstances as they arise. After the merger, MCI WorldCom expects to explore the possibility of taking steps that would be required to cause CS Wireless Systems, Inc., a 94% owned subsidiary of CAI, to become a wholly owned subsidiary of CAI or MCI WorldCom. Additionally, after the merger, MCI WorldCom expects to take appropriate steps to review and possibly reduce or restructure the outstanding indebtedness of CAI and CS. Except as described above or as referred to in Appendix B or Appendix C attached hereto, MCI WorldCom has no present plans or proposals that would relate to or result in an extraordinary corporate transaction such as a merger, reorganization or liquidation involving CAI or any of its subsidiaries or a sale or other transfer of a material amount of assets of CAI or any of its subsidiaries, any material change in the capitalization or dividend policy of CAI or any other material change in CAI's corporate structure or business or the composition of CAI's Board of Directors or management. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a) and (b). Under the definition of "beneficial ownership" as set forth in Rule 13d-3 under the Exchange Act, the Purchaser currently has beneficial ownership of 8,284,425 Shares of CAI to be issued pursuant to the First Agreement, constituting approximately 48.0% of the outstanding Shares, based on the number of shares outstanding as of April 26, 1999, as advised by CAI. The Purchaser has sole voting and investment power over such Shares, provided that Purchaser has agreed in the Merger Agreement to vote its shares in favor of the Merger. See Item 6 herein with respect to Shares covered by the Second Agreement, which is incorporated herein by reference. (c) Except as set forth in this Item 5 or Items 4 and 6, to the best knowledge of Purchaser, it has, and no directors or executive officers of Purchaser and no other person described in Item 2 hereof has, beneficial ownership of, or has engaged in any transaction during the past 60 days in, any Shares. (d) Unless and until the closing under the Second Agreement occurs and Purchaser receives the Shares covered thereby, the Second Agreement Parties will have the right to receive or the power to direct the receipt of dividends from the Shares owned by them, and neither Purchaser nor any of its designees, if any, will have any right to receive or the power to direct the receipt of dividends from, or proceeds from the sale of any of those Shares. (e) Not applicable. 7 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 7 OF 38 PAGES ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER The Purchaser does not have any contract, arrangement, understanding, or relationship (legal or otherwise) with any person with respect to any securities of the Company other than as indicated below and elsewhere herein. See Item 4 and Appendices B and C hereto for descriptions of the Merger Agreement and the Stock Option Agreement, which descriptions are incorporated by reference herein. COMMON STOCK General On March 23, 1999, MCI WorldCom entered into certain separate agreements to acquire, among other things, 8,284,425 shares and 2,270,715 shares of CAI common stock, together constituting approximately 61.2% of the outstanding shares of CAI common stock as of April 26, 1999. The purchase price for such shares of common stock under the agreements is less than the purchase price of $28 per share to be paid to CAI shareholders in connection with the Merger described herein. On June 4, 1999, following expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 on May 30, 1999, MCI WorldCom acquired the 8,284,425 shares. The following description of such agreements does not purport to be complete and is qualified in its entirety by reference to such agreements. Representations and Warranties of the Sellers and MCI WorldCom The agreements contain various representations and warranties of the sellers relating to, among other things: (i) the ownership by the sellers of the shares of CAI common stock, (ii) their organization, existence, good standing, corporate power and authority and similar matters, (iii) the authorization, execution and delivery of the agreement, (iv) the absence of any required consents or approvals of or filings with certain governmental entities, except as provided therein, (v) the absence of any other written contracts or agreements relating to the shares; and (vi) the sophistication of and adequacy of information possessed by the sellers relating to the decision to sell the shares. The agreements contain various representations and warranties of MCI WorldCom relating to, among other things: (i) MCI WorldCom's organization, existence, good standing, corporate power and authority and similar matters, (ii) the authorization, execution and delivery of the agreement, (iii) the absence of any required consents or approvals of or filings with certain governmental entities, except as provided therein, (iv) the sophistication of and adequacy of information possessed by MCI WorldCom relating to the decision to purchase the shares, (v) the status of MCI WorldCom as an accredited investor and the shares as unregistered securities, (vi) brokers or finders fees, and (vii) filings under the HSR Act (as hereinafter defined) and with the FCC. Certain Covenants of the Sellers and MCI WorldCom Under the agreements, the sellers and MCI WorldCom agreed to perform certain covenants, including, without limitation, the following: Prior to the closing of the purchase of the CAI common stock under the agreements, the sellers are required to consult with MCI WorldCom with respect to the exercise of any material right under or relating to such CAI common stock; provided, that in the case of the agreement relating to the 8,284,425 8 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 8 OF 38 PAGES shares of CAI common stock, the agreement expressly provided that any investment, voting or other decision relating to the shares remained with and in the sole discretion of the sellers of such shares. In addition, the sellers have agreed not to knowingly exercise any rights or take any action under or relating to the CAI common stock that would adversely affect the ability to consummate the transactions contemplated thereby, or that would materially lessen the benefits or rights that MCI WorldCom would otherwise receive in connection with the transactions contemplated by the agreements. The agreements provide that, subject to certain limitations, the sellers are to promptly notify MCI WorldCom of any notices they receive with respect to the CAI common stock, and forward such notices to MCI WorldCom upon request. Furthermore, the sellers are required to pay to MCI WorldCom any distribution received that accrued for the period following the closing date. The agreements also provide that references to the CAI common stock to be sold under the agreements include any securities received by the sellers (i) in exchange therefor pursuant to any bankruptcy proceeding, (ii) pursuant to any stock split or dividend, or (iii) or otherwise in connection such securities, following the execution of the respective agreements and prior to the applicable closing dates. The agreements generally prohibit the parties from disclosing any Confidential Information (as defined therein) to any third party without the prior written consent of the other party, other than (a) to certain specified representatives, (b) as and only to the extent required by applicable law, rule, regulation or judicial process, (c) as and only to the extent requested or required by any state, federal or foreign authority or examiner regulating any of the sellers or MCI WorldCom, (d) information that, at the time of disclosure or thereafter, is generally available to the public (other than as a result of a disclosure in violation of the agreement), and (e) in the case of the agreement relating to the 2,270,715 shares, disclosure required to effect the transfers contemplated by the agreement; provided, that prior to any disclosure under certain provisions, such party promptly advises the other party when requested or required to make a disclosure thereunder. The sellers, including the employees, officers, directors and agents of the sellers, under both agreements are prohibited from making, soliciting, assisting or initiating any inquiry or proposal, or providing any information to or participating in any negotiations with any third parties other than MCI WorldCom for the purpose of consummating any sale, transfer or other disposition of any CAI common stock. Under the agreement covering the sale of the 2,270,715 shares, however, such restriction does not apply in the event the FCC denies its consent to the transfer of such shares. Conditions to Closing; Closing The agreements generally provide, among other things, that MCI WorldCom's obligation to purchase such securities is subject to certain conditions, including, without limitation, conditions relating to: (i) the delivery of such securities, (ii) the accuracy in all material respects of the representations and warranties of the sellers, (iii) the performance in all material respects of the covenants by the sellers, (iv) the expiration or early termination of any waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act") (provided that such condition cannot be waived), (v) in the case of the agreement to purchase 2,270,715 of such shares, the receipt of the consent of the FCC (provided that such condition cannot be waived), (vi) the absence of any orders or decrees entered in any action or proceeding before any court, agency or body enjoining the consummation of the agreement or, in the case of the agreement to purchase 8,284,425 of such shares, the absence of any action or proceeding for purposes of enjoining the agreement, and (vii) in the case of the agreement to purchase 2,270,715 of such shares, the failure to terminate the agreement. 9 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 9 OF 38 PAGES The agreements provide, among other things, that the sellers' obligations to sell such securities are subject to certain conditions, including, without limitation, relating to: (i) payment for the securities, (ii) the accuracy in all material respects of the representations and warranties of MCI WorldCom, (iii) the performance in all material respects of the covenants by MCI WorldCom, (iv) the absence of any orders or decrees entered in any action or proceeding before any court, agency or body enjoining the consummation of the agreement or, in the case of the agreement to purchase 8,284,425 of such shares, the absence of any action or proceeding for purposes of enjoining the agreement, and (v) in the case of the agreement to purchase 2,270,715 of such shares, the failure to terminate the agreement. The closing of the sale and purchase of 8,284,425 shares of the CAI common stock was scheduled to occur three days after the expiration or early termination of any waiting period under the HSR Act, or at such other time as the parties mutually agree in writing. The closing of the sale and purchase of 2,270,715 shares of the CAI common stock is scheduled to occur three days after the satisfaction or waiver of the conditions to closing, including, without limitation, expiration or early termination of any waiting period under the HSR Act and receipt of any required FCC approvals, or at such other time as the parties mutually agree in writing. Put Right Under one of the agreements, MCI WorldCom has been granted the right to sell no less than all of the 8,284,425 shares of CAI common stock, as well as the Senior Secured Notes (as hereinafter defined), $83,994,512 aggregate principal amount of Unsecured Notes (as hereinafter defined) and $129,000,000 aggregate principal amount of CS Senior Notes (as hereinafter defined), and certain other securities, purchased under the agreement back to the sellers for the purchase price paid. Such right becomes exerciseable upon the earlier of (i) June 21, 1999 if, among other things, the FCC has not consented to the transfer of more than 50% of the common stock of CAI to MCI WorldCom (or to the transfer of a controlling interest in CS to MCI WorldCom) or the applicable waiting period under the HSR Act applicable to the purchase of more than 50% of the capital stock of CAI has not expired or been terminated, or (ii) if the FCC has denied its consent to the transfer of more than 50% of the outstanding common stock of CAI to MCI WorldCom (or to the transfer of a controlling interest in CS to MCI WorldCom), upon such denial. MCI WorldCom will have three business days following the occurrence of the event making such right exercisable to give notice of its intent to exercise its put right. The rights and obligations of the parties relating to the closing of the put right are subject to customary conditions. Termination Rights The agreement covering 2,270,715 shares of CAI common stock provides that, subject to certain conditions, MCI WorldCom has the right terminate the agreement if, among other things, the FCC has notified MCI WorldCom that the FCC has denied any application required for the acquisition of the CAI common stock from the sellers, including the interest in CS represented thereby. In addition, subject to certain conditions, the sellers have the right to terminate the agreement if, among other things, the FCC has notified MCI WorldCom that the FCC has denied by final order any application required for the acquisition of sellers' CAI common stock, including the interest in CS represented thereby, and MCI WorldCom shall not have either terminated the agreement or acquired the remaining securities subject to such agreement within five business days after notice by the sellers to MCI WorldCom of the sellers' intention to terminate the agreement. In addition, either party may terminate the agreement if, among other things, the applicable closing under such agreement has not been completed by the final termination date, initially set as the 90th day after the date of the agreement (or, if not a business day, the next business day). From time to time, MCI WorldCom may elect to extend the final termination date to a date no later than 180 days after the date of the agreement by providing notice to the sellers. MCI 10 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 10 OF 38 PAGES WorldCom may not elect to extend the final termination date unless certain conditions are satisfied or waived, and the purpose of the extension is to await expiration or early termination of the applicable waiting period under the HSR Act or receipt of any required FCC consents, orders or approvals. MCI WorldCom plans to exercise its election to extend the final termination date. Senior Secured Notes due 2000 MCI WorldCom holds the $80,000,000 aggregate principal amount of outstanding Senior Secured Notes of CAI due 2000 ("Senior Secured Notes"). The Senior Secured Notes were issued under that certain Note Purchase Agreement dated as of October 14, 1998 ("Note Purchase Agreement"). The closing of the acquisition of the Senior Secured Notes occurred on March 26, 1999, at which time MCI WorldCom was assigned all right, title and interest in and to the Senior Secured Notes, and assumed all of the sellers' obligations under the Senior Secured Notes and the Note Purchase Agreement. 13% Senior Notes due 2004 MCI WorldCom holds $119,412,609 aggregate principal amount of unsecured 13% Senior Notes of CAI due October 14, 2004 ("Unsecured Notes"), issued pursuant to the Indenture dated October 14, 1998 ("Indenture") between CAI and State Street Bank and Trust Company, as trustee. The closings of the acquisitions of the Unsecured Notes occurred on March 26, 1999 and April 29, 1999, at which time MCI WorldCom was assigned all of the sellers' right, title and interest in and to the Unsecured Notes. 11.375% Senior Notes of CS MCI WorldCom also holds $215,750,000 aggregate principal amount of unsecured 11.375% Senior Notes of CS due 2006 ("CS Senior Notes"), issued pursuant to an Indenture dated February 15, 1996 ("CS Indenture") between CS Wireless and State Street Bank and Trust Company, as trustee. The closing on the acquisition of the CS Senior Notes occurred on March 26, 1999 and April 29, 1999, at which time MCI WorldCom was assigned all of the sellers' right, title and interest in and to the CS Senior Notes. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS *(a) Purchase and Sale Agreement, dated March 23, 1999, between the Purchaser and the First Agreement Parties. *(b) Purchase and Sale Agreement, dated March 23, 1999, between the Purchaser and the Second Agreement Parties. (c) Agreement and Plan of Merger dated as of April 26, 1999, by and among Purchaser, CAI and Acquisition. (d) Stock Option Agreement dated as of April 26, 1999, by and among Purchaser, CAI and Acquisition. (e) 364-day Revolving Credit and Term Loan Agreement, dated as of August 6, 1998, among the Purchaser (borrower), NationsBank, N.A. (Arranging Agent and Administrative Agent), NationsBanc Montgomery Securities LLC (Lead Arranger), Bank of America NT & SA, Barclays Bank PLC, The Chase Manhattan Bank, Citibank, N.A., Morgan Guaranty Trust Company of New York, and Royal Bank of Canada (Co-Syndication Agents) and the lenders named therein dated August 6, 1998 (incorporated herein by reference to Exhibit 10.3 to the Purchaser's Current Report on Form 8-K dated August 6, 1998 (filed August 7, 1998) (File No. 0-11258)). 11 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 11 OF 38 PAGES * CERTAIN TERMS OF THESE AGREEMENTS HAVE BEEN OMITTED PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 12 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 12 OF 38 PAGES SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: June 9, 1999 MCI WORLDCOM, INC. By: /s/ SCOTT D. SULLIVAN --------------------------------- Name: Scott D. Sullivan Title: Chief Financial Officer 13 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 13 OF 38 PAGES APPENDIX A INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF MCI WORLDCOM, INC. Directors and Executive Officers of the Purchaser. Set forth below are the name, current business address, citizenship and the present principal occupation or employment and material occupations, positions, offices or employments for the past five years of each director and executive officer of MCI WORLDCOM, Inc. The principal address of MCI WORLDCOM, Inc. and, unless otherwise indicated below, the current business address for each individual listed below is 500 Clinton Center Drive, Clinton, Mississippi 39056, U.S.A. Unless otherwise indicated, each such person is a citizen of the United States. Unless otherwise indicated, each occupation set forth opposite the individual's name refers to employment with MCI WORLDCOM, Inc. References to service with the Purchaser prior to September 1993 includes service with LDDS Communications, Inc., a Tennessee corporation, which was the accounting, but not the legal, survivor of a three-way merger with Metromedia Communications Corporation and Resurgens Communications Group, Inc.
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS ---------------- -------------------------------------------------- CLIFFORD L. ALEXANDER, JR. Mr. Alexander has been a director of the Purchaser since its merger Alexander & Associates, Inc. with MCI Communications Corporation ("MCI") in September 1998 (the 400 C. Street, N.E. "MCI Merger"). He has been President of Alexander & Associates, Washington, D.C. 20002 Inc., management consultants, since 1981. Mr. Alexander is also a U.S.A. director of Dreyfus 3rd Century Fund, Dreyfus General Family of Funds, Mutual of America Life Insurance Company, Dun & Bradstreet Corporation, American Home Products Corporation and IMS Health Incorporated. James C. Allen Mr. Allen has been a director of the Purchaser since March 1998. 3023 Club Drive Mr. Allen is currently an investment director and member of the Destin, FL 32541 general partner of Meritage Private Equity Fund, a venture capital U.S.A. fund specializing in the telecommunications industry. He is the former Vice Chairman and Chief Executive Officer and a former director of Brooks Fiber Properties, Inc. ("BFP"), where he served in such capacities from 1993 until its merger with the Purchaser in January 1998. Mr. Allen served as President and Chief Operating Officer of Brooks Telecommunications Corporation, a founder of BFP, from April 1993 until it was merged with BFP in January 1996. Mr. Allen serves as a director of Metronet Communications Corp., Verio Inc., Completel LLC, and David Lipscomb University. JUDITH AREEN Ms. Areen has been a director of the Purchaser since the MCI Merger. Georgetown University Law Center She was a director of MCI until the MCI Merger. She has been 600 New Jersey Avenue, N.W. Executive Vice President for Law Center Affairs and Dean of the Law Washington, D.C. 20001 Center, Georgetown University since 1989. She has been a Professor U.S.A. of Law, Georgetown University, since 1976.
14 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 14 OF 38 PAGES
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS ---------------- -------------------------------------------------- CARL J. AYCOCK Mr. Aycock has been a director of the Purchaser since 1983. Mr. 123 South Railroad Avenue Aycock served as Secretary of the Purchaser from 1987 to 1995 and Brookhaven, MS 39601 was the Secretary and Chief Financial Officer of Master Corporation, U.S.A. a motel management and ownership company, from 1989 until 1992. Subsequent to 1992, Mr. Aycock has been self employed as a financial administrator. MAX E. BOBBITT Mr. Bobbitt has been a director of the Purchaser since 1992. Mr. 62 Carmel Drive Bobbitt was a director of Advanced Telecommunications Corporation Little Rock, AR 72112 ("ATC") until its merger with the Purchaser in December 1992 (the U.S.A. "ATC Merger"). He is currently a director of Metromedia China Corporation, a telecommunications company. From March 1997 until June 1998, Mr. Bobbitt served as President and Chief Executive Officer of Metromedia China Corporation. From 1996 until February 1997, Mr. Bobbitt was President and Chief Executive Officer of Asian American Telecommunications Corporation. Prior to 1996, Mr. Bobbitt held various positions including President and Chief Operating Officer and director of ALLTEL Corporation, a telecommunications company, from 1970 until January 1995. BERNARD J. EBBERS Mr. Ebbers has been President and Chief Executive Officer of the Purchaser since April 1985. Mr. Ebbers has served as a director of the Purchaser since 1983. FRANCESCO GALESI Mr. Galesi has been a director of the Purchaser since 1992. Mr. The Galesi Group Galesi was a director of ATC until the ATC Merger. Mr. Galesi is the 435 East 52nd Street Chairman and Chief Executive Officer of the Galesi Group, which New York, NY 10022 includes companies engaged in distribution, manufacturing, real U.S.A. estate and telecommunications. Mr. Galesi serves as a director of Amnex, Inc., Walden Residential Properties, Inc. and American Real Estate Investment Corporation.
15 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 15 OF 38 PAGES
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS ---------------- -------------------------------------------------- STILES A. KELLETT, JR. Mr. Kellett has served as a director of the Purchaser since 1981. Mr. Kellett Investment Corporation Kellett has been Chairman of Kellett Investment Corporation since 200 Galleria Parkway, Suite 1800 1995. From 1978 to 1995, Mr. Kellett served as Chairman of the Board Atlanta, GA 30339 of Directors of Convalescent Services, Inc., a long-term health care U.S.A. company in Atlanta, Georgia. Mr. Kellett serves as a director of Frederica Bank & Trust Company, St. Simons Island, Georgia and Mariner Health Group, Inc., New London, Connecticut. GORDON S. MACKLIN Mr. Macklin has been a director of the Purchaser since the MCI 8212 Burning Tree Road Merger. He was a director of MCI until the MCI Merger. Mr. Macklin is Bethesda, MD 20817 currently a corporate financial advisor. From 1993 until 1998, Mr. U.S.A. Macklin served as Chairman, White River Corporation, an information services company. Mr. Macklin is also a director of Fund American Enterprises Holdings, Inc.; Martek Biosciences Corporation; MedImmune, Inc.; Spacehab, Inc.; Real 3-D; and director, trustee or managing general partner, as the case may be, of 49 of the investment companies in the Franklin Templeton Group of Funds. Mr. Macklin was formerly Chairman, Hambrecht and Quist Group; director, H&Q Healthcare Investors; and President, National Association of Securities Dealers, Inc. JOHN A. PORTER Mr. Porter has been a director of the Purchaser since 1988. Mr. Integra Funding Porter served as Vice Chairman of the Board of the Purchaser from 295 Bay Street, Suite 2 September 1993 until the Purchaser's merger with MFS Communications Easton, MD 21601 Company, Inc. ("MFS") in December 1996 (the "MFS Merger") and served U.S.A. as Chairman of the Board of Directors of the Purchaser from 1988 until September 1993. From May 1995 to the present, Mr. Porter has served as Chairman of the Board of Directors and Chief Executive Officer of Industrial Electric Manufacturing, Inc., a manufacturer of electrical power distribution products. Mr. Porter also serves as Chairman of Phillips & Brooks/Gladwin, Inc., a manufacturer of pay telephone enclosures and equipment. Mr. Porter was previously President and sole shareholder of P.M. Restaurant Group, Inc. which filed for protection under Chapter 11 of the United States Bankruptcy Code in March 1995. Subsequent to March 1995, Mr. Porter sold all of his shares in P.M. Restaurant Group, Inc. Mr. Porter is also a director of Uniroyal Technology Corporation, XL Connect, Inc. and Inktomi, Inc.
16 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 16 OF 38 PAGES
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS ---------------- -------------------------------------------------- TIMOTHY F. PRICE Mr. Price serves as President and Chief Executive Officer of MCI MCI WORLDCOM, Inc. WorldCom Communications, a business unit of the Purchaser. He has 1801 Pennsylvania Avenue, N.W. served as a director since the MCI Merger. Mr. Price served as a Washington, D.C. 20006 director of MCI until the MCI Merger. Mr. Price served as President U.S.A. and Chief Operating Officer of MCI from November 1996 until the MCI Merger. He has been President and Chief Operating officer of MCI Telecommunications Corporation, a subsidiary of MCI, ("MCIT"), since July 1995. He was an Executive Vice President and Group President of MCIT, serving as Group President, Communication Services, from December 1994 to July 1995. He was an Executive Vice President of MCIT, serving as President, Business Markets, from June 1993 to December 1994. He was a Senior Vice President of MCIT from November 1990 to June 1993, serving as President, Business Services, from July 1992 to June 1993 and as Senior Vice President, Consumer Markets, from November 1990 to July 1992. BERT C. ROBERTS, JR. Mr. Roberts serves as Chairman of the Board of the Purchaser. Mr. MCI WORLDCOM, Inc. Roberts served as a director of the Purchaser since the MCI Merger. 1801 Pennsylvania Avenue, N.W. He was a director of MCI until the MCI Merger. From 1992 until the Washington, D.C. 20006 MCI Merger, Mr. Roberts served as Chairman of the Board of MCI. Mr. U.S.A. Roberts was Chief Executive Officer of MCI from December 1991 to November 1996. He was President and Chief Operating Officer of MCI from October 1985 to June 1992 and President of MCIT from May 1982 to June 1998. Mr. Roberts is a director of The News Corporation Limited, Telefonica de Espana, S.A. ("Telefonica") and Valence Technology, Inc.. JOHN W. SIDGMORE Mr. Sidgmore serves as Vice Chairman of the Board of the Purchaser. MCI WORLDCOM, Inc. Mr. Sidgmore has been a director of the Purchaser since the MFS 3060 Williams Drive Merger and has served as a director of MFS since August 1996. From Fairfax, VA 22301 the MFS Merger until the MCI Merger, Mr. Sidgmore served as Vice U.S.A. Chairman of the Board and Chief Operations Officer of the Purchaser. Mr. Sidgmore was President and Chief Operating Officer of MFS from August 1996 until the MFS Merger. He was Chief Executive Officer of UUNET Technologies, Inc. ("UUNET") from June 1994 to October 1998, and President of UUNET from June 1994 to August 1996 and from January 1997 to September 1997. Mr. Sidgmore has been a director of UUNET since June 1994. From 1989 to 1994, he was President and Chief Executive Officer of CSC Intelicom, a telecommunications software company. Mr. Sidgmore is a director of Saville Systems PLC. SCOTT D. SULLIVAN Mr. Sullivan has been a director of the Purchaser since 1996. Mr. Sullivan serves as Chief Financial Officer and Secretary of the Purchaser. From the ATC Merger until December 1994, Mr. Sullivan served as Vice President and Assistant Treasurer of the Purchaser. From 1989 until 1992, Mr. Sullivan served as an executive officer of two long-distance companies, including ATC. From 1983 to 1989, Mr. Sullivan served in various capacities with KPMG LLP.
17 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 17 OF 38 PAGES
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS ---------------- -------------------------------------------------- LAWRENCE C. TUCKER Mr. Tucker has been a general partner of Brown Brothers Harriman & Brown Brothers Harriman & Co. Co., a private banking firm, since 1979. Mr. Taylor is also a 59 Wall Street director of Riverwood International Corporation, National Healthcare New York, NY 10005 Corporation and VAALCO Energy, Inc. Mr. Taylor has served as a U.S.A. director of the Purchaser since May 1995, and previously served as a director of the Purchaser from May 28, 1992 until the ATC Merger. JUAN VILLALONGA Mr. Villalonga has served as the Chairman and Chief Executive Officer (citizen of Spain) of Telefonica, a provider of telecommunications services in Spain, Telefonica de Espana, S.A since 1996. He has been a director of the Purchaser since November Gran Via 28, 9th floor 1998 pursuant to a Strategic Alliance Agreement among Telefonica, MCI 28013 Madrid and the Purchaser. Mr. Villalonga was previously the CEO of Bankers Spain Trust Spain and Portugal, the Chief Executive Officer of CS First Boston in Spain and a partner at Kinsey & Co., a consulting firm, for nine years.
18 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 18 OF 38 PAGES APPENDIX B SUMMARY OF THE MERGER AGREEMENT GENERAL Pursuant to the merger agreement, at the effective time of the merger, MCI WorldCom will acquire CAI through the merger of Cardinal Acquisition Subsidiary with and into CAI. At the effective time of the merger, Cardinal Acquisition Subsidiary will cease to exist, and CAI will be the surviving corporation and a wholly-owned subsidiary of MCI WorldCom. MERGER CONSIDERATION At the effective time of the merger, by virtue of the merger and without any action on the part of any shareholder, each issued and outstanding CAI common share held by CAI shareholders will be converted into the right to receive $28.00 in cash, without interest, except for shares canceled as described below and shares as to which dissenters' rights are exercised by a dissenting shareholder. All CAI common shares held as treasury shares will automatically be canceled and retired at the effective time of the merger and will cease to exist. No consideration will be delivered in exchange for these shares. Each CAI common share issued and outstanding immediately prior to the effective time of the merger that is owned by MCI WorldCom, Cardinal Acquisition Subsidiary, CAI or a subsidiary of CAI will be canceled as of the effective time of the merger, and no merger consideration will be payable with respect to such shares. As of the effective time of the merger, certificates representing all CAI common shares issued and outstanding immediately prior to the effective time (except for shares as to which dissenters? rights are exercised by a dissenting shareholder) will cease to have any rights with respect to those shares, except the right to receive the merger consideration in accordance with the terms of the merger agreement. As of the effective time of the merger, all shares of Cardinal Acquisition Subsidiary issued and outstanding immediately prior to the effective time of the merger will be converted into one share of common stock of CAI and will represent all of the issued and outstanding shares of CAI common stock after the merger. No dissenting shareholder will be entitled to any portion of the merger consideration or other distributions unless and until the dissenting shareholder fails to exercise or otherwise effectively withdraws or loses his or her rights to payment under Connecticut law. CAI common shares as to which dissenters' rights have been exercised will be treated in accordance with Sections 33-855 through 33-868 of the Connecticut Business Corporation Act. If any person, who otherwise would be deemed a dissenting shareholder, fails to properly exercise or effectively loses dissenters? rights with respect to any CAI common shares, those shares will be treated as though they had been converted as of the effective date of the merger into the right to receive the merger consideration, without interest. See "The Merger--Dissenters' Rights." EXCHANGE OF SHARES 19 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 19 OF 38 PAGES Prior to the effective time of the merger, MCI WorldCom will appoint an exchange agent. Immediately prior to the effective time of the merger, MCI WorldCom will deposit with the exchange agent funds in an amount sufficient to make the payments contemplated by the merger agreement. Soon after the completion of the merger, MCI WorldCom or the exchange agent will send a letter to each person who was a CAI shareholder as of the date the merger became effective. The letter will contain instructions on how to surrender CAI stock certificates to the exchange agent and receive the merger consideration. CAI shareholders have no right to any interest on the cash payable upon the surrender of CAI stock certificates. Any time following the sixth month after the effective time of the merger, CAI, as the surviving corporation, may require the exchange agent to deliver to it any portion of the funds deposited by MCI WorldCom with the exchange agent not already disbursed to CAI shareholders. In the event CAI requires the exchange agent to deliver such funds, CAI shareholders must thereafter look to CAI, as the surviving corporation, for payment of any merger consideration that may be payable to them upon surrender of their stock certificates. Any such shareholders will be deemed general creditors of CAI, as the surviving corporation, for such purpose. MCI WorldCom, CAI, as the surviving corporation, and the exchange agent will be entitled to withhold, from the merger consideration payable to any CAI shareholder, those amounts required to be deducted under tax law. All amounts so withheld will be deemed to have been paid to the applicable CAI shareholder. TREATMENT OF STOCK OPTIONS Prior to the effective time of the merger, each outstanding and unexpired option to purchase CAI common shares issued pursuant to its 1998 Stock Option Plan or its 1998 Outside Directors' Stock Option Plan that will be exercisable on the effective date of the merger in accordance with its terms, will be converted into the right to receive for each share subject to such option an amount in cash, subject to any applicable withholding tax, equal to the difference between $28 and the per share exercise price of such option to the extent such difference is a positive number. At the effective time of the merger, the CAI options will be canceled. The payment of these amounts will be made by the surviving corporation promptly following the effective time of the merger, provided that MCI WorldCom verifies the options and the optionee delivers a written instrument setting forth: o his or her number of options, their respective issue dates and exercise prices; o certain representations by the optionee; and o a confirmation of and consent to the conversion of the options as provided in the merger agreement. CAI agrees to cause all outstanding options to be amended to provide for and give effect to the transactions contemplated by the merger agreement. REPRESENTATIONS AND WARRANTIES In the merger agreement, CAI makes representations and warranties to MCI WorldCom and Cardinal Acquisition Subsidiary with respect to, among other things: o due organization and good standing of CAI and its subsidiaries; 20 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 20 OF 38 PAGES o capitalization, ownership of subsidiaries and other investments; o corporate authorization; o the vote required by the shareholders of CAI in connection with the merger agreement; o governmental approvals; o the opinion of BT Alex. Brown; o absence of any breach of organizational documents or material agreements or applicable law as a result of the contemplated transactions; o required, third-party consents under material contracts or any other obligation of CAI or any of its subsidiaries; o absence of any lien or encumbrance upon any asset of CAI or any of its subsidiaries; o accuracy of its filings with the Securities and Exchange Commission and other regulatory entities; o litigation, investigations or proceedings regarding violations of law; o accuracy of financial statements; o the absence of specified changes or events; o compliance with applicable law; o required licenses, permits and related FCC regulatory matters; o engagement of and payments to brokers, investment bankers, finders and financial advisors in connection with the merger agreement; o material contracts; o matters relating to compliance with the Employee Retirement Income Security Act of 1974, as amended, and other employee benefit matters; o tax matters; o liabilities; o environmental matters affecting CAI; o intellectual property matters; o owned and leased real property; 21 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 21 OF 38 PAGES o corporate records; o title to and condition of CAI's personal property; o absence of adverse actions against CAI and its subsidiaries or challenging the merger agreement; o labor and employee relations matters; o change of control agreements; o insurance; o satisfaction of Connecticut takeover statutes; o CAI's shareholder rights plan; o efforts to resolve any "Year 2000" computer problems; o outstanding CAI options; o transactions with affiliates; o absence of existing discussions by CAI with any third party relating to an alternative transaction; o various matters relating to CAI's investment in TelQuest Satellite Services LLC; o the accuracy of other information supplied by CAI; and o the preparation of the proxy statement. In the merger agreement, MCI WorldCom makes representations and warranties to CAI with respect to, among other things: o due organization and good standing of MCI WorldCom and Cardinal Acquisition Subsidiary; o corporate authorization; o governmental approvals; o absence of any breach of organizational documents or material agreements or applicable law as a result of the contemplated transactions; o required, third-party consents under any material contracts or any other obligation of MCI WorldCom or Cardinal Acquisition Subsidiary; o absence of any lien or encumbrance upon any asset of MCI WorldCom or Cardinal Acquisition Subsidiary; 22 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 22 OF 38 PAGES o engagement of and payments to brokers, investment bankers, finders and financial advisors in connection with the merger agreements; o MCI WorldCom's ownership of CAI debt and equity securities; and o the accuracy of information regarding MCI WorldCom and Cardinal Acquisition Subsidiary contained in the proxy statement, and the preparation of the proxy statement. CONDITIONS TO CLOSING CAI's and MCI WorldCom's obligation to effect the merger is subject to the satisfaction or waiver on or prior to the closing date of the merger of the following customary closing conditions: o the requisite approval by CAI shareholders of the merger agreement; o no order, statute, rule, regulation, executive order, stay, decree, judgment or injunction enacted, entered, promulgated, or enforced by any court or other governmental authority being in effect prohibiting or preventing the consummation of the merger or the other transactions contemplated under the merger agreement (CAI and MCI WorldCom being required to use their reasonable best efforts to have any of the foregoing vacated, dismissed or withdrawn by the effective time of the merger); o the waiting period, including any extensions, applicable to the consummation of the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 having expired or been terminated; o the opinion of BT Alex. Brown not being withdrawn; and o all consents, approvals and actions of, filings with and notices to any governmental authority required to consummate the merger and the other transactions contemplated by the merger agreement having been obtained by final order (other than those consents the failure of which to obtain, in MCI WorldCom's judgment, would not have a material adverse effect on the surviving corporation); the agreement providing that any approval relating to any FCC license must be obtained; and this condition may be waived by MCI WorldCom, in its sole judgment. In addition, MCI WorldCom's and Cardinal Acquisition Subsidiary's obligation to effect the merger is subject to the satisfaction or waiver of the following conditions: o the representations and warranties of CAI which are modified by materiality or material adverse effect being true and correct in all respects, and those not so modified by materiality or material adverse effect being true and correct in all material respects, as of the date of the merger agreement and as of the closing date, except for such changes not prohibited under the merger agreement and none of CAI's representations and warranties being untrue or incorrect to the extent that such untrue or incorrect, disregarding any materiality qualifications, representations and warranties, when taken as a whole, have had or would have a material adverse effect on CAI; 23 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 23 OF 38 PAGES o CAI having performed and complied with all covenants and agreements in all material respects and having satisfied in all material respects all conditions required to be performed or complied with or satisfied by it under the merger agreement at or prior to the effective time of the merger; o there having been no event that has or reasonably could be expected to have a material adverse effect on CAI or the surviving corporation, except as specified in the merger agreement; o no action, investigation or proceeding having been instituted, pending or threatened by any governmental authority, and there not being instituted, pending or threatened any action or proceeding by any other person, before any governmental authority, which is reasonably likely to be determined adversely to MCI WorldCom or Cardinal Acquisition Subsidiary: -- challenging or seeking to make illegal, delay materially or restrain or prohibit the consummation of the merger or seeking to obtain material damages or imposing any material adverse conditions in connection therewith or otherwise directly or indirectly relating to the transactions contemplated by the merger, -- seeking to restrain, prohibit or delay the exercise of full rights of ownership or operation by MCI WorldCom or Cardinal Acquisition Subsidiary or their affiliates of all or any portion of the business or assets of CAI and its subsidiaries, taken as a whole, or of MCI WorldCom or Cardinal Acquisition Subsidiary or any of their affiliates to dispose of or hold separate all or any material portion of the business or assets of CAI and its subsidiaries, taken as a whole, or of MCI WorldCom or Cardinal Acquisition Subsidiary or any of their affiliates, -- seeking to impose or confirm material limitations on the ability of MCI WorldCom or Cardinal Acquisition Subsidiary or any of their affiliates to exercise full rights of ownership of the CAI common shares, -- seeking to require divestiture by MCI WorldCom or Cardinal Acquisition Subsidiary or any of their affiliates of the CAI common shares, or -- that otherwise would reasonably be expected to have a material adverse effect on CAI; o at the effective time of the merger, holders of no more than 10% of the outstanding CAI common shares having taken actions to assert dissenters' rights under Connecticut law; o CAI having obtained or made the consents, approvals, waivers, authorizations or filings required in connection with the merger under all agreements or instruments to which it or any of its subsidiaries is a party, on terms and conditions reasonably acceptable to MCI WorldCom and such consents and approvals being in full force and effect, except those for which failure to obtain such consents and approvals would not in the judgment of MCI WorldCom have a material adverse effect prior to or after the effective time of the merger; provided that any consents relating to channel or tower site leases the failure 24 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 24 OF 38 PAGES of which to obtain in the aggregate are or would be material to CAI and its subsidiaries or are or would be material to the future plans or objectives of MCI WorldCom or the failure of which to obtain would otherwise have a material adverse effect, must have been obtained by CAI; and o CAI having furnished MCI WorldCom and Cardinal Acquisition Subsidiary with: -- a certificate dated the closing date signed on its behalf by an executive officer to the effect that certain specified conditions regarding accuracy of its representations and warranties and performance of its obligations have been satisfied, -- certificates of good standing, -- duly adopted Board and shareholder resolutions, -- copies of charter documents and by-laws, -- certain Noncompete and Confidentiality Agreements with specified executives of CAI, -- certain resignations, -- a list of shareholders of record, -- comfort letters, -- an opinion of counsel, and -- such other documents and instruments as MCI WorldCom reasonably may request. In addition, CAI's obligation to effect the merger is subject to the satisfaction or waiver of the following conditions: o the representations and warranties of MCI WorldCom which are modified by materiality or material adverse effect being true and correct in all respects, and those not so modified by materiality or material adverse effect being true and correct in all material respects, as of the date of the merger agreement and as of the closing date, except for such changes not prohibited under the merger agreement, and none of the representations and warranties of MCI WorldCom being untrue or incorrect, disregarding any materiality qualifications, to the extent that such untrue or incorrect representations or warranties, when taken as a whole, have had or would have a material adverse effect on MCI WorldCom; o MCI WorldCom having performed and complied with all covenants and agreements in all material respects and having satisfied in all material respects all conditions required to be performed or complied with or satisfied by it under the merger agreement at or prior to the effective time of the merger; and 25 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 25 OF 38 PAGES o MCI WorldCom having furnished CAI with a certificate dated the closing date signed on its behalf by an authorized officer to the effect that certain specified conditions have been satisfied. COVENANTS The merger agreement provides that, until the merger is completed, CAI will conduct its business in the ordinary course and consistent with past practice. CAI has agreed to use its reasonable business efforts to: o preserve its business organizations; o maintain and protect its FCC assets and channel leases; o maintain its insurance; o pay its accounts payable when due; o comply with all laws; o retain the services of its officers, agents and employees; and o maintain satisfactory existing business relationships. During the interim period between signing the merger agreement and the completion of the merger, CAI has agreed that it will not take certain actions without the consent of MCI WorldCom. More specifically, it has agreed not to: o amend its organizational documents or shareholder rights plan or merge with any person; o issue, sell, dispose of or encumber any shares of capital stock, options or warrants to acquire any shares of such capital stock; o declare or pay dividends or recapitalize or redeem capital shares; o incur any indebtedness, except for debt set forth in certain approved budgets; o assume or guarantee any obligations of another person; o make any capital expenditures or loans, advances or investments in another person, except as provided in the merger agreement; o acquire the stock or assets of, or merge or consolidate with, any other person or business; o voluntarily incur any material liability or obligation; o sell, lease or encumber property or assets; 26 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 26 OF 38 PAGES o increase any compensation or benefits payable, except for changes that are required under certain material contracts and increases in the ordinary course consistent with past practice of the lesser of 8% of the current compensation or $10,000 per annum, or increase in any manner the compensation of any director; o approve, enter into or otherwise increase, reprice or accelerate the payment or vesting of amounts, benefits or other rights payable or accrued under any employee benefit plan or terminate any employment, consulting or related arrangement; o enter into any employment agreement; o make certain elections with respect to taxes; o compromise, settle, forgive, cancel, grant any waiver or release relating to or otherwise adjust any debts, claims, rights or litigation owed to or involving CAI or its subsidiaries, other than in the ordinary course of business consistent with past practice, subject to certain limitations; o enter into or amend any lease as to real property; o enter into or amend certain agreements; o terminate any channel lease; o enter into, amend, modify or waive any rights under any channel lease other than in the ordinary course of business and subject to certain limitations and requirements; o enter into, amend, modify, terminate or waive any rights under any material contract, other than channel leases and FCC licenses, any material agreement or material obligation that restricts in any material respect, its activities or the activities of its subsidiaries, or any agreement or obligation that restricts in any material respect any other person; o enter into any leasing or licensing arrangements, take-or-pay arrangements or other affiliations, arrangements or agreements with respect to any channel lease, subject to certain limitations; o take any action with respect to indemnification of any person; o change accounting practices or policies; and o take any action that would reasonably be expected to result in a breach of any of its covenants, representations or warranties or to have a material adverse effect. No Solicitation. CAI has agreed (1) to immediately terminate any discussions or negotiations with any parties with respect to a Takeover Proposal (as described below) and (2) that neither CAI nor any of its officers, directors, employees, subsidiaries or advisors will, directly or indirectly through another person: 27 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 27 OF 38 PAGES o solicit, initiate or encourage or take any other action designed to facilitate any Takeover Proposal; or o participate in any discussions or negotiations regarding any Takeover Proposal. A "Takeover Proposal" means any inquiry, proposal or offer relating to any direct or indirect acquisition or purchase of: o 15% or more of the assets of CAI or any of its subsidiaries or 5% or more of any class of equity securities of CAI or any of its subsidiaries; o any tender offer or exchange offer that could result in any person owning 15% or more of any class of equity securities of CAI or any of its subsidiaries; or o any merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving CAI or any of its subsidiaries (other than the merger described in this proxy statement); or o any other transaction reasonably expected to impede, interfere with, prevent or materially delay the merger or which could reasonably be expected to dilute materially the benefits to MCI WorldCom of the transactions contemplated by the merger agreement. The merger agreement requires CAI to recommend to its shareholders that they approve the merger agreement and the transactions contemplated by the merger agreement. The CAI board and its committees are prohibited from: o withdrawing or modifying, or proposing publicly to withdraw or modify, the approval of the CAI board or its recommendation to its shareholders; o approving or recommending, or proposing publicly to approve or recommend, any Takeover Proposal; and o causing CAI to enter into any letter of intent, agreement in principal, acquisition agreement or other agreement related to any Takeover Proposal. In addition, CAI is required to immediately advise MCI WorldCom of any request for information or of any Takeover Proposal, the material terms and conditions of any such request or Takeover Proposal and the identity of the person making such request or Takeover Proposal. CAI is required to keep MCI WorldCom fully informed of the status and details of any such request or Takeover Proposal. The merger agreement does not prohibit CAI from (1) taking and disclosing to its shareholders a position consistent with its obligations under the merger agreement with respect to a tender offer required by law or (2) making any disclosure consistent with its obligations under the merger agreement to its shareholders if, in the good faith judgment of the board of directors, after receipt of advice from outside counsel, failure to disclose would be inconsistent with applicable law. The board of directors, however, cannot withdraw or modify its position or recommendation of the merger contemplated by the merger agreement. 28 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 28 OF 38 PAGES ADDITIONAL AGREEMENTS Shareholders Meeting. CAI has agreed to hold a meeting of its shareholders to vote on the merger and to use its reasonable best efforts to obtain the shareholders' approval. The board of directors has unanimously recommended the merger and the merger agreement. Notification of Certain Matters. CAI is required to notify MCI WorldCom promptly if: o CAI receives any notice of, or other communication relating to, a default or an event which, with notice or lapse of time or both, would become a default under any material contract of CAI; o CAI receives any notice or other communication from any third party alleging that the consent of such third party is or may be required in connection with the transactions contemplated by the merger agreement; o CAI receives any material notice or other communication from any governmental authority in connection with the transactions contemplated by the merger agreement; o an event occurs which would have a material adverse effect on CAI; o any litigation commences or is threatened involving or affecting CAI or any of its subsidiaries or affiliates, or any of their respective properties or assets, or, to its knowledge, any employee, agent, director or officer of CAI or any of its subsidiaries, in his or her capacity as such or as a fiduciary under a benefit plan of CAI, which, if pending on the date of the merger agreement, would have been required to have been disclosed or which relates to the consummation of the merger or any material development occurs in connection with any litigation previously disclosed by CAI; and o any event occurs that would cause a breach by CAI of any provision of the merger agreement or a related agreement, including any such breach that would occur if such event had taken place on or prior to the date of the merger agreement. Access to Information; Confidentiality. CAI has agreed to give MCI WorldCom and its officers, employees, accountants, counsel, financial advisors and other representatives, full access during normal business hours, upon reasonable notice, during the period prior to the effective time of the merger, to all of CAI's properties, books, contracts, commitments, personnel and records and all other information concerning its business, properties and personnel as MCI WorldCom reasonably requests. Efforts; Cooperation. Subject to the terms and conditions provided in the merger agreement, CAI has agreed to cooperate and use reasonable efforts to make, or cause to be made, all filings necessary or proper under applicable laws and regulations to consummate and make effective the transactions contemplated by the merger agreement, including cooperation in the preparation and filing of this proxy statement, any required filings under the Hart-Scott-Rodino Act or other filings and any amendments. CAI has also agreed that if, at any time after the effective time of the merger, any further action is necessary or desirable to carry out the purposes of the merger agreement, including the execution of additional instruments, CAI will take all such necessary action. 29 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 29 OF 38 PAGES CAI has agreed to use reasonable efforts to obtain as promptly as practicable all required consents and approvals of any governmental entity or any other person required in connection with, the consummation of the transactions contemplated by the merger agreement. In addition, CAI has agreed to coordinate with MCI WorldCom in advance of sending any communications to or scheduling any meetings with any governmental entity relating to the merger agreement or the merger and agreed to promptly share all correspondences or other communications received from any governmental entity relating to the merger agreement or the merger. Year 2000 Plan. CAI is required to use all commercially reasonable efforts to ensure that its "Year 2000" plan is completed in a timely manner. CAI must: o allow MCI WorldCom to monitor CAI's Year 2000 compliance issues and its Year 2000 plan; o notify MCI WorldCom if CAI does not achieve, or if it reasonably expects that it will not achieve, milestones and objectives identified in its Year 2000 plan; and o cooperate in good faith with MCI WorldCom's efforts to cause CAI to be Year 2000 compliant. Purchase of CAI Common Shares. CAI may not prohibit MCI WorldCom or any of its affiliates or associates from purchasing CAI common shares or entering into option, lock-up, voting or proxy agreements or any other similar agreements with respect to CAI common shares at any time prior to the consummation of the merger. Conversion of Options. Subject to certain limitations and requirements, CAI must: o modify each outstanding option exercisable on or prior to the effective time of the merger, and cause each such option either to be exercised (if otherwise exercisable) prior to the effective time of the merger, or to be canceled as of the effective time of the merger, in exchange for the option consideration described in the proxy statement; and o modify each outstanding option not exercisable on or prior to the effective time of the merger to be converted, as of the effective time of the merger, to the right to receive solely the option consideration described in the proxy statement, with such option otherwise becoming exercisable following the effective time of the merger, in accordance with its terms. Indemnification and Insurance. The merger agreement provides that the certificate of incorporation and by-laws of the surviving corporation must contain similar provisions with respect to indemnification and exculpation from liability set forth in the Certificate of Incorporation and By-Laws of CAI. MCI WorldCom may not, and shall cause the surviving corporation not to, amend, repeal or otherwise modify these provisions for a period of six years from the effective time of the merger in any manner that would materially and adversely affect the rights of individuals who at the effective time of the merger were directors, officers, employees or agents of CAI, unless such modification is required by law. MCI WorldCom has agreed to indemnify and hold each director and officer of CAI (determined as of the effective time of the merger) harmless against any costs or expenses (including reasonable attorneys' fees), judgments, fines, losses, claims, damages or liabilities incurred in connection with any 30 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 30 OF 38 PAGES claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to matters existing or occurring at or prior to the effective time of the merger, whether asserted or claimed prior to, at or after such time, to the fullest extent that CAI would have been permitted under Connecticut law and CAI's certificate of incorporation or by-laws in effect on April 26, 1999 to indemnify such person. The merger agreement also provides that for six years after the effective time of the merger, and to the extent available, the surviving corporation or MCI WorldCom will maintain officers' and directors' liability insurance with respect to those persons who were covered by CAI's directors' and officers' liability insurance policy on terms and amounts no less favorable than those in effect on the date of the merger agreement. MCI WorldCom, however, is not required to expend in any one year an amount in excess of 175% of the annual premiums currently paid by CAI for the insurance. If MCI WorldCom, the surviving corporation or any of its successors or assigns (1) consolidates with or merges into any other corporation or entity and is not the continuing or surviving corporation or entity of such consolidation or merger, or (2) transfers all or substantially all of its properties and assets to any person, corporation or entity, then, and in each case, proper provisions will be made so that the successors and assigns of MCI WorldCom or the surviving corporation, as the case may be, assume the indemnification and insurance obligations set forth in the merger agreement. Fees and Expenses. Except as described below under "Termination, Fees, Amendment and Waiver," whether or not the merger is completed, all fees and expenses incurred in connection with the merger, the merger agreement and the transactions contemplated thereby will be paid by the party incurring these fees or expenses. Amendment. To the extent permitted by law, the merger agreement may be amended by the parties at any time before or after the approval of the merger agreement by the CAI shareholders. After approval, however, the parties may not make any amendment that by law requires further approval by the CAI shareholders. Extension; Waiver. At any time prior to the effective time of the merger, a party may (a) extend the time for the performance of any of the obligations or other acts of the other party, (b) waive any inaccuracies in the representations and warranties of the other party contained in the merger agreement or in any document delivered pursuant to the merger agreement or (c) subject to the second sentence of the immediately preceding paragraph, waive compliance by the other party with any of the agreements or conditions contained in the merger agreement. Any agreement on the part of a party to any extension or waiver will be valid only if set forth in writing signed on behalf of the party extending or waiving the condition or agreement. The failure of any party to the merger agreement to assert its rights under the merger agreement or otherwise will not constitute a waiver of these rights. TERMINATION, FEES, AMENDMENT AND WAIVER The merger agreement may be terminated at any time prior to the effective time of the merger, whether before or after shareholder approval: o by mutual written consent of MCI WorldCom and CAI; o by either MCI WorldCom or CAI;: 31 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 31 OF 38 PAGES -- if the merger has not been completed by February 1, 2000; provided, however, that either party may extend such date to a date no later than May 1, 2000, if such party determines that additional time is necessary in connection with obtaining certain specified consents from governmental authorities; and provided, further, that the right to terminate the merger agreement will not be available to any party whose failure to perform any of its obligations under the merger agreement results in the failure of the merger to be completed by such time; -- if the special meeting has concluded and the approval of the shareholders of CAI has not been obtained; or -- if any court of competent jurisdiction or other governmental authority shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the consummation of the merger and such order, decree or ruling or other action shall have become final and nonappealable; o by MCI WorldCom, if CAI: -- breaches any of its representations modified by materiality or material adverse effect, -- materially breaches any of its representations not modified by materiality or material adverse effect, or -- breaches or fails to perform any material covenant or agreement contained in the merger agreement about which MCI WorldCom notifies CAI, if CAI fails to cure or otherwise resolve such breach or failure to perform to the reasonable satisfaction of MCI WorldCom within 20 days after CAI receives MCI WorldCom's notice; o by CAI, if MCI WorldCom: -- breaches any of its representations modified by materiality or material adverse effect, -- materially breaches any of its representations not modified by materiality or material adverse effect, or -- breaches or fails to perform any material covenant or agreement contained in the merger agreement about which CAI notifies MCI WorldCom, if MCI WorldCom fails to cure or otherwise resolve such breach or failure to perform to the reasonable satisfaction of CAI within 20 days after MCI WorldCom receives CAI's notice; or o by MCI WorldCom, if CAI breaches the no solicitation and shareholder recommendation provisions of the merger agreement. 32 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 32 OF 38 PAGES If either CAI or MCI WorldCom terminates the merger agreement, the merger agreement will become void and have no effect, without any liability or obligation on the part of CAI, MCI WorldCom or Cardinal Acquisition Subsidiary, other than the following provisions, which survive termination: o the obligation of CAI and MCI WorldCom to keep all non-public information connected with the merger confidential; o the agreement between CAI and MCI WorldCom to each pay their own fees and expenses, and CAI's obligation to pay MCI WorldCom a termination fee in certain circumstances; o the agreement among CAI, MCI WorldCom and Cardinal Acquisition Subsidiary to consult with each other before issuing press releases or other public statements and to only issue press releases or other public statements if required by law or a national securities exchange; and o the effects of termination as described under this ?Termination, Fees, Amendment and Waiver? section. CAI is obligated to pay to MCI WorldCom a termination fee of $18,000,000 if the merger agreement: o is terminated after a Takeover Proposal (or an announced intention to make a Takeover Proposal) has been made known to CAI, its shareholders or announced publicly; or o is terminated by MCI WorldCom as a result of a breach by CAI of the prohibitions against soliciting a Takeover Proposal. DISSENTERS' RIGHTS If the CAI merger is consummated, holders of CAI common shares will be entitled to relief as dissenting shareholders under Sections 33-855 through 33-868 of the Connecticut Business Corporation Act (the "CBCA"). Such holders will be entitled to such relief, however, only if they comply strictly with all of the procedural and other requirements of Sections 33-855 through 33-868. The following summary is qualified in its entirety by reference to Sections 33-855 through 33-868. In accordance with the provisions of Sections 33-855 to 33-872 of the CBCA, if the CAI merger is consummated, holders are entitled to dissent from, and shall have the right to be paid the fair value of all shares of CAI Common Stock they own in the event of consummation of the merger. As provided in CBCA Section 33-861(a), any CAI shareholder who wishes to assert dissenters' rights: o must deliver to CAI before the vote is taken on the merger written notice of such shareholder's intent to demand payment for such shareholder's shares if the merger is consummated; and o must not vote such shares in favor of the merger. That notice may be addressed to CAI's registered agent at its registered office or to CAI or its secretary at the following address: 18 Corporate Woods Boulevard, Third Floor, Albany, New York 12211. The rights of holders to be paid the value of their shares pursuant to Sections 33-855 to 33-872 of the CBCA 33 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 33 OF 38 PAGES are their exclusive remedy as a holder of such shares with respect to the merger, whether or not they proceed as provided in the statute. As provided in CBCA Section 33-862, if the merger is approved and the merger is consummated, CAI must deliver a written dissenters' notice to all shareholders who have satisfied the above described requirements of CBCA Section 33-861(a) no later than ten days after such consummation. That dissenters' notice would be required to: o state where the payment demand must be sent and where and when certificates for certificated shares must be deposited; o inform holders of uncertificated shares to what extent transfer of the shares will be restricted after the payment demand is received; o supply a form for demanding payment that both includes the date of the first announcement to news media or to shareholders of the terms of the merger agreement and requires that each shareholder asserting dissenters' rights certify whether or not such shareholder acquired beneficial ownership of the shares before that date; o set a date by which CAI must receive the payment demand, which date may not be fewer than 30 nor more than 60 days after the date CAI delivers the written dissenters' notice; and o be accompanied by a copy of CBCA Sections 33-855 to 33-872. As provided in CBCA Section 33-863(a), a shareholder receiving a dissenters' notice would be required to: o demand payment; o certify whether such shareholder acquired beneficial ownership of his or her shares before the date of the first announcement to news media or to shareholders of the terms of the merger agreement as set forth in the dissenters' notice; and o deposit the certificate or certificates representing such shareholder's shares in accordance with the terms of the dissenters' notice. A shareholder who does not demand payment or deposit his or her share certificates, each by the date set forth in the dissenters' notice, will not be entitled to payment for his or her shares under CBCA Sections 33-855 to 33-872. Except as provided below, upon receipt of a payment demand, CAI would be required to pay each shareholder who makes a proper demand for payment pursuant to CBCA Section 33-863(a) the amount CAI estimates to be the fair value of such shareholder's shares, plus accrued interest, as provided in CBCA Section 33-865(a). That payment would be required to be accompanied by: o CAI's balance sheet as of the end of a fiscal year ending not more than sixteen months before the date of payment, an income statement for that year and a statement of changes in shareholders' equity for that year, and the latest available interim financial statements, if any; 34 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 34 OF 38 PAGES o a statement of CAI's estimate of the fair value of the shares; o an explanation of how the interest was calculated; o a statement of the shareholder's right to demand payment under CBCA Section 33-868; and o a copy of CBCA Sections 33-855 to 33-872. Pursuant to CBCA Section 33-868, a dissenting shareholder would be permitted to notify CAI in writing of such shareholder's own estimate of the fair value of his or her shares and the amount of interest due, and demand payment of his or her estimate, less any payment CAI makes under CBCA Section 33-865, if: o such shareholder believes that the amount paid under CBCA Section 33-865 is less than the fair value of such shareholder's shares or that the interest due is incorrectly calculated; o CAI fails to make payment under CBCA Section 33-865 within 60 days after the date set for such shareholder's demand payment; or o CAI fails to close the merger and does not return the deposited certificates or release the transfer restrictions imposed on uncertificated shares within 60 days after the date set for demanding payment. A dissenting shareholder will waive his or her right to demand payment under CBCA Section 33-868 if such shareholder does not notify CAI of his or her demand in writing within 30 days after CAI makes payment for such shareholder's shares. Pursuant to CBCA Section 33-871(a) and (b), if a dissenting shareholder's demand for payment under CBCA Section 33-868 remains unsettled, CAI must commence a proceeding within 60 days after receipt of such shareholder's demand for payment and petition the superior court for the judicial district where CAI's registered office in the State of Connecticut is located to determine the fair value of such shareholder's shares and accrued interest. If CAI fails to timely commence such proceeding, CAI must pay each dissenting shareholder whose demand remains unsettled the amount demanded. All dissenting shareholders making such demand for payment as described above, whose demands remain unsettled, shall be made parties to the proceeding, and all parties must be served with a copy of the petition. Dissenting shareholders not resident in Connecticut may be served by registered or certified mail or by publication as provided by law. The jurisdiction of the court is plenary and exclusive. The court may, but need not, appoint one or more appraisers to receive evidence and recommend a decision on the question of fair value. If appointed, the appraiser will have the powers described in the order appointing them, or in any amendment to it. The dissenting shareholders will be entitled to the same discovery rights as parties in other civil proceedings. Each CAI shareholder made a party to the proceeding will be entitled to judgment for the amount, if any, by which the court finds the fair value of such shareholder's shares, plus interest, exceeds the amount paid by CAI. The costs and expenses, including the reasonable compensation and expenses of court-appointed appraisers, of any such proceeding will be determined by the court and will be assessed against CAI, except that the court may assess costs against all or some dissenting shareholders, in amounts the court finds equitable, to the extent the court finds that they acted arbitrarily, vexatiously or not in good faith in 35 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 35 OF 38 PAGES demanding payment under CBCA Section 33-868. The court may also assess the fees and expenses of counsel and experts employed by any party, in amounts the court finds equitable: o against CAI in favor of any or all dissenting shareholders if the court finds that CAI failed to substantially comply with the requirements of CBCA Sections 33-860 to 33-868, inclusive, or o against either CAI or a dissenting shareholder, in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously or not in good faith with respect to rights provided by CBCA Sections 33-855 to 33-872, inclusive. If the court finds that the services of counsel for any dissenting shareholder were of substantial benefit to other dissenting shareholders similarly situated, and that such fees should not be assessed against CAI, the court may award to those counsel reasonable fees to be paid out of the amounts awarded to the dissenting shareholders who were benefitted. The foregoing is only a summary of the dissenters' rights of holders of CAI common shares, in the event the CAI merger is consummated. Any CAI shareholder who intends to exercise dissenters' rights should carefully review the text of the applicable provisions of the CBCA. The failure of a holder of CAI common shares to follow precisely the procedures summarized above and set forth in the CBCA may result in loss of dissenters' rights. 36 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 36 OF 38 PAGES APPENDIX C SUMMARY OF STOCK OPTION AGREEMENT On April 26, 1999, CAI entered into a stock option agreement granting to MCI WorldCom an option to acquire up to 6,090,481 CAI common shares, at a price of $28.00 per share. The number of CAI common shares subject to the option represents all of the authorized but unissued CAI common shares available to CAI to be issued and is subject to adjustment in particular instances. The remaining terms of the stock option agreement are summarized below. MCI WorldCom may exercise its option only upon the occurrence of any of the following "purchase events": o if CAI recommends to its shareholders, or it or any person other than MCI WorldCom or its affiliates publicly proposes or publicly announces a Takeover Proposal (as defined above) that is not withdrawn at the time of the option exercise; o if any person other than MCI WorldCom or its affiliates acquires beneficial ownership of 15% or more of the voting securities of CAI; or o if the CAI board withdraws or modifies in any adverse manner its recommendation with respect to the merger agreement and the merger. The option terminates: o if the merger is consummated, upon the completion of the merger; o if the merger agreement is terminated for any reason and a purchase event (described above) has occurred prior to such termination, 18 months after the occurrence of such purchase event; o if the merger agreement is terminated: -- by mutual consent of the parties, -- because the merger has not occurred within the time frame contemplated by the merger agreement, -- as a result of a final, non-appealable order, decree or ruling enjoining or otherwise prohibiting the consummation of the merger, -- as a result of breach by MCI WorldCom of any of its representations modified by materiality or material adverse effect, -- as a result of material breach by MCI WorldCom of any of its representations not modified by materiality or material adverse effect, or -- as a result of breach or failure to perform by MCI WorldCom of any material covenant or agreement contained in the merger agreement about which CAI 37 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 37 OF 38 PAGES notifies MCI WorldCom, if MCI WorldCom fails to cure or otherwise resolve such breach or failure to perform to the reasonable satisfaction of CAI within 20 days after MCI WorldCom receives CAI's notice; o if the merger agreement is terminated for any reason other than those specified in the immediately preceding bullet point, 18 months after such termination; and o 30 months from the date of the stock option agreement. CAI is required to notify MCI WorldCom if: o CAI recommends to Shareholders, or CAI or any person (other than MCI WorldCom or any affiliate or associate of MCI WorldCom) publicly proposes or publicly announces, a bona fide Takeover Proposal that is not withdrawn at the time of the exercise of the option; o any person (other than MCI WorldCom or any affiliate or associate of MCI WorldCom) acquires beneficial ownership (as such term is defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934) of or has the right to acquire beneficial ownership of, or any "group" (as such term is defined in Section 13(d)(3) of the Securities Exchange Act), other than a group of which MCI WorldCom or any affiliate or associate of MCI WorldCom is a member, is formed which beneficially owns, or has the right to acquire beneficial ownership of, 15% or more of the voting power of CAI; or o the CAI board withdraws or modifies in a manner adverse to MCI WorldCom its recommendation with respect to the merger agreement and the merger. MCI WorldCom's right to exercise the option will not be affected if CAI fails to notify MCI WorldCom of any such event. MCI WorldCom will send CAI notice if it wishes to exercise the option. If prior notification to or approval of any governmental authority is required in connection with MCI WorldCom's purchase of its common shares, CAI must cooperate in the filing of the required notice or application for approval and the obtaining of such approval. MCI WorldCom's purchase of its common shares will close immediately after such regulatory approvals (and any mandatory waiting periods). MCI WorldCom granted CAI, or a nominee of CAI, a power of attorney to vote, at any meeting of its shareholders called to consider the merger agreement, any option shares acquired by it on or prior to the record date. The power of attorney and proxy granted by MCI WorldCom lasts from the date of the stock option agreement to the earlier to occur of the termination of the merger agreement or the effective time of the merger and includes the right to sign its name (as shareholder) to any consent, certificate or other document relating to CAI that the law of the State of Connecticut may permit or require: o in favor of the merger agreement and the merger; and o against any proposal for any recapitalization, merger (other than the merger described in this proxy statement), sale of assets or other business combination between CAI and any person or entity (other than MCI WorldCom or Cardinal Acquisition Subsidiary or other permitted assignee thereof under the merger agreement) or any other action or agreement 38 CUSIP NO. 12476P 20 3 SCHEDULE 13D PAGE 38 OF 38 PAGES that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of MCI WorldCom under the merger agreement or which could result in any of the conditions to the merger agreement not being fulfilled. The stock option agreement contains representations and warranties of CAI, including: o corporate authority; o beneficial ownership; o capitalization and shares reserved for issuance upon exercise of the option; and o absence of any breach of organizational documents or material agreements as a result of the contemplated transactions. The stock option agreement also contains representations and warranties of MCI WorldCom, including corporate authority and investment representations. The stock option agreement also contains standard demand and piggyback registration rights relating to the CAI common stock underlying the option represented by the stock option agreement, as well as certain other customary terms. 39 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------ ----------- *(a) Purchase and Sale Agreement, dated March 23, 1999, between the Purchaser and the First Agreement Parties. *(b) Purchase and Sale Agreement, dated March 23, 1999, between the Purchaser and the Second Agreement Parties. (c) Agreement and Plan of Merger dated as of April 26, 1999, by and among Purchaser, CAI and Acquisition. (d) Stock Option Agreement dated as of April 26, 1999, by and among Purchaser, CAI and Acquisition. (e) 364-day Revolving Credit and Term Loan Agreement, dated as of August 6, 1998, among the Purchaser (borrower), NationsBank, N.A. (Arranging Agent and Administrative Agent), NationsBanc Montgomery Securities LLC (Lead Arranger), Bank of America NT & SA, Barclays Bank PLC, The Chase Manhattan Bank, Citibank, N.A., Morgan Guaranty Trust Company of New York, and Royal Bank of Canada (Co-Syndication Agents) and the lenders named therein dated August 6, 1998 (incorporated herein by reference to Exhibit 10.3 to the Purchaser's Current Report on Form 8-K dated August 6, 1998 (filed August 7, 1998) (File No. 0-11258)).
* CERTAIN TERMS OF THESE AGREEMENTS HAVE BEEN OMITTED PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. EX-99.(A) 2 PURCHASE AND SALE AGREEMENT 1 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. EXHIBIT A PURCHASE AND SALE AGREEMENT PURCHASE AND SALE AGREEMENT dated as of March __, 1999, between * and * (each a "Seller" and collectively, "Sellers") and MCI WORLDCOM, Inc. ("Purchaser"). PRELIMINARY STATEMENTS 1. Sellers hold the following securities: (a) CAI Wireless Systems, Inc.: 2, 270,715 shares of common stock (the "CAI Equity Securities"); (b) CAI Wireless Systems, Inc.: $35,418,097 face amount of 13% Senior Notes due 2004 issued pursuant to an Indenture (the "CAI Senior Note Indenture") (the "CAI Note Securities" and together with the CAI Equity Securities, the "CAI Securities"); (c) * : $ * face amount of 14.50% Senior Discount Notes due * issued pursuant to an Indenture (the " * Senior Note Indenture") (" * Securities"); and (d) CS Wireless Systems, Inc.: $86,750,000 face amount of 11.375% Senior Discount Notes due 2006 issued pursuant to an Indenture (the "CS Senior Note Indenture" and together with the CAI Senior Note Indenture and the ATEL Senior Note Indenture, the "Indentures") ("CS Securities" and collectively with the CAI Securities and the ATEL Securities, the "Securities"). 2. Sellers wish to sell and assign, and Purchaser wishes to purchase, the Securities, together with all accreted interest thereon as of the applicable Closing Date, and the Assigned Rights, subject to the terms and conditions hereof. As used herein, the term "Assigned Rights" shall include all of Sellers right, title and interest in and to, or derived from, the Securities, including without limitation all of its rights as a holder of the Securities under the Indentures. NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the Sellers and Purchaser agree as follows. - --------------- * Confidential portions omitted pursuant to a confidential treatment request and filed separately with Securities and Exchange Commission 1 2 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. ARTICLE I. PURCHASE AND SALE SECTION 1.01. Purchase and Sale. Upon the terms and subject to the conditions of this Agreement, each of the Sellers agrees to sell, assign, convey, transfer and deliver, and Purchaser agrees to purchase, acquire, accept and pay for, all of such Seller's right, title and interest in the Securities, together with all accrued and unpaid interest thereon and fees with respect thereto and the Assigned Rights with respect to the Securities on the Closing Date (as defined below). SECTION 1.02. Purchase Price. As consideration for the sale, assignment, conveyance, transfer and delivery of the Securities contemplated in Section 1.01, Purchaser shall pay or cause to be paid an aggregate amount set forth in the applicable Schedule as the Purchase Price (the "Purchase Price"). The Purchase Price shall be allocated among the Securities in the manner and to the extent set forth in the attached Schedules. SECTION 1.03. Closing. Upon the terms and subject to the conditions of this Agreement, the closing of the transactions contemplated by this Agreement (the "Closing") shall take place at 10:00 a.m. on the third Business Day (as defined below) after which each of the conditions set forth in Section 4.01 and Section 4.02 have been satisfied or duly waived, or, if the Sellers and the Purchaser agree to a different date, such different date (the "Closing Date"). In the event Purchaser has elected to purchase all (but not less than all) of the Securities other than the CAI Equity Securities in accordance with Section 4.03, the closing of such purchase (the "Initial Closing") shall take place at 10:00 a.m. on the third Business Day following the date Purchaser gives notice of such election or, if the Sellers and the Purchaser agree to a different date, such different date (the "Initial Closing Date"). The Closing and, if applicable, the Initial Closing, shall take place in the offices of Bryan Cave LLP, New York, New York. "Business Day" shall mean any day other than a Saturday, Sunday or legal holiday under the laws of New York or any day on which banking institutions located in such state are authorized or required by law or other governmental action to close. SECTION 1.04. Closing Deliveries by Sellers. (a) On the Closing Date, if there has not been an Initial Closing Date, each Seller shall deliver or cause to be delivered to Purchaser all of such Seller's right, title and interest in and to all of the Securities, and all documentation related thereto, and whatever documents of conveyance or transfer may be necessary or desirable to transfer to and confirm in Purchaser, or at Purchaser's request, Purchaser's nominee, all right, title and interest in and to the Securities and the related Assigned Rights. Sellers shall also deliver to Purchaser prior to such Closing Date joint written notice of the wire account into which the Purchase Price shall be transferred (the 2 3 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. "Total Payment Instruction"). The Sellers agree that Purchaser shall have no obligation to allocate the Purchase Price among the Sellers. (b) On the Closing Date, if there has been an Initial Closing Date, each Seller shall deliver or cause to be delivered to Purchaser all of such Seller's right, title and interest in and to the CAI Equity Securities, and all documentation related thereto, and whatever documents of conveyance or transfer may be necessary or desirable to transfer to and confirm in Purchaser, or at Purchaser's request, Purchaser's nominee, all right, title and interest in and to the CAI Equity Securities. Sellers shall also deliver to Purchaser prior to such Closing Date joint written notice of the wire account into which the portion of the Purchase Price allocated to the CAI Equity Securities shall be transferred. (the "CAI Payment Instruction"). The Sellers agree that Purchaser shall have no obligation to allocate the Purchase Price among the Sellers. (c) On the Initial Closing Date, if any, each Seller shall deliver or cause to be delivered to Purchaser all of such Seller's right, title and interest in and to all of the Securities other than the CAI Equity Securities, and all documentation related thereto, and whatever documents of conveyance or transfer may be necessary or desirable to transfer to and confirm in Purchaser, or at Purchaser's request, Purchaser's nominee, all right, title and interest in and to the Securities, other than the CAI Equity Securities, and the related Assigned Rights. Sellers shall also deliver to Purchaser prior to such Initial Closing Date joint written notice of the wire account into which the portion of the Purchase Price allocated to the Securities other than the CAI Equity Securities shall be transferred (the "Initial Payment Instruction"). The Sellers agree that Purchaser shall have no obligation to allocate the Purchase Price among the Sellers. SECTION 1.05. Closing Deliveries by Purchaser. (a) On the Closing Date, if there has not been an Initial Closing Date, Purchaser shall pay the Purchase Price in same day funds by wire transfer in accordance with the Total Payment Instruction. (b) On the Closing Date, if there has been an Initial Closing Date, Purchaser shall pay the Purchase Price allocated to the CAI Equity Securities in same day funds by wire transfer in accordance with the CAI Payment Instruction. (c) On the Initial Closing Date, if any, Purchaser shall pay the Purchase Price allocated to all of the Securities other than the CAI Equity Securities in same day funds by wire transfer in accordance with the Initial Payment Instruction. 3 4 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. SECTION 1.06 Additional Securities. (a) On April 9, 1999, Sellers shall offer to sell to Purchaser the following securities issued by * (" * ") at the * Purchase Price, as specified on Schedule II: (i) $ * face amount of 13.125% Senior Discount Notes due * issued pursuant to an Indenture (the " * Senior Note Indenture"); and (ii) * "Units", each one consisting of $ * face amount of 13.125% Senior Discount Notes due * and one warrant to purchase * shares of common stock of * governed by a Warrant Agreement (the " * Warrant") (the securities described in clause (i) and this clause (ii), collectively, the " * Securities"). (b) Purchaser shall not be obligated to purchase the * Securities. If Purchaser determines at such time, in its sole and absolute discretion, to purchase the * Securities at the * Purchase Price, it will confirm its willingness to accept the offer in writing on or before April 12, 1999. Immediately upon receipt of such written confirmation, (i) the * Securities shall be deemed to be, and shall be included, in the definition of, Securities, (ii) the * Senior Note Indenture shall be deemed to be, and shall be included, in the definition of, the Indentures, (iii) Seller's rights under the * Senior Note Indenture and the * Warrant shall be deemed to be, and shall be included, in the definition of, the Assigned Rights, and (iv) the * Purchase Price shall be deemed to be, and shall be included in the definition of, Purchase Price, in each case, for all purposes under this Agreement and, for the purposes of Article II, relating back to the date of this Agreement. ARTICLE II. REPRESENTATIONS AND COVENANTS OF SELLERS SECTION 2.01. Representations and Warranties and Covenants of Sellers. Each Seller, severally and not jointly and each solely as to itself, hereby represents, warrants and covenants to Purchaser: (a) Such Seller is the sole legal and beneficial owner and beneficial holder of the Securities (or, in the case of the * Warrants, the beneficial owner and beneficial holder of the Warrants) to be assigned by it hereunder and has undivided good title to such Securities, free and clear of any lien, security interest or other adverse claim; - ----------------------- * Confidential portions omitted pursuant to a confidential treatment request and filed separately with Securities and Exchange Commission 4 5 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. (b) Such Seller is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, and has the full power and authority to take, and has taken, all action necessary to execute and deliver this Agreement and any other documents required or permitted to be executed or delivered by it in connection with this Agreement and to fulfill its obligations hereunder except that Seller has not yet taken the actions required to be taken under normal and customary transfer provisions set forth in the Indentures and the Warrant, and the execution, delivery and performance by it of this Agreement does not violate its charter or bylaws or any law, rule, regulation, order or decree applicable to it and does not conflict with or result in the breach of any contract or other instrument binding upon it; (c) This Agreement has been duly executed and delivered by such Seller and constitutes the legal, valid and binding obligation of such Seller, enforceable against such Seller in accordance with its terms, subject to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors' rights and to general equitable principles, provided, that such Seller makes no representation by reason of this paragraph (c) with respect to the collectability or enforceability of any of the Securities or the Assigned Rights or any portion thereof; (d) No notice to, registration or filing with, consent or approval of, or other action by, any person or federal, state or other governmental agency, authority, administrator or regulatory body, arbitrator, court or other tribunal, foreign or domestic, is required in connection with the due execution, delivery and performance of this Agreement by such Seller and the sale by such Seller of the Securities to be assigned by it hereunder, except that Seller has not yet taken the actions required to be taken under normal and customary transfer provisions set forth in the Indentures and the Warrant and as provided for herein or such consents as shall no longer be necessary on the applicable Closing Date; (e) Prior to the closing of the purchase of a Security hereunder, Seller shall consult with Purchaser with respect to the exercise of any material right under or relating to, and the taking of any material action with respect to, the Securities or Assigned Rights, except in each case to the extent it may be contractually or legally prohibited from doing so. Prior to the closing of the purchase of a Security hereunder, Seller shall not knowingly exercise any rights under or relating to, or take any action with respect to, the Securities or Assigned Rights which Seller knows would have the effect of adversely affecting the ability to consummate the transactions contemplated hereby or which Seller knows would materially lessen the benefits or rights that Purchaser would otherwise receive in connection with the transactions contemplated hereby. (f) Other than this Agreement and except as may have been previously discussed with Purchaser, Seller has not entered into any contract, agreement or written document which conveys 5 6 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. or purports to convey rights to any person or entity that relate to, or restricts the sale of, the Securities or the Assigned Rights. (g) Seller has not made any filings under Rule 144 under the Securities Act of 1933 (the "Securities Act"), Section 13(d), Section 13(g) or Section 16 of the Securities Exchange Act of 1934 (the "Securities Exchange Act"), or any other statute, rule or regulation under the federal securities laws relating to the transactions contemplated hereby, or the Securities, except for the filing made on behalf of Sellers relating to the CAI Equity Securities on FORM 13G/A (including all related prior FORMs 13G and 13G/A, if any) and FORM 3. Seller has not made any public disclosure of any kind relating to this Agreement or the transactions contemplated hereby except that Seller has made disclosure and may hereafter make disclosure to employees, officers, directors and advisors or other persons who have a need to know such information and are subject to appropriate obligations of confidentiality (whether in writing or otherwise) and Seller may make such other disclosure which does not violate the provisions of Section 6.11. To the best of Seller's knowledge, Seller is not required to make any filing with respect to the Securities or the transactions contemplated hereby under Rule 144 of the Securities Act, Section 13(d), Section 13(g) or Section 16 of the Securities Exchange Act, or any other statute, rule or regulation under the federal securities laws earlier than April 25, 1999 (or, if sooner, the Closing Date); provided, however, if such Seller determines that any such filing shall be required prior to April 25, 1999 (or, if sooner, the Closing Date), Seller shall consult with Purchaser of its determination within a reasonable period prior to the making of such filing; (h) Seller does not possess any other right, title or interest of any kind in any issuer of the Securities other than the Securities and the Assigned Rights. Except as disclosed to Purchaser prior to the execution of this Agreement, Seller does not possess any interest of any kind in or have any representatives on the board of directors of any person or entity whose primary business, to such Seller's actual knowledge, is in the wireless CATV industry or the use of the MMDS, MDS, ITFS or H channels and whom Purchaser identifies to Seller from time to time as being such an entity or person (such persons and entities, collectively, "Restricted Persons"). Within six months after the execution of this Agreement, no Seller shall purchase or otherwise acquire any interest of any kind in or have any representatives on the board of directors of any Restricted Person; (i) Seller has not entered into any agreement with respect to the Securities that contains provisions which, upon consummation of the transactions contemplated hereby, prohibit Purchaser from exchanging or materially impair Purchaser's ability to exchange, any of the debt Securities for any type of securities in any potential case commenced under chapter 11 of the United States Bankruptcy Code for the issuer of such Securities. (j) Seller is a sophisticated seller and with respect to the Securities, has adequate information concerning the business and financial condition of each issuer of such Securities to 6 7 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. make an informed decision regarding the Securities, and has independently, without reliance upon Purchaser and based on such information as it deemed appropriate, made its own analysis and decision to enter into this Agreement. Seller acknowledges and agrees that Purchaser may possess material information with respect to any issuer of such Securities not known to Seller or otherwise publicly available which may be material to a decision to sell the Securities (the "Purchaser Non-public Information"), that Seller has determined to sell the Securities notwithstanding its lack of knowledge of the Purchaser Non-public Information, that Seller may be at a disadvantage because of the disparity of information between Purchaser and Seller and that Purchaser is relying on the provisions of this Section 2.01(j) in engaging in the transactions contemplated in this Agreement and would not engage in such transactions in the absence of these provisions. Seller irrevocably and unconditionally waives and releases Purchaser and its affiliates from all claims that Seller might have (whether for damages, recision or any other relief) based on Purchaser's possession or non-disclosure of the Purchaser Non-public Information to Seller, and Seller agrees not to solicit or encourage, directly or indirectly, any other person or entity to assert such a claim; provided that the foregoing shall not operate to lessen any liability for the breach of a representation, warranty or covenant contained herein. The provisions of this Section 2.01(j) shall survive the occurrence of the Termination Date and termination of this Agreement; and (k) Seller shall cooperate with Purchaser in connection with any necessary application(s) for the consent of the Federal Communications Commission ("FCC") required for the transfer of the CAI Equity Securities as provided in this Agreement as soon as practicable after April 15, 1999, including, without limitation, supplying as promptly as possible any additional information and documentary material that may be requested by the FCC in order to obtain such consent. ARTICLE III. REPRESENTATIONS AND COVENANTS OF PURCHASER SECTION 3.01. Representations, Warranties and Covenants of Purchaser. Purchaser hereby represents, warrants and covenants to each of the Sellers that: (a) Purchaser is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation, and has the full power and authority to take, and has taken, all action necessary to execute and deliver this Agreement, and any other documents required or permitted to be executed or delivered by it in connection with this Agreement, and to fulfill its obligations hereunder, and the execution, delivery and performance by it of this Agreement does not violate its charter or bylaws or any law, rule, regulation, order or decree applicable to it and does not conflict with or result in the breach of any contract or other instrument binding upon it; 7 8 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. (b) No notice to, registration or filing with, consent or approval of, or other action by, any person or federal, state or other governmental agency, authority, administrator or regulatory body, arbitrator, court or other tribunal, foreign or domestic, is required in connection with the due execution, delivery and performance of this Agreement by Purchaser or the purchase by Purchaser of the Securities, except as provided for herein, or such consents as shall no longer be necessary on the applicable Closing Date; (c) This Agreement has been duly executed and delivered by Purchaser and constitutes the legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, subject to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors' rights and to general equitable principles; (d) Purchaser is a sophisticated buyer and with respect to the Securities has adequate information concerning the business and financial condition of each issuer of such Securities to make an informed decision regarding the Securities, and has independently, without reliance upon Sellers and based on such information as it deemed appropriate, made its own analysis and decision to enter into this Agreement. Purchaser acknowledges and agrees that Sellers may possess material information with respect to any issuer of such Securities not known to Purchaser or otherwise publicly available which may be material to a decision to sell the Securities (the "Seller Non-public Information"), that Purchaser has determined to buy the Securities notwithstanding its lack of knowledge of the Seller Non-public Information, that Purchaser may be at a disadvantage because of the disparity of information between Purchaser and Sellers and that Sellers are relying on the provisions of this Section 3.01(d) in engaging in the transactions contemplated in this Agreement and would not engage in such transactions in the absence of these provisions. Purchaser irrevocably and unconditionally waives and releases each Seller and its affiliates from all claims that Purchaser might have (whether for damages, recision or any other relief) based on such Seller's possession or non-disclosure of the Seller Non-public Information to Purchaser, and Purchaser agrees not to solicit or encourage, directly or indirectly, any other person or entity to assert such a claim; provided that the foregoing shall not operate to lessen any liability for the breach of a representation, warranty or covenant contained herein. The provisions of this Section 3.01(d) shall survive the occurrence of the Termination Date and termination of this Agreement. (e) Purchaser acknowledges that no Seller has made nor makes any representation or warranty, whether express or implied, except as expressly set forth in this Agreement. Purchaser acknowledges that the sale of the Securities to Purchaser by each Seller is irrevocable, and that Purchaser shall have no recourse to any Seller in that regard, except with respect to breaches of representations, warranties and covenants expressly set forth in this Agreement. Purchaser acknowledges that the consideration paid pursuant hereto for the purchase of the Securities may differ both in kind and amount from any payments or distributions that ultimately may be received by Purchaser with respect thereto. Purchaser acknowledges that it is assuming the risk 8 9 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. of full or partial loss which is inherent with each of the Securities, and all collectability risks associated therewith, provided that the foregoing shall not operate to lessen any liability for the breach of a representation, warranty or covenant contained herein; (f) Purchaser is an "accredited investor" within the meaning of Section2(15) of the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. Purchaser is purchasing the Securities without a view toward selling or distributing the Securities in a manner that would violate applicable securities laws and Purchaser has not solicited or received any offer from any third party to purchase any of the Securities; provided that Purchaser may exchange the Securities with any issuer of such Securities for other securities of such issuer or other consideration and Purchaser may transfer the Securities to one or more of its affiliates. Purchaser acknowledges that the sale of the Securities was not in any way solicited by any Seller or any of its affiliates or advisors; (g) Purchaser hereby acknowledges that except as otherwise provided in this Agreement no Seller (i) makes any representation or warranty whatsoever with respect to any statements, warranties or representations made by other persons or entities in or in connection with the Indentures and the Warrant or the execution, legality, validity, enforceability, genuineness, sufficiency, or value of the Indentures or Warrant nor (ii) makes any representation or warranty nor assumes any responsibility with respect to the financial condition of any issuer of the Securities or the performance or observance by any party (other than a Seller) to the Indentures and Warrant of any of its obligations under any of such documents; (h) Purchaser has not engaged any third party as broker or finder or incurred or become obligated to pay any broker's commission or finder's fee in connection with the transactions contemplated by this Agreement other than Donaldson, Lufkin and Jenrette Securities Corporation for whose fees and expenses Purchaser shall be solely responsible; (i) Purchaser acknowledges that none of the Securities have been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such exemption is required by applicable law, and the issuer thereof is not required to register such Security; (j) Purchaser shall make an appropriate filing pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder (the "HSR Act") with respect to the transfer of the CAI Equity Securities contemplated by this Agreement as soon as practicable after April 15, 1999 and supply as promptly as practicable to the appropriate governmental authorities any additional information and documentary material that may be requested pursuant to the HSR Act. Purchaser shall, to the extent Purchaser deems it reasonable to do so, contest any claim, action, suit, arbitration, inquiry, 9 10 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. proceeding or investigation by or before any governmental authority seeking to restrain, enjoin or alter the transactions contemplated by this Agreement and attempt to avoid the imposition of such restraint, injunction or alteration, and if any such order, writ, judgment, injunction, decree, stipulation or award has been granted by any governmental authority, attempt to have such order, writ, judgment, injunction, decree, stipulation or award vacated or lifted; (k) Purchaser shall file or cause to be filed any necessary application(s) for the FCC's consent required for the transfer of the CAI Equity Securities provided for in this Agreement as soon as practicable after April 15, 1999 and supply as promptly as possible any additional information and documentary material that may be requested by the FCC in order to obtain such consent. Purchaser will advise Seller from time to time of the progress of any such application and will notify Seller promptly of any determination by the FCC to deny approval of any such application; and (l) Purchaser or an affiliate of Purchaser is legally qualified under all relevant laws and regulations to hold the FCC licenses, and to receive any authorization from any other federal, state or local regulatory or governmental authority necessary to consummate the transactions contemplated by this Agreement. ARTICLE IV. CONDITIONS TO CLOSING SECTION 4.01. Conditions to Obligations of Sellers. The obligations of each Seller to assign, sell, transfer and convey such Seller's right, title and interest in and to the Securities to Purchaser on either the Initial Closing Date or the Closing Date, as applicable, shall be subject to the fulfillment of each of the following conditions on such Closing Date: (a) On the Closing Date, if there has not been an Initial Closing Date, Sellers shall have received the payment of the Purchase Price in accordance with Section 1.05(a); (b) On the Closing Date, if there has been an Initial Closing Date, Sellers shall have received payment of the Purchase Price allocable to the CAI Equity Securities in accordance with Section 1.05(b); (c) On the Initial Closing Date, if any, Sellers shall have received payment of the Purchase Price allocable to all the Securities except the CAI Equity Securities in accordance with Section 1.05(c); 10 11 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. (d) the representations and warranties of Purchaser contained in this Agreement shall have been true and correct in all material respects when made and as of the applicable Closing Date (it being agreed that such representations and warranties shall be deemed to have been confirmed by Purchaser as of such Closing Date, without the need for further written certification, unless such Purchaser shall have notified Seller in writing to the contrary prior to such Closing Date); (e) Purchaser shall have complied in all material respects with all covenants required by this Agreement to be complied with by it on or prior to such Closing Date; (f) No order or decree shall have been entered in any action or proceeding before any court, agency or body of competent jurisdiction enjoining the consummation of this Agreement; provided that prior to invoking this condition, Sellers shall have used their respective reasonable best efforts to have any such order or decree vacated; and (g) the Termination Date (as defined in Section 5.03) shall not have occurred. SECTION 4.02. Conditions to Obligations of Purchaser. The obligations of Purchaser to purchase and accept assignment of the Securities from any Seller on the Initial Closing Date or the Closing Date, as applicable, shall be subject to the fulfillment of each of the following conditions on or prior to such Closing Date: (a) On the Closing Date, if there has not been an Initial Closing Date, Purchaser shall have received the deliveries required by Section 1.04(a); (b) On the Closing Date, if there has been an Initial Closing Date, Purchaser shall have received the deliveries required by Section 1.04(b); (c) On the Initial Closing Date, if any, Purchaser shall have received the deliveries required by Section 1.04(c); (d) the representations and warranties of each Seller contained in this Agreement shall have been true and correct in all material respects when made and as of such Closing Date (it being agreed that such representations and warranties shall be deemed to have been confirmed by such Seller as of such Closing Date, without the need for further written certification, unless such Seller shall have notified Purchaser in writing to the contrary prior to such Closing Date); (e) Each Seller shall have complied in all material respects with all covenants required by this Agreement to be complied with by it on or prior to such Closing Date; (f) With respect to the Closing Date, but not the Initial Closing Date, any waiting period under the HSR Act applicable to the purchase of the CAI Equity Securities contemplated 11 12 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. hereby shall have expired or been terminated; provided that the conditions set forth in this Section 4.02(f) cannot be waived by Purchaser; (g) With respect to the Closing Date, but not the Initial Closing Date, the Purchaser shall have received any consents, orders and approvals from the FCC which are required for the consummation of the purchase of the CAI Equity Securities; provided that the conditions set forth in this Section 4.02(g) cannot be waived by Purchaser; (h) No order or decree shall have been entered in any action or proceeding before any court, agency or body of competent jurisdiction enjoining the consummation of this Agreement; provided that prior to invoking this condition, Purchaser shall have used its reasonable best efforts to have any such order or decree vacated; and (i) The Termination Date (as defined in Section 5.03) shall not have occurred. SECTION 4.03. Waiver by Purchaser of Condition of FCC Approval. Sellers agree that at any time during the term of this Agreement after Purchaser has confirmed its willingness to accept Sellers' offer to sell the * Securities at the * Purchase Price in accordance with Section 1.06, if Purchaser has not received any consents, orders and approvals from the FCC required for the purchase by Purchaser of the CAI Equity Securities, including the interest represented thereby in CS Wireless Systems, Inc., Purchaser may elect to purchase all (but not less than all) of the Securities other than the CAI Equity Securities at the Purchase Price allocable to such Securities in the Schedules; provided that no such election may be made unless or until all conditions in Sections 4.01 and 4.02 (except Section 4.02 (g) and those conditions which by their terms are applicable solely to a Closing Date for the purchase of the CAI Equity Securities exclusively) have been satisfied or duly waived. Purchaser may make this election by delivery of written notice to the Sellers. ARTICLE V. TERMINATION SECTION 5.01. Right of Termination. (a) The Purchaser shall have the right to terminate this Agreement upon the occurrence of any of the following events: (i) Sellers shall not have offered to sell the * Securities to Purchaser at the * Purchase Price on April 9, 1999, as provided in Section 1.06; or - ----------------------- * Confidential portions omitted pursuant to a confidential treatment request and filed separately with Securities and Exchange Commission 12 13 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. (ii) the FCC shall have notified Purchaser that the FCC shall have denied any application required for the purchase by Purchaser of the CAI Equity Securities, including the interest represented thereby in CS Wireless Systems, Inc. (b) The Sellers shall have the right to terminate this Agreement upon the occurrence of any of the following events: (i) Sellers shall have offered to sell Purchaser the * Securities as provided in Section 1.06 hereof and Purchaser shall not have elected on or before April 12, 1999 to purchase all of the * Securities, as provided in Section 1.06; or (ii) the FCC shall have notified Purchaser that the FCC shall have denied by final order any application required for the purchase by Purchaser of the CAI Equity Securities, including the interest represented thereby in CS Wireless Systems, Inc., and Purchaser shall not have either terminated this Agreement or purchased all the other Securities within five Business Days after notice by Seller to Purchaser of Seller's intention to terminate this Agreement as a result thereof. (c) The Purchaser and the Sellers shall each have the right to terminate this Agreement upon the following: (i) the Closing with respect to all the Securities shall not have occurred on or before 5:00 p.m. on the Final Termination Date (as hereinafter defined), which initially is the day which is 90 days after the date of this Agreement (or, if such day is not a Business Day, the next Business Day thereafter ( the "Final Termination Date")), unless Purchaser shall have exercised its election pursuant to Section 5.02, if applicable, in which event the Final Termination Date shall be the day which is specified by Purchaser in its then most recent Extension Notice (as defined in Section 5.02) (or if such day is not a Business Day, the next Business Day); provided that the Final Termination Date shall not extend beyond the day which is 180 days after the date of this Agreement (or, if such day is not a Business Day, the next Business Day thereafter), unless otherwise agreed by each of the Sellers. SECTION 5.02. Election to Extend Final Termination Date. At any time prior to termination of this Agreement, Purchaser may from time to time elect to extend the Final Termination Date to a date which is not beyond the day which is 180 days after the date of this Agreement (or if such day is not a Business Day, the next Business Day), by delivering notice to such effect to the Sellers (the "Extension Notice"), which notice shall specify the date to which - ----------------------- * Confidential portions omitted pursuant to a confidential treatment request and filed separately with Securities and Exchange Commission 13 14 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. the Final Termination Date shall then be extended; provided that Purchaser may not elect to extend the Final Termination Date unless all of the conditions in Sections 4.01 shall have been satisfied (other than the payments required to be made on the Closing Date by the Purchaser) or duly waived and the purpose for the extension is to continue to seek satisfaction of the conditions in Sections 4.02 (f) and (g). Purchaser may exercise its election herein one or more times, in its sole discretion. SECTION 5.03. Notice of Termination; Termination Date. Any party exercising its right of termination shall send written notice to each of the other parties hereto at the addresses set forth herein. Immediately upon delivery of such notice, this Agreement shall automatically terminate and be of no further force or effect except as specifically set forth in this Agreement. "Termination Date" is the date such notice is duly given. ARTICLE VI. MISCELLANEOUS SECTION 6.01. Further Assurances. Each of the Sellers and Purchaser each hereby agree to execute and deliver, or cause to be executed and delivered, such other documents, instruments and agreements, and take such other actions, as either party may reasonably request in connection with the transactions contemplated by this Agreement. SECTION 6.02. Receipt of Information. Each of the Sellers shall (a) promptly notify Purchaser of any notices they receive under the Securities, the Indentures or Warrant from and after the date hereof, and (b) at Purchaser's request, promptly forward any such notices that they receive to Purchaser, except, in the case of both clauses (a) and (b), to the extent such Seller is legally or contractually prohibited from doing so. Sellers shall promptly pay to Purchaser any amounts they receive as interest or other distribution that accrue for the period following the applicable Closing Date. SECTION 6.03. Amendment; Waiver; Remedies. This Agreement shall not be amended or otherwise modified unless in writing and signed by the parties hereto. No failure on the part of either party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof by such party, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The rights and remedies of each party provided herein are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law or in equity. SECTION 6.04. Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered, if 14 15 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. sent by registered or certified mail (return receipt requested), (b) when delivered, if delivered personally, (c) when transmitted, if sent by facsimile if a confirmation of transmission is produced by the sending machine or (d) when delivered, if sent by overnight mail or overnight courier, in each case to the parties at the following addresses or facsimile numbers (or at such other addresses or facsimile numbers as shall be specified by like notice): If to Sellers, at: * with a copy to * If to Purchaser, at: MCI WORLDCOM, Inc. 3060 Williams Drive, Suite 600 Fairfax, VA 22031 Attention: Robert Finch Vice President - Strategic Development Fax: (703) 645-4637 with a copy to: P. Bruce Borghardt General Counsel - Corporate Development MCI WORLDCOM, Inc. 10777 Sunset Office Drive, Suite 330 St. Louis, MO 63127 Fax: (314) 909-4101 SECTION 6.05. Costs and Expenses. The Sellers and Purchaser shall each pay their own respective costs and expenses incurred in connection with the negotiation, preparation, execution and performance of this Agreement, including, but not limited to, attorneys' fees. - ----------------------- * Confidential portions omitted pursuant to a confidential treatment request and filed separately with Securities and Exchange Commission 15 16 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. SECTION 6.06. Survival. Except as otherwise specified herein, the covenants, representations and warranties of the parties contained herein shall survive the consummation of the transactions contemplated hereby but shall not survive the occurrence of the Termination Date and the termination of this Agreement (except as otherwise provided herein or to the extent of any rights or remedies which arose prior to such termination on account of a breach by any party of any of its representations, warranties or covenants prior to such termination). SECTION 6.07. Successors and Assigns. This Agreement shall inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns; provided, however, that no party shall assign its rights and obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld. Any purported assignment absent such consent shall be void. Notwithstanding the foregoing, Purchaser may assign this Agreement to an affiliate without consent as long as it remains liable for any breach of this Agreement, and Sellers may assign this Agreement to one or more partnerships or other entities managed either by Moore Capital Management, Inc. or Moore Capital Advisors, L.L.C., as the case may be, as long as Sellers remain liable for any breach of this Agreement. SECTION 6.08. Counterparts. This Agreement may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto and the receipt of an original or telecopy executed counterpart by each party hereto; provided that any party delivering its counterpart by telecopy will as soon as reasonably practicable after such delivery deliver an original executed counterpart to each other party hereto. SECTION 6.09. Governing Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York. Each party to this Agreement hereby irrevocably consents to the jurisdiction of the United States Court for the Southern District of New York located in the State and City of New York in any action to enforce, interpret or construe any provision of this Agreement or of any other agreement or document delivered in connection herewith and hereby waives any objection to venue, whether by reason of improper venue, forum non conveniens or lack of personal jurisdiction or otherwise, to any such action brought in that Court. SECTION 6.10. Waiver of Trial by Jury. Each Seller and Purchaser each hereby knowingly, voluntarily and intentionally waive any rights they may have to a trial by jury in respect of any litigation based hereon, or arising out of, under, or in connection with this Agreement, the Indentures or Warrant, any related documents and agreements or any course of conduct, course of dealing, or statements (whether verbal or written) in connection therewith. 16 17 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. SECTION 6.11. Confidentiality. No party hereto shall disclose any Confidential Information (as defined below) to any third party without the prior written consent of the other parties hereto, other than (a) to the officers, directors, employees, agents and advisors of such party or its affiliates who have a need to know such Confidential Information and are subject to appropriate confidentiality obligations, (b) as and only to the extent required by applicable law, rule, regulation or judicial process, (c) as and only to the extent requested or required by any state, federal or foreign authority or examiner regulating any of Sellers or Purchaser, (d) information that, at the time of disclosure or thereafter is generally available to the public (other than as a result of a disclosure in violation of the terms of this Section) and (e) disclosure required to effect the transfers contemplated by this Agreement, but only after notifying the other parties hereto and delaying such disclosure, if requested by Purchaser; provided that prior to any disclosure under clauses (b) or (c), such party shall promptly advise the other party when requested or required to make a disclosure thereunder. For purposes of this Section 6.11, "Confidential Information" means any information related to or in connection with the identity of the parties hereto or the price or value of any interest transferred hereunder or the existence or terms of this Agreement. This Section survives termination of this Agreement. SECTION 6.12. No-Shop. Prior to the Termination Date, no Seller including the employees, officers, directors and agents of the Seller shall make, solicit, assist or initiate any inquiry or proposal, or provide any information to or participate in any negotiations with, any corporation, partnership, agent, attorney, financial advisor, person, or other entity or group (other than Purchaser) ("Third Parties") for the purpose of consummating any sale, transfer or other disposition of the Securities or Assigned Rights, except for the CAI Equity Securities and related Assigned Rights in the event the FCC denies by final order any required application for the transfer thereof to Purchaser ("Disposition") . Each Seller acknowledges that entering into any contract or agreement with any Third Party with respect to any Disposition, even if any such Disposition were conditional upon the termination of this Agreement or nonconsummation of the transactions contemplated hereby, would violate this Agreement. SECTION 6.13. Miscellaneous. (a) This Agreement and any agreement, document or instrument attached hereto or referred to herein integrate all the terms and conditions mentioned herein or incidental hereto, constitute the entire agreement and understanding between the parties hereto and supersede any and all prior agreements and understandings relating to the subject matter hereof. (b) All payments made hereunder shall be made without any set-off or counterclaim. (c) If any provision of this Agreement shall be determined to be unenforceable by any court of law, the remaining provisions shall be severable and enforceable in accordance with their 17 18 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. terms unless to do so would frustrate the purpose of the parties in entering into this Agreement, in which case the party whose purpose is frustrated shall have the right to terminate this Agreement without liability or obligation hereunder, except for those provisions which provide that they shall survive termination. (d) Each Seller and Purchaser agree that no adequate remedy at law may exist for breach of certain of their respective obligations under this Agreement, and that therefore in the event any party hereto fails to comply with its obligations hereunder, the other party hereto shall have the right to obtain specific performance of the obligations of such defaulting party, injunctive relief or such other equitable relief as may be available. (e) The section captions and headings in this Agreement are for convenience only and are not intended to be full or accurate descriptions of the contents thereof. They shall not be deemed to be part of this Agreement and in no way define, limit, extend or describe the scope or intent of any provision hereof. (f) Each Seller and Purchaser intend and agree that the transactions contemplated hereby shall not result in the creation of any trust or fiduciary relationship between Purchaser and any Seller or in the creation of a joint venture between such parties. (g) It is understood that the term "Securities" used in this Agreement shall include any securities, properties or other consideration received by Seller (i) in exchange therefor pursuant to any bankruptcy proceeding, (ii) pursuant to any stock split or stock dividend or (iii) otherwise in connection with the Securities, in each case following the execution of this Agreement and prior to the applicable Closing Date. 18 19 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. SELLERS: * BY: ------------------------------------ ITS: * BY: ------------------------------------ ITS: PURCHASER: MCI WORLDCOM, INC. BY: /s/ CHARLES T. CANNADA ------------------------------------ ITS: Senior Vice President - ----------------------- * Confidential portions omitted pursuant to a confidential treatment request and filed separately with Securities and Exchange Commission 19 20 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. SCHEDULE I: PURCHASE PRICE
Securities Purchase Price - ---------- -------------- A. CAI Securities: A: CAI Equity Securities: CAI Equity Securities: 2,270,715 shares of Common Stock $ * Other CAI Securities: Other CAI Securities: See below. $35,418,097 face amount of 13% Senior Notes due 2004 B. * Securities: B. See below $ * face amount of 14.50% Senior Discount Notes due * . C. CS Securities: C: See below $86,750,000 face amount of 11.375% Senior Discount Notes due 2006 The Purchase Price for the Securities specified in "A. Other CAI Securities", "B" and "C" is $ * , plus interest as described below.
TOTAL PURCHASE PRICE FOR ALL THE SECURITIES SPECIFIED ABOVE: $ * , PLUS INTEREST ACCRUING AT THE RATE OF 10% PER ANNUM FROM THE NINETIETH DAY AFTER THE DATE OF THE AGREEMENT TO AND INCLUDING THE CLOSING DATE (SUCH AMOUNT, INCLUDING INTEREST, IF ANY, THE "PURCHASE PRICE"). - ----------------------- * Confidential portions omitted pursuant to a confidential treatment request and filed separately with Securities and Exchange Commission 20 21 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. SCHEDULE II: * PURCHASE PRICE
Securities Purchase Price - ---------- -------------- (i) $ * face amount of 13.125% Senior Discount FOR THE SECURITIES LISTED IN CLAUSES (i) AND Notes due * (ii): (ii) 117,915 "Units", each one consisting of $ * $ * , PLUS INTEREST ACCRUING AT THE face amount of 13.125% Senior Discount Notes due * RATE OF 10% PER ANNUM FROM THE NINETIETH and one warrant to purchase * shares of common stock DAY AFTER THE DATE OF THE AGREEMENT TO AND of * INCLUDING THE CLOSING DATE (SUCH AMOUNT, INCLUDING INTEREST, IF ANY, THE " * PURCHASE PRICE").
- ----------------------- * Confidential portions omitted pursuant to a confidential treatment request and filed separately with Securities and Exchange Commission EX-99.(B) 3 PURCHASE AND SALE AGREEMENT 1 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. EXHIBIT B PURCHASE AND SALE AGREEMENT PURCHASE AND SALE AGREEMENT dated as of March 23, 1999, between * and * (each a "Seller", and collectively "Sellers"), and MCI WORLDCOM, Inc. ("Purchaser"). PRELIMINARY STATEMENTS 1. Pursuant to the following Securities Documents (as defined below), Sellers collectively hold the following Securities (as defined below): (i) 15% Senior Secured Notes of Wireless One, Inc., a Delaware corporation and debtor and debtor in possession under a case pending under Chapter 11 of the Bankruptcy Code ("Wireless One"), due August 12, 1999, issued pursuant to the Amended and Restated Note Purchase Agreement dated as of February 12, 1999 (the "Wireless One DIP Note Purchase Agreement") in an aggregate principal amount of $18,854,986 (the "Wireless One DIP Note"); (ii) unsecured 13 1/2% Senior Discount Notes Due * of * , issued pursuant to the Indenture dated as of * (the " * Indenture"), in the aggregate principal amount of * (the " * Note * "); (iii) unsecured 13% Senior Notes Due * of * , issued pursuant to the Indenture dated as of * (the " * Indenture" and together with the * Indenture, the " * Indentures"), in the aggregate principal amount of * (the " * Note * " and, together with the * Note Due 2006, the " * Notes"); (iv) Senior Secured Notes of CAI Wireless Systems, Inc., a Connecticut corporation ("CAI"), due October 14, 2000, issued pursuant to the Note Purchase Agreement dated as of October 14, 1998 (the "CAI Note Purchase Agreement") in an aggregate principal amount of the A Note equal to $30,000,000 (the "CAI A Note") and of the B Note equal to $50,000,000 (the "CAI B Note"); - --------------- * Confidential portions omitted pursuant to a confidential treatment request and filed separately with Securities and Exchange Commission 2 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. (v) unsecured 13% Senior Notes of CAI, due October 14, 2004, issued pursuant to the Indenture dated as of October 14, 1998 (the "CAI Senior Note Indenture") in the aggregate principal amount of $83,994,512 (the "CAI Notes"); (vi) 8,284,425 shares of common stock of CAI (the "CAI Stock"); (vii) unsecured 13.125% Senior Notes of * , a [Delaware] corporation, issued pursuant to an Indenture (the "PCTV Indenture") in an aggregate amount of * (the " * Notes"); and (viii) unsecured 11.375% Senior Notes of CS Wireless Systems, Inc., a Delaware corporation ("CS") issued pursuant to the Indenture dated February 15, 1996 (the "CS Indenture") in an aggregate principal amount of $129,000,000 (the "CS Notes"). 2. Sellers wish to sell and assign, and Purchaser wishes to purchase and assume, subject to the terms and conditions hereof: (i) all right, title and interest and, with respect to the Wireless One DIP Note, the CAI A Note and CAI B Note, all obligations (other than liabilities for breaches thereof by, or other obligations thereunder of, such Seller accrued prior to the assignment to Purchaser hereunder), if any, of Sellers in and to the Wireless One DIP Note, the * Notes, the CAI A Note, the CAI B Note, the CAI Notes, the * Notes, the CS Notes and the CAI Stock, together with all accrued and unpaid interest thereon and fees with respect thereto as of the applicable Closing Date (the "Securities"); (ii) all right, title and interest and, with respect to the Wireless One DIP Note Purchase Agreement and the CAI Note Purchase Agreement, all obligations (other than liabilities for breaches thereof by, or other ob* ligations thereunder of, such Seller accrued prior to the assignment to Purchaser hereunder), if any, of Sellers in and to the Wireless One DIP Note Purchase Agreement, * Indenture, the * Indenture, the CAI Note Purchase Agreement, the CAI Senior Note Indenture, the * Indenture and the CS Indenture and any and all instruments, agreements and other writings executed in connection with or pursuant thereto, including, without limitation, those evidencing the securities (collectively, with the * Voting Agreement (as defined below), the "Securities Documents"); - --------------- * Confidential portions omitted pursuant to a confidential treatment request and filed separately with Securities and Exchange Commission 3 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. (iii) all right, title and interest of Sellers in and to any property, whether real or personal, tangible or intangible, of whatever kind and wherever located, whether now owned or hereafter acquired or created, in which a lien, encumbrance, security interest, mortgage, deed of trust, pledge, claim, set-off or charge of any kind (collectively, "Liens") had been granted or purported to have been granted pursuant to any of the Securities Documents (the "Collateral") and all right, title and interest in and to any and all instruments, agreements and other writings evidencing such a Lien or related to such Collateral, (collectively, the "Collateral Documents"); and (iv) any and all rights, remedies, privileges, causes of action or claims of any Seller (whether known or unknown) against any person or entity which in any way is based upon, arises out of, or is related to, any of the foregoing, including, without limitation, any "claims" within the meaning of section 101(5) of the Bankruptcy Code. The items described in clauses (ii) through (iv) above, are referred to herein collectively as the "Assigned Rights". 3. Sellers wish to sell and assign, and Purchaser wishes to purchase and assume, subject to the terms and conditions hereof, all right, title and interest and all obligations of Sellers (other than liabilities for breaches thereof by, or other obligations thereunder of, Sellers accrued prior to the assignment to Purchaser hereunder) in and to the * Voting Agreement (as defined below). NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, Sellers and Purchaser agree as follows. ARTICLE I PURCHASE AND SALE SECTION 1.01. Purchase and Sale. Upon the terms and subject to the conditions of this Agreement, (a) at the Initial Closing (as hereinafter defined), each Seller shall sell, assign, transfer and convey to Purchaser (without recourse to such Seller), and Purchaser shall purchase and accept from each Seller from and after the Initial Closing Date (as hereinafter defined), all of such Seller's right, title and interest in and to the * Notes, the CAI Notes, the CAI A Note, the - --------------- * Confidential portions omitted pursuant to a confidential treatment request and filed separately with Securities and Exchange Commission 4 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. CAI B Note, the * Notes and the CS Notes, together with all accrued and unpaid interest thereon and fees with respect thereto as of the Initial Closing Date and the Assigned Rights with respect to such Securities (the "Part I Securities") and Purchaser shall assume all of such Seller's obligations arising after the Initial Closing Date under the * Voting Agreement, the CAI A Note, the CAI B Note and the CAI Note Purchase Agreement; (b) at the April Closing (as hereinafter defined), each Seller shall sell, assign, transfer and convey to Purchaser (without recourse to such Seller), and Purchaser shall purchase, accept and assume from Seller from and after the April Closing Date (as hereinafter defined), all of such Seller's obligations under and right, title and interest in and to the Wireless One DIP Note and Wireless One DIP Note Purchase Agreement, together with all accrued and unpaid interest thereon and fees with respect thereto as of the April Closing Date and the Assigned Rights with respect to such Securities (the "Part II Securities"); and (c) at the Final Closing (as hereinafter defined), each Seller shall sell, assign, transfer and convey to Purchaser (without recourse to such Seller), and Purchaser shall purchase and accept from Seller from and after the Final Closing Date (as hereinafter defined), all of such Seller's right, title and interest in and to the CAI Stock. SECTION 1.02. Purchase Price. As consideration for the sale, assignment, transfer, conveyance and delivery of the Securities and Assigned Rights contemplated in Section 1.01, Purchaser shall pay or cause to be paid an aggregate amount of $ * (the "Purchase Price"). The Purchase Price shall be allocated to each Seller with respect to each Closing Date as set forth in the attached Schedule I opposite such Closing Date. SECTION 1.03. Closing. Upon the terms and subject to the conditions of this Agreement, (a) the sale and purchase of the Part I Securities contemplated by this Agreement and the assignment and assumption of the * Voting Agreement shall take place at the closing (the "Initial Closing") to be held at the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York at 11:00 a.m., New York time on March 26, 1999 (the "Initial Closing Date") or at such other place or at such other time as Purchaser and Sellers mutually agree upon in writing. (b) the sale and purchase of the Part II Securities contemplated by this Agreement shall take place at the closing (the "April Closing") to be held at the offices of - --------------- * Confidential portions omitted pursuant to a confidential treatment request and filed separately with Securities and Exchange Commission 5 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. Shearman & Sterling, 599 Lexington Avenue, New York, New York at 11:00 a.m., New York time on April 15, 1999 (the "April Closing Date") or at such other place or at such other time as Purchaser and Sellers mutually agree upon in writing.* (c) the sale and purchase of the CAI Stock contemplated by this Agreement shall take place at the closing (the "Final Closing") to be held at the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York at 11:00 a.m., New York time on the date that is 3 business days after the expiration or termination of any waiting period under the HSR Act (as hereinafter defined) applicable to the purchase of the CAI Stock contemplated hereby (the "Final Closing Date" and together with the Initial Closing Date and the April Closing Date, the "Closing Dates") or at such other place or at such other time as Purchaser and Sellers mutually agree upon in writing. SECTION 1.04. Closing Deliveries by Sellers. (a) On the Initial Closing Date, each Seller shall deliver or cause to be delivered to Purchaser all of such Seller's right, title and interest in and to: (i) the Part I Securities, and all documentation related thereto, and whatever documents of conveyance or transfer may be necessary or desirable to transfer to and confirm in Purchaser, or at Purchaser's request, Purchaser's nominee, all right, title and interest in and to the Part I Securities, in each case without recourse or warranty to any Seller except as set forth in this Agreement, and Purchaser shall assume such Seller's obligations under the CAI A Note, the CAI B Note and the CAI Note Purchase Agreement (other than liabilities for breaches thereof by, or other obligations thereunder of, Seller accrued prior to the assignment to Purchaser hereunder), and deliver whatever documents of assumption may be necessary or desirable to reflect such assumption; (ii) the * Voting Agreement, all documentation related thereto, and whatever documents of conveyance or transfer may be necessary or desirable to transfer to and confirm in Purchaser, or at Purchaser's request, Purchaser's nominee, all right, title and interest in and to the * Voting Agreement, without recourse or warranty to any Seller except as set forth in this Agreement, and Purchaser shall assume Sellers' obligations under the * Voting Agreement (other than liabilities for breaches thereof by, or other obligations thereunder of, Seller accrued prior to the assignment to Purchaser - --------------- * Confidential portions omitted pursuant to a confidential treatment request and filed separately with Securities and Exchange Commission 6 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. hereunder), and deliver whatever documents of assumption may be necessary or desirable * to reflect such assumption. (b) on the April Closing Date, each Seller shall deliver or cause to be delivered to Purchaser all of such Seller's right, title and interest in and to the Part II Securities, and all documentation related thereto, and whatever documents of conveyance or transfer may be necessary or desirable to transfer to and confirm in Purchaser, or at Purchaser's request, Purchaser's nominee, all right, title and interest in and to the Part II Securities, in each case without recourse or warranty to any Seller except as set forth in this Agreement and Purchaser shall assume such Seller's obligations under the Wireless One DIP Note and Wireless One DIP Note Purchase Agreement (other than liabilities for breaches thereof by, or other obligations thereunder of, Seller accrued prior to the assignment to Purchaser hereunder), and deliver whatever documents of assumption may be necessary or desirable to reflect such assumption. (c) on the Final Closing Date, each Seller shall deliver or cause to be delivered to Purchaser all of such Seller's right, title and interest in and to the CAI Stock and stock power duly executed by such Seller, and whatever documents of conveyance or transfer may be necessary or desirable to transfer to and confirm in Purchaser, or at Purchaser's request, Purchaser's nominee, all right, title and interest in and to the CAI Stock, without recourse or warranty to any Seller except as set forth in this Agreement. SECTION 1.05. Closing Deliveries by Purchaser. On each Closing Date, Purchaser shall deliver to each Seller in same day funds, by wire transfer to an account to be designated by such Seller, the portion of the Purchase Price to be paid to such Seller on such Closing Date in the amount set forth in Schedule I opposite such Closing Date. ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLERS SECTION 2.01. Representations and Warranties and Covenants of Sellers. Each Seller, severally and not jointly and each solely as to itself, hereby represents, warrants and covenants to Purchaser as of the date hereof that: - --------------- * Confidential portions omitted pursuant to a confidential treatment request and filed separately with Securities and Exchange Commission 7 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. (a) Such Seller is the sole legal and beneficial owner and holder of the Securities and the Assigned Rights to be assigned by it hereunder and has undivided good title to such Securities and Assigned Rights, free and clear of any lien, security interest or other adverse claim, except the Agreement Concerning Voting dated * with respect to the * Notes (the " * Voting Agreement") and such Securities are not subject to any prior sale, transfer, assignment or participation by such Seller or any agreement by such Seller to assign, convey, transfer or participate, in whole or in part; (b) Such Seller is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, and has the full power and authority to take, and has taken, all action necessary to execute and deliver this Agreement and any other documents required or permitted to be executed or delivered by it in connection with this Agreement and to fulfill its obligations hereunder and thereunder, and the execution, delivery and performance by it of this Agreement does not violate its charter or bylaws or any law, rule, regulation, order or decree applicable to it and does not conflict with or result in the breach of any contract or other instrument binding upon it; (c) This Agreement has been duly executed and delivered by such Seller and constitutes the legal, valid and binding obligation of such Seller, enforceable against such Seller in accordance with its terms, subject, as to enforceability, to bankruptcy, insolvency, fraudulent conveyance, moratorium, reorganization and other laws of general application relating to or affecting creditors' rights and to general equitable principles, provided, however, that such Seller makes no representation in this Section 2.01(c) with respect to the collectability or enforceability of any of the Securities or the Securities Documents or any portion thereof; (d) No notice to, registration or filing with, consent or approval of, or other action by, any person or federal, state or other governmental agency, authority, administrator or regulatory body, arbitrator, court or other tribunal, foreign or domestic, is required in connection with the due execution, delivery and performance of this Agreement by such Seller and the sale by such Seller of the Securities to be assigned by it hereunder, except with respect to the Wireless One DIP Note, the filing under Section 13(g) of the Securities Exchange Act of 1934 (the "Securities Exchange Act") in connection with the sale of the CAI Stock and as otherwise provided for herein; (e) Prior to the closing of the purchase of a Security hereunder (other than the Wireless One DIP Note), Seller shall consult with Purchaser with respect to the exercise of any material right under or relating to, and the taking of any material action with respect to, the Securities or Assigned Rights, provided, however, that any investment, voting or other decision relating to the Securities shall remain with and in the sole discretion of Sellers. Prior to the closing of the purchase of a Security hereunder (other than the Wireless One DIP Note) Seller shall not knowingly exercise any rights under or relating to, or take any action with respect to, - --------------- * Confidential portions omitted pursuant to a confidential treatment request and filed separately with Securities and Exchange Commission 8 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. the Securities or Assigned Rights which would have the effect of adversely affecting the ability to consummate the transactions contemplated hereby or materially lessen the benefits or rights that Purchaser would otherwise receive in connection with the transactions contemplated hereby. Subject to Section 6.11 hereof and for the period from the date hereof through the April Closing Date, Seller shall promptly advise Purchaser if Seller determines in its discretion that it is necessary to disclose the sale of its interest in the Wireless One DIP Note. (f) Other than this Agreement, neither Seller has entered into any written contract, agreement or other documents conveying or purporting to convey rights to any person or entity that relate to the Securities or the Assigned Rights other than the Securities Documents and the * Voting Agreement; (g) Neither Seller has made any filings under Rule 144 under the Securities Act of 1933 (the "Securities Act"), Section 13(d), Section 13(g) or Section 16 of the Securities Exchange Act, or any other statute, rule or regulation under the federal securities laws relating to the transactions contemplated hereby or the Securities, except for a Schedule 13G filing with respect to the CAI Stock. Neither Seller has made any public disclosure of any kind relating to this Agreement or the transactions contemplated hereby except that Sellers have made disclosure and may hereafter make disclosure to employees, officers, directors and advisors or other persons subject to appropriate obligations of confidentiality (whether in writing or otherwise). To the best of such Seller's knowledge, such Seller is not required to make any filing with respect to the Securities or the transactions contemplated hereby under Rule 144 of the Securities Act, Section 13(d), Section 13(g) or Section 16 of the Securities Exchange Act, or any other statute, rule or regulation under the federal securities laws prior to April 25, 1999; provided, however, if such Seller determines that any such filing shall be required prior to April 25, 1999, such Seller shall promptly advise Purchaser of any determination that such filing is necessary and prior to the making of such filing; (h) Neither Seller possesses any other right, title or interest of any kind in any issuer of the Securities other than the Securities and the Assigned Rights. Except as disclosed to Purchaser prior to the execution of this Agreement, no Seller possesses any interest of any kind in or has any representatives on the board of directors of any person or entity whose primary business, to such Seller's actual knowledge, is in the wireless CATV industry or the use of MMDS, MDS, ITFS or H channels. Within six months after the execution of this Agreement, except for securities of * , a Delaware corporation and debtor and debtor in possession under a case pending under chapter 11 of the Bankruptcy Code (" * ") owned by Sellers on the date hereof or any consideration distributed under * 's plan of reorganization confirmed in * 's - --------------- * Confidential portions omitted pursuant to a confidential treatment request and filed separately with Securities and Exchange Commission 9 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. chapter 11 case in respect of such securities, no Seller shall purchase or otherwise acquire any interest of any kind in or have any representatives on the board of directors of any person or entity, to the actual knowledge of such Seller, whose primary business is in the wireless CATV industry or the use of MMDS, MDS, ITFS or H channels; (i) (i) To the best of such Seller's knowledge, such Seller has not breached or violated the terms and conditions of the * Voting Agreement, the Wireless One DIP Note, the Wireless One DIP Note Purchase Agreement, the CAI A Note, the CAI B Note or the CAI Note Purchase Agreement (the "Assumed Agreements") and (ii) Seller has not taken any action with respect to the Securities that would materially impair the ability of Purchaser, upon consummation of the transactions contemplated hereby, to exchange any of the Securities for any type of securities in any existing or potential bankruptcy proceedings of the issuer of such Securities. Seller shall satisfy any of its obligations that accrue prior to the assumption thereof by Purchaser under the Assumed Agreements; (j) Each Seller is a sophisticated buyer and with respect to the Securities, has adequate information concerning the business and financial condition of each issuer of such Securities to make an informed decision regarding the Securities, and has independently, without reliance upon Purchaser and based on such information as it deemed appropriate, made its own analysis and decision to enter into this Agreement and each Seller acknowledges and agrees that Purchaser may possess material information with respect to any issuer of such Securities not known to such Seller or otherwise publicly available which may be material to a decision to sell the Securities (the "Non-public Information"), that such Seller has determined to sell the Securities notwithstanding its lack of knowledge of the Non-public Information, and that Purchaser shall not have any liability to Seller to the extent such liability arises from, is caused by or relates to the non-disclosure of the Non-public Information and such Seller hereby releases Purchaser therefrom with respect to such nondisclosure; provided that the foregoing shall not operate to lessen any liability for the breach of any other representation, warranty or covenant contained herein. - --------------- * Confidential portions omitted pursuant to a confidential treatment request and filed separately with Securities and Exchange Commission 10 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER SECTION 3.01. Representations, Warranties and Covenants of Purchaser. Purchaser hereby represents, warrants and covenants to Seller as of the date hereof that: (a) Purchaser is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation, and has the full power and authority to take, and has taken, all action necessary to execute and deliver this Agreement, and any other documents required or permitted to be executed or delivered by it in connection with this Agreement, and to fulfill its obligations hereunder and thereunder, and the execution, delivery and performance by it of this Agreement does not violate its charter or bylaws or any law, rule, regulation, order or decree applicable to it and does not conflict with or result in the breach of any contract or other instrument binding upon it; (b) No notice to, registration or filing with, consent or approval of, or other action by, any person or federal, state or other governmental agency, authority, administrator or regulatory body, arbitrator, court or other tribunal, foreign or domestic, is required in connection with the due execution, delivery and performance of this Agreement by Purchaser or the purchase by Purchaser of the Securities, except as provided for herein; (c) This Agreement has been duly executed and delivered by Purchaser and constitutes the legal, valid and binding obligations of Purchaser, enforceable against Purchaser in accordance with its terms, subject, as to enforceability, to bankruptcy, insolvency, fraudulent conveyance, moratorium, reorganization and other laws of general application relating to or affecting creditors' rights and to general equitable principles; (d) Purchaser is a sophisticated buyer and with respect to the Securities, has adequate information concerning the business and financial condition of each issuer of such Securities to make an informed decision regarding the Securities, and has independently, without reliance upon any Seller and based on such information as it deemed appropriate, made its own analysis and decision to enter into this Agreement and Purchaser acknowledges and agrees that each Seller may possess material information with respect to any issuer of such Securities not known to the Purchaser or otherwise publicly available which may be material to a decision to buy the Securities (the "Seller Non-public Information"), that Purchaser has determined to acquire the Securities notwithstanding its lack of knowledge of the Non-public Information, and that no Seller shall have any liability to Purchaser to the extent such liability arises from, is 11 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. caused by or relates to the non-disclosure of the Seller Non-public Information and Purchaser hereby releases each Seller therefrom with respect to such nondisclosure; provided that the foregoing shall not operate to lessen any liability for the breach of any other representation, warranty or covenant contained herein; (e) Purchaser acknowledges that no Seller has made nor makes any representation or warranty, whether express or implied, except as expressly set forth in this Agreement. Purchaser acknowledges that the sale of the Securities to Purchaser by each Seller is irrevocable, and that Purchaser shall have no recourse to any Seller, except with respect to breaches of representations, warranties and covenants expressly set forth in this Agreement and the put set forth in Section 5.01. Purchaser acknowledges that the consideration paid pursuant hereto for the purchase of the Securities may differ both in kind and amount from any payments or distributions that ultimately may be received by Purchaser with respect thereto. Purchaser acknowledges that it is assuming the risk of full or partial loss which is inherent with each of the Securities, and all collectability risks associated therewith; provided that the foregoing shall not operate to lessen any liability for the breach of any other representation, warranty or covenant contained herein; (f) Purchaser is an "accredited investor" within the meaning of Section 2(15) of the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. Purchaser is purchasing the Securities without a view toward selling or distributing the Securities in a manner that would violate applicable securities laws and Purchaser has not solicited or received any offer from any third party to purchase any of the Securities; provided, however, that Purchaser may exchange the Securities with any issuer of such Securities for other securities of such issuer or other consideration and Purchaser may transfer the Securities to one or more of its affiliates. Purchaser acknowledges that the sale of the Securities was not in any way solicited by any Seller or any of its affiliates or advisors; (g) Purchaser hereby acknowledges that, except as otherwise provided in this Agreement, no Seller (i) makes any representation or warranty whatsoever with respect to any statements, warranties or representations made by other persons or entities in or in connection with the Securities Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien, security interest, pledge, charge, encumbrance, assignment, financing statement or other security created or purported to be created under or in connection with, the Securities Documents nor (ii) makes any representation or warranty nor assumes any responsibility with respect to the financial condition of any issuer of the Securities or the performance or observance by any party (other than a Seller) to the Securities Documents of any of its obligations under any of the Securities Documents; 12 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. (h) Purchaser has not engaged any third party as broker or finder or incurred or become obligated to pay any broker's commission or finder's fee in connection with the transactions contemplated by this Agreement, other than Donaldson, Lufkin and Jenrette Securities Corporation for whose fees and expenses Purchaser shall be solely responsible; (i) Purchaser acknowledges that the sale of the Securities to Purchaser has not been registered under the Securities Act and that the Securities may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such exemption is required by applicable law, and the issuer thereof is not required to register such Security; (j) Purchaser shall make an appropriate filing pursuant to the HSR Act (as hereinafter defined) with respect to the transfer (i) of the CAI Stock and (ii) of more than 50% of the capital stock of CAI as soon as practicable after April 15, 1999 and shall supply as promptly as practicable to the appropriate governmental authorities any additional information and documentary material that may be requested pursuant to the HSR Act. Purchaser shall, to the extent Purchaser deems it reasonable to do so, contest any claim, action, suit, arbitration, inquiry, proceeding or investigation by or before any governmental authority seeking to restrain, enjoin or alter the transactions contemplated by this Agreement and attempt to avoid the imposition of such restraint, injunction or alteration, and if any such order, writ, judgment, injunction, decree, stipulation or award (an "Order") has been granted by any governmental authority, to the extent Purchaser deems it reasonable to do so, attempt to have such Order vacated or lifted; (k) Purchaser shall file or cause to be filed the application(s) for the FCC's consent to acquisition of more than 50% of the capital stock of CAI as soon as practicable after April 15, 1999 and shall supply as promptly as possible any additional information and documentary material that may be requested by the FCC in order to obtain such consent; (l) Purchaser or an affiliate of Purchaser is legally qualified under all relevant laws and regulations to hold the FCC licenses, and to receive any authorization from any other federal, state or local regulatory or governmental authority necessary to consummate the transactions contemplated by this Agreement; and (m) Purchaser is not an affiliate of CAI. 13 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. ARTICLE IV CONDITIONS TO CLOSING SECTION 4.01. Conditions to Obligations of Sellers. The obligations of each Seller to assign, sell, transfer and convey the Securities and the Assigned Rights to Purchaser on the applicable Closing Date shall be subject to the fulfillment of each of the following conditions on such Closing Date: (a) such Seller shall have received on such Closing Date payment of its portion of the Purchase Price allocable to the Securities to be sold to Purchaser on such Closing Date; (b) the representations and warranties of Purchaser contained in this Agreement shall have been true and correct in all material respects when made and as of such Closing Date (it being agreed that such representations and warranties shall be deemed to have been confirmed by Purchaser as of such Closing Date, without the need for further written certification, unless Purchaser shall have notified each Seller in writing to the contrary prior to the such Closing Date); (c) Purchaser shall have complied in all material respects with all covenants required by this Agreement to be complied with by it on or prior to such Closing Date; (d) Purchaser shall have executed the * Voting Agreement or an assumption agreement relating thereto; and (e) There shall not have been instituted and there shall not be pending any action or proceeding before any court of competent jurisdiction or governmental agency or regulatory or administrative body, and no order or decree shall have been entered in any action or proceeding before such court, agency or body, (i) for the purpose of enjoining or preventing the consummation of the transactions contemplated hereunder or (ii) which claims that this Agreement, the transactions contemplated hereby or the consummation thereof is illegal; provided that prior to invoking this condition, such Seller shall have used its reasonable best efforts to have any such action, proceeding or notice withdrawn or dismissed or such order or decree vacated. - --------------- * Confidential portions omitted pursuant to a confidential treatment request and filed separately with Securities and Exchange Commission 14 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. SECTION 4.02. Conditions to Obligations of Purchaser. The obligations of Purchaser to purchase and accept assignment of the Securities and the Assigned Rights and to assume the obligations contemplated hereby from any Seller on the applicable Closing Date shall be subject to the fulfillment of each of the following conditions on or prior to such Closing Date: (a) On the Initial Closing Date, Purchaser shall have received, in each case without recourse or warranty to any Seller except as set forth in this Agreement, the deliveries required by Section 1.04(a); (b) On the April Closing Date, Purchaser shall have received, in each case without recourse or warranty to any Seller except as set forth in this Agreement, the deliveries required by Section 1.04(b); (c) Each Seller shall have complied in all material respects with all covenants required by this Agreement to be complied with by it on or prior to such Closing Date; (d) on the Final Closing Date, Purchaser shall have received, without recourse or warranty to any Seller except as set forth in this Agreement, the deliveries required by Section 1.04(c); (e) the representations and warranties of each Seller contained in this Agreement shall have been true and correct in all material respects when made and as of such Closing Date (it being agreed that such representations and warranties shall be deemed to have been confirmed by such Seller as of such Closing Date, without the need for further written certification, unless such Seller shall have notified Purchaser in writing to the contrary prior to such Closing Date); (f) with respect to the Final Closing Date, any waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder (the "HSR Act") applicable to the purchase of more than 50% of the capital stock of CAI shall have expired or been terminated; provided however, that the condition set forth in this Section 4.02(f) cannot be waived by Purchaser; (g) There shall not have been instituted and there shall not be pending any action or proceeding before any court of competent jurisdiction or governmental agency or regulatory or administrative body, and no order or decree shall have been entered in any action or proceeding before such court, agency or body, (i) for the purpose of enjoining or preventing the consummation of the transactions contemplated hereunder, (ii) which claims that this Agreement, the transactions contemplated hereby or the consummation thereof is illegal or (iii) requiring or seeking to require divestiture by Purchaser or any issuer of the Securities of all or any material 15 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. portion of their respective businesses, securities or assets as a result of the transactions contemplated hereby; provided that prior to invoking this condition, Purchaser shall have used its reasonable best efforts to have any such action, proceeding or notice withdrawn or dismissed or such order or decree vacated. ARTICLE V THE PUTS SECTION 5.01. Purchaser Put Option. (a) Notwithstanding anything contained herein to the contrary, Purchaser shall have a Put Right (as herein defined) that shall become exercisable upon the earlier of (i) June 21, 1999 if the Waiting Condition (as herein defined) is satisfied, or (ii) the satisfaction of the Denial Condition (as hereinafter defined) ((i) and (ii) shall be referred to as "Trigger Events"). The "Waiting Condition" is satisfied if any of the following are true: (1) the FCC has not consented to the transfer of more than 50% of the capital stock of CAI to Purchaser, (2) the FCC has not consented to the transfer of a controlling interest in CS to Purchaser (and such consent is required), or (3) any waiting period under the HSR Act applicable to the purchase of more than 50% of the capital stock of CAI shall not have expired or been terminated. The "Denial Condition" is satisfied if any of the following are true: (A) the FCC has denied its consent to the transfer of more than 50% of the capital stock of CAI to Purchaser, or (B) the FCC has denied its consent to the transfer of a controlling interest in CS to Purchaser. "Put Right" means Purchaser's right to put the Put Securities (as hereinafter defined) to Seller. Purchaser shall have three business days following the occurrence of a Trigger Event to give notice of its intent to exercise its Put Right. In such notice Purchaser shall specify a date ("Put Exercise Date") upon which it intends to exercise the Put Right, which Put Exercise Date shall be within five business days of the Trigger Event. Subject to the conditions precedent in (b) below, on the Put Exercise Date, the Seller shall purchase from Purchaser and Purchaser shall sell to Sellers all, but not less than all, of the Securities, the Assigned Rights and the Wireless One Voting Agreement purchased by Purchaser prior to the Put Exercise Date, or any securities, properties or other consideration received (i) in exchange therefor pursuant to any bankruptcy proceeding, (ii) pursuant to any stock split or stock dividend or (iii) otherwise in connection with the Securities (the "Put Securities"). The aggregate purchase price for the Put Securities shall be an amount equal to the portion of the Purchase Price paid by Purchaser for such Securities (the "Put Exercise Price"). Subject to the conditions set forth in (b) below, upon the exercise of the Put Right by Purchaser, Purchaser shall deliver to Sellers the Securities previously sold to Purchaser, and all documentation related thereto, and whatever documents of conveyance or transfer may be necessary or desirable to transfer to and confirm in such Seller, or at such Seller's request, Seller's nominee, all right, title and interest in and to such Securities, in each case without recourse or warranty to Purchaser except as set forth in this Agreement, and such Seller shall assume Purchaser's obligations under the Assumed Agreements (other than liabilities for 16 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. breaches thereof by, or other obligations thereunder of, Purchaser accrued prior to the assignment to Seller hereunder), and deliver whatever documents of assumption may be necessary or desirable to reflect such assumption and such Seller shall pay to Purchaser the Put Exercise Price by wire transfer of immediately available funds. Upon the closing of the put transaction, this Agreement shall terminate and be of no further force or effect except for provisions that survive termination. (b) (i) The right of Purchaser to exercise the put and the obligation of Sellers to purchase the Put Securities is subject to each of the following conditions: (x) with respect to the Assumed Agreements, Purchaser shall have performed and complied in all material respects with all agreements, covenants and conditions contained in the Securities Documents related to the Put Securities which are required to be performed or complied with by it on or before the Put Exercise Date; (y) from the date such Securities were purchased by Purchaser hereunder, no material amendment, modification or change has been made by or on behalf of or consented to by Purchaser to the terms or conditions of such Security or Securities Documents that would reasonably be likely to be materially adverse to a holder of such Security; (z) Purchaser represents and warrants to Sellers that, as of the Put Exercise Date, Purchaser is the sole legal and beneficial owner and holder of the Put Securities and has undivided good title to such Put Securities, free and clear of any lien, security interest or other adverse claim, and such Put Securities are not subject to any prior sale, transfer, assignment or participation by Purchaser or any agreement by Purchaser to assign, convey, transfer or participate in whole or in part. (ii) Each Seller may, in its sole and absolute discretion, waive the conditions in Section (b)(i)(x) and (b)(i)(z) above if Purchaser provides Sellers with an indemnification satisfactory to each Seller. ARTICLE VI MISCELLANEOUS SECTION 6.01. Further Assurances. Each Seller and Purchaser each hereby agree to execute and deliver, or cause to be executed and delivered, such other documents, instruments and agreements, and take such other actions, as either party may reasonably request in connection with the transactions contemplated by this Agreement. 17 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. SECTION 6.02. Receipt of Information and Interest. Seller shall (a) use all reasonable efforts promptly to advise Purchaser of any notices it receives under the Securities, the Securities Documents or the Assigned Rights from and after the date hereof, to the extent such notices have been sent to all holders of such Securities, are not subject to any separate confidentiality arrangements, do not contain any proprietary information or do not relate to the Wireless One DIP Note and (b) at Purchaser's request, promptly forward any such notices that it receives to Purchaser. If Seller shall receive any interest or other distribution in respect of any of the Securities that accrued for the period following the applicable Closing Date with respect to such Security, Seller shall promptly pay to Purchaser such interest or other distribution it received. SECTION 6.03. Amendment; Waiver; Remedies. This Agreement shall not be amended or otherwise modified unless in writing and signed by the parties hereto. No failure on the part of either party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof by such party, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The rights and remedies of each party provided herein are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law or in equity. SECTION 6.04. Notices. All notices and other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered, if sent by registered or certified mail (return receipt requested), (b) when delivered, if delivered personally, (c) when transmitted, if sent by facsimile if a confirmation of transmission is produced by the sending machine or (d) when delivered, if sent by overnight mail or overnight courier, in each case to the parties at the following addresses or facsimile numbers (or at such other addresses or facsimile numbers as shall be specified by like notice): 18 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. If to Sellers, at: * with a copy (which shall not constitute notice) to: * If to Purchaser, at: MCI WORLDCOM, Inc. 3060 Williams Drive, Suite 600 Fairfax, VA 22031 Attention: Robert Finch Vice President - Strategic Development Fax: (703) 645-4637 with a copy (which shall not constitute notice) to: P. Bruce Borghardt General Counsel - Corporate Development MCI WORLDCOM, Inc. 10777 Sunset Office Drive, Suite 330 St. Louis, MO 63127 Fax: (314) 909-4101 SECTION 6.05. Costs and Expenses. The Sellers and Purchaser shall each pay their own respective costs and expenses incurred in connection with the negotiation, preparation, execution and performance of this Agreement, including, but not limited to, attorneys' fees. In the event of litigation or other proceedings arising out of the interpretation or enforcement of this Agreement or any document, instrument or agreement executed pursuant hereto, the prevailing party shall be entitled to receive its out-of-pocket costs and expenses incurred in connection with such litigation or proceedings, including, without limitation, reasonable attorneys' fees and expenses. SECTION 6.06. Survival. Subject to Section 5.01, the agreements, covenants, representations and warranties of the parties contained herein shall survive the consummation of the transactions contemplated hereby. - ----------------- * Confidential portions omitted pursuant to a confidential treatment request and filed separately with Securities and Exchange Commission 19 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. SECTION 6.07. Successors and Assigns. This Agreement shall inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns; provided, however, that no party shall assign its rights and obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld. Any purported assignment absent such consent shall be void. SECTION 6.08. Counterparts. This Agreement may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. SECTION 6.09. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. Each party to this Agreement hereby irrevocably consents to the jurisdiction of the United States District Court for the Southern District of New York located in the State and City of New York in any action to enforce, interpret or construe any provision of this Agreement or of any other agreement or document delivered in connection herewith and hereby waives any objection to venue, whether by reason of improper venue, forum non conveniens or lack of personal jurisdiction or otherwise, to any such action brought in that Court. SECTION 6.10. Waiver of Trial by Jury. Each Seller and Purchaser each hereby knowingly, voluntarily and intentionally waive any rights they may have to a trial by jury in respect of any litigation based hereon, or arising out of, under, or in connection with this Agreement, the Securities Documents, any related documents and agreements or any course of conduct, course of dealing, or statements (whether verbal or written) in connection therewith. SECTION 6.11. Confidentiality. No party hereto shall disclose any Confidential Information (as defined below) to any third party without the prior written consent of the other party hereto, other than (a) to the officers, directors, employees, agents and advisors of such party or its affiliates who have a need to know such Confidential Information and are subject to appropriate confidentiality obligations, (b) as and only to the extent required by applicable law, rule, regulation or judicial process, (c) as and only to the extent requested or required by any state, federal or foreign authority or examiner regulating any of Sellers or Purchaser and (d) information that, at the time of disclosure or thereafter is generally available to the public (other than as a result of a disclosure in violation of the terms of this Section); provided, however, that prior to any disclosure under parts (b) or (c), such party shall promptly advise the other party when requested or required to make a disclosure thereunder. For purposes of this Section 6.11, "Confidential Information" means any information related to or in connection with the identity of the parties hereto or the price or value of any interest transferred hereunder or the existence or terms of this Agreement. This Section 6.11 shall survive the termination of this Agreement. 20 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. SECTION 6.12. No-Shop. No Seller including the employees, officers, directors and agents of the Seller shall make, solicit, assist or initiate any inquiry or proposal, or provide any information to or participate in any negotiations with, any corporation, partnership, agent, attorney, financial advisor, person, or other entity or group (other than Purchaser) ("Third Parties") for the purpose of consummating any sale, transfer or other disposition of the Securities or Assigned Rights ("Disposition"). Each Seller acknowledges that entering into any contract or agreement with any Third Party with respect to any Disposition, even if any such Disposition were conditional upon the termination of this Agreement or nonconsummation of the transactions contemplated hereby, would violate this Agreement. SECTION 6.13. Miscellaneous. (a) This Agreement and any agreement, document or instrument attached hereto or referred to herein integrate all the terms and conditions mentioned herein or incidental hereto, constitute the entire agreement and understanding between the parties hereto and supersede any and all prior agreements and understandings relating to the subject matter hereof. (b) All payments made hereunder shall be made without any set-off or counterclaim. (c) If any provision of this Agreement shall be determined to be unenforceable by any court of law, the remaining provisions shall be severable and enforceable in accordance with their terms unless to do so would frustrate the purpose of the parties in entering into this Agreement, in which case the party whose purpose is frustrated shall have the right to terminate this Agreement without liability or obligation hereunder except for the provisions which provide that they shall survive the termination of this Agreement. (d) Each Seller and Purchaser agree that no adequate remedy at law may exist for breach of certain of their respective obligations under this Agreement, and that therefore in the event any party hereto fails to comply with its obligations hereunder, the other party hereto shall have the right to obtain specific performance of the obligations of such defaulting party, injunctive relief or such other equitable relief as may be available. (e) The section captions and headings in this Agreement are for convenience only and are not intended to be full or accurate descriptions of the contents thereof. They shall not be deemed to be part of this Agreement and in no way define, limit, extend or describe the scope or intent of any provision hereof. (f) Each Seller and Purchaser intend and agree that the transactions contemplated hereby shall not (i) constitute a loan by Purchaser to any Seller nor (ii) result in the 21 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. creation of any trust or fiduciary relationship between Purchaser and any Seller, or in the creation of a joint venture between such parties. (g) For purposes of this Agreement, the term "Securities" shall be deemed to include any securities, properties or other consideration received by the holder of such Securities (i) in exchange therefor pursuant to any bankruptcy proceeding, (ii) pursuant to any stock split or stock dividend or (iii) otherwise in connection with the Securities following the execution of this Agreement and prior to the applicable Closing Date or the Put Exercise Date, as the case may be. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized signatories as of the date first above written. * By -------------------------------- Name: Title: - --------------- * Confidential portions omitted pursuant to a confidential treatment request and filed separately with Securities and Exchange Commission 22 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. * By -------------------------------- Name: Title: MCI WORLDCOM, INC. By /s/ CHARLES T. CANNADA -------------------------------- Name: Charles T. Cannada Title: Senior Vice President - --------------- * Confidential portions omitted pursuant to a confidential treatment request and filed separately with Securities and Exchange Commission 23 CONFIDENTIAL TREATMENT REQUESTED BY MCI WORLDCOM, INC. SCHEDULE 1
Closing Date Purchase Price - ------------ -------------- * * Aggregate ------- ------- --------- Part I Initial Closing Date $ * $ * $ * ------- ------- ------- Part II April Closing Date $ * $ * $ * ------- ------- ------- Part III Final Closing Date $ * $ * $ * ------- ------- ------- TOTAL PURCHASE PRICE: $ * ========
- -------- * Confidential portions omitted pursuant to a confidential treatment request and filed separately with Securities and Exchange Commission EX-99.(C) 4 STOCK OPTION AGREEMENT 1 EXHIBIT C STOCK OPTION AGREEMENT STOCK OPTION AGREEMENT, dated as of April 26, 1999 (the "Agreement"), by and between MCI WORLDCOM, INC., a Georgia corporation ("MCI WorldCom"), and CAI WIRELESS SYSTEMS, INC., a Connecticut corporation ("CAI"). RECITALS (A) MERGER AGREEMENT. MCI WorldCom, CAI and Cardinal Acquisition Subsidiary, Inc., a Connecticut corporation and wholly owned subsidiary of MCI WorldCom ("Acquisition Subsidiary"), have entered into an Agreement and Plan of Merger dated as of the date hereof (the "Merger Agreement"), which provides, upon the terms and subject to the conditions set forth therein, for the merger of Acquisition Subsidiary with and into CAI (the "Merger"); and (B) CONDITION TO MERGER AGREEMENT. As a condition and inducement to MCI WorldCom's pursuit of the transactions contemplated by the Merger Agreement, and in consideration therefor, CAI has agreed to grant MCI WorldCom the Option (as hereinafter defined). NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein and in the Merger Agreement, and intending to be legally bound hereby, MCI WorldCom and CAI, agree as follows: 1. DEFINED TERMS. Capitalized terms which are used but not defined herein shall have the meanings ascribed to such terms in the Merger Agreement. 2. GRANT OF OPTION. Subject to the terms and conditions set forth herein, CAI hereby grants to MCI WorldCom an irrevocable option (the "Option") to purchase a number of shares of common stock, par value $.01 per share ("CAI Common"), of CAI up to 6,090,481 of such shares (as adjusted as set forth herein, the "Option Shares", which shall include the Option Shares before and after any transfer of such Option Shares, and which represents 24.4% of the fully diluted shares of CAI Common as of the date hereof), at a purchase price per Option Share (as adjusted as set forth herein, the "Purchase Price") equal to $28. 3. EXERCISE OF OPTION. (a) Provided that no preliminary or permanent injunction or other order against the delivery of Option Shares issued by any court of competent jurisdiction in the United States shall be in effect, Holder (as hereinafter defined) may exercise the Option, in whole or in part, at any time and from time to time following the occurrence of a Purchase Event (as hereinafter defined); provided that the Option shall terminate and be of no further force or effect as follows: (A) If the Merger is consummated, upon the Effective Time; (B) If the Merger Agreement is terminated for any reason and a Purchase Event has occurred prior to such termination, eighteen (18) months after the occurrence of such Purchase Event; 2 (C) If the Merger Agreement is terminated pursuant to Sections 7.1(a), 7.1(b)(i), 7.1(b)(iii), or 7.1(e) and a Purchase Event has not occurred prior to such termination, upon such termination; (D) If the Merger Agreement is terminated for any reason other than those enumerated in clause (C) above and a Purchase Event has not occurred prior to such termination, eighteen (18) months after such termination; and (E) Thirty (30) months from the date hereof if the Merger has not been consummated and the Merger Agreement has not been terminated by such date. provided, however, that any purchase of Option Shares shall be subject to compliance with applicable law. The term "Holder" shall mean the holder or holders of the Option from time to time, and which is initially MCI WorldCom. (b) As used herein, a "Purchase Event" means any of the following events: (i) CAI shall have recommended to its shareholders, or CAI or any person (other than MCI WorldCom or any affiliate or associate of MCI WorldCom) shall have publicly proposed or publicly announced, a bona fide Takeover Proposal that shall not have been withdrawn at the time of the exercise of the Option; or (ii) any person (other than MCI WorldCom or any affiliate or associate of MCI WorldCom) shall have acquired beneficial ownership (as such term is defined in Rule 13d-3 promulgated under the Securities Exchange Act) of or the right to acquire beneficial ownership of, or any "group" (as such term is defined in Section 13(d)(3) of the Securities Exchange Act), other than a group of which MCI WorldCom or any affiliate or associate of MCI WorldCom is a member, shall have been formed which beneficially owns, or has the right to acquire beneficial ownership of, 15% or more of the voting power of CAI; or (iii) CAI's Board of Directors shall have withdrawn or modified in a manner adverse to MCI WorldCom the recommendation of CAI's Board of Directors with respect to the Merger Agreement and the Merger. As used in this Agreement, "person" shall have the meaning specified in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act. (c) CAI shall notify Holder promptly in writing of the occurrence of any Purchase Event, it being understood that the giving of such notice by CAI shall not be a condition to the right of Holder to exercise the Option. 2 3 (d) In the event Holder wishes to exercise the Option, it shall send to CAI a written notice (the date of which being herein referred to as the "Notice Date") specifying (i) the total number of Option Shares it intends to purchase pursuant to such exercise and (ii) a place and date not earlier than three (3) business days nor later than fifteen (15) business days from the Notice Date for the closing (the "Closing") of such purchase (the "Closing Date"). If prior notification to or approval of any Governmental Authority is required in connection with such purchase, CAI shall cooperate with Holder in the filing of the required notice or application for approval and the obtaining of such approval and the Closing shall occur immediately following such regulatory approvals (and any mandatory waiting periods). Any exercise of the Option shall be deemed to occur on the Notice Date relating thereto. (e) Holder, which is initially MCI WorldCom, by this Agreement, with respect to any Option Shares acquired by it on or prior to the record date for the meeting of shareholders of CAI called to consider the Merger Agreement and the Merger, does hereby constitute and appoint CAI, or any nominee of CAI, with full power of substitution, from the date hereof to the earlier to occur of the termination of the Merger Agreement or the Effective Time, as its true and lawful attorney and proxy (its "Proxy"), for and in its name, place and stead, to vote each of such Option Shares as its Proxy, at every annual, special or adjourned meeting of the shareholders of CAI, including the right to sign its name (as shareholder) to any consent, certificate or other document relating to CAI that the law of the State of Connecticut may permit or require: (i) in favor of the Merger Agreement and the Merger; and (ii) against any proposal for any recapitalization, merger (other than the Merger), sale of assets or other business combination between CAI and any person or entity (other than MCI WorldCom or Acquisition Subsidiary or other permitted assignee thereof under the Merger Agreement) or any other action or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of MCI WorldCom under the Merger Agreement or which could result in any of the conditions to the Merger Agreement not being fulfilled. THIS POWER OF ATTORNEY IS IRREVOCABLE, IS GRANTED IN CONSIDERATION OF CAI ENTERING INTO THE MERGER AGREEMENT AND IS COUPLED WITH AN INTEREST SUFFICIENT IN LAW TO SUPPORT AN IRREVOCABLE POWER. This appointment shall revoke all prior powers of attorney and proxies appointed by Holder at any time with respect to the Option Shares and no subsequent powers of attorney or proxies will be appointed by Holder, or be effective, with respect thereto during the term of this Agreement. Holder shall perform such further acts and execute such further documents and instruments as may reasonably be required to vest in CAI the power to carry out and give effect to the provisions of this Agreement. 4. PAYMENT AND DELIVERY OF CERTIFICATES. 3 4 (a) On each Closing Date, Holder shall (i) pay to CAI, in immediately available funds by wire transfer to a bank account designated by CAI, an amount equal to the Purchase Price multiplied by the number of Option Shares to be purchased on such Closing Date, and (ii) present this Agreement to CAI at the address of CAI specified in Section 11(f) and CAI shall mark and return this Agreement to Holder to reflect the exercise of this Option. (b) At each Closing, simultaneously with the delivery of immediately available funds, and presentation of this Agreement as provided in Section 4(a), (i) CAI shall deliver to Holder (A) a certificate or certificates representing the Option Shares to be purchased at such Closing, which Option Shares shall be free and clear of all liens, fully paid and nonassessable and subject to no preemptive rights, and (B) an executed new agreement with the same terms as this Agreement evidencing the right to purchase the balance of the Option Shares purchasable hereunder, if any, and the remaining rights of the Holder, and (ii) Holder shall deliver to CAI a letter agreeing that Holder shall not offer to sell or otherwise dispose of such Option Shares in violation of applicable federal and state law or of the provisions of this Agreement. (c) In addition to any other legend that is required by applicable law, certificates for the Option Shares delivered at each Closing shall be endorsed with a restrictive legend which shall read substantially as follows: THE TRANSFER AND VOTING OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND A STOCK OPTION AGREEMENT DATED AS OF APRIL 26, 1999. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY CAI OF A WRITTEN REQUEST THEREFOR. It is understood and agreed that the portion of the above legend relating to restrictions on transfer shall be removed by delivery of substitute certificate(s) without such legend if Holder shall have delivered to CAI a copy of a letter from the staff of the SEC, or an opinion of counsel in form and substance reasonably satisfactory to CAI and its counsel, to the effect that such legend is not required for purposes of the Securities Act. It is understood and agreed that the portion of the above legend relating to voting shall be removed upon expiration or termination of the proxy referred to in Section 3(e) hereof. (d) Upon the giving by Holder to CAI of the written notice of exercise of the Option provided for under Section 3(d), the tender of the applicable purchase price in immediately available funds and the tender of this Agreement to CAI, Holder shall be deemed to be the holder of record of the shares of CAI Common issuable upon such exercise, notwithstanding that the stock transfer books of CAI shall then be closed or that certificates representing such shares of CAI Common shall not then be actually delivered to Holder. CAI shall pay all expenses, and any and all United States federal, state, and local taxes and other charges that may be payable in connection with the preparation, issuance and delivery of stock certificates under this Section in the name of Holder or its assignee, transferee, or designee. 4 5 (e) CAI agrees (i) that it shall at all times maintain, free from preemptive rights, sufficient authorized but unissued or treasury shares of CAI Common so that the Option may be exercised without additional authorization of CAI Common after giving effect to all other options, warrants, convertible securities and other rights to purchase CAI Common, (ii) that it will not, by charter amendment or through reorganization, consolidation, merger, dissolution or sale of assets, or by any other voluntary act, avoid or seek to avoid the observance or performance of any of the covenants, stipulations or conditions to be observed or performed hereunder by CAI, and (iii) promptly to take all action as may from time to time be required (including (A) complying with all premerger notification, reporting and waiting period requirements, (B) in the event prior approval of or notice to any governmental regulatory agency is necessary before the Option may be exercised, cooperating fully with Holder in preparing such applications or notices and providing such information to such Governmental Authority as it may require and (C) amending, redeeming or taking such other action with respect to the Rights Plan so as to preclude MCI WorldCom from becoming an "Acquiring Person" (as defined in the Rights Plan) and to preclude a "Stock Acquisition Date" (as defined in the Rights Plan) or a "Distribution Date" (as defined in the Rights Plan) (or similar events) from occurring thereunder in order to permit Holder to exercise the Option and CAI duly and effectively to issue shares of the CAI Common pursuant hereto. 5. REPRESENTATIONS AND WARRANTIES OF CAI. CAI hereby represents and warrants to MCI WorldCom (and Holder, if different from MCI WorldCom) as follows: (a) Corporate Authority. CAI has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby; the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of CAI, and no other corporate proceedings on the part of CAI are necessary to authorize this Agreement or to consummate the transactions so contemplated; this Agreement has been duly and validly executed and delivered by CAI. (b) Beneficial Ownership. To the best knowledge of CAI, as of the date of this Agreement, no person or group has beneficial ownership of more than 10% of the issued and outstanding shares of CAI Common other than persons or other entities affiliated with Merrill Lynch Asset Management, L.P. and Moore Capital Management, Inc., as reflected in Schedule 13Gs, publicly filed with the SEC on or prior to April 15, 1999. (c) Shares Reserved for Issuance; Capital Stock. CAI has taken all necessary corporate action to authorize and reserve and permit it to issue, and at all times from the date hereof through the termination of this Agreement in accordance with its terms will have reserved for issuance upon the exercise of the Option, that number of shares of CAI Common equal to the maximum number of shares of CAI Common at any time and from time to time purchasable upon exercise of the Option, and all such shares, upon issuance pursuant to the Option, will be duly authorized, validly issued, fully paid and nonassessable, and will be delivered free and clear of all claims, liens, encumbrances, and security interests (other than those created by this Agreement) and not subject to any preemptive rights. 5 6 (d) No Violations. The execution, delivery and performance of this Agreement does not and will not, and the consummation by CAI of any of the transactions contemplated hereby will not, constitute or result in (A) a breach or violation of, or a default under, its certificate of incorporation or by-laws, or the comparable governing instruments of any of its subsidiaries, or (B) a breach or violation of, or a default under, any agreement, lease, contract, note, mortgage, indenture, arrangement or other obligation of it or any of its subsidiaries (with or without the giving of notice, the lapse of time or both) or under any law, rule, ordinance or regulation or judgment, decree, order, award or governmental or non-governmental permit or license to which it or any of its subsidiaries is subject, that would, in any case, give any other person the ability to prevent or enjoin CAI's performance under this Agreement in any material respect. 6. REPRESENTATIONS AND WARRANTIES OF MCI WORLDCOM. MCI WorldCom hereby represents and warrants to CAI as follows: (a) Corporate Authority. MCI WorldCom has full corporate power and authority to enter into this Agreement and, subject to obtaining the approvals referred to in this Agreement, to consummate the transactions contemplated by this Agreement; the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of MCI WorldCom; and this Agreement has been duly executed and delivered by MCI WorldCom. (b) Investment Representations. (i) MCI WorldCom is acquiring the Option and the Option Shares (collectively, the "Securities") for its own account for investment only, and not with a view to, or for sale in connection with, any distribution of the Securities in violation of the Securities Act, or any rule or regulation under the Securities Act. (ii) MCI WorldCom has had such opportunity as it deems adequate to obtain from representatives of CAI such information as is necessary to permit MCI WorldCom to evaluate the merits and risks of its investment in CAI. (iii) MCI WorldCom has sufficient experience in business, financial and investment matters to be able to evaluate the risks involved in the purchase of the Securities and to make an informed investment decision with respect to such purchase. (iv) MCI WorldCom acknowledges that (1) the Securities have not been registered under the Securities Act and are "restricted securities" within the meaning of Rule 144 under the Securities Act and (2) the Securities cannot be sold, transferred or otherwise disposed of unless they are subsequently registered under the Securities Act or an exemption from registration is then available. 6 7 7. ADJUSTMENT UPON CHANGES IN CAI CAPITALIZATION, ETC. (a) In the event of any change in the CAI Common by reason of a stock dividend, stock split, split-up, recapitalization, combination, exchange of shares or similar transaction, the type and number of shares or securities subject to the Option, and the Purchase Price therefor, shall be adjusted appropriately, and proper provision shall be made in the agreements governing such transaction so that Holder shall receive, upon exercise of the Option, the number and class of shares or other securities or property that Holder would have received in respect of CAI Common if the Option had been exercised immediately prior to such event, or the record date therefor, as applicable. If any additional shares of CAI Common are issued after the date of this Agreement (other than pursuant to an event described in the first sentence of this Section 7(a), upon exercise of any option to purchase CAI Common outstanding on the date hereof or upon conversion into CAI Common of any convertible security of CAI outstanding on the date hereof), the number of shares of CAI Common subject to the Option shall be adjusted so that, after such issuance, it, together with any shares of CAI Common previously issued pursuant hereto, equals [24.4]% of the number of shares of CAI Common then issued and outstanding, giving effect to any shares subject to or issued pursuant to the Option. No provision of this Section 7 shall be deemed to affect or change, or constitute authorization for any violation of, any of the covenants or representations in the Merger Agreement. (b) In the event that CAI shall enter into an agreement (i) to consolidate with or merge into any person, other than MCI WorldCom or one of its subsidiaries, and shall not be the continuing or surviving corporation of such consolidation or merger, (ii) to permit any person, other than MCI WorldCom or one of its subsidiaries, to merge into CAI and CAI shall be the continuing or surviving corporation, but, in connection with such merger, the then outstanding shares of CAI Common shall be changed into or exchanged for stock or other securities of CAI or any other person or cash or any other property or the outstanding shares of CAI Common immediately prior to such merger shall after such merger represent less than 50% of the outstanding shares and share equivalents of the merged company, or (iii) to sell or otherwise transfer all or substantially all of its assets to any person, other than MCI WorldCom or one of its subsidiaries, then, and in each such case, the agreement governing such transaction shall make proper provisions so that the Option shall, upon the consummation of any such transaction and upon the terms and conditions set forth herein, be converted into, or exchanged for, an option to acquire the number and class of shares or other securities or property that Holder would have received in respect of CAI Common if the Option had been exercised immediately prior to such consolidation, merger, sale or transfer, or the record date therefor, as applicable. 8. REGISTRATION RIGHTS. (a) Demand Registration Rights. CAI shall, subject to the conditions of Section 8(c) below, if requested by Holder, including MCI WorldCom and any permitted transferee acquiring at least 10% of the shares of CAI Common represented by the Option on the date hereof (each, a 7 8 "Selling Shareholder"), as expeditiously as possible prepare and file a registration statement under the Securities Act if such registration is necessary in order to permit the sale or other disposition of any or all shares of CAI Common or other securities that have been acquired by or are issuable to the Selling Shareholder upon exercise of the Option in accordance with the intended method of sale or other disposition stated by the Selling Shareholder in such request, including without limitation a "shelf" registration statement under Rule 415 under the Securities Act or any successor provision, and CAI shall use its best efforts to qualify such shares or other securities for sale under any applicable state securities laws, provided, however, that CAI shall not be required to consent to general jurisdiction or qualify to do business in any state where it is not otherwise required to so consent to such jurisdiction or to so qualify to do business. (b) Additional Registration Rights. If CAI at any time after the exercise of the Option proposes to register any shares of CAI Common under the Securities Act, CAI will promptly give written notice to the Selling Shareholders of its intention to do so and, upon the written request of any Selling Shareholder given within thirty (30) days after receipt of any such notice (which request shall specify the number of shares of CAI Common intended to be included in such public offering by the Selling Shareholder), CAI will cause all such shares for which a Selling Shareholder requests participation in such registration to be so registered and included in such public offering, provided, however, that CAI may elect to not cause any such shares to be so registered (i) if such public offering is to be underwritten and the underwriters in good faith object for valid business reasons, or (ii) in the case of a registration solely to implement an employee benefit plan or a registration filed on Form S-4 of the Securities Act or any successor Form; provided, further, however, that such election pursuant to (i) may only be made two times. If some but not all the shares of CAI Common, with respect to which CAI shall have received requests for registration pursuant to this Section 8(b), shall be excluded from such registration, CAI shall make appropriate allocation of shares to be registered among the Selling Shareholders desiring to register their shares pro rata in the proportion that the number of shares requested to be registered by each such Selling Shareholder bears to the total number of shares requested to be registered by all such Selling Shareholders then desiring to have CAI Common registered for sale. (c) Conditions to Required Registration. CAI shall use all reasonable efforts to cause each registration statement referred to in Section 8(a) above to become effective and to obtain all consents or waivers of other parties which are required therefor and to keep such registration statement effective; provided, however, that CAI may delay any registration of Option Shares required pursuant to Section 8(a) above for a period not exceeding ninety (90) days provided CAI shall in good faith determine that any such registration would adversely affect CAI (provided that this right may not be exercised more than once during any twelve month period), and CAI shall not be required to register Option Shares under the Securities Act pursuant to Section 8(a) above: (i) on more than one occasion during any calendar year; (ii) within ninety (90) days after the effective date of a registration referred to in Section 8(b) above pursuant to which the Selling Shareholder or Selling Shareholders concerned were afforded the opportunity to register such shares under the Securities Act and such shares were registered as requested; 8 9 (iii) unless a request therefor is made to CAI by Selling Shareholders that hold at least 25% or more of the aggregate number of Option Shares (including shares of CAI Common issuable upon exercise of the Option) then outstanding; or (iv) if all the Option Shares proposed to be registered could be sold by the Selling Shareholders in a 90-day period in accordance with Rule 144. In addition to the foregoing, CAI shall not be required to maintain the effectiveness of any registration statement after the expiration of six (6) months from the effective date of such registration statement. CAI shall use all reasonable efforts to make any filings, and take all steps, under all applicable state securities laws to the extent necessary to permit the sale or other disposition of the Option Shares so registered in accordance with the intended method of distribution for such shares; provided, however, that CAI shall not be required to consent to general jurisdiction or qualify to do business in any state where it is not otherwise required to so consent to such jurisdiction or to so qualify to do business. (d) Expenses. Except where applicable state law prohibits such payments, CAI will pay all expenses (including without limitation registration fees, qualification fees, blue sky fees and expenses, including the fees and expenses of counsel, legal expenses, including the reasonable fees and expenses of one counsel to the holders whose Option Shares are being registered (not to exceed $15,000), printing expenses, the costs of special audits or "cold comfort" letters, expenses of underwriters, excluding discounts and commissions but including liability insurance if CAI so desires or the underwriters so require, and the reasonable fees and expenses of any necessary special experts) in connection with each registration pursuant to Section 8(a) or 8(b) above (including the related offerings and sales by holders of Option Shares) and all other qualifications, notifications or exemptions pursuant to Section 8(a) or 8(b) above. (e) Indemnification. In connection with any registration under Section 8(a) or 8(b) above, CAI hereby indemnifies the Selling Shareholders, and each underwriter thereof, including each person, if any, who controls such Holder or underwriter within the meaning of Section 15 of the Securities Act, against all expenses, losses, claims, damages and liabilities caused by any untrue, or alleged untrue, statement of a material fact contained in any registration statement or prospectus or notification or offering circular (including any amendments or supplements thereto) or any preliminary prospectus, or caused by any omission, or alleged omission, to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such expenses, losses, 9 10 claims, damages or liabilities of such indemnified party are caused by any untrue statement or alleged untrue statement that was included by CAI in any such registration statement or prospectus or notification or offering circular (including any amendments or supplements thereto) in reliance upon and in conformity with, information furnished in writing to CAI by such indemnified party expressly for use therein, and CAI and each officer, director and controlling person of CAI shall be indemnified by such Selling Shareholders, or by such underwriter, as the case may be, for all such expenses, losses, claims, damages and liabilities caused by any untrue, or alleged untrue, statement, that was included by CAI in any such registration statement or prospectus or notification or offering circular (including any amendments or supplements thereto) in reliance upon, and in conformity with, information furnished in writing to CAI by or on behalf of such Selling Shareholder or such underwriter, as the case may be, expressly for such use. Promptly upon receipt by a party indemnified under this Section 8(e) of notice of the commencement of any action against such indemnified party in respect of which indemnity or reimbursement may be sought against any indemnifying party under this Section 8(e), such indemnified party shall notify the indemnifying party in writing of the commencement of such action, but the failure so to notify the indemnifying party shall not relieve it of any liability which it may otherwise have to any indemnified party under this Section 8(e) except to the extent the indemnified party is materially prejudiced thereby. In case notice of commencement of any such action shall be given to the indemnifying party as above provided, the indemnifying party shall be entitled to participate in and, to the extent it may wish, jointly with any other indemnifying party similarly notified, to assume the defense of such action at its own expense, with counsel chosen by it and reasonably satisfactory to such indemnified party. The indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel (other than reasonable costs of investigation) shall be paid by the indemnified party unless (i) the indemnifying party either agrees to pay the same, (ii) the indemnifying party fails to assume the defense of such action with counsel reasonably satisfactory to the indemnified party, or (iii) the indemnified party has been advised by counsel that one or more legal defenses may be available to the indemnifying party that may be contrary to the interest of the indemnified party, in which case the indemnifying party shall be entitled to assume the defense of such action notwithstanding its obligation to bear fees and expenses of such counsel. No indemnifying party shall be liable for any settlement entered into without its consent, which consent may not be unreasonably withheld. If the indemnification provided for in this Section 8(e) is unavailable to a party otherwise entitled to be indemnified in respect of any expenses, losses, claims, damages or liabilities referred to herein, then the indemnifying party, in lieu of indemnifying such party otherwise entitled to be indemnified, shall contribute to the amount paid or payable by such party to be indemnified as a result of such expenses, losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative benefits received by CAI, the Selling Shareholders and the underwriters from the offering of the securities and also the relative fault of CAI, the Selling Shareholders and the underwriters in connection with the statements or omissions which resulted in such expenses, losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The amount paid or payable by a party as a result of the expenses, losses, claims, damages and liabilities referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim, provided, however, that in no case shall any Selling Shareholder be responsible, in the aggregate, for any amount in excess of the net offering proceeds attributable to its Option Shares included in the offering. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Any obligation by any Selling Shareholder to indemnify shall be several and not joint with other holders. 10 11 In connection with any registration pursuant to Section 8(a) or 8(b) above, CAI and each Selling Shareholder (other than MCI WorldCom) shall enter into an agreement containing the indemnification provisions of this Section 8(e). In the event of an underwritten public offering pursuant to Section 8(b), the Company and the Selling Shareholders shall enter into an underwriting agreement containing customary terms and provisions; provided that the indemnification provisions as they relate to Selling Shareholders shall contain substantially the same limitations as the provisions set forth herein. (f) Miscellaneous Reporting. CAI shall comply with all reporting requirements and will do all such other things as may be necessary to permit the expeditious sale at any time of any Option Shares by the Selling Shareholders thereof in accordance with and to the extent permitted by any rule or regulation promulgated by the SEC from time to time, including, without limitation, Rule 144. CAI shall at its expense provide the Selling Shareholders with any information necessary in connection with the completion and filing of any reports or forms required to be filed by them under the Securities Act or the Securities Exchange Act, or required pursuant to any state securities laws or the rules of any stock exchange. (g) Issue Taxes. CAI will pay all stamp taxes in connection with the issuance and the sale of the Option Shares and in connection with the exercise of the Option, and will hold the Selling Shareholders harmless, without limitation as to time, against any and all liabilities, with respect to all such taxes. 9. QUOTATION; LISTING. If CAI Common or any other securities to be acquired in connection with the exercise of the Option are then authorized for quotation or trading or listing on any securities exchange or market, CAI, upon the request of Holder, will promptly file an application, if required, to authorize for quotation or trading or listing the shares of CAI Common or other securities to be acquired upon exercise of the Option on such securities exchange or market and will use its best efforts to obtain approval, if required, of such quotation or listing as soon as practicable. 10. DIVISION OF OPTION. This Agreement (and the Option granted hereby) are exchangeable, without expense, at the option of Holder, upon presentation and surrender of this Agreement at the principal office of CAI for other Agreements providing for Options of different denominations entitling the holder thereof to purchase in the aggregate the same number of shares of CAI Common purchasable hereunder. The terms "Agreement" and "Option" as used herein include any other Agreements and related Options for which this Agreement (and the Option granted hereby) may be exchanged. Upon receipt by CAI of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Agreement, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Agreement, if mutilated, CAI will execute and deliver a new Agreement of like tenor and date. Any such new Agreement executed and delivered shall constitute an additional contractual obligation on the part of CAI, whether or not the Agreement so lost, stolen, destroyed or mutilated shall at any time be enforceable by anyone. 11 12 11. MISCELLANEOUS. (a) Expenses. Except as expressly provided herein, each of the parties hereto shall bear and pay all costs and expenses incurred by it or on its behalf in connection with the transactions contemplated hereunder, including fees and expenses of its own financial consultants, investment bankers, accountants and counsel. (b) Waiver and Amendment. Any provision of this Agreement may be waived at any time by the party that is entitled to the benefits of such provision. This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by the parties hereto. (c) Entire Agreement; No Third-Party Beneficiaries; Severability. This Agreement, together with the Merger Agreement and the other documents and instruments referred to herein and therein, between MCI WorldCom and CAI (i) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof, and (ii) is not intended to confer upon any person other than the parties hereto (other than the indemnified parties under Section 8(e) and any transferees of the Option Shares or any permitted transferee of this Agreement pursuant to Section 11(h)) any rights or remedies hereunder. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. If for any reason such court or Governmental Authority determines that the Option does not permit Holder to acquire the full number of shares of CAI Common as provided in Section 3 (as may be adjusted herein), it is the express intention of CAI to allow Holder to acquire such lesser number of shares as may be permissible without any amendment or modification hereof. (d) Governing Law. This Agreement shall be interpreted, construed and governed in accordance with the internal laws of the State of New York (without regard to any applicable conflicts of law rules), except for matters governed by the Connecticut Code, which shall be interpreted, construed and governed by Connecticut Code. (e) Descriptive Headings. The descriptive headings contained herein are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. (f) Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (with confirmation) or mailed by registered or certified mail (return receipt requested) to the parties at the addresses set forth in the Merger Agreement (or at such other address for a party as shall be specified by like notice). 12 13 (g) Counterparts. This Agreement and any amendments hereto may be executed in two counterparts, each of which shall be considered one and the same agreement and shall become effective when both counterparts have been signed and delivered, it being understood that both parties need not sign the same counterpart. (h) Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder or under the Option shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other party, except that Holder may assign this Agreement to a wholly-owned subsidiary of Holder and Holder may assign its rights hereunder in whole or in part after the occurrence of a Purchase Event. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. (i) Further Assurances. In the event of any exercise of the Option by Holder, CAI and Holder shall execute and deliver all other documents and instruments and take all other action that may be reasonably necessary in order to consummate the transactions provided for by such exercise. (j) Specific Performance. The parties hereto agree that this Agreement may be enforced by either party through specific performance, injunctive relief and other equitable relief. Both parties further agree to waive any requirement for the securing or posting of any bond in connection with the obtaining of any such equitable relief and that this provision is without prejudice to any other rights that the parties hereto may have for any failure to perform this Agreement. IN WITNESS WHEREOF, CAI and MCI WorldCom have caused this Stock Option Agreement to be signed by their respective officers thereunto duly authorized, all as of the day and year first written above. CAI WIRELESS SYSTEMS, INC. By: /s/ JARED E. ABBRUZZESE Name: Jared E. Abbruzzese Title: Chairman and Chief Executive Officer MCI WORLDCOM, INC. By: /s/ CHARLES T. CANNADER Name: Charles T. Cannader Title: Senior Vice President 13 EX-99.(D) 5 AGREEMENT AND PLAN OF MERGER 1 EXHIBIT D =============================================================================== AGREEMENT AND PLAN OF MERGER BY AND AMONG CAI WIRELESS SYSTEMS, INC., MCI WORLDCOM, INC. AND CARDINAL ACQUISITION SUBSIDIARY INC. Dated as of April 26, 1999 =============================================================================== 2 TABLE OF CONTENTS
Page ---- ARTICLE I - TERMS OF THE MERGER...............................................1 1.1 The Merger.........................................................1 1.2 Effective Time......................................................2 1.3 Merger Consideration................................................2 1.4 Shareholders' Rights upon Merger....................................2 1.5 Dissenting Shares...................................................3 1.6 Surrender and Exchange of Shares....................................3 1.7 Options and Warrants................................................5 1.8 Certificate of Incorporation........................................5 1.9 By-Laws.............................................................6 1.10 Other Effects of Merger............................................6 1.11 Additional Actions.................................................6 ARTICLE II - REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF TARGET......6 2.1 Organization and Good Standing......................................6 2.2 Capitalization......................................................7 2.3 Subsidiaries........................................................8 2.4 Authorization; Binding Agreement....................................8 2.5 Governmental Approvals.............................................10 2.6 No Violations......................................................10 2.7 Securities Filings and Litigation..................................11 2.8 Target Financial Statements........................................12 2.9 Absence of Certain Changes or Events...............................13 2.10 Compliance with Laws..............................................14 2.11 Permits, FCC Licenses; Channel Leases; System Agreements; and the Systems; Interference; Households.................................14 2.12 Finders and Investment Bankers....................................20 2.13 Contracts.........................................................20 2.14 Employee Benefit Plans............................................21 2.15 Taxes and Tax Returns.............................................23 2.16 Liabilities.......................................................25 2.17 Environmental Matters.............................................25 2.18 Intellectual Property.............................................26 2.19 Real Estate.......................................................27 2.20 Corporate Records.................................................27 2.21 Title to and Condition of Personal Property.......................28 2.22 No Adverse Actions................................................28 2.23 Labor Matters.....................................................28 2.24 Change of Control Agreements......................................29 2.25 Insurance.........................................................29 2.26 Information Supplied..............................................29
ii 3 2.27 Takeover Statutes.................................................30 2.28 Target Rights Plan................................................30 2.29 Year 2000.........................................................30 2.30 Target Options....................................................31 2.31 Transactions with Affiliates......................................31 2.32 No Existing Discussions...........................................32 2.33 TelQuest..........................................................32 2.34 Disclosure........................................................33 ARTICLE III - REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF ACQUIROR..33 3.1 Organization and Good Standing.....................................33 3.2 Authorization; Binding Agreement...................................34 3.3 Governmental Approvals.............................................34 3.4 No Violations......................................................34 3.5 Finders and Investment Bankers.....................................35 3.6 Information Supplied...............................................35 3.7 Acquiror Ownership.................................................35 ARTICLE IV - ADDITIONAL COVENANTS OF TARGET..................................36 4.1 Conduct of Business of Target and Target Subsidiaries..............36 4.2 Notification of Certain Matters....................................40 4.3 Access and Information.............................................40 4.4 Shareholder Approval; Proxy Statement; Shareholder Lists...........41 4.5 Reasonable Business Efforts........................................42 4.6 Public Announcements...............................................42 4.7 Compliance.........................................................43 4.8 Benefit Plans......................................................43 4.9 No Solicitation of Takeover Proposal...............................43 4.10 Securities and Shareholder Materials..............................44 4.11 Resignations......................................................44 4.12 Noncompete and Confidentiality Agreements; Consulting Agreement...45 4.13 Comfort Letters...................................................45 4.14 Takeover Statutes.................................................45 4.15 Year 2000 Plan....................................................45 4.16 Purchase of Target Common Stock...................................45 4.17 Conversion of Options.............................................46 ARTICLE V - ADDITIONAL COVENANTS OF ACQUIROR.................................46 5.1 Public Announcements...............................................46 5.2 Compliance.........................................................46 5.3 Proxy Statement....................................................46 5.4 Target Senior Secured Credit Facility..............................47 5.5 CS Borrowing.......................................................47 5.6 Indemnification and Insurance......................................47
iii 4 ARTICLE VI - CONDITIONS......................................................48 6.1 Conditions to Each Party's Obligations.............................48 6.1.1 Shareholder Approval..........................................48 6.1.2 No Injunction or Action.......................................49 6.1.3 HSR Act.......................................................49 6.1.4 Opinion of Financial Advisor..................................49 6.1.5 Governmental Approvals........................................49 6.2 Conditions to Obligations of Target................................50 6.2.1 Acquiror Representations and Warranties.......................50 6.2.2 Performance by Acquiror.......................................50 6.2.3 Certificate...................................................50 6.3 Conditions to Obligations of Acquiror..............................50 6.3.1 Target Representations and Warranties.........................50 6.3.2 Performance by Target.........................................51 6.3.3 No Material Adverse Change....................................51 6.3.4 No Pending Action.............................................51 6.3.5 Dissenting Shares.............................................52 6.3.6 Required Consents.............................................52 6.3.7 Certificates and Other Deliveries.............................52 6.3.8 Opinion of Target Counsel.....................................53 6.3.9 Comfort Letters...............................................53 ARTICLE VII - TERMINATION AND ABANDONMENT....................................53 7.1 Termination........................................................53 7.2 Termination Fees and Rights........................................54 7.3 Procedure Upon Termination.........................................55 ARTICLE VIII - MISCELLANEOUS.................................................55 8.1 Confidentiality....................................................55 8.2 Amendment and Modification.........................................56 8.3 Waiver of Compliance; Consents.....................................56 8.4 Survival of Representations and Warranties.........................56 8.5 Notices............................................................56 8.6 Binding Effect; Assignment.........................................57 8.7 Expenses...........................................................58 8.8 Governing Law......................................................59 8.9 Counterparts.......................................................58 8.10 Interpretation....................................................58 8.11 Entire Agreement..................................................58 8.12 Severability......................................................58 8.13 Specific Performance..............................................59 8.14 Third Parties.....................................................59 8.15 Schedules.........................................................59 8.16 Control...........................................................59
iv 5 LIST OF SCHEDULES*
SCHEDULE DESCRIPTION -------- ----------- 2.2(a) Rights, Subscriptions, Warrants, Options, etc., with Respect to Stock 2.2(b) Restrictions with Respect to Stock 2.3(a) Target Ownership Interests 2.3(b) Claims as to Capital Stock and Other Interests Held 2.3(c) Rights with respect to Target Subsidiary Securities 2.3(d) CS Limitations 2.5 Regulatory Consents 2.6 Target Required Approvals 2.7 Target Litigation 2.9 Target Subsequent Events 2.10 Compliance with Laws 2.11(a) Target Markets 2.11(b) Target Channel Leases 2.11(c) Target FCC Licenses 2.11(d) Target Systems Status 2.11(f) Target Systems 2.11(g) Target Systems Licenses, Permits 2.11(h) Target Systems Electrical Interference 2.11(i) Target Collocation and Other Applications 2.11(j) Target Fees 2.11(k) Target Total Households 2.11(l) Target License Judgments, Orders, Complaints & Proceedings 2.11(m) Target Regulatory Reports 2.13 Target Material Contracts 2.14 Target Employee Benefit Plans 2.15 Target Tax Matters 2.16 Target Liabilities 2.17 Target Environmental Matters 2.18(a)(1) Target Intellectual Property 2.18(a)(2) Target Intellectual Property Exceptions 2.19(b) Target Leased Real Property 2.20 Target Records Off Premises 2.22 Target Adverse Actions 2.23 Target Labor Matters 2.24 Target Change In Control Agreements 2.31 Target Affiliate Transactions
*The reporting person undertakes to furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon request. iv 6 2.33(a)(1) TelQuest Capitalization 2.33(a)(2) TelQuest Capitalization Exceptions 2.33(b) TelQuest Subsidiaries 2.33(d) TelQuest Investment Exceptions 4.12(a) Form of Noncompete and Confidentiality Agreement 4.12(b) Designated Persons for Noncompete and Confidentiality Agreement 6.3.8 Opinion of Counsel to Acquiror
v 7 GLOSSARY OF DEFINED TERMS
Term Page Where - ---- Defined ---------- Acquiror.....................................................................1 Acquiror Ancillary Agreements...............................................34 Acquiror Material Adverse Effect............................................34 Acquiror Material Contract .................................................35 Acquiror Modified Representation............................................51 Acquiror Nonmodified Representation.........................................51 Acquisition Subsidiary.......................................................1 affiliate...................................................................59 Agreement....................................................................1 Alternative Use.............................................................19 Alternative Use Application.................................................19 associate...................................................................59 Benefit Plan................................................................22 Booster Application.........................................................19 Booster License.............................................................19 BTA.........................................................................19 BTA Authorization...........................................................19 Certificate of Merger........................................................1 Certificates.................................................................3 Channel Leases..............................................................19 Channel License.............................................................19 Channels....................................................................19 Claim Notice................................................................26 Closing......................................................................2 Closing Date.................................................................2 Code.........................................................................4 Collocation Application.....................................................17 Collocation Site............................................................19 Connecticut Code.............................................................1 Consent.....................................................................10 CS..........................................................................11 CS Approved Budget..........................................................13 CS Borrowing................................................................40 CS Subsidiaries.............................................................13 Effective Time...............................................................2 Enforceability Exceptions....................................................9 Environmental Laws..........................................................26 ERISA.......................................................................22
vii 8 Event.......................................................................13 Exchange Agent...............................................................3 FCC Licenses................................................................19 FCC Rules...................................................................20 Final Order.................................................................50 GAAP........................................................................13 Governmental Authority......................................................10 HSR Act.....................................................................10 Intellectual Property.......................................................26 IRS.........................................................................22 ITFS........................................................................20 Law.........................................................................11 Letter of Transmittal.......................................................3 Licensee....................................................................20 Litigation..................................................................12 MDS.........................................................................20 Merger.......................................................................1 Merger Consideration.........................................................2 MMDS........................................................................20 Multi-employer Plan.........................................................22 NASD........................................................................10 Noncompete and Confidentiality Agreements...................................45 Other Application...........................................................18 person......................................................................59 Proxy Statement.............................................................42 Rights Plan.................................................................31 SEC.........................................................................11 Securities Act...............................................................8 Securities Exchange Act......................................................8 Senior Secured Credit Facility..............................................36 Senior Secured Notes........................................................36 shareholder.................................................................59 Subsidiary...................................................................7 Surviving Corporation........................................................1 Surviving Corporation Common Stock...........................................2 Surviving Corporation Material Adverse Effect...............................50 System......................................................................20 System Agreements...........................................................20 Takeover Statute............................................................30 Target.......................................................................1 Target Ancillary Agreements..................................................8 Target Approved Budget......................................................13 Target Common Stock..........................................................2 Target Financial Statements.................................................12 Target Material Adverse Effect...............................................7
ii 9 Target Material Contract....................................................21 Target Minority Entity.......................................................8 Target Modified Representation..............................................51 Target Nonmodified Representation...........................................51 Target Permits..............................................................14 Target Real Property Leases.................................................27 Target Securities Filings...................................................11 Target Shares................................................................2 Target Subsidiaries..........................................................6 Tax.........................................................................23 Tax Return..................................................................23 TelQuest....................................................................32 TelQuest Subsidiaries.......................................................33 Termination Fee.............................................................55 Tower Site Leases...........................................................27 Wireless Cable Service......................................................20 Wireless Telecommunications Service.........................................20 Year 2000 Compliant.........................................................31 Year 2000 Plan..............................................................31 Year 2000 Problem...........................................................31
iii 10 AGREEMENT AND PLAN OF MERGER This Agreement and Plan of Merger (the "Agreement") is made and entered into as of April 26, 1999, by and among MCI WORLDCOM, Inc., a Georgia corporation ("Acquiror"), Cardinal Acquisition Subsidiary, Inc., a Connecticut corporation and wholly owned subsidiary of Acquiror ("Acquisition Subsidiary"), and CAI Wireless Systems, Inc., a Connecticut corporation ("Target"). Recitals A. The respective Boards of Directors of Target, Acquisition Subsidiary and Acquiror have approved the merger (the "Merger") of Acquisition Subsidiary with and into Target in accordance with the laws of the State of Connecticut and the provisions of this Agreement. B. Target, Acquisition Subsidiary and Acquiror desire to make certain representations, warranties and agreements in connection with, and establish various conditions precedent to, the Merger. C. As a condition and inducement to Acquiror and Acquisition Subsidiary entering into this Agreement, concurrently with the execution and delivery of this Agreement, Target has granted an option to Acquiror to purchase 6,090,481 shares of common stock of Target pursuant to the terms and conditions of a Stock Option Agreement between Target and Acquiror dated as of even date herewith (the "Stock Option Agreement"). NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements hereinafter set forth, the parties hereto agree as follows: ARTICLE I TERMS OF THE MERGER 1.1 THE MERGER. Upon the terms and subject to the conditions of this Agreement, the Merger shall be consummated in accordance with the Connecticut Business Corporation Act (the "Connecticut Code"). At the Effective Time (as defined in Section 1.2, below), upon the terms and subject to the conditions of this Agreement, Acquisition Subsidiary shall be merged with and into Target in accordance with the Connecticut Code and the separate existence of Acquisition Subsidiary shall thereupon cease, and Target, as the surviving corporation in the Merger (the "Surviving Corporation"), shall continue its corporate existence under the laws of the State of Connecticut as a subsidiary of Acquiror. Acquiror shall prepare and Target shall execute a certificate of merger (the "Certificate of Merger") in order to comply in all respects with the requirements of the Connecticut Code and with the provisions of this Agreement. 1.2 EFFECTIVE TIME. The Merger shall become effective at the time of the filing of the Certificate of Merger with Secretary of State of the State of Connecticut in accordance with the applicable provisions of the Connecticut Code or at such later time as may be specified in the 11 Certificate of Merger. The Certificate of Merger shall be filed as soon as practicable after all of the conditions set forth in this Agreement have been satisfied or waived by the party or parties entitled to the benefit of the same. Acquiror, after consultation with Target, shall determine the time of such filing and the place where the closing of the Merger (the "Closing") shall occur. The time when the Merger shall become effective is herein referred to as the "Effective Time" and the date on which the Effective Time occurs is herein referred to as the "Closing Date." 1.3 MERGER CONSIDERATION. (a) Subject to the provisions of this Agreement and any applicable backup or other withholding requirements, each of the issued and outstanding shares ("Target Shares") of common stock, par value $0.01 per share, of Target ("Target Common Stock") (other than shares canceled pursuant to Section 1.3(b) and Dissenting Shares (as hereinafter defined), if any) as of the Effective Time shall by virtue of the Merger and without any action on part of the holder thereof, be converted into the right to receive, and there shall be paid as hereinafter provided, in exchange for each of the Target Shares, $28.00 in cash (the "Merger Consideration"), payable to the holder thereof, without interest thereon, upon the surrender of the certificate formerly representing such Target Share in the manner provided in Section 1.6. (b) Each share of Target Common Stock issued and outstanding immediately prior to the Effective Time that is owned by Acquiror or Acquisition Subsidiary and each share of Target Common Stock held in the treasury of Target or by a wholly owned subsidiary of Target shall be canceled as of the Effective Time and no Merger Consideration shall be payable with respect thereto. From and after the Effective Time, there shall be no further transfers on the stock transfer books of Target of any of the Target Shares outstanding prior to the Effective Time. If, after the Effective Time, Certificates (as hereinafter defined) are presented to the Surviving Corporation, they shall be canceled and exchanged for the Merger Consideration provided for in, and in accordance with the procedures set forth in, this Agreement. (c) Subject to the provisions of this Agreement, at the Effective Time, the shares of Acquisition Subsidiary common stock outstanding immediately prior to the Merger shall be converted, by virtue of the Merger and without any action on the part of the holder thereof, into one validly issued, fully paid and nonassessable share of the common stock of the Surviving Corporation (the "Surviving Corporation Common Stock"), which share of the Surviving Corporation Common Stock shall constitute all of the issued and outstanding capital stock of the Surviving Corporation. 1.4 SHAREHOLDERS' RIGHTS UPON MERGER. Upon consummation of the Merger, the certificates which theretofore represented Target Shares (other than Dissenting Shares) (the "Certificates") shall cease to represent any rights with respect thereto, and, subject to applicable Law (as hereinafter defined) and this Agreement, the Certificates shall only represent the right to receive the Merger Consideration. 1.5 DISSENTING SHARES. (a) Notwithstanding anything in this Agreement to the contrary, Shares which are issued and outstanding immediately prior to the Effective Time and which are held by holders of Target Common Stock who have demanded and exercised any 2 12 dissenters' rights in the manner provided under the Connecticut Code, if applicable and, as of the Effective Time, have neither effectively withdrawn nor lost their rights to payment under the Connecticut Code (the "Dissenting Shares"), shall not be converted into or be exchangeable for the right to receive the Merger Consideration, unless and until such holder shall have failed to exercise or shall have effectively withdrawn or lost such holder's right to payment under the Connecticut Code. If such holder shall have so failed to exercise or shall have effectively withdrawn or lost such right, such holder's Shares shall thereupon be deemed to have been converted into and to have become exchangeable for, at the Effective Time, the right to receive the Merger Consideration provided for in this Agreement, without any interest thereon. (b) Target shall give Acquiror (i) prompt notice of any demands for appraisal and payment pursuant to Section 33-861 of the Connecticut Code received by Target, withdrawals of such demands, and any other instruments served pursuant to the Connecticut Code, and received by Target and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal and payment under the Connecticut Code. Target shall not, except with the prior written consent of Acquiror or as otherwise required by applicable law, make any payment with respect to any such demands for appraisal and payment or offer to settle or settle any such demands. 1.6 SURRENDER AND EXCHANGE OF SHARES. (a) Prior to the Effective Time, Acquiror shall designate The Bank of New York or such other bank or trust company as it may designate to act as exchange agent in the Merger (the "Exchange Agent"). Immediately prior to the Effective Time, Acquiror will deposit with the Exchange Agent the funds necessary to make the payments contemplated herein on a timely basis. After the Effective Time, each holder of a Target Share (other than Dissenting Shares) shall surrender and deliver the Certificates to the Exchange Agent together with a duly completed and executed transmittal letter provided by the Exchange Agent (the "Letter of Transmittal") and any other required documents. Upon such surrender and delivery, the holder shall be entitled to receive in exchange therefor the Merger Consideration, and such Certificate shall forthwith be canceled. No interest will be paid or accrued on the cash payable upon the surrender of the Certificates. If payment is to be made to a person other than the person in whose name the Certificate surrendered is registered, it shall be a condition of payment that the Certificate so surrendered shall be properly endorsed or otherwise in proper form for transfer and that the person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of the Certificate surrendered or establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not applicable. Until surrendered in accordance with the provisions of this Section 1.6 and exchanged, each outstanding Certificate after the Effective Time (other than Certificates representing Dissenting Shares) shall be deemed for all purposes only to evidence the right to receive Merger Consideration, without any interest thereon. (b) At any time following the sixth (6th) month after the Effective Time, the Surviving Corporation shall be entitled to require the Exchange Agent to deliver to it any portion of the funds which had been made available to the Exchange Agent and not disbursed to holders of shares of Target Common Stock (including, without limitation, all interest and other income 3 13 received by the Exchange Agent in respect of all amounts of funds made available to it), and thereafter each such holder shall be entitled to look only to the Surviving Corporation (subject to abandoned property, escheat and other similar laws), and only as general creditors thereof, with respect to any Merger Consideration that may be payable upon due surrender of the Certificates held by such holder. If any Certificates representing shares of Target Common Stock shall not have been surrendered immediately prior to such date on which the Merger Consideration in respect of such Certificate would otherwise escheat to or become the property of any Governmental Entity (as hereinafter defined), any such cash, shares, dividends or distributions payable in respect of such Certificate shall, to the extent permitted by applicable Law, become the property of the Surviving Corporation, free and clear of all claims or interest of any person previously entitled thereto. Notwithstanding the foregoing, none of the Surviving Corporation, Acquiror, Acquisition Subsidiary or the Exchange Agent shall be liable to any holder of a share of Target Common Stock for any Merger Consideration delivered in respect of such share of Target Common Stock to a public official pursuant to any abandoned property, escheat or other similar Law. (c) At the Effective Time, the stock transfer books of the Target shall be closed and thereafter there shall be no further registration of transfers of shares of Target Common Stock on the records of the Target. Except for Acquiror and Acquisition Subsidiary, the holders of shares of Target Common Stock outstanding immediately prior to the Effective Time shall cease to have any rights, from and after the Effective Time, with respect to such shares of Target Common Stock except as otherwise provided herein or by applicable Law, and all cash paid pursuant to this Article I upon the surrender or exchange of Certificates shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of the Target Common Stock theretofore represented by such Certificate. (d) Acquiror, Acquisition Subsidiary, the Surviving Corporation and the Exchange Agent, as the case may be, shall be entitled to deduct and withhold from the Merger Consideration otherwise payable pursuant to this Agreement to any holder of shares of Target Common Stock and Target Options (as hereinafter defined) such amounts that Acquiror, Acquisition Subsidiary, the Surviving Corporation or the Exchange Agent is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the "Code"), the rules and regulations promulgated thereunder or any provision of state, local or foreign tax Law. To the extent that amounts are so withheld by Acquiror, Acquisition Subsidiary, the Surviving Corporation or the Exchange Agent, such amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Target Common Stock and Target Options in respect of which such deduction and withholding was made by Acquiror, Acquisition Subsidiary, the Surviving Corporation or the Exchange Agent. 1.7 OPTIONS AND WARRANTS. (a) Prior to the Effective Time, Target shall cause each outstanding and unexpired option or warrant to purchase Shares described in Schedule 2.2 (an "Option" and, collectively, the "Options"), if such Option is exercisable as of the Effective Time, to be converted into the right to receive from the Surviving Corporation an amount of cash equal to the product of (i) the 4 14 number of Shares subject to the Option and (ii) the excess, if any, of the Merger Consideration over the exercise price per Share of such Option (the "Option Consideration"), as contemplated by Section 4.17. Prior to the Effective Time, the Target shall cause each Option to be converted as described herein, and shall take all steps necessary to give written notice to each holder of an Option that, as applicable: (i) all Options which are exercisable as of the Effective Time shall be canceled effective as of the Effective Time; (ii) the Option Consideration for such Options which are exercisable as of the Effective Time held by such holder shall be payable as described in Section 1.7(b); (iii) all Options which are not exercisable as of the Effective Time shall be converted, immediately prior to the Effective Time, to the right to receive, when exercisable, solely the Option Consideration, with such Option otherwise becoming exercisable in accordance with its terms; and (iv) the Option Consideration for such Options which are not exercisable as of the Effective Time held by such holder shall be payable as described in Section 1.7(b). The Board of Directors of Target or any committee thereof responsible for the administration of any plans under which Options have been granted shall take any and all action necessary to effectuate matters described in this Section 1.7 and Section 4.17 on or before the Effective Time. (b) The Option Consideration shall be payable by the Surviving Corporation to each holder of Options promptly following the Effective Time, in the case of Options which are exercisable as of the Effective Time, or promptly following exercise, in the case of Options which become exercisable after the Effective Time, only after (i) verification by the Acquiror and the Surviving Corporation of the ownership and terms of the particular Option by reference to the Surviving Corporation's records, and (ii) delivery of a written instrument duly executed by the holder of the applicable Option, in a form provided by the Target and acceptable to Acquiror and setting forth (x) the aggregate number of Options owned by that person and their respective issue dates and exercise prices, (y) a representation by the person that he or she is the owner of all Options described pursuant to clause (x) and that none of those Options has expired or ceased to be exercisable and (z) a confirmation of, and consent to, the cancellation and/or conversion of all Options held by such person effective as of the Effective Time, as contemplated by this Section 1.7 and Section 4.17. (c) Any amounts payable pursuant to this Section 1.7 shall be subject to any required withholding of taxes and shall be paid without interest. 1.8 CERTIFICATE OF INCORPORATION. At and after the Effective Time, the Certificate of Incorporation of the Surviving Corporation shall be amended and restated in its entirety to read as the Certificate of Incorporation of the Acquisition Subsidiary in effect at the Effective Time except that Article First shall be amended to read as follows: "The name of the corporation is CAI Wireless Systems, Inc." (subject to any subsequent amendment). 1.9 BY-LAWS. At and after the Effective Time, the By-Laws of Acquisition Subsidiary in effect at the Effective Time shall be the By-Laws of the Surviving Corporation (subject to any subsequent amendment). 1.10 OTHER EFFECTS OF MERGER. The directors and officers of Acquisition Subsidiary at the Effective Time shall be the initial directors and officers of the Surviving Corporation and will hold office from the Effective Time until their respective successors are duly elected or appointed 5 15 and qualify in the manner provided in the Certificate of Incorporation and By-Laws of the Surviving Corporation, or as otherwise provided by Law. The Merger shall have all further effects as specified in the applicable provisions of the Connecticut Code. 1.11 ADDITIONAL ACTIONS. If, at any time after the Effective Time, the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Corporation its right, title or interest in, to or under any of the rights, properties or assets of Acquisition Subsidiary or Target or otherwise to carry out this Agreement, the officers and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of Acquisition Subsidiary or Target, as the case may be, all such deeds, bills of sale, assignments and assurances and to take and do, in the name and on behalf of Acquisition Subsidiary or Target, as the case may be, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under such rights, properties or assets in the Surviving Corporation or otherwise to carry out this Agreement. ARTICLE II REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF TARGET Target represents, warrants and/or covenants to and with Acquiror as follows: 2.1 ORGANIZATION AND GOOD STANDING. Target and, except for TelQuest (as hereinafter defined), each of its Subsidiaries (as defined below) (the "Target Subsidiaries") is a corporation, limited liability company or partnership duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization and has all requisite corporate, limited liability company or partnership power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Target and each of the Target Subsidiaries is duly qualified and in good standing to do business in each jurisdiction in which the character of the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so duly qualified and in good standing would not have a Target Material Adverse Effect (as defined below). For purposes of this Agreement, "Target Material Adverse Effect" shall mean a material adverse effect on (i) the business, assets, condition (financial or otherwise), properties, liabilities, prospects or the results of operations of Target and the Target Subsidiaries taken as a whole, (ii) the ability of Target to perform its obligations set forth in this Agreement and the Target Ancillary Agreements (as hereinafter defined), or (iii) the ability to timely consummate the transactions contemplated by this Agreement and the Target Ancillary Agreements. Target has delivered to Acquiror a complete and accurate list of the jurisdictions of incorporation or organization and qualification of Target and the Target Subsidiaries. Target has heretofore delivered to Acquiror accurate and complete copies of the Certificates or Articles of Incorporation and By-Laws, or equivalent governing instruments, as currently in effect, of Target and each of the Target Subsidiaries. "Subsidiary" means, with respect to any person, any affiliate controlled by such person directly, or indirectly through one or more intermediaries, and shall include, without limitation, any corporation, partnership, joint venture, limited liability company, 6 16 trust, estate or other organization or entity, of which (or in which) 50% or more of: (i) the issued and outstanding shares of capital stock having ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect thereto of such corporation or other organization (irrespective of whether at the time shares of capital stock or other interests of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency); (ii) the interest in the capital or profits of such partnership, joint venture, limited liability company or other organization or entity; or (iii) the beneficial interest in such trust or estate; is at the time, directly or indirectly, owned or controlled by such person, by such person and one or more of its other subsidiaries or by one or more of such person's other subsidiaries; 2.2 CAPITALIZATION. As of the date hereof, the authorized capital stock of Target consists of 25,000,000 shares of Target Common Stock and 5,000,000 shares of preferred stock, of which 2,000,000 shares have been designated by the Board of Directors of Target as Series A Preferred Stock and are reserved for issuance under the Rights Plan (as hereinafter defined). As of the opening of business on the date hereof, (a) 17,241,379 shares of Target Common Stock were issued and outstanding, and (b) no shares of Target Common Stock were issued and held in the treasury of Target. No other capital stock of Target is issued or outstanding. All issued and outstanding shares of the Target Common Stock are duly authorized, validly issued, fully paid and non-assessable and were issued free of preemptive rights and in compliance with applicable corporate and securities Laws (as hereinafter defined). Except as set forth on Schedule 2.2(a) attached hereto, as of the date of this Agreement there are no outstanding rights, reservations of shares, subscriptions, warrants, puts, calls, unsatisfied preemptive rights, options or other agreements of any kind relating to any of the capital stock or any other security of Target, and there is no authorized or outstanding security of any kind convertible into or exchangeable for any such capital stock or other security. There are no restrictions upon the transfer of or otherwise pertaining to the securities (including, but not limited to, the ability to pay dividends thereon) or retained earnings of Target and the Target Subsidiaries or the ownership thereof other than those, if any, described on Schedule 2.2(b) attached hereto or those imposed generally by the Securities Act of 1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934, as amended (the "Securities Exchange Act"), applicable state or foreign securities Laws or applicable corporate Law. 2.3 SUBSIDIARIES. Schedule 2.3(a) attached hereto sets forth the name and percentages of outstanding capital stock or other interest held, directly or indirectly, by Target and other persons, with respect to Target's Subsidiaries or other persons in which Target or a Target Subsidiary holds, directly or indirectly, any capital stock or other interest (a "Target Minority Entity"). Except as set forth on Schedule 2.3(b) attached hereto, all of the capital stock and other interests so held by Target are owned by it or a Target Subsidiary as indicated on said Schedule 2.3(a), free and clear of any claim, lien, encumbrance, security interest or agreement with respect thereto. All of the outstanding shares of capital stock in each of the Target Subsidiaries are duly authorized, validly issued, fully paid and non-assessable and were issued free of preemptive rights and in compliance with applicable Laws. Except as set forth on Schedule 2.3(c) attached hereto, there are no irrevocable proxies, voting agreements or similar obligations with respect to such capital stock of the Target Subsidiaries or a Target Minority Entity held by Target or any of the Target Subsidiaries and no equity securities or other interests 7 17 of any of the Target Subsidiaries are or may become required to be issued or purchased by reason of any options, warrants, rights to subscribe to, puts, calls, reservation of shares or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of any capital stock of any Target Subsidiary, and there are no contracts, commitments, understandings or arrangements by which any Target Subsidiary is bound to issue additional shares of its capital stock, or options, warrants or rights to purchase or acquire any additional shares of its capital stock or securities convertible into or exchangeable for such shares. Except as set forth on Schedule 2.3(d), Target is not aware of any provision of the Certificate of Incorporation or By-Laws of CS (as hereinafter defined) or Target or any other agreement, contract, understanding or arrangement or of any Law that would restrict, limit or condition, or otherwise adversely affect, the ability of Target, as the holder of over 90% of the capital stock of CS, to cause CS, immediately following the Effective Time, to merge with and into Target or a direct or indirect wholly-owned subsidiary of Target or Acquiror. 2.4 AUTHORIZATION; BINDING AGREEMENT. (a) Target has all requisite corporate power and authority to execute and deliver this Agreement and the Stock Option Agreement and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the other agreements and documents referred to herein and to be executed in connection herewith to which Target is or will be a party or a signatory, including, without limitation, the Stock Option Agreement (the "Target Ancillary Agreements") and the consummation of the transactions contemplated hereby and thereby including, but not limited to, the Merger have been duly and validly authorized by Target's Board of Directors and no other corporate proceedings on the part of Target or any Target Subsidiary are necessary to authorize the execution and delivery of this Agreement and the Target Ancillary Agreements or to consummate the transactions contemplated hereby or thereby (other than the adoption of this Agreement by the shareholders of Target in accordance with the Connecticut Code and the Certificate of Incorporation and By-Laws of Target). This Agreement and the Stock Option Agreement have been duly and validly executed and delivered by Target and constitute, and upon execution and delivery thereof as contemplated by this Agreement, the Target Ancillary Agreements will constitute, the legal, valid and binding agreements of Target, enforceable against Target in accordance with its and their respective terms, except to the extent that enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by principles of equity regarding the availability of remedies ("Enforceability Exceptions"). (b) At a meeting duly called and held on April 26, 1999, the Board of Directors of Target, after consideration of (A) the long-term as well as the short-term interests of Target, (B) the interests of the shareholders, long-term as well as short-term, including the possibility that those interests may be best served by the continued independence of Target, (C) the interests of Target's employees, customers, creditors and suppliers, and (D) community and societal considerations including those of any community in which any office or other facility of Target is located, unanimously (i) determined that this Agreement and the other transactions contemplated hereby, including the Merger, are fair to and in the best interests of Target and the holders of Target Shares, (ii) approved, authorized and adopted this Agreement, the Target Ancillary Agreements, the Merger and the other transactions contemplated hereby and thereby, and (iii) 8 18 resolved to recommend approval and adoption of this Agreement and the Merger and the other transactions contemplated hereby and thereby by the holders of Target Shares. (c) Target's Board of Directors has received from Target's financial advisor, BT Alex. Brown Incorporated, a written opinion addressed to it for inclusion in the Proxy Statement (as hereinafter defined) to the effect that the Merger Consideration is fair to the holders of the Target Shares (other than Acquiror and its affiliates) from a financial point of view. An accurate and complete copy of such opinion has been provided to Acquiror. (d) The affirmative vote of the holders of two-thirds of the outstanding Target Shares is required to adopt this Agreement and the Merger and the other transactions contemplated hereby and thereby. No other vote of the holders of Target Common Stock or any other capital stock of Target is required by Law or the Certificate of Incorporation or By-Laws of Target or otherwise in order for Target to consummate the Merger and the transactions contemplated hereby and by the Target Ancillary Agreements. (e) The Certificate of Incorporation of Target, as amended through the date hereof, specifically provides that Target has elected not to be governed by Sections 33-840 to 33-845, inclusive, of the Connecticut Code. Such provisions of the Certificate of Incorporation have been duly adopted by vote of the Board of Directors and shareholders of Target, as necessary and appropriate to ensure the effectiveness of such provisions, in the case of Sections 33-840 to 33-843, inclusive, of the Connecticut Code such that such provisions are inapplicable to the Merger, the Target Ancillary Agreements and the transactions contemplated hereby and thereby, and the execution, delivery and performance of any agreement to acquire, or any other acquisition of, Target Common Stock by Acquiror or any of its affiliates or associates, and, in the case of Sections 33-844 to 33-845, inclusive, of the Connecticut Code such that such provisions are, in Target's reasonable business judgment, inapplicable to the Merger, the Target Ancillary Agreements and the transactions contemplated hereby and thereby and the execution, delivery and performance of any agreement to acquire, or any other acquisition of, Target Common Stock by Acquiror or any of its affiliates or associates. The Board of Directors of Target and a majority of the nonemployee directors (as described in Section 33-844 of the Connecticut Code), of which there are at least two, have approved this Agreement, the Target Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby, including, but not limited to, the Merger. Accordingly, the restrictions on "business combinations" under the provisions of Sections 33-840 to 33-845, inclusive, of the Connecticut Code are inapplicable to the Merger, the Target Ancillary Agreements and the transactions contemplated hereby and thereby and the execution, delivery and performance of any agreement to acquire, or any other acquisition of, Target Common Stock by Acquiror or any of its affiliates or associates. 2.5 GOVERNMENTAL APPROVALS. No consent, approval, waiver or authorization of, notice to or registration, declaration or filing with or other action by ("Consent") any nation or government, any state or other political subdivision thereof, any person, authority or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government including, without limitation, any governmental or regulatory authority, agency, department, board, commission or instrumentality, any court, tribunal or arbitrator and any self-regulatory organization ("Governmental Authority") on the part of Target or any of the 9 19 Target Subsidiaries is required in connection with any change of control of Target or any of the Target Subsidiaries, including, without limitation, any acquisition of Target Common Stock by Acquiror or any of its affiliates or associates, or the execution or delivery by Target of this Agreement and the Target Ancillary Agreements or the consummation by Target of the transactions contemplated hereby or thereby, other than (i) the filing of the Certificate of Merger with the Secretary of the State of Connecticut in accordance with the Connecticut Code, (ii) filings with the SEC, state securities laws administrators and the National Association of Securities Dealers, Inc. (the "NASD"), (iii) Consents from or with Governmental Authorities set forth on Schedule 2.5 attached hereto, (iv) filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder (the "HSR Act"), and (v) Consents described in Section 2.11 below, and (vi) those Consents that, if they were not obtained or made, do not or would not have a Target Material Adverse Effect, provided that the failure to obtain any Consent relating to any FCC License (as hereinafter defined) shall be deemed to have a Target Material Adverse Effect and the failure to obtain Consents relating to Channel Leases (as hereinafter defined) or Tower Site Leases (as hereinafter defined), which, in the aggregate, are or would be material to Target and the Target Subsidiaries or are or would be material to the future plans or objectives of Acquiror, or the failure of which to obtain would otherwise have a Target Material Adverse Effect, shall be deemed to have a Target Material Adverse Effect. 2.6 NO VIOLATIONS. The execution and delivery of this Agreement and the Target Ancillary Agreements, the consummation of the transactions contemplated hereby and thereby and compliance by Target with any of the provisions hereof or thereof and any change of control of Target or any of the Target Subsidiaries, including, without limitation, any acquisition of Target Common Stock by Acquiror or any of its affiliates or associates, will not (i) conflict with or result in any breach of any provision of the Certificate and/or Articles of Incorporation or By-Laws or other governing instruments of Target or any of the Target Subsidiaries, (ii) except as set forth on Schedule 2.6(a) attached hereto, require any Consent under or result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration or augment the performance required) under any of the terms, conditions or provisions of any Target Material Contract (as hereinafter defined) or other obligation to which Target or any Target Subsidiary is a party or by which any of them or any of their properties or assets may be bound, (iii) result in the creation or imposition of any lien or encumbrance of any kind upon any of the assets of Target or any Target Subsidiary, or (iv) subject to obtaining the Consents from Governmental Authorities referred to in Section 2.5, above, contravene any applicable provision of any constitution, treaty, statute, law, code, rule, regulation, tariff, ordinance, policy, permit or order of any Governmental Authority or other matters having the force of law including, but not limited to, any orders, decisions, injunctions, judgments, awards and decrees of or agreements with any court, tribunal, arbitrator, mediator or other Governmental Authority ("Law") currently in effect to which Target or any Target Subsidiary or its or any of their respective assets or properties are subject, except in the case of clauses (ii), (iii) and (iv), above, for any deviations from the foregoing which do not or would not have a Target Material Adverse Effect. 2.7 SECURITIES FILINGS AND LITIGATION. Target has made available to Acquiror true and complete copies of (i) its Annual Reports on Form 10-K, as amended, for the years ended 10 20 March 31, 1996, 1997 and 1998, as filed with the Securities and Exchange Commission (the "SEC"), (ii) the Annual Reports on Form 10-K, as amended, for the years ended December 31, 1996, 1997 and 1998, as filed by CS Wireless Systems, Inc. ("CS") with the SEC, (iii) the proxy statements relating to all of the meetings of shareholders (whether annual or special) of Target and the Target Subsidiaries (including CS) since January 1, 1996, as filed with the SEC, and (iv) all other reports, statements, schedules, registration statements and other filings or documents and amendments thereto (including, without limitation, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as amended) filed by Target or CS with the SEC since January 1, 1996. The reports, statements, schedules, registration statements, and other filings and documents set forth in clauses (i) through (iv), above, and those subsequently provided or required to be provided pursuant to this Section, are referred to collectively herein as the "Target Securities Filings." Target and the Target Subsidiaries have filed with the SEC all Target Securities Filings required to be filed therewith on or prior to the date of this Agreement and, as of the Closing, Target and the Target Subsidiaries shall have filed with the SEC all Target Securities Filings required to be filed on or prior thereto. As of their respective dates, or as of the date of the last amendment thereof, if amended after filing, none of the Target Securities Filings (including all schedules thereto and disclosure documents incorporated by reference therein), contained or, as to Target Securities Filings subsequent to the date hereof, will contain any untrue statement of a material fact or omitted or, as to Target Securities Filings subsequent to the date hereof, will omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Each of the Target Securities Filings at the time of filing or as of the date of the last amendment thereof, if amended after filing, complied or, as to Target Securities Filings subsequent to the date hereof, will comply in all material respects with the Securities Exchange Act or the Securities Act, as applicable. Except as set forth in Schedule 2.7 attached hereto, there is no action, cause of action, claim, demand, suit, proceeding, citation, summons, subpoena, inquiry or investigation of any nature, civil, criminal, regulatory or otherwise, in law or in equity, by or before any court, tribunal, arbitrator, mediator or other Governmental Authority ("Litigation") pending or, to the knowledge of Target, threatened against Target, any Target Subsidiary or any Target Minority Entity, or any officer, director, employee or agent thereof, in his or her capacity as such, or as a fiduciary with respect to any Benefit Plan (as hereinafter defined) of Target, or otherwise relating, in a manner that could have a Target Material Adverse Effect, to Target, any Target Subsidiary, any Target Minority Entity or the securities of any of them, or any properties or rights of Target, any of the Target Subsidiaries or any Target Minority Entity or any Benefit Plan. No event has occurred as a consequence of which Target would be required to file a Current Report on Form 8-K pursuant to the requirements of the Securities Exchange Act as to which such a report has not been timely filed with the SEC. Any reports, statements, schedules, registration statements and other filings and documents and amendments thereto (including, without limitation, Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as amended) filed by Target with the SEC after the date hereof shall be provided to Acquiror no later than the date of such filing. 2.8 TARGET FINANCIAL STATEMENTS. The audited consolidated and unaudited interim financial statements of Target and the Target Subsidiaries included in the Target Securities 11 21 Filings and, as prepared by Target, the unaudited financial statements of Target and the Target Subsidiaries as of and for the months ended January 31, 1999, February 28, 1999 and March 31, 1999 (the "Target Financial Statements") have been provided to Acquiror. Except as noted therein, the Target Financial Statements were or, as to those Target Financial Statements provided or required to be provided subsequent to the date hereof pursuant to this Section, will be prepared in accordance with generally accepted accounting principles applicable to the businesses of Target and the Target Subsidiaries consistently applied in accordance with past accounting practices and fairly present (including, but not limited to, the inclusion of all adjustments with respect to interim periods which are necessary to present fairly the financial condition and assets and liabilities or the results of operations of Target and the Target Subsidiaries except as may be indicated therein or in the notes thereto, subject to normal year-end adjustments in the ordinary course with respect to certain items immaterial in amount or effect and the exclusion of footnote disclosure in interim Target Financial Statements) the financial condition and assets and liabilities and the results of operations of Target and the Target Subsidiaries as of the dates and for the periods indicated. Except as reflected in the Target Financial Statements, as of their respective dates, neither Target nor any Target Subsidiary had any debts, obligations, guaranties of obligations of others or liabilities (contingent or otherwise) that would be required in accordance with generally accepted accounting principles to be disclosed in the Target Financial Statements. Any financial statements prepared with respect to Target or a Target Subsidiary subsequent to the date hereof promptly shall be provided to Acquiror and shall constitute Target Financial Statements for purposes hereof. 2.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in the Target Securities Filings made available by Target to Acquiror prior to the date of this Agreement or in Schedule 2.9 attached hereto, since December 31, 1998, through the date of this Agreement, there has not been: (i) any event, occurrence, fact, condition, change, development or effect ("Event") that has had or could reasonably be expected to have a Target Material Adverse Effect (except for (A) any decrease in monthly average revenues, as determined based on generally accepted accounting principles ("GAAP") , of Target and the Target Subsidiaries (other than CS and its Subsidiaries (the "CS Subsidiaries") ) of no more than 5.5% per month, subject to adjustment by percentage increase or decrease of 0.7% for seasonal trends (e.g., college population subscribers), (B) deviations of cash flow from operations of Target and the Target Subsidiaries (other than CS and the CS Subsidiaries) of 25% or less on a month-to-month basis as compared to cash flow from operations projected in the budget of Target dated March 22, 1999 for the period from April 1, 1999 to October 31, 2000 delivered by Target pursuant to that certain Note Purchase Agreement dated as of October 14, 1998, a copy of which budget has been delivered to Acquiror (the "Target Approved Budget")), (C) any decrease in monthly average GAAP-based revenues of CS and the CS Subsidiaries of no more than 5.5% per month, subject to adjustment by percentage increase or decrease of 0.7% for seasonal trends (e.g., college population subscribers), and (D) deviations of cash flow from operations of CS and the CS Subsidiaries of 25% or less on a month-to-month basis as compared to cash flow from operations projected in the budget of CS dated April 20, 1999 (the "CS Approved Budget"), a copy of which has been delivered to Acquiror); (ii) any declaration, payment or setting aside for payment of any dividend (except to Target or a Target Subsidiary wholly owned by Target) or other distribution or any redemption, purchase or other acquisition of any shares of capital stock or securities of or 12 22 interest in Target or any Target Subsidiary; (iii) any return of any capital or other distribution of assets to shareholders of Target or any Target Subsidiary (except to Target or a Target Subsidiary wholly owned by Target); (iv) other than in the ordinary course of business and consistent with the Target Approved Budget, with respect to Target and any Target Subsidiary other than CS and the CS Subsidiaries, and the CS Approved Budget, with respect to CS and the CS Subsidiaries, any investment of a capital nature by the purchase of any property or assets by Target or any Target Subsidiary; (v) any acquisition (by merger, consolidation, acquisition of stock or assets or otherwise) of any person or business; (vi) any sale, disposition, pledge, mortgage or other transfer of assets or properties of Target or any Target Subsidiary other than in the ordinary course of business consistent with past practice or having a net book value in excess of $250,000 individually or $500,000 in the aggregate; (vii) any action or agreement or undertaking by Target or any Target Subsidiary to take any action that, if taken or done on or after the date hereof, would result in a breach of Section 4.1, below; (viii) any change in accounting methods or practices or any change in depreciation or amortization policies or rates of or applicable to Target or any Target Subsidiary; (viii) any employment, severance or consulting agreement entered into by Target or any Target Subsidiary with any shareholder, officer, director, agent, employee or consultant of Target or any Target Subsidiary or any amendment or modification to, or termination of, any current employment, severance or consulting agreement to which Target or any Target Subsidiary is a party or by which it is bound; (ix) any forgiveness, cancellation, compromise, settlement, waiver or release of any debts, claims, rights or Litigation; (x) any agreement, authorization or commitment to take, whether in writing or otherwise, any action which, if taken prior to the date hereof, would have made any representation or warranty of Target in this Agreement untrue or incorrect in any material respect; or (xi) any failure by Target or any Target Subsidiary to conduct its business in the ordinary course consistent with past practice. 2.10 COMPLIANCE WITH LAWS. Other than as may be set forth on Schedule 2.10, the business of Target and each Target Subsidiary has been operated in compliance with all Laws applicable thereto, except for any instances of non-compliance which do not and would not have a Target Material Adverse Effect. 2.11 PERMITS, FCC LICENSES; CHANNEL LEASES; SYSTEM AGREEMENTS; THE SYSTEMS; INTERFERENCE; Households. Target and the Target Subsidiaries have all permits, certificates, licenses, approvals, tariffs and other authorizations required in connection with the operation of their respective businesses (collectively, "Target Permits"), (ii) neither Target nor any Target Subsidiary is in violation of any Target Permit, and (iii) no proceedings are pending or, to the knowledge of Target, threatened, to revoke or limit any Target Permit, except, in the case of clause (i) or (ii) above, those the absence or violation of which do not and would not have a Target Material Adverse Effect. Without limiting the generality of the foregoing: (a) Schedule 2.11(a) sets forth a description of each of the markets in which Target and each of its Target Subsidiaries has a System. (b) Schedule 2.11(b) lists all Channel Leases by name of underlying lessee and the monthly payment obligations thereunder. Except as set forth in Schedule 2.11(b), (A) each Channel Lease constitutes a legal, valid, and binding obligation of the parties thereto and is in 13 23 full force and effect and enforceable in accordance with its terms, subject to the Enforceability Exceptions, and materially complies with all applicable Laws and has been filed with the FCC, to the extent required by the FCC Rules, and no other Consent of any Governmental Authority is required to enable Target or any of the Target Subsidiaries to operate under such Channel Lease to recognize the benefits thereunder, or to comply with applicable Laws; (B) none of Target or any of the Target Subsidiaries has assigned its rights and interests under any Channel Lease to any other Person; (C) none of Target or any of the Target Subsidiaries is in material breach or default under any such Channel Lease, which breach or default could result in the termination, impairment, or forfeiture of any rights under or any payments being made with respect to any such Channel Lease, nor has an event occurred with respect to any Channel Lease which (whether with or without notice, the lapse of time, or the happening or occurrence of any other event) would constitute a breach or default under such Channel Lease; (D) to the knowledge of Target, no third party has any rights to assert any interest in any Channel Lease or the rights and benefits granted to Target or any of the Target Subsidiaries pursuant thereto; (E) there are no contractual restrictions relating to any such Channel Lease that reasonably could be expected to materially adversely affect or delay the collocation of the Channels (as hereinafter defined) at their respective Collocation Sites (as hereinafter defined) or the implementation of digital technology or Alternative Use (as hereinafter defined) services; (F) there are no material provisions of any such Channel Lease that are the subject of negotiation, nor has any party to any such Channel Lease requested the renegotiation of any material term thereof; (G) none of the Channel Leases contain a put or call option with respect to the subject matter thereof; and (H) none of the Channel Leases contains any provisions granting the other party thereto the right to terminate the Channel Leases upon, or otherwise limiting or adversely affecting the ability of Acquiror or any of its affiliates or associates to effect, a change in control of Target or any of the Target Subsidiaries, including, without limitation, any acquisition of Target Common Stock by Acquiror or any of its affiliates or associates, or the execution and delivery of this Agreement or the Target Ancillary Agreements or the consummation of the transactions contemplated hereby and thereby. Except as set forth on Schedule 2.11(b), upon any such change in control and upon the closing of the transactions contemplated by this Agreement, all such Channel Leases shall continue in force and effect in accordance with their terms without penalty, acceleration or rights of early termination and Acquisition Subsidiary will have the sole right to use the transmission capacity of the FCC License under each of the Channel Leases (other than the transmission capacity expressly reserved by such Channel Lease for the holder of an FCC License). Target has delivered or made available to Acquiror complete and accurate copies of each of the Channel Leases and none of such have been amended in any respect. (c) Schedule 2.11(c) lists all FCC Licenses and applications for FCC Licenses. Except as set forth in Schedule 2.11(c), (A) each of such FCC Licenses has been duly and validly issued and is enforceable in accordance with its terms, subject to the Enforceability Exceptions, and is in full force and effect; (B) neither Target nor any of the Target Subsidiaries has assigned its rights and interest under any of the FCC Licenses or any application for an FCC License; (C) neither Target, any of the Target Subsidiaries nor any lessor under any Channel Lease, as the case may be, is in violation of the terms under the corresponding FCC License, which violation could result in the termination or forfeiture of any rights under, or any payments being made with respect to, such FCC License, nor has an event occurred with respect to any of the FCC Licenses 14 24 which (whether with or without notice, the lapse of time, or the happening or occurrence of any other event) would constitute such a violation of the terms of such FCC License that could result in the termination or forfeiture of such FCC License; (D) to the knowledge of Target, except with respect to the lessors under the Channel Leases, no third party has any rights to assert any interest in any of the FCC Licenses or applications for FCC Licenses; and (E) there are no contractual restrictions relating to any of the FCC Licenses which reasonably could be expected to materially adversely affect the collocation of the Channels that are the subject thereof at their respective Collocation Site (as hereinafter defined) or the implementation of an Alternative Use (as hereinafter defined). Upon a change in control of Target or any of the Target Subsidiaries, including, without limitation, any acquisition of Target Common Stock by Acquiror or any of its affiliates or associates, or the execution and delivery of this Agreement or the Target Ancillary Agreements or the consummation of the transactions contemplated hereby and thereby, all such FCC Licenses shall continue in full force and effect in accordance with their terms without penalty, acceleration or rights of termination and Acquisition Subsidiary will have full rights and benefits under and to the FCC Licenses. Target has delivered or made available to Acquiror complete and accurate copies of each of the FCC Licenses and none of them have been amended in any respect. (d) Schedule 2.11(d) accurately lists, with respect to each of the Systems, all Channels, and accurately describes the following: (i) the status of each FCC License, including (A) the expiration date of the license, (B) the renewal deadline and any pending construction deadline and the status of compliance therewith (including whether one or more extensions of the filing deadline have been requested or obtained), (C) the status of any pending applications (including assignment and transfer of control applications) including whether the application has been accepted for filing by the FCC and any pending deadline for filing timely petitions to deny such FCC applications, (D) whether there are any threatened or pending interference issues, petitions to deny, informal objections, competing or conflicting applications, outstanding no-objection letters, comments or waiver requests, and (E) with respect to any licensed service areas of Target or any of the Target Subsidiaries that otherwise qualify as protected service areas pursuant to 47 C.F.R. Section 21.902(d), whether there are any currently pending FCC applications that were also pending on September 9, 1983 that Target has identified as causing harmful interference to its service area; (ii) the status of each Collocation Application (as hereinafter defined), Booster Application (as hereinafter defined) and Alternative Use Application (as hereinafter defined) and any amendments thereto, including (A) the relevant Collocation Site or other transmission site and proposed technical parameters and conditions for analog and digital operations, (B) whether the application has been accepted for filing by the FCC, (C) whether there are any threatened or pending interference issues, petitions to deny, informal objections, competing or conflicting applications, outstanding no-objection letters, outstanding consent letters, comments or waiver requests, and (D) with respect to any licensed service areas of Target or any of the Target Subsidiaries that otherwise qualify as protected service areas pursuant to 47 C.F.R. Section 21.902(d), whether there are any currently pending FCC applications that were also pending on September 9, 1983 that Target has identified as causing harmful interference to its service area; and 15 25 (iii) the market trials and operations that Target or any of the Target Subsidiaries are conducting, or intend to conduct, pursuant to the Target Approved Budget, with respect to Target and any Target Subsidiary other than CS and the CS Subsidiaries, and the CS Approved Budget, with respect to CS and the CS Subsidiaries, with respect to Alternative Uses of the Channels or the Systems and the relevant authorizations used, or to be used, in conjunction with such trial and operations and the conditions contained therein. (e) Complete and correct copies of all of the Target Permits, including, without limitation, Booster Applications, Collocation Applications, Alternative Use Applications and amendments thereto (with the FCC file date stamped thereon), FCC Licenses and material related thereto, including pending applications filed with the FCC relating to the Systems and other Target Permits owned, held or possessed by Target or any of the Target Subsidiaries have been provided to Acquiror. (f) Except as set forth on Schedule 2.11(f) and except for Channel Licenses held by third parties, with respect to each of the Systems, all of the assets, Target Permits and System Agreements relating to each System are owned by one or more of Target and the Target Subsidiaries. (g) Except as disclosed in Schedule 2.11(g), (i) Target and each of the Target Subsidiaries have obtained and possess all System Agreements, patents, copyrights, certificates of confirmation, licenses, permits, trademarks, and trade names, or rights thereto, necessary to conduct its business as currently conducted by Target and each of the Target Subsidiaries and none of Target or any of the Target Subsidiaries is in violation of any valid rights of others with respect to any of the foregoing; (ii) no other license, permit or franchise is necessary to the operation by Target or any of the Target Subsidiaries of the Systems as currently conducted by Target and each of its Target Subsidiaries; and (iii) Target and each of the Target Subsidiaries have obtained and possess or applied for all licenses, and have obtained and possess all leases, conduit use, equipment rental and microwave or satellite relay agreements necessary for the operation of the Systems as required by the System Agreements. (h) Except as set forth on Schedule 2.11(h), neither any of Target, any of the Target Subsidiaries, nor any Licensee of a Channel has contractually accepted or will contractually accept any electrical interference from any source that is likely to result in material adverse electrical interference to any of the Channels in any of the Systems now operating or expected to be operated, including the BTA Authorizations (as hereinafter defined) or any newly licensed Channel in any BTA (as hereinafter defined) in which any System operates or Target or any of the Target Subsidiaries expect to operate. Except as set forth in Schedule 2.11(h), neither Target nor any of the Target Subsidiaries has filed a petition currently pending before the FCC against any application filed with the FCC by a third party applicant and no third party has filed a petition currently pending before the FCC against any application filed with the FCC by Target or any of the Target Subsidiaries. (i) Except as set forth in Schedule 2.11(i), (i) each Collocation Application and Other Application (as hereinafter defined) complies with the FCC rules (including the interference protection requirements), has been accepted for filing by the FCC, and cut-off from competing 16 26 and conflicting applications; (ii) the deadline for filing timely petitions to deny each Collocation Application and each Other Application has lapsed; (iii) there are no threatened or pending petitions to deny, informal objections, competing or conflicting applications, outstanding no-objection letters, comments, petitions for reconsideration, petitions for review or waiver requests relating to such Collocation Applications and Other Applications; and (iv) a protected service area for the FCC License has been granted or requested. For purposes hereof, (i) a "Collocation Application" shall mean any application filed with, or granted by, the FCC to authorize the operation of the facilities associated with each FCC License at a common transmitter site with other ITFS (as hereinafter defined) and Multichannel Multipoint Distribution Service and Multipoint Distribution Service stations pursuant to common technical parameters of the FCC License and (ii) "Other Application" shall mean any other applications, in addition to Collocation Applications, filed with or granted by the FCC to authorize the provision of digital services and/or two-way services on the facilities associated with each FCC License. (j) Except as set forth in Schedule 2.11(j), all regulatory fees and expenses due and payable associated with the FCC Licenses have been paid to the FCC, including all fees and costs associated with the FCC Licenses held by the Target or any of the Target Subsidiaries to provide MMDS (as hereinafter defined) or MDS (as hereinafter defined) service in BTAs. Schedule 2.11(j) discloses any discounts or bidding credits that the Target or any of the Target Subsidiaries received from the FCC in conjunction with the licensing of the BTA Authorizations. (k) Schedule 2.11(k) lists the total number of households for each BTA in which Target or any of the Target Subsidiaries has been granted or is leasing an FCC License and describes any material assumptions for arriving at such determinations. (l) Except as disclosed on Schedule 2.11(l), all FCC Licenses are in full force and effect and there are no outstanding adverse judgments, injunctions, decrees or orders that have been issued by the FCC against the Target or any Target Subsidiary or affiliate thereof or the holder of an FCC License and there are no pending or threatened complaints, investigations, inquiries or proceedings by or before the FCC or other Governmental Authority or any actions or events that (i) could result in the revocation, cancellation, adverse modification or non-renewal of any FCC License or the imposition of a material fine or forfeiture, (ii) materially impair Target's or any of the Target Subsidiaries' ability to develop or operate any of the Channels or Systems, or (iii) otherwise result in a Target Material Adverse Change. The Systems, Channels, FCC Licenses and related facilities are currently providing and, to the knowledge of Target, have been providing service to the public (rather than a test signal or color bar) and are being operated and/or developed in material compliance with the respective FCC License and other Target Permits and with all other Laws. (m) Except as set forth on Schedule 2.11(m), since January 1, 1996 all material reports and other documents required to be filed with the FCC or other Governmental Authority with respect to the Systems, Channels, FCC Licenses, System Agreements and Channel Leases have been timely filed, including, without limitation certifications of completion of construction. Notwithstanding anything contained herein to the contrary, to the knowledge of Target, except as set forth on Schedule 2.11(m), there have been no failures to make filings with the FCC or any Governmental Authority at any time that would reasonably be likely to have a material adverse 17 27 effect on any of the Channels, FCC Licenses, System Agreements or Systems, or any of Target or any of the Target Subsidiaries, or what would reasonably be likely to result in the imposition of a material fine or forfeiture, including copyright filings, extension requests, and reports required by Sections 21.11(a), 21.911 and 21.920 of the FCC Rules. (n) As used in this Agreement, the following terms have the respective meanings set forth below (such meanings to be equally applicable to both the singular and plural forms of the term defined): "Alternative Use" means the provision of service other than Wireless Cable Service through the use of, among others, ITFS, MDS, and MMDS channels, including two-way transmission services and fixed or mobile telecommunications services. "Alternative Use Application" means an application filed by Target or any of the Target Subsidiaries or the Licensee of a Channel to provide an Alternative Use, including an application for developmental authority, experimental authority, or special temporary authority or any Booster Application requesting to provide an Alternative Use. "Booster Application" means any application filed with, or granted by, the FCC to authorize the operation of a booster station. "Booster License" means a license for a booster station. "BTA" means basic trading area, as defined by Rand McNally and used by the FCC in licensing MDS and MMDS channels pursuant to the competitive bidding process. "BTA Authorization" means the Target Permit granted by the FCC to apply for individual MDS and MMDS channels with a certain BTA. "Channel Leases" means all leases to use transmission capacity held by or for benefit of one or more of Target or any of the Target Subsidiaries of transmission capacity on ITFS, MDS, or MMDS frequencies licensed by the FCC. "Channel License" means any Target Permits for a Channel granted by the FCC to any one or more of Target or the Target Subsidiaries or leased to Target or any of the Target Subsidiaries by a lessor of a Channel Lease, or any application pending before the FCC for such Target Permit. "Channels" means the ITFS, MDS, or MMDS frequencies licensed, or expected to be licensed, to one or more of Target or any of the Target Subsidiaries by the FCC pursuant to an FCC License or made available to one or more of Target or any of the Target Subsidiaries by an ITFS, MDS, or MMDS applicant, permittee, conditional licensee or licensee pursuant to a Channel lease, including any frequencies associated with any booster station, repeater station, response station hub or any facility used to provide an Alternative Use. "Collocation Site" means the site at which the facilities for the corresponding Channel are, or are to be, collocated at a common transmitter site with other Channels that are used to 18 28 provide Wireless Telecommunications Service (as hereinafter defined) on the System. "FCC Licenses" means the Target Permits, including, without limitation, any Channel Licenses, Booster Licenses and any other related facility licenses and construction permits, issued by the FCC to Target or any of the Target Subsidiaries or any lessor under a Channel Lease, or that are the subject of an application filed with the FCC by Target or any of the Target Subsidiaries or any such lessor under a Channel Lease, to operate one or more of the Channels, including, without limitation, any BTA Authorization, individual Target Permit to construct or operate Channels within a BTA, and any Alternative Use permit. "FCC Rules" means Title 47 of the Code of Federal Regulations, as amended at any time and from time to time, and FCC decisions issued pursuant to the adoption of such regulations. "ITFS" means the Instructional Television Fixed Service, a class of microwave frequencies licensed by the FCC pursuant to Part 74 of the FCC Rules. "Licensee" means an applicant, permittee, conditional licensee, or licensee of a facility regulated by the FCC. "MDS" means the Multipoint Distribution Service, a domestic transmission service licensed by the FCC pursuant to Part 21 of the FCC Rules. "MMDS" means Multichannel Multipoint Distribution Service, a domestic transmission service licensed by the FCC pursuant to Part 21 of the FCC Rules. "System Agreements" means, collectively, all FCC Licenses for Channels and booster stations, Channel Leases, Tower Site Leases, programming agreements, retransmission agreements, non-interference or cooperation agreements (excluding no-objection letters issued in the ordinary course of business), equipment agreements or instruments, licenses, permits, and other material agreements pertaining to the transmission of video, voice, or data signals through wireless cable transmission facilities, of each of Target and each of the Target Subsidiaries now existing or hereafter acquired or obtained, relative to the Channels or the construction and operation of the Systems. "Systems" means the wireless telecommunications systems constructed and operated by one or more of Target and each of the Target Subsidiaries for the provision of Wireless Telecommunications Service. "Tower Site Leases" is defined in Section 2.19(b). "Wireless Cable Service" means the provision of subscription video or entertainment and additional programming services and services ancillary thereto through the use of, among other, ITFS, MDS, and MMDS channels. "Wireless Telecommunications Service" means any service that is permitted under FCC rules and regulations or authorized by the FCC to be provided on or by means of the transmission capacity on an ITFS, MDS, or MMDS channel, including Wireless Cable Services and 19 29 Alternative Use services. 2.12 FINDERS AND INVESTMENT BANKERS. Neither Target nor any of the Target Subsidiaries nor any of their officers or directors or other affiliates has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders' fees in connection with the acquisition of Target Common Stock by Acquiror or any of its affiliates or associates, the Merger, the Target Ancillary Agreements or the transactions contemplated hereby or thereby, other than pursuant to the agreement with BT Alex. Brown Incorporated, an accurate and complete copy of which has been provided to Acquiror. 2.13 CONTRACTS. Schedule 2.13 attached hereto sets forth a complete and accurate list of all material notes, bonds, mortgages, indentures, contracts, leases, licenses, agreements, understandings, arrangements, commitments, instruments, bids or proposals to which Target or any Target Subsidiary is a party or is subject ("Target Material Contract") . For purposes of this Section 2.13, a note, bond, mortgage, indenture, contract, lease, license, agreement, understanding, arrangement, commitment, instrument, bid or proposal shall be considered material if (i) it is with an affiliate or associate of Target or of a Target Subsidiary or with a Target Minority Entity, (ii) it is required to be described in or filed as an exhibit to any document filed under the Securities Act or the Securities Exchange Act by an issuer subject thereto, (iii) the financial obligation of Target or a Target Subsidiary thereunder or applicable to the assets or properties of Target or a Target Subsidiary could exceed $250,000, (iv) it provides for recurring monthly revenues to Target or a Target Subsidiary in excess of $20,000, (v) it includes any exclusivity or non-competition restrictions applicable to Target or a Target Subsidiary, (vi) it is for the purchase or sale of any assets otherwise than in the ordinary course of business, or (vii) it is a collective bargaining or similar agreement or an agreement relating to which employees of Target or any of the Target Subsidiaries are represented by a union in their employment relationship with Target and any of the Target Subsidiaries. Target has made available to Acquiror true and accurate copies of all Target Material Contracts. Target Material Contracts are valid and binding and are in full force and effect and enforceable in accordance with their respective terms (assuming the other parties thereto are bound, as to which Target has no basis to believe otherwise), subject to the Enforceability Exceptions. Any and all transactions between or involving Target or a Target Subsidiary and an affiliate or associate thereof were entered into in the ordinary course of business and are upon fair and reasonable terms not materially less favorable than Target or such Target Subsidiary could obtain or become entitled to in an arm's-length transaction with a person that is not an affiliate or an associate. Except as set forth in Schedule 2.6(b) attached hereto, (i) no Consent of any person is needed in order that each such Target Material Contract shall continue in full force and effect in accordance with its terms without penalty, acceleration or rights of early termination by reason of any change of control of Target or any of the Target Subsidiaries, including, without limitation, any acquisition of Target Common Stock by Acquiror or any of its affiliates or associates, or the execution, delivery or performance of this Agreement and the Target Ancillary Agreements or the consummation of the transactions contemplated hereby or thereby, and (ii) neither Target nor any Target Subsidiary is in violation or breach of or default under any such Target Material Contract, nor to Target's knowledge is any other party to any such Target Material Contract in violation or breach of or default under any such Target Material Contract. 20 30 2.14 EMPLOYEE BENEFIT PLANS. (a) Except as set forth in Schedule 2.14 attached hereto, there are no Benefit Plans (as defined below) maintained or contributed to by Target or a Target Subsidiary under which Target, a Target Subsidiary or the Surviving Corporation could incur any liability. A "Benefit Plan" shall include (i) an employee benefit plan as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, together with all regulations thereunder ("ERISA"), even if, because of some other provision of ERISA, such plan is not subject to any or all of ERISA's provisions, and (ii) whether or not described in the preceding clause, (a) any pension, profit sharing, stock bonus, deferred or supplemental compensation, retirement, thrift, stock purchase, stock appreciation or stock option plan, or any other compensation, welfare, fringe benefit or retirement plan, program, policy, course of conduct, understanding or arrangement of any kind whatsoever, whether formal or informal, oral or written, providing for benefits for or the welfare of any or all of the current or former employees or agents of Target or a Target Subsidiary or their beneficiaries or dependents, (b) a multi-employer plan as defined in Section 3(37) of ERISA (a "Multi-employer Plan"), or (c) a multiple employer plan as defined in Section 413 of the Code. (b) With respect to each Benefit Plan (where applicable): Target has made available to Acquiror complete and accurate copies of (i) all plan and trust texts and agreements, insurance contracts and other funding arrangements; (ii) annual reports on the Form 5500 series for the last three (3) years; (iii) financial statements and/or annual and periodic accountings of plan assets for the last three (3) years; (iv) the most recent determination letter received from the Internal Revenue Service ("IRS"); (v) actuarial valuations for the last three (3) years; and (vi) the most recent summary plan description as defined in ERISA. (c) With respect to each Benefit Plan while maintained or contributed to by Target or a Target Subsidiary: (i) if intended to qualify under Code Sections 401(a) or 403(a), such Benefit Plan has received a favorable determination letter from the IRS that it so qualifies, and its trust is exempt from taxation under Code Section 501(a) and nothing has since occurred to cause the loss of the Benefit Plan's qualification; (ii) except for payment of benefits made in the ordinary course of the plan administration, no event has occurred and there exists no circumstance under which Target, a Target Subsidiary or the Surviving Corporation could incur material liability under ERISA, the Code or otherwise; (iii) no accumulated funding deficiency as defined in Code Section 412 has occurred or exists; (iv) no material non-exempt prohibited transaction as defined under ERISA and the Code has occurred; (v) no reportable event as defined in Section 4043 of ERISA has occurred; (vi) all contributions and premiums due have fully been made and paid on a timely basis; and (vii) except as set forth on Schedule 2.14 attached hereto, all contributions made or required to be made under any Benefit Plan meet the requirements for deductibility under the Code, and all contributions accrued prior to the Effective Time which have not been made have been properly recorded on the Target Financial Statements. (d) No Benefit Plan of Target or a Target Subsidiary is a defined benefit pension plan subject to Title IV of ERISA or Section 412 of the Code. Each of such Benefit Plans has been maintained in compliance with its terms and all applicable Law, except where the failure to do so would not result in a Target Material Adverse Effect or a Surviving Corporation Material 21 31 Adverse Effect (as hereinafter defined). Neither Target nor any of the Target Subsidiaries contributes to, or has any outstanding liability with respect to, any Multi-employer Plan. (e) With respect to each Benefit Plan which is a welfare plan (as defined in ERISA Section 3(1)): (i) any liability for medical or death benefits with respect to current or former employees beyond their termination of employment is set forth in the Target Financial Statements (or footnotes thereto) to the extent required to be so set forth by applicable accounting principles; (ii) there are no reserves, assets, surplus or prepaid premiums under any such plan; (iii) except as set forth in Schedule 2.14 attached hereto, no term or provision of any such plan prohibits the amendment or termination thereof; and (iv) Target and the Target Subsidiaries have complied with Code Section 4980B, except for any deviations from the foregoing which do not and would not have a Target Material Adverse Effect or a Surviving Corporation Material Adverse Effect. (f) Except as set forth in Schedule 2.14 attached hereto, the consummation of the Merger or the other transactions contemplated by this Agreement or the Target Ancillary Agreements or any change of control of Target or any of the Target Subsidiaries, including, without limitation, any acquisition of Target Common Stock by Acquiror or any of its affiliates or associates, will not, either alone or in conjunction with another Event: (i) entitle any individual to severance pay, or (ii) accelerate the time of payment or vesting of benefits or increase the amount of compensation or benefits due to any individual. 2.15 TAXES AND TAX RETURNS. (a) Except as disclosed in Schedule 2.15 attached hereto, Target and each of the Target Subsidiaries has timely filed, or caused to be timely filed, all federal, state, local and foreign income, gross receipts, sales, use, property, production, payroll, franchise, withholding, employment, social security, license, excise, transfer, gains, and other tax returns or reports required to be filed by it (any of the foregoing being referred to herein as a "Tax Return"), and each such Tax Return is true, correct and complete, and further, Target and each of the Target Subsidiaries has paid, collected or withheld, or caused to be paid, collected or withheld, all taxes and governmental charges, assessments and contributions of any nature whatsoever including, but not limited to, any related penalties, interest and liabilities (any of the foregoing being referred to herein as a "Tax"), required to be paid, collected or withheld, other than such Taxes for which adequate reserves in the Target Financial Statements have been established or which are being contested in good faith and have been disclosed in writing to Acquiror prior to the date of this Agreement. Except as set forth in Schedule 2.15 attached hereto, there are no claims or assessments pending against Target or any Target Subsidiary for any alleged deficiency in any Tax, and Target does not know of any threatened Tax claims or assessments against Target or any Target Subsidiary (other than those for which adequate reserves in the Target Financial Statements have been established or which are being contested in good faith and have been disclosed in writing to Acquiror prior to the date of this Agreement). Except as set forth in Schedule 2.15 attached hereto, neither Target nor any Target Subsidiary has made an election under Section 338 of the Code or has taken any action that would result in any Tax liability of Target or any Target Subsidiary as a result of a deemed election within the meaning of Section 338 of the Code. Except as set forth in Schedule 2.15 attached hereto, neither Target nor any 22 32 Target Subsidiary has any waivers or extensions of any applicable statute of limitations to assess any Taxes. Except as set forth in Schedule 2.15 attached hereto, there are no outstanding requests by Target or a Target Subsidiary for any extension of time within which to file any Tax Return or within which to pay any Taxes shown to be due on any Tax Return. Except as set forth on Schedule 2.15 attached hereto, no taxing authority is conducting or has notified or, to the knowledge of Target, has threatened Target or any Target Subsidiary that it intends to conduct, an audit of any prior Tax period of Target or any of its past or present subsidiaries. Except as disclosed in Schedule 2.15 attached hereto, neither Target nor any Target Subsidiary has ever been an "S" corporation under the Code. (b) Neither Target nor any Target Subsidiary is a party to any Tax sharing agreements or similar arrangements with respect to or involving Target or a Target Subsidiary. (c) Neither Target nor any Target Subsidiary has made or become obligated to make, or will, as a result of the transactions contemplated by this Agreement, make or become obligated to make, any "excess parachute payment" as defined in Section 280G of the Code. (d) Neither Target nor any Target Subsidiary is or has been a United States real property holding company (as defined in Section 897(c)(2) of the Code) during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. (e) Neither Target nor any Target Subsidiary is a person other than a United States person within the meaning of the Code. (f) None of the assets of Target or of any Target Subsidiary is property which Target or any Target Subsidiary is required to treat as being owned by any other person pursuant to the so-called "safe harbor lease" provisions of former Section 168(f)(8) of the Code. (g) Target and each Target Subsidiary have disclosed on their federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income tax liability within the meaning of Section 6662(d) of the Code. (h) There are no liens for Taxes on the assets of Target or any Target Subsidiary except for statutory liens for current Taxes not yet due and payable. (i) All elections with respect to Taxes affecting Target and the Target Subsidiaries are set forth in Schedule 2.15 attached hereto or, with respect to elections made on or before March 31, 1999, are reflected in the Tax Returns of Target filed and provided to Acquiror prior to the date of this Agreement. Neither Target nor any Target Subsidiary: (i) has made or will make a deemed dividend election under former Treas. Reg. Section 1.1502-32(f)(2) or a consent dividend election under Section 565 of the Code; (ii) has consented at any time under Section 341(f)(l) of the Code to have the provisions of Section 341(f)(2) of the Code apply to any disposition of the assets of Target or any Target Subsidiary; (iii) has agreed, or is required, to make any adjustment under Section 481(a) of the Code by reason of a change in accounting method or otherwise; (iv) has made an express election, or is required, to treat any asset of Target or any Target Subsidiary as owned by another person for federal income tax purposes or as 23 33 tax-exempt bond financed property or tax-exempt use property within the meaning of Section 168 of the Code; or (v) has made any of the foregoing elections or is required to apply any of the foregoing rules under any comparable state, foreign or local income Tax provision. (j) Target and the Target Subsidiaries are not and have never been includible corporations in an affiliated group of corporations, within the meaning of Section 1504 of the Code, other than in the affiliated group of which Target is the common parent corporation. (k) Except as set forth in Schedule 2.15 attached hereto, the consolidated net operating losses, net capital losses, foreign tax credits, investment and other tax credits set forth in the Target Financial Statements are not subject to any limitations under Section 382, Section 383 or the Treasury regulations (whether temporary, proposed or final) under Section 1502 of the Code. (l) Except as set forth in Schedule 2.15 attached hereto, neither Target nor any Target Subsidiary is a partner or member in or subject to any joint venture, partnership, limited liability company or other arrangement or contract that is or could be treated as a partnership for federal income tax purposes. (m) Except as set forth in Schedule 2.15 attached hereto, neither Target nor any Target Subsidiary is a party to or otherwise subject to any arrangement having the effect of or giving rise to the recognition of a deduction or loss before the Effective Time, and a corresponding recognition of taxable income or gain after the Effective Time, or any other arrangement that would have the effect of or give rise to the recognition of taxable income or gain by Target or a Target Subsidiary after the Effective Time without the receipt of or entitlement to a corresponding amount of cash. 2.16 LIABILITIES. From December 31, 1998, through the date of this Agreement, except as expressly disclosed in the Target Securities Filings made available by Target to Acquiror prior to the date of this Agreement or in Schedule 2.16 attached hereto, Target and the Target Subsidiaries do not have any direct or indirect indebtedness, liability, claim, loss, damage, deficiency, obligation or responsibility, fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise, whether or not of a kind required by generally accepted accounting principles to be set forth in a financial statement other than those incurred in the ordinary course of business and in an amount not in excess of $500,000 individually or $2,000,000 in the aggregate. Except as set forth on Schedule 2.16 attached hereto or reflected in the Target Securities Filings made available by Target to Acquiror prior to the date of this Agreement, as of the date of this Agreement, neither Target nor the Target Subsidiaries have any (i) obligations in respect of borrowed money, (ii) obligations evidenced by bonds, debentures, notes or other similar instruments, (iii) obligations which would be required by generally accepted accounting principles to be classified as "capital leases," (iv) obligations to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business and payable not more than twelve (12) months from the date of incurrence, and (v) any guaranties of any obligations of any other person. 24 34 2.17 ENVIRONMENTAL MATTERS. As of the date of this Agreement, (i) Target and the Target Subsidiaries are in compliance in all material respects with all applicable Environmental Laws (as hereinafter defined), (ii) there is no civil, criminal or administrative judgment, action, suit, demand, claim, hearing, notice of violation, investigation, proceeding, notice or demand letter pending or, to the knowledge of Target, threatened against Target, a Target Subsidiary or any of their properties pursuant to Environmental Laws, and (iii) except as set forth on Schedule 2.17 attached hereto, there are no past or present Events which reasonably may be expected to prevent compliance with, or which have given rise to or will give rise to material liability on the part of Target or a Target Subsidiary under, Environmental Laws. As used herein the term "Environmental Laws" shall mean Laws relating to pollution, chemical usage, waste or emission control, the management, generation, presence or disposal of asbestos, hazardous or toxic wastes or substances, the protection or remediation of the environment, environmental activity, product stewardship or public health and safety. 2.18 INTELLECTUAL PROPERTY. (a) For purposes of this Agreement, "Intellectual Property" shall mean all U.S. and foreign patents, trademarks, service marks, trade names, copyrights, franchises and similar rights of or used by Target or a Target Subsidiary, all applications for any of the foregoing and all permits, grants and licenses or other rights running to or from Target or any of the Target Subsidiaries relating to any of the foregoing and any and all goodwill associated therewith. Target or one of the Target Subsidiaries owns, or is licensed to, or otherwise has, the full and exclusive rights to use all right, title and interest in, to and under any and all Intellectual Property identified on Schedule 2.18(a)(1) and any and all goodwill associated therewith. Except as set forth on Schedule 2.18(a)(2), Target or one of the Target Subsidiaries owns, or is licensed to use, or otherwise has, legally enforceable rights to all of the Intellectual Property currently used or proposed to be used in, and necessary for the conduct of the business of Target and the Target Subsidiaries as presently or proposed to be conducted. The rights of Target and the Target Subsidiaries in the Intellectual Property are, subject to the rights of any licensor thereof, free and clear of any liens or other encumbrances and restrictions and Target and the Target Subsidiaries have not received, as of the date of this Agreement, notice of any adversely-held Intellectual Property of any other person, or notice of any charge or claim of any person relating to such Intellectual Property or any process or confidential information of Target or any Target Subsidiary ("Claim Notice") and do not know of any basis for any such charge or claim. Target, the Target Subsidiaries and their respective predecessors, if any, have not conducted business at any time during the period beginning five (5) years prior to the date hereof under any corporate, trade or fictitious names other than their current corporate names. Target shall promptly notify, and shall cause the Target Subsidiaries to promptly notify, Acquiror of any Claim Notice received by Target or a Target Subsidiary after the date of this Agreement. The business of each of Target and the Target Subsidiaries, presently conducted, does not conflict with and, to the knowledge of Target, has not been alleged to conflict with any patents, trademarks, trade names, service marks, copyrights or other intellectual property rights of others. The execution and delivery of this Agreement, the Target Ancillary Agreements, the consummation of the transactions contemplated hereby and thereby and any change of control of Target or any of the Target Subsidiaries, including, without limitation, any acquisition of Target Common Stock by Acquiror or any of its affiliates or associates, will not result in the loss or impairment of any of 25 35 the Intellectual Property rights or Target's or any Target Subsidiaries' right to use any of the licensed Intellectual Property rights. To the knowledge of Target, there are no third parties using any of the Intellectual Property rights material to the business of Target or any Target Subsidiaries as presently conducted. (b) Without limiting the generality of paragraph (a) above, except as disclosed in Schedule 2.18(b), each of Target and the Target Subsidiaries owns, or possesses valid rights to, all computer software programs that are material to the conduct of the business of the Target and Target Subsidiaries. To Target's knowledge, there are no infringement suits, actions or proceedings pending or threatened against the Target or any Target Subsidiary with respect to any software owned or licensed by the Target or any Target Subsidiary. 2.19 REAL ESTATE. (a) Neither Target nor any of the Target Subsidiaries owns or has any agreement or other right to acquire any real property as of the date of this Agreement. (b) Schedule 2.19(b) attached hereto sets forth a true, correct and complete schedule as of the date of this Agreement of all material leases, subleases, easements, rights-of-way, licenses or other agreements under which Target or any of the Target Subsidiaries uses or occupies, or has the right to use or occupy, now or in the future, any real property or improvements thereon (the "Target Real Property Leases"), including, without limitation, all agreements relating to the location of towers and transmitters (the "Tower Site Leases") . Schedule 2.19(b) accurately and completely lists and sets forth a description (including location of premises, term and assignability) of the Tower Site Leases and office and studio space and the same constitute the only Tower Site Leases and other leases necessary in connection with the conduct of business by Target and any of the Target Subsidiaries as currently conducted. Each of Target and the Target Subsidiaries enjoys quiet possession under all leases (including Tower Site Leases) to which it is a party as lessee, and all of such leases are valid, subsisting, and in full force and effect. Except as set forth in Schedule 2.19(b), upon a any change of control of Target or the Target Subsidiaries, including, without limitation, any acquisition of Target Common Stock by Acquiror or any of its affiliates or associates, or the execution or delivery of this Agreement and the Target Ancillary Agreements or the consummation of the Merger or the transactions contemplated hereby or thereby, all such Target Real Property Leases shall continue in full force and effect in accordance with their terms, without penalty, acceleration or rights of early termination. Except for the matters listed on said Schedule 2.19(b), Target or a Target Subsidiary, as indicated thereon, holds the leasehold estate under or other interest in each Target Real Property Lease free and clear of all liens, encumbrances and other rights of occupancy other than statutory landlords or mechanics' liens which have not been executed upon. (c) All of the existing towers owned by Target or any Target Subsidiaries and, to the best of Target's knowledge, all of the other existing towers, used in the operation of the Systems are obstruction-marked and lighted to the extent required by, and in accordance with, the rules and regulations of the Federal Aviation Administration (the "FAA") or the FCC. Appropriate notification to the FAA has been filed for each tower where required by the rules and regulations of the FAA or FCC. 26 36 2.20 CORPORATE RECORDS. The respective corporate record books of or relating to Target and each of the Target Subsidiaries have been made available to Acquiror by Target and contain materially accurate and complete records of (i) all corporate actions of the respective shareholders and directors (and committees thereof) of Target and the Target Subsidiaries, (ii) the Certificate and/or Articles of Incorporation, By-Laws and/or other governing instruments, as amended, of Target and the Target Subsidiaries, and (iii) the issuance and transfer of stock of Target and the Target Subsidiaries. Except as set forth on Schedule 2.20 attached hereto, neither Target nor any Target Subsidiary has any of its material records or information recorded, stored, maintained or held off the premises of Target and the Target Subsidiaries. 2.21 TITLE TO AND CONDITION OF PERSONAL PROPERTY. Target and each of the Target Subsidiaries have good and marketable title to, or a valid leasehold interest in, all material items of any personal property reflected in the Target Financial Statements dated December 31, 1998, or currently used in the operation of their respective businesses, and such property or leasehold interests are free and clear of all liens, claims, charges, security interests, options, or other title defects or encumbrances, except for property disposed of in the ordinary course since the date thereof consistent with the provisions of Section 2.9, above, and such exceptions to title and liens, claims, charges, security interests, options, title defects or encumbrances which do not and would not have a Target Material Adverse Effect or interfere with the use and enjoyment of such property and interests. As of the date of this Agreement, all such personal property is in good operating condition and repair (ordinary wear and tear excepted), is suitable for the use to which the same is customarily put by Target or any Target Subsidiary, is, to the knowledge of Target, free from inherent or latent manufacturing defects, and is free from all other material defects and is of a quality and quantity presently usable in the ordinary course of the operation of the business of Target and the Target Subsidiaries. 2.22 NO ADVERSE ACTIONS. Except as set forth on Schedule 2.22 attached hereto, there is no existing, pending or, to the knowledge of Target, threatened termination, cancellation, limitation, modification or change in the business relationship of Target or any of the Target Subsidiaries, with any supplier, customer or other person except as are immaterial individually and in the aggregate and are in the ordinary course of business. None of Target, any Target Subsidiary or, to the knowledge of Target, any director, officer, agent, employee or other person acting on behalf of any of the foregoing has used any corporate funds for unlawful contributions, payments, gifts, entertainment or other unlawful expenses relating to political activity, or made any direct or indirect unlawful payments to governmental or regulatory officials or others. 2.23 LABOR MATTERS. Except as set forth on Schedule 2.13 or Schedule 2.23 attached hereto, neither Target nor any of the Target Subsidiaries has any obligations, contingent or otherwise, under any employment, severance or consulting agreement, collective bargaining agreement or other contract with a labor union or other labor or employee group. To the knowledge of Target, as of the date of this Agreement, there are no efforts presently being made or threatened by or on behalf of any labor union with respect to the unionizing of employees of Target or any Target Subsidiary. As of the date of this Agreement, there is no unfair labor practice complaint against Target or any Target Subsidiary pending or, to the knowledge of Target, threatened before the National Labor Relations Board or comparable agency; there is no labor strike, dispute, slowdown or stoppage pending or, to the knowledge of Target, threatened 27 37 against or involving Target or any Target Subsidiary; no representation question exists respecting the employees of Target or any Target Subsidiary; no grievance or internal or informal complaint exists, no arbitration proceeding arising out of or under any collective bargaining agreement is pending and no claim therefor has been asserted; no collective bargaining agreement is currently being negotiated by Target or any Target Subsidiary; and neither Target nor any Target Subsidiary is experiencing any work stoppage, strike, slowdown or other labor difficulty. As of the date of this Agreement, there has not been, and to the knowledge of Target there will not be, any material adverse change in relations with employees or agents of Target or any Target Subsidiary as a result of any announcement or consummation of the transactions contemplated by this Agreement or the Target Ancillary Agreements or any change of control of Target or the Target Subsidiaries, including, without limitation, any acquisition of Target Common Stock by Acquiror or any of its affiliates or associates. Target shall promptly notify, and shall cause the Target Subsidiaries to promptly notify, Acquiror upon knowledge by Target or a Target Subsidiary of the occurrence after the date hereof of any matter referenced in this Section. 2.24 CHANGE OF CONTROL AGREEMENTS. Except as set forth in Schedule 2.24, neither the execution and delivery of this Agreement or the Target Ancillary Agreements nor the consummation of the Merger or the other transactions contemplated hereby or thereby, nor any change of control of Target or the Target Subsidiaries, including without limitation, any acquisition of Target Common Stock by Acquiror or any of its affiliates or associates will (either alone or in conjunction with any other Event) result in, cause the accelerated vesting or delivery of, or increase the amount of value of, any payment or benefit to any director, officer or employee of Target or any Target Subsidiary. Except as set forth in Schedule 2.24, without limiting the generality of the foregoing, (x) no amount paid or payable by Target in connection with the Merger or the other transactions contemplated by this Agreement or the Target Ancillary Agreements, including accelerated vesting of options, (either solely as a result thereof or as a result of such transactions in conjunction with any other event) will be an "excess parachute payment" within the meaning of Section 280G of the Code and (y) there are no agreements or arrangements on behalf of any officer, director or employee providing for payment or other benefits to such person contingent upon the execution of this Agreement or the Target Ancillary Agreements or the transactions contemplated hereby or thereby or a transaction involving a change control of the Target or the Target Subsidiaries, including, without limitation, any acquisition of Target Common Stock by Acquiror or any of its affiliates or associates. 2.25 INSURANCE. Target and each of the Target Subsidiaries has obtained and maintains in full force and effect insurance with responsible and reputable insurance companies or associations in such amounts, on such terms and covering such risks, including fire and other risks insured against by extended coverage, public liability insurance and insurance against claims for personal injury or death or property damage occurring in connection with the activities of Target or the Target Subsidiaries or any properties owned, occupied or controlled by them, as is customary and prudent. Neither Target nor any of the Target Subsidiaries has received notice of default under, or intended cancellation or nonrenewal of, any policies of insurance. Neither Target nor any Target Subsidiary has been refused any insurance for coverage by an insurance carrier to which it has applied for insurance. 28 38 2.26 INFORMATION SUPPLIED. The Proxy Statement (as hereinafter defined) to be mailed to the holders of Target Common Stock in connection with the Shareholders' Meeting (as hereinafter defined) to be called to consider the Merger at the date such document is first published, sent or delivered to the holders of Target Common Stock or at any time prior to or during the pendency of the Shareholders' Meeting, will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The Proxy Statement and any related schedules or other filings made with the SEC, as contemplated hereby, will comply as to form and substance in all material respects with the requirements of the Securities Exchange Act and the applicable rules and regulations of the SEC thereunder and other applicable Laws. Notwithstanding the foregoing, no representation or warranty is made by Target with respect to statements made or incorporated by reference therein based on information relating solely to Acquiror or Acquisition Subsidiary supplied by Acquiror or Acquisition Subsidiary in writing expressly for inclusion or incorporation by reference in the foregoing document. 2.27 TAKEOVER STATUTES. No "business combination," "fair price," "moratorium," "control share acquisition" or other similar antitakeover statute or regulation enacted under state or federal laws in the United States (each a "Takeover Statute"), including, without limitation, Sections 33-840 et seq. of the Connecticut Code (inasmuch as Target has taken all requisite corporate action thereunder), applicable to Target or any of the Target Subsidiaries is applicable to the Merger, this Agreement, the Target Ancillary Agreements or the other transactions contemplated hereby or thereby or any change of control of Target or the Target Subsidiaries, including, without limitation, any acquisition of Target Common Stock by Acquiror or any of its affiliates or associates. 2.28 TARGET RIGHTS PLAN. Under the Rights Agreement dated April 16, 1999, between Target and ChaseMellon Shareholder Services LLC, as Rights Agent (the "Rights Plan"), Acquiror will not become an "Acquiring Person", no "Stock Acquisition Date" or "Distribution Date" will occur and the "Rights" will not separate from the Target Common Stock (as such terms are defined in the Rights Plan), and Target's shareholders will not be entitled to receive any benefits under the Rights Plan as a result of the approval, execution or delivery of this Agreement, the Target Ancillary Agreements or the consummation of the transactions contemplated hereby or thereby or the execution, delivery or performance of any other agreement to acquire, or any other acquisition of, Target Common Stock by Acquiror or any affiliate or associate. As of the Effective Time, the Rights Plan will terminate and the "Rights" thereunder will be of no further force or effect. 2.29 YEAR 2000. (a) The Target has initiated a review and assessment of the Year 2000 Problem (as hereinafter defined), has developed a plan for addressing the Year 2000 Problem on a timely basis and is implementing such plan on a timely basis. Except as would not reasonably be expected to have a Target Material Adverse Effect, to the best knowledge of the Target after due inquiry, none of the assets or equipment owned or utilized by Target or any of the Target Subsidiaries will fail to perform because of, or due in any way to, a Year 2000 Problem. To the best knowledge of the Target based on responses to written inquiries made by Target or otherwise based on information brought specifically to the attention of the Target, no 29 39 vendor, supplier or customer of Target or any of the Target Subsidiaries is reasonably expected to experience Year 2000 Problem that, individually or in the aggregate, could constitute a Target Material Adverse Effect. The term "Year 2000 Problem" means the inability of any hardware, software or process to recognize or correctly calculate dates on and after January 1, 2000, or the failure of computer systems, products or services to perform any of their intended functions in a proper manner in connection with data containing any date on or after January 1, 2000. (b) Target has made available to Acquiror Target's plan to address the Year 2000 Problem (the "Year 2000 Plan"). To the Target's knowledge, the Year 2000 Plan will enable the Target and the Target Subsidiaries to be Year 2000 Compliant in a timely manner except as to matters which are not reasonably likely to result in a Target Material Adverse Effect and the aggregate cost for the Target and the Target Subsidiaries to become Year 2000 Compliant is estimated to be $800,000. "Year 2000 Compliant" means that (a) the products, services, or other item(s) at issue accurately process, provide and/or receive date/time data (including calculating, comparing, and sequencing), within, from, into, and between centuries (including the twentieth and twenty-first centuries and the years 1999 and 2000), including leap year calculations, and (b) neither performance nor the functionality nor the supply of the products, services, and other items at issue will be affected by dates/times prior to, on, after, or spanning January 1, 2000. The design of the products, services, and other items at issue to ensure compliance with the foregoing warranties and representations includes proper date/time data century recognition and recognition of 1999 and 2000, calculations that accommodate same century and multicentury formulae and date/time values before, on, after, and spanning January 1, 2000, and date/time data interface values that reflect the century, 1999 and 2000. 2.30 TARGET OPTIONS. Upon the consummation of the Merger, each of Target's outstanding Options to acquire shares of Target Common Stock shall, pursuant to their terms as amended as contemplated hereby, if vested as of the Effective Time, become converted into the right to receive an amount in cash equal to the Option Consideration, as contemplated by Section 1.7, or, if unvested, shall become converted into the right to receive an amount in cash equal to the Option Consideration, as contemplated by Section 1.7, and shall become vested following the Effective Time in accordance with their terms. 2.31 TRANSACTION WITH AFFILIATES. Except as set forth in Schedule 2.31 (other than compensation and benefits received in the ordinary course of business as an employee or director of Target or the Target Subsidiaries), no director, officer or any other affiliate or associate of Target or any of the Target Subsidiaries or any entity in which, to the knowledge of Target, any such director, officer or other affiliate or associate, owns any beneficial interest (other than a publicly held corporation whose stock is traded on a national securities exchange or in the over-the-counter market and less than 1% of the stock of which is beneficially owned by such persons), (A) has any interest in: (i) any contract, arrangement or understanding with, or relating to the business or operations of Target or any of the Target Subsidiaries; (ii) any loan, arrangement, understanding, agreement or contract for or relating to indebtedness of Target or any of the Target Subsidiaries, or (ii) any property (real, personal or mixed), tangible or intangible, used or currently intended to be used in, the business or operations of Target or any of the Target Subsidiaries or (B) is an obligor under any notes receivable of Target or any of the Target Subsidiaries. 30 40 2.32 NO EXISTING DISCUSSIONS. As of the date hereof, Target is not engaged, directly or indirectly, in any negotiations or discussions with any other party with respect to a Takeover Proposal (as hereinafter defined). 2.33 TELQUEST (a) TelQuest Satellite Services LLC ("TelQuest") is a limited liability company duly organized, validly existing and in good standing under the laws of Delaware and has all requisite limited liability company power and authority to own, lease and operate its properties and to carry on its business. TelQuest is in good standing to do business in each jurisdiction in which the character of the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified and in good standing would not have a Target Material Adverse Effect. As of the date hereof, the authorized capitalization of TelQuest is as set forth on Schedule 2.33(a)(1) and each of Target and CS has a 28.34% membership interest, subject to dilution as set forth on Schedule 2.33(a)(2); and all outstanding interests in TelQuest are duly authorized, validly issued and fully paid and non-assessable and issued free of preemptive rights and in compliance with applicable Laws. Except as set forth on Schedule 2.33(a)(2), there are no outstanding rights, reservations of shares, subscriptions, warrants, puts, calls, unsatisfied preemptive rights, options or other agreements of any kind relating to any of the interests in or any other security of TelQuest, and there is no authorized or outstanding interest or other security of any kind convertible into or exchangeable for any such interest or other security. (b) Except as set forth on Schedule 2.33(b), TelQuest has no Subsidiaries, and holds no direct or indirect capital stock or other interest in any other person. The business, affairs, financial condition or results of operations are not, and are not required to be, reported in the Target Financial Statements and are not reflected in the Target Approved Budget or the CS Approved Budget, except to the extent reported on an equity basis. (c) The execution and delivery of this Agreement and the Target Ancillary Agreements, the consummation of the transactions contemplated hereby and thereby and compliance by Target with any of the provisions hereof or thereof, and any change of control of Target or any of the Target Subsidiaries, including, without limitation, any acquisition of Target Common Stock by Acquiror or any of its affiliates or associates, will not (i) conflict with or result in any breach of any provision of any governing instruments of TelQuest or any of its Subsidiaries ("TelQuest Subsidiaries") , (ii) require any Consent relating directly or indirectly to TelQuest or any of the TelQuest Subsidiaries or result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration or augment the performance required) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, contract, lease, license, agreement, understanding, instrument, bid or proposal or other obligation relating directly or indirectly to TelQuest or any of the TelQuest Subsidiaries, or (iii) result in the creation or imposition of any lien or encumbrance of any kind upon any of the assets of TelQuest or any of the TelQuest Subsidiaries, or (iv) contravene any applicable Law currently in effect to which TelQuest or any of the TelQuest Subsidiaries or any of its assets or properties is subject. 31 41 (d) Except as set forth on Schedule 2.33(d), neither Target nor any Target Subsidiary has any direct or indirect obligation or liability, fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise, to invest, contribute, loan, borrow, sell, assign, convey or otherwise transfer or dispose of, or to provide, purchase or otherwise acquire, any funds, property or services, or make any payments, to or from TelQuest or any of the TelQuest Subsidiaries or otherwise to directly or indirectly participate in any transaction with or relating to TelQuest or any of the TelQuest Subsidiaries, directly or indirectly. No Event relating to or in connection with TelQuest or any of the TelQuest Subsidiaries, directly or indirectly, does or could give rise to any direct or indirect indebtedness, liability, claim, loss, damage, deficiency, obligation or responsibility of, against or on the part of Target or any of the Target Subsidiaries, fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise, whether or not of a kind required by generally accepted accounting principles to be set forth in a financial statement. 2.34 DISCLOSURE. All information and documents provided prior to the date of this Agreement, and all information and documents subsequently provided, to Acquiror or its representatives or lenders by or on behalf of Target in connection with the transactions contemplated by this Agreement are or contain, or will be or will contain as to subsequently provided information or documents, true, accurate and complete information in all material respects with respect to the subject matter thereof and are, or will be as to subsequently provided information or documents, reasonably responsive to any specific request made by or on behalf of Acquiror or its representatives or lenders. ARTICLE III REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF ACQUIROR Acquiror represents, warrants and/or covenants to and with Target as follows: 3.1 ORGANIZATION AND GOOD STANDING. Acquiror is a corporation duly organized and validly existing under the laws of the State of Georgia. Acquisition Subsidiary is a corporation duly organized and validly existing under the laws of the State of Connecticut. Acquiror and Acquisition Subsidiary have all requisite corporate power and authority to own, lease and operate its properties and to carry on their businesses as now being conducted, except where the failure to have such power and authority would not have an Acquiror Material Adverse Effect (as hereinafter defined). Acquiror and Acquisition Subsidiary are duly qualified and in good standing to do business in each jurisdiction in which the character of the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so duly qualified and in good standing would not have an Acquiror Material Adverse Effect. For purposes of this Agreement, "Acquiror Material Adverse Effect" shall mean a material adverse effect on (i) the business, assets, condition (financial or otherwise), properties, liabilities, prospects or the results of operations of Acquiror and its subsidiaries (including Acquisition Subsidiary) taken as a whole, (ii) the ability of Acquiror to perform its obligations set forth in this Agreement and the Acquiror Ancillary Agreements (as hereinafter 32 42 defined), or (iii) the ability to timely consummate the transactions contemplated by this Agreement and the Acquiror Ancillary Agreements. 3.2 AUTHORIZATION; BINDING AGREEMENT. Acquiror and Acquisition Subsidiary have all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the other agreements and documents referred to herein and to be executed in connection herewith to which Acquiror or Acquisition Subsidiary is or will be a party or a signatory (the "Acquiror Ancillary Agreements") and the consummation of the transactions contemplated hereby and thereby including, but not limited to, the Merger have been duly and validly authorized by the respective Boards of Directors of Acquiror and Acquisition Subsidiary, as appropriate, and no other corporate proceedings on the part of Acquiror or Acquisition Subsidiary are necessary to authorize the execution and delivery of this Agreement and the Acquiror Ancillary Agreements or to consummate the transactions contemplated hereby or thereby. This Agreement has been duly and validly executed and delivered by each of Acquiror and Acquisition Subsidiary and constitutes, and upon execution and delivery thereof as contemplated by this Agreement, the Acquiror Ancillary Agreements will constitute, the legal, valid and binding agreements of Acquiror and Acquisition Subsidiary, enforceable against each of Acquiror and Acquisition Subsidiary in accordance with its and their respective terms, subject to the Enforceability Exceptions. 3.3 GOVERNMENTAL APPROVALS. No Consent from or with any Governmental Authority on the part of Acquiror or Acquisition Subsidiary is required in connection with the execution or delivery by Acquiror and Acquisition Subsidiary of this Agreement and the Acquiror Ancillary Agreements or the consummation by Acquiror and Acquisition Subsidiary of the transactions contemplated hereby or thereby other than (i) filings with the SEC, state securities laws administrators and the NASD and filing and recordation of appropriate merger documents as required by the Connecticut Code, (ii) Consents from or with Governmental Authorities, (iii) filings under the HSR Act, and (iv) those Consents that, if they were not obtained or made, do not or would not have an Acquiror Material Adverse Effect. 3.4 NO VIOLATIONS. The execution and delivery of this Agreement and the Acquiror Ancillary Agreements, the consummation of the transactions contemplated hereby and thereby and compliance by Acquiror and Acquisition Subsidiary with any of the provisions hereof or thereof will not (i) conflict with or result in any breach of any provision of the Certificate and/or Articles of Incorporation or By-Laws or other governing instruments of Acquiror or Acquisition Subsidiary, (ii) require any Consent under or result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration or augment the performance required) under any of the terms, conditions or provisions of any Acquiror Material Contract (as hereinafter defined) or other obligation to which Acquiror or the Acquisition Subsidiary is a party or by which any of them or any of their properties or assets may be bound, (iii) result in the creation or imposition of any lien or encumbrance of any kind upon any of the assets of Acquiror or the Acquisition Subsidiary, or (iv) subject to obtaining the Consents from Governmental Authorities referred to in Section 3.3, above, contravene any Law currently in effect to which Acquiror or the Acquisition Subsidiary or its or any of their respective assets or properties are subject, except in the case of clauses (ii), (iii) 33 43 and (iv), above, for any deviations from the foregoing which do not or would not have an Acquiror Material Adverse Effect. An "Acquiror Material Contract" is any material note, bond, mortgage, indenture, contract, lease, license, agreement, understanding, instrument, bid or proposal that is required to be described in or filed as an exhibit to any reports, statements or registration statements filed, or required be filed, by Acquiror pursuant to the Securities Act or the Securities Exchange Act. 3.5 FINDERS AND INVESTMENT BANKERS. Neither Acquiror nor any of its officers or directors has employed any broker or finder other than Donaldson, Lufkin & Jenrette Securities Corporation or otherwise incurred any liability for any brokerage fees, commissions or finders' fees in connection with the transactions contemplated hereby. 3.6 INFORMATION SUPPLIED. None of the information relating solely to Acquiror or Acquisition Subsidiary supplied or to be supplied by Acquiror or Acquisition Subsidiary in writing expressly for inclusion or incorporation by reference in the Proxy Statement (as hereinafter defined) will, at the date such document is first published, sent or delivered to holders of Target Common Stock or, at any time during the pendency of the Shareholders' Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. Notwithstanding the foregoing, no representation or warranty is made by the Acquiror or Acquisition Subsidiary with respect to statements made or incorporated by reference therein based on information supplied by the Target for inclusion or incorporation by reference in the foregoing document. 3.7 ACQUIROR OWNERSHIP. As of the date of this Agreement, Acquiror is a party to agreements to purchase an aggregate of approximately 10,555,140 shares of Target Common Stock, $35,418,097 face amount of 13% Senior Notes due 2004 of Target and $86,750,000 face amount of 11.375% Senior Discount Notes due 2006 of CS. The agreements provide, among other things, that Acquiror's obligation to purchase such securities is subject to certain conditions, including one or more of the following conditions generally relating to the delivery of the shares, the accuracy of representations and warranties of the sellers, the performance of certain covenants by the sellers, the expiration of any waiting period under the HSR Act, the receipt of the Consent of the FCC, the absence of certain actions or proceedings or orders or decrees, and the failure of the agreement to be terminated. The agreements provide, among other things, that the sellers' obligations to sell such securities are subject to certain conditions, including one or more of the following conditions generally relating to payment, the accuracy of representations and warranties of Acquiror, the performance of certain covenants by Acquiror, the absence of certain actions or proceedings or orders or decrees, and the failure of the agreement to be terminated. As of the date of this Agreement, Acquiror is the beneficial owner (as assignee or otherwise) of approximately (i) $83,994,512 aggregate principal amount of 13% Senior Notes due 2004 issued by Target, and (ii) $30.0 million principal amount of the Senior Secured A Note due October 14, 2000 and $50.0 million principal amount of the Senior Secured B Note due October 14, 2000 (the "Senior Secured Notes"), each issued under the Note Purchase Agreement dated as of October 14, 1998 of Target (the "Senior Secured Credit Facility"), and (iii) $129,000,000 aggregate principal amount of 11.375% Senior Notes due 2006 issued by CS. 34 44 ARTICLE IV ADDITIONAL COVENANTS OF TARGET Target represents, covenants and agrees as follows: 4.1 CONDUCT OF BUSINESS OF TARGET AND TARGET SUBSIDIARIES. Except as expressly contemplated by this Agreement, during the period from the date of this Agreement to the Effective Time, Target shall conduct, and it shall cause the Target Subsidiaries to conduct, its or their respective businesses in the ordinary course and consistent with past practice, subject to the limitations contained in this Agreement, and Target shall, and it shall cause the Target Subsidiaries to, use its or their respective reasonable business efforts to preserve intact its or their respective business organizations, to maintain and protect the FCC Licenses and Channel Leases, to keep available the services of its officers, agents and employees and to maintain satisfactory relationships with all persons with whom any of them does business. Without limiting the generality of the foregoing, and except as otherwise expressly provided in this Agreement, after the date of this Agreement and prior to the Effective Time, neither Target nor any Target Subsidiary will, without the prior written consent of Acquiror: (i) amend or propose to amend its Certificate or Articles of Incorporation or By-Laws (or comparable governing instruments) in any material respect; (ii) authorize for issuance, issue, grant, sell, pledge, dispose of or propose to issue, grant, sell, pledge or dispose of any shares of, or any options, warrants, commitments, subscriptions or rights of any kind to acquire or sell any shares of, the capital stock or other securities of Target or any Target Subsidiary including, but not limited to, any securities convertible into or exchangeable for shares of stock of any class of Target or any Target Subsidiary, except for the issuance of shares of Target Common Stock pursuant to the exercise of stock options or warrants outstanding on the date of this Agreement or under the Rights Plan in accordance with their present terms; (iii) split, combine or reclassify any shares of its capital stock or declare, pay or set aside any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock, other than dividends or distributions to Target or a Target Subsidiary wholly owned by Target, or directly or indirectly redeem, purchase or otherwise acquire or offer to acquire any shares of its capital stock or other securities; (iv) (a) except for debt (including, but not limited to, obligations in respect of capital leases) not in excess of the amounts set forth in the Target Approved Budget (except as contemplated in the last paragraph of this Section 4.1), with respect to Target and the Target Subsidiaries (other than CS and the CS Subsidiaries), or the CS Approved Budget, with respect to CS and the CS Subsidiaries, create, incur or assume any short-term debt, long-term debt or obligations in respect of capital leases; (b) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, indirectly, contingently or otherwise) for the obligations of any person, except for obligations permitted by this Agreement of any wholly owned Target Subsidiary in the ordinary course of business consistent with past practice; (c) make any capital expenditures or make any loans, advances or capital contributions to, or investments in, any other 35 45 person (other than customary advances to employees made in the ordinary course of business consistent with past practice), provided that Target will continue to make capital expenditures, maintain, upgrade and expand its facilities and those of the Target Subsidiaries (other than CS and the CS Subsidiaries) and otherwise operate in accordance with the Target Approved Budget and that CS will continue to make capital expenditures, maintain, upgrade and expand its facilities and those of the CS Subsidiaries and otherwise operate in accordance with the CS Approved Budget; (d) acquire the stock or assets of, or merge or consolidate with, any other person or business; or (e) voluntarily incur any material liability or obligation (absolute, accrued, contingent or otherwise); (v) sell, transfer, mortgage, pledge or otherwise dispose of, or encumber, or agree to sell, transfer, mortgage, pledge or otherwise dispose of or encumber, any material assets or properties, real, personal or mixed; (vi) increase in any manner the compensation of any of its officers, agents or employees other than any increases required pursuant to the Target Material Contracts in accordance with their terms in effect on the date of this Agreement and increases in the ordinary course of business consistent with past practice not in excess on an individual basis of the lesser of 8.0% of the current compensation of such individual or $10,000 per annum, or increase in any manner the compensation of any director; (vii) except as required by ERISA and only after reasonable prior consultation with Acquiror, enter into, establish, amend, make non-routine or material interpretations or determinations with respect to, or terminate any employment, consulting, retention, change in control, collective bargaining, bonus or other incentive compensation, profit sharing, health or other welfare, stock option, stock purchase, restricted stock, or other equity, pension, retirement, vacation, severance, deferred compensation or other compensation or benefit plan, policy, agreement, trust, fund or arrangement with, for or in respect of, any shareholder, officer, director, other employee, agent, consultant, affiliate or associate; (viii) make any elections with respect to Taxes that are inconsistent with the prior elections reflected in the Target Financial Statements as of and to the period ended December 31, 1998; (ix) compromise, settle, forgive, cancel, grant any waiver or release relating to or otherwise adjust any debts, claims, rights or Litigation, except routine debts, claims, rights or Litigation in the ordinary course of business consistent with past practice, involving only a payment not in excess of $250,000 individually or $1,000,000 when aggregated with all such payments by Target and the Target Subsidiaries combined; (x) take any action or omit to take any action, which action or omission, if taken prior to, on or after the date hereof, would result in a breach of any of the covenants, representations or warranties of Target set forth in this Agreement or would have a Target Material Adverse Effect; 36 46 (xi) enter into any lease or other agreement, or amend any lease or other agreement, with respect to real property; (xii) subject to clauses (xiv) and (xv) below, enter into or amend any agreement or transaction (a) pursuant to which the aggregate financial obligation of Target or a Target Subsidiary or the value of the services to be provided could exceed $500,000 individually or $2,000,000 in the aggregate for all such agreements or transactions, and (b) which is not terminable upon no more than 30 days' notice by Target or the Target Subsidiary involved without penalty in excess of $50,000 individually or $250,000 when aggregated with the penalties under all such agreements or transactions; (xiii) terminate any Channel Lease; (xiv) enter into, amend, modify or waive any rights under any Channel Lease (a) outside the ordinary course of business, provided, however, that Acquiror shall not unreasonably withhold its consent, taking into account the plans and objectives of Acquiror regarding Target and the Target Subsidiaries, or (b) without providing notice to, and reasonable consultation with, Acquiror prior to taking such action; (xv) enter into, amend, modify, terminate or waive any rights under (a) any Target Material Contract, including, without limitation, any Tower Site Lease or System Agreement, other than Channel Leases and FCC Licenses; or (b) any material agreement or other material obligation that restricts, in any material respect, the activities of Target or a Target Subsidiary; or (c) any agreement or obligation that restricts in any material respect any other person; (xvi) enter into any leasing or licensing agreements, take-or-pay arrangements or other affiliations, alignments or agreements with respect to any Channel Leases, provided, that Acquiror shall not unreasonably withhold its consent, taking into account the plans and objectives of Acquiror regarding Target and the Target Subsidiaries, and, provided further, that Target or any of the Target Subsidiaries may, without the prior written consent of Acquiror, renegotiate any Channel Leases in the ordinary course of business and after prior notice to, and reasonable consultation with, Acquiror; (xvii) take any action with respect to the indemnification of any person; (xviii) change any accounting practices or policies or depreciation or amortization rates, except as required by generally accepted accounting principles or Laws or as agreed to or requested by Target's auditors after consultation with Acquiror's auditors; (xix) adopt a plan of liquidation, dissolution, merger, consolidation, share exchange, restructuring, recapitalization, or other reorganization; or (xx) resolve, agree, commit or arrange to do any of the foregoing. 37 47 Furthermore, Target covenants, represents and warrants that from and after the date hereof, unless Acquiror shall otherwise expressly consent in writing, Target shall, and Target shall cause each Target Subsidiary to, use its or their reasonable business efforts to: (i) keep in full force and effect insurance comparable in amount and scope of coverage to insurance now carried by it or them; (ii) pay all accounts payable and other obligations, when they become due and payable, in the ordinary course of business consistent with past practice and with the provisions of this Agreement, except if the same are contested in good faith, and, in the case of the failure to pay any material accounts payable or other obligations which are contested in good faith, only after consultation with Acquiror; and (iii) comply in all material respects with all Laws applicable to it or any of them or their respective properties, assets or businesses and maintain in full force and effect all Target Permits necessary for, or otherwise material to, such businesses. Notwithstanding the foregoing and subject to certain conditions described in the following sentence, Target may borrow up to $22.0 million from CS on terms that are reasonably acceptable to Acquiror by increasing the maximum principal amount of the Senior Secured B Notes due October 14, 2000 under the Senior Secured Credit Facility, and a non-transferable Senior Secured B Note in such amount will be issued by Target to CS to evidence such borrowing (the "CS Borrowing") , provided CS shall waive its right to participate in the Facility B Fee (as such term is defined in the Senior Secured Credit Facility). The proceeds of the CS Borrowing shall be used for the purpose of funding general working capital purposes pursuant to the Target Approved Budget and expenses incurred in connection with the transactions contemplated hereby prior to the consummation of the Merger. Target's ability to borrow such sum from CS shall be subject to the necessary documentation of the CS Borrowing on terms satisfactory to Acquiror, the compliance with all applicable Laws, the Certificate of Incorporation and the By-Laws of Target and CS, the obtaining of all necessary Consents of Governmental Authorities and third parties and the delivery of appropriate legal opinions, certificates, information and other documentation, each in form and substance to the satisfaction of Acquiror. Target hereby represents and warrants that the CS Borrowing shall not give rise to liability or obligation for any brokerage fees, commissions, finder's fees or other similar fees or expenses. Subject to and upon satisfaction of the foregoing, Acquiror agrees that it will grant its consent to the CS Borrowing as a holder of the Senior Secured Notes, the 13% Senior Notes due 2004 of Target and the 11.375% Senior Notes due 2006 of CS, to the extent permitted thereunder. 4.2 NOTIFICATION OF CERTAIN MATTERS. Target shall give prompt notice to Acquiror if any of the following occur after the date of this Agreement: (i) any notice of, or other communication relating to, a default or Event which, with notice or lapse of time or both, would become a default under any Target Material Contract; (ii) receipt of any notice or other communication from any third party alleging that the Consent of such third party is or may be required in connection with the transactions contemplated by this Agreement; (iii) receipt of any material notice or other communication from any Governmental Authority (including, but not limited to, the FCC, the NASD or any other securities exchange) in connection with the 38 48 transactions contemplated by this Agreement; (iv) the occurrence of an Event which would have a Target Material Adverse Effect; (v) the commencement or threat of any Litigation involving or affecting Target or any Target Subsidiary or any affiliate, or any of their respective properties or assets, or, to its knowledge, any employee, agent, director or officer of Target or any Target Subsidiary, in his or her capacity as such or as a fiduciary under a Benefit Plan of Target, which, if pending on the date hereof, would have been required to have been disclosed in or pursuant to this Agreement or which relates to the consummation of the Merger or any material development in connection with any Litigation disclosed by Target in or pursuant to this Agreement or the Target Securities Filings; and (vi) the occurrence of any Event that would cause a breach by Target of any provision of this Agreement or a Target Ancillary Agreement, including such a breach that would occur if such Event had taken place on or prior to the date of this Agreement. 4.3 ACCESS AND INFORMATION. Between the date of this Agreement and the Effective Time, Target and the Target Subsidiaries, upon reasonable notice, will give, and shall direct its accountants and legal counsel to give, Acquiror, its lenders and their respective authorized representatives (including, without limitation, financial advisors, accountants and legal counsel) at all reasonable times full access to all offices and other facilities, to all personnel and to all contracts, agreements, commitments, books and records (including, but not limited to, Tax Returns) of or pertaining to Target and the Target Subsidiaries, will permit the foregoing to make such inspections as they may reasonably require and will cause its officers and employees promptly to furnish Acquiror with (a) such financial and operating data and other information with respect to the business, assets, liabilities, obligations and operations of Target and the Target Subsidiaries as Acquiror may from time to time reasonably request including, but not limited to, data and information required for inclusion in any of Acquiror's registration statements and/or other filings with the SEC, and (b) a copy of each material report, schedule and other document filed or received by Target or any Target Subsidiary pursuant to the requirements of applicable securities Laws, the NASD or other securities exchange or the FCC. 4.4 SHAREHOLDER APPROVAL; PROXY STATEMENT; SHAREHOLDER LISTS. (a) As soon as practicable, Target will in accordance with applicable Law, its Certificate of Incorporation and its By-Laws take all steps necessary to duly call, give notice of, convene and hold a meeting of its shareholders (the "Shareholders' Meeting") for the purpose of adopting this Agreement and the Merger and the other transactions contemplated hereby and for such other purposes as may be necessary or desirable in connection with effectuating the transactions contemplated hereby. Except as otherwise contemplated in this Agreement, the Board of Directors of Target (i) will take all steps necessary to present and recommend to the shareholders of Target that they adopt this Agreement and approve the transactions contemplated hereby, and (ii) will use its reasonable best efforts to obtain any necessary adoption and approval by Target's shareholders of this Agreement and the Merger and the other transactions contemplated hereby, including, without limitation, voting the Target Shares held by such Directors for such adoption and approval. (b) Acquiror and Target will as promptly as practicable following the execution of this Agreement jointly prepare, and Target shall file, a proxy statement on an appropriate schedule or other form for distribution to holders of Target Shares in advance of the 39 49 Shareholders' Meeting and such other schedules and other filings as may be necessary or appropriate (collectively, together with any amendments or supplements thereto, the "Proxy Statement") with the SEC and will use its reasonable best efforts to respond to the comments of the SEC and to cause the Proxy Statement to be mailed to the holders of Target Shares at the earliest practical time. Target shall furnish all information concerning it and the holders of its capital stock as Acquiror may reasonably request in connection with such actions. Target will notify Acquiror promptly of the receipt of the comments of the SEC, if any, and of any request by the SEC for amendments or supplements to the Proxy Statement or for additional information with respect thereto, and will supply Acquiror with copies of all correspondence between Target or its representatives, on the one hand, and the SEC or members of its staff, on the other hand, with respect to the Proxy Statement or the Merger or this Agreement, the Target Ancillary Targets or the other transactions contemplated hereby or thereby. If (A) at any time prior to the Shareholders' Meeting, any event should occur relating to Target or any of the Target Subsidiaries which should be set forth in an amendment of, or a supplement to, the Proxy Statement, Target will promptly inform Acquiror and (B) if at any time prior to the Shareholders' Meeting, any event should occur relating to Acquiror or Acquisition Subsidiary or any of their respective associates or affiliates, or relating to the plans of any such persons for Target after the Effective Time that should be set forth in an amendment of, or a supplement to, the Proxy Statement, Acquiror will promptly inform Target and in the case of (A) or (B) Target and Acquiror shall file and, if required, mail such amendment or supplement to holders of Target Shares; provided, prior to such filing or mailing, Target and Acquiror shall consult with each other with respect to such amendment or supplement and shall incorporate the other's comments thereon. Target will not distribute or file the Proxy Statement, or any amendment thereof or supplement thereto, to which Acquiror reasonably objects. (c) Target hereby consents to the inclusion in the Proxy Statement of the recommendation of the Board of Directors of Target described in Section 2.4, subject to any modification, amendment or withdrawal thereof permitted hereby, and represents that its financial advisers have, subject to the terms of their engagement letters with Target and the Board of Directors of Target, consented to the inclusion of references to their opinions in the Proxy Statement. Target and its counsel shall permit Acquiror and its counsel to participate in all communications with the SEC and its staff, including any meetings and telephone conferences, relating to the Proxy Statement, the Merger or this Agreement or the other transactions contemplated hereby. (d) Target shall promptly upon the request by Acquiror, or shall cause its transfer agent to promptly, furnish Acquiror and Acquisition Subsidiary with mailing labels containing the names and addresses of all record holders of shares of Target Common Stock and with security position listings of shares of Target Common Stock held in stock depositories, each as of the most recent practicable date, together with all other available listings and computer files containing names, addresses and security position listings of record holders and beneficial owners of shares of Target Common Stock. Target shall furnish Acquiror and Acquisition Subsidiary with such additional information, including, without limitation, updated listings and computer files of the holders of Target Common Stock, mailing labels and security position listings, and such other assistance as Acquiror or their agents may reasonably request. 40 50 4.5 REASONABLE BUSINESS EFFORTS. Subject to the terms and conditions herein provided, Target agrees to use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective as promptly as practicable the Merger and the other transactions contemplated by this Agreement and the Target Ancillary Agreements, including, without limitation, any acquisition of Target Common Stock by Acquiror or any of its affiliates or associates, including, but not limited to (i) obtaining the Consent of others to this Agreement, the Target Ancillary Agreements and the transactions contemplated hereby and thereby, including, without limitation, any acquisition of Target Common Stock by Acquiror or any of its affiliates or associates, (ii) the defending of any Litigation against Target or any Target Subsidiary challenging this Agreement, the Target Ancillary Agreements or the consummation of the transactions contemplated hereby or thereby, including, without limitation, any acquisition of Target Common Stock by Acquiror or any of its affiliates or associates, (iii) obtaining all Consents from Governmental Authorities required for the consummation of the Merger and the transactions contemplated hereby or thereby, including, without limitation, any acquisition of Target Common Stock by Acquiror or any of its affiliates or associates, and (iv) timely making all necessary filings under the HSR Act. Upon the terms and subject to the conditions hereof, Target agrees to use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary to satisfy the other conditions of the Closing set forth herein. Target will consult with counsel for Acquiror as to, and will permit such counsel to participate in, at Acquiror's expense, any Litigation referred to in clause (ii) above brought against or involving Target or any Target Subsidiary. 4.6 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in effect, Target shall not, and shall cause its affiliates not to, without the written consent of Acquiror, make any announcement or other disclosure relating to this Agreement, the terms hereof, the Merger or negotiations with respect thereto, except to their legal, accounting and financial advisers engaged in connection with the Merger, unless otherwise required by Law or pursuant to any applicable listing agreement with, or rules of, the NASD or other securities exchange; provided, that the Target shall give Acquiror notice a reasonable time prior to any such disclosure required by Law or otherwise, as referred to above, and shall cooperate with and consult with Acquiror regarding the contents of any such disclosure. 4.7 COMPLIANCE. In consummating the Merger and the transactions contemplated hereby and by the Target Ancillary Agreements, Target shall comply in all material respects with the applicable provisions of the Securities Exchange Act and shall comply, and/or cause the Target Subsidiaries to comply or to be in compliance, in all material respects, with all other applicable Laws. 4.8 BENEFIT PLANS. Between the date of this Agreement and through the Effective Time, no discretionary award or grant under any Benefit Plan of Target or a Target Subsidiary shall be made without the prior written consent of Acquiror; nor shall Target or a Target Subsidiary take any action or permit any action to be taken to accelerate the vesting of any warrants or options previously granted pursuant to any such Benefit Plan. Neither Target nor any Target Subsidiary shall make any amendment to any Benefit Plan, any awards thereunder or the 41 51 terms of any security convertible into or exchangeable for capital stock without the prior written consent of Acquiror. 4.9 NO SOLICITATION OF TAKEOVER PROPOSAL. (a) Target shall, and shall direct and cause its officers, directors, employees, representatives and agents to, immediately cease any discussions or negotiations with any parties that may be ongoing with respect to a Takeover Proposal (as hereinafter defined). Target shall not, nor shall it permit any of the Target Subsidiaries to, nor shall it authorize or permit any of its officers, directors or employees or any investment banker, financial advisor, attorney, accountant or other representative retained by it or any of the Target Subsidiaries to, directly or indirectly, (i) solicit, initiate or encourage (including by way of furnishing information), or take any other action designed or reasonably likely to facilitate, any inquiries or the making of any proposal which constitutes, or may reasonably be expected to lead to, any Takeover Proposal, or (ii) participate in any discussions or negotiations regarding any Takeover Proposal. Without limiting the generality of the foregoing, it is understood that any violation of the restrictions set forth in the previous two sentences by any director, officer, employee, agent or representative of Target or any of the Target Subsidiaries, including, without limitation, any investment banker, financial advisor, attorney, accountant or other representative retained by Target or any of the Target Subsidiaries, whether or not acting on behalf of Target or any of the Target Subsidiaries, shall be deemed to be a breach of this Section by Target. For all purposes of this Agreement, "Takeover Proposal" means any inquiry, proposal or offer relating to any direct or indirect acquisition or purchase, in one transaction or a series of related transactions, of 15% or more of the assets of Target or any of the Target Subsidiaries or 5% or more of any class of equity securities of Target or any of the Target Subsidiaries, any tender offer or exchange offer that if consummated would result in any person beneficially owning 15% or more of any class of equity securities of Target or any Target Subsidiary, any merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving Target or any Target Subsidiary, other than the transactions contemplated by this Agreement, or any other transaction the consummation of which could reasonably be expected to impede, interfere with, prevent or materially delay the Merger or which could reasonably be expected to dilute materially the benefits to Acquiror of the transactions contemplated by this Agreement. (b) The Board of Directors of Target shall promptly recommend to the shareholders of Target that they adopt this Agreement and approve the transactions contemplated hereby. Neither the Board of Directors of Target nor any committee thereof shall (i) withdraw or modify, or propose publicly to withdraw or modify, the approval or recommendation by such Board of Directors or such committee of the Merger or this Agreement, (ii) approve or recommend, or propose publicly to approve or recommend, any Takeover Proposal or (iii) cause Target to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement related to any Takeover Proposal. (c) In addition to the obligations of Target set forth in paragraphs (a) and (b) of this Section 4.9, Target shall immediately advise Acquiror orally and in writing of any request for information or of any Takeover Proposal, the material terms and conditions of such request or Takeover Proposal and the identity of the person making such request or Takeover Proposal. 42 52 Target will keep Acquiror fully informed of the status and details (including amendments or proposed amendments) of any such request or Takeover Proposal. (d) Nothing contained in this Section 4.9 shall prohibit Target from taking and disclosing to its shareholders a position consistent with its obligations hereunder contemplated by Rule 14e-2(a) promulgated under the Securities Exchange Act or from making any disclosure consistent with its obligations hereunder to Target's shareholders if, in the good faith judgment of the Board of Directors of Target, after consultation with outside counsel, failure so to disclose would be inconsistent with applicable Law; provided, however, neither Target nor its Board of Directors nor any committee thereof shall withdraw or modify, or propose publicly to withdraw or modify, its position with respect to the Merger or this Agreement or approve or recommend, or propose publicly to approve or recommend, a Takeover Proposal. 4.10 SECURITIES AND SHAREHOLDER MATERIALS. Target and the Target Subsidiaries shall send to Acquiror a copy of all material public reports and materials as and when it sends the same to its shareholders, the SEC, the NASD or any other securities commission, exchange or market. 4.11 RESIGNATIONS. Target shall cause the officers and/or directors of Target and the Target Subsidiaries as Acquiror may request to voluntarily resign their positions as such prior to and as of the Effective Time. The instruments effecting such resignations are herein referred to as the "Resignations." Target shall cause such directors, prior to their resignation, to appoint new directors nominated by Acquiror to fill such vacancies. 4.12 NONCOMPETE AND CONFIDENTIALITY AGREEMENTS. Target shall use its reasonable business efforts to obtain, at or prior to the Closing, duly executed noncompete and confidentiality agreements in substantially the form attached hereto as Schedule 4.12(a) (the "Noncompete and Confidentiality Agreements") from the persons designated on Schedule 4.12(b) attached hereto. 4.13 COMFORT LETTERS. Upon the request of Acquiror, Target shall use reasonable business efforts to provide to Acquiror prior to the Effective Time "comfort letters" from the independent certified public accountants for Target dated as of the date of the Proxy Statement and the Closing Date, addressed to the Board of Directors of each of Target and Acquiror, covering such matters as Acquiror shall reasonably request with respect to facts concerning the financial condition and results of operations of Target and the Target Subsidiaries and customary for such certified public accountants to deliver in connection with a transaction similar to the Merger. 4.14 TAKEOVER STATUTES. If any Takeover Statute is or may become applicable to the Merger or this Agreement or the Target Ancillary Agreements or the transactions contemplated hereby or thereby or the execution, delivery or performance of any other agreement to acquire, or any other acquisition of, Target Common Stock by Acquiror or any of its affiliates or associates, Target and the members of its Board of Directors will grant such approvals, and will take such other actions as are necessary so that the Merger, this Agreement, the Target Ancillary Agreements and the other transactions contemplated by hereby or thereby or the execution, 43 53 delivery or performance of any other agreement to acquire, or any other acquisition of, Target Common Stock by Acquiror or any of its affiliates or associates may be consummated as promptly as practicable on the terms contemplated hereby and will otherwise act to eliminate or minimize the effects of any Takeover Statute on the Merger, this Agreement, the Target Ancillary Agreements and any of the transactions contemplated hereby or thereby or the execution, delivery or performance of any other agreement to acquire, or any other acquisition of, Target Common Stock by Acquiror or any of its affiliates or associates. 4.15 YEAR 2000 PLAN. Target shall use all commercially reasonable efforts to ensure that the Year 2000 Plan shall be completed in a timely manner. Target shall (i) allow Acquiror to monitor Target's Year 2000 compliance issues and Year 2000 Plan, (ii) provide prompt notice to Acquiror if Target does not achieve, or reasonably expects it shall not achieve, milestones and objectives identified in the Year 2000 Plan and (iii) cooperate in good faith with Acquiror's efforts to cause Target to be Year 2000 Compliant. 4.16 PURCHASE OF TARGET COMMON STOCK. Target shall in no way prohibit Acquiror or any of its affiliates or associates from purchasing shares of Target Common Stock or entering into option, lock-up, voting or proxy agreements or any other similar agreements with respect to Target Common Stock (including, but not limited to, amending the Rights Plan to cause such acquisition or agreement to trigger a "Stock Acquisition Date" or "Distribution Date" or cause Acquiror or any of its affiliates or associates to become an "Acquiring Person" (as such terms are defined in the Rights Plan) at any time prior to the consummation of the Merger. 4.17 CONVERSION OF OPTIONS. Target shall offer to modify, and shall obtain such modification to, each outstanding Option which is exercisable on or prior to the Effective Time, to cause each such Option either to be exercised (if otherwise exercisable) prior to the Effective Time, or to be canceled as of the Effective Time in exchange for the Option Consideration, as contemplated by Section 1.7(b). Target shall offer to modify, and shall obtain such modification to, each outstanding Option which is not exercisable on or prior to the Effective Time to be converted, as of the Effective Time, to the right to receive solely the Option Consideration, with such Option otherwise becoming exercisable following the Effective Time, in accordance with its terms, as contemplated by Section 1.7(b). Target shall effect the foregoing after reasonable consultation with Acquiror pursuant to written agreements in form and substance reasonably satisfactory to Acquiror, including, without limitation, in a form consistent with Section 1.7(b) hereof. ARTICLE V ADDITIONAL COVENANTS OF ACQUIROR Acquiror covenants and agrees as follows: 5.1 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in effect, Acquiror shall not, and shall cause its affiliates not to, without the written consent of Target, make any announcement or other disclosure relating to this Agreement, the terms hereof, the Merger or negotiations with respect thereto, except to their legal, accounting and financial advisers 44 54 engaged in connection with the Merger, unless otherwise required by Law or pursuant to any applicable listing agreement with, or rules and regulations of, the NASD or other securities exchange; provided, that the Acquiror shall give Target notice a reasonable time prior to any such disclosure required by Law or otherwise, as referred to above, and shall cooperate with and consult with Target regarding the contents of any such disclosure 5.2 COMPLIANCE. In consummating the Merger and the transactions contemplated hereby, Acquiror shall comply in all material respects with the applicable provisions of the Securities Exchange Act and shall comply, and/or cause the Acquisition Subsidiary to comply or to be in compliance, in all material respects, with all other applicable Laws applicable thereto. 5.3 PROXY STATEMENT. Acquiror shall cooperate with Target with respect to the preparation of the Proxy Statement as set forth in Section 4.4. and shall provide Target with such information concerning Acquiror and Acquisition Subsidiary as shall be required to be included therein. Acquiror shall vote, or cause to be voted, in favor of the Merger and this Agreement all shares of Target Common Stock directly or indirectly beneficially owned by it. 5.4 TARGET SENIOR SECURED CREDIT FACILITY. Acquiror shall give its consent to the Merger in Acquiror's capacity as the assignee of the holder of the Senior Secured Notes issued by Target under the Senior Secured Credit Facility, at the Closing, subject to satisfaction of the conditions to Acquiror's obligations to effect the Merger. 5.5 CS BORROWING. Acquiror shall use its reasonable efforts to request consents to the CS Borrowing from the sellers of any notes from which Acquiror has agreements to purchase such notes that are described in Section 3.7, above, to the extent that Acquiror shall not have purchased such notes. 5.6 INDEMNIFICATION AND INSURANCE. (a) The Certificate of Incorporation and By-Laws of the Surviving Corporation shall contain provisions with respect to indemnification and exculpation similar to those set forth in the Certificate of Incorporation and By-Laws of Target, which provisions the Acquiror shall not and shall cause the Surviving Corporation not to amend, repeal or otherwise modify for a period of six (6) years from the Effective Time in any manner that would materially and adversely affect the rights thereunder of individuals who at the Effective Time were directors, officers, employees or agents of Target, unless such amendment, repeal or other modification is required by applicable Law. (b) From and after the Effective Time, Acquiror agrees that it will indemnify and hold harmless each present director and officer of Target (when acting in such capacity) determined as of the Effective Time (the "Indemnified Parties"), against any costs or expenses (including reasonable attorneys' fees), judgments, fines, losses, claims, damages or liabilities (collectively, "Costs") incurred in connection with any claim, action, suit, proceeding or investigation whether civil, criminal, administrative or investigative, arising out of or pertaining to matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent that Target would have been permitted 45 55 under the Connecticut Code and its Certificate of Incorporation or By-Laws in effect on the date of this Agreement to indemnify such person (and Acquiror shall also advance expenses as incurred to the fullest extent permitted under applicable Law and the Certificate of Incorporation and the By-Laws of Target, provided that the person to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such person is not entitled to indemnification). (c) Any Indemnified Party wishing to claim indemnification under paragraph (b) of this Section 5.6, upon learning of any such claim, action, suit, proceeding or investigation, shall promptly notify Acquiror thereof in writing, but the failure to so notify shall not relieve Acquiror of any liability it may have to such Indemnified Party if such failure does not materially prejudice Acquiror. In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), (i) Acquiror or the Surviving Corporation shall have the right to assume the defense thereof, and Acquiror shall not be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Parties in connection with the defense thereof, except that if Acquiror or the Surviving Corporation elects not to assume such defense, or if there are any issues which raise material conflicts of interest between Acquiror or the Surviving Corporation and the Indemnified Parties, the Indemnified Parties may retain counsel reasonably satisfactory to Acquiror, and Acquiror or the Surviving Corporation shall pay all reasonable fees and expenses of such counsel for the Indemnified Parties; provided, however, that Acquiror shall be obligated pursuant to this paragraph (c) to pay for only one firm or counsel for all Indemnified Parties, (ii) the Indemnified Parties will cooperate in the defense of any such matter, and (iii) Acquiror shall not be liable for any settlement effected without its prior written consent. (d) For a period of six (6) years after the Effective Time and to the extent available, Acquiror or the Surviving Corporation shall maintain in effect policies of directors' and officers' liability insurance covering those persons who are currently covered by Target's directors' and officers' liability insurance policy on terms (including the amounts of coverage and the amounts of deductibles, if any) that are no less favorable to them in any material respect than the terms now applicable to them under Target's current insurance policies; provided that the Surviving Corporation shall not be required to pay an annual premium for such insurance in excess of 175% of the last annual premium paid prior to the date hereof, but in such case shall purchase as much coverage as possible for such amount. (e) If Acquiror or the Surviving Corporation or any of their successors or assigns (i) shall consolidate with or merge into any other corporation or entity and shall not be the continuing or surviving corporation or entity in such consolidation or merger or (ii) shall transfer all or substantially all of its properties and assets to any individual, corporation or other entity, then and in each case, proper provisions shall be made so that the successors and assigns of Acquiror or the Surviving Corporation, as the case may be, shall assume all of the obligations set forth in this Section 5.6; provided, that the failure to make such provisions shall not affect the validity of any such consolidation, merger or transfer. (f) The provisions of this Section 5.6 are intended to be for the benefit of, and shall be enforceable by, each of the Indemnified Parties, their heirs and representatives. 46 56 ARTICLE VI CONDITIONS 6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations of each party to effect the Merger shall be subject to the fulfillment or waiver at or prior to the Effective Time of the following conditions: 6.1.1 SHAREHOLDER APPROVAL. This Agreement and the Merger and the other transactions contemplated hereby shall have been duly adopted at or prior to the Effective Time by the requisite vote of the shareholders of Target in accordance with the Certificate of Incorporation and By-Laws of Target, the Connecticut Code and the Securities Exchange Act. 6.1.2 NO INJUNCTION OR ACTION. No order, statute, rule, regulation, executive order, stay, decree, judgment or injunction shall have been enacted, entered, promulgated or enforced by any court or other Governmental Authority, which prohibits or prevents the consummation of the Merger or the other transactions contemplated hereby and which has not been vacated, dismissed or withdrawn by the Effective Time. Target and Acquiror shall use their reasonable best efforts to have any of the foregoing vacated, dismissed or withdrawn by the Effective Time. 6.1.3 HSR ACT. Any waiting period applicable to the Merger under the HSR Act shall have expired or earlier termination thereof shall have been granted and no action shall have been instituted by either the United States Department of Justice or the Federal Trade Commission to prevent the consummation of the transactions contemplated by this Agreement or to modify or amend such transactions in any material manner, or if any such action shall have been instituted, it shall have been withdrawn or a final judgment shall have been entered against such Department or Commission, as the case may be. 6.1.4 OPINION OF FINANCIAL ADVISOR. The fairness opinion referenced in Section 2.4(c) above shall not have been withdrawn at or prior to the Effective Time. 6.1.5 GOVERNMENTAL APPROVALS. All Consents, other than Consents the failure of which to be obtained or made, in the judgment of Acquiror, would not have a material adverse effect on the business, assets, condition (financial or otherwise), properties, liabilities, prospects or the result of operations of the Surviving Corporation and its subsidiaries taken as a whole ("Surviving Corporation Material Adverse Effect"), of any Governmental Authority required for the consummation of the Merger and the transactions contemplated by this Agreement shall have been obtained by Final Order (as hereinafter defined), provided that any Consent relating to any FCC License shall be so obtained or made by Final Order. The term "Final Order" with respect to any Consent of a Governmental Authority shall mean an action by the appropriate Governmental Authority as to which: (i) no request for stay by such Governmental Authority of the action is pending, no such stay is in effect, and, if any deadline for filing any such request is designated by statute or regulation, it has passed; (ii) no petition for rehearing or 47 57 reconsideration of the action is pending before such Governmental Authority, and no appeal or comparable administrative remedy is pending before such Governmental Authority, and the time for filing any such petition, appeal or administrative remedy has passed; (iii) such Governmental Authority does not have the action under reconsideration on its own motion and the time for such reconsideration has passed; and (iv) no appeal to a court, or request for stay by a court, of the Governmental Authority action is pending or in effect, and if any deadline for filing any such appeal or request is designated by statute or rule, it has passed. The condition contained in this Subsection 6.1.5 may be waived by Acquiror, in its sole judgment. 6.2 CONDITIONS TO OBLIGATIONS OF TARGET. The obligation of Target to effect the Merger shall be subject to the fulfillment at or prior to the Effective Time of the following additional conditions, any one or more of which may be waived by Target: 6.2.1 ACQUIROR REPRESENTATIONS AND WARRANTIES. The representations and warranties of Acquiror contained in this Agreement that are modified by materiality or Acquiror Material Adverse Effect ("Acquiror Modified Representation") shall be true and correct in all respects and those that are not so modified ("Acquiror Nonmodified Representation") shall be true and correct in all material respects, on the date hereof and, except for changes not prohibited by this Agreement, as of the Effective Time as if made at the Effective Time. Furthermore, none of the representations or warranties of Acquiror contained in this Agreement, disregarding any qualifications therein or in this Section 6.2.1 regarding materiality or Acquiror Material Adverse Effect, shall be untrue or incorrect to the extent that such untrue or incorrect representations or warranties, when taken together as a whole, have had or would have an Acquiror Material Adverse Effect. 6.2.2 PERFORMANCE BY ACQUIROR. Acquiror shall have performed and complied with all of the covenants and agreements in all material respects and satisfied in all material respects all of the conditions required by this Agreement to be performed or complied with or satisfied by Acquiror at or prior to the Effective Time. 6.2.3 CERTIFICATE. Acquiror shall have delivered to Target a certificate executed on its behalf by its President or another authorized officer to the effect that the conditions set forth in Subsections 6.2.1 and 6.2.2, above, have been satisfied. 6.3 CONDITIONS TO OBLIGATIONS OF ACQUIROR. The obligations of Acquiror to effect the Merger shall be subject to the fulfillment at or prior to the Effective Time of the following additional conditions, any one or more of which may be waived by Acquiror: 6.3.1 TARGET REPRESENTATIONS AND WARRANTIES. The representations and warranties of Target contained in this Agreement that are modified by materiality or Target Material Adverse Effect ("Target Modified Representation") shall be true and correct in all respects, and those that are not so modified ("Target Nonmodified Representation") shall be true and correct in all material respects, on the date hereof and, except for changes not prohibited by this Agreement, as of the Effective Time as if made at the Effective Time. Furthermore, none of the representations or warranties of Target 48 58 contained in this Agreement, disregarding any qualifications therein or in this Section 6.3.1 regarding materiality or Target Material Adverse Effect, shall be untrue or incorrect to the extent that such untrue or incorrect representations or warranties, when taken together as a whole, have had or would have a Target Material Adverse Effect. 6.3.2 PERFORMANCE BY TARGET. Target shall have performed and complied with all the covenants and agreements in all material respects and satisfied in all material respects all the conditions required by this Agreement to be performed or complied with or satisfied by Target at or prior to the Effective Time. 6.3.3 NO MATERIAL ADVERSE CHANGE. There shall have not occurred after the date hereof any Event that has or reasonably could be expected to have a Target Material Adverse Effect or a Surviving Corporation Material Adverse Effect (as hereinafter defined) (except for (A) any decrease in monthly average GAAP-based revenues of Target and the Target Subsidiaries (other than CS and the CS Subsidiaries) of no more than 5.5% per month, subject to adjustment by percentage increase or decrease of 0.7% for seasonal trends (e.g., college population subscribers), (B) deviations of cash flow from operations of Target and the Target Subsidiaries (other than CS and the CS Subsidiaries) of 25% or less on a month-to-month basis as compared to cash flow from operations projected in the Target Approved Budget, (C) any decrease in monthly average GAAP-based revenues of CS and the CS Subsidiaries of no more than 5.5% per month, subject to adjustment by percentage increase or decrease of 0.7% for seasonal trends (e.g., college population subscribers), and (D) deviations of cash flow from operations of CS and the CS Subsidiaries of 25% or less on a month-to-month basis as compared to cash flow from operations projected in the CS Approved Budget). 6.3.4 NO PENDING ACTION There shall not be instituted, pending or threatened any action, investigation or proceeding by any Governmental Authority, and there shall not be instituted, pending or threatened any action or proceeding by any other person, domestic or foreign, before any Governmental Authority, which is reasonably likely to be determined adversely to Acquiror or Acquisition Subsidiary, (A) challenging or seeking to make illegal, to delay materially or otherwise, directly or indirectly, to restrain or prohibit the consummation of the Merger, seeking to obtain material damages or imposing any material adverse conditions in connection therewith or otherwise, directly or indirectly relating to the transactions contemplated by the Merger, (B) seeking to restrain, prohibit or delay the exercise of full rights of ownership or operation by Acquiror or Acquisition Subsidiary or their affiliates of all or any portion of the business or assets of Target and the Target Subsidiaries, taken as a whole, or of Acquiror or Acquisition Subsidiary or any of their affiliates, or to compel Acquiror or Acquisition Subsidiary or any of their affiliates to dispose of or hold separate all or any material portion of the business or assets of Target and the Target Subsidiaries, taken as a whole, or of Acquiror or Acquisition Subsidiary or any of their affiliates, (C) seeking to impose or confirm material limitations on the ability of Acquiror or Acquisition Subsidiary or any of their affiliates to exercise full rights of the ownership of the shares of Target Common Stock, including, without limitation, the right to vote the shares of Target Common Stock acquired or owned by Acquiror or Acquisition Subsidiary or any of their affiliates on all 49 59 matters properly presented to the holders of Target Common Stock, (D) seeking to require divestiture by Acquiror or Acquisition Subsidiary or any of their affiliates of the shares of Target Common Stock, or (E) that otherwise would reasonably be expected to have a Target Material Adverse Effect. 6.3.5 DISSENTING SHARES. At the Effective Time, Dissenting Shares shall not exceed 10% of the Target Shares. 6.3.6 REQUIRED CONSENTS. All required Consents of any person (other than a Governmental Authority) to the Merger or the transactions contemplated hereby shall have been obtained or made on terms and conditions reasonably acceptable to Acquiror and be in full force and effect, except for those the failure of which to obtain or be made, in the judgment of Acquiror, would not have a Surviving Corporation Material Adverse Effect; provided that any Consents relating to any Channel Leases or Tower Site Leases, the failure of which to obtain, in the aggregate, are or would be material to Target and the Target Subsidiaries or are or would be material to the future plans or objectives of Acquiror or the failure of which to obtain would otherwise have a Target Material Adverse Effect shall be so obtained or made. 6.3.7 CERTIFICATES AND OTHER DELIVERIES. Target shall have delivered, or caused to be delivered, to Acquiror (i) a certificate executed on its behalf by its President or another duly authorized officer to the effect that the conditions set forth in Subsections 6.1.1, 6.1.4, 6.1.5, 6.3.1, 6.3.2, 6.3.3, 6.3.4, 6.3.5 and 6.3.6, above, have been satisfied; (ii) a certificate of good standing or of legal existence, as applicable, from the Secretary of State of each state or comparable authority in other jurisdictions in which Target and the Target Subsidiaries are incorporated or qualified to do business stating that each is a validly existing corporation in good standing or of legal existence, as applicable; (iii) duly adopted resolutions of the Board of Directors and shareholders of Target approving the execution, delivery and performance of this Agreement, the Target Ancillary Agreements and the instruments contemplated hereby and thereby, certified by the Secretary or Assistant Secretary of Target; (iv) a true and complete copy of the Articles or Certificate of Incorporation or comparable governing instruments, as amended, of Target and each of the Target Subsidiaries certified by the Secretary of State of the state of incorporation or comparable authority in other jurisdictions, and a true and complete copy of the By-Laws or comparable governing instruments, as amended, of Target and each of the Target Subsidiaries certified by the Secretary thereof; (v) the duly executed Noncompete and Confidentiality Agreements; (vi) the duly executed Resignations on terms and conditions reasonably acceptable to Acquiror; (vii) a list of the shareholders of Target entitled to vote on the adoption of this Agreement and an undertaking from Target's transfer agent to deliver a list of the shareholders of Target as of the Effective Time as soon thereafter as it is available, each such list to be certified by the transfer agent of Target; and (viii) such other documents and instruments as Acquiror reasonably may request. 6.3.8 OPINION OF TARGET COUNSEL. Acquiror shall have received the opinion of Day, Berry & Howard LLP, counsel to the Target, in form and substance reasonably satisfactory to Acquiror, covering the matters set forth in Schedule 6.3.8 attached hereto. 50 60 6.3.9 COMFORT LETTERS. Acquiror shall have received "comfort letters" from the independent certified public accountants for Target dated as of the date of the Proxy Statement and the Closing Date, addressed to the Board of Directors of each of Target and Acquiror, covering such matters as Acquiror shall reasonably request with respect to facts concerning the financial condition and results of operations of Target and the Target Subsidiaries and customary for such certified public accountants to deliver in connection with a transaction similar to the Merger. ARTICLE VII TERMINATION AND ABANDONMENT 7.1 TERMINATION. This Agreement may be terminated at any time prior to the Effective Time, whether before or after approval of the shareholders of Target described herein, only: (a) by mutual written consent of Acquiror and Target; (b) by either Acquiror or Target if: (i) the Merger shall not have been consummated on or prior to February 1, 2000; provided, however, that if Target or Acquiror determines that additional time is necessary in connection with obtaining a Consent from the FCC or, solely with respect to the HSR Act, any other Governmental Authority or satisfying any related waiting period, such date may be extended by Target or Acquiror from time to time by written notice to the other party to a date no later than May 1, 2000; and provided further, however, that the right to terminate this Agreement pursuant to this Section 7.1(b)(i) shall not be available to any party whose failure to perform any of its obligations under this Agreement results in the failure of the Merger to be consummated by such time; (ii) the approval of holders of Target Common Stock required by Section 6.1.1 shall not have been obtained at a meeting duly convened therefor or at any adjournment or postponement thereof; (iii) any court of competent jurisdiction or other Governmental Authority shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the consummation of the Merger and such order, decree or ruling or other action shall have become final and nonappealable; (c) by Acquiror, if (i) there are any breaches of any Target Modified Representation or there are any material breaches of any Target Nonmodified Representation, or (ii) Target shall have breached or failed to perform, notwithstanding satisfaction or due waiver of all conditions thereto, any of its material covenants or agreements contained herein as to which notice specifying such breach or failure has been given to Target promptly after the discovery thereof and Target has failed to cure or otherwise resolve the same to the reasonable satisfaction of Acquiror within twenty (20) days after receipt of such notice; 51 61 (d) by Acquiror, if Section 4.9 shall be breached by Target in any material respect, including, without limitation, by failing to promptly notify Acquiror as required thereunder; (e) by Target, if (i) there are any breaches of any Acquiror Modified Representation or there are any material breaches of any Acquiror Nonmodified Representation, or (ii) Acquiror shall have breached or failed to perform, notwithstanding satisfaction or due waiver of all conditions thereto, any of its material covenants or agreements contained herein as to which notice specifying such breach or failure has been given to Acquiror promptly after the discovery thereof and Acquiror has failed to cure or otherwise resolve the same to the reasonable satisfaction of Target within twenty (20) days after receipt of such notice. The party desiring to terminate this Agreement pursuant to the preceding paragraphs (b), (c), (d) or (e), shall give written notice of such termination to the other party in accordance with Section 8.5 below. 7.2 TERMINATION FEES AND RIGHTS. (a) In the event of termination of this Agreement and the abandonment of the Merger pursuant to this Article VII, this Agreement (other than as set forth in this Section 7.2, Section 7.3, Section 8.1 and Section 8.7) shall become void and of no effect with no liability on the part of any party hereto (or of any of its directors, officers, employees, agents, legal or financial advisers or other representatives); provided, however, that no such termination shall relieve any party hereto from any liability for breach of this Agreement. (b) In the event that (A) a bona fide Takeover Proposal shall have been made known to Target or any of the Target Subsidiaries and made known to the holders of Target Common Stock generally or has been made directly to holders of Target Common Stock generally or any person shall have publicly announced an intention (whether or not conditional) to make a bona fide Takeover Proposal and such Takeover Proposal or announced intention shall not have been withdrawn and thereafter this Agreement is terminated by either Acquiror or Target pursuant to Section 7.1(b)(i), or (B) this Agreement is terminated by Acquiror pursuant to Section 7.1(d), then Target shall promptly, but in no event later than two days after the date of such termination, pay Acquiror a fee equal to $18 million (the "Termination Fee"), payable by wire transfer of same day funds. Target acknowledges that the agreements contained in this Section 7.2(b) are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, Acquiror would not enter into this Agreement; accordingly, if Target fails to promptly pay the amount due pursuant to this Section 7.2(b), and in order to obtain such payment, Acquiror commences a suit which results in a judgment against Target for the Termination Fee set forth in this paragraph (b), Target shall also pay to Acquiror its costs and expenses (including attorneys' fees) in connection with such suit, together with interest on the amount of the Termination Fee at the prime rate of NationsBank, N.A. in effect on the date such payment was required to be made. 7.3 PROCEDURE UPON TERMINATION. In the event of termination pursuant to this Article VII, this Agreement shall terminate and the Merger shall be abandoned without further action by Target or Acquiror, provided that the agreements contained in Sections 7.2, 7.3, 8.1 and 52 62 8.7 hereof shall remain in full force and effect. If this Agreement is terminated as provided herein, each party shall use its reasonable best efforts to redeliver all documents, work papers and other material (including any copies thereof) of any other party relating to the transactions contemplated hereby, whether obtained before or after the execution hereof, to the party furnishing the same. Nothing contained in this Agreement shall relieve any party from any liability for any inaccuracy, misrepresentation or breach of this Agreement prior to termination. ARTICLE VIII MISCELLANEOUS 8.1 CONFIDENTIALITY. Unless (i) otherwise expressly provided in this Agreement, (ii) required by applicable Law or any listing agreement with, or the rules and regulations of, any applicable securities exchange or the NASD, (iii) necessary to secure any required Consents as to which the other party has been advised, or (iv) consented to in writing by Acquiror and Target, this Agreement and any information or documents furnished in connection herewith shall be kept strictly confidential by Target and the Target Subsidiaries, Acquiror and Acquisition Subsidiary and their respective officers, directors, employees and agents. Prior to any disclosure pursuant to the preceding sentence, the party intending to make such disclosure shall consult with the other party regarding the nature and extent of the disclosure. Nothing contained herein shall preclude disclosures to the extent necessary to comply with accounting, SEC and other disclosure obligations imposed by applicable Law. In connection with any filing with the SEC under the Securities Exchange Act, Target or Acquiror, after consultation with the other party, may include any information required to be included therein with respect to the Merger. Acquiror and Target shall cooperate with the other and provide such information and documents as may be required in connection with any such filings. In the event the Merger is not consummated, Acquiror and Target shall return to the other all documents furnished by the other and will hold in absolute confidence all information obtained from the other party except to the extent (i) such party is required to disclose such information by Law or such disclosure is necessary or desirable in connection with the pursuit or defense of a claim, (ii) such information was known by such party prior to such disclosure or was thereafter developed or obtained by such party independent of such disclosure, (iii) such party received such information on a non-confidential basis from a source, other than the other party, which is not known by such party to be bound by a confidentiality obligation with respect thereto or (iv) such information becomes generally available to the public or is otherwise no longer confidential. Prior to any disclosure of information pursuant to the exception in clause (i) of the preceding sentence, the party intending to disclose the same shall so notify the party which provided the same in order that such party may seek a protective order or other appropriate remedy should it choose to do so. 8.2 AMENDMENT AND MODIFICATION. To the extent permitted by applicable Law, this Agreement may be amended, modified or supplemented only by a written agreement among Target, Acquiror and Acquisition Subsidiary, whether before or after approval of the Merger and this Agreement by the holders of Target Common Stock and the holders of the common stock of Acquisition Subsidiary. 53 63 8.3 WAIVER OF COMPLIANCE; CONSENTS. Any failure of Target on the one hand, or Acquiror on the other hand, to comply with any obligation, covenant, agreement or condition herein may be waived by Acquiror on the one hand, or Target on the other hand, only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Agreement requires or permits consent by or on behalf of any party hereto, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in this Section 8.3. 8.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective representations and warranties of Target and Acquiror contained herein or in any certificates or other documents delivered prior to or at the Closing shall survive the execution and delivery of this Agreement, notwithstanding any investigation made or information obtained by the other party, but shall terminate at the Effective Time. 8.5 NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered in person, by facsimile, receipt confirmed, or on the next business day when sent by overnight courier or on the second succeeding business day when sent by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified by like notice): (i) if to Target, to: CAI Wireless Systems, Inc. 18 Corporate Woods Blvd., Third Floor Albany, NY 12211 Attention: James P. Ashman, Executive Vice President Telecopy: 518-462-3045 with a copy to: Day, Berry & Howard LLP One Canterbury Green Stamford, CT 06901 Attention: Sabino Rodriguez III, Esq. Telecopy: 203-977-7301 and Skadden, Arps, Slate, Meagher & Flom 919 Third Avenue New York, New York 10022 Attention: J. Gregory Milmoe, Esq. Telecopy: 212-735-2000 54 64 and (ii) if to Acquiror or Acquisition Subsidiary, to: Robert M. Finch Vice President - Strategic Development MCI WORLDCOM, Inc. 3060 Williams Drive, Suite 600 Fairfax, VA 22031 Telecopy: 703-645-4637 with copies to: P. Bruce Borghardt, Esq. General Counsel - Corporate Development MCI WORLDCOM, Inc. 10777 Sunset Office Drive, Suite 330 St. Louis, MO 63127 Telecopy: 314-909-4101 and Bryan Cave LLP 211 N. Broadway, Suite 3600 St. Louis, MO 63102 Attention: R. Randall Wang, Esq. Telecopy: 314-259-2020 8.6 BINDING EFFECT; ASSIGNMENT. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto prior to the Effective Time without the prior written consent of the other party hereto, except that Acquisition Subsidiary may assign to Acquiror or any other Subsidiary of Acquiror any and all rights, interests and obligations of Acquisition Subsidiary under this Agreement. 8.7 EXPENSES. All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs or expenses, subject to the rights of such party contemplated under Section 7.2, above. 8.8 GOVERNING LAW. This Agreement shall be deemed to be made in, and in all respects shall be interpreted, construed and governed by and in accordance with the internal laws of, the State of New York (without regard for its choice of law rules), except for matters governed by the Connecticut Code, which shall be interpreted, construed and governed by the Connecticut Code. 55 65 8.9 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 8.10 INTERPRETATION. The article and section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement. No rule of construction shall apply to this Agreement which construes ambiguous language in favor of or against any party by reason of that party's role in drafting this Agreement. As used in this Agreement, (i) the term "person" shall mean and include an individual, a partnership, a joint venture, a corporation, a limited liability company, a trust, an association, an unincorporated organization, a Governmental Authority and any other entity; (ii) the terms "affiliate" and "associate" shall have the same meanings as set forth in Rule 12b-2 under the Securities Exchange Act; and (iii) the term "shareholder" of any specified person shall mean any holder of capital stock or other equity interest in such person. 8.11 ENTIRE AGREEMENT. This Agreement and the other agreements, documents or instruments referred to herein or executed in connection herewith including, but not limited to, the Schedules attached hereto, which Schedules are incorporated herein by reference, embody the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties, covenants, or undertakings, other than those expressly set forth or referred to herein. This Agreement supersedes all prior agreements and the understandings between the parties with respect to such subject matter, including, without limitation, the letter agreement dated April 15, 1999 between Acquiror and Target. 8.12 SEVERABILITY. In case any provision in this Agreement or in any of the other agreements, documents or instruments referred to herein shall be held invalid, illegal or unenforceable in any jurisdiction, such provision shall be modified or deleted, as to the jurisdiction involved, only to the extent necessary to render the same valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions hereof or thereof shall not in any way be affected or impaired thereby nor shall the validity, legality or enforceability of such provision be affected thereby in any other jurisdiction. 8.13 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, the parties further agree that each party shall be entitled to an injunction or restraining order to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other right or remedy to which such party may be entitled under this Agreement, at law or in equity. 8.14 THIRD PARTIES. Nothing contained in this Agreement or in any instrument or document executed by any party in connection with the transactions contemplated hereby shall create any rights in, or be deemed to have been executed for the benefit of, any person that is not 56 66 a party hereto or thereto, or, a successor or permitted assign of such a party, provided that the Indemnified Parties shall be entitled to the benefits of Section 5.6 hereof. 8.15 SCHEDULES. The Schedules in this Agreement shall be arranged in separate parts corresponding to the numbered and lettered sections, and the disclosure in any numbered or lettered part shall be deemed to relate to and to qualify only the particular representation or warranty set forth in the corresponding numbered or lettered section, and not any other representation or warranty (unless an express and specific reference to any other Schedule which clearly identifies the particular item being referred is set forth therein). 8.16 CONTROL. Neither Acquiror nor Acquisition Subsidiary have exercised, and neither shall exercise, any control over Target, the Target Subsidiaries or the FCC Licenses held by Target or any of the Target Subsidiaries prior to the grant of necessary approvals by the FCC, to the extent such approvals are required by Law prior to the exercise of any such control. [The remainder of this page is intentionally left blank.] 57 67 IN WITNESS WHEREOF, Acquiror, Acquisition Subsidiary and Target have caused this Agreement to be signed and delivered by their respective duly authorized officers as of the date first above written. CAI WIRELESS SYSTEMS, INC. By: /s/ JARED E. ABBRUZZESE ----------------------------------------- Name: Jared E. Abbruzzese --------------------------------------- Title: Chairman and Chief Executive Officer --------------------------------------- MCI WORLDCOM, INC. By: /s/ JOHN SIDGMORE ----------------------------------------- Name: John Sidgmore --------------------------------------- Title: --------------------------------------- CARDINAL ACQUISITION SUBSIDIARY, INC. By: /s/ JOHN SIDGMORE ----------------------------------------- Name: John Sidgmore --------------------------------------- Title: --------------------------------------- 58 -----END PRIVACY-ENHANCED MESSAGE-----