<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number :
0-23008
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AMERICAN TELECASTING, INC.
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(Exact name of registrant as specified in its charter)
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Delaware 54-1486988
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
5575 Tech Center Drive, Colorado Springs, CO 80919
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (719) 260 - 5533
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</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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As of July 26, 1996, 18,435,714 shares of the registrant's Common Stock, par
value $.01 per share, were outstanding.
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AMERICAN TELECASTING, INC.
INDEX
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Page
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PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
December 31, 1995 and June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations -
Three Months Ended June 30, 1995 and 1996 and
Six Months Ended June 30, 1995 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1995 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION.
Items 1-3. None
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . . . . 14
Item 5. None
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
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<CAPTION>
December 31, June 30,
1995 1996
--------- ---------
(Unaudited)
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ASSETS
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . $ 32,514 $ 25,589
Trade accounts receivable, net . . . . . . . . . . . . . . . . 2,171 1,426
Prepaid expenses and other current assets . . . . . . . . . . . 2,874 2,726
--------- ---------
Total current assets . . . . . . . . . . . . . . . . . . . . . . 37,559 29,741
Property and equipment, net . . . . . . . . . . . . . . . . . . . 112,377 115,723
Deferred license and leased license acquisition costs, net . . . 143,006 152,042
Goodwill, net . . . . . . . . . . . . . . . . . . . . . . . . . . 16,030 15,596
Deferred financing costs . . . . . . . . . . . . . . . . . . . . 5,268 5,030
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . 2,809 1,954
--------- ---------
Total assets . . . . . . . . . . . . . . . . . . . . . . $ 317,049 $ 320,086
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses . . . . . . . . . . . . . $ 20,003 $ 23,847
Current portion of long-term obligations . . . . . . . . . . . 11,062 10,851
Customer deposits . . . . . . . . . . . . . . . . . . . . . . . 605 456
--------- ---------
Total current liabilities . . . . . . . . . . . . . . . . . . . . 31,670 35,154
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 6,131 5,942
2004 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 116,864 125,794
2005 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,262 108,064
Other long-term obligations, net of current portion . . . . . . . 8,386 5,888
--------- ---------
Total liabilities . . . . . . . . . . . . . . . . . . . 263,313 280,842
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value; 3,000,000 shares authorized;
no shares issued and outstanding . . . . . . . . . . . . . . . -- --
Class A Common Stock, $.01 par value; 30,000,000 shares authorized;
16,435,974 and 18,365,214 shares issued and outstanding,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . 164 184
Class B Common Stock, $.01 par value; 10,000,000 shares
authorized; no shares issued and outstanding . . . . . . . . . -- --
Additional paid-in capital . . . . . . . . . . . . . . . . . . . 135,364 158,000
Common Stock warrants outstanding . . . . . . . . . . . . . . . . 10,130 10,129
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . (91,922) (129,069)
--------- ---------
Total stockholders' equity . . . . . . . . . . . . . . . 53,736 39,244
--------- ---------
Total liabilities and stockholders' equity . . . . . . . $ 317,049 $ 320,086
========= =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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<PAGE> 4
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
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Three Months Ended Six Months Ended
June 30, June 30,
1995 1996 1995 1996
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Revenues:
Service and other . . . . . . . . . . . . . . . . . . . . $ 10,683 $15,109 $ 19,852 $ 30,164
Installation . . . . . . . . . . . . . . . . . . . . . . 304 313 579 681
--------------------------------------------------
Total revenues . . . . . . . . . . . . . . . . . . . . . . 10,987 15,422 20,431 30,845
Costs and Expenses:
Operating . . . . . . . . . . . . . . . . . . . . . . . . 5,627 8,814 10,380 17,388
Marketing . . . . . . . . . . . . . . . . . . . . . . . . 1,816 2,054 3,502 4,354
General and administrative . . . . . . . . . . . . . . . 3,898 4,509 7,436 9,520
Depreciation and amortization . . . . . . . . . . . . . . 6,390 10,156 12,003 20,114
--------------------------------------------------
Total costs and expenses . . . . . . . . . . . . . . . . . 17,731 25,533 33,321 51,376
--------------------------------------------------
Loss from operations . . . . . . . . . . . . . . . . . . . (6,744) (10,111) (12,890) (20,531)
Interest expense . . . . . . . . . . . . . . . . . . . . . (4,387) (9,058) (8,433) (17,887)
Interest income . . . . . . . . . . . . . . . . . . . . . . 376 236 786 586
Other income (expense), net . . . . . . . . . . . . . . . . (53) 453 (47) 496
--------------------------------------------------
Loss before income tax benefit . . . . . . . . . . . . . . (10,808) (18,480) (20,584) (37,336)
Income tax benefit . . . . . . . . . . . . . . . . . . . . 44 84 2,109 189
--------------------------------------------------
Loss before cumulative effect of change in accounting
for installation costs, net of income taxes . . . . . . . (10,764) (18,396) (18,475) (37,147)
Cumulative effect of change in accounting
for installation costs, net of income taxes of $369 . . . -- -- 602 --
--------------------------------------------------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . $(10,764) $(18,396) $(17,873) $(37,147)
==================================================
Net income (loss) per share - see Note 2:
Loss per share before cumulative effect of
accounting change . . . . . . . . . . . . . . . . . . . $ (0.68) $ (1.06) $ (1.19) $ (2.19)
Income per share from cumulative effect of
accounting change . . . . . . . . . . . . . . . . . . . -- -- 0.04 --
--------------------------------------------------
Net loss per share . . . . . . . . . . . . . . . . . . . $ (0.68) $ (1.06) $ (1.15) $(2.19)
==================================================
Weighted average number of shares outstanding . . . . . . . 15,873,062 17,381,001 15,553,433 16,970,012
==================================================
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
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Six Months Ended
June 30,
---------------------------------
1995 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . $(17,873) $(37,147)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . 12,003 20,114
Deferred income taxes . . . . . . . . . . . . . . . . . . . . (2,109) (189)
Amortization of debt discount and deferred financing costs . 7,251 16,937
Cumulative effect of accounting change . . . . . . . . . . . (602) --
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 (407)
Changes in operating assets and liabilities . . . . . . . . . (2,830) (5,955)
-------- --------
Net cash used in operating activities . . . . . . . . . . . (4,109) (6,647)
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities of short-term investments . . . . . . . . . . . . . 20,002 --
Purchases of property and equipment . . . . . . . . . . . . . . (18,139) (18,173)
Payments received on loans to related parties and others.... . -- 252
Additions to deferred license and leased license
acquisition costs . . . . . . . . . . . . . . . . . . . . . . (2,193) (1,923)
Net cash used in acquisitions . . . . . . . . . . . . . . . . . (7,321) --
-------- --------
Net cash used in investing activities . . . . . . . . . . . (7,651) (19,844)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock, net of
stock issuance costs . . . . . . . . . . . . . . . . . . . . 471 20,124
Borrowings under revolving credit facilities . . . . . . . . . 23,300 200
Principal payments on revolving credit facilities . . . . . . . (5,679) --
Increase in deferred financing costs . . . . . . . . . . . . . (517) --
Minority interest contributions . . . . . . . . . . . . . . . -- 837
Principal payments on notes payable . . . . . . . . . . . . . . (1,603) (1,191)
Principal payments on capital lease obligations . . . . . . . . (207) (404)
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Net cash provided by financing activities . . . . . . . . . 15,765 19,566
-------- --------
Net increase (decrease) in cash and cash equivalents . . . . . . 4,005 (6,925)
Cash and cash equivalents, beginning of period . . . . . . . . . 13,329 32,514
-------- --------
Cash and cash equivalents, end of period . . . . . . . . . . . . $ 17,334 $ 25,589
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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<PAGE> 6
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BUSINESS DESCRIPTION
History and Organization
American Telecasting, Inc. ("ATI") owns and operates a network of
wireless cable television systems providing subscription television
service. ATI and its subsidiaries are collectively referred to herein as
the "Company." As of June 30, 1996 the Company owned and operated 39
wireless cable systems located throughout the United States. The Company
also has significant channel interests in 16 other markets where it expects
to construct wireless cable systems in the future.
Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have
been included. All significant intercompany accounts and transactions have
been eliminated in consolidation. Operating results for the six month
period June 30, 1996 are not necessarily indicative of the results that may
be expected for the year ending December 31, 1996. For further information,
refer to the consolidated financial statements and footnotes thereto
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
2. SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
The Company considers all short-term investments with original
maturities of 90 days or less to be cash equivalents. As of June 30, 1996,
cash equivalents principally consisted of federal government/agency debt
securities.
Net Loss Per Share
Net loss per share is computed on the weighted-average number of
common shares outstanding for the respective periods. The effect of common
stock equivalents on net loss per share is not included as it would be
anti-dilutive. Fully diluted loss per share is not presented as it would
not materially differ from primary loss per share.
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<PAGE> 7
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
3. PENDING ACQUISITION
On June 28, 1996, the Company entered into a definitive
agreement to acquire wireless cable channel rights and certain other
subscription television assets in Cincinnati, Ohio (the "Cincinnati
Acquisition") for aggregate consideration of approximately $5.2
million (of which approximately $2.0 million was paid in July 1996).
Also on June 28, 1996, the Company acquired certain of the Cincinnati
subscription television assets and entered into a management agreement
to operate the subscription television assets that it has not yet
acquired. Completion of the Cincinnati Acquisition is subject to
certain contingencies, such as FCC approvals, the satisfactory
completion of due diligence, and other customary conditions to
closing, which may or may not be satisfied. There can be no assurance
that the Cincinnati Acquisition will be consummated.
4. LONG-TERM DEBT
Long-term debt at June 30, 1996 consists of the following (in
thousands):
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2004 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 125,794
2005 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,064
Revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,450
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,290
Capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,138
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 861
----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,597
Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,851
----------
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 239,746
==========
</TABLE>
Fresno MMDS Associates (the "Fresno Partnership") maintains a
revolving credit facility (the "Fresno Facility") that provides for
maximum potential borrowings for the Fresno, Visalia and Merced
systems of $8.5 million. As of June 30, 1996, approximately $8.5
million was outstanding under the Fresno Facility and no amounts were
available for borrowing. Outstanding borrowings bear interest at the
banks' prime rate plus 2.25%. (10.50% at June 30, 1996). Effective
June 30, 1996, the Fresno Facility was amended (the "Amended
Agreement") to, among other things, (i) permit the incurrence by the
Fresno Partnership of up to $2.3 million in subordinated debt due ATI;
(ii) permit the payment to ATI by the Fresno Partnership of a loan fee
of up to $23,000; and (iii) modify certain of the financial and other
operating covenants specified in the original agreement. In addition,
past violations of certain financial and other operating covenants
associated with the Fresno Facility were waived by the bank. In
exchange for the bank's entering into the Amended Agreement, the
Fresno Partnership agreed to cause the bank's participation in the
Fresno Facility to be eliminated, by March 31, 1997, through
prepayment by the Fresno Partnership of all amounts due, assignment of
the bank's participation to a third party lender or lenders, which may
include ATI, or some combination of the foregoing. In connection
therewith, in July 1996 ATI purchased a $1.5 million participation in
the Fresno Facility from the bank. The bank's participation in the
Fresno Facility is required to be further reduced by $2.0 million on
each of September 30 and December 31, 1996, with any remaining
participation by the bank to be fully reduced by March 31, 1997. The
Fresno Partnership was in compliance, as of June 30, 1996, with the
terms of the Amended Agreement. The Fresno Facility also contains
restrictive covenants that, among other things, prohibit the payment
of dividends.
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<PAGE> 8
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
5. COMMITMENTS AND CONTINGENCIES
Litigation
In February 1994, a complaint was filed by Fresno Telsat, Inc.
("Fresno Telsat") in the Superior Court of the State of California for the
County of Monterey against two officers of the Company (one of whom is also
a director), the Company, and other named and unnamed defendants. The
complaint seeks compensatory damages (in an unspecified amount but
estimated by the plaintiff to be no less than $5.0 million) and exemplary
damages against all defendants, costs, and other relief. The complaint
alleges, among other claims, that all defendants, including the Company,
participated in a conspiracy to misappropriate corporate opportunities
belonging to Fresno Telsat. Although the ultimate outcome of this matter
cannot be predicted, management believes, based on its review of this claim
and discussion with legal counsel, that the resolution of this matter will
not have a material impact on the Company's financial position or future
results of operations.
BTA Auction
The Company was involved in the recently completed bidding process
for wireless cable channel authorizations in certain basic trading areas
("BTAs"). The Company was the highest bidder in 59 markets. In the
aggregate, the Company's bids in these markets totaled approximately $10.1
million. Of such amount, approximately $4.7 million has been paid in the
form of upfront fees paid prior to commencement of the auction
(approximately $1.5 million), a downpayment with respect to each BTA for
which the Company was the highest bidder (approximately $500,000), and
required payments upon the FCC's notification to the Company of the
issuance of certain of its BTA licenses (approximately $2.7 million). The
remaining amount (approximately $5.4 million) is due upon the FCC's
notification to the Company of the issuance of the remainder of its BTA
licenses, which the Company expects will occur before the end of 1996. As
of June 30, 1996, the Company's condensed consolidated balance sheet
reflects approximately $8.1 million as accrued liabilities relating to the
Company's BTA payments (of which $2.7 million was paid in July 1996).
6. NONCASH FINANCING ACTIVITIES
In February 1996, $2.5 million of the notes issued in connection
with the Company's September 1995 acquisition of Superchannels of Las
Vegas, Inc. were converted into 162,854 shares of ATI Common Stock.
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<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
All statements contained herein that are not historical facts,
including but not limited to, statements regarding anticipated future capital
requirements, the Company's future development plans, the Company's ability to
obtain additional debt, equity or other financing, and the Company's ability to
generate cash from system operations or sales of assets, are based on current
expectations. These statements are forward looking in nature and involve a
number of risks and uncertainties. Actual results may differ materially.
Among the factors that could cause actual results to differ materially are the
following: the availability of sufficient capital to finance the Company's
business plan on terms satisfactory to the Company; competitive factors, such
as the introduction of new technologies and competitors into the subscription
television business; pricing pressures which could affect demand for the
Company's service; changes in labor, equipment and capital costs; future
acquisitions or strategic partnerships; general business and economic
conditions; and the other risk factors described from time to time in the
Company's reports filed with the SEC. The Company wishes to caution readers
not to place undue reliance on any such forward looking statements, which
statements are made pursuant to the Private Securities Litigation Reform Act of
1995 and, as such, speak only as of the date made.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations require substantial amounts of capital for
(i) the installation of equipment in new subscribers' homes, (ii) the
construction of additional transmission and headend facilities and related
equipment purchases, (iii) the funding of start-up losses and other working
capital requirements, (iv) the acquisition of additional wireless cable channel
rights and systems, and (v) investments in, and maintenance of, vehicles and
administrative offices. The Company's capital expenditures, exclusive of
acquisitions of wireless cable systems and additions to deferred license and
leased license acquisition costs, during the six-month periods ended June 30,
1995 and 1996 were approximately $18.1 million, and $18.2 million,
respectively. Such expenditures were primarily for the installation of
equipment in new subscribers' homes and the construction and expansion of the
Company's wireless cable systems.
As of June 30, 1996, the Company had significant channel interests in
16 markets where it expects to construct wireless cable systems in the future,
assuming, among other factors, that sufficient financing is available. There
can be no assurance that the Company will be successful in constructing and
launching these systems. The Company expects to incur significant capital
expenditures in connection with construction and development of these systems,
as well as expansion of existing markets and acquisition activities. There can
be no assurance that the Company's current development plans will not be
altered to respond to specific market opportunities, channel availability,
competitive factors, or other industry developments, or that its capital
requirements will not increase as a result of future acquisitions.
The Company was involved in the recently completed bidding process for
wireless cable channel authorizations in certain basic trading areas ("BTAs").
The Company was the highest bidder in 59 markets. In the aggregate, the
Company's bids in these markets totaled approximately $10.1 million. Of such
amount, a total of approximately $4.7 million has been paid in the form of
upfront fees paid prior to commencement of the auction (approximately $1.5
million), a downpayment with respect to each BTA for which the Company was the
highest bidder (approximately $500,000), and required payments upon the FCC's
notification to the Company of the issuance of certain of its BTA licenses
(approximately $2.7 million). The remaining amount (approximately $5.4
million) is due upon the FCC's notification to the Company of the issuance of
the remainder of its BTA licenses, which the Company expects will occur before
the end of 1996.
The Company has experienced negative cash flow from operations in each
year since its formation, and although certain of the Company's more mature
systems currently generate positive cash flow from operations, the Company
expects to continue to experience negative consolidated cash flow from
operations due to operating costs associated with system development, expansion
and acquisition activities. Until sufficient cash flow is generated from
operations, the Company will be required to utilize its current capital
resources or external sources of funding to satisfy its working capital and
capital expenditure needs.
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<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Historically, the Company's ability to generate positive operating
cash flow in certain of its markets has enabled it to obtain bank financing at
the system level to finance subscriber growth. Currently, the Company has one
credit facility (the Fresno Facility) under which maximum potential borrowings
aggregate $8.5 million. No amounts are currently available for borrowing under
the Fresno Facility, which provides for borrowings for the Company's Fresno,
Visalia, and Merced systems. Effective June 30, 1996, the Fresno Facility was
amended (the "Amended Agreement") to, among other things (i) permit the
incurrence by the Fresno Partnership of up to $2.3 million in subordinated debt
due ATI; (ii) permit the payment to ATI by the Fresno Partnership of a loan fee
of up to $23,000; and (iii) modify certain of the financial and other operating
covenants specified in the original agreement. In addition, past violations of
certain financial and other operating covenants associated with the Fresno
Facility were waived by the bank. In exchange for the bank's entering into the
Amended Agreement, the Fresno Partnership agreed to cause the bank's
participation in the Fresno Facility to be eliminated, by March 31, 1997,
through prepayment by the Fresno Partnership of all amounts due, assignment of
the bank's participation to a third party lender or lenders, which may include
ATI, or some combination of the foregoing. In connection therewith, in July
1996 ATI purchased a $1.5 million participation in the Fresno Facility from the
bank. The bank's participation in the Fresno Facility is required to be
further reduced by $2.0 million on each of September 30 and December 31, 1996,
with any remaining participation by the bank to be fully reduced by March 31,
1997. The Fresno Partnership was in compliance, as of June 30, 1996, with the
terms of the Amended Agreement.
Future system expansion requirements of the Fresno, Visalia, and
Merced systems are expected to be financed from additional cash contributions
or advances from ATI. The Company does not expect that it will be able to
expand the Fresno, Visalia and Merced systems without additional bank or other
financings. System expansion requirements during 1996 for the Company's other
operating wireless cable systems and its markets not yet launched are expected
to be financed from existing cash and investment balances, additional equity or
other financing, borrowings under future credit facilities, and cash generated
from system operations. While the Company has been able to arrange
satisfactory bank debt facilities to date, there can be no assurance that
sufficient debt financing will continue to be available in the future, or that
it will be available on terms acceptable to the Company.
In May 1996, the Company completed an offering of 1,700,000 shares of
its Common Stock resulting in net proceeds of approximately $20.3 million
(after deducting underwriting discounts and commissions but before deducting
other expenses of the offering). Additional equity, debt or other financing
will be required before the end of the third quarter of 1996 to fund the
Company's projected needs for working capital (including debt service), as well
as its capital expenditure requirements for its existing systems and markets
not yet launched. Management expects that the Company will require at least
$5.0 million of additional debt or equity financing before the end of the third
quarter of 1996, and an additional $20.0 million before the end of 1996, to
cover ongoing operating losses and to achieve its targeted subscriber levels.
Management plans to meet these cash needs through a combination of equity,
subordinated debt and bank financing, and from cash generated from operations.
Without such additional equity or debt financing, the Company will be required
to significantly curtail its operations and expansion plans. There can be no
assurance that additional debt, equity or other financing will be available on
terms acceptable to the Company, or at all. As appropriate opportunities
become available, the Company may sell or lease certain channel rights from its
portfolio, subject to certain restrictions described below. In addition, the
Company may finance future development of wireless cable systems, future
acquisitions of wireless cable systems and channel rights, and future general
corporate activities through additional equity or debt financings, joint
ventures or other arrangements. There can be no assurance that such financing
will be available on terms acceptable to the Company, or at all.
The indentures associated with the 2004 Notes and the 2005 Notes
contain a number of covenants and other provisions that impose certain
financial and operating constraints on the Company as long as any 2004 Notes or
2005 Notes remain outstanding. These covenants include limitations on
consolidated debt, limitations on certain payments,
-10-
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
investments and distributions, and limitations on liens and certain asset
sales. As a result of such limitations, the Company's additional borrowing
capacity currently approximates $3.1 million. Accordingly, the Company's
ability to finance ongoing working capital and system expansion requirements
from borrowings under existing or future credit facilities is currently
limited. The Fresno Facility also contains a number of restrictive covenants,
including a restriction on the ability of certain of ATI's subsidiaries to pay
dividends or make loans to ATI.
In February 1996, $2.5 million of the notes issued in connection with
the Company's September 1995 acquisition of Superchannels of Las Vegas, Inc.
were converted into 162,854 shares of ATI Common Stock.
The Company continuously pursues opportunities to acquire businesses
and channel rights that are consistent with its business plan. Except for the
Cincinnati Acquisition (as defined below), as of the date of this Report, the
Company has no written agreements, arrangements or understandings to acquire
any material wireless cable businesses or assets. On June 28, 1996, the
Company entered into a definitive agreement to acquire wireless cable channel
rights and certain other subscription television assets in Cincinnati, Ohio
(the "Cincinnati Acquisition") for aggregate consideration of approximately
$5.2 million (of which approximately $2.0 million was paid in July 1996). Also
on June 28, 1996, the Company acquired certain of the Cincinnati subscription
television assets and entered into a management agreement to operate the
subscription television assets that it has not yet acquired. The subscription
television assets acquired or to be acquired by the Company in connection with
the Cincinnati Acquisition served approximately 3,100 subscribers as of June
30, 1996. Completion of the Cincinnati Acquisition is subject to certain
contingencies, such as FCC approvals, the satisfactory completion of due
diligence, and other customary conditions to closing, which may or may not be
satisfied. There can be no assurance that the Cincinnati Acquisition will be
consummated. Any future acquisitions may require additional equity or other
financing.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1995
Service revenues increased $4.4 million, or 41.4%, during the three
months ended June 30, 1996 to $15.1 million, as compared to $10.7 million
during the same period of 1995. This increase resulted primarily from the
addition of new subscribers. Subscriber increases resulted primarily from the
1995 acquisitions of the Fresno, Visalia, Merced, Redding, Las Vegas and Rapid
City systems and the completion of construction and commencement of operation
of systems in Ft. Collins, Greeley, Yuba City, and Lincoln during 1995 and
Anchorage and Portland during 1996. Service price increases contributed only a
small portion of the aggregate increase in service revenues. The number of
subscribers to the Company's wireless cable systems increased to 178,000 at
June 30, 1996 compared to 174,900 at March 31, 1996 (119,100 and 143,900 at
March 31, 1995 and June 30, 1995, respectively).
On a "same system" basis (comparing systems that were operational for
all of each of the three-month periods ended June 30, 1995 and 1996), service
revenues increased $2.3 million, or 23.4%, to $12.1 million, as compared to
$9.8 million for the three-month period ended June 30, 1995. Same systems
during this period totaled 27 systems. The average number of same-system
subscribers increased approximately 18.3% during the three months ended June
30, 1996, as compared to the same period of 1995.
Installation revenues for the three months ended June 30, 1996 totaled
$313,000, compared to $304,000 during the same period of 1995. The net
increase in installation revenues of $9,000, or 3.0%, resulted primarily from
less discounting of installation rates. Installation rates vary widely by
system based upon competitive conditions. The Company occasionally reduces
installation charges as part of selected promotional campaigns. The number of
installations completed during the three months ended June 30, 1996 decreased
approximately 12.1% as compared to the same period during 1995.
-11-
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Operating expenses, principally programming, site costs and other
direct expenses, aggregated $8.8 million (or 57.2% of total revenues) during
the three months ended June 30, 1996, compared to $5.6 million (or 51.2% of
total revenues) during the same period of 1995. The increase of $3.2 million
was primarily the result of additional systems and subscribers as well as
increased programming costs for additions to channel line-ups and increased
pay-per-view offerings in various systems.
Marketing and selling expenses totaled $2.1 million (or 13.3% of total
revenues) during the three months ended June 30, 1996, compared to $1.8 million
(or 16.5% of total revenues) during the same period of 1995. The increase in
such expenses of $238,000 resulted from the addition of new systems. During
the three-month period ended June 30, 1996, general and administrative expenses
totaled $4.5 million (or 29.2% of total revenues), a $611,000 increase over the
same period of 1995 ($3.9 million or 35.5% of total revenues). This increase
also resulted from the addition of new systems.
The Company's loss from operations was $10.1 million during the
three-month period ended June 30, 1996, compared to $6.7 million during the
same period of 1995. The increase in the loss from operations of $3.4 million
resulted primarily from increased depreciation and amortization expense.
Depreciation and amortization expense (principally depreciation of property and
equipment and amortization of deferred license and leased license acquisition
costs, goodwill and covenants not-to-compete) increased $3.8 million due to
increases in deferred license costs, goodwill and subscriber equipment
resulting from the acquisition and addition of new systems and the addition of
equipment installed in new subscribers' homes.
Interest expense increased $4.7 million during the quarter ended June
30, 1996 to $9.1 million, as compared to $4.4 million during the same period of
1995. The increase in interest expense primarily resulted from noncash
interest charges associated with the Company's 14.5% Senior Discount Notes due
2005 (the "2005 Notes") issued in connection with the Company's August 1995
units offering (the "1995 Units Offering") and the Company's Senior Discount
Notes due 2004 (the "2004 Notes") issued in connection with the Company's June
1994 units offering (the "1994 Units Offering"). Interest expense associated
with the 2004 Notes also increased due to an increase in the interest rate on
the 2004 Notes from 12.5% to 14.5% effected in conjunction with the 1995 Units
Offering. Earnings before interest, taxes, depreciation and amortization
totaled $45,000 for the three months ended June 30, 1996, as compared to a loss
before interest, taxes, depreciation, and amortization of $354,000 during the
same period of 1995.
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Service revenues increased $10.3 million, or 51.9%, during the six
months ended June 30, 1996 to $30.2 million, as compared to $19.9 million
during the same period of 1995. This increase resulted primarily from the
addition of new subscribers. Subscriber increases resulted primarily from the
1995 acquisitions of the Medford, Sheridan, Fresno, Visalia, Merced, Redding,
Las Vegas and Rapid City systems and the completion of construction and
commencement of operation of systems in Ft. Collins, Greeley, Yuba City, and
Lincoln during 1995 and Anchorage and Portland during 1996. Service price
increases contributed only a small portion of the aggregate increase in service
revenues. The number of subscribers to the Company's wireless cable systems
increased to 178,000 at June 30, 1996 compared to 173,700 at December 31, 1995
(106,500 and 143,900 at December 31, 1994 and June 30, 1995, respectively).
On a "same system" basis (comparing systems that were operational for
all of each of the six-month periods ended June 30, 1995 and 1996), service
revenues increased $4.8 million, or 25.4%, to $23.5 million, as compared to
$18.7 million for the six-month period ended June 30, 1995. Same systems
during this period totaled 25 systems. The average number of subscribers in
these systems increased approximately 21.8% during the six months ended June
30, 1996, as compared to the same period of 1995.
-12-
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Installation revenues for the six months ended June 30, 1996 totaled
$681,000, compared to $579,000 during the same period of 1995. The net
increase in installation revenues of $102,000, or 17.6%, resulted primarily
from less discounting of installation rates. The number of installations
completed during the six months ended June 30, 1996 decreased approximately
1.2% as compared to the same period during 1995.
Operating expenses, principally programming, site costs and other
direct expenses, aggregated $17.4 million (or 56.4% of total revenues) during
the six months ended June 30, 1996, compared to $10.4 million (or 50.8% of
total revenues) during the same period of 1995. The increase of $7.0 million
was primarily the result of additional systems and subscribers as well as
increased programming costs for additions to channel line-ups and increased
pay-per-view offerings in various systems.
Marketing and selling expenses totaled $4.4 million (or 14.1% of total
revenues) during the six months ended June 30, 1996, compared to $3.5 million
(or 17.1% of total revenues) during the same period of 1995. The increase in
such expenses of $852,000 resulted from the addition of new systems. During
the six-month period ended June 30, 1996, general and administrative expenses
totaled $9.5 million (or 30.9% of total revenues), a $2.1 million increase over
the same period of 1995 ($7.4 million or 36.4% of total revenues). This
increase also resulted from the addition of new systems.
The Company's loss from operations was $20.5 million during the
six-month period ended June 30, 1996, compared to $12.9 million during the same
period of 1995. The increase in the loss from operations of $7.6 million
resulted primarily from increased depreciation and amortization expense.
Depreciation and amortization expense (principally depreciation of property and
equipment and amortization of deferred license and leased license acquisition
costs, goodwill and covenants not-to-compete) increased $8.1 million due to
increases in deferred license costs, goodwill and subscriber equipment
resulting from the acquisition and addition of new systems and the addition of
equipment installed in new subscribers' homes.
Interest expense increased $9.5 million during the quarter ended June
30, 1996 to $17.9 million, as compared to $8.4 million during the same period
of 1995. The increase in interest expense primarily resulted from noncash
interest charges associated with the 2005 Notes issued in connection with 1995
Units Offering and the 2004 Notes issued in connection with the 1994 Units
Offering. Interest expense associated with the 2004 Notes also increased due
to an increase in the interest rate on the 2004 Notes from 12.5% to 14.5%,
effected in conjunction with the 1995 Units Offering. The loss before
interest, taxes, depreciation and amortization totaled $417,000 for the six
months ended June 30, 1996, as compared to $887,000 during the same period of
1995.
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<PAGE> 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) The annual meeting of stockholders of American Telecasting, Inc.
was held April 25, 1996.
b) At the annual meeting of stockholders, proposals were considered
for the election of Donald R. DePriest, Richard F. Seney, Robert
D. Hostetler, William J. Blake, Mitchell R. Hauser, James S.
Quarforth and Carl A. Rosberg as directors to serve until the 1997
annual meeting of stockholders.
c) Other matters voted upon at the meeting included (i) the approval
of an amendment to the Company's restated certificate of
incorporation to (a) reclassify the existing Common Stock of the
Company as Class A Common Stock, (b) authorize a new class of
non-voting common stock, designated as Class B Common Stock, (c)
increase the number of authorized shares of Common Stock from
25,000,000 to 40,000,000, consisting of 30,000,000 shares of Class
A Common Stock and 10,000,000 shares of Class B Common Stock, and
(d) establish the rights, powers and limitations of the Class A
Common Stock and the Class B Common Stock; (ii) approval of an
amendment to the American Telecasting, Inc. 1990 Stock Option
Program, As Amended, to increase the number of shares that may be
issued pursuant to the plan from 1,125,000 to 1,525,000; and (iii)
ratification of the appointment of Arthur Andersen LLP as
independent auditors for the Company for 1996. The
director-nominees were elected and all proposals were approved.
The voting results were as follows:
<TABLE>
<CAPTION>
Votes Votes Broker
Proposal Votes For Against Withheld Abstained Non-Votes
<S> <C> <C> <C> <C> <C>
Election as director:
Donald R. DePriest 13,366,266 -- 65,702 -- --
Richard F. Seney 13,366,277 -- 65,691 -- --
Robert D. Hostetler 13,366,266 -- 65,702 -- --
William J. Blake 13,296,715 -- 135,263 -- --
Mitchell R. Hauser 13,366,277 -- 65,691 -- --
James S. Quarforth 13,366,277 -- 65,691 -- --
Carl A. Rosberg 13,296,715 -- 135,253 -- --
Approval of amendment to the Company's 11,407,634 1,994,884 -- 5,951 23,539
restated certificate of incorporation
Approval of amendment to the American 12,638,261 764,339 -- 5,829 23,539
Telecasting, Inc. 1990 Stock Option
Program, As Amended
Ratification of the appointment of Arthur 13,400,995 350 -- 463 --
Andersen LLP as independent auditors for
the Company for 1996
</TABLE>
-14-
<PAGE> 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1(i) Certificate of Amendment of Restated Certificate of
Incorporation of American Telecasting, Inc. dated as of April
24, 1996.
10.1 Agreement for Purchase and Sale of Assets dated June 28, 1996
among Novner Enterprises, Inc., Alvin Novick, Phyllis Novick,
American Telecasting of Cincinnati, Inc. and American
Telecasting, Inc.
10.2 Management Agreement dated as of June 28, 1996 between Novner
Enterprises, Inc. and American Telecasting of Cincinnati, Inc.
10.3 Agreement for Exchange of Assets dated July 10, 1996 among
Heartland Wireless Communications, Inc., Heartland Wireless
South Dakota Properties, Inc., Heartland Wireless Florida
Properties, Inc. and American Telecasting, Inc.
10.4 First Amendment to Amended and Restated Revolving Credit
Agreement dated as of June 30, 1996 among Fresno MMDS
Associates, First Union National Bank of North Carolina,
Fresno Telsat, Inc. and Fresno Wireless Cable Television,
Inc.; related Subordination Agreement dated as of June 30,
1996 by American Telecasting, Inc. and Fresno MMDS Associates
in favor of First Union National Bank of North Carolina;
related Assignment Acceptance and Intercreditor Agreement
dated as of July 18, 1996 among First Union National Bank of
North Carolina, American Telecasting, Inc., First Union
National Bank of North Carolina as agent and Fresno MMDS
Associates.
10.5 Side agreement between Fresno Telsat, Inc. and American
Telecasting, Inc.
10.6 American Telecasting, Inc. 1990 Stock Option Program, As
Amended (Effective April 25, 1996).
27 Financial Data Schedule
(b) Reports on Form 8-K.
The following reports on Form 8-K were filed during the quarter ended
June 30, 1996:
(i) Current Report on Form 8-K dated April 1, 1996 to report,
under Item 5, that the Company had issued a press release
relating to the results of the Federal Communications
Commission's auction of basic trading areas.
-15-
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN TELECASTING, INC.
Date: July 26, 1996 By:/s/ David K. Sentman
-----------------------------------
David K. Sentman
Senior Vice President-Finance, Chief
Financial Officer and
Treasurer (Principal
Financial Officer)
Date: July 26, 1996 By:/s/ John R. Hager
-----------------------------------
John R. Hager
Controller
(Principal Accounting Officer)
-16-
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
3.1(i) Certificate of Amendment of Restated Certificate of Incorporation of American Telecasting, Inc. dated as of April
24, 1996.
10.1 Agreement for Purchase and Sale of Assets dated June 28, 1996 among Novner Enterprises, Inc., Alvin Novick, Phyllis
Novick, American Telecasting of Cincinnati, Inc. and American Telecasting, Inc.
10.2 Management Agreement dated as of June 28, 1996 between Novner Enterprises, Inc. and American Telecasting of
Cincinnati, Inc.
10.3 Agreement for Exchange of Assets dated July 10, 1996 among Heartland Wireless Communications, Inc., Heartland
Wireless South Dakota Properties, Inc., Heartland Wireless Florida Properties, Inc. and American Telecasting, Inc.
10.4 First Amendment to Amended and Restated Revolving Credit Agreement dated as of June 30, 1996 among Fresno MMDS
Associates, First Union National Bank of North Carolina, Fresno Telsat, Inc. and Fresno Wireless Cable Television,
Inc.; related Subordination Agreement dated as of June 30, 1996 by American Telecasting, Inc. and Fresno MMDS
Associates in favor of First Union National Bank of North Carolina; related Assignment Acceptance and Intercreditor
Agreement dated as of July 18, 1996 among First Union National Bank of North Carolina, American Telecasting, Inc.,
First Union National Bank of North Carolina as agent and Fresno MMDS Associates.
10.5 Side agreement between Fresno Telsat, Inc. and American Telecasting, Inc.
10.6 American Telecasting, Inc. 1990 Stock Option Program, As Amended (Effective April 25, 1996).
27 Financial Data Schedule
</TABLE>
-17-
<PAGE> 1
EXHIBIT 3.1(i)
CERTIFICATE OF AMENDMENT OF
RESTATED CERTIFICATE OF INCORPORATION OF
AMERICAN TELECASTING, INC.
AMERICAN TELECASTING, INC. (the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of
the State of Delaware, DOES HEREBY CERTIFY:
1. That the Board of Directors of the Corporation acting at a
meeting in accordance with the Corporation's Amended and Restated Bylaws and
the General Corporation Law of the State of Delaware, adopted resolutions
providing that the Restated Certificate of Incorporation of the Corporation be
amended by deleting ARTICLE IV, CAPITAL STOCK, in its entirety and inserting
the following in place thereof:
ARTICLE IV
CAPITAL STOCK
Section 4.1. Total Number of Shares of Capital Stock. The
total number of shares of capital stock of all classes that the
Corporation shall have authority to issue is 43,000,000 shares. The
authorized capital stock is divided into 3,000,000 shares of Preferred
Stock, of the par value of $.01 each (the "Preferred Stock"), and
40,000,000 shares of Common Stock, of the par value of $.01 each (the
"Common Stock"). The shares of Common Stock of the Corporation shall
consist of two classes, 30,000,000 shares of Class A Common Stock and
10,000,000 shares of Class B Common Stock.
Section 4.2. Preferred Stock.
(a) The shares of Preferred Stock of the Corporation may be
issued from time to time in one or more classes or series thereof, the
shares of each class or series thereof to have such voting powers,
full or limited, or no voting powers, and such designations,
preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions thereof, as are
stated and expressed herein or in the resolution or resolutions
providing for the issue of such class or series, adopted by the Board
of Directors as hereinafter provided.
(b) Authority is hereby expressly granted to the Board of
Directors of the Corporation, subject to the provisions of this
Article IV and to the limitations prescribed by the Delaware General
Corporation Law, to authorize the issue of
<PAGE> 2
one or more classes, or series thereof, of Preferred Stock and with
respect to each such class or series to fix by resolution or
resolutions providing for the issue of such class or series the voting
powers, full or limited, if any, of the shares of such class or series
and the designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions thereof. The authority of the Board of Directors with
respect to each class or series thereof shall include, but not be
limited to, the determination or fixing of the following:
(i) the designation of such class or series;
(ii) the dividend rate of such class or series, the
conditions and dates upon which such dividends shall be payable, the
relation which such dividends shall bear to the dividends payable on
any other class or classes of stock or any other series of any class
of stock of the Corporation, and whether such dividends shall be
cumulative or noncumulative;
(iii) whether the shares of such class or series
shall be subject to redemption by the Corporation (in addition to
redemption pursuant to Article X hereof) and, if made subject to such
redemption, the times, prices and other terms and conditions of such
redemption;
(iv) the terms and amount of any sinking fund
provided for the purchase or redemption of the shares of such class or
series;
(v) whether or not the shares of such class or
series shall be convertible into or exchangeable for shares of any
other class or classes of any stock or any other series of, any class
of stock of the Corporation, and, if provision is made for conversion
or exchange, the times, prices, rates, adjustments and other terms and
conditions of such conversion or exchange;
(vi) the extent, if any, to which the holders of
shares of such class or series shall be entitled to vote with respect
to the election of directors or otherwise;
(vii) the restrictions, if any, on the issue or
reissue of any additional Preferred Stock;
(viii) the rights of the holders of the shares of
such class or series upon the dissolution of, or upon the distribution
of assets of, the Corporation; and
(ix) the manner in which any facts ascertainable
outside the resolution or resolutions providing for the issue of such
class or series shall operate upon the voting powers,
-2-
<PAGE> 3
designations, preferences, rights and qualifications, limitations or
restrictions of such class or series.
Section 4.3. Common Stock.
(a) The Class A Common Stock and the Class B Common Stock
shall be identical in all respects, except that the holders of the
Class B Common Stock shall have no voting rights for any purpose
whatsoever and the holders of the Class A Common Stock shall, to the
exclusion of the holders of the Class B Common Stock, have full voting
power for all purposes, except as provided otherwise in the General
Corporation Law of the State of Delaware. Subject to all of the
rights of the Preferred Stock provided for by resolution or
resolutions of the Board of Directors pursuant to this Article IV or
by the Delaware General Corporation Law, the holders of Class A Common
Stock shall have one vote per share of Class A Common Stock on all
matters on which holders of Class A Common Stock are entitled to vote,
except as provided in Section 10.1(c).
(b) All shares of Common Stock currently issued and
outstanding as of the date hereof are shares of Class A Common Stock.
2. That thereafter at the Annual Meeting of the Stockholders of
American Telecasting, Inc., duly called and convened, a majority of the stock
of the Corporation entitled to vote thereon approved the foregoing amendment.
3. That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
(signatures on the following page)
-3-
<PAGE> 4
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by Robert D. Hostetler, the Chief Executive Officer and
President of the Corporation, and attested by Richard F. Seney, the Secretary
of the Corporation, as of this ___ day of ________________, 1996.
By: /s/ ROBERT D. HOSTETLER
--------------------------
Name: Robert D. Hostetler
Title: Chief Executive Officer
and President
Attest:
By: /s/ RICHARD F. SENEY
--------------------------
Name: Richard F. Seney
Title: Secretary
-4-
<PAGE> 1
EXHIBIT 10.1
AGREEMENT
FOR
PURCHASE AND SALE OF ASSETS
This AGREEMENT FOR PURCHASE AND SALE OF ASSETS (this "Agreement") is
made and entered into this 28th day of June, 1996 by and among NOVNER
ENTERPRISES, INC., an Ohio corporation ("Novner"), ALVIN NOVICK, an individual
("Alvin"), PHYLLIS NOVICK, an individual ("Phyllis"; Novner, Alvin and Phyllis
are each individually and collectively referred to as "Seller" and "Sellers"),
AMERICAN TELECASTING OF CINCINNATI, INC., a Delaware corporation ("Buyer") and,
for purposes of Section 11.12 only AMERICAN TELECASTING, INC., a Delaware
corporation ("ATI").
WHEREAS, Sellers and Cincinnati Wireless Cable, Inc., an Ohio
corporation ("CWC"), own or lease certain wireless cable channel rights, or
applications therefor, in the Cincinnati, Ohio market, Sellers operate systems
to provide certain private cable services in the Cincinnati, Ohio market and
for the Holiday Inn (formerly Ramada) at Sanibel Island, Florida (collectively,
the "SMATV System") (all of Sellers' and CWC's wireless cable channel rights
and/or applications therefor, all other wireless cable television assets owned
or leased by Sellers and CWC, the SMATV System, and all assets related thereto
are collectively referred to herein as the "Business");
WHEREAS, Buyer desires to purchase from Sellers and Sellers desire to
sell to Buyer all of Sellers' rights, title and interest in and to the
Business, on and subject to the terms and conditions set forth herein;
WHEREAS, Buyer wishes to acquire control of CWC's assets used in the
Business by means of a purchase of all of the outstanding capital stock of CWC
and as part of this transaction; and
WHEREAS, Alvin and Phyllis own all of the outstanding capital stock in
CWC and desire to sell such stock to Buyer pursuant to the terms set forth
herein;
NOW THEREFORE, in consideration of the premises and promises herein
contained, the parties agree as set forth below.
<PAGE> 2
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1. The Transaction. Sellers shall sell, transfer, assign and
deliver to Buyer, and Buyer shall purchase, accept, assume and receive, all of
their respective right, title and interest in and to the Purchased Assets (as
defined in Section 1.2 below).
1.2. Purchased Assets. The "Purchased Assets" are all of the
assets, properties, rights, licenses, permits and claims of Sellers or any
affiliated person or entity used in, relating to, or arising from the conduct
of the Business, including, but not limited to, the following, but excluding
assets owned by CWC:
(a) all wireless cable channel rights and authorizations
relating to or used in the Business (including all contracts or leases
giving the Business the right to use wireless cable channel rights and
authorizations owned by other entities) including, without limitation,
those wireless cable channel rights and fixed earth station
authorizations listed on Schedule 4.21 attached hereto (the "Channel
Rights");
(b) all agreements, contracts and assets used in or related to
the SMATV System, including, but not limited to, those agreements,
contracts and assets listed on Schedule 1.2(b) attached hereto (such
agreements and contracts are referred to herein as the "SMATV
Contracts");
(c) all other permits, licenses, franchises, product
registrations, filings, authorizations, approvals and indicia of
authority (and pending applications for any thereof) necessary to (i)
to conduct the operations of the Business and to own, manufacture,
construct, operate and maintain any product, service, fixture,
facility, equipment, vehicle, machinery or installation of the
Business, or (ii) to store, transport, dispose of, market, use or sell
any goods or services used, handled, produced, disposed of, marketed
or sold in the operation of the Business, as issued by any
governmental agency or instrumentality (the "Approvals"), including
but not limited to those which are listed on Schedule 1.2(c);
(d) all transmission equipment used in connection with the
Business and the Channel Rights, including, but not limited to, the
equipment listed on Schedule 1.2(d) attached hereto;
<PAGE> 3
(e) all rights in, to and under the tower rental agreements
listed on Schedule 1.2(e) attached hereto (the "Tower Lease
Agreements");
(f) all assets listed on Schedule 1.2(f) attached hereto;
(g) all rights under any other contracts, licenses, instruments
and other agreements relating to the Business including, without
limitation, all rights under agreements with employees and consultants
concerning confidentiality and the assignment of inventions;
(h) all accounts which arose in the ordinary course of the
Business (except for the account receivable owed by The Crosley Bar);
(i) all fixtures, machinery and equipment, whether owned or
leased relating solely to the Business;
(j) the BSI billing system and any other billing systems
relating solely to the Business;
(k) all supplies, parts, components, work in process, finished
goods and other inventories relating solely to the Business;
(l) all performance and other bonds, security and other
deposits, and advances maintained for use in the conduct of the
Business;
(m) all patents, trademarks, trade names, trade styles, logos
and service marks and all applications and registrations therefor and
licenses thereof relating to the Business;
(n) all customer files, all lists of customers, all rights and
claims under customer orders, service agreements, purchase orders,
dealer and distributorship agreements, and other similar commitments
relating solely to the Business;
(o) all documents and records relating to the Purchased Assets,
or the operations, products or services of the Business (including
historical cost and pricing data), and employment and personnel
records for all employees of the Business;
(p) copies or originals of all accounting books, records,
ledgers and electronic data processing materials relating solely to
the Business;
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(q) all customer deposits, all prepaid expenses, deferred
charges and rights to volume rebates due from suppliers relating
solely to the Business;
(r) all easements, appurtenances and privileges located on real
property and used in the Business and all improvements, fixtures and
other appurtenances related thereto;
(s) the vehicles listed on Schedule 1.2(s) (the "Vehicles");
(t) all of the outstanding shares of the CWC's capital stock,
no par value (the ownership of all of the outstanding stock of CWC is
set forth on Schedule 1.2(t); all of the outstanding capital stock of
CWC is referred to as herein as the "Stock"); and
(u) all other assets, properties, rights and claims related to
the operations of the Business which arise in or from the conduct
thereof.
Notwithstanding anything contained herein to the contrary, the Purchased Assets
shall not include (i) the assets listed on Schedule 1.2(z) attached hereto,
(ii) all assets related solely to systems at or contracts for the Hills
Community Properties (which means any property now or hereafter owned, managed
or controlled by Hills Developers, the Gutman family or any affiliates), (iii)
the Special Account, (iv) the "Novner" name which is being retained by Novner,
(v) Novner's office furnishings, fixtures, supplies, telephone and telecopy
systems, programming agreements, contracts with suppliers, customer deposits
related to the videoway equipment, and the videoway equipment, and (vi) all
notes receivable of Novner (collectively, the "Excluded Assets"). For purposes
hereof, the "Special Account" shall mean the separate line of business of
Novner, as distinct from Novner's wireless cable and SMATV television business
(the assets of which are being sold to Buyer hereunder), which has its own
checking account and accounting system and whose activities are limited to
commercial and residential satellite TV sales and installations (all sizes) and
programming, and "home-like" entertainment systems, both residential and
commercial. To the extent that Novner is in compliance with its obligations
hereunder and a SMATV Contract and the equipment directly related thereto are
managed by Buyer under the Management Agreement (defined in Section 3.2 (a)(v))
and are not assigned to Buyer on or before the first anniversary of the First
Closing Date, such SMATV Contract and any equipment directly related thereto
shall be deemed to be "Excluded Assets" hereunder.
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1.3. Assumed Obligations. Buyer shall assume and discharge only
those obligations (the "Assumed Obligations") of Sellers specifically arising
under the Channel Rights, the Tower Lease Agreements, the SMATV Contracts, and
the Approvals assigned to Buyer after the First Closing or the Second Closing
(as such capitalized terms are defined in Section 3.1 below), as the case may
be. Buyer shall forever defend, indemnify and hold harmless Sellers from and
against any and all liabilities, obligations, claims, damages (including
incidental and consequential damages), costs and expenses (including court
costs and reasonable attorneys' fees) related to or arising from Buyer's
failure to fully perform and discharge the Assumed Obligations. Buyer further
agrees to pay and discharge all such Assumed Obligations as they come due.
1.4. Excluded Liabilities and Obligations. Except as expressly
set forth in Section 1.3 above, Buyer shall not assume and shall not be liable
or responsible for any debt, obligation or liability of Sellers, any Affiliate
(as defined in Section 4.4) of any Seller, or any claim against any of the
foregoing, of any kind, whether known or unknown, contingent, absolute, or
otherwise. Except for the Assumed Obligations set forth in Section 1.3 hereof,
Sellers shall forever defend, indemnify and hold harmless Buyer from and
against any and all liabilities, obligations, losses, claims, damages
(including incidental and consequential damages), costs and expenses (including
court costs and reasonable attorneys' fees) related to or arising from the
Business or the Purchased Assets prior to the First Closing Date or the Second
Closing Date, as the case may be.
ARTICLE II
CONSIDERATION FOR TRANSFER
2.1. Consideration. The aggregate consideration for the
Purchased Assets is $5,188,163 as adjusted pursuant to Sections 2.2, 2.3 and
2.4 below (the "Purchase Price"). The Purchase Price shall be paid to Sellers
as set forth below.
(a) As provided in Subsection (b) below, on the First Closing
Date Buyer shall wire transfer to Pepper & Corazzini ("Escrow Agent") $97,500
(the "First Closing Deposit"), on the Second Closing Date Buyer shall wire
transfer to the Escrow Agent $150,000 (the "Second Closing Deposit"), pursuant
to the terms of the Indemnification Escrow Agreement among Buyer, Sellers, and
Escrow Agent, in substantially the form of Schedule 2.1(a) attached hereto (the
"Indemnification Escrow Agreement").
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(b) On the First Closing Date, Buyer shall make the following
wire transfers:
i) to Novner, an amount equal to $2,071,359, as
adjusted pursuant to Section 2.2 below, minus an amount
equal to the First Closing Deposit, the First LOI Deposit
(as defined in Section 2.4 below), and the Second LOI
Deposit (as defined in Section 2.4 below)(such net payment
is referred to herein as the "First Closing Payment");
ii) to the Escrow Agent, an amount equal to the First
Closing Deposit pursuant to the terms of the
Indemnification Escrow Agreement; and
iii) to the Escrow Agent, an amount equal to the
Adjustment Amount (as defined in Section 2.2(b)(ii)), if
any, pursuant to the terms of the Subscriber Escrow
Agreement among Novner, Buyer and Escrow Agent, in
substantially the form of Schedule 2.1(b)(iii) attached
hereto (the "Subscriber Escrow Agreement").
(c) On the Second Closing Date, Buyer shall make the following
wire transfers:
i) to Alvin and Phyllis jointly, an aggregate amount
equal to the $3,116,804, as adjusted pursuant to Sections
2.2 and 2.3, minus an amount equal to the Second Closing
Deposit and the MDS Amount (as defined in Section 2.3)
(such net payment is referred to herein as the "Second
Closing Payment"); and
ii) to the Escrow Agent, an amount equal to the Second
Closing Deposit pursuant to the terms of the
Indemnification Escrow Agreement; and
iii) an amount equal to the MDS Amount to either Novner
or the Escrow Agent, as determined in accordance with
Section 2.3(a), and if to Escrow Agent, pursuant to the
terms of the MDS Escrow Agreement among Novner, Buyer and
the Escrow Agent, in substantially the form of Schedule
2.1(c)(iii) attached hereto (the "MDS Escrow Agreement").
(d) Of the aggregate Purchase Price of $5,188,163, $2,071,359
shall be paid to Novner, and $2,966,804 shall be paid to Alvin and Phyllis
jointly, and the MDS Escrow Amount will be paid to Novner as set forth in
Section 2.3(a). All adjustments,
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deposits and partial payments shall be allocated among the Sellers in
proportion to the amounts reflected in the prior sentence.
2.2 Adjustments to Purchase Price.
(a) The Purchase Price shall be reduced by the aggregate amount
of any and all obligations or liabilities associated with the Purchased Assets
except for Assumed Obligations as follows:
i) at the First Closing, the $2,071,359 of the
Purchase Price otherwise payable shall be reduced by the
aggregate amount of any and all obligations or liabilities
associated with the SMATV Assets (as defined in Section
3.1(a) below) which are assumed by Buyer as of the First
Closing Date (if monies equal to all customer deposits of
the Business are not delivered to Buyer at the First
Closing, the amount of such deposits will be considered a
liability to be deducted from the Purchase Price) and such
reduction shall be made by decreasing the $2,071,359 of the
Purchase Price;
ii) at the First Closing, the $2,071,359 of the
Purchase Price otherwise payable shall be increased by an
amount equal to all prepaid expenses paid by Novner and
related solely to the SMATV Assets for business and license
fees, utility charges, property and equipment rentals, and
other service charges which are allocable to the period
after July 1, 1996, and such increase shall be made by
increasing the $2,071,359 of the Purchase Price; and
iii) at the Second Closing, the $3,116,804 of the
Purchase Price otherwise payable shall be reduced by the
aggregate amount of any and all obligations or liabilities
associated with the Wireless Assets (as defined in Section
3.1(b) below) which are assumed by Buyer as of the Second
Closing Date, except for tower related payments paid by
Buyer pursuant to Section 7.5, and such reduction shall be
made by decreasing $3,116,804 of the Purchase Price.
(b) The Purchase Price shall also be adjusted based on the
number of Subscribers of the SMATV System as follows:
i) in the event that the number of Subscribers (as
defined in Subsection (e) below) delivered to Buyer under
new SMATV Qualifying Contracts (as defined in
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Section 2.2(c)) entered into after May 29, 1996 and on or
before the First Closing Date, plus the 2,428 Subscribers
which the SMATV System had as of May 29, 1996 (all such
Subscribers are referred to herein as the "Closing
Subscribers"), exceeds 3,000, the Purchase Price shall be
increased by an amount equal to such excess multiplied by
$650; provided, however that in no event shall such
increase exceed $250,000; and
ii) in the event that there are less than 2,400
Closing Subscribers as of the First Closing Date, the
Purchase Price shall be decreased by an amount equal to
$500 multiplied by the number equal to 2,400 minus the
number of Closing Subscribers (the "Adjustment Amount"),
except that there shall not be a reduction in the Purchase
Price to the extent that such reduction is due to the
exclusion of the Queens Tower and Grandin House
subscribers.
Any increase or decrease in the Purchase Price under this Section 2.2(b) shall
be made by increasing or decreasing, as the case may be, the $2,071,359 portion
of the Purchase Price.
(c) i) Novner shall be entitled to "earn-back" an amount
equal to the Adjustment Amount, if any, by delivering to
Buyer, duly executed consent to assignment and
certification agreement(s) and/or acknowledgement letter(s)
which were not delivered at the First Closing, within one
year after the First Closing. Within five days after
receipt of each such agreement or letter and a bill of
sale, in substantially the form of Schedule 3.2(b)(ii) by
Buyer, Buyer and Novner shall instruct the Escrow Agent to
release to Novner an amount equal to $500 multiplied by the
number of Subscribers set forth on Schedule 4.25 and
subject to such agreement or letter, or, in the event that
the Subscriber Escrow Agreement has terminated, Buyer shall
deliver, within fifteen days after receipt of each such
agreement or letter and bill sale, such amount to Novner
via wire transfer; provided, however that in no event shall
Novner be entitled to "earn-back" an aggregate amount
greater than the Adjustment Amount under this Section
2.2(c)(i).
ii) Novner shall also be entitled to also "earn-back"
an aggregate amount equal to $250,000 (the "Original SMATV
Reduction Amount"), to the extent
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that the number of Subscribers assigned to Buyer under this
Agreement at or following the First Closing exceeds 3,000,
by delivering to Buyer, on or before the first anniversary
of the First Closing Date, SMATV or MDU contracts to
provide services in the greater Cincinnati market, each of
which contains terms and conditions standard to ATI and its
subsidiaries' SMATV and MDU contracts, and which is for a
term of at least five years and provides a rate of return
of 30% as determined in accordance with ATI's standard
procedures for SMATV and MDU contracts (such rate of return
calculation to be based on projected penetrations similar
those achieved elsewhere by ATI and its subsidiaries
similar to those achieved elsewhere by ATI and its
subsidiaries). Within five days after executing each such
contract, Novner shall deliver a copy of the signed
contract to Buyer for its review. Within fifteen days
after Buyer's receipt of such contract, Buyer will notify
Novner in writing whether or not it accepts such contract
(all such accepted contracts are referred to herein as
"Qualifying Contracts"). Within ten days after receipt of
such notice from Buyer, Novner shall deliver an assignment
of such Qualifying Contract to Buyer, in a form
satisfactory to Buyer, and Buyer shall deliver to Sellers
an amount equal to (A) if such Qualifying Contract is for a
SMATV or MDU system which has been fully constructed to
Buyer's satisfaction, $650 for each subscriber who has
signed a contract to receive the basic channel package, not
"pay" or "premium" services, under such Qualifying
Contract, or (B) if there are no existing subscribers under
such Qualifying Contract or if the system has not been
fully constructed to Buyer's satisfaction, $650 per
projected subscriber minus the costs of construction of the
system allocated on a per subscriber basis, consistent with
ATI's standard practices, and subject to the 30% internal
rate of return described above based on projected
penetrations similar to those achieved elsewhere by ATI;
provided, however, that in no event shall a subscriber be
considered within the definition of a Subscriber if such
subscriber received television services from Sellers or
Buyer in the past (except for subscribers receiving service
under current or proposed contracts with Storer
Communications of Kentucky, Inc./TKR or Warner Cable
Communications, Inc. described in more detail on Schedule
2.2(c) attached hereto (the "TKR and Warner
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Contracts")). Novner hereby covenants and agrees to only
enter into contracts which it reasonably believes satisfy
the above criteria. In the event that Buyer does not
accept a contract delivered to Buyer within the fifteen day
period because Buyer reasonably believes such contract does
not meet the above criteria, Novner may either service such
contract or sell such contract to a third party and such
activities will not be considered a breach of Sellers'
obligations under the Non-competition Agreements (as
defined in Section 3.2(b)(ix)). Notwithstanding anything
contained herein to the contrary, on the date that Novner
"earns-back" an amount equal to the Original SMATV
Reduction Amount or the date Novner obtains a waiver or
exemption from the FCC regarding the "cross-ownership"
rules and regulations which could prohibit Buyer's
operation of a wireless cable system and SMATV systems in
Cincinnati, in a form reasonably satisfactory to Buyer
(Buyer also agrees a temporary waiver in the nature of the
"Blackstone" waiver that allows Buyer to operate both the
Wireless Assets and the SMATV Assets on a temporary basis
for at least twelve months shall be satisfactory to for
Buyer) (the "FCC Waiver") Sellers shall immediately
discontinue all activities related to SMATV subscribers and
contracts in the greater Cincinnati market, except for
activities permitted under the Non-competition Agreements.
(d) Notwithstanding anything contained in this Agreement to the
contrary, in no event shall the aggregate amount of the First Closing Payment,
the Adjustment Amount, the First LOI Deposit, the Second LOI Deposit, the First
Closing Deposit and all payments made to Sellers under Qualifying Contracts and
the TKR and Warner Contracts and Section 7.6 exceed an amount equal to
$2,321,359.
(e) For purposes of this Agreement, "Subscribers" shall mean
all those subscribers receiving the basic channel package (not "pay" or
"premium" services) offered by Sellers in the Cincinnati, Ohio Market, and in
the Sanibel Island, Florida market, and whose bills for such services are not
more than 60 days past due. Notwithstanding the above, (i) all subscribers
which are related to hotel, motel or retirement contracts shall be counted on
an equivalent basic unit basis equal to the number of such subscribers divided
by three, (ii) in the case of subscribers receiving programming from under the
TKR and Warner Contracts, such subscribers shall only be considered to be
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Subscribers if and when Sellers deliver to Buyer a programming agreement signed
by Storer Communications of Kentucky, Inc./TKR or Warner Cable Communications,
Inc. which is assignable to Buyer and has a term of at least one year from a
date on or after the First Closing, and (iii) the first 100 Subscribers whose
bills are more than 60 days but less than 120 days past due at May 29, 1996
shall be included as "Subscribers" for the minimum Subscriber calculations, if
each such Subscriber has been a subscriber for the last six months.
Notwithstanding anything contained herein to the contrary, in no event shall a
subscriber be considered within the definition of "Subscriber" unless the SMATV
or MDU contract or the TKR and Warner Contracts pursuant to which such
subscriber receives services is assigned to Buyer and Sellers deliver a consent
to assignment and certification agreement for such written contract or
acknowledgement letter for such oral contract under Section 3.2(b)(iii) below;
if a consent to assignment and certification agreement or acknowledgement
letter is not delivered for such contract(s) at the First Closing, the number
of subscribers subject to such contract(s) will be deducted from the number of
Closing Subscribers and a corresponding reduction in the First Closing Payment
will be made under Section 2.2(b)(ii).
2.3 Additional Adjustment for Licenses Not Held by Novner.
(a) If the FCC has not authorized by Final Order (as defined in
Subsection (b) below) (i) the assignment of the MDS- 1 channel license for
Cincinnati to Novner and such assignment has not been consummated on or before
the Second Closing Date, and (ii) the petition for reconsideration filed by
Novner seeking to have the FCC reinstate the MDS-2 channel application for
Cincinnati on or before the Second Closing Date, then Buyer shall at the Second
Closing deliver $150,000 of the $3,116,804 Purchase Price otherwise payable
(the "MDS Amount") to the Escrow Agent pursuant to terms and conditions of the
MDS Escrow Agreement. In the event that a Final Order and closing assigning
the MDS-1 channel license to Novner or a Final Order granting the MDS-2 channel
license to Novner occurs on or before January 31, 1998, the Escrow Agent shall
deliver the monies, including interest, in escrow under the MDS Escrow
Agreement to Novner within five business days after the date either such grant
becomes a Final Order. In the event that the FCC does not grant by Final Order
either the MDS-1 assignment application to Novner and such assignment has not
been consummated or the MDS-2 application to Novner, on or before January 31,
1998, the Purchase Price shall be permanently reduced by an amount equal to the
MDS Amount and the Escrow Agent shall deliver all monies under the MDS Escrow
Agreement to Buyer.
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(b) For purposes of this Agreement, a "Final Order" means an
FCC action granting an application as to which the time for filing for
administrative or judicial review or reconsideration or for the FCC to set
aside such grant on its own motion has expired without any such filing having
been made or FCC action taken, or, in the event of such filing or FCC action,
the FCC grant has been reaffirmed or upheld and the time for seeking further
administrative or judicial review with respect thereto has expired without any
such request for such further review having been filed.
2.4. Credit for Disbursements from Escrows. Pursuant to the
terms of that certain Escrow Agreement among ATI, CWC, Novner, Alvin, Phyllis
and Escrow Agent dated October 23, 1995 (the "First Escrow Agreement"), ATI
deposited $25,000 into escrow (the "First LOI Deposit"). Pursuant to the terms
of that certain Escrow Agreement among ATI, CWC, Novner, Alvin, Phyllis and
Escrow Agent dated November 7, 1995 (the "Second Escrow Agreement"), ATI
deposited $100,000 into escrow (the "Second LOI Deposit"). The $125,000
(together with interest) deposited in escrow pursuant to the First Escrow
Agreement and the Second Escrow Agreement shall be disbursed to Novner and
credited against the Purchase Price payable at the First Closing.
2.5. Allocation of the Purchase Price. The Purchase Price shall
be allocated as follows: (a) a total of $2,071,359 for the SMATV System and
the Subscribers, suballocated at $100 per Subscriber of the SMATV System for
the Forum/Clifton Colony subscribers and for any other contracts which have a
term of less than one year and $200,000 for the SMATV equipment, (b) $1,000,000
for the Stock, and (c) the remainder of the Purchase Price for the Wireless
Assets.
2.6. No Further Ownership Rights in CWC. At and after the
Second Closing Date, Alvin and Phyllis shall cease to have any rights as
stockholders, officers, directors or creditors of CWC.
ARTICLE III
THE FIRST CLOSING AND THE SECOND CLOSING
3.1. The Closings.
(a) On such date as is mutually agreed to by the parties hereto
but in no event later than June 30, 1996 (the "First Closing Date"), the first
closing (the "First Closing") shall be held at McDermott, Will & Emery, 1850 K
Street, N.W., Washington, DC 20006, at 10:00 a.m., or at such other place as
mutually
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agreed to by the parties hereto, at which time Sellers shall transfer title to
the Purchased Assets used in the operation of the SMATV System (collectively,
the "SMATV Assets") and Buyer shall make the payments required under Section
3.2(a); provided, however, that the SMATV Assets shall not include the TKR and
Warner Contracts and subscribers thereunder unless contract(s) with TKR and/or
Warner satisfying the requirements to Section 2.2(e) above and consents to such
assignments in the form of Schedule 3.2(b)(ii) are delivered to Buyer. Subject
to the terms of this Agreement, at the First Closing, Sellers shall take all
steps necessary to place Buyer in actual possession and operating control of
the SMATV Assets.
(b) On such date as mutually agreed to by the parties hereto
but in no event later than November 15, 1996 (the "Second Closing Date"), the
second closing (the "Second Closing") shall be held at McDermott, Will & Emery,
1850 K Street, N.W., Washington, DC 20006, at 10:00 a.m., or at such other
place as mutually agreed to by the parties hereto, at which time Novner, Alvin
and Phyllis shall transfer title to the Purchased Assets used in the operation
of Sellers' wireless cable business and all other Purchased Assets not already
transferred to Buyer at the First Closing (collectively, the "Wireless Assets")
and the Stock, and Buyer shall make the payments required under Section 3.3(a).
At the Second Closing, Sellers shall take all steps necessary to place Buyer in
actual possession and operating control of the Wireless Assets and the Stock.
3.2. Deliveries at the First Closing.
(a) At the First Closing, Buyer shall deliver the following to
Sellers:
i) a certificate signed by a duly authorized officer
of Buyer attesting to the accuracy of Buyer's
representations and warranties and Buyer's compliance with
its covenants and obligations under this Agreement as of
the First Closing Date;
ii) the First Closing Payment, via wire transfer, to
Sellers pursuant to written wire transfer instructions
delivered by Sellers;
iii) the Indemnification Escrow Agreement, the Subscriber
Escrow Agreement duly executed by Buyer;
iv) wire transfers to Escrow Agent representing the First
Closing Deposit and the Adjustment Amount, if any;
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v) the management agreement between Buyer and Novner, duly
executed by Buyer substantially in the form of Schedule
3.2(a)(v) hereto (the "Management Agreement");
vi) a lease agreement (the "Lease") with Alvin Novick for
approximately 4,000 square feet of office space located at
9919 Springfield Pike, Cincinnati, Ohio, in substantially
the form of Schedule 3.2(a)(vi) hereto; and
vii) such other instruments or documents as may be
reasonably necessary to carry out the transactions
contemplated hereby.
(b) At the First Closing, Sellers shall deliver the following
to Buyer:
i) certificates of each Seller signed by such Seller or a
duly authorized officer of such Seller attesting to the
accuracy of such party's representations and warranties and
such party's compliance with its covenants and obligations
under this Agreement as of the First Closing Date;
ii) a general assignment and bill of sale duly executed by
Novner assigning all rights and interests to the SMATV
Assets, in substantially the form of Schedule 3.2(b)(ii)
attached hereto;
iii) consent to assignment and certification agreements
for all written contracts and acknowledgement letters for
all oral contracts (except the TKR and Warner Contracts)
included within the SMATV Assets duly executed by all
parties thereto (except Buyer), in substantially the form
of Schedule 3.2(b)(iii)(A) for written agreements and the
form of Schedule 3.2(b)(iii)(B) for oral agreements
attached hereto; provided, however, that, with respect to
agreements covering Subscribers to the SMATV systems,
Novner shall only be required to deliver consent to
assignment and certification agreements and acknowledgement
letters covering 1,000 Subscribers;
iv) an opinion of Vorys, Sater, Seymour & Pease, in
substantially the form of Schedule 3.2(b)(iv) attached
hereto;
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v) the Indemnification Escrow Agreement duly executed by
Sellers, and the Subscriber Escrow Agreement duly executed
by Novner duly executed by Alvin and Phyllis;
vi) the Management Agreement duly executed by Novner;
vii) a non-competition agreement duly executed by each of
Novner, Alvin, Phyllis, Howard Friedman, and each other
officer, director or shareholder of Novner or CWC,
substantially in the form of Schedule 3.2(b)(vii) hereto
(collectively, the "Non-competition Agreements");
viii) a list identifying each account receivable of Novner
related to the Business and the amount owed by each debtor
as of day before the First Closing Date, in a form
acceptable to Buyer;
ix) a list identifying each account payable and each other
obligation of Novner and CWC, and the amount owed by each
such party as of the day before the First Closing Date, in
a form acceptable to Buyer;
x) evidence satisfactory to Buyer that the SMATV System
serves at least 2,000 Subscribers (computed by including
all persons who are otherwise Subscribers under the SMATV
Contracts without regard to whether a consent to assignment
and certification agreement or acknowledgment letter has
been obtained at the First Closing);
xi) a list identifying each subscriber who has given a
deposit to the Business and the amount of each such deposit
as of the day before the First Closing Date;
xii) evidence satisfactory to Buyer that the shareholders
and the Board of Directors of Novner has approved this
Agreement and the transactions contemplated herein in
accordance with requirements of applicable state corporate
law;
xiii) payoff and release letters from creditors of
Sellers with respect to debts or liabilities relating to
the SMATV Assets, together with UCC-3 termination
statements with respect to financing statements previously
filed in favor of said creditors against any of the SMATV
Assets;
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xiv) certificates of title for the Vehicles duly endorsed
in favor of Buyer;
xv) the Lease duly executed by Alvin Novick;
xvi) an indemnification letter agreement regarding the
Channel Rights and related equipment duly executed by
Sellers, in a form acceptable to Buyer; and
xvii) such other instruments or documents as may be
reasonably necessary to carry out the transactions
contemplated hereby.
3.3. Deliveries at the Second Closing.
(a) At the Second Closing, Buyer shall deliver the following to
Alvin and Phyllis:
i) a certificate signed by a duly authorized officer
of Buyer attesting to the accuracy of Buyer's
representations and warranties and Buyer's compliance with
its covenants and obligations under this Agreement as of
the Second Closing Date;
ii) the Second Closing Payment and any amount due under
Section 7.6, if any, via wire transfer, to Alvin and
Phyllis pursuant to written wire transfer instructions
delivered by Alvin and Phyllis;
iii) a wire transfer to Escrow Agent representing the
Second Closing Deposit and the MDS Amount;
iv) the MDS Escrow Agreement duly executed by Buyer; and
v) such other instruments or documents as may be
reasonably necessary to carry out the transactions
contemplated hereby.
(b) At the Second Closing, Sellers shall deliver the following
to Buyer:
i) certificates of each Seller selling Purchased Assets at
the Second Closing signed by such Seller or a duly
authorized officer of such Seller, attesting to the
accuracy of such party's representations and warranties and
such party's compliance with its
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covenants and obligations under this Agreement as of the
Second Closing Date;
ii) a general assignment and bill of sale duly executed by
each Seller selling Purchased Assets at the Second Closing
assigning all rights and interests to the Wireless Assets,
in substantially the form of Schedule 3.2(b)(ii) attached
hereto;
iii) consent to assignment and certification agreements
for all agreements included within the Wireless Assets,
including, but not limited to, all agreements included
within the Channel Rights and the Tower Lease Agreements,
duly executed by all parties thereto (except Buyer), in
substantially the form of Schedule 3.2(b)(iii)(A) attached
hereto;
iv) an opinion of Vorys, Sater, Seymour & Pease, in
substantially the form of Schedule 3.3(b)(iv) attached
hereto;
v) a channel lease agreement with purchase option in favor
of Buyer for each of the E Group channel license duly
executed by Alvin and Phyllis, the F Group channel license
duly executed by Alvin and Phyllis, the MDS-1 channel
license duly executed by Novner, and the MDS-2 channel
license, duly executed by Novner, in substantially the form
of Schedule 3.3(b)(v) attached hereto;
vi) a list identifying each account receivable of CWC and
each account receivable of Alvin and Phyllis related to the
Purchased Assets and the amount owed by each debtor as of
day before the Second Closing Date, in a form acceptable to
Buyer;
vii) a list identifying each account payable and each
other obligation of Novner, CWC, Alvin and Phyllis related
to the Stock and the Purchased Assets, and the amount owed
by Novner, CWC, Alvin and Phyllis as of the day before the
Second Closing Date, in a form acceptable to Buyer;
viii) an opinion of Pepper & Corazzini, L.L.P. regarding
Federal Communications Commission matters, in substantially
the form of Schedule 3.3(b)(viii) hereto;
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ix) payoff and release letters from creditors of Sellers
with respect to debts or liabilities relating to the
Wireless Assets, together with UCC-3 termination statements
with respect to financing statements previously filed in
favor of said creditors against any of the Wireless Assets;
x) stock certificates representing all of the Stock,
properly endorsed for transfer to Buyer or in blank;
xi) a certificate of the Secretary of CWC certifying
copies of the Articles of Incorporation, By-laws, minute
book and stock record book of CWC are true, correct and
complete copies of such documents, and a copy of the
Certificate of Incorporation of CWC and all amendments
thereto, certified by the Secretary of State of Ohio, as of
a date not earlier than 10 days prior to the Second Closing
Date;
xii) resignations effective immediately from all of CWC's
officers, directors and employees;
xiii) the MDS Escrow Agreement duly executed by Novner; and
xiv) such other instruments or documents as may be
reasonably necessary to carry out the transactions
contemplated hereby.
3.4. Nonassignable Contracts and Licenses.
(a) To the extent that the assignment by Sellers of any of (i)
the Channel Rights, Approvals, SMATV Contracts, or Tower Lease Agreements, (ii)
any government approvals related to the Business, or (iii) any sales order,
purchase order, lease, license or other contract included in the Purchased
Assets (collectively, the "Contracts and Licenses") is not permitted without
(A) the consent of the issuing party or governmental agency or any other party
thereto, (B) the approval of Buyer as a source of the services called for by
such Contracts and Licenses, or (C) the approval of Buyer as a lessee or
licensee under such Contracts and Licenses, this Agreement shall not be deemed
to constitute an assignment or an attempted assignment of the same, if such
assignment or attempted assignment would constitute a breach thereof. However,
unless otherwise agreed as to any particular Contracts and Licenses (or class
thereof), Sellers shall use their best efforts to obtain any and all such
consents, approvals and novations (provided that Sellers shall not be obligated
by this Section to make any payments other than
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outstanding amounts due under such Contracts and Licenses and ordinary filing
fees). All such consents, approvals and novations shall be in forms reasonably
acceptable to Buyer.
(b) If any such consent, approval or novation is requested but
not obtained, or any agreements required under this Section 3.4 are not
obtained, Sellers shall cooperate with Buyer in any reasonable arrangement
designed to provide Buyer with all of the benefits under such Contracts and
Licenses as if such consent, approval or novation had been obtained.
(c) If any such a consent, approval or novation is requested
but not obtained prior to the First Closing Date or the Second Closing Date, as
the case may be, and as a result Buyer will not receive the benefit of all of
the underlying Contracts and Licenses despite the best efforts of all of the
parties to develop a suitable arrangement pursuant to Subsection (b) above,
Buyer shall have the right to terminate this Agreement at the First Closing
(except that Buyer may not terminate for failure by Novner to deliver consent
to assignment and certification agreements and acknowledge letters for
subscribers if Novner delivers such agreements and letters covering at least
1,000 Subscribers as contemplated under Section 3.2(b)(iii)) or its obligations
to purchase the Wireless Assets at the Second Closing, as the case may be.
3.5. Escrow for Indemnification.
The First Closing Deposit and the Second Closing Deposit delivered by
Buyer to the Escrow Agent pursuant hereto shall, without regard to any other
provision hereof, be held in escrow by the Escrow Agent pursuant to the
Indemnification Escrow Agreement, providing for return of the monies held in
escrow to Buyer as reimbursement or compensation for any amounts due Buyer as a
result of any breach of a representation, warranty, covenant or other
obligation of any of the Sellers hereunder, or in satisfaction of any
obligation of any Seller hereunder. For purposes of the Indemnification Escrow
Agreement and this Section 3.5 only, each of the Sellers shall be jointly and
severally liable for the obligations of any or all Sellers hereunder so that
Buyer may proceed against the monies in escrow under the Indemnification Escrow
Agreement regardless of which individual Seller's obligation is the subject of
such reimbursement or compensation due Buyer so that Buyer shall be entitled to
proceed against the cash held in escrow under the Indemnification Escrow
Agreement to satisfy any obligation of any Seller. The escrow will expire on
the first anniversary of the Second Closing Date and all of the monies then
remaining in escrow (including accrued interest) shall be delivered to Sellers,
except to the extent
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claims shall have been made against them by Buyer. If a claim has been made
against the escrowed monies by Buyer at the time the escrowed monies are
scheduled to be released from escrow and if the value of the escrowed monies
scheduled for release exceeds the amount of such claim, cash equal in value to
such excess may be released to Sellers at that time.
Buyer shall be entitled to proceed against any monies in escrow under
the Indemnification Escrow Agreement, the Subscriber Escrow Agreement and the
MDS Escrow Agreement in satisfaction of any obligation of any Seller under the
indemnification letter agreement delivered pursuant to Section 3.2(b)(xvi).
3.6. Termination.
(a) This Agreement may be terminated under the circumstances
described below, in addition to any other grounds for termination provided for
herein or by law:
i) by Buyer in the event that any one or more of the
conditions set forth in Article VIII has not been fulfilled
in any material respect as of the First Closing Date;
ii) by Buyer if any Seller has breached in any material
respect any representation, warranty, covenant or agreement
made by any Seller in this Agreement, which breach cannot
be or is not cured by the First Closing Date;
iii) by Buyer in the event that there has been a
material adverse change with respect to the Channel Rights,
the Approvals, the SMATV Contracts, the Tower Lease
Agreements, or any of the Purchased Assets as of the First
Closing Date;
iv) by Buyer in the event that the SMATV System has less
than 2,000 Subscribers as of the First Closing Date
(computed by including all persons who are otherwise
Subscribers under the SMATV Contracts without regard to
whether a consent to assignment and certification agreement
or acknowledgement letter has been obtained at the First
Closing);
v) by Sellers in the event that any one or more of the
conditions set forth in Article IX has not been fulfilled
in any material respect as of the First Closing Date; or
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vi) by Sellers, if Buyer has breached in any material
respect any representation, warranty, covenant or agreement
made by Buyer in this Agreement, which breach cannot be or
is not cured by the First Closing Date.
(b) If this Agreement is terminated it shall become null and
void and have no further force or effect, except as otherwise provided herein.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller represents and warrants to Buyer as of the date hereof, as
of the First Closing Date, and as of the Second Closing Date as set forth
below. For purposes of this Agreement the term "Business Assets" shall mean
the Purchased Assets and all assets owned by CWC. Notwithstanding anything to
the contrary in this Agreement (except as set forth in Section 3.5) the
representations and warranties of any Seller in this Agreement relate only to
and are made only with respect to such Seller and the Business Assets owned or
leased by and sold by such Seller, and are qualified in their entirety by
disclosures made to Buyer whether orally (in the case of the SMATV Assets) or
in writing (in the case of the SMATV Assets and the Wireless Assets) and
disclosures to and information obtained by Buyer in the course of its
investigation of the Business. All representations and warranties made with
respect to the SMATV Assets and the MDS-1 channel in Cincinnati, Ohio are made
to the best knowledge of each Seller without any investigation other than as
may actually have been done by each Seller in the ordinary course of its
business.
4.1. Authority. Each Seller has full legal right, power and
authority, without the consent of any other person or if such consent is
required, each Seller has obtained such consent and notified in writing Buyer
of such consent, to execute and deliver this Agreement and to carry out the
transactions contemplated hereby. All corporate and other acts or proceedings
required to be taken by each Seller to authorize the execution, delivery and
performance of this Agreement and all transactions contemplated hereby have
been duly and properly taken.
4.2. Validity. This Agreement has been, and the documents to be
delivered at the First Closing and the Second Closing will be, duly executed
and delivered by each Seller and shall constitute lawful, valid and legally
binding obligations of each
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Seller, enforceable in accordance with their respective terms. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby will not result in the creation of any lien, charge or
encumbrance of any kind against any of the Business Assets or the acceleration
of any indebtedness or other obligation of any Seller and are not prohibited
by, do not violate or conflict with any provision of, and do not constitute a
default under or a breach of (a) the charter or by-laws of Novner or CWC, (b)
any contract, agreement or other instrument to which any Seller or CWC is a
party or by which any of the Business Assets are bound, (c) any order, writ,
injunction, decree or judgment of any court or governmental agency, or (d) any
law, rule or regulation applicable to any Seller or CWC, and will not restrict
the ability of Buyer to carry on the business previously conducted by Sellers
and CWC in connection with the Business Assets. No approval, authorization,
consent or other order or action of, or filing with, any court, administrative
agency or other governmental authority is required for the execution and
delivery by any Seller of this Agreement, or any other agreement provided for
herein, or the consummation by Sellers of the transactions contemplated hereby
or thereby, except for approvals and consents to be delivered at the First
Closing and the Second Closing, as the case may be.
4.3. Due Organization. Novner and CWC are each duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, and each has full power and authority and all requisite licenses,
permits and franchises to own, lease and operate its assets and to carry on its
business as presently conducted.
4.4. Transactions with Affiliates. No Affiliate of any Seller
(other than persons included within the definition of Seller or CWC):
(a) owns, directly or indirectly, any debt, equity or other
interest or investment in any corporation, firm or other entity which
is a competitor, lessor, lessee, customer, supplier or advertiser of
Novner or CWC (other than TV America, Inc., and the Hills Properties
business);
(b) has any cause of action or other claim whatsoever against
or owes any material amount to, or is owed any material amount by,
Novner or CWC (other than TV America, Inc., and the Hills Properties
business);
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(c) has any interest in or owns any property or right used in
the conduct of the Business (other than TV America, Inc., and the
Hills Properties business);
(d) is a party to any contract, lease, agreement, arrangement
or commitment used in the Business (other than TV America, Inc., and
the Hills Properties business); or
(e) has received from or furnished to Novner or CWC any goods
or services (with or without consideration) since December 31, 1990
(other than TV America, Inc., and the Hills Properties business).
The term "Affiliate" shall mean, with respect to any person or entity, any
member of the immediate family (including spouse, brother, sister, descendant,
ancestor or in-law) of any officer, director, partner or shareholder of such
person or entity, or any corporation, partnership, trust or other entity in
which such person or entity or any such family member has a material interest
or is a director, officer, partner or trustee. The term Affiliate shall also
include any entity which controls, or is controlled by, or is under common
control with any of the individuals or entities described in the preceding
sentence.
4.5. Financial Statements. The unaudited financial statements
of Novner and CWC for the year ended December 31, 1995 attached hereto as
Schedule 4.5 (collectively, the "Financial Statements") are (a) accurate,
correct and complete in all material respects, (b) in accordance with the books
of account and records of Novner and CWC, (c) fair presentations of the
financial condition and results of operations of Novner and CWC as of the dates
and for the periods indicated, and (d) prepared in accordance with generally
accepted U.S. accounting principles applied on a consistent basis throughout
the periods covered thereby.
4.6. Interim Change. Since December 31, 1995, there has not
been (a) any material change in the financial condition, assets, liabilities,
personnel or business of Novner or CWC, or in their relationships with
suppliers, customers, distributors, lessors or others, except changes in the
ordinary course of business; (b) any damage, destruction or loss, whether or
not covered by insurance, adversely affecting the Business Assets; (c) any
advances to or investments in or transfers of assets to any Affiliate or any
third-party; (d) any event or condition of any character materially adversely
affecting the Business or Business properties of Sellers or CWC; (e) any
material decrease in the actual net worth or in the book value of Novner or
CWC, other than due to operating losses incurred in the ordinary
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course of business; or (f) any change in the credit practices of Novner or CWC
with respect to the Business or in its methods of maintaining its books,
accounts or business records. Neither Novner nor CWC have incurred or become
subject to, nor agreed to incur or become subject to, any liability or
obligation with respect to Novner or CWC, contingent or otherwise, except
current liabilities and contractual obligations in the ordinary course of
business.
4.7. Certain Transactions. Since December 31, 1995, Sellers and
CWC have not (a) incurred or become subject to any obligation or liability
(absolute or contingent) with respect to Novner, CWC or the Business Assets,
except current liabilities incurred in the ordinary course of business and
obligations under the Material Contracts (as defined in Section 4.10) listed on
Schedule 4.10; (b) made any accrual or arrangement for the payment of bonuses
or special compensation of any kind or any severance or termination pay to any
present or former officer or employee; (c) mortgaged, pledged or subjected to
lien or any other encumbrance or restriction any of the Business Assets,
tangible or intangible; (d) sold, assigned or transferred, or agreed to sell,
assign or transfer, any asset which otherwise would be one of the Business
Assets; (e) suffered any material losses with respect to the Business or the
Business Assets; (f) waived or agreed to waive any material rights relating to
or involving the Business; (g) made or permitted any amendment or termination
of any Material Contract other than in the ordinary course of business; (h)
effected any change in the accounting methods and principles used in connection
with its books, records and financial statements; (i) entered into any
transaction relating to Sellers or CWC other than in the ordinary course of
business, except those transactions expressly required by the terms of this
Agreement; or (j) changed in any material way its business policies or
practices. Since December 31, 1994, there have not been any special sales of
any products or services by Sellers or CWC or any changes in the prices charged
for any products or services by Sellers or CWC.
4.8. Title to the Purchased Assets. Sellers collectively are
the sole and exclusive legal and equitable owners of all right, title and
interest in and have good and marketable title to all of the Purchased Assets,
excluding those assets which are leased to Sellers. None of the Business
Assets which Sellers or CWC purports to own are subject to (a) any contract of
lease, license or sale, (b) any security interest, mortgage, pledge, lien,
charge or encumbrance of any kind or character, direct or indirect, whether
accrued, absolute, contingent or otherwise, except for Permitted Liens (as
hereinafter defined), (c) subject to any royalty or commission arrangements, or
(d) subject to any
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claims, covenants or restrictions. For purposes of this Agreement, the term
"Permitted Liens" shall mean all minor liens and encumbrances which do not
materially detract from the value or interfere with the present use of such
property and assets, provided that the aggregate dollar amount of such minor
liens and encumbrances shall not exceed $5,000. Attached hereto as Schedule
4.8 is an accurate, correct and complete depreciation schedule which lists all
of the Business Assets which are depreciable.
4.9. Leases. Sellers have delivered to Buyer an accurate,
correct and complete copy of each lease and sublease agreement included within
the Business Assets, including, without limitation, the Tower Lease Agreements
and all leases included within or related to the Channel Rights or the SMATV
System (collectively, the "Leases"). Schedule 4.9 contains a full, complete
and correct list of all the Leases. With respect to such Leases:
(a) the Leases are in full force and effect and are valid,
binding and enforceable in accordance with their respective terms;
(b) no amounts payable under any Leases are past due and all
liabilities and obligations of Sellers or the lessees to be paid or
performed on or before the First Closing Date and the Second Closing
Date, under the Leases have been, or will have been on such dates,
fully paid or performed;
(c) no Seller is in breach of any provision of, in violation of
or in default under the terms of any Lease, and no other party to any
Lease is in breach of any provision of, in violation of, or in default
under the terms of any Lease. No event has occurred which is, or
after the giving of notice or passage of time or both, would
constitute a default under or result in the breach of any Lease by any
Seller or, to the knowledge of Sellers, by any other party;
(d) no Seller has received any notice of a default, offset or
counterclaim under any Lease, or any other communication calling upon
a Seller to comply with any provision of any Lease or ascertaining
noncompliance;
(e) no Seller has received notice that any party to any Lease
intends to cancel or terminate such Lease or to exercise or not
exercise options or rights under such Lease;
(f) at the First Closing or the Second Closing, as the case may
be, Sellers will have filed all necessary
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applications and will have used their best efforts to obtain all
requisite consents and approvals for the transfer or assignment of any
Leases to Buyer and subject to obtaining the necessary consents to be
delivered at the First Closing or the Second Closing, as the case may
be, the assignment of each Lease to Buyer will not constitute a breach
of, or a default under, any provision of any Lease, and Buyer, after
the First Closing or the Second Closing, as the case may be, will have
and may enjoy and enforce all of its rights and benefits under the
Leases; and
(g) Sellers collectively have marketable title to each Lease
and there does not now exist any security interest, lien, encumbrance
or claim of others created or suffered to exist on the leasehold
interest created under any Lease.
4.10. Material Contracts. All contracts, agreements, instruments
and plans related to the Business Assets to which any Seller or CWC is a party,
or by which any Seller, CWC or any of the Business Assets are subject or bound,
meeting any of the descriptions set forth below, are hereby defined as the
"Material Contracts":
(a) any contract with a subscriber of the SMATV System
(collectively, the "Subscriber Contracts");
(b) any SMATV Contract;
(c) any right of entry agreement;
(d) any contract with a provider of programming;
(e) any contract with any government or any agency or
instrumentality thereof;
(f) all licenses or royalty agreements;
(g) any contract for the purchase of any equipment, materials,
machinery, parts, supplies or services in excess of $5,000;
(h) any purchase order, agreement or commitment obligating any
Seller or CWC to sell or deliver any product or service at a price
which does not cover the costs (including labor, materials and
production overhead) plus Novner's customary profit margin associated
with such product or service;
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(i) any deed, lease, agreement or other instrument affecting
any right, title or interest in or to any real property included
within the Business Assets;
(j) any contract with respect to the discharge or removal of
effluent, waste pollutants of any nature;
(k) any contract necessary for operation of the Business as it
is presently conducted which has an aggregate value to the Business of
$10,000 or more; and
(l) any other contract, lease, sublease or commitment or
agreement related to the Business which:
(i) provides for payment or performance by any
party thereto having an aggregate value of $5,000 or more;
(ii) is not terminable without payment or penalty
on 60 days (or less) notice, or
(iii) is between an Affiliate and any Seller or CWC.
All Material Contracts described in Paragraphs (b) through (l) above are listed
on Schedule 4.10 attached hereto.
All Material Contracts are in full force and effect and are valid,
binding and enforceable in accordance with their terms. Neither Sellers nor
CWC are in breach of any provision of, in violation of, or in default under the
terms of more than five percent of the Subscriber Contracts or any other
Material Contract, and no other party to any other Material Contract is in
breach of any provision of, in violation of, or in default under the terms of
any other Material Contract. No event has occurred which is, or after the
giving of notice or passage of time or both, would constitute a default under
or result in the breach of any Material Contract by any Seller or CWC, or by
any other party to a Material Contract other than a Subscriber Contract.
Accurate, correct and complete copies of each written Material Contract have
been delivered or made available to Buyer. Neither Sellers nor CWC has
received notice that any party to any Material Contract intends to cancel or
terminate such Material Contract or to exercise or not exercise options or
rights under such Material Contract. All liabilities and obligations of
Sellers and CWC to be paid or performed on or before the First Closing Date or
the Second Closing Date, as the case may be, under the Material Contracts have
been, or will have been on such dates, fully paid or performed. With respect
to certain Subscriber Contracts and SMATV Contracts, Buyer is aware that
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service problems exist which may rise to the level of a breach or default under
such contracts.
4.11. Condition of Assets. The Wireless Assets, whether owned or
leased, are in normal operating condition and repair (reasonable wear and tear
excepted) and are in suitable condition for the purposes for which they are
presently being used. The Business Assets conform to all applicable laws,
ordinances and regulations, except for such minor variations as do not impair
or interfere with the use of such property and assets for the purposes for
which they are employed, and no Seller or CWC has received any notice to the
contrary. The condition of the Business Assets are adequate and suitable to
meet all present requirements of the Business as presently conducted. The
Business Assets will furnish Buyer with all capacity and rights to produce,
develop, use, sell, distribute, install and service the products and to perform
the same services in the same manner as presently being performed by the
Business.
4.12. Absence of Undisclosed Liabilities. Except as reflected on
Novner's and CWC's balance sheets for the year ending December 31, 1995, none
of Novner, CWC or the Business has nor will any of them have any indebtedness,
obligation or liability of any nature. None of the Sellers, CWC, or the
Business is directly or indirectly liable with respect to (by discount,
repurchase agreement or otherwise), or obligated in any other way, to provide
funds in respect of, or to guarantee or assume, any debt, obligation or
dividend of, any person with respect to the Business. Novner and CWC are each
solvent, having assets which at a fair valuation exceed each of their
liabilities, and will not become insolvent as a result of the transactions
contemplated hereby. No Seller either in its individual capacity or on behalf
of the Business, is entering into the transaction contemplated by this
Agreement with the intent to hinder, delay or defraud any entity to which
Sellers, CWC or the Business are indebted. Following consummation of the
transactions contemplated by this Agreement, Novner will have sufficient
capital and property remaining to conduct the business in which it will
thereafter be engaged.
4.13. Taxes. Sellers, CWC and each corporation, partnership or
trust in which such party directly or indirectly owns an interest
(collectively, the "Taxpayers") has filed, been included in or sent, or will
file, be included in or send, all returns, declarations and reports and all
information returns and statements required to be filed or sent by or with
respect to it in respect of taxes of any kind for any period ending on or
before the First Closing Date and the Second Closing Date (collectively, the
"Returns"), as the case may be. As of the
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time of filing, the Returns have correctly reflected in all material respects,
and Returns not yet filed as of the date hereof will correctly reflect in all
material respects, the income, business, assets, operations, activities and
status of the relevant Taxpayers and any other information required to be shown
thereon. Each Taxpayer has timely paid all taxes shown as due and payable on
its Returns required to be filed or sent prior to the date hereof and will
timely pay all taxes that will be shown as due and payable on its Returns
required to be filed or sent after the date hereof. No Taxpayer is delinquent
in the payment of any tax or has requested any extension of time within which
to file or send any Return which Return has not been or will not be timely
filed or sent. No adjustment of or deficiency for any tax or claim for
additional taxes has been proposed, threatened, asserted or assessed against
any Taxpayer or any member of any affiliated or combined group of which any
Taxpayer is or was a member for which Seller could be liable. Novner and CWC
have withheld all required amounts from employees working for any Seller or CWC
and, with respect to such employees, have filed all foreign, Federal, state and
local returns and reports with respect to employee income tax withholding and
social security and unemployment taxes in compliance with the tax withholding
provisions of the Code and other applicable foreign, Federal, state or local
laws. The Financial Statements contain adequate accruals for all taxes in
respect of Novner and CWC for all periods ending on or prior to December 31,
1994. Each of Novner and CWC has previously made available to Buyer for
inspection accurate, correct and complete copies of all returns and reports
filed by any Taxpayer with respect to the Business. All required tax
estimates, deposits, prepayments and similar reports or payments for current
periods have been properly made. There are no tax liens on any of the Business
Assets or assets of any Taxpayer and no basis exists for the imposition of any
such liens. No Taxpayer has any dispute with any taxing authority as to taxes
of any nature. Sellers and CWC have obtained all appropriate sales tax
exemption certificates for all sales made without charging or remitting a sales
tax.
4.14. Litigation. Except for the action to collect an accounts
receivable of Novner from The Crosley Bar, none of the Sellers or CWC are
engaged in, or a party to, any suit, action, proceeding, investigation or
legal, administrative, arbitration or other method of settling disputes or
disagreements or governmental investigation. To the best of each Seller's
knowledge, none of the Sellers or CWC are threatened with any suit, action,
proceeding, investigation or legal, administrative, arbitration or other method
of settling disputes or disagreements or governmental investigations, and none
of the Sellers know, anticipate, or have notice of any basis for any such
action.
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None of the Sellers or CWC has received notice of any investigation threatened
or contemplated by any foreign, Federal, state or local governmental or
regulatory authority, which remains unresolved. None of the Sellers, CWC, or
any of the Business Assets are subject to any judgment, order, writ, injunction
or decree of any court or any Federal, state, local or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or any arbitrator.
4.15. Licenses and Permits. Schedules 4.15 and 4.21 contain an
accurate, correct and complete list and summary description (including the name
of the holder of each license) of each license, certificate, approval,
franchise, registration, accreditation, authorization and permit (including
pending applications for any thereof) (collectively, the "Licenses and
Permits") which are material to the operation of the Business and the Business
Assets, the foreign, Federal, state or local jurisdiction issuing such Licenses
and Permits, and the type and number of such License or Permit. Such Licenses
and Permits are valid and in full force and effect and there are not pending,
or, to the knowledge of Sellers, threatened, any proceedings which could result
in the termination, revocation, limitation or impairment of any such License or
Permit. Sellers and CWC have all material certificates, licenses, permits,
approvals, franchises, registrations, accreditation and other authorizations as
are necessary in order to enable them to own and conduct the Business as
presently conducted, and to own and exercise any and all rights in and to the
Business Assets, except for authorizations related to potential violations of
the FCC's rules and regulations regarding "cross- ownership." No violations
have been recorded in respect of any Licenses and Permits and no proceeding is
pending or, to the knowledge of any Seller, threatened or contemplated with
respect to the revocation or limitation of the same.
4.16. Compliance with Law. Except for potential violations of
the FCC's rules and regulations regarding "cross- ownership," the Business
Assets conform in all material respects to all applicable laws, ordinances,
codes, licensing requirements, rules and regulations, except for such minor
violations as do not impair or interfere with the use for which the Business
Assets are employed, and no Seller has received any notice to the contrary.
Sellers and CWC have complied in all material respects with all laws,
ordinances, regulations, licensing requirements, rules, decrees, awards or
orders applicable to Sellers and CWC, and there is not and will not be any
material liability arising from or relating to any violations thereof, except
for FCC rules and regulations regarding "cross-ownership" relating to hardwire
and wireless cable ownership. No notice from any governmental
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body or other person of any violation of any law, ordinance, code, rule or
regulation or requiring or calling attention to the necessity of any work,
repairs, new construction, installation or alteration has been served.
4.17. Brokers. None of the Sellers or CWC has retained any
broker or finder or incurred any liability or obligation for any brokerage
fees, commissions or finders fees with respect to this Agreement or the
transactions contemplated hereby.
4.18 Hart Scott Applicability. CWC's total assets, as indicated
on its last regularly prepared balance sheet, were less then $25,000,000, and
CWC's total revenues during its last full fiscal year were less than
$25,000,000.
4.19. Insurance. Schedule 4.19 contains an accurate, correct and
complete list and summary description (including the name of the insurer,
coverage, premium and expiration date) of all binders, policies of insurance or
fidelity bonds maintained with respect to the Business Assets, including those
maintained by Sellers or CWC or in which any Seller or CWC is a named insured.
With respect to the Business (a) all insurance has been issued under policies
or binders for the benefit of Sellers and CWC and all premiums and other
amounts due have been paid by Sellers and CWC, (b) there are no pending or
asserted material claims against such insurance by Sellers or CWC with respect
to the Business Assets, as to which the insurers have denied liability, and (c)
there exist no claims in excess of $5,000 under such insurance that have not
been properly filed by Sellers and CWC. In the last two full fiscal years
there have not been claims made in an aggregate amount greater than $50,000
with respect to the Business Assets.
4.20. Material Facts. The representations and warranties of
Sellers contained in this Agreement and each schedule, certificate or other
written statement delivered pursuant to this Agreement, or in connection with
the transactions contemplated herein, are accurate, correct and complete, do
not contain any untrue statement of a material fact or, considered in the
context in which presented, omit to state a material fact necessary in order to
make the statements and information contained herein or therein not misleading.
No Seller is aware of information directly related to the operation of the
Business necessary to enable a prospective purchaser to make an informed
investment decision to purchase the Business which has not been expressly
disclosed in writing or orally, nor of any fact which materially adversely
affects the business, operations, properties, prospects or condition, financial
or otherwise, of the Business or the
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ability of any Seller to fully perform this Agreement and the transactions
contemplated hereby, which is not known by Buyer.
4.21. FCC Matters.
(a) Schedule 4.21 hereto (the "FCC Schedule") lists all of the
licenses issued by the FCC that each Seller holds and all licenses for channels
that any Seller or CWC utilizes pursuant to or a lease or similar agreement
with a third party, including, Affiliates, that holds such a license ("Third
Party Licensees") (all such licenses are collectively referred to herein as
"FCC Licenses"), with such licenses listed by authorized channel(s) and call
sign. Except as noted in the FCC Schedule, each FCC License is validly issued
by the FCC, is in full force and effect, and is unimpaired by any act or
omission of any Seller or the holder of any such FCC License. Each FCC License
bears the full license term granted therefor or, if any such license bears an
expiration date prior to the date hereof, an application to renew the FCC
License was timely filed in accordance with FCC prescribed procedures, is
pending and is not and cannot subject to any timely-filed petition to deny,
protest or competing application. No third party has sought the
reconsideration or has otherwise filed with the FCC, formally or informally, a
challenge to the grant of any of the FCC Licenses, and the time for imposing
such requests for reconsideration and challenges has passed. Except as set
forth on the FCC Schedule, none of the Sellers, CWC or the Third Party
Licensees have agreed to accept any interference from any third party or to
take any action to protect any third party's reception from interference.
There is no complaint before the FCC or proceeding pending before the FCC which
looks toward the revocation, modification, or other action which is adverse to
the operations under, any FCC License listed on the FCC Schedule.
(b) Each MDS channel listed in the FCC Schedule is authorized to
operate with technical facilities that are identical (except for channel(s))
with the other MDS channels listed on the FCC Schedule. The facilities
authorized by each FCC License have been constructed in compliance with the
construction authorization granted therefor or, if not constructed, such lack
of construction and the time currently authorized to complete construction is
accurately stated on the FCC Schedule. None of the authorized MDS channels has
a predicted desired-to-undesired signal-to-noise ratio with regard to the
signal of any other authorized or previously proposed station within any
portion of the pertinent protected service area applicable under the FCC rules
(including Section 21.902) that is less than 45 dB, as regards co-channel
interference, or 0 dB, as regards adjacent channel interference, such
calculations
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made in accordance with FCC rules. No licensee of any such channel(s) has
agreed to accept any interference to the reception of any such channel from any
third party or to take any action to protect any third party's reception from
interference. Except as set forth in the FCC Schedule, no co-channel station
to any such channel is licensed to a site within 50 miles of the transmitter
site of such channel. There is no complaint or proceeding pending before the
FCC which, if determined as requested by the moving party, could result in the
revocation, modification, or other action which is adverse to the operations
under, of any authorization listed on the FCC Schedule. All such operating
channels operate in compliance with their respective FCC authorizations full
time, with an E.I.R.P. of not less than the minimum allowed by the Commission
and with an omni-directional transmission antenna.
(c) The FCC Schedule also lists all applications that Sellers,
CWC, the Third Party Licensees and applicants for the FCC Licenses that have
agreed to lease their channels to Sellers or CWC have pending before the FCC,
as well as all petitions to the FCC for reconsideration or reinstatement or
similar pleadings regarding returned applications which are separately
identified as such on the FCC Schedule. Except as noted in the FCC Schedule,
each such pending application is complete, complies fully with published FCC
rules and policies, and proposes facilities which can be authorized consistent
with the requirement to protect adjacent and co-channel stations from harmful
interference as defined by FCC rules. Except as set forth in the FCC Schedule,
each such application proposes technical facilities which are identical (except
for proposed channel(s)) with those proposed in all other applications listed
on the FCC Schedule (if any), with the facilities authorized under each license
listed on the FCC Schedule, and with the channels listed on the FCC Schedule.
No such application proposes carrier offset. Except as set forth in the FCC
Schedule, each such application proposes facilities which provide FCC-required
protection to all authorized and previously proposed facilities, and no such
application is mutually-exclusive with any other application for a new station
or modification to an existing station authorization.
(e) None of the channels used by any Seller or CWC are
authorized by special temporary or experimental authority.
4.22. Retransmission Consent; Copyright. Schedule 4.22 sets
forth the identity of all broadcast station signals transmitted by Sellers'
and/or CWC's wireless cable and SMATV systems. To the extent required by law
and except as set forth in Schedule 4.22, the licensee of each such station
(other than
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superstations) has given Sellers or CWC its written consent to transmit the
signal of its station and each such consent is in full force and effect.
4.23. CARS Stations and STLs. None of the Sellers or CWC is the
licensee of any CARS station or stations licensed under Parts 90 or 94 of the
FCC's rules.
4.24. Employees.
(a) Schedule 4.24 contains an accurate, correct and complete
list and summary description of all written and oral employment contracts with
officers, directors and employees of the Business, collective bargaining
agreements, incentive arrangements, pension plans, profit sharing plans and
other employee compensation or benefit plans, arrangements or understandings to
which any Seller or CWC is a party or otherwise bound with respect to the
Business. Schedule 4.24 also sets forth the name, position and present rate of
compensation, direct and indirect, of each employee of the Business whose
annual aggregate remuneration equals or exceeds $20,000. Since December 31,
1995, there has not occurred any material adverse change with regard to the
managers and employees of the Business. None of the employees listed on
Schedule 4.24 is eligible for payments that would constitute "parachute
payments" under Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"). There are no controversies pending or, to the knowledge of any
Seller, threatened involving any executive personnel, supervisory personnel or
group of employees, except individual grievances under any collective
bargaining agreement which, in the aggregate, are not material. The Business
has not suffered or sustained any labor disputes resulting in any work stoppage
and no such work stoppage is threatened. No union organizing or election
activities involving any nonunion employees of the Business are in progress or
threatened.
(b) Sellers and CWC have complied in all material respects with
all laws relating to the employment of labor, including provisions relating to
wages, hours, benefits, pension plans, equal opportunity, collective bargaining
and the payment of social security and other taxes. Except to the extent
provided for on the Financial Statements or as disclosed in the schedules, none
of the Sellers, CWC or the Business has or will have any liability arising out
of claims made or suits brought (including, without limitation, workers
compensation claims and claims or suits for contribution to, or indemnification
of, third parties, occupational health and safety, environmental, consumer
protection or equal employment matters) for injury, sickness, disease, death or
termination of employment of any person
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(including, without limitation, any employee or former employee or any
contractor or subcontractor of any Seller or CWC or any agent or distributor of
any Seller or CWC), or for any violations of the Employee Retirement Income
Security Act of 1974, as amended, to the extent attributable to an event
occurring or a state of facts existing prior to the First Closing Date or the
Second Closing Date, as the case may be.
4.25. Subscriber Information. The Business currently provides
service to at least 2,400 Subscribers (computed by including all persons who
are otherwise Subscribers under the SMATV Contracts without regard to whether a
consent to assignment agreement or acknowledgement letter has been obtained at
the First Closing) under the SMATV System. Schedule 4.25 is an accurate,
correct and complete list of the number of basic and pay subscribers, the basic
and pay fees charged and the monthly revenues, all as of May 29, 1996. As of
the First Closing Date, there shall have been no change in the information
contained in Schedule 4.25, except as provided in a certificate delivered by
Sellers to Buyer at the First Closing.
4.26. Subscriber Premise Equipment. An inventory (based only on
Novner's records) of subscriber premise equipment of the Business as of June
23, 1996, is listed in Schedule 4.26. All such inventories disposed of
subsequent to December 31, 1995 have been disposed of only in the ordinary
course of business and at prices and under terms that are normal and consistent
with past practice.
4.27. Motor Vehicles. Schedule 1.2(t) contains an accurate,
correct and complete list of all motor vehicles used in the Business, whether
owned or leased. All vehicles are properly licensed and registered in
accordance with applicable law.
4.28. Suppliers. With respect to the Business, all sales
contracts and orders with customers and with suppliers of goods and services
were entered into by or on behalf of the Business and were entered into in the
ordinary course of business for usual quantities and at normal prices. Each
such contract or order with a customer involves commitments of not less than
the published list price on the standard contract utilized by the Business.
Schedule 4.28 lists the ten largest suppliers of the Business, determined on
the basis of costs of items or services purchased for the fiscal year ended
December 31, 1995. No Seller knows, or has no reason to believe, that any
material customer or supplier of the Business will cease to do business with
the Business after, or as a result of, the consummation of any transactions
contemplated hereby or that any material customer or supplier of the Business
is threatened with bankruptcy or
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insolvency. With respect to the Business, no Seller knows of any fact,
condition or event which would adversely affect its relationship with any
customer.
4.29. MDS-1 and MDS-2 Channels. Novner has entered into a lease
and purchase agreements as to the MDS-1 channel in Cincinnati, Ohio, and filed
with the FCC a Petition for Reconsideration seeking to have the FCC reinstate
its MDS-2 channel application, which was dismissed by the FCC on August 31,
1995, copies of the lease and purchase agreements and the Petition for
Reconsideration are attached hereto as Schedules 4.29(a) and 4.29(b).
4.30. Accounts Receivable. All outstanding accounts and notes
receivable of Novner and CWC reflected on the Financial Statements, and the
Accounts Receivable lists delivered to Buyer will be, as of the day before the
First Closing Date and the Second Closing Date, as the case may be, will be due
and valid claims against account debtors for goods or services delivered or
rendered, collectible in full within 60 days of delivery, except as reserved
against on the Financial Statements, and subject to no material defenses,
offsets or counterclaims. All such receivables will have arisen in the
ordinary course of business on terms and conditions consistent with past
practice, and will not be subject to any prior assignment, claim, lien or
security interest. None of the Sellers or CWC have incurred any liabilities to
customers for promotional allowances or otherwise with respect to the Business
which in the aggregate exceed $1,000. None of the Sellers or CWC have
liability for any refunds, allowances or returns with respect to products sold
or services rendered by the Business which in the aggregate exceed $1,000 on or
prior to the First Closing Date or the Second Closing Date, as the case may be,
except to the extent of reserves therefore reflected on the Financial
Statements. Alvin and Phyllis have no outstanding accounts and notes
receivable related to the Business or the Business Assets.
4.31. Intellectual Property; Trade Secrets; Software and
Information Systems. None of the Sellers or CWC own any patents, trademarks,
trademark rights, trade names, service marks, copyrights and applications for
any of the foregoing relating. No Seller nor CWC has any exclusive right,
title and interest to any electronic data processing systems, information
systems, computer software, programs, program specifications, source codes,
input data, data bases and report layouts and formats, record file layouts,
diagrams, functional specifications and narrative descriptions, flow charts and
other related material used in the Business.
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4.32. Environmental Matters. To the best of each Seller's
knowledge, Novner and CWC, as the case may be, are not in violation of any
applicable statute, law or regulation relating to the environment or
occupational health and safety, and to the best of each of their knowledge, no
material expenditure are or will be required in order to comply with any such
existing statute, law or regulation.
4.33. Capitalization and Ownership of CWC. The aggregate
authorized, issued and outstanding equity capital and ownership of CWC is as
set forth on Schedule 1.2(t) of this Agreement. All shares of capital stock in
CWC presently issued and outstanding are owned beneficially and of record by
Alvin and Phyllis. All such shares have been duly authorized and validly
issued and are fully paid and nonassessable, with no preemptive rights
attaching thereto. There are no restrictions affecting the transferability of
the Stock. No shares are held in treasury by CWC. CWC does not have
outstanding any stock or securities convertible or exchangeable for any shares
of its capital stock. There are no outstanding options, rights, warrants,
conversion rights or other agreements or commitments to which CWC is a party or
by which it is bound, providing for the issuance of additional shares of
capital stock of CWC or for any other adjustment, purchase or transfer
affecting the Stock. There are no rights in or claims possessed by a person
enforceable against CWC in law or in equity to compel such an issuance,
adjustment or transfer. CWC is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its
capital stock. Except as set forth on Schedule 4.33, no dividends or
distributions of any kind have ever been made with respect to CWC's capital
stock. The Stock is owned free and clear of all liens, charges, claims,
encumbrances or other restrictions on transfer. Upon delivery of the stock
certificates representing the Stock to Buyer, Buyer will have the full, valid
and marketable title to the Stock.
ARTICLE V
REPRESENTATIONS AND
WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers as of the date hereof,
as of the First Closing Date, and as of the Second Closing Date, as set forth
below.
5.1. Authority. Buyer has full legal right, power and
authority, without the consent of any other person, to execute and deliver this
Agreement and to carry out the transactions
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contemplated hereby. All corporate and other acts or proceedings required to
be taken by Buyer to authorize the execution, delivery and performance of this
Agreement and all transactions contemplated hereby have been duly and properly
taken.
5.2. Validity. This Agreement has been, and the documents to be
delivered by Buyer at the First Closing and the Second Closing will be, duly
executed and delivered by Buyer and constitute lawful, valid and legally
binding obligations of Buyer, enforceable in accordance with their respective
terms. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby will not result in the creation of any
lien, charge or encumbrance or the acceleration of any indebtedness or other
obligation of Buyer and are not prohibited by, do not violate or conflict with
any provision of, and do not result in a default under or a breach of (a)
Buyer's charter or by-laws, (b) any contract, agreement or other instrument to
which Buyer is a party, (c) any regulation, order, decree or judgment of any
court or governmental agency, or (d) any law applicable to Buyer. No approval,
authorization, consent or other order or action of or filing with any court,
administrative agency or other governmental authority is required for the
execution and delivery by Buyer of this Agreement or such other agreements and
instruments or the consummation by Buyer of the transactions contemplated
hereby or thereby. No approval, authorization, consent or other order or
action of, or filing with, any court, administrative agency or other
governmental authority is required for the execution and delivery by Buyer of
this Agreement, or any other agreement provided for herein, or the consummation
by Buyer of the transactions contemplated hereby or thereby, except for the FCC
approvals of the Applications.
5.3. Due Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
with full power and authority to own or lease its properties and to carry on
the business in which it is engaged. Buyer is duly licensed and qualified to
do business as a foreign corporation and is in good standing in all
jurisdictions where failure to be so licensed or qualified would have a
material adverse effect upon its business or assets.
5.4. Brokers. Buyer has not retained any broker or finder or
incurred any liability or obligation for any brokerage fees, commissions or
finders fees with respect to this Agreement or the transactions contemplated
hereby.
5.5 Litigation. Buyer is not engaged in, or a party to, any
suit, action, proceeding, investigation or legal, administrative, arbitration
or other method of settling disputes
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or disagreements or governmental investigation. Buyer is not threatened with
any suit, action, proceeding, investigation or legal, administrative,
arbitration or other method of settling disputes or disagreements or
governmental investigations, and Buyer does not know, anticipate, or have
notice of any basis for any such action. Buyer has not received notice of any
investigation threatened or contemplated by any foreign, Federal, state or
local governmental or regulatory authority, which remains unresolved. Neither
Buyer nor Buyer's business, nor any of Buyer's assets are subject to any
judgment, order, writ, injunction or decree of any court or any Federal, state,
local or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or any arbitrator.
ARTICLE VI
COVENANTS OF SELLERS
Each Seller hereby agrees with respect to the Business and the
Business Assets owned by and being sold by such Seller to, and Alvin and
Phyllis agree to cause CWC and their other Affiliates to, keep, perform and
fully discharge the covenants and agreements set forth below.
6.1. Interim Conduct of Business. Taking into account the
Management Agreement, from the date hereof until the Second Closing, Sellers
shall preserve, protect and maintain the Business and the Business Assets, and
shall operate the Business consistent with prior practice and in the ordinary
course of business, and without limiting the generality of the foregoing, from
the date hereof until the Second Closing Date, except for transactions
expressly approved in writing by Buyer, each Seller shall:
(a) maintain inventories at current levels, except for sales or
purchases in the ordinary course of business, and maintain the
properties of the Business and the Business Assets in the same repair,
order and condition as such Business Assets presently are, reasonable
wear and tear excepted;
(b) maintain and keep in full force and effect all insurance
relating to the Business or the Business Assets;
(c) preserve intact the organization and reputation of each
Seller and CWC, and keep available the services of the present
executives, employees and agents of Novner and CWC
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and preserve the goodwill of suppliers, customers and others having
business relationships with each Seller and CWC;
(d) maintain the books, accounts and records of Novner and CWC
in the usual, regular and ordinary manner on a basis consistent with
prior years;
(e) not enter into, amend or terminate, or agree to enter into,
amend or terminate, any Lease or Material Contract;
(f) not extend credit in the sale of products or services,
collection of receivables or otherwise, other than in the ordinary
course of business;
(g) not merge or consolidate with or agree to merge or
consolidate with, nor purchase or agree to purchase all or
substantially all of the assets of, nor otherwise acquire, any
corporation, partnership, or other business organization or division
thereof;
(h) not sell, lease or otherwise dispose of or agree to sell,
lease or otherwise dispose of, any of its assets, properties, rights
or claims, except in the ordinary course of business;
(i) not take any action to seek, encourage, solicit or support
any inquiry, proposal, expression of interest or offer from any other
person or entity with respect to (i) an acquisition, combination or
similar transaction involving any Seller or CWC, or substantially all
of the assets or securities related thereof, (ii) the sale of Novner's
or CWC's capital stock or any securities convertible into or
exercisable or exchangeable for shares of capital stock of Novner or
CWC, or (iii) a restructuring or public offering of Novner or CWC, and
each Seller will promptly inform Buyer of the existence of any such
inquiry, proposal, expression of interest or offer and shall not,
without the written consent of Buyer, furnish any information to, or
participate in any discussions or negotiations with, any other person
or entity regarding the same;
(j) not incur any liabilities on behalf of CWC, not incur
additional liabilities on behalf of Novner prior to the First Closing
Date sufficient to cause Novner's total liabilities with respect to
the Business to exceed $100,000, and not occur any additional
liabilities on behalf of Novner in connection with MDS-1 and MDS-2
channel licenses for Cincinnati, Ohio;
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(k) not declare, set aside or pay any dividend or make any
other distribution with respect to the capital stock of Novner or CWC;
(l) not, with respect to the Business Assets, incur or become
subject to, nor agree to incur or become subject to, any debt,
obligation or liability, contingent or otherwise, except current
liabilities and contractual obligations in the ordinary course of
business;
(m) not file any license applications, including amendments,
with the FCC;
(n) not sell, assign or otherwise dispose of the Channel
Rights;
(o) not conduct any special offers, customer discounts,
marketing promotions or waive customer deposits for the SMATV System;
or
(p) not amend or modify the charter or by-laws or equivalent
document of Novner or CWC.
From the date hereof through the Second Closing Date, Sellers shall upon the
reasonable request of Buyer (i) report on all material operational matters and
the general status of on-going operations of the Business to Buyer, and (ii)
confer on a regular and frequent basis with one or more designated
representatives of Buyer in all decisions regarding the Wireless Assets and the
SMATV System and its subscribers in order to ensure that the Business is being
operated in a manner reasonably consistent with ATI's standard practices
regarding the operation of wireless cable and/or SMATV systems. Sellers shall
promptly notify Buyer of any material change in the financial condition,
results of operations, properties, business or prospects of Novner or CWC and
shall keep Buyer fully informed of such events, and, to the extent that such
events relate to the Business Assets, permit Buyer's representatives to
participate in all discussions relating thereto.
6.2. Access. From the date hereof through the Second Closing
Date, Sellers shall, and shall cause CWC to, give Buyer and its representatives
reasonable, full and free access to all properties, facilities, personnel,
books, contracts, leases, commitments and records included within or pertaining
to the Business Assets or the Business, and during this period each Seller
shall, and shall cause CWC to, furnish Buyer with all financial and operating
data and other information as to the Business Assets, the Business and Novner's
and CWC's assets,
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properties, rights and claims, as Buyer may from time to time request. In
particular, Sellers shall (a) afford to the officers, employees, attorneys,
accountants, appraisers, and other authorized representatives of Buyer
reasonable access, during normal business hours, to the offices, plants,
properties, books and records of any Seller and CWC in order that Buyer may
have full opportunity to make such engineering, environmental, legal,
financial, accounting and other reviews or investigations of the Business
Assets as Buyer shall desire to make, (b) use its best efforts to cause its
independent public accountants to permit Buyer's independent public accountants
to inspect their work papers and other records relating to the Business Assets,
and (c) furnish, and cause the officers and employees of each Seller and CWC to
furnish, to Buyer and its authorized representatives such additional financial
and operating data and other information regarding the Business Assets and CWC
as Buyer shall from time to time request.
6.3. Confidentiality. Except as may be required in connection
with approval or implementation of this Agreement, or for securities, tax, or
other regulatory purposes, no Seller, nor any Affiliate any Seller, nor any of
the respective successors and assigns of any Seller or such Affiliates shall
use, publish or disclose any information concerning Buyer, or its Affiliates;
provided, however, that the foregoing shall not apply to information that (a)
was known by any Seller when received, (b) is or thereafter becomes lawfully
obtainable from other sources, (c) is necessary or appropriate to disclose to
any regulatory authority having jurisdiction over any Seller or Buyer or any
Affiliate thereof or as otherwise required by law, or (d) is reasonably
necessary to disclose to confirm the representations and warranties contained
herein. In the event of any termination of this Agreement, (i) each Seller
shall, and shall cause CWC to, treat as confidential and proprietary and shall
not disclose or use, directly or indirectly, in any manner whatsoever, or
permit others under their control to disclose or to use, any such information
concerning Buyer or its business or products obtained pursuant to or in
connection with the transactions which are the subject matter of this
Agreement, and (ii) each Seller shall, and shall cause CWC to, promptly return
to Buyer, upon written request, all written information and documents received
from any other party, its affiliates, accountants or counsel, in connection
with such transactions, including all copies thereof; provided, however, that
the foregoing shall in no event prohibit any Seller from using or disclosing
any such information in any proceeding that may be brought in connection with
such termination. The provisions of this Section 6.3 shall survive any
termination of this Agreement.
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6.4. Consents.
(a) Each Seller shall use its best efforts to obtain or make at
the earliest practicable date, all consents, shareholder approvals,
governmental authorizations, approvals, estoppel certificates and filings
required to be made or obtained by it in connection with the consummation of
the transactions contemplated by this Agreement, or which are reasonably
requested by Buyer, including, but not limited to, the consent to assignment
and certification agreements and acknowledgement letters to be delivered under
Article III hereof and consents for the assignment of the TKR and Warner
Contracts; provided, however, that Sellers shall not be obligated by this
Section 6.4(a) to make any payments beyond reasonable and ordinary filing fees
and payment of outstanding obligations under such contract to be assigned.
(b) On or prior to the First Closing Date or the Second Closing
Date, as specified in Articles III, Sellers shall obtain all such waivers and
consents under any contract, indenture, loan agreement or security agreement to
which any Seller or CWC, or any Affiliate thereof, is a party as are necessary
to prevent a breach or violation of, or default under, any such contract,
indenture, loan agreement or security agreement as a result of the consummation
of the transactions contemplated hereby, except to the extent that the parties
have agreed to delay the delivery of such waivers and consents at the First
Closing.
(c) Notwithstanding anything contained in this Section 6.4 to
the contrary, Sellers shall not be deemed to be in default of their respective
obligations under this Section 6.4 if Sellers used their best efforts to obtain
such consents as provided for in this Section 6.4.
(d) Notwithstanding anything contained in this Agreement,
Sellers shall not be obligated to obtain or deliver the FCC Waiver to Buyer and
obtaining the FCC Waiver shall not be a condition to the Second Closing;
provided, however, that Sellers shall use their best efforts to obtain the FCC
Waiver as contemplated by this Agreement.
6.5. Best Efforts. Each Seller shall use its best efforts to
consummate the transactions contemplated by this Agreement and shall not take
any other action inconsistent with its obligations hereunder or which could
hinder or delay the consummation of the transactions contemplated hereby, and
from the date hereof through the Second Closing Date, each Seller shall use its
best efforts to fulfill the conditions to its own and any Affiliate's
obligations hereunder and to cause its representations and
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warranties to remain true and correct in all material respects as of the First
Closing Date and the Second Closing Date.
6.6. Bulk Transfer Compliance. Sellers shall indemnify and hold
harmless Buyer against any and all expense, loss, damage or liability,
including the court costs and reasonable attorneys' fees, arising from or
related to claims asserted by third parties due to noncompliance by Sellers
and/or Buyer with applicable bulk transfer laws.
6.7. Records and Documents. For 3 years following the Second
Closing Date, Sellers shall grant to Buyer and its representatives, at Buyer's
reasonable request, access to and the right to make copies of those records and
documents related to the Purchased Assets, possession of which is retained by
Sellers, as may be necessary or useful in connection with Buyer's conduct of
the business in connection with the Purchased Assets after the Second Closing.
If during such period any Seller elects to dispose of such records, such Seller
shall first give 60 days written notice, during which period Buyer shall have
the right to take such records without further consideration.
6.8. Certain Payments. Prior to the First Closing and promptly
following First Closing, Sellers shall pay when due and fully discharge all
amounts owed to employees, all taxes or amounts withheld from employees, sales
and/or use taxes collected in the conduct of the Business and all liabilities
and obligations to customers and suppliers of the Business which are not
assumed by Buyer, as and when due, and shall otherwise pay, discharge or make
adequate provision for all other liabilities and obligations relating to the
Business, including all Excluded Liabilities and Obligations. Sellers shall
promptly pay when due and fully discharge any income, excise, employment, sales
or use taxes arising as a result of the sale, transfer, conveyance or
assignment of the Business or the Purchased Assets.
6.9. Payment of Liabilities. Sellers shall pay and fully
discharge all liabilities and obligations of Sellers other than the Assumed
Obligations, but including the Excluded Liabilities and Obligations, when due
and owing. Novner further agrees to, without limiting the generality of the
foregoing, pay all obligations listed on Schedule 6.9 and to indemnify Buyer
and hold Buyer harmless of and from all liability, loss, cost or expense, that
Buyer may incur in connection therewith (regardless of any indemnification
limits or qualifications set forth in any other Section of this Agreement).
6.10. Continued Assistance. For a period of 3 years following
the Second Closing Date, Sellers shall refer to Buyer
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as promptly as reasonably practicable all monies paid on account of the
accounts receivable sold to Buyer under Section 1.2(h) hereof, and any
telephone calls, letters, orders, notices, requests, inquiries and other
communications relating to the Purchased Assets. From time to time, at Buyer's
request and without further consideration, Sellers shall execute, acknowledge
and deliver such documents, instruments or assurances and take such other
action as Buyer may reasonably request to more effectively assign, convey and
transfer any of the assets, properties, rights or claims related to the
Purchased Assets, and will assist Buyer in the vesting, collection or reduction
to possession of such assets, properties, rights and claims.
6.11. Employees.
(a) Each Seller shall use its best efforts to encourage the
employees of the Business to continue their employment until First Closing and
on such date to accept and retain employment with Buyer.
(b) Concurrently with the First Closing, Sellers shall, and
shall cause CWC to, terminate all employees of the Business and shall pay each
such employee any amounts owing for the period prior to the First Closing.
Notwithstanding anything herein to the contrary, no employee of the Business
shall become an employee of Buyer after the First Closing until such time as
Buyer has made an offer of employment to such employee which has been accepted
and such employee works on a consistent basis, and each employee not currently
working on a consistent basis due to injury, illness or other reason shall
continue to be covered by Sellers' or CWC's health and medical insurance (if
such employee would normally be covered by such insurance).
(c) There are no pending grievances, employee complaints or
outstanding citations or other pending matters with due regard for not
generating changes in work practice or precedents which will have significant
impact on the future operations of the Business. Each Seller shall notify
Buyer of the occurrence of any such event and Buyer shall have the right to
approve or withhold approval of any settlement and resolution thereof. Sellers
agree to reimburse Buyer for the costs and expense incurred by Buyer to resolve
any grievances filed before the First Closing by any of Sellers' employees
covered by a collective bargaining agreement.
(d) Each Seller agrees that it will not (directly or
indirectly), from the date hereof until the second anniversary of the First
Closing Date, take any action to cause any employee hired by Buyer to leave
such employment.
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6.12. Fund for Liabilities; Continued Existence. Novner shall
(a) continue to exist as a going concern in good standing for a period of two
(2) years following the Second Closing or such longer period as may be
necessary to give Buyer the full benefit of any FCC authorizations being leased
to Buyer under the channel lease agreements delivered under Article III hereof,
and (b) shall maintain an unencumbered net worth sufficient to discharge the
Excluded Liabilities and Obligations during such period.
6.13. FCC Applications. Sellers (i) agree that they will
continue to process diligently and in good faith all FCC applications listed on
the FCC Schedule, (ii) agree that they will use their best efforts (other than
payment of money) to cause the FCC to grant each such application and thereby
license facilities identical (except for channel) with those facilities
currently used in the Business, and (iii) agree not to amend or otherwise alter
any such application without first notifying Buyer of such amendment or
alteration and consulting with Buyer to the end of assuring that the
application will continue to propose technical facilities identical to (except
in channel) those other channels used in the Business. Each Seller further
agrees that, from the date hereof until one year following the Second Closing,
it will cooperate with Buyer in securing any consent letters that may be
requested by Buyer in connection with the consolidation the greater Cincinnati
market.
6.14. MDS-1 and MDS-2 Channel Payments. In the event that the
this Agreement is terminated prior to the First Closing of the transactions
contemplated hereunder, Novner shall use its best efforts to consummate a sale
or lease transaction for the MDS- 1 channel and the MDS-2 channel, or either of
such channels if Novner owns only one license, and deliver an amount equal to
$90,000 to Buyer (the "Expense Advance") or Novner may pay the Expense Advance
to Buyer without such a sale or lease and shall thereby be released from its
obligations under this Section 6.13; provided, however, that if the aggregate
amount of monies to be received by Novner in connection with such sale or lease
transaction is less than $90,000, then Buyer shall only be entitled to such
lesser amount. Notwithstanding the above, Novner shall not enter into such a
sale or lease transaction without the prior written consent of Buyer if the
monies to be received by Novner in connection with such sale or lease
transaction are less than $90,000. In the event that Novner does not deliver
an amount equal to the Expense Advance within 120 days after termination of
this Agreement, Novner shall assign all rights to sell, assign or lease the
MDS-1 channel and the MDS-2 channel, or either of the channels if Novner owns
only one license, for an amount equal to or greater than $90,000, with Novner
to receive any excess in such price over $90,000. The
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provisions of this Section 6.13 shall survive any termination of this
Agreement.
6.15. New Subscribers. From the date hereof until the First
Closing Date, Novner shall continue its normal marketing efforts to obtain and
"hook-up" new subscribers and pay all expenses incurred in connection
therewith.
6.16. Financial Statements. Within 15 days of Buyer's request
for audited financial statements, Sellers shall cause a firm of independent
public accountants designated by Buyer to prepare audited financial statements
and balance sheets for the Business for the years ended December 31, 1994 and
December 31, 1995. Such financial statements and balance sheets shall be
prepared in accordance with generally accepted accounting principles,
consistently applied. Sellers shall provide all information and documents
available to Sellers required for the preparation of such financial statements
and balance sheets. Sellers shall deliver such financial statements and
balance sheets to Buyer within 3 days of receipt by Sellers. Buyer shall pay
the accounting firm's fees for preparing such statements, and Sellers shall
direct the accounting firm to consult with Buyer in advance regarding its
anticipated fees. Sellers shall also cause such accountants to provide to
Buyer all statements, reports, consents, opinions and other documents Buyer or
its Affiliates are required to file with the Securities and Exchange Commission
in connection with its reporting obligations or registration of securities.
6.17. Securities Law Compliance. Alvin and Phyllis shall cause CWC
to take all actions necessary on its part to implement the transactions
contemplated by this Agreement. Furthermore, Alvin and Phyllis shall cause CWC
not to take any action in connection with the sale of the Stock to the Buyer
which would cause Alvin and Phyllis to lose the benefit of the exemptions they
are relying upon from the registration requirements of Federal and state
securities laws.
6.18. Waived First Closing Deliverables. In the event that Buyer
waives the delivery of any consents, approvals or waivers in connection with
the transfer of the SMATV Assets to Buyer, Novner shall use its best efforts to
deliver such consents, approvals or waivers to Buyer as soon as possible after
the First Closing; provided, however, that Novner shall not be obligated to
make any payments beyond reasonable and ordinary filing fees and payment of
outstanding obligations under each such contract to be assigned to Buyer.
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6.19. Revisions to the FCC Representations and Warranties
Contained in Sections 4.21, 4.22, 4.23, and 4.23. Sellers shall deliver to
Buyer, within fifteen days after the First Closing Date a list of written
amendments and exceptions to the representations and warranties of Sellers set
forth in Sections 4.21, 4.22, 4.23, and 4.23 which are necessary and
appropriate to make such representations and warranties true, correct and
accurate and to reflect newly acquired information regarding such
representations and warranties. Notwithstanding anything else contained herein
to the contrary, (i) Sellers shall have no liability for inaccuracies
previously made in such representations and warranties, and (ii) in the event
that such amendments and exceptions evidence an adverse material change which
could prevent Buyer from obtaining complete rights to the Wireless Assets
(excluding the MDS-1 channel in Cincinnati, Ohio) either by assignment or lease
pursuant to the channel lease agreements delivered under Section 3.3(b)(v)
above, Buyer shall have the right, in its sole discretion, to terminate Buyer's
obligation to purchase the Wireless Assets under this Agreement and such
termination shall not constitute a default under this Agreement and Sellers
shall not be entitled to exercise any rights set forth in Section 10.5 of this
Agreement.
6.20. Revisions to the Licenses and Permits Representation and
Warranty Contained in Section 4.15. Sellers shall deliver to Buyer, within
fifteen days after the First Closing Date, a list of written amendments and
exceptions to the representations and warranties of Sellers set forth in
Section 4.15 which are necessary and appropriate to make such representations
and warranties true, correct and accurate and to reflect newly acquired
information regarding such representations and warranties. In no event shall
such new information constitute a default under this Agreement; provided,
however, that Sellers agree to indemnify Buyer and hold Buyer harmless of and
from all liability, loss, cost or expense (including reasonable attorneys fees
and court costs), that Buyer may incur in connection with or as a result of
such new information (regardless of any indemnification limits or
qualifications set forth in any other Section of this Agreement).
ARTICLE VII
COVENANTS OF BUYER
Buyer hereby agrees to keep, perform and fully discharge the covenants
and agreements set forth below.
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7.1. Confidentiality. Except as may be required in connection
with approval or implementation of this Agreement, or for securities, tax, or
other regulatory purposes, neither Buyer, nor any Affiliate of Buyer, nor any
of the respective successors and assigns of Buyer or such Affiliates shall use,
publish or disclose any information concerning Sellers or their Affiliates
prior to the First Closing; provided, however, that the foregoing shall not
apply to information that (a) was known by Buyer when received, (b) is or
thereafter becomes lawfully obtainable from other sources, (c) is necessary or
appropriate to disclose to any regulatory authority having jurisdiction over
Buyer or Sellers or any affiliate thereof or as otherwise required by law, or
(d) is reasonably necessary to disclose to confirm the representations and
warranties contained herein. In the event of any termination of this
Agreement, (i) Buyer shall treat as confidential and proprietary and shall not
disclose or use, directly or indirectly, in any manner whatsoever, or permit
others under their control to disclose or to use, any such information
concerning Sellers or their businesses or products obtained pursuant to or in
connection with the transactions which are the subject matter of this
Agreement, and (ii) Buyer shall promptly return to Sellers, upon written
request, all written information and documents received from any other party,
its affiliates, accountants or counsel, in connection with such transactions,
including all copies thereof; provided, however, that the foregoing shall in no
event prohibit Buyer from using or disclosing any such information in any
proceeding that may be brought in connection with such termination. The
provisions of this Section 7.1 shall survive any termination of this Agreement.
7.2. Consents. Buyer shall use its best efforts to obtain or
make at the earliest practicable date all other consents, governmental
authorizations, approvals, estoppel certificates and filings required to be
obtained by it or which may be reasonably necessary to the consummation of the
transactions contemplated by this Agreement or which are reasonably requested
by Seller.
7.3. Best Efforts. Buyer shall use its best efforts to
consummate the transactions contemplated by this Agreement and shall not take
any other action inconsistent with its obligations hereunder or which could
hinder or delay the consummation of the transactions contemplated hereby, and
from the date hereof through the Second Closing Date, Buyer shall use its best
efforts to fulfill the conditions to its own obligations hereunder and to cause
its representations and warranties to remain true and correct in all material
respects as of the Second Closing Date.
7.4. Delivery of Services by Buyer After Closing. After the
First Closing Date, Buyer, to the extent that it is permitted
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to do so under its programming agreements, shall deliver (at no cost to Buyer
except for costs to reimbursed as provided below) to Novner (a) at the Hills
Community Properties, and (b) for a period of three years after the First
Closing Date, at the unit locations under the TKR and Warner Contracts, in the
event that they are not assigned to Buyer, and any other contracts not accepted
by Buyer pursuant to Section 2.2(b) above, the programming carried on any or
all wireless cable channels operated by Buyer in the greater Cincinnati, Ohio
market for a total price of Buyer's programming costs thereof plus 20%. All
obligations of Buyer under this Section 7.4 shall terminate upon the earlier of
the termination of this Agreement or, with respect to each contract, upon the
assignment, transfer or sale of such contract by Sellers or any other
termination of Sellers' obligation to provide programming to such locations.
All parties hereto acknowledge that Buyer's and/or its Affiliate's programming
agreements may prevent Buyer from delivering any services under this Section
7.4.
7.5. Additional Obligations of Buyer.
(a) Buyer has agreed to purchase and shall retain
all ownership rights in and to the transmitter equipment necessary to build out
the MDS-1 channel license and increase the wattage for the E Group Channel
license and F Group Channel license (collectively, the "Buyer's Equipment").
In the event that this Agreement is terminated, the Buyer's Equipment shall be
returned to Buyer or Sellers may elect to purchase the Buyer's Equipment,
within thirty business days after termination of this Agreement with the
closing of such sale to be within sixty days after termination of this
Agreement, and the sale price shall be Buyer's actual purchase cost and
installation expense for the Buyer's Equipment (collectively, the "Equipment
Expenses").
(b) Buyer shall reimburse Sellers for the monthly lease fees
under the Tower Lease Agreements, and the monthly headend telephone and
electric fees associated with the Tower Lease Agreements incurred by Sellers on
and after May 1, 1996 and prior to any termination of this Agreement, within
fifteen business days after submission of an invoice(s) to Buyer demonstrating
payment by Sellers of such fees.
7.6. FCC Waiver. In the event that Novner obtains the FCC
Waiver by Final Order prior to September 15, 1996, the Second Closing Date
shall be accelerated to a date not later than 30 days after Buyer's receipt of
the FCC Waiver and at the Second Closing, Buyer shall deliver to Novner an
amount equal to the Original SMATV Reduction Amount minus any amounts paid to
Novner for Qualifying contracts pursuant to Section 2.2(c)(ii). In the
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event that Novner obtains the FCC Waiver by Final Order after September 15,
1996 but prior to the Second Closing, at the Second Closing, Buyer shall
deliver to Novner an amount equal to the Original SMATV Reduction Amount minus
(a) all costs incurred by Buyer and ATI to cure the potential "cross-ownership"
problem, and (b) an amount equal to all amounts paid to Novner for Qualifying
contracts pursuant to Section 2.2(c)(ii).
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
Each and all of the obligations of Buyer and to consummate the
transactions contemplated by this Agreement are subject to fulfillment prior to
or at each of the First Closing and the Second Closing (except as otherwise
provided below), unless waived by Buyer, of the conditions precedent set forth
below.
8.1. Accuracy of Warranties and Performance of Covenants. The
representations and warranties of Sellers contained herein shall be accurate in
all material respects as if made on and as of the First Closing Date and Second
Closing Date, except for changes occurring in the ordinary course of the
operation of the Business. Sellers shall have each performed all of the
obligations and complied with each and all of the covenants, agreements and
conditions required to be performed or complied with by them on or prior to the
First Closing and the Second Closing, as the case may be. Sellers shall have
delivered all documents required to be delivered by Sellers at the First
Closing or the Second Closing, as the case may be, under Article III.
8.2. No Pending Action. No action, suit, proceeding, review or
investigation before any court, administrative agency or other governmental
authority shall be pending or threatened wherein an unfavorable judgment,
decree or order would prevent the carrying out of this Agreement or any of the
transactions contemplated hereby, declare unlawful the transactions
contemplated hereby, cause such transactions to be rescinded, or which would if
successful affect the right of Buyer to own, operate or control the Business or
the Business Assets after the date such Business Assets are sold to Buyer.
8.3. Consents. All consents or assignments that are required
for the transfer of the Purchased Assets, or that are required for the
consummation of the transactions contemplated hereby, or that are required in
order to prevent a breach of or a
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default under or a termination of any agreement to which any Seller or CWC is a
party or to which any portion of the Business or the Business Assets are
subject, will have been obtained or provided for on or before the First Closing
Date or the Second Closing Date, as the case may be, as provided for in Article
III; provided, however, in no event shall Novner be required to deliver consent
to assignment and certification agreements and acknowledgement letter as
contemplated under Section 3.2(b)(iii) for more than 1,000 Subscribers. At the
First Closing and the Second Closing, as the case may be, all regulatory
agencies shall have taken such action as may be required to permit the
consummation of the transactions contemplated hereby, and such actions shall
remain in full force and effect.
8.4. Condition of the Purchased Assets. There shall have been
no material adverse change between the date of this Agreement and the First
Closing Date regarding the SMATV Contracts, the Tower Lease Agreement, the
Approvals related to the SMATV Assets, or the physical condition of any of the
SMATV Assets or the assets owned by CWC. There shall have been no material
adverse change between the date of this Agreement and Second Closing Date
regarding the Channel Rights, the Approvals related to the Wireless Assets, or
the physical condition of any of the Purchased Assets to be assigned at the
Second Closing.
8.5. No Adverse Actions by Securities Agencies. No Federal or state
agency shall have taken any formal or informal action, or made any statement,
indicating that it believes the sale and transfer of the Stock to Buyer is not
exempt from applicable registration requirements.
8.6. Ownership of CWC Stock. As of the Second Closing Date (a)
Alvin and Phyllis shall be the record and beneficial owner of the shares of the
Stock as set forth on Schedule 1.1(t) hereto, (b) other than as set forth in
Schedule 1.1(t), there shall be no outstanding capital stock of CWC or rights
to acquire capital stock of CWC, and (c) each of Phyllis and Alvin shall have
good and marketable title to such shares of the Stock and the absolute right,
power and capacity to sell, assign, transfer and deliver the same to Buyer free
and clear of any liens, encumbrances, pledges, security interests, restrictive
agreements, transfer restrictions, voting trust arrangements, claims and
imperfections of any nature whatsoever.
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ARTICLE IX
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS
Each and all of the obligations of Sellers to consummate the
transactions contemplated by this Agreement are subject to fulfillment prior to
or at each of the First Closing and the Second Closing (except as otherwise
provided below), unless waived by Sellers, of the conditions precedent set
forth below.
9.1. Accuracy of Warranties and Performance of Covenants. The
representations and warranties of Buyer contained herein shall be accurate in
all material respects as if made on and as of the First Closing Date and Second
Closing Date, except for changes occurring in the ordinary course of operation
of Buyer's business. Buyer shall have performed all of the obligations and
complied with each and all of the covenants, agreements and conditions required
to be performed or complied with by it on or prior to the First Closing or the
Second Closing, as the case may be. Buyer shall have delivered all documents
and monies required to be delivered by Buyer at the First Closing and the
Second Closing, as the case may be, under Article III. It shall be a condition
precedent to Sellers' obligations to sell the Wireless Assets to Buyer at the
Second Closing, that the First Closing shall have occurred.
ARTICLE X
SURVIVAL AND INDEMNIFICATION; FAILURE TO
CLOSE; AND LIQUIDATED DAMAGES
10.1. Survival. All representations, warranties, covenants and
agreements contained in this Agreement or in any document delivered pursuant
hereto shall be deemed to be material and to have been relied upon by the
parties hereto, and shall survive the Second Closing and shall be fully
effective and enforceable for a period of one year following the Second Closing
Date or such longer period as provided for in any other section of this
Agreement, but shall thereafter be of no further force or effect, except as
they relate to claims for indemnification timely made pursuant to this Article
or claims alleging fraud on the part of a party hereto, further except for the
covenants in Articles VI and VII, which shall survive indefinitely. Any claim
for indemnification asserted in writing before the first anniversary of the
Second Closing Date shall survive until resolved or judicially determined.
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10.2. Indemnification.
(a) A party shall not be entitled to indemnification or any
other remedy under this Agreement with respect to a representation or warranty
which is inaccurate and which the party seeking the indemnification had actual
acknowledge that such representation or warranty was inaccurate. No party
shall take any action to seek indemnification hereunder unless such party
notifies the party it is seeking indemnification from promptly upon becoming
aware of the default in question and gives such party sixty days to cure any
default which is the cause of such indemnification request.
(b) Each party shall indemnify and hold harmless the other,
from and against any and all "out-of-pocket" loss, damage, expense (provided
that with respect to the obligations listed on Schedule 6.8 hereto, the
out-of-pocket limitation shall not apply) (including court costs, amounts paid
in settlement, judgments, reasonable attorneys' fees or other expenses for
investigating and defending), suit, action, claim, liability or obligation
related to, caused by or arising from any misrepresentation, breach of a
warranty or failure to fulfill any covenant or agreement contained herein,
together with interest at a floating interest rate equal at all times to the
rate of interest publicly announced from time to time by the First National
Bank of North Carolina as its corporate prime rate (or its equivalent) from the
date upon which such loss, damage, expense or liability was incurred to the
date of payment. For purposes of this Agreement, "out-of-pocket" expenses
shall include, but shall not exceed, in the event that Buyer does not obtain
complete rights to use the Wireless Assets (excluding the MDS-1 channel and the
MDS-2 channel in Cincinnati, Ohio), either by assignment or lease pursuant to
the channel lease agreements delivered under Section 3.2(c)(v) above, the
$2,966,804 of the Purchase Price payable hereunder, or the amount thereof
attributable to such individual Wireless Asset.
(c) Any party seeking indemnification shall give written notice
to the indemnifying party of the facts and circumstances giving rise to the
claim promptly after becoming aware of such facts and circumstances. The loss,
damage and expense incurred by a party shall be determined on a net after-tax
basis and shall take into account any insurance proceeds received by such
party.
10.3. Defense Against Asserted Claims. Any party seeking
indemnification (the "Indemnified Party") shall give written notice to the
indemnifying party ("Indemnifying Party") of the facts and the circumstances
giving rise to the claim promptly after becoming aware of such facts and
circumstances. The
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Indemnified Party shall not settle or compromise any claim by a third party for
which the Indemnified Party is entitled to indemnification hereunder without
the prior written consent of the Indemnifying Party, unless legal action shall
have been instituted against the Indemnified Party and the Indemnifying Party
shall not have taken control of such suit within 60 days after notification
thereof as provided herein. In connection with any claim giving rise to
indemnification hereunder resulting from or rising out of any claim or legal
proceeding by a person other than the Indemnified Party, the Indemnifying
Party, at its sole cost and expense, may, upon written notice to the
Indemnified Party, assume the defense of any such claim or legal proceeding
without prejudice to the right of the Indemnifying Party thereafter to contest
its obligation to indemnify the Indemnified Party in respect to the claims
asserted therein. If the Indemnifying Party assumes the defense of any such
claim or legal proceeding, the Indemnifying Party shall select counsel to
conduct the defense in such claims and legal proceedings and at its sole cost
and expense shall take all steps necessary in the defense or settlement
thereof. The Indemnifying Party shall not consent to a settlement of, or the
entry of any judgment arising from, any claim or legal proceeding, without the
prior written consent of the Indemnified Party (which shall not be unreasonably
withheld), unless the Indemnifying Party admits in writing its liability to
hold the Indemnified Party harmless from and against any losses, damages,
expenses and liabilities arising out of such settlement and concurrently with
such settlement, the Indemnifying Party pays into the court the full amount of
all losses, damages, expenses and liabilities to be paid by the Indemnifying
Party in connection with such settlement and, if such settlement would impose
or affect ongoing obligations of the Indemnified Party, the Indemnified Party
consents thereto, which consent shall not be unreasonably withheld. The
Indemnified Party shall be entitled to participate in the defense of any such
action with its own counsel and at its own expense. If the Indemnifying Party
does not assume the defense of any such claim or litigation resulting therefrom
in accordance with the terms hereof, the Indemnified Party may defend such
claim or litigation in such a manner as it may deem appropriate, including
settling such claim or litigation, after giving notice of the same to
Indemnifying Party on such terms as the Indemnified Party may deem appropriate,
and provided that the Indemnified Party shall have complied with this Section
10.3 in any action by the Indemnified Party seeking indemnification from
Indemnifying Party in accordance with the provisions of this Section,
Indemnifying Party shall not be entitled to question the manner in which the
Indemnified Party defended such claim or litigation or the amount or nature of
any such settlement. In the event of a claim by a third party, the Indemnified
Party shall cooperate with the
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Indemnifying Party in the defense of such action (including making a personal
contact with the third party if deemed beneficial) and the relevant records of
each party shall be made available on a timely basis.
10.4. Failure to Close Because of Default. In the event that the
First Closing is not consummated on or before July 31, 1996 or the Second
Closing is not consummated on or before November 15, 1996, by virtue of a
default made by a party in the observance or in the due and timely performance
of any of its material covenants or agreements herein contained, the parties
shall have and retain all of the rights afforded them at law or in equity by
reason of that default, except as otherwise provided in Section 10.7 below;
provided, however, that in no event shall any party hereto be responsible for
money damages if such party has complied with Section 11.9 and, in the case of
Buyer, Buyer's sole remedy shall be the return of the First LOI Deposit and the
Second LOI Deposit (if applicable) and specific performance, and, in the case
of Sellers, Sellers' sole remedy shall be as set forth in Section 10.7. In
addition, Sellers acknowledge that the Purchased Assets are unique, that a
failure by Sellers to complete the transactions contemplated by this Agreement
will cause irreparable and continuing damage to Buyer, and that actual damages
for any such failure may be difficult to ascertain and may be inadequate and
that Buyer will have no adequate remedy at law. Consequently, Sellers agree
that Buyer, its Affiliates, successors and assigns shall be entitled, at
Buyer's sole election, to specific performance of any of the provisions of this
Agreement in addition to any other legal or equitable remedies to which Buyer
may otherwise be entitled.
10.5. Failure to Close Without a Default.
(a) In the event that the First Closing is not consummated on
or before July 31, 1996 and all of the conditions precedent set forth in
Article VIII have been satisfied Sellers, Sellers shall have the right to
acquire Buyer's wireless cable channel rights in the Cincinnati market, as set
forth on Schedule 10.5 attached hereto ("Buyer's Channel Rights"), and Buyer's
Equipment for an amount equal to (a) Buyer's actual investment in Buyer's
Channel Rights (which amount shall be determined by Buyer acting in good
faith), (b) the Expense Advance, (c) all amounts paid to Sellers under Section
7.5(b), (d) the Equipment Expenses, (e) $90,000 representing the MDS-1 and
MDS-2 advance, and (f) the Second LOI Deposit (to the extent the First Deposit
and the Second Deposit are returned to Buyer under the applicable escrow
agreement, such amounts shall be credited against the purchase price for
Buyer's Channel Rights). Such right must be exercised by written notice
thereof by Sellers delivered to Buyer prior to
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<PAGE> 57
August 10, 1996. In the event of such exercise by Sellers, the purchase of
Buyer's Channel Rights under this Section 10.5 shall constitute Sellers' sole
remedy against Buyer for Buyer's failure to close the transactions contemplated
hereunder and/or Buyer's breach of any representation, warranty, agreement,
covenant or obligation hereunder.
(b) Notwithstanding anything herein contained to the contrary,
in the event that the sale of the SMATV Assets to Buyer does not occur on or
before June 30, 1996 and Buyer has not breached any representation or warranty
made herein or defaulted in the observance or in the due and timely performance
of any of its covenants or agreements herein contained, then Buyer shall have
the option to extend the First Closing Date to a date not later than July 31,
1996, and amend the Purchase Price adjustment set forth in Section 2.2(b)(ii)
so that the number "2,400" in such Subsection is replaced with the number
"2,500."
10.6. Reimbursement of Costs. The costs and expenses, including
fees and disbursements of counsel and expenses of investigation, incurred by
any Indemnified Party in connection with any claim made under this Article X
shall be reimbursed on a quarterly basis by the Indemnifying Party, without
prejudice to the Indemnifying Party's right to contest the Indemnified Party's
right to indemnification and subject to refund (with interest computed as
provided in Section 10.2(a)) in the event the Indemnifying Party is ultimately
held not to be obligated to indemnify the Indemnified Party.
10.7. Termination Fees and Liquidated Damages. In the event that
Buyer terminates this Agreement pursuant to Sections 3.6(a)(i), (ii), (iii), or
(iv) of this Agreement, Sellers shall be entitled to keep the First LOI
Deposit, the Second LOI Deposit shall be returned to Buyer, and Sellers shall
be obligated to take the actions required under Section 6.13, which shall
survive termination of this Agreement. In the event that Sellers terminate
this Agreement pursuant to Sections 3.6(a)(v) or (vi) of this Agreement,
Sellers shall be entitled to keep the First LOI Deposit and the Second LOI
Deposit, and Sellers shall be obligated to take the actions required under
Section 6.13, which shall survive termination of this Agreement. Buyer and
Sellers agree that Sellers' damages from a termination of this Agreement or any
breach hereof by Buyer are difficult to precisely determine mutually and agree
that the monies to be paid as set forth in the preceding sentence and Sellers'
right to acquire Buyer's Channel Rights (including Buyer's Equipment) as set
forth in Section 10.5(a) are each a good faith and reasonable estimate of
damages for each such circumstance and are enforceable as liquidated damages
and not as a penalty. The termination rights
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<PAGE> 58
provided in Sections 3.6(a)(v) and 3.6(a)(vi) and the liquidated damages
provided for in this Section 10.7 shall be Sellers' sole remedy against Buyer
for termination of this Agreement due to any breach of this Agreement by Buyer.
ARTICLE XI
GENERAL PROVISIONS
11.1. Amendments and Waiver. No amendment, waiver or consent
with respect to any provision of this Agreement shall in any event be
effective, unless the same shall be in writing and signed by the parties
hereto, and then such amendment, waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
11.2. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be delivered in person
or sent by registered or certified mail, postage prepaid, or by telecopy,
telegram or telex as follows:
(a) If to Novner:
Novner Enterprises
9915 Springfield Pike
Cincinnati, Ohio 45215
Attn: Howard Friedman
With a copy to:
David A. Gronke, Esq.
Vorys, Sater, Seymour & Pease
2100 Atrium Two
221 East Fourth Street
Cincinnati, Ohio 45201-0236
(b) If to Alvin and Phyllis:
Novner Enterprises
9915 Springfield Pike
Cincinnati, Ohio 45215
Attn: Alvin Novick
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<PAGE> 59
With a copy to:
David A. Gronke, Esq.
Vorys, Sater, Seymour & Pease
2100 Atrium Two
221 East Fourth Street
Cincinnati, Ohio 45201-0236
(c) If to Buyer:
American Telecasting of Cincinnati, Inc.
5575 Tech Center Drive, Suite 300
Colorado Springs, Colorado 80919
Attention: President
With a copy to:
Cynthia J. Levitt, Esq.
McDermott, Will & Emery
1850 K Street, N.W., Suite 500
Washington, D.C. 20006
Any party may change its address for receiving notice by written notice given
to the others named above.
11.3. Expenses. Each party shall pay all costs and expenses
incurred by such party in connection with the preparation and execution of this
Agreement and the consummation of the transactions contemplated hereby. The
provisions of this Section shall survive any termination of this Agreement.
11.4. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
11.5. Successors and Assigns; Joint and Several Liability of
Sellers. This Agreement shall bind and inure to the benefit of the parties
named herein and their respective successors and assigns. Sellers shall not be
entitled to assign their rights or duties under this Agreement without the
prior written consent of Buyer. Buyer shall be entitled to assign its rights
and duties under this Agreement without the prior written consent of Sellers to
American Telecasting, Inc., or any Affiliate of American Telecasting, Inc.
With respect to the separate obligations and liability of Novner, Alvin and
Phyllis under this Agreement and except as set forth in Section 3.5, their
liability shall be separate and several; provided, however, that all
obligations of Alvin and Phyllis shall be joint and several.
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<PAGE> 60
11.6. Entire Transaction. This Agreement and the documents
referred to herein contain the entire understanding among the parties with
respect to the transactions contemplated hereby, and supersede all other
agreements, understandings and undertakings among the parties on the subject
matter hereof.
11.7. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Colorado.
11.8. Other Rules of Construction. References in this Agreement
to sections, schedules and exhibits are to sections of, and schedules and
exhibits to, this Agreement unless otherwise indicated. Words in the singular
include the plural and in the plural include the singular. Words importing any
gender shall include the other gender. The word "or" is not exclusive. The
word "including" shall mean including, without limitation. The section and
other headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
11.9. Reasonable Efforts. Subject to the terms and conditions
provided for herein, each of the parties hereto agrees to use all reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations, to consummate and make effective the transactions contemplated by
this Agreement.
11.10. Announcements. No public announcement of this Agreement or
any transaction contemplated hereby shall be made by any party prior to the
First Closing without the written approval of the other parties hereto (which
approval shall not be unreasonably withheld), except as required by law or the
regulations of any securities exchange. Each party shall use its best effort
to maintain the confidentiality of the terms of the purchase and sale
transaction contemplated hereby, except as required by law, or to implement
this Agreement, or as necessary to protect the interests of such party
hereunder.
11.11. Limitations on Obligations of Sellers. Notwithstanding the
fact that the term "Sellers" as defined in this Agreement includes Novner,
Alvin and Phyllis, any covenant, agreement or obligation of Sellers set forth
in this Agreement shall be an obligation only of the Seller in question
(Novner, Alvin or Phyllis, as the case may be) who owns or operates the
Business or the Business Assets as to which the covenant, agreement or
obligation relates or arises out of or in connection with; and no Seller shall
be liable or responsible for, or
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<PAGE> 61
obligated to perform or deemed to have assumed or guaranteed any covenant,
agreement or obligation which relates to the Business or Purchased Assets owned
and being sold by any other Seller. Without limiting the generality of the
foregoing, and notwithstanding anything to the contrary in this Agreement or
otherwise (except as set forth in Sections 3.5 and 11.13 hereof), Alvin and
Phyllis shall not be liable or responsible for or obligated to perform or
deemed to have assumed or guaranteed any covenant, agreement or obligation
related to the SMATV Assets or the Business owned by and being sold by Novner,
nor shall Alvin and Phyllis be deemed liable or responsible for or obligated to
perform or deemed to have assumed any agreement or obligation of Novner to any
third party, or which arises under this Agreement (or otherwise), or which
would arise under this Agreement by reason of the fact that the definition of
"Sellers" includes Novner, Alvin and Phyllis collectively. Without limiting
the generality of the foregoing, by way of example, Alvin and Phyllis shall not
be responsible for, nor shall they be deemed to have agreed pursuant to Section
1.4 to indemnify and defend Buyer against, any liability, obligations, loss,
claim, damage, cost or expense of Novner or arising from or related to Novner's
business or Novner's Purchased Assets.
11.12. American Telecasting, Inc. Guaranty. In consideration of
Sellers execution and delivery of this Agreement and their agreement to perform
the transactions contemplated hereby, ATI hereby guarantees absolutely and
unconditionally, in the event Sellers have satisfied all conditions to the
First Closing and the Second Closing, as the case may be, the payment of the
Purchase Price then payable to Sellers as set forth in this Agreement and the
payment of all other monetary obligations of Buyer to Sellers hereunder. Such
guarantee is a guarantee of payment, not collection, and Sellers shall be
entitled to proceed directly against ATI in the case of default by Buyer
hereunder and under the Management Agreement, the MDS Escrow Agreement, the
Indemnification Escrow Agreement, and the Subscriber Escrow Agreement. ATI's
obligations hereunder shall not be affected by Buyer's bankruptcy. ATI also
acknowledges and agrees to be bound by the terms of Sections 7.5(a) and
10.5(a).
11.13. Set-Off. Notwithstanding the provisions of Sections 11.5
and 11.11, at the Second Closing, Buyer shall be entitled to set-off any amount
owing from any Seller hereunder to Buyer such amount against the Second Closing
Payment.
11.14. Partial Invalidity. In the event that any provision of
this Agreement or the documents to be delivered hereunder shall be held invalid
or unenforceable by any court of competent
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<PAGE> 62
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof or thereof.
(signatures on the following page)
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<PAGE> 63
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by a duly authorized officer all as of the date first
written above.
BUYER: AMERICAN TELECASTING OF CINCINNATI, INC.
By: ___________________________________
Name: Robert D. Hostetler
Title: President
SELLERS: NOVNER ENTERPRISES, INC.
By: __________________________________
Name: ________________________________
Title: _______________________________
(signature)
--------------------------------------
Alvin Novick (name)
--------------------------------------
(signature)
--------------------------------------
Phyllis Novick (name)
--------------------------------------
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<PAGE> 64
LIST OF SCHEDULES
Schedule 1.2(b) SMATV Contracts
Schedule 1.2(c) Approvals
Schedule 1.2(d) Transmission Equipment
Schedule 1.2(e) Tower Lease Agreement
Schedule 1.2(f) Miscellaneous Assets
Schedule 1.2(s) Vehicles
Schedule 1.2(t) Stock
Schedule 1.2(z) Excluded Assets
Schedule 2.1(a) Indemnification Escrow Agreement
Schedule 2.1(b)(iii) Subscriber Escrow Agreement
Schedule 2.1(c)(iii) MDS Escrow Agreement
Schedule 2.2(d) TKR and Warner Contracts
Schedule 3.2(a)(v) Management Agreement
Schedule 3.2(a)(vi) Lease
Schedule 3.2(b)(ii) General Assignment and Bill of Sale
Schedule 3.2(b)(iii)(A) Consent to Assignment and Certification
Agreements
Schedule 3.2(b)(iii)(B) Acknowledgment Letters
Schedule 3.2(b)(vi) Opinion of Corporate counsel ("First
Closing")
Schedule 3.2(b)(vii) Non-Competition Agreement
Schedule 3.3(b)(iv) Opinion of Corporate Counsel ("Second
Closing")
Schedule 3.3(b)(v) Channel Lease Agreement
Schedule 3.3(b)(viii) Opinion of FCC Counsel
Schedule 4.5 Financial Statements
Schedule 4.9 Leases
Schedule 4.10 Material Contracts
Schedule 4.15 Licenses and Permits
Schedule 4.19 Insurance
Schedule 4.21 Channel Rights
Schedule 4.22 Retransmission Consent; Copyright
Schedule 4.23 CARS and STLS
Schedule 4.24 Employees
Schedule 4.25 Subscriber Information
Schedule 4.26 Subscriber Premise Equipment
Schedule 4.29(a) and (b) MDS-1 and MDS-2 Documents
Schedule 6.9 Liabilities
Schedule 10.5 Buyer's Channel Rights
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<PAGE> 1
EXHIBIT 10.2
Schedule 3.2(a)(v)
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is made as of this __ day
of June, 1996 between NOVNER ENTERPRISES, INC., (the "Company"), and AMERICAN
TELECASTING OF CINCINNATI, INC. ("ATCI").
WHEREAS, ATCI is purchasing the Company's SMATV business in the
greater Cincinnati, Ohio market pursuant to the terms of that certain Agreement
for Purchase and Sale of Assets between, among others, ATCI and the Company,
dated as of June __, 1996 (the "Purchase Agreement"; capitalized terms used
herein and not defined herein have the meanings assigned to them in the
Purchase Agreement).
WHEREAS, it is anticipated that at the First Closing, the Company may
not have the necessary consents and approvals to transfer all SMATV related
assets to ATCI and the Company and ATCI have decided that is in their mutual
best interests that ATCI manage and operate all SMATV contracts and systems
listed on Exhibit A attached (collectively, the "SMATV Systems") until such
time as they can be assigned to ATCI under the terms of the Purchase Agreement.
WHEREAS, it a condition to the First Closing that this Agreement be
executed and delivered by the parties hereto.
NOW, THEREFORE, in consideration of the premises and mutual promises
set forth herein, the parties hereby agree as set forth below.
1. Appointment. The Company hereby appoints ATCI as the sole and
exclusive manager to provide all services necessary to the proper operation of
the SMATV Systems and in accordance with reasonable standards and the contracts
in question. ATCI shall, through its officers, employees, agents and other
personnel, provide all management and technical services necessary to the
proper operation of the SMATV Systems in accordance with the terms of this
Agreement and in accordance with reasonable standards and the contracts in
question. The Company agrees that ATCI shall have complete responsibility and
authority for the SMATV Systems.
2. Duties of ATCI. ATCI shall provide all services necessary
with respect to the design, construction, operation, maintenance, purchasing of
goods and services, administration, marketing and programming of the SMATV
Systems and shall perform on behalf of the Company the Company's obligations
under the Contracts included within the SMATV Systems. ATCI shall devote its
best efforts to carrying out and performing the duties specified in this
Agreement in a professional, expert and diligent manner in accordance with the
same standards American Telecasting, Inc. and ATCI customarily apply in the
operation or management of wireless and hardwire cable television systems
<PAGE> 2
owned or managed by ATCI or its affiliates. ATCI shall provide whatever
personnel as are reasonably required to fulfill its obligations under this
Agreement and the personnel shall provide the services specified in this
Agreement. ATCI may take any and all actions as a "owner" in connection with
the SMATV Systems, including, but not limited to, collecting subscribers fees,
settling account disputes, purchasing supplies, and upgrading the SMATV
Systems. ATCI shall be responsible for all of its expenses incurred in
connection with this Agreement and the operation of the SMATV Systems,
including, any upgrades, renovations, or modifications of the assets included
within the SMATV Systems.
3. Assistance. To the extent reasonably required for the
provision of ATCI's services pursuant to this Agreement, the Company shall
make available to ATCI's personnel who are performing services under this
Agreement access to all records, equipment and areas within the control of the
Company as may be reasonably requested by the personnel.
4. Term of Agreement. The term of this Agreement shall be from
the date first set forth above until the first anniversary of the First Closing
Date; provided, however, that the term of this Agreement shall earlier
terminate in the event ATCI fails to perform its obligations hereunder in any
material respect and such failure continues or is not cured for a period of
thirty days after written notice thereof from the Company to ATCI. Upon
expiration of the term of this Agreement, any assets included within the SMATV
Systems which have not been assigned to ATCI under the Purchase Agreement,
shall be returned to the Company and all obligations of the parties hereto
shall terminate (except that all revenues generated for periods prior to the
termination shall belong to ATCI; the Company, to the extent that it receives
such revenues after the termination, shall promptly deliver all such revenues
to ATCI). Upon assignment of any asset contained within the SMATV Systems to
ATCI under the Purchase Agreement all obligations of the parties hereto in
connection with such asset shall automatically terminate.
5. Compensation. On and after the date hereof, ATCI shall be
entitled to all gross revenues derived from the SMATV Systems, including, but
not limited to, all subscriber fees payable by subscribers pursuant to
contracts included within the SMATV Systems and all other income from the SMATV
Systems. ATCI shall be deemed to have paid the Company $1,000 in consideration
of the Company entering into this Agreement, which consideration was
transferred to the Company as part of the First Closing Payment.
6. Indemnity and Insurance. ATI shall indemnify the Company and
keep the Company fully indemnified, against any loss, claim or damage incurred
by the Company as a direct result of any action or claim brought against it by
any third party with
2
<PAGE> 3
respect to ATCI providing services as specified in this Agreement. Each party
hereto shall promptly notify the other party of such actions or claims and the
Company shall permit ATCI to defend any such actions or claims against the
Company. Notwithstanding anything herein to the contrary, in no event shall
ATCI be liable for its actions in connection with this Agreement, except to the
extent that ATCI's actions constituted willful misconduct, gross negligence or
fraud. In no event shall ATCI be responsible for the consequences of the
Company's prior defaults, if any, under the agreements related to the SMATV
Systems. ATCI shall at all times maintain relevant insurance for the assets
included within the SMATV Systems.
7. Assignability. Neither party may assign its rights and
obligations under this Agreement without the prior written consent of the other
party; provided that ATCI may assign its rights and obligations under this
Agreement without restriction or limitation to American Telecasting, Inc., or
any subsidiary of American Telecasting, Inc.
8. Severability. In the event that any of the provisions of this
Agreement shall be held to be invalid or unenforceable, the remaining
provisions shall nevertheless continue to be valid and enforceable as though
invalid or unenforceable parts had not been included therein.
9. Entire Agreement. This Agreement constitutes the entire
agreement between the parties relating to the subject matter hereof and
supersedes all prior agreements or understandings among the parties hereto with
respect to the subject matter hereof.
10. Amendments. This Agreement shall not be amended or modified
except by a writing signed by both parties hereto.
11. Miscellaneous. The failure of either party at any time to
require performance of the other party of any provision of this Agreement shall
in no way affect the right of such party thereafter to enforce the same
provision, nor shall the waiver by either party of any breach of any provision
hereof be taken or held to be a waiver of any other or subsequent breach, or as
a waiver of the provision itself. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Colorado, without
regard to the conflict of laws of such State. This Agreement and all of its
rights, privileges, and obligations will be binding upon the parties and all
successors and agreed to assigns thereof.
12. Agents, Employees, Legal Representatives. Neither party
hereto shall be constituted the agent, employee or legal representative of the
other for any purpose whatsoever. ATCI
3
<PAGE> 4
shall conduct its activities as a person having no authority to bind the
Company.
13. Best Efforts. Each party shall do all things necessary to
give full effect to this Agreement and the transactions contemplated by this
Agreement.
14. Headings. The headings or titles in this Agreement are for the
purpose of reference only and shall not in any way affect the interpretation or
construction of this Agreement.
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
together constitute one and the same document.
16. Notices. Any notice to be given hereunder by either party to
the other may be effected in writing by personal delivery, or by mail, certified
with postage prepaid, or by overnight delivery service. Notices sent by mail
or by an overnight delivery service shall be addressed to the parties at the
addresses appearing following their signatures below, and either party may
change its address by written notice in accordance with this paragraph.
17. Reports. ATCI shall provide the Company with monthly
subscriber reports upon the Company's written request therefor.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first written above.
AMERICAN TELECASTING
OF CINCINNATI, INC.
By:
---------------------------
Name: Robert Hostetler
Title: President
Address: 5575 Tech Center Drive
Suite 300
Colorado Springs, CO 80919
NOVNER ENTERPRISES, INC.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
Address:
----------------------
----------------------
4
<PAGE> 1
EXHIBIT 10.3
AGREEMENT
FOR
EXCHANGE OF ASSETS
THIS AGREEMENT FOR EXCHANGE OF ASSETS (this "Agreement") is made and
entered into this _ day of July, 1996, by and between HEARTLAND WIRELESS
COMMUNICATIONS, INC., a Delaware corporation ("Heartland Parent"), HEARTLAND
WIRELESS SOUTH DAKOTA PROPERTIES, INC., a South Dakota corporation ("Heartland
SD"), HEARTLAND WIRELESS FLORIDA PROPERTIES, INC., a Florida corporation
("Heartland FL"; Heartland SD and Heartland FL are individually and
collectively referred to herein as "Heartland" and each reference herein to
"Heartland" shall be deemed to be a reference to Heartland SD and Heartland FL
individually and collectively), and AMERICAN TELECASTING, INC., a Delaware
corporation ("ATI").
WHEREAS, Heartland has acquired rights in and to certain Federal
Communications Commission ("FCC") authorizations for wireless cable television
channels or applications for such authorizations in the Elk Point, South
Dakota, Montrose, South Dakota, and Naples, Florida markets (collectively, the
"Heartland Markets");
WHEREAS, ATI has acquired rights in and to certain FCC authorizations
for wireless cable television channels or applications for such authorizations
in the Peoria, Illinois, Grand Rapids, Michigan, and Danville, Illinois markets
(collectively, the "ATI Markets");
WHEREAS, ATI desires to acquire from Heartland and Heartland desires
to assign to ATI all the rights, title and interest in, to or arising from the
such authorizations and applications in the Heartland Markets and such other
assets as are specifically set forth herein by means of a like-kind exchange
and its intended that the exchange of asset's contemplated hereunder qualify as
a like-kind exchange within the meaning of Section 1031 of the Internal Revenue
Code, as amended; and
WHEREAS, Heartland desires to acquire from ATI and ATI desires to
assign to Heartland all the rights, title and interest in, to or arising from
the such authorizations and applications in the ATI Markets and such other
assets as are specifically set forth herein on the terms and conditions set
forth herein by means of a like-kind exchange and its intended that the
exchange of asset's contemplated hereunder qualify as a like-kind exchange
within the meaning of Section 1031 of the Internal Revenue Code, as amended;
NOW, THEREFORE, in consideration of the premises and promises herein
contained the parties agree as follows as set
<PAGE> 2
forth below.
ARTICLE I
EXCHANGE OF ASSETS
1.1. The Transaction. At the Closing (as defined in Section
3.1), (a) Heartland shall sell, transfer, assign and deliver to ATI, and ATI
shall purchase, accept, assume and receive, all right, title and interest in,
to or arising from the Heartland Assets (as defined in Section 1.2), and (b)
ATI shall sell, transfer, assign and deliver to Heartland, and Heartland shall
purchase, accept, assume and receive, all right, title and interest in, to or
arising from the ATI Assets (as defined in Section 1.3).
1.2. Heartland Assets. The "Heartland Assets" are the assets,
rights and claims set forth below:
(a) all of Heartland's rights in, to and under the
channel lease agreements listed on Schedule 1.2(a) attached hereto
(the "Heartland FCC Schedule"; all such channel rights, and contracts
and leases are referred to herein as the "Heartland Channel Rights");
(b) the Agreement of Option to Lease and Lease
between Heartland SD and Paul & Connie Smith, William & Connie Smith,
and Heartland SD, as assignee of Rural Vision Central, Inc., dated
November 7, 1991, as extended from time to time, for the Elk Point,
South Dakota market (the "Heartland Tower Lease Agreement"); and
(c) all documents and records relating to the
foregoing Heartland Assets.
1.3. ATI Assets. The "ATI Assets" are the assets, rights and
claims set forth below:
(a) all of ATI's rights in, to and under the
wireless channel authorizations and applications therefore, and the
channel lease agreements listed on Schedule 1.3(a) attached hereto
(the "ATI FCC Schedule"; all such channel rights, and contracts and
leases are referred to herein as the "ATI Channel Rights"); and
(b) all documents and records relating to the
foregoing ATI Assets.
1.4. Assumed Obligations.
(a) At the Closing, ATI shall assume and discharge
only those obligations of Heartland under the Heartland Channel Rights and the
Heartland Tower Lease Agreement incurred after the
-2-
<PAGE> 3
Closing Date (the "Obligations Assumed by ATI"). ATI shall forever defend,
indemnify and hold harmless Heartland from and against any and all liabilities,
obligations, claims, damages (including incidental and consequential damages),
costs and expenses (including court costs and reasonable attorneys' fees)
related to or arising from its failure to fully perform and discharge the
responsibilities of Heartland (to the extent assumed as provided herein) with
respect to the foregoing.
(b) At the Closing, Heartland shall assume and
discharge only those obligations of ATI under the ATI Channel Rights and the
ATI Tower Lease Agreement incurred after the Closing Date (the "Obligations
Assumed by Heartland"). Heartland shall forever defend, indemnify and hold
harmless ATI from and against any and all liabilities, obligations, claims,
damages (including incidental and consequential damages), costs and expenses
(including court costs and reasonable attorneys' fees) related to or arising
from its failure to fully perform and discharge the responsibilities of ATI (to
the extent assumed as provided herein) with respect to the foregoing.
1.5. Excluded Liabilities and Obligations.
(a) Except as expressly set forth in Section 1.4(a)
above, ATI shall not assume and shall not be liable or responsible for any
debt, obligation or liability of Heartland, or any subsidiary or any affiliate
thereof, or any claim against any of the foregoing, of any kind, whether known
or unknown, contingent, absolute, or otherwise.
(b) Except as expressly set forth in Section 1.4(b)
above, Heartland shall not assume and shall not be liable or responsible for
any debt, obligation or liability of ATI, or any subsidiary or any affiliate
thereof, or any claim against any of the foregoing, of any kind, whether known
or unknown, contingent, absolute, or otherwise.
ARTICLE II
CONSIDERATION FOR TRANSFER
2.1. Consideration for the Heartland Assets. The aggregate
consideration for the Heartland Assets shall be the transfer of the ATI Assets
to Heartland.
2.2. Consideration for the ATI Assets. The aggregate
consideration for the ATI Assets shall be the transfer of the Heartland Assets
to ATI.
2.3. Prorations. In the event that at the Closing, Heartland
has prepaid expenses under the Heartland Channel Rights and the Heartland Tower
Lease Agreement attributable to the time
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period after the Closing Date, Heartland shall deliver to ATI evidence of such
prepayments, and ATI shall reimburse Heartland for such prepaid expenses for
the time period commencing after the Closing Date. In the event that at the
Closing, ATI has prepaid expenses under the ATI Channel Rights and the ATI
Tower Lease Agreement attributable to the time period after the Closing Date,
ATI shall deliver to Heartland evidence of such prepayments, and Heartland
shall reimburse ATI for such prepaid expenses for the time period commencing
after the Closing Date. All payments to be made pursuant to this Section 2.3
shall be offset against each other.
2.4. No Adjustments for Pending Applications. In the event that
a pending application with the FCC for a license included within either the
Heartland Channel Rights or the ATI Channel Rights is dismissed and the other
party to acquire the rights in such pending application does not terminate this
Agreement pursuant to Section 3.5, there shall not be any adjustment to the
consideration deliverable under this Article II.
ARTICLE III
THE CLOSING AND TRANSFER OF ASSETS
3.1. Closing. On such date as mutually agreed to by the
parties hereto, but in no event later than sixty days after the date of this
Agreement (the "Closing Date"), the closing (the "Closing") shall be held at
the offices of McDermott, Will & Emery, located at 1850 K Street, N.W.,
Washington, DC 20006, at 10:00 a.m., at which time the parties shall perform
the actions specified in Sections 3.2 and 3.3 hereof.
3.2. Deliveries by ATI at Closing. At the Closing, ATI shall
deliver the following to Heartland:
(a) a certificate signed by a duly authorized
officer of ATI attesting to the accuracy of ATI's representations and
warranties and such ATI's compliance with its covenants and
obligations under this Agreement as of the Closing Date;
(b) a bill of sale duly executed by ATI, in
substantially the form of Schedule 3.2(b) attached hereto;
(c) consent, assignment and certification agreements
for all leasehold interests included in the ATI Assets, including any
leasehold interests included within the ATI Channel Rights and the ATI
Tower Lease Agreement, in substantially the form of Schedule 3.2(c)
hereto;
(d) an opinion of ATI's general corporate counsel,
in substantially the form of Schedule 3.2(d) attached
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hereto;
(e) MMDS Sublease and Option Agreement for each of
the E and F channel groups in Peoria, Illinois, in substantially the
form of Schedule 3.2(e) attached hereto (the "Sublease Agreements");
(f) an opinion of ATI's Federal Communications
counsel, in a form reasonably acceptable to Heartland; and
(g) such other instruments or documents as may be
reasonably necessary to carry out the transactions contemplated
hereby.
3.3. Deliveries by Heartland at Closing. At the Closing,
Heartland shall deliver the following to ATI:
(a) certificates signed by a duly authorized officer of
each of Heartland SD and Heartland FL attesting to the accuracy of
such company's representations and warranties and compliance with its
covenants and obligations under this Agreement as of the Closing Date;
(b) bills of sale duly executed by each of Heartland
SD and Heartland FL, in substantially the form of Schedule 3.3(b)
attached hereto;
(c) consent, assignment and certification agreements
for all leasehold interests included in the Heartland Assets,
including any leasehold interests included within the Heartland
Channel Rights and the Heartland Tower Lease Agreement, in
substantially the form of Schedule 3.2(c) hereto;
(d) an opinion of Heartland's general corporate
counsel, in substantially the form of Schedule 3.3(d) attached hereto;
(e) an opinion of Heartland's Federal Communications
counsel, in a form reasonably acceptable to ATI;
(f) Sublease Agreements duly executed by Heartland
SD and/or Heartland FL; and
(g) such other instruments or documents as may be
reasonably necessary to carry out the transactions contemplated
hereby.
3.4. Nonassignable Contracts and Licenses.
(a) To the extent that (i) the assignment by
Heartland or ATI of any of Heartland Channel Rights or the
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ATI Channel Rights, as the case may be, (ii) any government approvals
related to the operation of wireless cable systems in the Heartland
Markets or the ATI Markets, or (iii) any sales order, purchase order,
lease, license or other contract included in the Heartland Assets or
the ATI Assets (collectively, the "Contracts and Licenses") is not
permitted without (A) the consent of the issuing party or governmental
agency or any other party thereto, (B) the approval of ATI or
Heartland, as the case may be, as a source of the services called for
by such Contracts and Licenses, or (C) the approval of ATI or
Heartland, as the case may be, as a lessee or licensee under such
Contracts and Licenses, this Agreement shall not be deemed to
constitute an assignment or an attempted assignment of the same, if
such assignment or attempted assignment would constitute a breach
thereof. However, unless otherwise agreed as to any particular
Contracts and Licenses, Heartland and ATI shall use their best efforts
to obtain any and all such consents, approvals and novations. All
such consents, approvals and novations shall be in forms acceptable to
parties hereto.
(b) If any such consent, approval or novation is
requested but not obtained, the parties hereto shall cooperate with
each other party hereto in any reasonable arrangement designed to
provide the party to whom assets are being transferred hereunder with
all of the benefits under such Contracts and Licenses as if such
consent, approval or novation had been obtained.
(c) If such a consent, approval or novation is
requested but not obtained prior to the Closing Date and as a result
ATI or Heartland, as the case may be, will not receive the benefit of
the underlying Contracts and Licenses despite the mutual best efforts
of the parties to develop a suitable arrangement pursuant to
subsection (b) above, ATI or Heartland, as the case may be, shall have
the right to terminate this Agreement.
3.5. Termination.
(a) This Agreement may be terminated under the circumstances
described below, in addition to any other grounds for termination provided for
herein or by law:
(i) by ATI in the event that there has been a material
adverse change with respect to the Heartland Assets;
(ii) by ATI in the event that any one or more of the
conditions set forth in Article VIII has not been fulfilled
in any material respect prior to the Closing Date;
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<PAGE> 7
(iii) by ATI if Heartland SD or Heartland FL has breached
in any material respect any representation, warranty,
covenant or agreement made by Heartland SD or Heartland FL
in this Agreement, which breach cannot be or is not cured
by the Closing Date;
(iv) by Heartland in the event that there has been a
material adverse change with respect to the ATI Assets;
(v) by Heartland in the event that any one or more of the
conditions set forth in Article IX has not been fulfilled
in any material respect as of the Closing Date; or
(vi) by Heartland, if ATI has breached in any material
respect any representation, warranty, covenant or agreement
made by ATI in this Agreement, which breach cannot be or is
not cured by the Closing Date.
(b) If this Agreement is terminated it shall become null and
void and have no further force or effect, except as otherwise provided herein.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HEARTLAND
Heartland SD and Heartland FL each represent and warrant to ATI as of
the date hereof, and as of the Closing, as set forth below.
4.1. Authority. Heartland has full legal right, power and
authority, without the consent of any other person, to execute and deliver this
Agreement and to carry out the transactions contemplated hereby, except for
consents to be delivered at Closing in connection with the Heartland Channel
Rights and the Heartland Tower Lease Agreement (the "Heartland Consents"). All
corporate and other acts or proceedings required to be taken by Heartland to
authorize the execution, delivery and performance of this Agreement and all
transactions contemplated hereby have been duly and properly taken.
4.2. Validity. This Agreement has been, and the documents to be
delivered at Closing will be, duly executed and delivered and constitute
lawful, valid and legally binding obligations of Heartland, enforceable in
accordance with their respective terms. Except for the Heartland Consents, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in the creation of any lien,
charge or encumbrance of any kind or the acceleration of any
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<PAGE> 8
indebtedness or other obligation of Heartland as it may relate to the Heartland
Assets and are not prohibited by, do not violate or conflict with any provision
of, and do not constitute a default under or a breach of (a) the charter or
By-laws of Heartland, (b) any contract, agreement or other instrument to which
Heartland is a party or by which Heartland or any of its assets are bound, (c)
any order, writ, injunction, decree or judgment of any court or governmental
agency, or (d) any law, rule or regulation applicable to Heartland and will not
restrict the ability of ATI to carry on any operations relating to the
Heartland Assets. Except for the Heartland Consents, no approval,
authorization, consent or other order or action of or filing with any court,
administrative agency or other governmental authority is required for the
execution and delivery by Heartland of this Agreement or such other agreements
and instruments or the consummation by Heartland of the transactions
contemplated hereby or thereby.
4.3. Due Organization. Heartland is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, and has full power and authority and all
requisite licenses, permits and franchises to own, lease and operate its assets
and to carry on the business in which it is engaged. Heartland is duly
licensed and qualified to do business as a foreign corporation and is in good
standing in all jurisdictions where failure to be so licensed or qualified
would have a material adverse effect upon its business or assets or where
failure to qualify would affect the ability of ATI to enforce any material
rights included in the Heartland Assets.
4.4. Title to Heartland Assets. Heartland is the sole and
exclusive legal and equitable owners of all right, title and interest in and it
has good and marketable title to all of the Heartland Assets. None of the
Heartland Assets which Heartland purports to own are subject to (a) any
contract of lease, license or sale, (b) any security interest, mortgage,
pledge, lien, charge or encumbrance of any kind or character, direct or
indirect, whether accrued, absolute, contingent or otherwise, except minor
liens and encumbrances which do not materially detract from the value or
interfere with the present use of such property and assets, (c) subject to any
royalty or commission arrangements, or (d) subject to any claims, covenants or
restrictions.
4.5. Leases. Heartland has delivered to ATI an accurate,
correct and complete copy of each lease agreement included within the Heartland
Assets, including, without limitation, the all channel lease agreements listed
on the Heartland FCC Schedule and the Heartland Tower Lease Agreement
(collectively, the "Heartland Property Leases"). With respect to the Heartland
Property Leases:
(a) the Heartland Property Leases are in full force
and effect and are valid, binding and enforceable in
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<PAGE> 9
accordance with their respective terms;
(b) no amounts payable under any Heartland Property
Lease are past due and all liabilities and obligations of Heartland to
be paid or performed on or before the Closing Date under the Heartland
Property Leases have been, or will have been on such date, fully paid
or performed;
(c) Heartland has, and to the best of its knowledge,
each other party to each Heartland Property Lease, has complied with
all material commitments and obligations on its part to be performed
or observed under each such Heartland Property Lease;
(d) Heartland has not received any notice of a
default, offset or counterclaim under any Heartland Property Lease, or
any other communication calling upon Heartland to comply with any
provision of any Heartland Property Lease or ascertaining
noncompliance, and (i) to the best of Heartland's knowledge, no event
or condition has happened or presently exists which constitutes a
default or, after notice or lapse of time or both, would constitute a
default by any party (other than Heartland) under any Heartland
Property Lease, and (ii) no event or condition has happened or
presently exists which constitutes a default or, after notice or lapse
of time or both, would constitute a default by Heartland under any
Heartland Property Lease;
(e) except for the Heartland Consents, Heartland has
filed all necessary applications and has obtained all requisite
consents and approvals for the transfer or assignment of all of the
Heartland Property Leases to which Heartland is a party to ATI, and
the assignment of each Heartland Property Lease to ATI will not
constitute a breach of or a default under any provision of any
Heartland Property Lease and upon such assignment ATI will have and
may enjoy and enforce all rights and benefits of the lessee under the
Heartland Property Leases;
(f) Heartland has not received notice that any party
to any Heartland Property Lease intends to cancel or terminate such
Heartland Property Lease or to exercise or not exercise options or
rights under such Heartland Property Lease; and
(g) Heartland has marketable title to each Heartland
Property Lease and there does not now and there will not at Closing
exist any security interest, lien, encumbrance or claim of others
created or suffered to exist on the leasehold interest created under
any Heartland Property Lease.
4.6. Litigation. Heartland is not engaged in or a party
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<PAGE> 10
to or threatened with any suit, action, proceeding, investigation or legal,
administrative, arbitration or other method of settling disputes or
disagreements or governmental investigation, and Heartland does not know,
anticipate or have notice of any basis for any such action. Heartland has not
received notice of any investigation threatened or contemplated by any foreign,
Federal, state or local governmental or regulatory authority, which remains
unresolved. Heartland nor any of the Heartland Assets are subject to any
judgment, order, writ, injunction or decree of any court or any Federal, state,
local or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or any arbitrator.
4.7. Licenses and Permits. Schedule 1.2(a) contains an
accurate, correct and complete list and status of each license, certificate,
approval, registration, accreditation, authorization and permit which pertain
to or in any way affect the Heartland Assets, including the Heartland Channel
Rights (collectively, the "Heartland Licenses and Permits") held by Heartland,
the foreign, Federal, state or local jurisdiction issuing such Licenses and
Permits, and the type and number of such Heartland License or Permit. The
Heartland Licenses and Permits are valid and in full force and effect and there
are not pending, or, to the knowledge of Heartland, threatened, any proceedings
which could result in the termination, revocation, limitation or impairment of
any such Heartland License or Permit. Heartland has all certificates,
licenses, permits, approvals, franchises, registrations, accreditation and
other authorizations as are necessary in order to enable it to own and exercise
any and all rights and interests in and to the Heartland Assets. All Heartland
Licenses and Permits are freely assignable to ATI. No violations have been
recorded in respect of any Heartland Licenses and Permits and no proceeding is
pending or, to the knowledge of Heartland, threatened or contemplated with
respect to the revocation or limitation of the same.
4.8. Compliance with Law. The Heartland Assets conform to all
applicable laws, ordinances, codes, licensing requirements, rules and
regulations, except for such minor violations as do not impair or interfere
with the use for which such Heartland Assets are employed, and Heartland has
not received any notice to the contrary. Except for minor violations not
affecting the value of the Heartland Assets or the validity of the Heartland
Channel Rights, Heartland has complied with all laws, ordinances, regulations,
licensing requirements, rules, decrees, awards or orders, and there is not and
will not be any liability arising from or relating to any violations thereof.
To Heartland's knowledge, there is no proposed or pending change in any such
law or regulation which would adversely affect the Heartland Assets, other than
proposed Federal laws regulations applicable to the wireless cable industry in
general. No notice from any governmental body or other person of any violation
of any law, ordinance, code, rule or regulation or requiring or calling
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<PAGE> 11
attention to the necessity of any work, repairs, new construction, installation
or alteration has been served.
4.9. Brokers. Heartland has not retained any broker or finder or
incurred any liability or obligation for any brokerage fees, commissions or
finders fees with respect to this Agreement or the transactions contemplated
hereby.
4.10. Material Facts. No representation or warranty made by
Heartland in this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained herein not misleading.
4.11. Assets. The Heartland Assets constitute all wireless cable
television assets in the Heartland Markets in which Heartland, Heartland
Parent, or any affiliate thereof has an interest in.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF ATI
ATI hereby represents and warrants to Heartland as of the date hereof,
and as of the Closing, as set forth below.
5.1. Authority. ATI has full legal right, power and authority,
without the consent of any other person, to execute and deliver this Agreement
and to carry out the transactions contemplated hereby, except for consents to
be delivered at Closing in connection with the ATI Channel Rights and the ATI
Tower Lease Agreement (the "ATI Consents"). All corporate and other acts or
proceedings required to be taken by ATI to authorize the execution, delivery
and performance of this Agreement and all transactions contemplated hereby have
been duly and properly taken.
5.2. Validity. This Agreement has been, and the documents to be
delivered at Closing will be, duly executed and delivered and constitute
lawful, valid and legally binding obligations of ATI, enforceable in accordance
with their respective terms. Except for the ATI Consents, the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby will not result in the creation of any lien, charge or
encumbrance of any kind or the acceleration of any indebtedness or other
obligation of ATI as it may relate to the ATI Assets and are not prohibited by,
do not violate or conflict with any provision of, and do not constitute a
default under or a breach of (a) the charter or By-laws of ATI, (b) any
contract, agreement or other instrument to which ATI is a party or by which ATI
or any of its assets are bound, (c) any order, writ, injunction, decree or
judgment of any court or governmental agency, or
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(d) any law, rule or regulation applicable to ATI and will not restrict the
ability of ATI to carry on any operations relating to the ATI Assets. Except
for the ATI Consents and FCC approval of any assignment of the E and F Group
FCC authorizations in Peoria, Illinois to Heartland, no approval,
authorization, consent or other order or action of or filing with any court,
administrative agency or other governmental authority is required for the
execution and delivery by ATI of this Agreement or such other agreements and
instruments or the consummation by ATI of the transactions contemplated hereby
or thereby.
5.3. Due Organization. ATI is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, and has full power and authority and all requisite licenses,
permits and franchises to own, lease and operate its assets and to carry on the
business in which it is engaged. ATI is duly licensed and qualified to do
business as a foreign corporation and is in good standing in all jurisdictions
where failure to be so licensed or qualified would have a material adverse
effect upon its business or assets or where failure to qualify would affect the
ability of ATI to enforce any material rights included in the ATI Assets.
5.4. Title to ATI Assets. ATI is the sole and exclusive legal
and equitable owners of all right, title and interest in and it has good and
marketable title to all of the ATI Assets. None of the ATI Assets which ATI
purports to own are subject to (a) any contract of lease, license or sale, (b)
any security interest, mortgage, pledge, lien, charge or encumbrance of any
kind or character, direct or indirect, whether accrued, absolute, contingent or
otherwise, except minor liens and encumbrances which do not materially detract
from the value or interfere with the present use of such property and assets,
(c) subject to any royalty or commission arrangements, or (d) subject to any
claims, covenants or restrictions.
5.5. Leases. ATI has delivered to Heartland an accurate,
correct and complete copy of each lease agreement included within the ATI
Assets, including, without limitation, the all channel lease agreements listed
on the ATI FCC Schedule and the ATI Tower Lease Agreement (collectively, the
"ATI Property Leases"). With respect to the ATI Property Leases:
(a) the ATI Property Leases are in full force and
effect and are valid, binding and enforceable in accordance with their
respective terms;
(b) no amounts payable under any ATI Property Lease
are past due and all liabilities and obligations of ATI to be paid or
performed on or before the Closing Date under the ATI Property Leases
have been, or will have been on such date, fully paid or performed;
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(c) ATI has, and to the best of its knowledge, each
other party to each ATI Property Lease, has complied with all material
commitments and obligations on its part to be performed or observed
under each such ATI Property Lease;
(d) ATI has not received any notice of a default,
offset or counterclaim under any ATI Property Lease, or any other
communication calling upon ATI to comply with any provision of any ATI
Property Lease or ascertaining noncompliance, and (i) to the best of
ATI's knowledge, no event or condition has happened or presently
exists which constitutes a default or, after notice or lapse of time
or both, would constitute a default by any party (other than ATI)
under any ATI Property Lease, and (ii) no event or condition has
happened or presently exists which constitutes a default or, after
notice or lapse of time or both, would constitute a default by ATI
under any ATI Property Lease;
(e) except for the ATI Consents, ATI has filed all
necessary applications and has obtained all requisite consents and
approvals for the transfer or assignment of all of the ATI Property
Leases to which ATI is a party to Heartland, and the assignment of
each ATI Property Lease to Heartland will not constitute a breach of
or a default under any provision of any ATI Property Lease and upon
such assignment Heartland will have and may enjoy and enforce all
rights and benefits of the lessee under the ATI Property Leases;
(f) ATI has not received notice that any party to
any ATI Property Lease intends to cancel or terminate such ATI
Property Lease or to exercise or not exercise options or rights under
such ATI Property Lease; and
(g) ATI has marketable title to each ATI Property
Lease and there does not now and there will not at Closing exist any
security interest, lien, encumbrance or claim of others created or
suffered to exist on the leasehold interest created under any ATI
Property Lease.
5.6. Litigation. Except as set forth in public filings made by
ATI with the Securities and Exchange Commission, ATI is not engaged in or a
party to or threatened with any material suit, action, proceeding,
investigation or legal, administrative, arbitration or other method of settling
disputes or disagreements or governmental investigation, and ATI does not know,
anticipate or have notice of any basis for any such action. ATI has not
received notice of any investigation threatened or contemplated by any foreign,
Federal, state or local governmental or regulatory authority, which remains
unresolved. ATI nor any of the ATI Assets are subject to any judgment, order,
writ, injunction or decree of any court or any Federal, state, local or other
governmental department, commission, board, bureau, agency
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or instrumentality, domestic or foreign, or any arbitrator.
5.7. Licenses and Permits. Schedule 1.3(a) contains an
accurate, correct and complete list and status of each license, certificate,
approval, registration, accreditation, authorization and permit which pertain
to or in any way affect the ATI Assets, including the ATI Channel Rights
(collectively, the "ATI Licenses and Permits") held by ATI, the foreign,
Federal, state or local jurisdiction issuing such Licenses and Permits, and the
type and number of such ATI License or Permit. The ATI Licenses and Permits
are valid and in full force and effect and there are not pending, or, to the
knowledge of ATI, threatened, any proceedings which could result in the
termination, revocation, limitation or impairment of any such ATI License or
Permit. ATI has all certificates, licenses, permits, approvals, franchises,
registrations, accreditation and other authorizations as are necessary in order
to enable it to own and exercise any and all rights and interests in and to the
ATI Assets. All ATI Licenses and Permits are freely assignable to Heartland,
subject to FCC consent where required. No violations have been recorded in
respect of any ATI Licenses and Permits and no proceeding is pending or, to the
knowledge of ATI, threatened or contemplated with respect to the revocation or
limitation of the same.
5.8. Compliance with Law. The ATI Assets conform to all
applicable laws, ordinances, codes, licensing requirements, rules and
regulations, except for such minor violations as do not impair or interfere
with the use for which such ATI Assets are employed, and ATI has not received
any notice to the contrary. Except for minor violations not affecting the
value of the ATI Assets or the validity of the ATI Channel Rights, ATI has
complied with all laws, ordinances, regulations, licensing requirements, rules,
decrees, awards or orders, and there is not and will not be any liability
arising from or relating to any violations thereof. To ATI's knowledge, there
is no proposed or pending change in any such law or regulation which would
adversely affect the ATI Assets, other than proposed Federal laws regulations
applicable to the wireless cable industry in general. No notice from any
governmental body or other person of any violation of any law, ordinance, code,
rule or regulation or requiring or calling attention to the necessity of any
work, repairs, new construction, installation or alteration has been served.
5.9. Brokers. ATI has not retained any broker or finder or
incurred any liability or obligation for any brokerage fees, commissions or
finders fees with respect to this Agreement or the transactions contemplated
hereby.
5.10. Material Facts. No representation or warranty made by ATI
in this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
herein not misleading.
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5.11. Assets. The ATI Assets constitute all wireless cable
television assets in the ATI Markets in which ATI, or any affiliate thereof has
an interest in.
5.12. Subscribers. There are fewer than fifty subscribers
receiving transmission on the E and F channel groups in Peoria, Illinois.
ARTICLE VI
COVENANTS OF HEARTLAND
Each of Heartland SD and Heartland FL hereby agree to keep, perform
and fully discharge the covenants and agreements set forth below.
6.1. Interim Conduct. From the date hereof until the Closing,
Heartland shall preserve, protect and maintain its rights and interests in and
to the Heartland Assets. Without limiting the generality of the foregoing, as
pertains to or in any way affects the Heartland Assets, from the date hereof
until the Closing, except for transactions expressly approved in writing by
ATI, Heartland shall:
(a) not enter into, amend or terminate, or agree to
enter into, amend or terminate, any contract relating to the Heartland
Assets, including, but not limited to, the Heartland Property Leases;
(b) not merge or consolidate with or agree to merge
or consolidate with, nor purchase or agree to purchase all or
substantially all of the assets of, nor otherwise acquire, any
corporation, partnership, or other business organization or division
thereof, if it would preclude Heartland from fulfilling its
obligations under this Agreement with respect to the Heartland Assets;
(c) not sell, lease or otherwise dispose of or agree
to sell, lease or otherwise dispose of, any of the Heartland Assets,
except as is necessary to consummate the transactions contemplated
hereby;
(d) not take any action to seek, encourage, solicit
or support any inquiry, proposal, expression of interest or offer from
any other person or entity with respect to the sale, assignment or
transfer of the Heartland Assets, or an acquisition, combination or
similar transaction involving the Heartland Assets, and Heartland will
promptly inform ATI of the existence of any such inquiry, proposal,
expression of interest or offer and shall not without the written
consent of ATI furnish any information to or participate in any
discussions or negotiations with any other person or
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entity regarding the same; and
(e) shall file with the FCC, on or before July 31,
1996, extensions of the construction completion dates under the
permits for the Heartland Channel Rights which contain July 31, 1996
construction deadlines.
From the date hereof through the Closing, Heartland shall confer on a regular
and frequent basis with one or more designated representatives of ATI to report
on all matters relating to or affecting the Heartland Assets.
6.2. Access to Information Pertaining to the Heartland Assets.
From the date hereof through the Closing Date, as it may in any way relate to
the Heartland Assets, Heartland shall give ATI and its representatives full and
free access to all properties, facilities, personnel, books, contracts, leases,
commitments and records, and during this period Heartland shall furnish ATI
with all pertinent financial and operating data and other information as to the
Heartland Assets, as ATI may from time to time request. In particular,
Heartland shall afford to the officers, employees, attorneys, accountants,
appraisers, and other authorized representatives of ATI reasonable access,
during normal business hours, to the offices, properties, books and records of
Heartland in order that ATI may have full opportunity to make such engineering,
legal, financial, accounting and other reviews or investigations of the
Heartland Assets.
6.3. Continued Assistance. Following the Closing, Heartland
shall refer to ATI as promptly as practicable any telephone calls, letters,
orders, notices, requests, inquiries and other communications relating to the
Heartland Assets. Heartland shall cooperate in an orderly transfer of the
Heartland Assets. From time to time, at ATI's request and without further
consideration, Heartland shall execute, acknowledge and deliver such documents,
instruments or assurances and take such other action as ATI may reasonably
request to more effectively assign, convey and transfer any of the Heartland
Assets, and will assist ATI in the vesting of such Heartland Assets.
6.4. Confidentiality. Except as may be required in connection
with approval or implementation of this Agreement, or for securities, tax, or
other regulatory purposes, neither Heartland, nor any Affiliate of Heartland,
nor any of the respective successors and assigns of Heartland or such
Affiliates shall use, publish or disclose any information concerning ATI or its
Affiliates prior to the Closing; provided, however, that the foregoing shall
not apply to information that (a) was known by Heartland when received, (b) is
or thereafter becomes lawfully obtainable from other sources, (c) is necessary
or appropriate to disclose to any regulatory authority having jurisdiction over
Heartland or ATI or any Affiliate thereof or as otherwise required by law, or
(d) is reasonably necessary to disclose to
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<PAGE> 17
confirm the representations and warranties contained herein. In the event of
any termination of this Agreement, (i) Heartland and its Affiliates shall treat
as confidential and proprietary and shall not disclose or use, directly or
indirectly, in any manner whatsoever, or permit others under their control to
disclose or to use, any such information concerning ATI or its businesses or
products obtained pursuant to or in connection with the transactions which are
the subject matter of this Agreement, and (ii) Heartland and its Affiliates
shall promptly return to ATI, upon written request, all written information and
documents received from ATI, its Affiliates, accountants or counsel, in
connection with such transactions, including all copies thereof. The
provisions of this Section 6.4 shall survive any termination of this Agreement.
For purposes of this Agreement, the term "Affiliate" shall mean, with respect
to any person or entity, any member of the immediate family (including spouse,
brother, sister, descendant, ancestor or in-law) of any officer, director,
partner or stockholder of such person or entity, or any corporation,
partnership, trust or other entity in which such person or entity or any such
family member has a material interest or is a director, officer, partner or
trustee. The term Affiliate shall also include any entity which controls, or
is controlled by, or is under common control with any of the individuals or
entities described in the preceding sentence.
6.5. Consents.
(a) Heartland shall obtain or make at the earliest
practicable date and in any event before the Closing all consents, governmental
authorizations, approvals, estoppel certificates and filings required to be
obtained by it or which may be reasonably necessary to the consummation of the
transactions contemplated by this Agreement or which are reasonably requested
by ATI; provided, however, that Heartland shall not be obligated by this
Section 6.5(a) to make any payments beyond those ordinarily associated with
obtaining or making such consents, approvals, authorizations, approvals,
certificates and filings.
(b) On or prior to the Closing Date, Heartland shall
obtain all such waivers and consents under any indenture, loan agreement or
security agreement to which Heartland or any Affiliate thereof is a party as
are necessary to prevent a breach or violation of, or default under, any such
indenture, loan agreement or security agreement as a result of the consummation
of the transactions contemplated hereby.
6.6. Best Efforts. Heartland shall use its best efforts to
consummate the transactions contemplated by this Agreement and shall not take
any other action inconsistent with its obligations hereunder or which could
hinder or delay the consummation of the transactions contemplated hereby. From
the date hereof through the Closing Date, Heartland shall use its best efforts
to fulfill
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<PAGE> 18
the conditions to its obligations hereunder and to cause its representations
and warranties to remain true and correct in all material respects as of the
Closing Date.
6.7. Obligations under the MMDS Agreements. In the event that
ATI is required to pay more than $10,000 to Jack G. Hubbard to purchase the E
group channels in Peoria, Illinois under that certain MMDS Service Agreement
between Jack G. Hubbard and ATI dated December 11, 1989 (the "Hubbard
Agreement"), or ATI is required to pay more than $10,000 to Stephanie Engstrom
to purchase the F group channels in Peoria, Illinois under that certain MMDS
Service Agreement between Stephanie Engstrom and ATI dated December 11, 1989
(the "Engstrom Agreement"), Heartland shall promptly pay ATI such additional
amount upon ATI's written request therefor (which amount shall be considered
part of the option price payable from Heartland to ATI under the Sublease
Agreements). Heartland further agrees to indemnify and hold harmless ATI for
(a) any and all additional amounts ATI is required to pay the licenseholders
under the Hubbard Agreement and/or the Engstrom Agreement to purchase the
licenses as contemplated under Section 7.7 below, and all other costs and
expenses associated therewith and not otherwise payable to ATI under the
Sublease Agreements, and (b) all loss, damage, expense (including court costs,
amounts paid in settlement, judgments, reasonable attorneys' fees or other
expenses for investigating and defending), suit, action, claim, liability or
obligation related to, caused by or arising from ATI's exercise of its option
to purchase the licenses under the Hubbard Agreement and/or the Engstrom
Agreement, together with interest at a floating interest rate equal at all
times to the rate of interest publicly announced from time to time by First
Union National Bank of North Carolina as its corporate base rate from the date
upon which such loss, damage, expense or liability was incurred to the date of
payment. Heartland's obligations under this Section 6.7 shall survive
indefinitely and shall not be subject to the $10,000 indemnification cap set
forth in Section 10.2 below.
ARTICLE VII
COVENANTS OF ATI
ATI hereby agrees to keep, perform and fully discharge the covenants
and agreements set forth below.
7.1. Interim Conduct. From the date hereof until the Closing,
ATI shall preserve, protect and maintain its rights and interests in and to the
ATI Assets. Without limiting the generality of the foregoing, as pertains to
or in any way affects the ATI Assets, from the date hereof until the Closing,
except for transactions expressly approved in writing by Heartland, ATI shall:
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<PAGE> 19
(a) not enter into, amend or terminate, or agree to
enter into, amend or terminate, any contract relating to the ATI
Assets, including, but not limited to, the ATI Property Leases;
(b) not merge or consolidate with or agree to merge
or consolidate with, nor purchase or agree to purchase all or
substantially all of the assets of, nor otherwise acquire, any
corporation, partnership, or other business organization or division
thereof, if it would preclude ATI from fulfilling its obligations
under this Agreement with respect to the ATI Assets;
(c) not sell, lease or otherwise dispose of or agree
to sell, lease or otherwise dispose of, any of the ATI Assets, except
as is necessary to consummate the transactions contemplated hereby;
and
(d) not take any action to seek, encourage, solicit
or support any inquiry, proposal, expression of interest or offer from
any other person or entity with respect to the sale, assignment or
transfer of the ATI Assets, or an acquisition, combination or similar
transaction involving the ATI Assets, and ATI will promptly inform
Heartland of the existence of any such inquiry, proposal, expression
of interest or offer and shall not without the written consent of
Heartland furnish any information to or participate in any discussions
or negotiations with any other person or entity regarding the same.
From the date hereof through the Closing, ATI shall confer on a regular and
frequent basis with one or more designated representatives of Heartland to
report on all matters relating to or affecting the ATI Assets.
7.2. Access to Information Pertaining to the ATI Assets. From
the date hereof through the Closing Date, as it may in any way relate to the
ATI Assets, ATI shall give Heartland and its representatives full and free
access to all properties, facilities, personnel, books, contracts, leases,
commitments and records, and during this period ATI shall furnish Heartland
with all pertinent financial and operating data and other information as to the
ATI Assets, as Heartland may from time to time request. In particular, ATI
shall afford to the officers, employees, attorneys, accountants, appraisers,
and other authorized representatives of Heartland reasonable access, during
normal business hours, to the offices, properties, books and records of ATI in
order that Heartland may have full opportunity to make such engineering, legal,
financial, accounting and other reviews or investigations of the ATI Assets.
7.3. Continued Assistance. Following the Closing, ATI shall
refer to Heartland as promptly as practicable any telephone
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<PAGE> 20
calls, letters, orders, notices, requests, inquiries and other communications
relating to the ATI Assets. ATI shall cooperate in an orderly transfer of the
ATI Assets. From time to time, at Heartland's request and without further
consideration, ATI shall execute, acknowledge and deliver such documents,
instruments or assurances and take such other action as Heartland may
reasonably request to more effectively assign, convey and transfer any of the
ATI Assets, and will assist Heartland in the vesting of such ATI Assets.
7.4. Confidentiality. Except as may be required in connection
with approval or implementation of this Agreement, or for securities, tax, or
other regulatory purposes, neither ATI, nor any Affiliate of ATI, nor any of
the respective successors and assigns of ATI or such Affiliates shall use,
publish or disclose any information concerning Heartland or its Affiliates
prior to the Closing; provided, however, that the foregoing shall not apply to
information that (a) was known by ATI when received, (b) is or thereafter
becomes lawfully obtainable from other sources, (c) is necessary or appropriate
to disclose to any regulatory authority having jurisdiction over ATI or
Heartland or any Affiliate thereof or as otherwise required by law, or (d) is
reasonably necessary to disclose to confirm the representations and warranties
contained herein. In the event of any termination of this Agreement, (i) ATI
and its Affiliates shall treat as confidential and proprietary and shall not
disclose or use, directly or indirectly, in any manner whatsoever, or permit
others under their control to disclose or to use, any such information
concerning Heartland or its businesses or products obtained pursuant to or in
connection with the transactions which are the subject matter of this
Agreement, and (ii) ATI and its Affiliates shall promptly return to Heartland,
upon written request, all written information and documents received from
Heartland, its Affiliates, accountants or counsel, in connection with such
transactions, including all copies thereof. The provisions of this Section 7.4
shall survive any termination of this Agreement.
7.5. Consents.
(a) ATI shall obtain or make at the earliest
practicable date and in any event before the Closing all consents, governmental
authorizations, approvals, estoppel certificates and filings required to be
obtained by it or which may be reasonably necessary to the consummation of the
transactions contemplated by this Agreement or which are reasonably requested
by Heartland; provided, however, that ATI shall not be obligated by this
Section 7.5(a) to make any payments beyond those ordinarily associated with
obtaining or making such consents, approvals, authorizations, approvals,
certificates and filings.
(b) On or prior to the Closing Date, ATI shall
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<PAGE> 21
obtain all such waivers and consents under any indenture, loan agreement or
security agreement to which ATI, or any Affiliate thereof is a party as are
necessary to prevent a breach or violation of, or default under, any such
indenture, loan agreement or security agreement as a result of the consummation
of the transactions contemplated hereby.
7.6. Best Efforts. ATI shall use its best efforts to consummate
the transactions contemplated by this Agreement and shall not take any other
action inconsistent with its obligations hereunder or which could hinder or
delay the consummation of the transactions contemplated hereby. From the date
hereof through the Closing Date, ATI shall use its best efforts to fulfill the
conditions to its obligations hereunder and to cause its representations and
warranties to remain true and correct in all material respects as of the
Closing Date.
7.7. Exercise of Purchase Options. ATI shall, within thirty
days after the date hereof, exercise its option to purchase the E and F channel
groups in Peoria, Illinois, under that Hubbard Agreement and the Engstrom
Agreement, and take all actions reasonably necessary to effectuate the
assignment of the licenses to ATI under the Hubbard Agreement and the Engstrom
Agreement.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF ATI
Each and all of the obligations of ATI to consummate the transactions
contemplated by this Agreement are subject to fulfillment prior to or at the
Closing of the conditions precedent set forth below.
8.1. Accuracy of Warranties and Performance of Covenants. The
representations and warranties of Heartland contained herein shall be accurate
in all material respects as if made on and as of the Closing Date, except for
changes occurring in the ordinary course of operation of its business.
Heartland shall have performed all of the obligations and complied with each
and all of the covenants, agreements and conditions required to be performed or
complied with on or prior to the Closing.
8.2. No Pending Action. No action, suit, proceeding or
investigation before any court, administrative agency or other governmental
authority shall be pending or threatened wherein an unfavorable judgment,
decree or order would prevent the carrying out of this Agreement or any of the
transactions contemplated hereby, declare unlawful the transactions
contemplated hereby, cause such transactions to be rescinded, or which might
affect the right of ATI to own, operate or control the Heartland Assets.
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<PAGE> 22
8.3. Consents. All consents by third parties that are required
for the transfer of the Heartland Assets or the ATI Assets or that are required
for the consummation of the transactions contemplated hereby, or that are
required in order to prevent a breach of or a default under or a termination of
any agreement to which Heartland or ATI is a party or to which any portion of
the property of Heartland or ATI is subject, will have been obtained or
provided for. All regulatory agencies shall have taken such action as may be
required to permit the consummation of the transactions contemplated hereby and
such actions shall remain in full force and effect.
8.4. Condition of Assets. The Heartland Assets and the ATI
Assets shall not have been adversely affected in any way by any act of God,
fire, flood, accident, war, labor disturbance, legislation (proposed or
enacted), or other event or occurrence, whether or not covered by insurance,
and there shall have been no change in the Heartland Assets or the ATI Assets,
their financial condition or prospects, which would have an adverse effect
thereon.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF HEARTLAND
Each and all of the obligations of Heartland to consummate the
transactions contemplated by this Agreement are subject to fulfillment prior to
or at the Closing of the conditions precedent set forth below.
9.1. Accuracy of Warranties and Performance of Covenants. The
representations and warranties of ATI contained herein shall be accurate in all
material respects as if made on and as of the Closing Date, except for changes
occurring in the ordinary course of operation of its business. ATI shall have
performed all of the obligations and complied with each and all of the
covenants, agreements and conditions required to be performed or complied with
on or prior to the Closing.
9.2. No Pending Action. No action, suit, proceeding or
investigation before any court, administrative agency or the governmental
authority shall be pending or threatened wherein an unfavorable judgment,
decree or order would prevent the carrying out of this Agreement or any of the
transactions contemplated hereby, declare unlawful the transactions
contemplated hereby or cause such transactions to be rescinded, or which might
affect the right of Heartland to own, operate or control the ATI Assets.
9.3. Consents. All consents by third parties that are required
for the transfer of the Heartland Assets or the ATI Assets or that are required
for the consummation of the transactions contemplated hereby, or that are
required in order
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<PAGE> 23
to prevent a breach of or a default under or a termination of any agreement to
which Heartland or ATI is a party or to which any portion of the property of
Heartland or ATI is subject, will have been obtained or provided for. All
regulatory agencies shall have taken such action as may be required to permit
the consummation of the transactions contemplated hereby and such actions shall
remain in full force and effect.
9.4. Condition of Assets. The Heartland Assets and the ATI
Assets shall not have been adversely affected in any way by any act of God,
fire, flood, accident, war, labor disturbance, legislation (proposed or
enacted), or other event or occurrence, whether or not covered by insurance,
and there shall have been no change in the Heartland Assets or the ATI Assets,
their financial condition or prospects, which would have an adverse effect
thereon.
ARTICLE X
SURVIVAL AND INDEMNIFICATION
10.1. Survival. All representations, warranties, covenants and
agreements contained in this Agreement or in any document delivered pursuant
hereto shall be deemed to be material and to have been relied upon by the
parties hereto, and shall survive the Closing and shall be fully effective and
enforceable for a period of one (1) year following the Closing Date (unless a
different period is specifically assigned thereto), but shall thereafter be of
no further force or effect, except as they relate to claims for indemnification
timely made pursuant to this Article or claims alleging fraud on the part of a
party hereto. Any claim for indemnification asserted in writing before the
first anniversary of the Closing Date or other applicable survival period shall
survive until resolved or judicially determined. The representations and
warranties set forth in this Agreement shall not be affected by any
investigation, verification or examination by any party hereto or by anyone on
behalf of any such party, except as specifically set forth herein or in a
schedule, certificate or document delivered pursuant to this Agreement.
10.2. Indemnification. Each party shall indemnify and hold
harmless the other from and against any and all loss, damage, expense
(including court costs, amounts paid in settlement, judgments, reasonable
attorneys' fees or other expenses for investigating and defending), suit,
action, claim, liability or obligation related to, caused by or arising from
any misrepresentation, breach of warranty or failure to fulfill any covenant or
agreement contained herein, together with interest at a floating interest rate
equal at all times to the rate of interest publicly announced from time to time
by First Union National Bank of North Carolina as its corporate base rate from
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<PAGE> 24
the date upon which such loss, damage, expense or liability was incurred to the
date of payment. Any party seeking indemnification shall give prompt written
notice to the indemnifying party of the facts and circumstances giving rise to
the claim. No party shall seek indemnification pursuant to this Section 10.2
unless the aggregate of all claims of such party under this Section exceeds
$10,000; provided, however, that the foregoing shall not prevent or preclude
actions seeking injunctive or other equitable forms of relief. Notwithstanding
anything contained herein to the contrary, in no event shall the maximum
indemnification obligation of any party hereunder exceed $2,500,000.
10.3. Defense Against Asserted Claims. Any party seeking
indemnification (the "Indemnified Party") shall give written notice to the
indemnifying party ("Indemnifying Party") of the facts and the circumstances
giving rise to the claim. The Indemnified Party shall not settle or compromise
any claim by a third party for which the Indemnified Party is entitled to
indemnification hereunder without the prior written consent of the Indemnifying
Party, unless legal action shall have been instituted against the Indemnified
Party and the Indemnifying Party shall not have taken control of such suit
within sixty (60) days after notification thereof as provided herein. In
connection with any claim giving rise to indemnification hereunder resulting
from or rising out of any claim or legal proceeding by a person other than the
Indemnified Party, the Indemnifying Party, at its sole cost and expense, may,
upon written notice to the Indemnified Party, assume the defense of any such
claim or legal proceeding without prejudice to the right of the Indemnifying
Party thereafter to contest its obligation to indemnify the Indemnified Party
in respect to the claims asserted therein. If the Indemnifying Party assumes
the defense of any such claim or legal proceeding, the Indemnifying Party shall
select counsel to conduct the defense in such claims and legal proceedings and
at its sole cost and expense shall take all steps necessary in the defense or
settlement thereof. The Indemnifying Party shall not consent to a settlement
of, or the entry of any judgment arising from, any claim or legal proceeding,
without the prior written consent of the Indemnified Party, unless the
Indemnifying Party admits in writing its liability to hold the Indemnified
Party harmless from and against any losses, damages, expenses and liabilities
arising out of such settlement and concurrently with such settlement, the
Indemnifying Party pays into the court the full amount of all losses, damages,
expenses and liabilities to be paid by the Indemnifying Party in connection
with such settlement and, if such settlement would impose or affect ongoing
obligations of the Indemnified Party, the Indemnified Party consents thereto,
which consent shall not be unreasonably withheld. The Indemnified Party shall
be entitled to participate in the defense of any such action with its own
counsel and at its own expense. If the Indemnifying Party does not assume the
defense of any such claim or litigation
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<PAGE> 25
resulting therefrom in accordance with the terms hereof, the Indemnified Party
may defend such claim or litigation in such a manner as it may deem
appropriate, including settling such claim or litigation after giving notice of
the same to Indemnifying Party on such terms as the Indemnified Party may deem
appropriate and any action by the Indemnified Party seeking indemnification
from Indemnifying Party in accordance with the provisions of this Section,
Indemnifying Party shall not be entitled to question the manner in which the
Indemnified Party defended such claim or litigation or the amount or nature of
any such settlement. In the event of a claim by a third party, the Indemnified
Party shall cooperate with the Indemnifying Party in the defense of such action
(including making a personal contact with the third party if deemed beneficial)
and the relevant records of each party shall be made available on a timely
basis.
10.4. Failure to Close Because of Default. In the event that the
Closing is not consummated on or before the sixtieth day after the date of this
Agreement, by virtue of a default made by a party in the observance or in the
due and timely performance of any of its covenants or agreements herein
contained, the parties shall have and retain all of the rights afforded them at
law or in equity by reason of that default. In addition, Heartland and ATI
each acknowledge that the Heartland Assets and the ATI Assets are unique, that
a failure by any party hereto to complete the transactions contemplated by this
Agreement will cause irreparable and continuing damage to the parties, and that
actual damages for any such failure may be difficult to ascertain and may be
inadequate and that the parties will have no adequate remedy at law.
Consequently, the parties hereto agree that all parties hereto, their
affiliates, successors and assigns shall be entitled, at each party's sole
election, to specific performance of any of the provisions of this Agreement in
addition to any other legal or equitable remedies to which such party may
otherwise be entitled.
10.6. Reimbursement of Costs. The costs and expenses, including
fees and disbursements of counsel and expenses of investigation, incurred by
any Indemnified Party in connection with any Claim made under this Article X
shall be reimbursed on a quarterly basis by the Indemnifying Party, without
prejudice to the Indemnifying Party's right to contest the Indemnified Party's
right to indemnification and subject to refund in the event the Indemnifying
Party is ultimately held not to be obligated to indemnify the Indemnified
Party.
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ARTICLE XI
GENERAL PROVISIONS
11.1. Amendments and Waiver. No amendment, waiver or consent
with respect to any provision of this Agreement shall in any event be
effective, unless the same shall be in writing and signed by the parties
hereto, and then such amendment, waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
11.2. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be delivered in person
or sent by registered or certified mail, postage prepaid, or by telecopy,
telegram or telex as follows:
(a) If to Heartland:
c/o Heartland Wireless Communications, Inc.
200 Chisholm Place, Suite 200
Plano, Texas 75975
Attention: John R. Bailey
With a copy to:
Vic Zanetti,
Arter & Hadden
1717 Main Street, Suite 4100
Dallas, Texas 75201
(b) If to ATI:
American Telecasting, Inc.
5575 Tech Center Drive, Suite 300
Colorado Springs, CO 80919
Attention: President
With a copy to:
Cynthia J. Levitt, Esq.
McDermott, Will & Emery
1850 K Street, N.W., Suite 500
Washington, D.C. 20006
Any party may change its address for receiving notice by written notice given
to the others named above.
11.3. Expenses. Each party to this Agreement shall pay its own
costs and expenses in connection with the transactions contemplated hereby.
Any sales, transfer or other taxes or fees applicable to the conveyance and
transfer from Heartland to ATI of the Heartland Assets shall be borne by
Heartland. Any sales, transfer or other taxes or fees applicable to the
conveyance and
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transfer from ATI to Heartland of the ATI Assets shall be borne by ATI. If any
action is brought by either party to enforce any provision of this Agreement,
the prevailing party shall be entitled to recover court costs, arbitration
expenses and reasonable attorneys' fees. The provisions of this Section shall
survive any termination of this Agreement.
11.4. Counterparts. This Agreement may be executed
simultaneously in two counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
11.5. Successors and Assigns; Joint and Several Liability. This
Agreement shall bind and inure to the benefit of the parties named herein and
their respective successors and assigns. Neither party shall be entitled to
assign its rights or duties under this Agreement without the prior written
consent of the other party hereto (which consent will not be unreasonably
withheld, conditioned or delayed). The liability of Heartland SD and Heartland
FL under this Agreement shall be joint and several.
11.6. Entire Transaction. This Agreement and the documents
referred to herein contain the entire understanding among the parties with
respect to the transactions contemplated hereby and supersedes all other
agreements, understandings and undertakings among the parties on the subject
matter hereof.
11.7. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Colorado.
11.8. Other Rules of Construction. References in this Agreement to
sections, schedules and exhibits are to sections of, and schedules and exhibits
to, this Agreement unless otherwise indicated. Words in the singular include
the plural and in the plural include the singular. The word "or" is not
exclusive. The word "including" shall mean including, without limitation. The
section and other headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
11.9. Announcements. No announcement of this Agreement or any
transaction contemplated hereby shall be made by any party prior to the Closing
without the written approval of the other parties hereto (which approval shall
not be unreasonable withheld), except as required by law or the regulations of
any securities exchange. Each party shall use reasonable best efforts to
maintain the confidentiality of the terms of the purchase and sale transaction
contemplated hereby, except as required by law or as necessary to protect the
interest of such party hereunder.
11.10. Partial Invalidity. In the event that any provision
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of this Agreement shall be held invalid or unenforceable by any court of
competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision hereof.
11.11. Heartland Parent Guaranty. In consideration of ATI's
execution and delivery of this Agreement and their agreement to perform the
transaction contemplated hereby, Heartland Parent hereby guarantees Heartland's
full, complete and timely performance of and compliance with all of its
covenants, agreements and other obligations set forth herein. Heartland Parent
agrees that no formal change, amendment, modification or waiver of any term or
condition hereof, no extension in whole or in part of the time for the
performance by Heartland of any of its obligations hereunder, and no
settlement, compromise, release, surrender, modification or impairment of, or
exercise or failure to exercise any claim, right or remedy of any kind or
nature in connection herewith, shall affect, impair or discharge, in whole or
in part, the liability of Heartland Parent for the full, prompt and
unconditional performance of the obligations of Heartland under this Agreement.
The obligations of Heartland Parent hereunder are absolute and unconditional,
irrespective of any circumstance which might otherwise constitute a legal or
equitable discharge or a surety or guarantor. The liability of Heartland
Parent hereunder shall be direct and not conditional or contingent upon the
pursuit of any remedies against Heartland. ATI may at its option proceed in
the first instance against Heartland Parent to collect any obligation hereunder
without first proceeding against Heartland. The guarantee of Heartland Parent
hereunder shall be deemed a continuing guarantee, and the above consent and
waiver of Heartland Parent shall remain in full force and effect until the
obligations of Heartland under this Agreement are fully paid and discharged.
Heartland Parent agrees to pay all costs, fees, and expenses (including
reasonable attorney's fees) incurred by ATI in collecting or enforcing
Heartland Parent's obligations hereunder. This guarantee shall run to and for
the benefit of ATI, and each of its legal representatives, successors and
assigns. This guarantee shall be binding upon Heartland Parent and all of its
successors and assigns.
[signatures on the following page]
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<PAGE> 29
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by a duly authorized officer all as of the date first
written above.
AMERICAN TELECASTING, INC.
By:
------------------------------------
Name: Robert D. Hostetler
Title: President
HEARTLAND WIRELESS COMMUNICATIONS, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
HEARTLAND WIRELESS SOUTH DAKOTA
PROPERTIES, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
HEARTLAND WIRELESS FLORIDA
PROPERTIES, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
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<PAGE> 30
<TABLE>
<CAPTION>
LIST OF SCHEDULES
-----------------
<S> <C>
Schedule 1.2(a) Heartland FCC Schedule
Schedule 1.3(a) ATI FCC Schedule
Schedule 3.2(b) ATI Bill of Sale
Schedule 3.2(c) Consent Assignment and Certification
Agreement
Schedule 3.2(d) ATI's Opinion of Corporate Counsel
Schedule 3.2(e) Sublease and Option Agreement
Schedule 3.3(b) Heartland Bill of Sale
Schedule 3.3(d) Heartland's Opinion of Corporate Counsel
</TABLE>
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<PAGE> 1
EXHIBIT 10.4
FIRST AMENDMENT TO AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
AND REAFFIRMATION OF GUARANTIES AND
COLLATERAL ASSIGNMENTS OF GENERAL PARTNER INTEREST
THIS FIRST AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
("First Amendment"), dated as of June 30, 1996, by and among FRESNO MMDS
ASSOCIATES, a California general partnership (the "Borrower"), FIRST UNION
NATIONAL BANK OF NORTH CAROLINA (the "Bank"), FRESNO TELSAT, INC., an Indiana
corporation ("Telsat"), and FRESNO WIRELESS CABLE TELEVISION, INC., a
Washington corporation ("Wireless"; Telsat and Wireless are sometimes referred
to individually herein as a "Guarantor" and collectively as the "Guarantors"),
amends that certain Amended and Restated Revolving Credit Agreement dated as of
September 30, 1994, between the Bank and the Borrower (the "Credit Agreement"),
reaffirms each of the Unconditional Guaranties dated as of October 30, 1992,
executed by the Guarantors in favor of the Bank guaranteeing the Borrower's
obligations under the Credit Agreement (the "General Partner Guaranties"), and
reaffirms the Collateral Assignments.
RECITALS:
A. The Borrower is in default of certain provisions of the Credit
Agreement and has requested that the Bank waive such defaults and amend the
Credit Agreement as provided herein.
B. The Borrower has additionally requested that the Bank consent to a
subordinated loan or loans to the Borrower by the Borrower's affiliate,
American Telecasting, Inc. ("ATI"), in amounts not to exceed in the aggregate
$2,300,000, to provide working capital for the Borrower.
C. The Bank has agreed to waive such defaults, consent to such
subordinated loans and amend the Credit Agreement as provided herein on the
condition, among other conditions provided below, that the Borrower cause the
Bank's exposure under the Credit Agreement to be reduced by causing another
third party lender or lenders, which may include ATI, to purchase from the Bank
assignments of the Bank's interest in the Borrower's Obligations to the Bank
pursuant to Section 9.17 of the Credit Agreement, all upon the terms and
conditions set forth herein.
D. Pursuant to the General Partner Guaranties, the Guarantors guaranteed
the due and punctual payment and performance of all of the Obligations as and
when due and payable (whether by acceleration or otherwise).
E. It is the intention of the parties that the Credit Agreement (as
amended hereby), the Notes and the other Collateral Documents, including
without limitation the General Partner Guaranties and the Collateral
Assignments of General Partner Interest, shall remain in full force and effect,
that the Borrower shall remain liable for the Obligations, and that the
Guarantors shall
<PAGE> 2
remain liable under the General Partner Guaranties and the Collateral
Assignments of General Partner Interest for the full amount of the Obligations.
IN CONSIDERATION of the foregoing Recitals and the agreements,
representations and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties, intending to be legally bound, agree as follows:
SECTION 1. Definitions. Capitalized terms used and not defined herein
are used as defined in the Credit Agreement.
SECTION 2. Waiver and Consent.
(a) The Bank hereby waives the violation by the Borrower of its financial
covenants set forth in Sections 7.14, 7.15, 7.16, and 7.19 of the Credit
Agreement for the period ending December 31, 1995. The Bank further hereby
waives the violation by the Borrower of its affirmative covenants set forth in
Sections 6.01(a) and 6.01(b), with respect to the late delivery of the
Borrower's financial statements for the periods ending March 31, 1996, and
December 31, 1995, respectively.
(b) The Bank consents to (i) the incurrence by the Borrower of up to Two
Million Three Hundred Thousand Dollars ($2,300,000) in subordinated debt from
ATI (the "Subordinated Indebtedness") and (ii) the payment to ATI of a loan fee
of up to one percent (1%) of the principal amount of the Subordinated
Indebtedness (the "Loan Fee"), upon the terms and conditions of this First
Amendment.
SECTION 3. Amendments to Credit Agreement.
(a) The definition of "Collateral Documents" in Section 1.01 of the Credit
Agreement is hereby amended to include the Assignment, Acceptance and
Intercreditor Agreements and Subordination Agreements contemplated in SECTION
3(F) hereof, and all amendments, renewals, extensions, and replacements
thereof.
(b) The definition of "Permitted Indebtedness" is hereby amended to add
the following clause:
"(VI) THE SUBORDINATED INDEBTEDNESS EVIDENCED BY THE
SUBORDINATED NOTE, AS DEFINED IN THE FIRST AMENDMENT."
(c) The definition of "Interest Expense" shall not include the accrual of
interest expense with respect to the Subordinated Indebtedness, but it shall
include interest paid on the Subordinated Indebtedness.
2
<PAGE> 3
(d) The definition of "Funded Indebtedness" is hereby amended to include,
without duplication, the Assigned Interests contemplated in the Assignment,
Acceptance and Intercreditor Agreements contemplated in SECTION 3(F) hereof,
and the definition of "Funded Indebtedness" shall specifically not include the
Subordinated Indebtedness evidenced by the Subordinated Note.
(e) Sections 7.13, 7.14, 7.15, and 7.16 of the Credit Agreement are each
deleted in their entirety and the following substituted in lieu thereof as of
March 31, 1996:
SECTION 7.13.MINIMUM SUBSCRIBERS. THE BORROWER SHALL NOT PERMIT
THE NUMBER OF BASIC SUBSCRIBERS TO BE LESS THAN THE NUMBER SET FORTH
BELOW FOR EACH OF THE FOLLOWING PERIODS:
<TABLE>
<CAPTION>
PERIOD MINIMUM BASIC SUBSCRIBERS
------------------------------------ ---------------------------
<S> <C>
CLOSING DATE, THROUGH MARCH 30, 1995 9,000
MARCH 31, 1995, THROUGH SEPTEMBER 29, 1995 13,500
SEPTEMBER 30, 1995, THROUGH MARCH 30, 1996 15,100
MARCH 31, 1996, AND THEREAFTER 14,000
</TABLE>
SECTION 7.14.MAINTENANCE OF ANNUALIZED OPERATING CASH FLOW TO
PRO FORMA DEBT SERVICE RATIO. THE BORROWER SHALL NOT ALLOW THE
RATIO OF THE BORROWER'S ANNUALIZED OPERATING CASH FLOW TO THE
BORROWER'S PRO FORMA DEBT SERVICE FOR THE FOLLOWING FOUR (4)
FISCAL QUARTERS TO BE LESS THAN THAT SET FORTH BELOW AS OF THE
END OF EACH FISCAL QUARTER DURING THE PERIODS SET FORTH BELOW:
3
<PAGE> 4
MINIMUM RATIO OF
BORROWER'S ANNUALIZED
EACH FISCAL QUARTER ENDING OPERATING CASH FLOW TO
DURING THE FOLLOWING PERIOD PRO FORMA DEBT SERVICE
------------------------------------ ---------------------------
CLOSING DATE THROUGH AND INCLUDING
SEPTEMBER 29, 1995 2.25:1
SEPTEMBER 30, 1995, THROUGH AND
INCLUDING MARCH 30, 1996 2.75:1
MARCH 31, 1996, THROUGH AND
INCLUDING JUNE 29, 1996 2.00:1
JUNE 30, 1996, AND THEREAFTER 0.50:1
SECTION 7.15. MAINTENANCE OF FUNDED INDEBTEDNESS TO ANNUALIZED
OPERATING CASH FLOW RATIO. THE BORROWER SHALL NOT ALLOW THE
RATIO OF THE BORROWER'S FUNDED INDEBTEDNESS OUTSTANDING DURING
ANY FISCAL QUARTER TO THE BORROWER'S ANNUALIZED OPERATING CASH
FLOW FOR THE SAME FISCAL QUARTER TO BE GREATER THAN THAT SET
FORTH BELOW:
MAXIMUM RATIO OF
BORROWER'S INDEBTEDNESS TO
ANNUALIZED OPERATING
PERIOD CASH FLOW
------------------------------------ ---------------------------
CLOSING DATE THROUGH AND INCLUDING
SEPTEMBER 29, 1995 3.50:1
SEPTEMBER 30, 1995, THROUGH AND
INCLUDING DECEMBER 30, 1995 3.25:1
DECEMBER 31, 1995, THROUGH AND
INCLUDING MARCH 30, 1996 3.00:1
MARCH 31, 1996, THROUGH AND
INCLUDING JUNE 29, 1996 4.00:1
JUNE 30, 1996, AND THEREAFTER 6.00:1
SECTION 7.16. FUNDED INDEBTEDNESS PER SUBSCRIBER. AT ALL TIMES
DURING EACH OF THE PERIODS SET FORTH BELOW, THE BORROWER SHALL
NOT PERMIT ITS
4
<PAGE> 5
OUTSTANDING FUNDED INDEBTEDNESS DIVIDED BY THE NUMBER OF BASIC SUBSCRIBERS
TO EXCEED THE FOLLOWING AMOUNTS:
PERIOD MAXIMUM AMOUNT
------------------------------------ ---------------------------
CLOSING THROUGH MARCH 30, 1996 $475.00
MARCH 31, 1996, AND THEREAFTER $550.00
(f) The following covenant of the Borrower shall be added to the end of
Section 7 as Section 7.20 to the Credit Agreement effective the date hereof:
SECTION 7.20. REDUCTION IN FUNB EXPOSURE; ASSIGNMENT OF
OBLIGATIONS. THE BORROWER SHALL CAUSE THE AMOUNT OF THE
BORROWER'S OBLIGATIONS UNDER THE CREDIT AGREEMENT HELD BY FIRST
UNION NATIONAL BANK OF NORTH CAROLINA ("FUNB") TO BE REDUCED IN
NOT LESS THAN THE FOLLOWING AMOUNTS ON A NONCUMULATIVE BASIS ON OR
BEFORE THE FOLLOWING DATES BY (I) PREPAYMENT BY THE BORROWER OF
SUCH OBLIGATIONS, (II) ASSIGNMENT BY FUNB OF ALL OR ANY PORTION OF
THE OBLIGATIONS PURSUANT TO SECTION 9.17 OF THE CREDIT AGREEMENT;
OR (III) A COMBINATION OF (I) AND (II), AND UPON THE FURTHER TERMS
SET FORTH BELOW:
<TABLE>
<CAPTION>
<S> <C>
DATE AMOUNT OF REDUCTION IN FUNB EXPOSURE
-------- ------------------------------------
7/18/96 $1,500,000
9/30/96 2,000,000
12/31/96 2,000,000
3/31/97 BALANCE HELD BY FUNB
</TABLE>
FUNB SHALL HAVE THE RIGHT TO APPROVE ANY PROPOSED ASSIGNEE IN ITS
SOLE DISCRETION. ANY SUCH ASSIGNMENT SHALL BE EVIDENCED BY THE
EXECUTION AND DELIVERY OF AN ASSIGNMENT, ACCEPTANCE AND
INTERCREDITOR AGREEMENT IN SUBSTANTIALLY THE FORM OF EXHIBIT A
ATTACHED TO THE FIRST AMENDMENT, AND ANY SUCH ASSIGNEE SHALL HAVE
EXECUTED A SUBORDINATION AGREEMENT IN FAVOR OF FUNB SUBSTANTIALLY
IN THE FORM OF EXHIBIT B ATTACHED TO THE FIRST AMENDMENT. UPON
THE EFFECTIVENESS OF SUCH ASSIGNMENTS, THE DEFINITION OF "THE
BANK" AS USED IN THE CREDIT AGREEMENT AND THE COLLATERAL DOCUMENTS
SHALL INCLUDE EACH OF FUNB AND EACH ASSIGNEE WITH RESPECT TO ITS
ASSIGNED INTERESTS, AND THEREAFTER EACH SUCH ASSIGNEE SHALL BE
ENTITLED TO THE BENEFITS AND SECURITY THEREOF AND SHALL HAVE ALL
OF THE RIGHTS AND OBLIGATIONS OF "THE BANK" THEREUNDER, INCLUDING
BUT NOT LIMITED TO THE RATABLE OBLIGATION TO FUND REVOLVING CREDIT
LOANS AND REIMBURSE FUNB FOR ANY PAYMENTS ON THE LETTER OF CREDIT.
THE BORROWER ACKNOWLEDGES THAT DELIVERY OF NEW PROMISSORY NOTES
5
<PAGE> 6
IN THE NAME OF SUCH ASSIGNEES SHALL NOT BE NECESSARY, AND ANY SUCH
ASSIGNEES SHALL BE DEEMED TO BE THE HOLDERS OF THE NOTE TO THE
EXTENT OF THEIR RESPECTIVE ASSIGNED INTERESTS. THE BORROWER
AGREES TO EXECUTE NEW PROMISSORY NOTES IF REQUESTED BY THE BANK OR
ANY ASSIGNEE.
SECTION 4. Conditions to Actions Set Forth Herein. The following are
conditions precedent and subsequent to the agreements and waivers of the Bank
set forth in this First Amendment.
(a) Amendment Fee. The Borrower shall have paid to the Bank on or before
the date hereof an amendment fee in the amount of $15,000.00.
(b) Subordinated Indebtedness. The Subordinated Indebtedness shall be
evidenced by one or more Subordinated Promissory Notes (collectively, the
"Subordinated Note") in form and substance acceptable to the Bank in its sole
discretion, which shall provide as follows:
(i) principal amount not more than $2,300,000;
(ii) maturity date not earlier than December 31, 2007;
(iii) interest rate not more than seventeen percent (17%); and
(iv) a provision indicating that it is subject to a Subordination
Agreement in favor of the Bank in substantially the form of
Exhibit B attached hereto.
The proceeds of the Subordinated Note may be used only for working capital and
to pay the Loan Fee.
(c) Compliance with Agreement. The Borrower shall have performed and
complied with all agreements and conditions contained herein, in the Credit
Agreement as amended hereby, in each of the Collateral Documents which are
required to be performed or complied with by the Borrower.
(d) No Material Adverse Change. No change that would cause a Material
Adverse Effect shall have occurred since December 31, 1995, that has not in the
Bank's reasonable opinion been corrected.
(e) Representations and Warranties. The representations and warranties
contained in Section 5 of the Credit Agreement as amended hereby, and in each
of the Collateral Documents and the documents to be delivered in connection
herewith, shall be true and correct in all respects as of the date hereof, and
as of the date of funding of the Subordinated Note, except to the extent that
they relate expressly to an earlier date.
6
<PAGE> 7
SECTION 5. Reaffirmation of Guaranties and Collateral Assignments. Each
Guarantor acknowledges this First Amendment and affirms that both the
Unconditional Guaranty and the Collateral Assignment of General Partner
Interest dated as of October 30, 1992, to which such Guarantor is a party,
remain in full force and effect with respect to the guaranty of the Obligations
and the granting to the Bank of a security interest in all of such Guarantor's
general partner interests in the Borrower as security for the Obligations of
the Borrower and the obligations of such Guarantor under its respective General
Partner Guaranty, notwithstanding the amendments set forth herein, and each
Guarantor agrees that any assignee of the Bank as described in Section 3(d)
above shall be entitled to the ratable benefits and security of such
Unconditional Guaranty and Collateral Assignment of General Partner Interest.
SECTION 6. Miscellaneous.
(a) Execution in Counterparts. This First Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which taken together shall constitute but one and the
same document.
(b) Governing Law. This First Amendment shall be governed by and
construed in accordance with the laws of the State of North Carolina, without
regard to conflicts of laws principles.
(c) Headings. Section headings in this First Amendment are included
herein for convenience of reference only and shall not constitute a part of
this First Amendment for any other purpose.
(d) Entire Agreement. This First Amendment, together with the Credit
Agreement, the Notes and the other Collateral Documents, embody the entire
agreement and understanding among the parties relating to the subject matter
hereof and supersede all prior proposals, negotiations, agreements, and
understandings relating to such subject matter. This First Amendment is
incorporated into the Credit Agreement by reference and shall constitute a part
thereof as if fully set forth therein.
(e) Fees and Expenses of Counsel. The Borrower agrees to reimburse the
Bank for reasonable fees and expenses of the Bank's legal counsel in connection
with the preparation, negotiation and execution of this First Amendment.
(f) Amendment. This First Amendment may only be amended, changed,
discharged or terminated, or any provision hereof waived, by an instrument in
writing signed by the Bank and the Borrower.
[SIGNATURES BEGIN ON FOLLOWING PAGE]
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be executed as of the date first above written.
FRESNO MMDS ASSOCIATES
By: /s/ TERRY J. HOLMES
---------------------------------
Name: TERRY J. HOLMES
Title: MANAGING DIRECTOR
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By: /s/ JIM F. REDMAN
---------------------------------
Name: JIM F. REDMAN
Title: SENIOR VICE PRESIDENT
FRESNO TELSAT, INC.
By: /s/ WILLIAM A MILLETT
---------------------------------
Name: WILLIAM A. MILLETT
Title: PRESIDENT
ATTEST:
/s/ JAMES A. SIMONS
- ---------------------------------
Secretary
[CORPORATE SEAL]
FRESNO WIRELESS CABLE TELEVISION, INC.
By: /s/ ROBERT D. HOSTETLER
---------------------------------
Name: ROBERT D. HOSTETLER
Title: PRESIDENT & CEO
ATTEST:
- ---------------------------------
Secretary
[CORPORATE SEAL]
8
<PAGE> 9
EXHIBIT A
FORM OF ASSIGNMENT, ACCEPTANCE AND INTERCREDITOR AGREEMENT
<PAGE> 10
ASSIGNMENT, ACCEPTANCE AND INTERCREDITOR AGREEMENT
THIS ASSIGNMENT, ACCEPTANCE AND INTERCREDITOR AGREEMENT (this
"Assignment" or "Agreement") is dated as of _______________, 1996, and is made
by and among First Union National Bank of North Carolina (the "Assignor," the
"Bank" and a "Lender"), ______________________________ (the "Assignee"), First
Union National Bank of North Carolina as Agent (in such capacity, the "Agent"),
and Fresno MMDS Associates (the "Borrower") with reference to that Amended and
Restated Revolving Credit Agreement dated as of September 30, 1994 (the "Credit
Agreement"), between the Assignor and the Borrower, amended as of June 30,
1996, by that First Amendment to Amended and Restated Revolving Credit
Agreement and Reaffirmation of Guaranties and Collateral Assignments of General
Partner Interest (the "First Amendment") (the Credit Agreement and the First
Amendment, and all other and further amendments of the Credit Agreement are
herein collectively referred to as the "Credit Agreement") (the Assignee and
the Assignor, together with any other assignees of the interest of the Assignor
as provided for herein and in the Credit Agreement who agree to be bound as
"Lenders" under the terms of this Agreement and become parties hereto are
referred to herein collectively as the "Lenders"). Capitalized terms used
herein and not otherwise defined herein shall have the meanings assigned to
them in the Credit Agreement.
W I T N E S S E T H :
WHEREAS, the Assignor is the Bank under the Credit Agreement, pursuant
to which the Bank has made Revolving Credit Loans to the Borrower as provided
in the Credit Agreement;
WHEREAS, the Credit Agreement allows the Bank to assign to any Person
all or any part of the Loans or the Note and all or any part of its rights
thereunder and under the Collateral Documents;
WHEREAS, the Bank proposes to assign to the Assignee the "Assigned
Interests" (as defined below); and
WHEREAS, the Lenders desire to appoint from among their number an
Agent to act as specified herein and in the Credit Agreement and the Collateral
Documents, and to set forth the duties and responsibilities of each of the
Lenders as to the other Lenders;
NOW, THEREFORE, for and in consideration of the mutual promises and
covenants contained in this Agreement, the parties hereby agree as follows:
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:
<PAGE> 11
1. Assignment. (a) Effective as of the Effective Date set forth
below, the Assignor hereby sells and assigns, without recourse, to the
Assignee, and the Assignee hereby purchases and assumes, without recourse or
warranty except as set forth herein and in the provisions of the Credit
Agreement incorporated herein, from the Assignor, the Assigned Interests (as
defined below). The "Assigned Interests" shall mean and consist of the
respective interests set forth on SCHEDULE 1 attached hereto in the Revolving
Credit Facility (as defined below) as of the Effective Date, together with any
amount of unpaid interest accrued on the assigned Loans to the Effective Date
and set forth on SCHEDULE 1 and any amount of Fees accrued to the Effective
Date for the account of the Assignor and set forth on SCHEDULE 1. The
"Revolving Credit Facility" shall mean and consist of the Revolving Credit
Commitment, Revolving Credit Loans and participations in the Letter of Credit
and disbursements under the Letter of Credit; it shall also mean and consist of
the Note unless and until the Borrower executes and delivers new promissory
notes to the Assignor and the Assignee reflective of their respective
interests, and the Assignee shall be deemed to be a holder of the Note to the
extent of its Assigned Interests.
(b) All amounts payable to the Assignor hereunder shall be paid in
U.S. Dollars by transfer of federal funds to the Assignor, ABA No. 053000219,
Account Name GL, Account No. 4659060000191, Attention: Hilda Weathers,
Reference: Fresno MMDS Associates.
2. Acceptance. From and after the Effective Date, (a) the
Assignee shall be a party to and be bound by the provisions of the Credit
Agreement and, to the extent of the Assigned Interests, have the rights and
obligations of the "Bank" thereunder and under the Collateral Documents (the
defined term "Bank" as used in the Credit Agreement and the Collateral
Documents shall hereafter mean and include collectively the "Lenders" as
defined herein to the extent of their Assigned Interests and the Assignor to
the extent of its retained interests) and (b) the Assignor shall, to the extent
of the Assigned Interests, relinquish its rights and be released from its
obligations under the Credit Agreement and Collateral Documents.
3. Loans. (a) Each Loan shall be made by the Lenders ratably in
accordance with their portion of the Revolving Credit Commitment; provided,
however, that the failure of any Lender to make any Loan shall not in itself
relieve any other Lender of its obligation to lend (it being understood,
however, that no Lender shall be responsible for the failure of any other
Lender to make any Loan required to be made by such other Lender). Each Lender
agrees that in computing such Lender's portion of any Loan to be made
hereunder, the Agent may, in its discretion, round each Lender's percentage of
such Loan to the next higher or lower whole dollar amount.
(b) The Agent shall promptly advise the Lenders of any notice given
pursuant to Section 2.01 of the Credit Agreement of the Borrower's request for
a Revolving Credit Loan and of each Lender's portion of the requested
borrowing. Each Lender shall make a Loan in the amount of its pro rata portion
on the proposed date thereof by wire transfer of immediately available funds to
the Agent in Charlotte, North Carolina, not later than 3:00 p.m., Charlotte
time.
(c) The Agent will promptly notify each Lender of a Letter of
Credit disbursement and, in the case of each Lender, its pro rata share (based
on such Lender's portion of the Revolving Credit Commitment) of such Letter of
Credit disbursement. Not later than 2:00 p.m.,
2
<PAGE> 12
Charlotte time, on such date, each Lender shall make available its pro rata
share of such Letter of Credit Disbursement, in Federal or other funds
immediately available in Charlotte, to the Agent at its address set forth in
the Credit Agreement, and the Agent will promptly make such funds available to
the Assignor. The Agent will promptly remit to each Lender that shall have
made such funds available its pro rata share of any amounts subsequently
received by the Agent from the Borrower in respect of such Letter of Credit
disbursement.
(d) Unless the Agent shall have received notice from a Lender
prior to the date of any Loan, or prior to the time of any required payment by
such Lender in respect of a Letter of Credit disbursement, that such Lender
will not make available to the Agent such Lender's portion of such Loan or
payment, the Agent may assume that such Lender has made such portion available
to the Agent on the date of such Loan or payment as provided above, and the
Agent may, in reliance upon such assumption, make available to the Borrower on
such date a corresponding amount. If and to the extent that such Lender shall
not have made such portion available to the Agent, such Lender and the Borrower
severally agree to repay to the Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date such amount
is made available to the Borrower until the date such amount is repaid to the
Agent at the Default Rate. If such Lender shall repay to the Agent such
corresponding amount in respect of a Loan, such amount shall constitute a
portion of such Lender's Assigned Interests for purposes of this Agreement.
4. Payments and Distributions. (a) The Commitment Fee and
interest are payable by the Borrower in respect of the Assigned Interests as
provided in the Credit Agreement. Such Commitment Fee and interest shall be
payable to the Assignee only to the extent such Commitment Fee and interest, as
applicable, constitute part of the Assigned Interests or accrue after the
Effective Date. The Travel and Administration Fee shall not constitute part of
the Assigned Interests and shall be retained by the Agent.
(b) Notwithstanding anything to the contrary contained in this
Assignment, if and when the Assignor receives or collects any payment of fees
or interest which is payable to the Assignee pursuant to paragraph (a) above,
the Assignor shall promptly distribute such payment to the Assignee.
(c) Notwithstanding anything to the contrary contained in this
Assignment, if and when the Assignee receives or collects any payment of fees
or interest which is payable to the Assignor pursuant to Paragraph (a) above,
the Assignee shall promptly distribute such payment to the Assignor.
5. Appointment of Agent. The Lenders hereby appoint First Union
National Bank of North Carolina ("First Union") as Agent to act as specified
herein and in the Credit Agreement and the Collateral Documents. Each Lender
hereby irrevocably authorizes the Agent to take such action on the Lender's
behalf under the provisions of this Assignment, the Credit Agreement, the
Collateral Documents and any other instruments and agreements referred to
herein or therein and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically
3
<PAGE> 13
delegated to or required of the Agent by the terms hereof or thereof and such
other powers as are reasonably incidental thereto. Once First Union is no
longer the Agent or a Lender hereunder, American Telecasting, Inc. ("ATI")
shall have the right either to serve as the Agent or to appoint the successor
Agent.
6. Nature of Duties. The Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement, the Credit
Agreement and the Collateral Documents. Neither the Agent nor any of its
officers, directors, employees or agents shall be liable to any of the Lenders
for any action taken or omitted by them as such hereunder or under the Credit
Agreement or any Collateral Document or in connection herewith or therewith,
unless resulting from their gross negligence or willful misconduct. The duties
of the Agent shall be mechanical and administrative in nature; the Agent shall
not, by reason of this Agreement, the Credit Agreement or any Collateral
Document, have a fiduciary relationship in respect of any Lender; and nothing
in this Agreement, the Credit Agreement or any Collateral Document, expressed
or implied, shall impose upon the Agent any duties, obligations or liabilities
in respect of this Agreement, the Credit Agreement or any Collateral Document
except as expressly set forth herein or therein.
7. Delegation of Duties. (a) In case of litigation relating to
this Agreement, the Credit Agreement or any Collateral Document, and in
particular in case of the enforcement thereof upon an Event of Default, or in
case the Agent deems that by reason of any present or future law of any
jurisdiction it may not exercise any of the powers, rights or remedies herein
or therein granted to the Agent or take any other action which may be desirable
or necessary in connection therewith, the Agent, with the written consent of
the Lenders then holding more than sixty percent (60%) of the aggregate
principal amount then outstanding on the Note (except as provided below, the
"Required Lenders"), may appoint an additional individual or institution as an
additional agent, in which event each and every remedy, power, right, claim,
demand, cause of action, immunity, interest and lien expressed or intended by
this Agreement, the Credit Agreement or the Collateral Documents to be
exercised by or vested or conveyed to the Agent with respect thereto shall be
exercisable by and vest in such additional agent, but only to the extent
necessary to enable such additional agent to exercise such powers, rights and
remedies, and every covenant and obligation necessary to the exercise thereof
by such additional agent shall run to and be enforceable by either of them.
Provided, however, so long as First Union National Bank of North Carolina, or
its legal successors ("First Union"), is the Agent or a Lender hereunder, then
the definition of "Required Lenders" for all purposes of this Agreement shall
mean solely First Union. Provided, further, once First Union is no longer the
Agent or a Lender hereunder, then so long as ATI or its legal successors is the
Agent or a Lender hereunder, then the definition of "Required Lenders" for all
purposes of this Agreement shall mean solely ATI.
(b) Should any conveyance or instrument in writing from the Lenders
be required by any additional agent so appointed by the Agent for more fully
confirming to it such rights, powers, duties and obligations, any and all such
conveyances and instruments shall, on the reasonable request of the Agent, be
executed, acknowledged and delivered by the Lenders. In case any such
additional agent or a successor shall die, dissolve, liquidate, become
incapable of acting, resign
4
<PAGE> 14
or be removed, all the rights, powers, duties and obligations of such
additional agent, so far as permitted by law, shall vest in and be exercised by
the Agent until the appointment of a successor to such additional agent. Any
such additional agent appointed by the Agent pursuant to this SECTION 7(B) may
be removed by the Agent at any time, in which case all powers, rights and
remedies vested in such additional agent shall again vest in the Agent as if no
such appointment of additional agent had been made.
(c) The Agent may execute any of its duties under this Agreement, the
Credit Agreement or any of the Collateral Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact that it selects
with reasonable care.
8. Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default,
unless the Agent has received written notice from the Borrower or a Lender
describing such Default or Event of Default and stating that such notice is a
"notice of default." Each Lender shall promptly give the Agent and each other
Lender such a notice upon its actual knowledge of a Default or an Event of
Default. In the event that the Agent receives such a notice from a Person
other than a Lender, the Agent shall give notice thereof to the Lenders.
9. Administration; Lack of Reliance on the Agent. (a) Each
Lender expressly acknowledges that neither the Agent nor any of its Affiliates
nor any officer, director, employee, agent or attorney-in-fact of any of them
has made any representation or warranty to it and that no act by the Agent
hereinafter taken, including any review of the affairs of the Borrower, shall
be deemed to constitute any representation or warranty by the Agent to any
Lender.
(b) Each Lender represents to the Agent and the other Lenders that
it has, independently and without reliance upon the Agent and the other Lenders
and based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Borrower and made its own decision to enter into the Credit Agreement and
extend credit to the Borrower thereunder. Each Lender also represents that it
will, independently and without reliance upon the Agent and the other Lenders
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under the Credit Agreement, and to make such
investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of the Borrower.
(c) Except for notices, reports and other documents expressly
required to be furnished to the Lenders by the Agent hereunder, the Agent shall
have no duty or responsibility, either initially or on a continuing basis, to
provide any Lender with any credit, financial or other information concerning
the business, prospects, operations, property, financial and other condition
5
<PAGE> 15
or creditworthiness of the Borrower or any other Person that may come into the
possession of the Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates, whether before the making of the Loans or at
any time or times thereafter.
(d) The Agent shall not be responsible to any Lender for any
recitals, statements, information, representations or warranties in the Credit
Agreement or in any Collateral Document or in any document, certificate or
other writing delivered in connection therewith or for the execution,
collectability, priority or sufficiency of the Credit Agreement or any
Collateral Document or the financial condition of the Borrower or any other
Person, or be required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of the Credit
Agreement or any Collateral Document, or the financial condition of the
Borrower or any other Person or the existence or possible existence of any
Default or Event of Default.
10. Certain Rights of the Agent. If the Agent shall request
instructions from the Lenders or the Required Lenders, as applicable, with
respect to any act or action (including failure to act) in connection with this
Agreement, the Credit Agreement or any Collateral Document, the Agent shall be
entitled to refrain from such act or taking such action unless and until the
Agent shall have received instructions from the Lenders or the Required
Lenders, as applicable; and the Agent shall incur no liability to any Person by
reason of so refraining. The Agent shall be fully justified in failing or
refusing to take any action hereunder, under the Credit Agreement or under any
Collateral Document (i) if such action would, in the opinion of the Agent, as
the case may be, be contrary to law or the terms of this Agreement, the Credit
Agreement or the Collateral Documents; (ii) if it shall not receive such advice
or concurrence of the Lenders or the Required Lenders as it deems appropriate;
or (iii) if it shall not first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it
by reason of taking or continuing to take any such action. Without limiting
the foregoing, no Lender shall have any right of action whatsoever against the
Agent as a result of the Agent's acting or refraining from acting hereunder,
under the Credit Agreement or under any Collateral Document in accordance with
the instructions of the Lenders or the Required Lenders, as the case may be.
11. Reliance by Agent. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution,
notice, statement, consent, certificate, telex, teletype, or telecopier
message, order or other documentary, teletransmission or telephone message
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person. The Agent may consult with legal counsel (including
counsel for the Borrower, if not unreasonable under the circumstances),
independent public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
12. Indemnification of Agent. Each Lender shall reimburse and
indemnify the Agent, in accordance with the ratio of (x) the respective
principal amount of the Loans then outstanding to such Lender to (y) the
outstanding aggregate principal amount of the Loans then outstanding
6
<PAGE> 16
to all of the Lenders (each Lender's "Pro Rata Share"), from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including reasonable attorneys' fees and
expenses) or disbursements of any kind or nature whatsoever which may at any
time (including at any time following the repayment of the Loans) be imposed
on, incurred by or asserted against the Agent in performing its duties
hereunder, under the Credit Agreement or under any Collateral Document or in
any way relating to or arising out of this Agreement, the Credit Agreement or
any Collateral Document or the transactions contemplated hereby or thereby or
any action taken or omitted by the Agent under or in connection with any of the
foregoing; provided, however, that no Lender shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements finally determined by a court of
competent jurisdiction and not subject to any appeal, to be the result of the
Agent's gross negligence or willful misconduct.
13. The Agent in its Individual Capacity. With respect to the
Note issued to it, the Agent shall have the same rights and powers as any other
Lender or holder of the Note or any notes issued in replacement for the Note or
any portion thereof and may exercise the same as though it were not performing
the agency duties specified herein; and the term "Lenders," "Required Lenders,"
"holder of the Note" or any similar terms shall, unless the context clearly
otherwise indicates, include the Agent in its individual capacity. The Agent
may accept deposits from, lend money to, issue letters of credit for the
account of and generally engage in any kind of banking, trust, financial
advisory or other business with the Borrower or any Affiliate of the Borrower
as if it were not the Agent performing the duties specified herein.
14. Assignment of Interests in Loan. This Agreement shall be
binding upon and inure to the benefit of the Agent, the Lenders and their
respective successors and permitted assigns. Unless other-wise provided in the
Credit Agreement, any Lender may transfer its pro rata interest in the Note and
the Credit Agreement and the other Collateral Documents, provided that the
transferee has agreed in writing to be bound by the terms of this Agreement as
a "Lender," and provided that the Agent shall the right to approve any proposed
transferee in its sole reasonable discretion. The Agent may deem and treat
each of the Lenders as the owner of its pro rata interest therein for all
purposes hereof unless and until a written notice of the assignment or transfer
thereof, as the case may be, shall have been filed with the Agent, signed by
such assignor or transferor and in form satisfactory to the Agent. Any
request, authority or consent of any Person or entity who, at the time of
making such request or giving such authority or consent, is the owner of such
interest shall be conclusive and binding on any subsequent, transferee or
assignee, as the case may be, of such interest.
15. Successor Agent. The Agent may resign as Agent hereunder and
under the Credit Agreement and the Collateral Documents at any time by giving
twenty (20) Business Days' prior written notice to the Borrower and the
Lenders. The Agent may be removed, with or without cause, by the Required
Lenders at any time by giving twenty (20) Business Days' prior written notice
to the Borrower, the Agent and the other Lenders. Such resignation or removal,
as the case may be, shall take effect upon the appointment of a successor Agent
as provided herein below. Upon any such notice of resignation or removal, as
the case may be, the Required
7
<PAGE> 17
Lenders shall appoint from among the Lenders a successor Agent hereunder. If
no successor Agent is appointed prior to the expiration of the notice period
for the resignation of the Agent, the Agent may appoint, after consulting with
the Lenders, a successor Agent from among the Lenders. Upon the written
acceptance of any appointment as Agent by a successor Agent, such successor
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations under this Agreement, the Credit
Agreement and the Collateral Documents. After any retiring Agent's resignation
or removal, as the case may be, as Agent, the provisions of this Agreement
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent. The resignation or removal of the Agent shall not in any
way affect the former Agent's status as a Lender hereunder or under the Credit
Agreement.
16. Reimbursement. Each of the Lenders agrees to promptly
reimburse the Agent in an amount equal to such Lender's Pro Rata Share of any
expenses incurred by the Agent, including reasonable attorneys' fees, in
connection with the preparation, administration, modification, or enforcement
(whether through negotiations, legal proceedings or otherwise) of this
Agreement, the Credit Agreement, any Collateral Document, or any document
contemplated by or referred to herein, to the extent the Agent is not
reimbursed for any such expenses by the Borrower within ten (10) Business Days
after demand by the Agent. If any amounts so paid to the Agent by the Lenders
are subsequently paid to the Agent by or on behalf of the Borrower, the Agent
shall promptly upon its receipt of any such amounts distribute the same to the
Lenders in the same proportion as such amounts were originally paid by the
Lenders to the Agent.
17. Waiver of Default. Upon the Agent's obtaining actual
knowledge of an Event of Default, the Agent shall notify the Lenders of the
existence and the nature of such Event of Default and shall poll the Lenders to
determine whether such Event of Default should be waived. The Agent shall be
authorized to waive an Event of Default on behalf of the Lenders and shall
waive such Event of Default if directed to do so by the Required Lenders in
writing. The Agent shall promptly commence such enforcement proceedings and
shall exercise such of its other rights and remedies under this Agreement, the
Credit Agreement, the Collateral Documents and applicable law as it deems
appropriate (or as directed by the Required Lenders) if the Agent is so
directed in writing by the Required Lenders. Unless so directed in writing as
described in the preceding sentence, it is agreed by the Lenders and the Agent
that the Agent shall not commence enforcement proceedings or exercise any of
such rights and remedies. Upon commencement of enforcement proceedings or the
exercise of any such rights and remedies, the Required Lenders may direct the
Agent to take action lawfully available to the Agent under the Credit Agreement
and the Collateral Documents but, unless the Agent shall first be indemnified
to its satisfaction by the Lenders requesting or acquiescing in any such action
for any liability and expense that might result therefrom, the Agent shall not
be required to, and shall be fully justified in failing or refusing to, take
any action that the Agent in good faith believes is or may be contrary to law
or to the terms of the Credit Agreement or the Collateral Documents or may
subject the Agent to liability. Notwithstanding the foregoing, unless and
until the Agent shall have received such directions, the Agent may (but shall
not be obligated to) take such action, or refrain from taking
8
<PAGE> 18
such action, with respect to a Default or Event of Default as it shall
reasonably deem in the best interests of the Lenders.
18. Amendment of Documents. Except as otherwise specifically set
forth in the Credit Agreement, the Agent is authorized to consent to any
waiver, amendment or modification of this Agreement, the Credit Agreement or
any Collateral Document with the consent of the Required Lenders; provided,
however, that no such waiver, amendment or modification shall, without the
consent of all Lenders (i) forgive or release any of the Obligations or any
obligations of any Person now or hereafter primarily or contingently liable
with respect to the Obligations; (ii) extend the scheduled maturity of the Loan
or extend the time of payment of any of the Obligations; (iii) reduce the rate
of interest on the Loans or any fees relating to the Loans; (iv) change the
definition of the term "Required Lenders"; (v) amend, modify or waive any
provisions of this SECTION 18; (vi) consent to the assignment or transfer by
the Borrower of any of its rights and obligations under the Credit Agreement or
any obligations of any Person now or hereafter primarily or contingently liable
with respect to the Obligations; or (vii) change any provisions governing the
amounts or procedures for determining amounts to be disbursed to the Lenders
upon payment by the Borrower. No provision that affects the rights or duties
of the Agent under this Agreement, the Credit Agreement or any Collateral
Document may be amended without the prior written consent of the Agent.
19. Invalidated Payments. If any amounts distributed by the Agent
to a Lender are subsequently returned or repaid by the Agent to the Borrower or
the representative or successor in interest of the Borrower, whether by court
order or by settlement approved by the Lender in question, such Lender shall,
promptly upon its receipt of notice thereof from the Agent, pay the Agent such
amount. If any such amounts are recovered by the Agent from the Borrower or
the representative or successor in interest of the Borrower, the Agent shall
redistribute such amounts to the Lenders on the same basis as such amounts were
originally distributed. The obligations of the Lenders and the Agent under
this SECTION 19 shall survive the repayment of the Note and the termination of
the Credit Agreement and the Collateral Documents.
20. Effect of Lender's Noncompliance. The failure of any Lender
to perform any of its obligations under the Credit Agreement, this Agreement or
any of the Collateral Documents, including, without limitation, the failure of
a Lender to pay to the Agent any amounts due to the Agent, shall not relieve
any other Lender of its obligations under this Agreement, the Credit Agreement,
or any Collateral Document.
21. Agreement to Cooperate. Each Lender agrees to cooperate fully
with each other Lender, to the end that the terms and provisions of this
Agreement may be promptly and fully carried out. Each Lender also agrees, from
time to time, to execute and deliver any and all other agreements, documents or
instruments and to take such other actions, all as may be reasonably necessary
or desirable, to effectuate the terms, provisions and the intent of this
Agreement, the Credit Agreement and the Collateral Documents.
9
<PAGE> 19
22. Independent Actions by Lenders. Each Lender agrees that it
shall not, unless specifically requested to do so by the Agent, commence or
cause to be commenced against the Borrower, any enforcement proceeding with
respect to the Loan.
23. Adjustments. If, at any time or times hereafter, any Lender
shall receive a payment under the Credit Agreement or the Note (including,
without limitation any voluntary payment, realization upon security, exercise
of the right of set off or banker's lien, counterclaim or cross action,
enforcement of any right under the Credit Agreement or any of the Collateral
Documents, but not including payments by the Borrower to individual Lenders or
the Agent as payment or reimbursement for out-of-pocket expenses payable or
reimbursable by the Borrower under the Credit Agreement or the Collateral
Documents, and not including payments to First Union to which First Union is
entitled as a senior creditor under any subordination agreement with any other
Lender), which, together with such payments received by the other Lenders (the
"total payment"), is in excess of such Lender's Pro Rata Share of the total
payment, such Lender shall promptly purchase for cash, without recourse or
warranty from the other Lenders, such participations in the Loans made by the
other Lenders as shall be necessary to cause such purchasing Lender to share
the excess payment ratably with each of the other Lenders; provided, however,
that if all or any portion of such excess payment is thereafter recovered from
such purchasing Lender, such purchase of participations shall be rescinded and
the purchase price restored ratably to the extent of such recovery, but without
interest.
24. Indemnification of Lenders. Each Lender (but subject to any
subordination agreement between First Union and any other Lender) agrees to
indemnify each other Lender (to the extent not reimbursed by the Borrower),
ratably according to such Lender's Pro Rata Share, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by, or asserted against such other Lender in any
way relating to or arising out of any action taken or omitted by such Lender
under this Agreement, the Credit Agreement, or any Collateral Document at the
request or direction of the Agent, where the Agent, in making such request or
direction, was acting within the authority granted to the Agent in this
Agreement.
25. No Third-Party Beneficiary. This Agreement is for the benefit
of the Lenders, and neither the Borrower nor any Person other than the Lenders
and the Agent shall have any rights or remedies in connection with this
Agreement, or be entitled to raise as a defense or rely upon in any manner
whatsoever the failure of Agent or any Lender to comply with the provisions of
this Agreement.
26. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing and delivered as provided in the
Credit Agreement or on SCHEDULE 1 hereto as to additional Lenders.
27. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of North Carolina without
regard to principles of conflicts of laws.
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<PAGE> 20
28. Captions. The captions or headings in this Agreement are for
convenience only and are not to affect the interpretation or construction of
this Agreement.
29. Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which taken together shall constitute but one and the
same document.
[remainder of page intentionally blank;
signatures begin on following page]
11
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first set forth above.
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, as Assignor and as a Lender
BY:
------------------------------
TITLE:
---------------------------
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, as Agent
BY:
------------------------------
TITLE:
---------------------------
[NAME OF ASSIGNEE], as Assignee and as a
Lender
BY:
------------------------------
TITLE:
---------------------------
FRESNO MMDS ASSOCIATES, as Borrower
BY:
------------------------------
TITLE:
---------------------------
12
<PAGE> 22
SCHEDULE 1
1. Date of Assignment:
2. Legal Name of Assignor:
3. Legal Name of Assignee:
4. Assignee's Address and Telecopy Number for Notices:
5. Effective Date of Assignment and Acceptance: , 199
------------- -----
6. Assigned Interests:
PERCENTAGE
PRINCIPAL AND COMMITMENT THEREUNDER
ASSIGNED Represented by Assigned Interest
-------- --------------------------------
REVOLVING $ %
FACILITY
ACCRUED $ %
AND UNPAID
INTEREST
ASSIGNED
(IF ANY)
FEES $ %
ASSIGNED
(IF ANY)
7. AGGREGATE ASSIGNMENT PAYMENT: $
-------------
<PAGE> 23
EXHIBIT B
FORM OF SUBORDINATION AGREEMENT
<PAGE> 24
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT ("Agreement") is entered into as of
__________________________, 19___, by _________________________
________________ (the "Subordinated Creditor") and FRESNO MMDS ASSOCIATES, a
California general partnership (the "Borrower"), in favor of FIRST UNION
NATIONAL BANK OF NORTH CAROLINA, a national banking institution (the "Bank").
RECITALS:
A. The Borrower is or will become simultaneously herewith
indebted to the Subordinated Creditor by way of assignment(s) from the Bank of
certain of the Borrower's obligations to the Bank (the "Assigned Interests"),
and the Borrower may hereafter from time to time become obligated to the
Subordinated Creditor in further amounts whether by (i) subordinated loan(s)
consented to by the Bank (the "New Debt") or (ii) additional Assigned Interests
from the Bank (all such indebtedness and any and all amendments, modifications,
replacements, substitutions and supplements thereto and any renewals and
extensions thereof, including the principal, interest, fees, costs, expenses
and attorneys' fees thereon, whether now existing or hereinafter arising and
whether created directly or acquired by assignment or otherwise, is
collectively referred to as the "Subordinated Debt").
B. The Borrower and the Bank are party to that Amended and
Restated Revolving Credit Agreement dated as of September 30, 1994 (the "Credit
Agreement"), as amended the date hereof by that First Amendment to Amended and
Restated Revolving Credit Agreement and Reaffirmation of Guaranties and
Collateral Assignments of General Partner Interest (the "First Amendment"), and
the Borrower is currently, without giving effect to the First Amendment, in
default of certain of its obligations to the Bank thereunder.
C. In connection with the waiver of the defaults of the Borrower
under the Credit Agreement and the other accommodations of the Bank to Borrower
as contained in the First Amendment, the Subordinated Creditor has agreed to
subordinate its rights against the Borrower and interests in the Borrower's
property to the Bank as hereinafter provided.
D. It is a condition precedent and subsequent to the agreements
of the Bank set forth in the First Amendment that the Subordinated Creditor
enter into this Agreement.
NOW, THEREFORE, for valuable consideration, the receipt of which is
hereby acknowledged by the Subordinated Creditor, and to induce the Bank to
make financial accommodation to the Borrower, the Subordinated Creditor and the
Borrower hereby agree as follows:
SECTION 1. Agreement to Subordinate Debt. The Subordinated Creditor
agrees that the Subordinated Debt is and shall be subordinate, to the extent
and in the manner hereinafter set forth, in right of payment to the prior
payment in full of all obligations of the Borrower to the
<PAGE> 25
Bank now or hereafter existing under all credit, overdraft, letter of credit,
acceptance or other facilities extended by the Bank to the Borrower or
successor entity thereto, whether for principal, interest (including, without
limitation, interest accruing after the filing of a petition initiating any
proceeding referred to in SECTION 4(A)), fees, expenses or otherwise (all such
obligations being the "Senior Obligations").
SECTION 2. Agreement to Subordinate Liens. The Subordinated Creditor
hereby agrees that any existing and future liens in favor of the Subordinated
Creditor encumbering any real and/or personal property of the Borrower securing
the Subordinated Debt (collectively, the "Subordinate Liens") be, and hereby
are made subordinate, junior and postponed in priority, operation and effect to
the priority, operation and effect of any and all existing and future liens in
favor of the Bank encumbering any real and/or personal property of the Borrower
(collectively, the "Senior Liens"), notwithstanding the perfection of, order of
perfection of, or failure to perfect any Senior Lien, or the filing or
recording, order of filing or recording, or failure to file or record any
instrument or other document in any filing or recording office in any
jurisdiction. The Subordinated Creditor hereby agrees that, as between the
Bank and the Subordinated Creditor, any Senior Liens in favor of the Bank are
senior in priority, operation and effect to the priority, operation and effect
of any and all Subordinate Liens, notwithstanding the perfection of, order of
perfection of, or failure to perfect of any Senior Lien, or the filing or
recording, order of filing or recording, or failure to file or record any
instrument or other document in any filing or recording office in any
jurisdiction.
SECTION 3. No Payment on Subordinated Debt. During the term of this
Agreement the Subordinated Creditor agrees not to ask, demand, sue for, take or
receive from the Borrower, and the Borrower agrees to not so pay, directly or
indirectly, in cash or other property or by set-off or in any other manner
(including, without limitation, from or by way of collateral), payment of all
or any of the Subordinated Debt unless and until the Senior Obligations shall
have been paid in full and all documentation regarding the Senior Obligations
has been canceled and terminated or assigned to the Subordinated Creditor;
provided, however, so long as no Default or Event of Default under the Amended
and Restated Revolving Credit Agreement between the Borrower and the Bank as of
September 30, 1996, as thereafter amended, shall have occurred and not been
waived in writing by the Bank, then the Subordinated Creditor shall have the
right to receive interest payments on the Assigned Interests.
SECTION 4. In Furtherance of Subordination. The Subordinated
Creditor agrees as follows:
(a) Upon any distribution of all or any of the assets of the
Borrower to creditors of the Borrower upon the dissolution, winding up,
liquidation, arrangement, reorganization, adjustment, protection, relief or
composition of the Borrower or its debts, whether in any bankruptcy,
insolvency, arrangement, reorganization, receivership, relief or similar
proceedings or upon an assignment for the benefit of creditors or any other
marshalling of the assets and liabilities of the Borrower or otherwise, any
payment or distribution of any kind (whether in cash, property or securities)
which otherwise would be payable or deliverable upon or with respect to
2
<PAGE> 26
the Subordinated Debt shall be paid or delivered directly to the Bank for
application (in the case of cash) to or as collateral (in the case of non-cash
property or securities) for the payment or prepayment of the Senior Obligations
until the Senior Obligations shall have been paid in full or assigned and all
documentation regarding the Senior Obligations has been canceled and terminated
or assigned.
(b) If any proceeding referred to in subsection (a) above is
commenced by or against the Borrower:
(i) the Bank is hereby irrevocably authorized and
empowered (in its own name or in the name of the Subordinated Creditor
or otherwise), but shall have no obligation, to demand, sue for,
collect and receive every payment or distribution referred to in
subsection (a) above and give acquittance therefor and to file claims
and proofs of claim and take such other action (including, without
limitation, voting the Subordinated Debt) as it may deem necessary or
advisable for the exercise or enforcement of any of the rights or
interests of the Bank hereunder; and
(ii) the Subordinated Creditor shall duly and
promptly take such action as the Bank reasonably may request (A) to
collect the Subordinated Debt for the account of the Bank and to file
appropriate claims or proofs of claim in respect of the Subordinated
Debt, (B) to execute and deliver to the Bank such powers of attorney,
assignments, or other instruments as it may request in order to enable
it to enforce any and all claims with respect to, and any security
interests and other liens securing payment of, the Subordinated Debt,
and (C) to collect and receive any and all payments or distributions
which may be payable or deliverable upon or with respect to the
Subordinated Debt.
(c) All payments or distributions upon or with respect to the
Subordinated Debt which are received by the Subordinated Creditor contrary to
the provisions of this Agreement shall be received in trust for the benefit of
the Bank, shall be segregated from other funds and property held by the
Subordinated Creditor and shall be forthwith paid over to the Bank in the same
form as so received (with any necessary endorsement) to be applied (in the case
of cash) to or held as collateral (in the case of non-cash property or
securities) for the payment or prepayment of the Senior Obligations in
accordance with their terms.
(d) The Bank is hereby authorized to demand specific
performance of this Agreement, whether or not the Borrower shall have complied
with any of the provisions hereof applicable to it, at any time when the
Subordinated Creditor shall have failed to comply with any of the provisions of
this Agreement applicable to it. The Subordinated Creditor hereby irrevocably
waives any defense based on the adequacy of a remedy at law, which might be
asserted as a bar to such remedy of specific performance.
(e) In the event that amounts received by the Bank in payment
of the Senior Obligations are subsequently required to be repaid to the
Borrower or otherwise forfeited or refunded to a receiver, trustee, bankruptcy
estate or otherwise, or the Bank agrees to repay any
3
<PAGE> 27
such amounts to the Borrower as part of a good faith compromise settlement of
pending or threatened claims, and the Subordinated Creditor has received any
payment on the Subordinated Debt in accordance with the priorities established
hereunder, (i) the Senior Obligations shall be reinstated to the extent of any
such repayment and shall be senior in right of priority and payment to the
Subordinated Debt and (ii) the Subordinated Creditor shall pay over to the Bank
all amounts received in payment of the Subordinated Debt, up to the amount of
any deficiency in payment in full of the Senior Obligations as a result of such
repayment to the Borrower.
SECTION 5. No Commencement of Any Proceeding. The Subordinated
Creditor agrees that, so long as any of the Senior Obligations shall remain
unpaid, it will not commence, or join with any creditor other than the Bank in
commencing, any proceeding referred to in SECTION 4(A).
SECTION 6. Rights of Subrogation. The Borrower and the Subordinated
Creditor agree that no payment or distribution to the Bank pursuant to the
provisions of this Agreement shall entitle the Subordinated Creditor to
exercise any rights of subrogation in respect thereof until the Senior
Obligations shall have been finally paid or assigned in full and all
documentation regarding the Senior Obligations has been canceled and terminated
or assigned, at which point the Subordinated Creditor's rights of subrogation
shall automatically be restored.
SECTION 7. Further Assurances. The Subordinated Creditor and the
Borrower will, at any time and from time to time, promptly execute and deliver
all further instruments and documents, and take all further action, that may be
necessary or desirable, or that the Bank may request, in order to protect any
right or interest granted or purported to be granted hereby or to enable the
Bank to exercise and enforce its rights and remedies hereunder.
SECTION 8. No Change in or Disposition of Subordinated Debt. The
Subordinated Creditor will not without the consent of the Bank:
(a) cancel or otherwise discharge any of the Subordinated Debt
(except upon payment in full thereof paid to the Bank as contemplated by
SECTION 4) or subordinate any of the Subordinated Debt to any indebtedness of
the Borrower other than the Senior Obligations;
(b) Sell, assign, pledge, encumber or otherwise dispose of any
of the Subordinated Debt unless such sale, assignment, pledge, encumbrance or
disposition is made expressly subject to this Agreement; or
(c) Permit the terms of any of the Subordinated Debt to be
changed, convert the Subordinated Debt to equity or receive any guarantees of
the Subordinated Debt so as to have an adverse effect upon the rights or
interests of the Bank hereunder.
SECTION 9. Senior Obligations Hereunder Not Affected. All rights and
interests of the Bank hereunder, and all agreements and obligations of the
Subordinated Creditor under this Agreement, shall remain in full force and
effect irrespective of:
4
<PAGE> 28
(i) any lack of validity or enforceability of the Note or any
other agreement or instrument relating to or evidencing credit or financial
accommodations provided by the Bank to the Borrower;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Senior Obligations, or any other
amendment, restructure, forbearance or waiver of or any consent to departure
from any agreement or instrument relating to or evidencing credit provided by
the Bank to the Borrower;
(iii) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Senior Obligations; or
(iv) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Borrower or a Subordinated
Creditor.
This is a continuing agreement of subordination and shall continue to be
effective and binding on the Subordinated Creditor until all Senior Obligations
and extensions or renewals thereof shall have been fully discharged.
SECTION 10. Waiver; Liquidation of Certain Collateral. The
Subordinated Creditor hereby waives promptness, diligence, notice of acceptance
and any other notice with respect to any of the Senior Obligations and this
Agreement and any requirement that the Bank protect, secure, perfect or insure
any security interest or lien or any property subject thereto or exhaust any
right or take any action against the Borrower or any other person or entity or
any collateral.
SECTION 11. Amendments, Etc. No amendment or waiver of any provision
of this Agreement nor consent to any departure by the Subordinated Creditor
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Bank, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 12. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing and delivered by U.S.
Mail, postage prepaid, return receipt requested or by hand delivery, to the
following addresses:
As to the Subordinated Creditor:
5
<PAGE> 29
As to the Borrower:
Fresno MMDS Associates
c/o American Telecasting, Inc.
5575 Tech Center Drive, Suite 300
Colorado Springs, Colorado 80919
Attention: Mr. Terry J. Holmes
Telecopy Number (719) 260-5010
As to the Bank:
First Union National Bank of North Carolina
One First Union Center TW-19
Charlotte, North Carolina 28288-0735
Attention: Specialized Industries/Communications
Telecopy Number: (704) 374-4092
or such other address as shall be designated by such party in a written notice
to the other party complying as to delivery with the terms of this Section.
All such notices shall be deemed to have been validly served, given or
delivered three (3) days after deposit in the United States mails or upon
delivery by hand.
SECTION 13. No Waiver; Remedies. No failure on the part of the Bank
to exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; 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 remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 14. Continuing Agreement. This Agreement is a continuing
agreement and shall (i) remain in full force and effect until the Senior
Obligations shall have been finally paid in full or assigned by the Bank and
all documentation regarding the Senior Obligations has been canceled and
terminated or assigned by the Bank; (ii) be binding upon the Subordinated
Creditor and its successors, transferees and assigns; and (iii) inure to the
benefit of and be enforceable by the Bank and its legal successors.
SECTION 15. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of North Carolina without
regard to principles of conflicts of laws nor domicile of the parties.
SECTION 16. Captions. The captions or headings in this Agreement are
for convenience only and are not to affect the interpretation or construction
of this Agreement.
6
<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first set forth above.
SUBORDINATED CREDITOR:
---------------------
------------------------------
By
--------------------------
Name:
Title:
BORROWER:
FRESNO MMDS ASSOCIATES (SEAL)
By
--------------------------
Name:
Title:
7
<PAGE> 31
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT ("Agreement") is entered into as of June
30, 1996, by AMERICAN TELECASTING, INC. (the "Subordinated Creditor") and
FRESNO MMDS ASSOCIATES, a California general partnership (the "Borrower"), in
favor of FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking
institution (the "Bank").
RECITALS:
A. The Borrower is or will become simultaneously herewith
indebted to the Subordinated Creditor by way of assignment(s) from the Bank of
certain of the Borrower's obligations to the Bank (the "Assigned Interests"),
and the Borrower may hereafter from time to time become obligated to the
Subordinated Creditor in further amounts whether by (i) subordinated loan(s)
consented to by the Bank (the "New Debt") or (ii) additional Assigned Interests
from the Bank (all such indebtedness and any and all amendments, modifications,
replacements, substitutions and supplements thereto and any renewals and
extensions thereof, including the principal, interest, fees, costs, expenses
and attorneys' fees thereon, whether now existing or hereinafter arising and
whether created directly or acquired by assignment or otherwise, is
collectively referred to as the "Subordinated Debt").
B. The Borrower and the Bank are party to that Amended and
Restated Revolving Credit Agreement dated as of September 30, 1994 (the "Credit
Agreement"), as amended the date hereof by that First Amendment to Amended and
Restated Revolving Credit Agreement and Reaffirmation of Guaranties and
Collateral Assignments of General Partner Interest (the "First Amendment"), and
the Borrower is currently, without giving effect to the First Amendment, in
default of certain of its obligations to the Bank thereunder.
C. In connection with the waiver of the defaults of the Borrower
under the Credit Agreement and the other accommodations of the Bank to Borrower
as contained in the First Amendment, the Subordinated Creditor has agreed to
subordinate its rights against the Borrower and interests in the Borrower's
property to the Bank as hereinafter provided.
D. It is a condition precedent and subsequent to the agreements
of the Bank set forth in the First Amendment that the Subordinated Creditor
enter into this Agreement.
NOW, THEREFORE, for valuable consideration, the receipt of which is
hereby acknowledged by the Subordinated Creditor, and to induce the Bank to
make financial accommodation to the Borrower, the Subordinated Creditor and the
Borrower hereby agree as follows:
SECTION 1. Agreement to Subordinate Debt. The Subordinated Creditor
agrees that the Subordinated Debt is and shall be subordinate, to the extent
and in the manner hereinafter set forth, in right of payment to the prior
payment in full of all obligations of the Borrower to the Bank now or hereafter
existing under all credit, overdraft, letter of credit, acceptance or other
facilities extended by the Bank to the Borrower or successor entity thereto,
whether for principal,
<PAGE> 32
interest (including, without limitation, interest accruing after the filing of
a petition initiating any proceeding referred to in SECTION 4(A)), fees,
expenses or otherwise (all such obligations being the "Senior Obligations").
SECTION 2. Agreement to Subordinate Liens. The Subordinated Creditor
hereby agrees that any existing and future liens in favor of the Subordinated
Creditor encumbering any real and/or personal property of the Borrower securing
the Subordinated Debt (collectively, the "Subordinate Liens") be, and hereby
are made subordinate, junior and postponed in priority, operation and effect to
the priority, operation and effect of any and all existing and future liens in
favor of the Bank encumbering any real and/or personal property of the Borrower
(collectively, the "Senior Liens"), notwithstanding the perfection of, order of
perfection of, or failure to perfect any Senior Lien, or the filing or
recording, order of filing or recording, or failure to file or record any
instrument or other document in any filing or recording office in any
jurisdiction. The Subordinated Creditor hereby agrees that, as between the
Bank and the Subordinated Creditor, any Senior Liens in favor of the Bank are
senior in priority, operation and effect to the priority, operation and effect
of any and all Subordinate Liens, notwithstanding the perfection of, order of
perfection of, or failure to perfect of any Senior Lien, or the filing or
recording, order of filing or recording, or failure to file or record any
instrument or other document in any filing or recording office in any
jurisdiction.
SECTION 3. No Payment on Subordinated Debt. During the term of this
Agreement the Subordinated Creditor agrees not to ask, demand, sue for, take or
receive from the Borrower, and the Borrower agrees to not so pay, directly or
indirectly, in cash or other property or by set-off or in any other manner
(including, without limitation, from or by way of collateral), payment of all
or any of the Subordinated Debt unless and until the Senior Obligations shall
have been paid in full and all documentation regarding the Senior Obligations
has been canceled and terminated or assigned to the Subordinated Creditor;
provided, however, so long as no Default or Event of Default under the Amended
and Restated Revolving Credit Agreement between the Borrower and the Bank as of
September 30, 1996, as thereafter amended, shall have occurred and not been
waived in writing by the Bank, then the Subordinated Creditor shall have the
right to receive interest payments on the Assigned Interests.
SECTION 4. In Furtherance of Subordination. The Subordinated
Creditor agrees as follows:
(a) Upon any distribution of all or any of the assets of the
Borrower to creditors of the Borrower upon the dissolution, winding up,
liquidation, arrangement, reorganization, adjustment, protection, relief or
composition of the Borrower or its debts, whether in any bankruptcy,
insolvency, arrangement, reorganization, receivership, relief or similar
proceedings or upon an assignment for the benefit of creditors or any other
marshalling of the assets and liabilities of the Borrower or otherwise, any
payment or distribution of any kind (whether in cash, property or securities)
which otherwise would be payable or deliverable upon or with respect to the
Subordinated Debt shall be paid or delivered directly to the Bank for
application (in the case of cash) to or as collateral (in the case of non-cash
property or securities) for the payment or
2
<PAGE> 33
prepayment of the Senior Obligations until the Senior Obligations shall have
been paid in full or assigned and all documentation regarding the Senior
Obligations has been canceled and terminated or assigned.
(b) If any proceeding referred to in subsection (a) above is
commenced by or against the Borrower:
(i) the Bank is hereby irrevocably authorized and
empowered (in its own name or in the name of the Subordinated Creditor
or otherwise), but shall have no obligation, to demand, sue for,
collect and receive every payment or distribution referred to in
subsection (a) above and give acquittance therefor and to file claims
and proofs of claim and take such other action (including, without
limitation, voting the Subordinated Debt) as it may deem necessary or
advisable for the exercise or enforcement of any of the rights or
interests of the Bank hereunder; and
(ii) the Subordinated Creditor shall duly and
promptly take such action as the Bank reasonably may request (A) to
collect the Subordinated Debt for the account of the Bank and to file
appropriate claims or proofs of claim in respect of the Subordinated
Debt, (B) to execute and deliver to the Bank such powers of attorney,
assignments, or other instruments as it may request in order to enable
it to enforce any and all claims with respect to, and any security
interests and other liens securing payment of, the Subordinated Debt,
and (C) to collect and receive any and all payments or distributions
which may be payable or deliverable upon or with respect to the
Subordinated Debt.
(c) All payments or distributions upon or with respect to the
Subordinated Debt which are received by the Subordinated Creditor contrary to
the provisions of this Agreement shall be received in trust for the benefit of
the Bank, shall be segregated from other funds and property held by the
Subordinated Creditor and shall be forthwith paid over to the Bank in the same
form as so received (with any necessary endorsement) to be applied (in the case
of cash) to or held as collateral (in the case of non-cash property or
securities) for the payment or prepayment of the Senior Obligations in
accordance with their terms.
(d) The Bank is hereby authorized to demand specific
performance of this Agreement, whether or not the Borrower shall have complied
with any of the provisions hereof applicable to it, at any time when the
Subordinated Creditor shall have failed to comply with any of the provisions of
this Agreement applicable to it. The Subordinated Creditor hereby irrevocably
waives any defense based on the adequacy of a remedy at law, which might be
asserted as a bar to such remedy of specific performance.
(e) In the event that amounts received by the Bank in payment
of the Senior Obligations are subsequently required to be repaid to the
Borrower or otherwise forfeited or refunded to a receiver, trustee, bankruptcy
estate or otherwise, or the Bank agrees to repay any such amounts to the
Borrower as part of a good faith compromise settlement of pending or threatened
claims, and the Subordinated Creditor has received any payment on the
Subordinated
3
<PAGE> 34
Debt in accordance with the priorities established hereunder, (i) the Senior
Obligations shall be reinstated to the extent of any such repayment and shall
be senior in right of priority and payment to the Subordinated Debt and (ii)
the Subordinated Creditor shall pay over to the Bank all amounts received in
payment of the Subordinated Debt, up to the amount of any deficiency in payment
in full of the Senior Obligations as a result of such repayment to the
Borrower.
SECTION 5. No Commencement of Any Proceeding. The Subordinated
Creditor agrees that, so long as any of the Senior Obligations shall remain
unpaid, it will not commence, or join with any creditor other than the Bank in
commencing, any proceeding referred to in SECTION 4(A).
SECTION 6. Rights of Subrogation. The Borrower and the Subordinated
Creditor agree that no payment or distribution to the Bank pursuant to the
provisions of this Agreement shall entitle the Subordinated Creditor to
exercise any rights of subrogation in respect thereof until the Senior
Obligations shall have been finally paid or assigned in full and all
documentation regarding the Senior Obligations has been canceled and terminated
or assigned, at which point the Subordinated Creditor's rights of subrogation
shall automatically be restored.
SECTION 7. Further Assurances. The Subordinated Creditor and the
Borrower will, at any time and from time to time, promptly execute and deliver
all further instruments and documents, and take all further action, that may be
necessary or desirable, or that the Bank may request, in order to protect any
right or interest granted or purported to be granted hereby or to enable the
Bank to exercise and enforce its rights and remedies hereunder.
SECTION 8. No Change in or Disposition of Subordinated Debt. The
Subordinated Creditor will not without the consent of the Bank:
(a) cancel or otherwise discharge any of the Subordinated Debt
(except upon payment in full thereof paid to the Bank as contemplated by
SECTION 4) or subordinate any of the Subordinated Debt to any indebtedness of
the Borrower other than the Senior Obligations;
(b) Sell, assign, pledge, encumber or otherwise dispose of any
of the Subordinated Debt unless such sale, assignment, pledge, encumbrance or
disposition is made expressly subject to this Agreement; or
(c) Permit the terms of any of the Subordinated Debt to be
changed, convert the Subordinated Debt to equity or receive any guarantees of
the Subordinated Debt so as to have an adverse effect upon the rights or
interests of the Bank hereunder.
SECTION 9. Senior Obligations Hereunder Not Affected. All rights and
interests of the Bank hereunder, and all agreements and obligations of the
Subordinated Creditor under this Agreement, shall remain in full force and
effect irrespective of:
4
<PAGE> 35
(i) any lack of validity or enforceability of the Note or any
other agreement or instrument relating to or evidencing credit or financial
accommodations provided by the Bank to the Borrower;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Senior Obligations, or any other
amendment, restructure, forbearance or waiver of or any consent to departure
from any agreement or instrument relating to or evidencing credit provided by
the Bank to the Borrower;
(iii) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Senior Obligations; or
(iv) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Borrower or a Subordinated
Creditor.
This is a continuing agreement of subordination and shall continue to be
effective and binding on the Subordinated Creditor until all Senior Obligations
and extensions or renewals thereof shall have been fully discharged.
SECTION 10. Waiver; Liquidation of Certain Collateral. The
Subordinated Creditor hereby waives promptness, diligence, notice of acceptance
and any other notice with respect to any of the Senior Obligations and this
Agreement and any requirement that the Bank protect, secure, perfect or insure
any security interest or lien or any property subject thereto or exhaust any
right or take any action against the Borrower or any other person or entity or
any collateral.
SECTION 11. Amendments, Etc. No amendment or waiver of any provision
of this Agreement nor consent to any departure by the Subordinated Creditor
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Bank, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 12. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing and delivered by U.S.
Mail, postage prepaid, return receipt requested or by hand delivery, to the
following addresses:
As to the Subordinated Creditor:
American Telecasting, Inc.
5575 Tech Center Drive, Suite 300
Colorado Springs, Colorado 80919
Attention: President
Telecopy Number (719) 260-5010
5
<PAGE> 36
As to the Borrower:
Fresno MMDS Associates
c/o American Telecasting, Inc.
5575 Tech Center Drive, Suite 300
Colorado Springs, Colorado 80919
Attention: Mr. Terry J. Holmes
Telecopy Number (719) 260-5010
As to the Bank:
First Union National Bank of North Carolina
One First Union Center TW-19
Charlotte, North Carolina 28288-0735
Attention: Specialized Industries/Communications
Telecopy Number: (704) 374-4092
or such other address as shall be designated by such party in a written notice
to the other party complying as to delivery with the terms of this Section.
All such notices shall be deemed to have been validly served, given or
delivered three (3) days after deposit in the United States mails or upon
delivery by hand.
SECTION 13. No Waiver; Remedies. No failure on the part of the Bank
to exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; 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 remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 14. Continuing Agreement. This Agreement is a continuing
agreement and shall (i) remain in full force and effect until the Senior
Obligations shall have been finally paid in full or assigned by the Bank and
all documentation regarding the Senior Obligations has been canceled and
terminated or assigned by the Bank; (ii) be binding upon the Subordinated
Creditor and its successors, transferees and assigns; and (iii) inure to the
benefit of and be enforceable by the Bank and its legal successors.
SECTION 15. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of North Carolina without
regard to principles of conflicts of laws nor domicile of the parties.
SECTION 16. Captions. The captions or headings in this Agreement are
for convenience only and are not to affect the interpretation or construction
of this Agreement.
6
<PAGE> 37
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first set forth above.
SUBORDINATED CREDITOR:
AMERICAN TELECASTING, INC.
By /s/ ROBERT D. HOSTETLER
------------------------------------------
Name: ROBERT D. HOSTETLER
Title: PRESIDENT & CEO
BORROWER:
FRESNO MMDS ASSOCIATES (SEAL)
By /s/ TERRY J. HOLMES
-------------------------------------
Name: TERRY J. HOLMES
Title: MANAGING DIRECTOR
7
<PAGE> 38
ASSIGNMENT, ACCEPTANCE AND INTERCREDITOR AGREEMENT
THIS ASSIGNMENT, ACCEPTANCE AND INTERCREDITOR AGREEMENT (this
"Assignment" or "Agreement") is dated as of July 18, 1996, and is made by and
among First Union National Bank of North Carolina (the "Assignor," the "Bank"
and a "Lender"), American Telecasting, Inc. (the "Assignee"), First Union
National Bank of North Carolina as Agent (in such capacity, the "Agent"), and
Fresno MMDS Associates (the "Borrower") with reference to that Amended and
Restated Revolving Credit Agreement dated as of September 30, 1994 (the "Credit
Agreement"), between the Assignor and the Borrower, amended as of June 30,
1996, by that First Amendment to Amended and Restated Revolving Credit
Agreement and Reaffirmation of Guaranties and Collateral Assignments of General
Partner Interest (the "First Amendment") (the Credit Agreement and the First
Amendment, and all other and further amendments of the Credit Agreement are
herein collectively referred to as the "Credit Agreement") (the Assignee and
the Assignor, together with any other assignees of the interest of the Assignor
as provided for herein and in the Credit Agreement who agree to be bound as
"Lenders" under the terms of this Agreement and become parties hereto are
referred to herein collectively as the "Lenders"). Capitalized terms used
herein and not otherwise defined herein shall have the meanings assigned to
them in the Credit Agreement.
W I T N E S S E T H :
WHEREAS, the Assignor is the Bank under the Credit Agreement, pursuant
to which the Bank has made Revolving Credit Loans to the Borrower as provided
in the Credit Agreement;
WHEREAS, the Credit Agreement allows the Bank to assign to any Person
all or any part of the Loans or the Note and all or any part of its rights
thereunder and under the Collateral Documents;
WHEREAS, the Bank proposes to assign to the Assignee the "Assigned
Interests" (as defined below); and
WHEREAS, the Lenders desire to appoint from among their number an
Agent to act as specified herein and in the Credit Agreement and the Collateral
Documents, and to set forth the duties and responsibilities of each of the
Lenders as to the other Lenders;
NOW, THEREFORE, for and in consideration of the mutual promises and
covenants contained in this Agreement, the parties hereby agree as follows:
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:
1. Assignment. (a) Effective as of the Effective Date set forth
below, the Assignor hereby sells and assigns, without recourse, to the
Assignee, and the Assignee hereby purchases and assumes, without recourse or
warranty except as set forth herein and in the provisions of the
<PAGE> 39
Credit Agreement incorporated herein, from the Assignor, the Assigned Interests
(as defined below). The "Assigned Interests" shall mean and consist of the
respective interests set forth on SCHEDULE 1 attached hereto in the Revolving
Credit Facility (as defined below) as of the Effective Date, together with any
amount of unpaid interest accrued on the assigned Loans to the Effective Date
and set forth on SCHEDULE 1 and any amount of Fees accrued to the Effective
Date for the account of the Assignor and set forth on SCHEDULE 1. The
"Revolving Credit Facility" shall mean and consist of the Revolving Credit
Commitment, Revolving Credit Loans and participations in the Letter of Credit
and disbursements under the Letter of Credit; it shall also mean and consist of
the Note unless and until the Borrower executes and delivers new promissory
notes to the Assignor and the Assignee reflective of their respective
interests, and the Assignee shall be deemed to be a holder of the Note to the
extent of its Assigned Interests.
(b) All amounts payable to the Assignor hereunder shall be paid in
U.S. Dollars by transfer of federal funds to the Assignor, ABA No. 053000219,
Account Name GL, Account No. 4659060000191, Attention: Hilda Weathers,
Reference: Fresno MMDS Associates.
2. Acceptance. From and after the Effective Date, (a) the
Assignee shall be a party to and be bound by the provisions of the Credit
Agreement and, to the extent of the Assigned Interests, have the rights and
obligations of the "Bank" thereunder and under the Collateral Documents (the
defined term "Bank" as used in the Credit Agreement and the Collateral
Documents shall hereafter mean and include collectively the "Lenders" as
defined herein to the extent of their Assigned Interests and the Assignor to
the extent of its retained interests) and (b) the Assignor shall, to the extent
of the Assigned Interests, relinquish its rights and be released from its
obligations under the Credit Agreement and Collateral Documents.
3. Loans. (a) Each Loan shall be made by the Lenders ratably in
accordance with their portion of the Revolving Credit Commitment; provided,
however, that the failure of any Lender to make any Loan shall not in itself
relieve any other Lender of its obligation to lend (it being understood,
however, that no Lender shall be responsible for the failure of any other
Lender to make any Loan required to be made by such other Lender). Each Lender
agrees that in computing such Lender's portion of any Loan to be made
hereunder, the Agent may, in its discretion, round each Lender's percentage of
such Loan to the next higher or lower whole dollar amount.
(b) The Agent shall promptly advise the Lenders of any notice given
pursuant to Section 2.01 of the Credit Agreement of the Borrower's request for
a Revolving Credit Loan and of each Lender's portion of the requested
borrowing. Each Lender shall make a Loan in the amount of its pro rata portion
on the proposed date thereof by wire transfer of immediately available funds to
the Agent in Charlotte, North Carolina, not later than 3:00 p.m., Charlotte
time.
(c) The Agent will promptly notify each Lender of a Letter of
Credit disbursement and, in the case of each Lender, its pro rata share (based
on such Lender's portion of the Revolving Credit Commitment) of such Letter of
Credit disbursement. Not later than 2:00 p.m., Charlotte time, on such date,
each Lender shall make available its pro rata share of such Letter
2
<PAGE> 40
of Credit Disbursement, in Federal or other funds immediately available in
Charlotte, to the Agent at its address set forth in the Credit Agreement, and
the Agent will promptly make such funds available to the Assignor. The Agent
will promptly remit to each Lender that shall have made such funds available
its pro rata share of any amounts subsequently received by the Agent from the
Borrower in respect of such Letter of Credit disbursement.
(d) Unless the Agent shall have received notice from a Lender
prior to the date of any Loan, or prior to the time of any required payment by
such Lender in respect of a Letter of Credit disbursement, that such Lender
will not make available to the Agent such Lender's portion of such Loan or
payment, the Agent may assume that such Lender has made such portion available
to the Agent on the date of such Loan or payment as provided above, and the
Agent may, in reliance upon such assumption, make available to the Borrower on
such date a corresponding amount. If and to the extent that such Lender shall
not have made such portion available to the Agent, such Lender and the Borrower
severally agree to repay to the Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date such amount
is made available to the Borrower until the date such amount is repaid to the
Agent at the Default Rate. If such Lender shall repay to the Agent such
corresponding amount in respect of a Loan, such amount shall constitute a
portion of such Lender's Assigned Interests for purposes of this Agreement.
4. Payments and Distributions. (a) The Commitment Fee and
interest are payable by the Borrower in respect of the Assigned Interests as
provided in the Credit Agreement. Such Commitment Fee and interest shall be
payable to the Assignee only to the extent such Commitment Fee and interest, as
applicable, constitute part of the Assigned Interests or accrue after the
Effective Date. The Travel and Administration Fee shall not constitute part of
the Assigned Interests and shall be retained by the Agent.
(b) Notwithstanding anything to the contrary contained in this
Assignment, if and when the Assignor receives or collects any payment of fees
or interest which is payable to the Assignee pursuant to paragraph (a) above,
the Assignor shall promptly distribute such payment to the Assignee.
(c) Notwithstanding anything to the contrary contained in this
Assignment, if and when the Assignee receives or collects any payment of fees
or interest which is payable to the Assignor pursuant to Paragraph (a) above,
the Assignee shall promptly distribute such payment to the Assignor.
5. Appointment of Agent. The Lenders hereby appoint First Union
National Bank of North Carolina ("First Union") as Agent to act as specified
herein and in the Credit Agreement and the Collateral Documents. Each Lender
hereby irrevocably authorizes the Agent to take such action on the Lender's
behalf under the provisions of this Assignment, the Credit Agreement, the
Collateral Documents and any other instruments and agreements referred to
herein or therein and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically delegated to or required of the
Agent by the terms hereof or thereof and such other powers as
3
<PAGE> 41
are reasonably incidental thereto. Once First Union is no longer the Agent or
a Lender hereunder, American Telecasting, Inc. ("ATI") shall have the right
either to serve as the Agent or to appoint the successor Agent.
6. Nature of Duties. The Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement, the Credit
Agreement and the Collateral Documents. Neither the Agent nor any of its
officers, directors, employees or agents shall be liable to any of the Lenders
for any action taken or omitted by them as such hereunder or under the Credit
Agreement or any Collateral Document or in connection herewith or therewith,
unless resulting from their gross negligence or willful misconduct. The duties
of the Agent shall be mechanical and administrative in nature; the Agent shall
not, by reason of this Agreement, the Credit Agreement or any Collateral
Document, have a fiduciary relationship in respect of any Lender; and nothing
in this Agreement, the Credit Agreement or any Collateral Document, expressed
or implied, shall impose upon the Agent any duties, obligations or liabilities
in respect of this Agreement, the Credit Agreement or any Collateral Document
except as expressly set forth herein or therein.
7. Delegation of Duties. (a) In case of litigation relating to
this Agreement, the Credit Agreement or any Collateral Document, and in
particular in case of the enforcement thereof upon an Event of Default, or in
case the Agent deems that by reason of any present or future law of any
jurisdiction it may not exercise any of the powers, rights or remedies herein
or therein granted to the Agent or take any other action which may be desirable
or necessary in connection therewith, the Agent, with the written consent of
the Lenders then holding more than sixty percent (60%) of the aggregate
principal amount then outstanding on the Note (except as provided below, the
"Required Lenders"), may appoint an additional individual or institution as an
additional agent, in which event each and every remedy, power, right, claim,
demand, cause of action, immunity, interest and lien expressed or intended by
this Agreement, the Credit Agreement or the Collateral Documents to be
exercised by or vested or conveyed to the Agent with respect thereto shall be
exercisable by and vest in such additional agent, but only to the extent
necessary to enable such additional agent to exercise such powers, rights and
remedies, and every covenant and obligation necessary to the exercise thereof
by such additional agent shall run to and be enforceable by either of them.
Provided, however, so long as First Union National Bank of North Carolina, or
its legal successors ("First Union"), is the Agent or a Lender hereunder, then
the definition of "Required Lenders" for all purposes of this Agreement shall
mean solely First Union. Provided, further, once First Union is no longer the
Agent or a Lender hereunder, then so long as ATI or its legal successors is the
Agent or a Lender hereunder, then the definition of "Required Lenders" for all
purposes of this Agreement shall mean solely ATI.
(b) Should any conveyance or instrument in writing from the Lenders
be required by any additional agent so appointed by the Agent for more fully
confirming to it such rights, powers, duties and obligations, any and all such
conveyances and instruments shall, on the reasonable request of the Agent, be
executed, acknowledged and delivered by the Lenders. In case any such
additional agent or a successor shall die, dissolve, liquidate, become
incapable of acting, resign or be removed, all the rights, powers, duties and
obligations of such additional agent, so far as
4
<PAGE> 42
permitted by law, shall vest in and be exercised by the Agent until the
appointment of a successor to such additional agent. Any such additional agent
appointed by the Agent pursuant to this SECTION 7(B) may be removed by the
Agent at any time, in which case all powers, rights and remedies vested in such
additional agent shall again vest in the Agent as if no such appointment of
additional agent had been made.
(c) The Agent may execute any of its duties under this Agreement, the
Credit Agreement or any of the Collateral Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact that it selects
with reasonable care.
8. Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default,
unless the Agent has received written notice from the Borrower or a Lender
describing such Default or Event of Default and stating that such notice is a
"notice of default." Each Lender shall promptly give the Agent and each other
Lender such a notice upon its actual knowledge of a Default or an Event of
Default. In the event that the Agent receives such a notice from a Person
other than a Lender, the Agent shall give notice thereof to the Lenders.
9. Administration; Lack of Reliance on the Agent. (a) Each
Lender expressly acknowledges that neither the Agent nor any of its Affiliates
nor any officer, director, employee, agent or attorney-in-fact of any of them
has made any representation or warranty to it and that no act by the Agent
hereinafter taken, including any review of the affairs of the Borrower, shall
be deemed to constitute any representation or warranty by the Agent to any
Lender.
(b) Each Lender represents to the Agent and the other Lenders that
it has, independently and without reliance upon the Agent and the other Lenders
and based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Borrower and made its own decision to enter into the Credit Agreement and
extend credit to the Borrower thereunder. Each Lender also represents that it
will, independently and without reliance upon the Agent and the other Lenders
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under the Credit Agreement, and to make such
investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of the Borrower.
(c) Except for notices, reports and other documents expressly
required to be furnished to the Lenders by the Agent hereunder, the Agent shall
have no duty or responsibility, either initially or on a continuing basis, to
provide any Lender with any credit, financial or other information concerning
the business, prospects, operations, property, financial and other condition or
creditworthiness of the Borrower or any other Person that may come into the
possession of the
5
<PAGE> 43
Agent or any of its officers, directors, employees, agents, attorneys-in-fact
or Affiliates, whether before the making of the Loans or at any time or times
thereafter.
(d) The Agent shall not be responsible to any Lender for any
recitals, statements, information, representations or warranties in the Credit
Agreement or in any Collateral Document or in any document, certificate or
other writing delivered in connection therewith or for the execution,
collectability, priority or sufficiency of the Credit Agreement or any
Collateral Document or the financial condition of the Borrower or any other
Person, or be required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of the Credit
Agreement or any Collateral Document, or the financial condition of the
Borrower or any other Person or the existence or possible existence of any
Default or Event of Default.
10. Certain Rights of the Agent. If the Agent shall request
instructions from the Lenders or the Required Lenders, as applicable, with
respect to any act or action (including failure to act) in connection with this
Agreement, the Credit Agreement or any Collateral Document, the Agent shall be
entitled to refrain from such act or taking such action unless and until the
Agent shall have received instructions from the Lenders or the Required
Lenders, as applicable; and the Agent shall incur no liability to any Person by
reason of so refraining. The Agent shall be fully justified in failing or
refusing to take any action hereunder, under the Credit Agreement or under any
Collateral Document (i) if such action would, in the opinion of the Agent, as
the case may be, be contrary to law or the terms of this Agreement, the Credit
Agreement or the Collateral Documents; (ii) if it shall not receive such advice
or concurrence of the Lenders or the Required Lenders as it deems appropriate;
or (iii) if it shall not first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it
by reason of taking or continuing to take any such action. Without limiting
the foregoing, no Lender shall have any right of action whatsoever against the
Agent as a result of the Agent's acting or refraining from acting hereunder,
under the Credit Agreement or under any Collateral Document in accordance with
the instructions of the Lenders or the Required Lenders, as the case may be.
11. Reliance by Agent. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution,
notice, statement, consent, certificate, telex, teletype, or telecopier
message, order or other documentary, teletransmission or telephone message
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person. The Agent may consult with legal counsel (including
counsel for the Borrower, if not unreasonable under the circumstances),
independent public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
12. Indemnification of Agent. Each Lender shall reimburse and
indemnify the Agent, in accordance with the ratio of (x) the respective
principal amount of the Loans then outstanding to such Lender to (y) the
outstanding aggregate principal amount of the Loans then outstanding to all of
the Lenders (each Lender's "Pro Rata Share"), from and against any and all
liabilities,
6
<PAGE> 44
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including reasonable attorneys' fees and expenses) or disbursements
of any kind or nature whatsoever which may at any time (including at any time
following the repayment of the Loans) be imposed on, incurred by or asserted
against the Agent in performing its duties hereunder, under the Credit
Agreement or under any Collateral Document or in any way relating to or arising
out of this Agreement, the Credit Agreement or any Collateral Document or the
transactions contemplated hereby or thereby or any action taken or omitted by
the Agent under or in connection with any of the foregoing; provided, however,
that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements finally determined by a court of competent
jurisdiction and not subject to any appeal, to be the result of the Agent's
gross negligence or willful misconduct.
13. The Agent in its Individual Capacity. With respect to the
Note issued to it, the Agent shall have the same rights and powers as any other
Lender or holder of the Note or any notes issued in replacement for the Note or
any portion thereof and may exercise the same as though it were not performing
the agency duties specified herein; and the term "Lenders," "Required Lenders,"
"holder of the Note" or any similar terms shall, unless the context clearly
otherwise indicates, include the Agent in its individual capacity. The Agent
may accept deposits from, lend money to, issue letters of credit for the
account of and generally engage in any kind of banking, trust, financial
advisory or other business with the Borrower or any Affiliate of the Borrower
as if it were not the Agent performing the duties specified herein.
14. Assignment of Interests in Loan. This Agreement shall be
binding upon and inure to the benefit of the Agent, the Lenders and their
respective successors and permitted assigns. Unless other-wise provided in the
Credit Agreement, any Lender may transfer its pro rata interest in the Note and
the Credit Agreement and the other Collateral Documents, provided that the
transferee has agreed in writing to be bound by the terms of this Agreement as
a "Lender," and provided that the Agent shall the right to approve any proposed
transferee in its sole reasonable discretion. The Agent may deem and treat
each of the Lenders as the owner of its pro rata interest therein for all
purposes hereof unless and until a written notice of the assignment or transfer
thereof, as the case may be, shall have been filed with the Agent, signed by
such assignor or transferor and in form satisfactory to the Agent. Any
request, authority or consent of any Person or entity who, at the time of
making such request or giving such authority or consent, is the owner of such
interest shall be conclusive and binding on any subsequent, transferee or
assignee, as the case may be, of such interest.
15. Successor Agent. The Agent may resign as Agent hereunder and
under the Credit Agreement and the Collateral Documents at any time by giving
twenty (20) Business Days' prior written notice to the Borrower and the
Lenders. The Agent may be removed, with or without cause, by the Required
Lenders at any time by giving twenty (20) Business Days' prior written notice
to the Borrower, the Agent and the other Lenders. Such resignation or removal,
as the case may be, shall take effect upon the appointment of a successor Agent
as provided herein below. Upon any such notice of resignation or removal, as
the case may be, the Required Lenders shall appoint from among the Lenders a
successor Agent hereunder. If no successor
7
<PAGE> 45
Agent is appointed prior to the expiration of the notice period for the
resignation of the Agent, the Agent may appoint, after consulting with the
Lenders, a successor Agent from among the Lenders. Upon the written acceptance
of any appointment as Agent by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations under this Agreement, the Credit Agreement and
the Collateral Documents. After any retiring Agent's resignation or removal,
as the case may be, as Agent, the provisions of this Agreement shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent. The resignation or removal of the Agent shall not in any way affect the
former Agent's status as a Lender hereunder or under the Credit Agreement.
16. Reimbursement. Each of the Lenders agrees to promptly
reimburse the Agent in an amount equal to such Lender's Pro Rata Share of any
expenses incurred by the Agent, including reasonable attorneys' fees, in
connection with the preparation, administration, modification, or enforcement
(whether through negotiations, legal proceedings or otherwise) of this
Agreement, the Credit Agreement, any Collateral Document, or any document
contemplated by or referred to herein, to the extent the Agent is not
reimbursed for any such expenses by the Borrower within ten (10) Business Days
after demand by the Agent. If any amounts so paid to the Agent by the Lenders
are subsequently paid to the Agent by or on behalf of the Borrower, the Agent
shall promptly upon its receipt of any such amounts distribute the same to the
Lenders in the same proportion as such amounts were originally paid by the
Lenders to the Agent.
17. Waiver of Default. Upon the Agent's obtaining actual
knowledge of an Event of Default, the Agent shall notify the Lenders of the
existence and the nature of such Event of Default and shall poll the Lenders to
determine whether such Event of Default should be waived. The Agent shall be
authorized to waive an Event of Default on behalf of the Lenders and shall
waive such Event of Default if directed to do so by the Required Lenders in
writing. The Agent shall promptly commence such enforcement proceedings and
shall exercise such of its other rights and remedies under this Agreement, the
Credit Agreement, the Collateral Documents and applicable law as it deems
appropriate (or as directed by the Required Lenders) if the Agent is so
directed in writing by the Required Lenders. Unless so directed in writing as
described in the preceding sentence, it is agreed by the Lenders and the Agent
that the Agent shall not commence enforcement proceedings or exercise any of
such rights and remedies. Upon commencement of enforcement proceedings or the
exercise of any such rights and remedies, the Required Lenders may direct the
Agent to take action lawfully available to the Agent under the Credit Agreement
and the Collateral Documents but, unless the Agent shall first be indemnified
to its satisfaction by the Lenders requesting or acquiescing in any such action
for any liability and expense that might result therefrom, the Agent shall not
be required to, and shall be fully justified in failing or refusing to, take
any action that the Agent in good faith believes is or may be contrary to law
or to the terms of the Credit Agreement or the Collateral Documents or may
subject the Agent to liability. Notwithstanding the foregoing, unless and
until the Agent shall have received such directions, the Agent may (but shall
not be obligated to) take such action, or refrain from taking such action, with
respect to a Default or Event of Default as it shall reasonably deem in the
best interests of the Lenders.
8
<PAGE> 46
18. Amendment of Documents. Except as otherwise specifically set
forth in the Credit Agreement, the Agent is authorized to consent to any
waiver, amendment or modification of this Agreement, the Credit Agreement or
any Collateral Document with the consent of the Required Lenders; provided,
however, that no such waiver, amendment or modification shall, without the
consent of all Lenders (i) forgive or release any of the Obligations or any
obligations of any Person now or hereafter primarily or contingently liable
with respect to the Obligations; (ii) extend the scheduled maturity of the Loan
or extend the time of payment of any of the Obligations; (iii) reduce the rate
of interest on the Loans or any fees relating to the Loans; (iv) change the
definition of the term "Required Lenders"; (v) amend, modify or waive any
provisions of this SECTION 18; (vi) consent to the assignment or transfer by
the Borrower of any of its rights and obligations under the Credit Agreement or
any obligations of any Person now or hereafter primarily or contingently liable
with respect to the Obligations; or (vii) change any provisions governing the
amounts or procedures for determining amounts to be disbursed to the Lenders
upon payment by the Borrower. No provision that affects the rights or duties
of the Agent under this Agreement, the Credit Agreement or any Collateral
Document may be amended without the prior written consent of the Agent.
19. Invalidated Payments. If any amounts distributed by the Agent
to a Lender are subsequently returned or repaid by the Agent to the Borrower or
the representative or successor in interest of the Borrower, whether by court
order or by settlement approved by the Lender in question, such Lender shall,
promptly upon its receipt of notice thereof from the Agent, pay the Agent such
amount. If any such amounts are recovered by the Agent from the Borrower or
the representative or successor in interest of the Borrower, the Agent shall
redistribute such amounts to the Lenders on the same basis as such amounts were
originally distributed. The obligations of the Lenders and the Agent under
this SECTION 19 shall survive the repayment of the Note and the termination of
the Credit Agreement and the Collateral Documents.
20. Effect of Lender's Noncompliance. The failure of any Lender
to perform any of its obligations under the Credit Agreement, this Agreement or
any of the Collateral Documents, including, without limitation, the failure of
a Lender to pay to the Agent any amounts due to the Agent, shall not relieve
any other Lender of its obligations under this Agreement, the Credit Agreement,
or any Collateral Document.
21. Agreement to Cooperate. Each Lender agrees to cooperate fully
with each other Lender, to the end that the terms and provisions of this
Agreement may be promptly and fully carried out. Each Lender also agrees, from
time to time, to execute and deliver any and all other agreements, documents or
instruments and to take such other actions, all as may be reasonably necessary
or desirable, to effectuate the terms, provisions and the intent of this
Agreement, the Credit Agreement and the Collateral Documents.
22. Independent Actions by Lenders. Each Lender agrees that it
shall not, unless specifically requested to do so by the Agent, commence or
cause to be commenced against the Borrower, any enforcement proceeding with
respect to the Loan.
9
<PAGE> 47
23. Adjustments. If, at any time or times hereafter, any Lender
shall receive a payment under the Credit Agreement or the Note (including,
without limitation any voluntary payment, realization upon security, exercise
of the right of set off or banker's lien, counterclaim or cross action,
enforcement of any right under the Credit Agreement or any of the Collateral
Documents, but not including payments by the Borrower to individual Lenders or
the Agent as payment or reimbursement for out-of-pocket expenses payable or
reimbursable by the Borrower under the Credit Agreement or the Collateral
Documents, and not including payments to First Union to which First Union is
entitled as a senior creditor under any subordination agreement with any other
Lender), which, together with such payments received by the other Lenders (the
"total payment"), is in excess of such Lender's Pro Rata Share of the total
payment, such Lender shall promptly purchase for cash, without recourse or
warranty from the other Lenders, such participations in the Loans made by the
other Lenders as shall be necessary to cause such purchasing Lender to share
the excess payment ratably with each of the other Lenders; provided, however,
that if all or any portion of such excess payment is thereafter recovered from
such purchasing Lender, such purchase of participations shall be rescinded and
the purchase price restored ratably to the extent of such recovery, but without
interest.
24. Indemnification of Lenders. Each Lender (but subject to any
subordination agreement between First Union and any other Lender) agrees to
indemnify each other Lender (to the extent not reimbursed by the Borrower),
ratably according to such Lender's Pro Rata Share, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by, or asserted against such other Lender in any
way relating to or arising out of any action taken or omitted by such Lender
under this Agreement, the Credit Agreement, or any Collateral Document at the
request or direction of the Agent, where the Agent, in making such request or
direction, was acting within the authority granted to the Agent in this
Agreement.
25. No Third-Party Beneficiary. This Agreement is for the benefit
of the Lenders, and neither the Borrower nor any Person other than the Lenders
and the Agent shall have any rights or remedies in connection with this
Agreement, or be entitled to raise as a defense or rely upon in any manner
whatsoever the failure of Agent or any Lender to comply with the provisions of
this Agreement.
26. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing and delivered as provided in the
Credit Agreement or on SCHEDULE 1 hereto as to additional Lenders.
27. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of North Carolina without
regard to principles of conflicts of laws.
28. Captions. The captions or headings in this Agreement are for
convenience only and are not to affect the interpretation or construction of
this Agreement.
10
<PAGE> 48
29. Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which taken together shall constitute but one and the
same document.
[remainder of page intentionally blank;
signatures begin on following page]
11
<PAGE> 49
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first set forth above.
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, as Assignor and as a Lender
BY: [ILLEGIBLE]
-------------------------------
TITLE: Senior Vice President
----------------------------
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, as Agent
BY: [ILLEGIBLE]
-------------------------------
TITLE: Senior Vice President
----------------------------
AMERICAN TELECASTING, INC., as Assignee
and as a Lender
BY: [ILLEGIBLE]
-------------------------------
TITLE: PRESIDENT AND CEO
----------------------------
FRESNO MMDS ASSOCIATES, as Borrower
BY: /s/ TERRY S. HOLMES
-------------------------------
TITLE: MANAGING DIRECTOR
----------------------------
12
<PAGE> 50
SCHEDULE 1
1. Date of Assignment: July 18, 1996
2. Legal Name of Assignor: First Union National Bank of North Carolina
3. Legal Name of Assignee: American Telecasting, Inc.
4. Assignee's Address and Telecopy Number for Notices: 5575 Tech Center
Dr., Suite 300, Colorado Springs, Co 80919; Telecopy (719) 260-5010
5. Effective Date of Assignment and Acceptance: July 18, 1996
------- -
6. Assigned Interests:
<TABLE>
<CAPTION>
PRINCIPAL PERCENTAGE OF
ASSIGNED COMMITMENT THEREUNDER
-------- REPRESENTED BY ASSIGNED INTEREST
--------------------------------
<S> <C> <C>
REVOLVING $ 1,500,000 17.751479289 %
FACILITY
ACCRUED $ -0-
AND UNPAID
INTEREST
ASSIGNED
(IF ANY)
FEES $ -0-
ASSIGNED
(IF ANY)
7. AGGREGATE ASSIGNMENT PAYMENT: $ 1,500,000
-------------
</TABLE>
<PAGE> 1
EXHIBIT 10.5
A G R E E M E N T
THIS AGREEMENT is entered into as of the __________day of July, 1996,
by and between FRESNO TELSAT, INC., an Indiana corporation ("Telsat") and
AMERICAN TELECASTING, INC., a Delaware corporation ("ATI").
WHEREAS, Telsat and Fresno wireless Cable Television, Inc., a
Washington corporation ("Wireless"), a subsidiary of ATI, are the general
partners in Fresno MMDS Associates ("FMA") a general partnership;
WHEREAS, FMA and First Union National Bank of North Carolina (the
"Bank") are parties to an Amended and Restated Revolving Credit. Agreement
dated as of September 30, 1994 (the "Credit Agreement"), as amended _________,
1996 by that First Amendment to Amended and Restated Revolving Credit Agreement
and Reaffirmation of Guarantees and Collateral Assignments of General Partner
Interests (the "First Amendment") (the "Credit Agreement and the First
Amendment and all other and further amendments of the Credit Agreement are
herein collectively referred to as the "Credit Agreement") by and among FMA,
the Bank, Telsat and Wireless. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to them in the Credit
Agreement;
WHEREAS, the Bank has assigned to ATI certain of its interests under
the Credit Agreement and the Collateral Documents pursuant to an Assignment,
Acceptance and Intercreditor Agreement dated,___________ 1996 (the "Assignment
Agreement") by and among the Bank and ATI;
WHEREAS, ATI as an assignee of interests from the Bank will have
certain rights as a secured creditor against FMA in the event of a default
under the,Credit Agreement;
WHEREAS, FTI and ATI wish to limit the possible remedies available to
ATI as a secured creditor in the event the Bank no longer has any amounts due
to it under the Credit Agreement or the Collateral Documents;
NOW, THEREFORE,for and in consideration of the mutual promises and
covenants contained in this Agreement, the parties hereby agree as follows:
1. Except as set forth in Section 2, ATI, as an assignee of
interests of the Bank under the Credit Agreement and the Collateral Documents
shall have all the rights and remedies available to the Bank in such documents.
2. In the event that the Bank is no longer owed any amounts
pursuant to the Credit Agreement or the collateral Documents, whether as a
result of payment of such amounts or assignment of all of its interests to such
amounts, ATI agrees that in the event of a default under-the Credit Agreement
or the Collateral Documents,
<PAGE> 2
ATI in its role as a secured creditor will not retain collateral owned by FMA
or Telsat in satisfaction of the obligations owed to it under such documents
unless ATI has first provided written notice of such proposal to Telsat and
Telsat has failed to object to such proposal in writing within twenty-one (21)
days from the receipt of' the notification. In the absence of such a written
objection, ATI mav retain such collateral in satisfaction of the obligations
owed to it.
3. ATI agrees that, upon written request from Telsat, it will
assign to Telsat thirty-five percent (35%) of the interests which it acquires
from the Bank in the Credit Agreement and in the Collateral Documents, subject
to the requirements of the Assignment Agreement, for a consideration equal to
thirty-five percent (35%) of the costs incurred by ATI to acquire its
interests.
4. In the event that the Bank is no longer owed any amounts
pursuant to the Credit Agreement or the Collateral Documents, whether as a
result of payment of such amounts or assignment of all of its interests to such
amounts, ATI shall not institute or commence any proceedings or actions to
seize, sell or foreclose upon its interest in the collateral of FMA (which
interest ATI is or may acquire from the Bank under the Assignment Agreement)
unless and until a bonafide effort has been made for a period of at least one
hundred twenty (120) days to sell the entire business of FMA in a private sale
utilizing the services of a reputable, knowledgeable broker familiar with
wireless cable properties. Such one hundred twenty (120) day period shall
commence on the date potential purchasers are first provided with information
concerning the business of FMA in a form and content such as is usual and
customary in such transactions.
The requirements of this Paragraph 4 shall not apply, however,
in the event that both: (1) ATI no longer owns, directly or indirectly, a
majority equity interest in FMA and (2) Telsat was given the opportunity to
sell its equity interest in FMA on the same terms as ATI shall have sold or
disposed of all or any part of its interest in FMA in a transaction or
transactions which reduced ATI's equity interest in FMA to less than a majority
interest.
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first set forth above.
AMERICAN TELECASTING, INC.
By
-----------------------------------
Name
---------------------------------
Title
--------------------------------
FRESNO TELSAT, INC.
By /s/ WILLIAM A. MILLETT
-----------------------------------
Name WILLIAM A. MILLETT
---------------------------------
Title PRESIDENT
--------------------------------
<PAGE> 1
EXHIBIT 10.6
AMERICAN TELECASTING, INC,
1990 STOCK OPTION PROGRAM, AS AMENDED
(EFFECTIVE APRIL 25, 1996)
1. Purpose. The American Telecasting, Inc. 1990 Stock Option Program, as
amended (the "Plan") is intended to provide incentives which will attract and
retain highly competent persons as officers and key employees of American
Telecasting, Inc. (the "Company") and its subsidiaries by providing them
opportunities to acquire shares of Class A Common Stock of the Company pursuant
to the terms of this Plan.
2. Administration. The Plan will be administered by a committee (the
"Committee") of the Board of Directors of the Company comprised of two or more
members of the Board who qualify as disinterested persons within the meaning of
Securities and Exchange Commission Regulation Section 240.16b-3 or any
successor regulation. The determinations of the Committee shall be made in
accordance with their judgment as to the best interests of the Company and its
stockholders and in accordance with the purpose of the Plan.
3. Shares Reserved under the Plan. There is hereby reserved for issuance
under the Plan an aggregate of 1,525,000 shares of Class A Common Stock which
may be authorized but unissued or treasury shares. All of such shares may, but
need not, be issued pursuant to the exercise of Incentive Stock Options. The
maximum number of option shares which may be granted any optionee during the
term of this Plan after October 4, 1993 is 165,000 shares. If there is a
lapse, expiration, termination or cancellation of any option prior to the
issuance of shares thereunder, or if shares are issued upon the exercise of a
stock option and thereafter are reacquired by the Company pursuant to rights
reserved upon issuance thereof, those shares may again be used for new options
under this Plan. If, pursuant to Section 8 of the Plan, payment for shares
upon the exercise of an option is made in shares of Class A Common Stock, the
number of such shares delivered or certified to the Company in payment for the
exercise may be added back to the shares available for issuance under the Plan.
4. Participants. Participants will consist of such key employees
(including officers) of the Company or its subsidiaries as the committee in its
sole discretion determines to be responsible for the future growth and
profitability of the Company. Members of the Committee and other members of
the Board who are not employees of the Company may not participate in the Plan.
Designation of a participant in any year shall not require the Committee to
designate such person to receive a benefit in any other year or, once
designated, to receive the same type or amount of benefit as granted to the
participant in any year. The Committee shall consider such factors as it deems
pertinent in selecting participants and in determining the type and amount of
<PAGE> 2
their respective benefits.
5. Types of Benefits. Benefits under the Plan shall consist of (a)
Incentive Stock Options and (b) Non-qualified Stock Options, as hereinafter
described.
6. Incentive Stock Options. Incentive Stock Options shall consist of
stock options to purchase shares of Class A Common Stock at purchase prices not
less than 100% of the fair market value of the shares on the date the option is
granted. Incentive Stock Options will be exercisable not later than ten years
after they are granted. The aggregate fair market value (determined as of the
time the option is granted) of the shares of Class A Common Stock with respect
to which Incentive Stock Options are exercisable for the first time by a
participant during any calendar year (under all option plans of the Company and
its subsidiaries) shall not exceed $100,000.
7. Non-Qualified Stock Options. Non-qualified Stock Options shall consist
of stock options to purchase shares of Class A Common Stock at purchase prices
not less than 100% of the fair market value of the shares on the date the
option is granted. Non-qualified Stock Options will be exercisable not later
than ten years after the date they are granted.
8. Exercise of Options. Options may be exercised in whole or in part at
anytime during the option term by giving written notice of exercise to the
Company specifying the number of shares to be purchased and accompanied by
payment in full of the exercise price. As determined by the Committee at or
after grant, payment may also be made in the form of Class A Common Stock owned
by the participant for at least 6 months prior to exercise or by appropriate
certification of such ownership, in each case equal in value to the fair market
value of the Class A Common Stock on the date of exercise. In the discretion
of the Committee payment may also be made by delivering a properly executed
exercise notice to the Company together with a copy of irrevocable instructions
to a broker to deliver promptly to the Company the amount of sale proceeds
necessary to pay the exercise price. To facilitate such broker transactions,
the Company may enter into agreements for coordinated procedures with one or
more brokerage firms.
9. Termination of Employment. The Committee shall determine at the time
of the grant of an option the period during which the option may be exercised
following the optionee's termination of employment with the company and its
subsidiaries. However, the period of exercise following termination may not be
greater than 24 months in the case retirement, 12 months in the case of death
and 6 months in the case of any other termination of employment.
-2-
<PAGE> 3
10. Adjustment Provisions.
(a) If the Company shall at any time change the number of issued shares of
Class A Common Stock without new consideration to the Company (such as by stock
dividend, stock split, or similar transaction) the total number of shares
reserved for issuance under this Plan and the number of shares covered by each
outstanding option shall be adjusted so that the aggregate consideration
payable-to the Company shall not be changed.
(b) In the case of any reorganization, sale, merger, consolidation or
combination of the Company with or into another corporation other than a
reorganization, sale, merger, consolidation or combination in which the Company
is the continuing corporation and which does not result in the outstanding
Class A Common Stock being converted or exchanged for different securities,
cash or other property, or any combination thereof (an "Acquisition"), any
participant to whom a stock option has been granted under the Plan shall have
the right (subject to the provisions of the Plan and any limitation applicable
to such option) thereafter and during the term of such option to receive upon
exercise thereof the Acquisition Consideration (as hereinafter defined)
receivable upon such Acquisition by a holder of the number of shares of Class
A Common Stock which might have been obtained upon exercise of such option or
portion thereof, as the case may be immediately prior to such Acquisition. The
term "Acquisition Consideration" shall mean the kind and amount of shares of
the surviving or new corporation, cash, securities, evidence of indebtedness,
other property or any combination thereof, receivable in respect of one share
of Class A Common Stock of the Company upon consummation of an Acquisition.
11. Non-transferability. Each benefit granted under the Plan shall not be
transferable otherwise than by will or the taws of descent and distribution and
shall be exercisable during the participant's lifetime only by the participant.
In the event of the death of a participant, exercise shall be made only by the
executor or administrator of the estate of the deceased participant or the
person or persons to whom the deceased participant's rights under the benefit
shall pass by will or the laws of descent and distribution.
12. Other Provisions. The award of any benefit under the Plan may also be
subject to any other provisions (whether or not applicable to the benefit
awarded to any other participant) which the Committee determines appropriate,
including, without limitation, provisions for the installment purchase of Class
A Common Stock under stock options, restrictions on resale or other
dispositions, or understandings or conditions as to the participant's
employment in addition to those specifically provided for under the Plan.
-3-
<PAGE> 4
13. Taxes. The Company shall be entitled to withhold the amount of any
tax attributable to any shares deliverable under the Plan after giving the
person entitled to receive the shares notice as far in advance as practicable
and the Company may defer making delivery as to any benefit if any such tax is
payable until indemnified to its satisfaction. The Committee may, in its
discretion and subject to rules which it may adopt, permit a participant to pay
all or a portion of the taxes arising in connection with the exercise of a
Non-qualified Stock Option by electing to have the Company withhold shares of
Class A Common Stock from the shares otherwise deliverable to the participant,
having a fair market value equal to the amount to be withheld. The fair market
value of any fractional shares remaining after payment of withholding taxes
shall be paid to the participant in cash.
14. Duration, Amendment and Termination. No option shall be granted more
than ten years after the date of the amendment of this Plan; provided, however,
that the terms and conditions applicable to any option granted within such
period may thereafter be amended or modified by mutual agreement between the
Company and the participant or such other persons as may then have an interest
therein. The Board of Directors may amend the Plan from time to time or
terminate the Plan at any time; provided that no amendment may be made which
would cause this plan to lose its exemption under Securities and Exchange
Commission Regulation Section 240.16b-3. In addition, no action authorized by
this section shall reduce the amount of any existing benefit or change the
terms and conditions thereof without the participant's consent.
15. Stockholder Approval. The Plan was amended for the first time by the
Board of Directors on October 4, 1993, and such amendment was approved by the
stockholders on October 4, 1993. The Plan was amended for the second time by
the Board of Directors on March 5, 1996, and such amendment was approved by the
stockholders on April 25, 1996.
-4-
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