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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 March 31, 1997
-------------------------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number :
0-23008
- --------------------------------------------------------------------------------
AMERICAN TELECASTING, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 54-1486988
- ---------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5575 Tech Center Drive,
Colorado Springs, CO 80919
- ---------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (719) 260 - 5533
----------------------------
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
--- ---
As of May 12, 1997, 25,743,607 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, 1996 and March 31, 1997 ......................... 3
Condensed Consolidated Statements of Operations -
Three Months Ended March 31, 1996 and 1997 ................... 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1996 and 1997 ................... 5
Notes to Condensed Consolidated Financial Statements .......... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ........................... 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings .............................................. 16
Items 2-4. Not applicable
Item 5. Other Information .............................................. 17
Item 6. Exhibits and Reports on Form 8-K ............................... 18
</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, March 31,
1996 1997
------------ ------------
(Unaudited)
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ASSETS
Current Assets:
Cash and cash equivalents ...................................... $ 18,476 $ 14,125
Trade accounts receivable, net ................................. 1,867 1,352
Prepaid expenses and other current assets ...................... 2,790 3,721
------------ ------------
Total current assets ............................................ 23,133 19,198
Property and equipment, net ..................................... 99,271 91,147
Deferred license and leased license acquisition
costs, net ..................................................... 139,537 139,432
Goodwill, net ................................................... 15,163 14,946
Deferred financing costs, net ................................... 4,704 5,761
Other assets, net ............................................... 1,764 1,496
------------ ------------
Total assets ............................................ $ 283,572 $ 271,980
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses .......................... $ 15,022 $ 13,947
Current portion of long-term obligations ....................... 5,852 8,636
Customer deposits .............................................. 397 370
------------ ------------
Total current liabilities ....................................... 21,271 22,953
Deferred income taxes ........................................... 2,834 2,834
2004 Notes ...................................................... 135,484 140,561
2005 Notes ...................................................... 116,480 120,840
Other long-term obligations, net of current portion ............. 4,390 4,131
------------ ------------
Total liabilities ....................................... 280,459 291,319
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred Stock, $.01 par value; 2,500,000 shares
authorized; none issued and outstanding ........................ -- --
Series B Convertible Preferred Stock, $.01 par value; 500,000
shares authorized; 250,000 shares issued; 110,000 shares
and none outstanding, respectively ............................. 13,237 --
Class A Common Stock, $.01 par value; 30,000,000 shares
authorized; 20,784,238 and 25,743,607 shares issued and
outstanding, respectively ...................................... 208 257
Class B Common Stock, $.01 par value; 10,000,000 shares
authorized; no shares issued and outstanding ................... -- --
Additional paid-in capital ...................................... 176,091 189,410
Common Stock warrants outstanding ............................... 10,129 10,129
Accumulated deficit ............................................. (196,552) (219,135)
------------ ------------
Total stockholders' equity (deficit) .................... 3,113 (19,339)
------------ ------------
Total liabilities and stockholders' equity (deficit) .... $ 283,572 $ 271,980
============ ============
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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AMERICAN TELECASTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1996 1997
------------ ------------
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Revenues:
Service and other ............................. $ 15,055 $ 15,760
Installation .................................. 368 260
------------ ------------
Total Revenues ................................. $ 15,423 $ 16,020
Costs and Expenses:
Operating ..................................... 8,818 9,826
Marketing ..................................... 2,055 864
General and administrative .................... 5,011 5,076
Depreciation and amortization ................. 9,958 12,833
------------ ------------
Total costs and expenses ....................... 25,842 28,599
------------ ------------
Loss from operations ........................... (10,419) (12,579)
Interest expense ............................... (8,829) (10,331)
Interest income ................................ 350 184
Other income, net .............................. 44 143
------------ ------------
Loss before income tax benefit ................. (18,854) (22,583)
Income tax benefits ............................ 105 --
------------ ------------
Net loss ....................................... $ (18,749) $ (22,583)
============ ============
Net loss per share ............................. (1.13) (.92)
Weighted average number of shares outstanding .. 16,585,638 24,586,313
============ ============
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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AMERICAN TELECASTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1996 1997
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ....................................................... $(18,749) $(22,583)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ................................. 9,958 12,833
Deferred income taxes ......................................... (105) --
Amortization of debt discount and deferred financing costs .... 8,361 9,667
Bond appreciation rights and warrants ......................... -- 301
Minority interest income ...................................... -- (127)
Other ......................................................... 4 142
Changes in operating assets and liabilities ................... (4,054) (1,509)
-------- --------
Net cash used in operating activities ........................ (4,585) (1,276)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ............................ (8,648) (2,318)
Additions to deferred license and leased license
acquisition costs ............................................. (1,655) (561)
Proceeds from disposition of assets ........................... -- 55
Net cash used in acquisitions .................................. -- (1,293)
-------- --------
Net cash used in investing activities ........................ (10,303) (4,117)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock, net of
stock issuance costs .......................................... 185 --
Borrowings under credit facilities ............................. 200 6,155
Principal payments on revolving credit facilities .............. -- (2,950)
Increase in deferred financing costs ........................... -- (1,285)
Contributions by minority interest holder ...................... -- 462
Principal payments on notes payable ............................ (621) (1,068)
Principal payments on capital lease obligations ................ (194) (272)
-------- --------
Net cash (used in) provided by financing activities ........... (430) 1,042
-------- --------
Net decrease in cash and cash equivalents ...................... (15,318) (4,351)
Cash and cash equivalents, beginning of period ................. 32,514 18,476
-------- --------
Cash and cash equivalents, end of period ....................... $ 17,196 $ 14,125
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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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 March 31, 1997, the Company owned and operated 38
wireless cable systems located throughout the United States (the
"Developed Markets"). The Company also has significant wireless cable
(microwave) frequency interests in 16 other U.S. markets (the "Undeveloped
Markets").
Risks and Other Important Factors
Since inception, the Company has focused principally on developing
wireless cable systems to provide multiple channel television programming.
During 1996, the Company's business strategy evolved to adapt to the
significant regulatory and technological changes that have occurred
recently in the telecommunications industry and to the Company's capital
constraints. Management now believes that the most promising use of the
Company's wireless assets may be to provide a variety of digital wireless
services, instead of the traditional analog-based technology utilized by
the Company to date. Such digital wireless services could include digital
video (i.e., subscription television), high-speed Internet access and
telephony services. While the Company has begun planning and testing of
these digital wireless services, it has not yet introduced any of these
services. The Company's ability to introduce these services on a
commercial basis will depend on a number of factors, including the
availability of sufficient capital, the success of the Company's
development efforts, competitive factors (such as the introduction of new
technologies or the entry of competitors with significantly greater
resources than the Company), the level of consumer demand for such
services, the availability of appropriate transmission and reception
equipment on satisfactory terms, and the Company's ability to obtain the
necessary regulatory changes and approvals. The Company expects that the
market for any such additional services will be extremely competitive.
Since early 1996, the Company has taken certain actions aimed at
reducing its costs and conserving its capital. Such measures include
reductions in the size of the Company's workforce and decreases in capital
expenditures and discretionary expenses. During 1997, the Company does not
plan to make the capital expenditures necessary to add enough subscribers
to replace those subscribers who choose to stop receiving the Company's
service. Moreover, at this time, the Company does not generally intend to
further develop any of its Undeveloped Markets using analog technology.
Thus, the Company anticipates that its analog customer base will decrease
somewhat during 1997. As the Company's analog subscriber base decreases,
its revenues are expected to decrease unless and until it is able to
successfully introduce other revenue-producing wireless services, such as
digital video, high-speed Internet access and telephony. The Company
currently expects that its existing cash and investment balances, proceeds
from the Credit Facility (see Note 3) and cash generated from operations
will be sufficient to finance its operations during 1997. Thereafter,
additional financing will be required. If the Company's capital resources
are not sufficient to finance its operations, either in 1997 or
thereafter, the Company will be required to curtail its operations and
development plans, which curtailment could involve, among other things, a
complete cessation of new customer additions. Any proceeds received by the
Company from the BellSouth Transaction (See - Note 5) will provide further
resources to help finance the Company's operations and development plans.
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The Company will require significant additional capital to fully
implement its digital strategy. To meet such capital requirements, the
Company is pursuing opportunities to enter into strategic relationships or
transactions with other providers of telecommunications services. Such
relationships or transactions could involve, among other things, joint
ventures, sales or exchanges of stock or assets, or loans to or
investments in the Company by strategic partners. Except for the BellSouth
Transaction, the Company has not reached any agreements or understandings
with respect to such relationships or transactions and there can be no
assurance that any such agreements or understandings will be reached.
Interest payments on the Company's Senior Discount Notes due 2004
(the "2004 Notes") and the Company's 14.5% Senior Discount Notes due 2005
(the "2005 Notes") will commence on December 15, 1999 and February 15,
2001, respectively. Interest payments in 1999, 2000, and 2001 are expected
to be approximately $14.3 million, $28.5 million and $59.1 million,
respectively.
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
three-month period ended March 31, 1997 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1997.
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, 1996.
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 March 31,
1997, cash equivalents principally consisted of money market funds,
commercial paper, federal government/agency debt securities, and other
short-term, investment-grade, interest-bearing securities. The carrying
amounts reported in the balance sheet for cash and cash equivalents
approximate the fair values of those assets.
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
antidilutive.
In 1997, the Financial Accounting Standards Board released SFAS No.
128, "Earnings Per Share." SFAS No. 128 requires dual presentation of
basic and diluted earnings per share on the face of the income statement
for all periods presented. Basic earnings per share excludes dilution and
is computed by dividing income available to common stockholders by the
weighted-average number of common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity. Diluted
earnings per share is computed similarly to fully diluted earnings per
share pursuant to Accounting Principles Bulletin No. 15. SFAS No. 128 is
effective for reporting periods ending after December 15, 1997, and when
adopted, it will require restatement of prior years' earnings per share.
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Since the effect of outstanding options is antidilutive, they have
been excluded from the Company's computation of net loss per share.
Accordingly, management does not believe that SFAS No. 128 will have an
impact upon historical net loss per share as reported.
3. DEBT
Long-term debt at March 31, 1997 consisted of the following (in
thousands):
<TABLE>
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2004 Notes ........................................................ $140,561
2005 Notes ........................................................ 120,840
Credit facility ................................................... 6,456
Notes payable ..................................................... 3,385
Capital leases .................................................... 1,687
--------
Total ........................................................... 272,929
Less current portion ............................................ 8,636
--------
Long-term debt .................................................. $264,293
========
</TABLE>
On February 26, 1997, the Company entered into a twelve month
$17,000,000 credit facility (the "Credit Facility") with a bank. The loan
must be repaid earlier than the specified termination date and certain
mandatory prepayments must be made with proceeds from debt issuances or
certain asset sales, including the BellSouth Transaction. The Credit
Facility bears interest at a rate of 12.5%, which rate will increase by
0.50% per quarter. Borrowings under the Credit Facility are secured by a
security interest in favor of the bank in substantially all of the assets
of ATI and its subsidiaries. The Credit Facility is further secured by a
pledge of the stock of substantially all of ATI's subsidiaries as well as
a pledge of the note due to ATI from its Fresno subsidiary under the
Fresno Facility (as defined herein).
At or prior to closing, the Company paid the bank commitment and
additional fees totaling $680,000 and reimbursed the bank for its
out-of-pocket expenses incurred in conjunction with the making of the loan.
These payments are included in deferred financing costs and are amortized
over the life of the loan. During the term of the Credit Facility, the
Company is required to pay to the bank a commitment commission on the
unused loan balance at the annual rate of 0.50%. The Company has deposited
$1.0 million in escrow to satisfy certain interest obligations under the
Credit Facility, which amount is classified as a prepaid expense and other
current asset in the accompanying balance sheet as of March 31, 1997.
At closing, the Company also delivered 4,500 bond appreciation rights
("BARs") and an option to exercise 141,667 debt warrants or 141,667 equity
warrants. The debt warrants give the holder the right to increase the
principal amount of the loan by $6.00 per warrant, or the right to require
the Company to purchase the debt warrant for $6.00 per warrant. The debt
warrants are exercisable or puttable during a five-day period beginning on
the earlier of one year from the date of issuance, or notice that payment
in full of the Credit Facility has occurred or will occur shortly. The
equity warrants give the holder the right to purchase up to 141,667 shares
of the Company's Class A Common Stock for a price of $3.281 per share.
Pursuant to the option agreement relating to the warrants, the equity
warrants become exercisable only to the extent that the holder elects not
to exercise or put the debt warrants or, if the holder elects to put the
debt warrants to the Company, the Company fails to make payment therefor
within the time required. The Company valued the option at $6.00 per
warrant and is accreting this obligation through interest expense to the
expected maturity of the debt.
Amounts payable in connection with the BARs are based upon the
appreciation in price of $4.5 million face value of the Company's 2004
Notes. The BARs are exercisable after the earlier of June 15, 1999 or the
occurrence of an Event of Default under the 2004 Notes. The payment due
upon exercise of each BAR is equal to the market price of the 2004 Notes
on the closing date less $290. The net value of the BARs is payable to
holders of the BARs in cash. Included in the accompanying balance sheet as
of March 31, 1997 is $180,000 and $121,000 for amounts accrued pursuant to
the BARs and warrants, respectively.
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During 1996, Fresno MMDS Associates, which operates the Company's
Fresno, Visalia and Merced wireless cable systems (the "Fresno
Partnership") maintained a revolving credit facility (the "Fresno
Facility") with a bank that provided for borrowings for the Fresno,
Visalia and Merced systems. As of March 31, 1997, no amounts were
available for borrowing under the Fresno Facility. The Fresno Facility was
required to be fully assigned from the bank to ATI by March 31, 1997. As
of March 31, 1997, all amounts due to the bank under the Fresno Facility
were repaid by ATI with proceeds from the Credit Facility.
4. SERIES B CONVERTIBLE PREFERRED STOCK
During 1996, the Company completed private placements of a total of
250,000 shares of Series B Convertible Preferred Stock, resulting in total
net proceeds to the Company of $23.8 million. During 1996, 140,000 shares
of Series B Convertible Preferred Stock were converted into a total of
2,273,785 shares of the Company's Class A Common Stock with conversion
prices ranging from $4.33 to $7.87. During the first quarter of 1997, the
remaining 110,000 shares of Series B Convertible Preferred Stock were
converted into a total of 4,959,369 shares of the Company's Class A Common
Stock at conversion prices ranging from $2.10 to $4.37.
Each share of Series B Preferred Stock was convertible, at the option
of the holder, into that number of shares of Common Stock determined by
dividing (a) the sum of (i) the original issuance price for each such
share of Series B Preferred Stock plus (ii) the amount of all accrued but
unpaid dividends on each share of Series B Preferred Stock so converted,
by (b) the Conversion Price (as defined herein) in effect at the time of
conversion. The "Conversion Price" at any given time was equal to 80% of
the prevailing market price of the Class A Common Stock, provided that the
Conversion Price could not exceed $12.50 or be less than $2.00.
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 a director and officer of the Company, the
Company, and other named and unnamed defendants. The complaint seeks
compensatory damages and exemplary damages against all defendants, costs,
and other relief. In the course of pre-trial discovery, the plaintiff
estimated its damage claim at approximately $200 million. 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 continues to believe, 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.
On January 12, 1996, Videotron (Bay Area) Inc. filed a complaint
against ATI in the Circuit Court of the Thirteenth Judicial Circuit in and
for Hillsborough County, Florida. The Complaint alleges that ATI has
caused certain entities from which ATI leases channels and airtime for its
Bradenton and Lakeland, Florida wireless cable markets (the "ATI Lessors")
to actively oppose Videotron's FCC applications to increase broadcast
power in Videotron's Tampa, Florida wireless cable system (the "Tampa
market") in violation of a Non-Interference Agreement between Videotron
and ATI (the "Non-Interference Agreement"). The Complaint seeks injunctive
relief directing ATI to perform all acts, services and undertakings
required under the Non-Interference Agreement including, but not limited
to, using reasonable best efforts to cause the ATI Lessors not to object
to Videotron's attempt to increase broadcast power in the Tampa market and
to enter into certain non-interference agreements with respect thereto. In
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the alternative, the Complaint seeks damages for breach of the
Non-Interference Agreement (in an unspecified amount but exceeding
$15,000). Recently, in responding to written interrogatories, Videotron
estimated its damages to be approximately $113.5 million. Although the
ultimate outcome of this litigation cannot be predicted at this time,
management of ATI believes, based upon its review of the Complaint and
after consultation with counsel, that resolution of this matter will not
have a material adverse impact on the Company's financial position or
future results of operations.
In addition, the Company is occasionally a party to legal actions
arising in the ordinary course of its business, the ultimate resolution of
which cannot be ascertained at this time. However, in the opinion of
management, resolution of such matters will not have a material adverse
effect on the Company.
BTA Auction
The Company was involved in the FCC's bidding process for wireless
cable channel authorizations in certain basic trading areas ("BTAs"),
which was completed in March 1996. 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 $9.3
million has been paid. The remaining amount (approximately $800,000) 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 in
1997.
BellSouth Transaction
On March 18, 1997, the Company entered into a definitive agreement
(the "BellSouth Agreement") with BellSouth Corporation and BellSouth
Wireless Cable, Inc. ("BellSouth Wireless") which provides for the sale of
all of the Company's Florida and Louisville, Kentucky wireless cable
assets (the "Southeastern Assets") to BellSouth Wireless. The Southeastern
Assets include operating wireless cable systems in Orlando, Lakeland,
Jacksonville, Daytona Beach and Ft. Myers, Florida and Louisville,
Kentucky and wireless cable channel rights in Bradenton, Naples, Sebring
and Miami, Florida. The purchase price for all of the Southeastern Assets
will range from $67.9 million to $103.2 million, depending upon the number
of wireless cable channel rights that are ultimately transferred to
BellSouth Wireless. The BellSouth Agreement contains customary conditions
to closing, including the expiration of applicable waiting periods under
the federal antitrust laws and the satisfaction of all applicable
regulatory requirements. There can be no assurance that all of such
conditions will be satisfied or that the sale of assets to BellSouth
Wireless (the "BellSouth Transaction") will be consummated.
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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 the Company's plans for future
development and operation of its business, 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: a lack of
sufficient capital to finance the Company's business plan on terms satisfactory
to the Company; pricing pressures which could affect demand for the Company's
wireless communications services; changes in labor, equipment and capital
costs; the unavailability of digital compression technology and equipment at
reasonable prices; the Company's inability to incorporate digital compression
technology into certain of its subscription television systems in a cost
efficient manner; the Company's inability to develop and implement new services
such as high-speed Internet access and telephony; the Company's inability to
obtain the necessary authorizations from the FCC for such new services;
competitive factors, such as the introduction of new technologies and
competitors into the wireless communications business; a failure by the Company
to attract strategic partners; 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.
INTRODUCTION
During 1996, the Company's business strategy evolved to adapt to the
significant regulatory and technological changes that have occurred recently in
the telecommunications industry and to the Company's capital constraints.
Management now believes that the most promising use of the Company's wireless
assets may be to provide a variety of digital wireless services, instead of the
traditional analog-based technology utilized by the Company to date. Such
digital wireless services could include digital video (i.e., subscription
television), high-speed Internet access and telephony services. A successful
deployment of such services might include the full bundle of broad band (i.e.,
video and high-speed Internet) and narrow band (i.e., telephony) services.
While the Company has begun planning and testing of these wireless services, it
has not yet introduced any of these services. The Company's ability to
introduce these services will depend on a number of factors, including the
availability of sufficient capital, competitive factors (such as the
introduction of new technologies or the entry of competitors with significantly
greater resources than the Company), the level of consumer demand for such
services, and the Company's ability to obtain the necessary regulatory changes
and approvals.
During 1997, the Company intends to continue to operate its Developed
Markets principally as an analog wireless cable business. However, because of
its current financial condition and its revised business strategy, the Company
does not plan to make the capital expenditures necessary to add enough new
subscribers to replace those subscribers that choose to stop receiving the
Company's service. Moreover, at this time, the Company does not generally
intend to further develop any of its Undeveloped Markets using analog
technology. Thus, the Company anticipates that its analog customer base will
decrease somewhat during 1997. As the Company's analog subscriber base
decreases, its revenues are expected to decrease unless and until it is able to
successfully introduce other revenue-producing wireless services, such as
digital video, high-speed Internet access and telephony.
Since early 1996, the Company has taken certain actions aimed at reducing
its costs and conserving its capital, including reductions in the size of the
Company's workforce and decreases in capital expenditures and discretionary
expenses. As a result, the Company currently expects that its existing cash and
investment balances, proceeds from the Credit Facility, and cash generated from
operations will be sufficient to finance its operations during 1997. Thereafter,
additional financing will be required. If the Company's capital resources are
not sufficient to finance its operations, either in 1997 or thereafter, the
Company will be required to curtail its operations and development plans, which
curtailment could involve, among other things, a complete cessation of new
customer additions. In March 1997, the Company entered into an agreement to sell
certain assets to BellSouth Wireless with anticipated proceeds to the Company
ranging from $67.9 million to $103.2 million,
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depending on the number of wireless cable channel rights that are ultimately
transferred to BellSouth Wireless. Any such proceeds will provide further
resources to help finance the Company's operations and development plans. In
addition, the Company is pursuing strategic relationships or transactions with
other providers of telecommunications services. One of the Company's primary
objectives in pursuing such relationships and transactions is to facilitate
access to additional capital.
Operating cash flow is a commonly used measure of performance in the
wireless cable industry. However, operating cash flow does not purport to
represent cash used by operating activities and should not be considered in
isolation or as a substitute for measures of performance prepared in accordance
with generally accepted accounting principles.
Management believes that period-to-period comparisons of the Company's
financial results to date are not necessarily meaningful and should not be
relied upon as an indication of future performance due to the changes in the
Company's business strategy during the periods presented, as discussed more
fully above.
LIQUIDITY AND CAPITAL RESOURCES
SOURCES AND USES OF FUNDS
The Company has experienced negative cash flows from operations in each
year since its formation, and although certain of the Company's more
established systems currently generate positive cash flow from operations, the
Company expects to continue to experience negative consolidated free cash flow
from operations. 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.
On March 18, 1997, the Company entered into the BellSouth Agreement which
provides for the sale of all of the Company's Southeastern Assets to BellSouth
Wireless. The Southeastern Assets include operating wireless cable systems in
Orlando, Lakeland, Jacksonville, Daytona Beach and Ft. Myers, Florida and
Louisville, Kentucky and wireless cable channel rights in Bradenton, Naples,
Sebring and Miami, Florida. The purchase price for all of the Southeastern
Assets will range from $67.9 million to $103.2 million, depending upon the
number of wireless cable channel rights that are ultimately transferred to
BellSouth Wireless. The BellSouth Agreement contains customary conditions to
closing, including the expiration of applicable waiting periods under the
federal antitrust laws and the satisfaction of all applicable regulatory
requirements. There can be no assurance that all of such conditions will be
satisfied or that the BellSouth Transaction will be consummated.
The Company expects that its principal capital expenditure requirements
for 1997 will relate to replacement of customer churn, launch of high-speed
Internet services in one or more markets and the purchase of transmission
equipment for new channels. The Company intends to finance these capital
expenditures from existing cash and investment balances, borrowings under the
Credit Facility, and cash generated from system operations. The commercial
introduction by the Company of digital services, such as digital video,
high-speed Internet access and telephony, would require substantial additional
capital expenditures. While the Company may use a portion of the proceeds from
the BellSouth Transaction to acquire assets for the development of such digital
services, management does not expect that such proceeds will be sufficient to
fully implement its digital strategies for video, Internet access and telephony
throughout its markets. The Company is pursuing relationships or transactions
with other providers of telecommunications services to facilitate access to
additional capital, among other things. The Company's ability to fully
implement its revised business strategy will depend on its ability to attract
sufficient additional capital through relationships with strategic partners or
otherwise. There can be no assurance that sufficient capital will be available
on terms satisfactory to the Company, or at all.
To date, the Company's operations have required 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 wireless cable channel rights and
systems, and (v) investments in, and maintenance of, vehicles and
12
<PAGE> 13
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 three month periods ended March
31, 1997 and 1996 were approximately $2.3 million, and $8.6 million,
respectively. Such expenditures were primarily for the installation of
equipment in new subscribers' homes for the three months ended March 31, 1997
and for the construction and expansion of the Company's wireless cable systems
and the installation of equipment in new subscribers' homes for the three
months ended March 31, 1996.
In addition, the Company was involved in the FCC's bidding process for
wireless cable channel authorizations in certain BTAs, which was completed in
March 1996. 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 $9.3 million has been paid. The remaining
amount (approximately $800,000) 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 in 1997.
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 $3.5 million
had been paid as of March 31, 1997). 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 the date of acquisition. 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. Closing of the Cincinnati Acquisition is currently
scheduled for July 10, 1997. There can be no assurance that the Cincinnati
Acquisition will be consummated.
On February 26, 1997, the Company entered into a twelve month $17,000,000
credit facility (the Credit Facility) with a bank. The loan must be repaid
earlier than the specified termination date and certain mandatory prepayments
must be made with proceeds from debt issuances or certain asset sales,
including the BellSouth Transaction. The Credit Facility bears interest at a
rate of 12.5%, which rate will increase by 0.50% per quarter. Borrowings under
the Credit Facility are secured by a security interest in favor of the bank in
substantially all of the assets of ATI and its subsidiaries. The Credit
Facility is further secured by a pledge of the stock of substantially all of
ATI's subsidiaries as well as a pledge of the note due to ATI from its Fresno
subsidiary under the Fresno Facility.
At or prior to closing, the Company paid the bank commitment and additional
fees totaling $680,000 and reimbursed the bank for its out-of-pocket expenses
incurred in conjunction with the making of the loan. During the term of the
Credit Facility, the Company is required to pay to the bank a commitment
commission on the unused loan balance at the annual rate of 0.50%.
At closing, the Company also delivered 4,500 bond appreciation rights
(BARs) and an option to exercise 141,667 debt warrants or 141,667 equity
warrants. The debt warrants give the holder the right to increase the principal
amount of the loan by $6.00 per warrant, or the right to require the Company to
purchase the debt warrant for $6.00 per warrant. The debt warrants are
exercisable or puttable during a five-day period beginning on the earlier of
one year from the date of issuance, or notice that payment in full of the
Credit Facility has occurred or will occur shortly. The equity warrants give
the holder the right to purchase up to 141,667 shares of the Company's Class A
Common Stock for a price of $3.281 per share. Pursuant to the option agreement
relating to the warrants, the equity warrants become exercisable only to the
extent that the holder elects not to exercise or put the debt warrants or, if
the holder elects to put the debt warrants to the Company, the Company fails to
make payment therefor within the time required.
Amounts payable in connection with the BARs are based upon the
appreciation in price of $4.5 million face value of the Company's 2004 Notes.
The BARs are exercisable after the earlier of June 15, 1999 or the occurrence
of an Event of Default under the 2004 Notes. The payment due upon exercise of
each BAR is equal to the market price of the 2004 Notes on the closing date
less $290. The net value of the BARs is payable to holders of the BARs in cash.
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<PAGE> 14
During 1996, the Fresno Partnership maintained a revolving credit facility
(the Fresno Facility) with a bank that provided for borrowings for the Fresno,
Visalia and Merced systems. As of March 31, 1997, no amounts were available for
borrowing under the Fresno Facility. The Fresno Facility was required to be
fully assigned from the bank to ATI by March 31, 1997. As of March 31, 1997, all
amounts due to the bank under the Fresno Facility were repaid by ATI with
proceeds from the Credit Facility.
OTHER LIQUIDITY AND CAPITAL RESOURCES REQUIREMENTS AND LIMITATIONS
As a result of certain limitations contained in the Indentures (the
"Indentures") relating to the 2004 Notes and the 2005 Notes, the Company's
total borrowing capacity outside the 2004 Notes and the 2005 Notes is currently
limited to $17.5 million and its additional borrowing capacity was estimated at
approximately $6.0 million as of March 31, 1997. The Company expects that it
will utilize the Credit Facility to borrow all amounts that it is permitted to
borrow under the terms of the Indentures. Thus, the Company does not expect to
be able to raise additional debt capital in the foreseeable future. Moreover,
under current market conditions, the Company does not expect to be able to
raise additional capital by issuing equity securities. In the future, the
issuance of moderate amounts of certain types of new equity could, under
Section 382 of the Internal Revenue Code, require the Company to pay income
taxes on gains received on asset sales because of the Company's inability to
fully offset such gains against net operating loss carryforwards.
The Company has taken certain actions aimed at reducing its costs and
conserving its capital, including reductions in the size of its workforce and
decreases in capital expenditures and discretionary expenses. As a result of
these actions, the Company currently expects that its existing cash and
investment balances, proceeds from the Credit Facility, and cash generated from
operations will be sufficient to finance its operations during 1997.
Thereafter, additional financing will be required. If the Company's capital
resources are not sufficient to finance its operations, either in 1997 or
thereafter, the Company will be required to curtail its operations and
development plans, which curtailment could involve, among other things, a
complete cessation of new customer additions. If the BellSouth Transaction or
any strategic relationships or transactions with other providers of
telecommunications services are consummated, the proceeds therefrom will
provide further resources to help finance the Company's operations and
development plans.
Historically, the Company has generated operating and net losses on a
consolidated basis and can be expected to do so for the foreseeable future. Such
losses may increase as the Company's analog subscriber base declines, unless and
until the Company is able to successfully introduce other revenue-producing
wireless services. As a result of its history of net losses, the Company
currently has a negative tangible net worth and total liabilities exceeded total
assets as of March 31, 1997. By letter dated May 1, 1997, The Nasdaq Stock
Market, Inc. ("Nasdaq") informed the Company that, based upon a review of the
Company's Form 10-K for the fiscal year ended December 31, 1996, the Company no
longer meets the net tangible asset requirement for continued listing on the
Nasdaq National Market. The Nasdaq rules require, among other things, that the
Company have net tangible assets (as defined by Nasdaq as total assets less
liabilities and goodwill) of at least $4,000,000. At December 31, 1996, the
Company's net tangible assets, as defined, were negative $12,050,000, and at
March 31, 1997, the Company's net tangible assets, as defined, were negative
$34,285,000. Pursuant to the letter received by the Company from Nasdaq, the
Company is required to provide by May 15, 1997, its proposal to achieve
compliance with Nasdaq National Market listing requirements. If Nasdaq
determines that the Company's proposal does not warrant continued listing of the
Company's Class A Common Stock on the Nasdaq National Market, then Nasdaq may
commence a delisting process. This delisting could result in a decline in the
trading market for the Company's Class A Common Stock, which could potentially
depress the Company's stock and bond prices, among other consequences. The
Company expects to submit its proposal to Nasdaq by May 15, 1997, requesting
continuation of National Market listing status. However, there can be no
assurance that the Company will be able to provide either a compliance plan, or
justification for a waiver, that is acceptable to Nasdaq.
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<PAGE> 15
RESULTS OF OPERATIONS
Three Months Ended March 31, 1997 Compared to Three Months Ended March 31, 1996
Service revenues increased $705,000, or 4.7%, for the three months ended
March 31, 1997 to $15.8 million, as compared to $15.1 million during the same
period of 1996. This increase resulted primarily from subscription rate
increases implemented during the first quarter of 1997, offset in part by fewer
subscribers to the Company's wireless cable systems as of March 31, 1997. The
number of subscribers to the Company's wireless cable systems decreased to
173,600 at March 31, 1997, compared to 179,800 at December 31, 1996 (174,900
and 173,700 at March 31, 1996 and December 31, 1995, respectively).
On a "same system" basis (comparing systems that were operational for all
of each of the three month periods ended March 31, 1997 and 1996), service
revenues increased $500,000, or 3.4%, to $15.1 million, as compared to $14.6
million for the three-month period ended March 31, 1996. Same systems during
these periods totaled 36 systems. The Company's Portland, Oregon and Anchorage,
Alaska systems were omitted from same system revenues for both periods as these
systems were launched in the second quarter of 1996. Revenue from the St. James,
Minnesota and Yankton, South Dakota systems were omitted from same system
revenues for both periods as these systems were sold by the Company during the
second and fourth quarters, respectively, of 1996. The average number of
subscribers in these same systems increased approximately 1.0% for the three
months ended March 31, 1997, as compared to the same period of 1996.
Installation revenues for the three months ended March 31, 1997 totaled
$260,000, compared to $368,000 during the same period of 1996. The decrease in
installation revenues of $108,000, or 29.3%, was primarily the net result of
fewer subscriber installations as a portion of normal customer churn was not
replaced. Installation rates increased, on average, 33% for the quarter ended
March 31, 1997, as compared to installation rates during the same period of
1996. The number of installations completed during the three months ended March
31, 1997 decreased approximately 61.1% as compared to the same period during
1996. Installation rates vary widely by system based upon competitive
conditions. The Company occasionally reduces installation charges as part of
selected promotional campaigns.
Operating expenses, principally programming, site costs and other direct
expenses, aggregated $9.8 million (or 61.3% of total revenues) during the three
months ended March 31, 1997, compared to $8.8 million (or 57.2% of total
revenues) during the same period of 1996. The increase of $1.0 million was
primarily the result of increased programming rates for basic and premium
programming, and increased channel lease costs due to Consumer Price Index
adjustments.
Marketing and selling expenses totaled $864,000 (or 5% of total revenues)
during the three months ended March 31, 1997, compared to $2.1 million (or
13.3% of total revenues) during the same period of 1996. The decrease in such
expenses of $1.2 million was primarily due to headcount reductions which
resulted in reduced salaries and related sales commissions. Reduced advertising
also contributed to the reduction in marketing expenses.
The Company's loss from operations was $12.6 million during the
three-month period ended March 31, 1997, compared to $10.4 million during the
same period of 1996. The increase in the loss from operations of $2.2 million
resulted primarily from increased depreciation and amortization expense of $2.9
million. The increase in depreciation and amortization expense was due to a
revision in the useful lives of subscriber premise equipment from seven years
to three or four years made by the Company during the fourth quarter of 1996.
Interest expense increased $1.5 million during the quarter ended March 31,
1997 to $10.3 million, as compared to $8.8 million during the same period of
1996. The increase in interest expense primarily resulted from noncash interest
charges associated with the Company's 2004 Notes and 2005 Notes.
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<PAGE> 16
Interest expense also increased due to noncash interest charges associated with
the BARs and warrants recorded in connection with the Credit Facility.
The Company achieved earnings before interest, taxes, depreciation and
amortization of $254,000 for the three months ended March 31, 1997, as compared
to a loss before interest, taxes, depreciation and amortization of $461,000
during the same period of 1996.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously reported in the Company's Annual Report on Form 10-K for the
year ended December 31, 1996, on or about February 17, 1994, Fresno Telsat, Inc.
("FTI"), the 35% general partner of the Fresno Partnership, filed a Complaint in
the Superior Court of the State of California for the County of Monterey against
Robert D. Hostetler, Terry J. Holmes, the Company, and certain other named and
unnamed defendants. From 1989 through June 10, 1993, Mr. Hostetler was a member
of the Board of Directors and President of FTI. Mr. Hostetler and his wife
currently own 28% of the outstanding capital stock of FTI. Mr. Hostetler has
been employed by the Company since December 10, 1993 and became a Director of
the Company on March 22, 1994. In January 1996, Mr. Hostetler was appointed
President and Chief Executive Officer of the Company. From 1991 until June 1995,
Mr. Holmes was General Manager of the Fresno Partnership. He is currently
Managing Director of the Fresno Partnership. Mr. Holmes has been employed by the
Company since June 1995, and became Vice President--Operations of the Company in
January 1996. The Complaint alleges that, while he was a director and employee
of FTI, Mr. Hostetler engaged in wrongful conduct, including misappropriation of
corporate opportunity, fraud and unfair competition by exploiting business
opportunities that were the property of FTI. The Complaint also alleges that Mr.
Holmes engaged in a misappropriation of corporate opportunities belonging to
FTI. The Complaint further alleges that all defendants, including the Company,
participated in a conspiracy to misappropriate corporate opportunities belonging
to FTI and that the Company and the unnamed defendants engaged in wrongful
interference with fiduciary relationship by intentionally causing Mr. Hostetler
to breach his fiduciary duty to FTI and causing Mr. Hostetler to wrongfully
transfer FTI's corporate opportunities to the Company.
On August 28, 1996, ATI filed a Cross-Complaint (the "Cross-Complaint")
against FTI and certain of its officers and directors (the "Cross-Defendants").
The Cross-Complaint alleges that the Cross-Defendants have engaged in a
violation of Section 26-1-8-401 of the Indiana Code, conversion, conspiracy,
and breach of trust by failing to acknowledge and record ATI's ownership of
approximately 7% of FTI's capital stock purchased by ATI from a former
shareholder of FTI, and continuing to represent that FTI qualifies for
Subchapter S status under the Internal Revenue Code. The Cross-Complaint seeks
specific performance of the transfer of shares to ATI, compensatory damages,
punitive damages, an injunction against any further actions by the
Cross-Defendants in breach of trust or with the effect of dissipating and
diverting the property and assets of FTI, and the appointment of a receiver to
handle the affairs of FTI during the pendency of the FTI proceeding.
On or about February 24, 1997, the Company and Mr. Holmes each filed a
motion for summary judgment seeking dismissal of the claims in the Complaint
relating to an alleged conspiracy to misappropriate corporate opportunities of
FTI. On or about March 5, 1997, FTI filed a motion for leave to amend the
Complaint to add allegations that ATI aided and abetted Mr. Hostetler's
misappropriation of corporate opportunity and that all defendants wrongfully
interfered with FTI's prospective business opportunities. A hearing on the
motions to dismiss was held on April 25, 1997. The Court has not yet ruled on
these motions.
The Complaint seeks compensatory damages and exemplary damages against all
defendants, costs, an accounting, injunctive relief prohibiting Mr. Hostetler
from continuing to engage in unfair competition against FTI and prohibiting all
defendants from engaging in misappropriation of corporate opportunities
belonging to FTI, and the imposition of a
16
<PAGE> 17
constructive trust upon the corporate opportunities of FTI utilized in the
Company's initial public offering. While discovery has commenced in this
proceeding, no trial date has been scheduled. In the course of pre-trial
discovery, the plaintiff estimated its damage claim at approximately $200
million. Although the ultimate outcome of the litigation cannot be predicted at
this time, management continues to believe, based upon its review of the
Complaint and after consultation with counsel, that resolution of this matter
will not have a material adverse impact on the Company's financial position or
future results of operations.
In addition, the Company is occasionally a party to legal actions arising
in the ordinary course of its business, the ultimate resolution of which cannot
be ascertained at this time. However, in the opinion of management, resolution
of these matters will not have a material adverse effect on the Company.
ITEM 5. OTHER INFORMATION
On March 17, 1997, a consortium of wireless operators, including the
Company, petitioned the Federal Communications Commission ("FCC") to expand
two-way transmission of interactive services over wireless cable channels using
Multichannel Multipoint Distribution Services ("MMDS") and Instructional
Television Fixed Services ("ITFS") spectrum.
If the rulemaking is adopted by the FCC, wireless cable companies would be
able to offer an array of fixed, two-way wireless services, including two-way
high speed Internet and Intranet access, interactive educational products, and
interactive consumer services, such as video games and home shopping and
banking. Currently, MMDS companies must use almost all of their allocated
spectrum for downstream transmissions, and the current technical and processing
rules are not designed to handle applications for two-way services in an
efficient manner. While the FCC has recently granted permanent waivers for
two-way use of the spectrum, the proposed rules would standardize and
streamline the process. The FCC has acted quickly and accepted the proposed
rulemaking requests and the requests are currently open for public comment.
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<PAGE> 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10. Asset Purchase Agreement dated as of March 18, 1997 by and among
BellSouth Corporation, BellSouth Wireless Cable, Inc., American
Telecasting, Inc., American Telecasting of Central Florida, Inc.,
American Telecasting Development, Inc., American Telecasting of Fort
Myers, Inc., American Telecasting of Jacksonville, Inc., American
Telecasting of Louisville, Inc., and American Telecasting of Yuba
City, Inc.; related Option Agreement dated March 18, 1997, among
BellSouth Corporation, BellSouth Wireless Cable, Inc., American
Telecasting Development, Inc., and American Telecasting of Yuba City,
Inc.
11. Statement regarding computation of earnings per share.
27. Financial Data Schedule
(b) Reports on Form 8-K.
The following reports on Form 8-K were filed during the quarter ended
March 31, 1997:
(i) Current Report on Form 8-K dated January 13, 1997 to report, under
Item 5, that the Company had issued a press release announcing that
its letter of intent with CS Wireless Systems, Inc. had expired;
(ii) Current Report on Form 8-K dated February 26, 1997 to report, under
Item 5, that the Company had entered into a $17,000,000 Credit
Facility;
(iii) Current Report on Form 8-K dated March 18, 1997 to report, under Item
5, that the Company had entered into a definitive agreement with
BellSouth Corporation and BellSouth Wireless Cable, Inc. for the sale
of certain assets.
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<PAGE> 19
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: May 14, 1997 By: /s/ David K. Sentman
------------- ------------------------------------
David K. Sentman
Senior Vice President, Chief Financial
Officer and Treasurer
(Principal Financial Officer)
Date: May 14, 1997 By: /s/ Fred C. Pattin Jr.
------------- ------------------------------------
Fred C. Pattin Jr.
Controller
(Principal Accounting Officer)
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<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
10. Asset Purchase Agreement dated as of March 18, 1997 by and among
BellSouth Corporation, BellSouth Wireless Cable, Inc., American
Telecasting, Inc., American Telecasting of Central Florida, Inc.,
American Telecasting Development, Inc., American Telecasting of Fort
Myers, Inc., American Telecasting of Jacksonville, Inc., American
Telecasting of Louisville, Inc., and American Telecasting of Yuba
City, Inc.; related Option Agreement dated March 18, 1997, among
BellSouth Corporation, BellSouth Wireless Cable, Inc., American
Telecasting Development, Inc., and American Telecasting of Yuba City,
Inc.
11. Statement regarding computation of earnings per share.
27. Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10
[Execution Copy]
ASSET PURCHASE AGREEMENT
AMONG
BELLSOUTH CORPORATION,
BELLSOUTH WIRELESS CABLE, INC.,
AMERICAN TELECASTING, INC.,
AMERICAN TELECASTING OF CENTRAL FLORIDA, INC.,
AMERICAN TELECASTING DEVELOPMENT, INC.,
AMERICAN TELECASTING OF FORT MYERS, INC.,
AMERICAN TELECASTING OF JACKSONVILLE, INC.,
AMERICAN TELECASTING OF LOUISVILLE, INC.,
AND
AMERICAN TELECASTING OF YUBA CITY, INC.
Dated March 18, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Page
<S> <C> <C>
ARTICLE I
CERTAIN DEFINITIONS
Section 1.01 Acceptable Authorization . . . . . . . . . . . . . . 2
Section 1.02 Accounts . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.03 Additional Purchase Price . . . . . . . . . . . . . . 2
Section 1.04 Adjusted Purchase Price . . . . . . . . . . . . . . . 2
Section 1.05 Affiliate . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.06 Annual FCC Reports . . . . . . . . . . . . . . . . . 3
Section 1.07 Assets . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.08 Assignment and Assumption Agreement . . . . . . . . . 3
Section 1.09 Assumed Liabilities . . . . . . . . . . . . . . . . . 3
Section 1.10 ATI . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.11 Basic Subscriber . . . . . . . . . . . . . . . . . . 4
Section 1.12 BellSouth . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.13 BellSouth Material Adverse Effect . . . . . . . . . . 4
Section 1.14 BellSouth Sub . . . . . . . . . . . . . . . . . . . . 4
Section 1.15 Bill of Sale . . . . . . . . . . . . . . . . . . . . 4
Section 1.16 BTA . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.17 Business Day . . . . . . . . . . . . . . . . . . . . 4
Section 1.18 Cable Systems . . . . . . . . . . . . . . . . . . . . 4
Section 1.19 CARS . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.20 Capacity Lease . . . . . . . . . . . . . . . . . . . 4
Section 1.21 Channel . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.22 Closing . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.23 Closing Company Statement of Assets and
Assumed Liabilities . . . . . . . . . . . . . . . . . 5
Section 1.24 Closing Date . . . . . . . . . . . . . . . . . . . . 5
Section 1.25 Commercially Reasonable Best Efforts . . . . . . . . 5
Section 1.26 Communications Act. . . . . . . . . . . . . . . . . . 5
Section 1.27 Companies . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.28 Company Benefit Plans . . . . . . . . . . . . . . . . 5
Section 1.29 Company BTA Authorizations . . . . . . . . . . . . . 6
Section 1.30 Company Channel . . . . . . . . . . . . . . . . . . . 6
Section 1.31 Company Environmental Permits . . . . . . . . . . . . 6
Section 1.32 Company ERISA Plan . . . . . . . . . . . . . . . . . 6
Section 1.33 Company FCC Authorizations . . . . . . . . . . . . . 6
Section 1.34 Company FCC Licenses . . . . . . . . . . . . . . . . 6
Section 1.35 Company Financial Statements . . . . . . . . . . . . 6
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 1.36 Company Material Adverse Effect . . . . . . . . . . . 7
Section 1.37 Company Operating Systems . . . . . . . . . . . . . . 7
Section 1.38 Company Permits . . . . . . . . . . . . . . . . . . . 7
Section 1.39 Company Reports . . . . . . . . . . . . . . . . . . . 7
Section 1.40 Company Statement of Assets and Assumed Liabilities . 7
Section 1.41 Competing Transaction . . . . . . . . . . . . . . . . 7
Section 1.42 Confidentiality Agreement . . . . . . . . . . . . . . 7
Section 1.43 Constructed Channel . . . . . . . . . . . . . . . . . 7
Section 1.44 Contracts . . . . . . . . . . . . . . . . . . . . . . 7
Section 1.45 Copyright Office . . . . . . . . . . . . . . . . . . 7
Section 1.46 Current Assets . . . . . . . . . . . . . . . . . . . 8
Section 1.47 Current Liabilities . . . . . . . . . . . . . . . . . 8
Section 1.48 Delivered Digital-Ready Channel . . . . . . . . . . . 8
Section 1.49 Equipment . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.50 ERISA . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.51 Escrow Agent . . . . . . . . . . . . . . . . . . . . 9
Section 1.52 Escrow Agreement . . . . . . . . . . . . . . . . . . 9
Section 1.53 Escrow Fund . . . . . . . . . . . . . . . . . . . . . 9
Section 1.54 Exchange Act . . . . . . . . . . . . . . . . . . . . 9
Section 1.55 Expenses . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.56 FCC . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1.57 FCC Rules . . . . . . . . . . . . . . . . . . . . . . 10
Section 1.58 Final Order . . . . . . . . . . . . . . . . . . . . . 10
Section 1.59 GAAP . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1.60 Governmental Entity . . . . . . . . . . . . . . . . . 10
Section 1.61 Group 1 Markets . . . . . . . . . . . . . . . . . . . 10
Section 1.62 Group 2 Markets . . . . . . . . . . . . . . . . . . . 10
Section 1.63 Group 2 Markets Call . . . . . . . . . . . . . . . . 10
Section 1.64 Group 2 Markets Call Purchase Price . . . . . . . . . 10
Section 1.65 Group 2 Markets Closing . . . . . . . . . . . . . . . 10
Section 1.66 Group 2 Markets Closing Assets . . . . . . . . . . . 10
Section 1.67 Group 2 Markets Closing Assumed Liabilities . . . . . 11
Section 1.68 Group 2 Markets Closing Conditions . . . . . . . . . 11
Section 1.69 Group 2 Markets Closing Date . . . . . . . . . . . . 11
Section 1.70 Group 2 Markets Covenants . . . . . . . . . . . . . . 11
Section 1.71 [Intentionally Omitted] . . . . . . . . . . . . . . . 11
Section 1.72 [Intentionally Omitted] . . . . . . . . . . . . . . . 11
Section 1.73 Group 2 Markets Escrow Fund . . . . . . . . . . . . . 11
Section 1.74 Group 2 Markets Minimum Purchase Price . . . . . . . 11
Section 1.75 [Intentionally Omitted] . . . . . . . . . . . . . . . 12
Section 1.76 Group 2 Markets Put . . . . . . . . . . . . . . . . . 12
Section 1.77 Group 2 Markets Put Purchase Price . . . . . . . . . 12
Section 1.78 Group 2 Markets Termination Date . . . . . . . . . . 12
Section 1.79 HSR Act . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
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Section 1.80 Inventory . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.81 ITFS . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.82 Knowledge of ATI . . . . . . . . . . . . . . . . . . 12
Section 1.83 Lakeland/Bradenton Adjusted Purchase Price . . . . . 12
Section 1.84 Lakeland/Bradenton Assets . . . . . . . . . . . . . . 12
Section 1.85 Lakeland/Bradenton Assumed Liabilities . . . . . . . 12
Section 1.86 Lakeland/Bradenton Closing Company Statement of
Assets and Assumed Liabilities . . . . . . . . . . . 13
Section 1.87 Lakeland/Bradenton Closing Conditions . . . . . . . . 13
Section 1.88 [Intentionally Omitted] . . . . . . . . . . . . . . . 13
Section 1.89 [Intentionally Omitted] . . . . . . . . . . . . . . . 13
Section 1.90 Lakeland/Bradenton Markets Closing . . . . . . . . . 13
Section 1.91 Lakeland/Bradenton Markets Closing Date . . . . . . . 14
Section 1.92 Lakeland/Bradenton Markets Escrow Fund . . . . . . . 14
Section 1.93 Lakeland/Bradenton Preliminary Closing Company
Statement of Assets and Assumed Liabilities . . . . . 14
Section 1.94 Lakeland/Bradenton Purchase Price . . . . . . . . . . 14
Section 1.95 Lakeland/Bradenton Working Capital . . . . . . . . . 14
Section 1.96 Law . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 1.97 Lien . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 1.98 LOS Households . . . . . . . . . . . . . . . . . . . 14
Section 1.99 Market Delivery Requirement . . . . . . . . . . . . . 14
Section 1.100 Market Delivery Requirement--Post-Closing Date . . . 15
Section 1.101 Market Facilities . . . . . . . . . . . . . . . . . . 15
Section 1.102 Markets . . . . . . . . . . . . . . . . . . . . . . . 15
Section 1.103 MDS . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 1.104 MDU Contracts . . . . . . . . . . . . . . . . . . . . 15
Section 1.105 NYSE . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 1.106 OFS . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 1.107 Pending Application . . . . . . . . . . . . . . . . . 15
Section 1.108 Permitted Liens . . . . . . . . . . . . . . . . . . . 15
Section 1.109 Person . . . . . . . . . . . . . . . . . . . . . . . 15
Section 1.110 Preliminary Closing Company Statement of Assets
and Assumed Liabilities . . . . . . . . . . . . . . . 16
Section 1.111 Purchase Price . . . . . . . . . . . . . . . . . . . 16
Section 1.112 Real Property . . . . . . . . . . . . . . . . . . . . 16
Section 1.113 Second Closing . . . . . . . . . . . . . . . . . . . 16
Section 1.114 Second Closing Assets . . . . . . . . . . . . . . . . 16
Section 1.115 Second Closing Assumed Liabilities . . . . . . . . . 16
Section 1.116 Second Closing Date . . . . . . . . . . . . . . . . . 17
Section 1.117 Site Lease . . . . . . . . . . . . . . . . . . . . . 17
Section 1.118 Subsidiary or Subsidiaries . . . . . . . . . . . . . 17
Section 1.119 Tax or Taxes . . . . . . . . . . . . . . . . . . . . 17
Section 1.120 Videotron . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
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Section 1.121 Videotron Agreement . . . . . . . . . . . . . . . . . 17
Section 1.122 Videotron Liabilities . . . . . . . . . . . . . . . . 17
Section 1.123 Videotron Litigation . . . . . . . . . . . . . . . . 17
Section 1.124 Wireless Cable Channels . . . . . . . . . . . . . . . 17
Section 1.125 Wireless Cable Systems . . . . . . . . . . . . . . . 18
Section 1.126 Working Capital . . . . . . . . . . . . . . . . . . . 18
Section 1.127 Yuba City Sub . . . . . . . . . . . . . . . . . . . . 18
ARTICLE II
PURCHASE AND SALE OF ASSETS
Section 2.01 Purchase and Sale of Assets . . . . . . . . . . . . . 18
Section 2.02 Assumed Liabilities . . . . . . . . . . . . . . . . . 18
Section 2.03 Adjustments to Purchase Price . . . . . . . . . . . . 19
Section 2.04 Escrow . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.05 Closing . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.06 Lakeland/Bradenton Markets Closing . . . . . . . . . 20
Section 2.07 Second Closing . . . . . . . . . . . . . . . . . . . 22
Section 2.08 Group 2 Markets Closing . . . . . . . . . . . . . . . 23
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ATI AND THE COMPANIES
Section 3.01 Organization and Qualification; Subsidiaries . . . . 25
Section 3.02 Authorization; Enforceability . . . . . . . . . . . . 25
Section 3.03 Required Filings and Consents . . . . . . . . . . . . 26
Section 3.04 No Conflict . . . . . . . . . . . . . . . . . . . . . 26
Section 3.05 Environmental Matters . . . . . . . . . . . . . . . . 27
Section 3.06 Permits; Compliance . . . . . . . . . . . . . . . . . 27
Section 3.07 Company Reports; Financial Statements . . . . . . . . 28
Section 3.08 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.09 Litigation . . . . . . . . . . . . . . . . . . . . . 30
Section 3.10 Absence of Changes . . . . . . . . . . . . . . . . . 30
Section 3.11 Title to and Condition of Assets . . . . . . . . . . 30
Section 3.12 Inventory . . . . . . . . . . . . . . . . . . . . . . 31
Section 3.13 Books and Records . . . . . . . . . . . . . . . . . . 31
Section 3.14 Contracts . . . . . . . . . . . . . . . . . . . . . . 31
Section 3.15 Accounts . . . . . . . . . . . . . . . . . . . . . . 31
Section 3.16 Real Property . . . . . . . . . . . . . . . . . . . . 32
Section 3.17 Labor Matters . . . . . . . . . . . . . . . . . . . . 32
Section 3.18 Employee Benefit Plans . . . . . . . . . . . . . . . 32
Section 3.19 Fees and Expenses of Brokers and Others . . . . . . . 33
</TABLE>
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Section 3.20 Accuracy of Information . . . . . . . . . . . . . . . 34
Section 3.21 Indebtedness . . . . . . . . . . . . . . . . . . . . 34
Section 3.22 Transactions With Affiliates . . . . . . . . . . . . 34
Section 3.23 FCC Licenses . . . . . . . . . . . . . . . . . . . . 34
Section 3.24 ITFS and MDS Lease Agreements . . . . . . . . . . . . 36
Section 3.25 Site Leases and Lease Options . . . . . . . . . . . . 37
Section 3.26 Interference Consents . . . . . . . . . . . . . . . . 38
Section 3.27 Operating Markets . . . . . . . . . . . . . . . . . . 39
Section 3.28 Retransmission Consent; Programming Agreements . . . 39
Section 3.29 Copyright . . . . . . . . . . . . . . . . . . . . . . 40
Section 3.30 Cable Systems . . . . . . . . . . . . . . . . . . . . 40
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BELLSOUTH
AND BELLSOUTH SUB
Section 4.01 Organization and Qualification . . . . . . . . . . . 40
Section 4.02 Authorization; Enforceability . . . . . . . . . . . . 41
Section 4.03 Required Filings and Consents . . . . . . . . . . . . 41
Section 4.04 No Conflict . . . . . . . . . . . . . . . . . . . . . 41
Section 4.05 Fees and Expenses of Brokers and Others . . . . . . . 42
ARTICLE V
COVENANTS
Section 5.01 Conduct of the Businesses of the Wireless
Cable Systems . . . . . . . . . . . . . . . . . . . . 42
Section 5.02 No Solicitation . . . . . . . . . . . . . . . . . . . 46
Section 5.03 Access to Information; Confidentiality Agreement . . 46
Section 5.04 Best Efforts . . . . . . . . . . . . . . . . . . . . 47
Section 5.05 Consents . . . . . . . . . . . . . . . . . . . . . . 47
Section 5.06 Public Announcements . . . . . . . . . . . . . . . . 48
Section 5.07 Negotiation of Capacity Leases . . . . . . . . . . . 48
Section 5.08 Control of Wireless Cable Systems . . . . . . . . . . 48
Section 5.09 HSR Filings . . . . . . . . . . . . . . . . . . . . . 48
Section 5.10 Lakeland . . . . . . . . . . . . . . . . . . . . . . 48
Section 5.11 Programming and Billing Agreements . . . . . . . . . 49
Section 5.12 Maintenance of Subscriber Levels . . . . . . . . . . 49
Section 5.13 Certain Interference Consents . . . . . . . . . . . . 49
Section 5.14 Updating of Exhibits . . . . . . . . . . . . . . . . 49
</TABLE>
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ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Conditions Precedent to Each Party's Obligation. . . 50
Section 6.02 Conditions Precedent to Obligations of ATI
and the Companies . . . . . . . . . . . . . . . . . . 51
Section 6.03 Conditions Precedent to Obligations of BellSouth
and BellSouth Sub . . . . . . . . . . . . . . . . . . 52
ARTICLE VII
INDEMNITIES AND ADDITIONAL COVENANTS
Section 7.01 Indemnification by ATI . . . . . . . . . . . . . . . 55
Section 7.02 Indemnification by BellSouth . . . . . . . . . . . . 56
Section 7.03 Equitable Relief . . . . . . . . . . . . . . . . . . 57
Section 7.04 Bulk Sales Compliance . . . . . . . . . . . . . . . . 58
Section 7.05 Tax Matters; Allocation of Consideration . . . . . . 58
Section 7.06 Employment Matters . . . . . . . . . . . . . . . . . 58
Section 7.07 Employee Benefits Plans . . . . . . . . . . . . . . . 60
Section 7.08 Transfer Taxes and Fees . . . . . . . . . . . . . . . 60
Section 7.09 Additional Instruments . . . . . . . . . . . . . . . 60
Section 7.10 Certain Analog Equipment . . . . . . . . . . . . . . 60
Section 7.11 Sacramento BTA and Yuba City, California Options . . 60
Section 7.12 Compliance with Indenture . . . . . . . . . . . . . . 61
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.01 Termination . . . . . . . . . . . . . . . . . . . . . 61
Section 8.02 Effect of Termination . . . . . . . . . . . . . . . . 62
Section 8.03 Amendment . . . . . . . . . . . . . . . . . . . . . . 62
Section 8.04 Waiver . . . . . . . . . . . . . . . . . . . . . . . 62
Section 8.05 Expenses . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE IX
GENERAL PROVISIONS
Section 9.01 Survival of Representations and Warranties
and Covenants . . . . . . . . . . . . . . . . . . . . 63
Section 9.02 Notices . . . . . . . . . . . . . . . . . . . . . . . 63
Section 9.03 Headings . . . . . . . . . . . . . . . . . . . . . . 64
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Section 9.04 Severability . . . . . . . . . . . . . . . . . . . . 64
Section 9.05 Entire Agreement . . . . . . . . . . . . . . . . . . 64
Section 9.06 Assignment . . . . . . . . . . . . . . . . . . . . . 65
Section 9.07 Parties in Interest . . . . . . . . . . . . . . . . . 65
Section 9.08 Failure or Indulgence Not Waiver;
Remedies Cumulative . . . . . . . . . . . . . . . . . 65
Section 9.09 Governing Law . . . . . . . . . . . . . . . . . . . . 65
Section 9.10 Counterparts . . . . . . . . . . . . . . . . . . . . 65
</TABLE>
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EXHIBIT INDEX
1.03 Additional Purchase Price
1.08 Assignment and Assumption Agreement
1.15 Bill of Sale
1.34 Company FCC Licenses
1.40 Company Statement of Assets and Assumed Liabilities
1.48(B) ITFS Airtime Availability
1.48(C) Interference Agreements
1.49 Equipment
1.64 Group 2 Markets Call Purchase Price
1.77 Group 2 Markets Put Purchase Price
1.80 Inventory
1.94 Lakeland/Bradenton Purchase Price
1.98 LOS Households
1.99(a) Market Delivery Requirement (Closing Date)
1.99(b) Market Delivery Requirement (Execution Date)
1.100 Market Delivery Requirement - Post-Closing Date
1.101 Market Facilities
1.108 Permitted Liens
1.111 Purchase Price
1.112 Real Property
2.04 Escrow Agreement
3.01 Subsidiaries of the Companies
3.03 Consents
3.04 Conflicts
3.06 Company Permits
3.08 Taxes
3.09 Litigation
3.10 Changes
3.14 Contracts
3.17 Certain Labor Matters
3.18 Employee Benefit Plans
3.23(a) FCC Licenses
3.23(b) Company BTAs and BTA Authorizations
3.23(c) Operational Exceptions
3.23(d) Pending Applications
3.23(e) Exceptions to Filing of Annual FCC Reports
3.24 Capacity Leases
3.25 Site Leases
3.27 Company Operating System Information
3.28(a) Retransmission Consents
3.28(b) Programming Agreements
3.29 Certain Copyright Issues
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5.01(b)(xiii) Consent and Estoppel
5.01(b)(xv) Certain Actions to be Taken Prior to Closing
5.05 Third Party Consents
5.07(a) Capacity Leases to be Amended or Renewed
5.07(b) Prospective Capacity Lessors
6.01(c) Reduction of Purchase Price for Company FCC Licenses Not
Assigned at Closing
6.02(f) Opinions to be Delivered by Hunton & Williams and Walter H.
Alford, Esq.
6.03(h) Covenant Not to Compete and Right of First Refusal
6.03(j)(i) Opinions to be Delivered by McDermott, Will & Emery
6.03(j)(ii) Form of Opinion of Gurman, Blask & Freedman, Chartered
6.03(k) Channel Lease Agreement
6.03(p) Lakeland/Bradenton Markets Closing Conditions
7.11 Option Agreement
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT dated March 18, 1997 (as it may be
amended from time to time, this "Agreement") is made by and among (i) BELLSOUTH
CORPORATION, a Georgia corporation ("BellSouth"), (ii) BELLSOUTH WIRELESS
CABLE, INC., a Delaware corporation ("BellSouth Sub"), (iii) AMERICAN
TELECASTING, INC., a Delaware corporation ("ATI"), and (iv) AMERICAN
TELECASTING OF CENTRAL FLORIDA, INC., a Delaware corporation, AMERICAN
TELECASTING DEVELOPMENT, INC., a Delaware corporation, AMERICAN TELECASTING OF
FORT MYERS, INC., a Delaware corporation, and AMERICAN TELECASTING OF
JACKSONVILLE, INC., a Delaware corporation, AMERICAN TELECASTING OF LOUISVILLE,
INC., a Delaware corporation, (collectively, the "Companies") and AMERICAN
TELECASTING OF YUBA CITY, INC., a Delaware corporation ("Yuba City Sub").
RECITALS
WHEREAS, ATI and the Companies, wholly owned subsidiaries of ATI,
own certain assets relating to the conduct of wireless cable television
business in each of the Markets, and Yuba City Sub owns certain assets relating
to the conduct of wireless cable television business in Yuba City, California;
and
WHEREAS, ATI and the Companies desire to sell and BellSouth Sub
desires to purchase all of ATI's and the Companies' assets relating to the
wireless cable television business in the Markets on the terms and conditions
set forth herein; and
WHEREAS, ATI and Yuba City Sub desire to grant an exclusive
option to BellSouth and BellSouth Sub to purchase all of ATI's and Yuba City
Sub's assets relating to the wireless cable television business in Yuba City,
California and the BTA rights in Sacramento, California on the terms and
conditions set forth herein; and
WHEREAS, the Boards of Directors of the Companies, Yuba City Sub
and ATI have determined that the acquisition and the option are consistent with
and in furtherance of the long-term business strategy of the Companies, Yuba
City Sub and ATI and is fair to and in the best interests of the Companies,
Yuba City Sub and ATI and have approved and adopted this Agreement and the
transactions contemplated hereby; and
WHEREAS, the Boards of Directors of BellSouth and BellSouth Sub
have approved and adopted this Agreement and the transactions contemplated
hereby;
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NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth herein and for
other good and valuable consideration, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms shall have the
meanings assigned to them below:
Section 1.01 Acceptable Authorization. "Acceptable Authorization"
shall mean a Company Channel authorized by a license granted by a Final Order
and covered by any required certification or notification of completion of
construction timely filed with the FCC (or if untimely filed was subsequently
accepted by the FCC) (a "Constructed Channel"), or if the construction deadline
has not passed, a conditional license or similar authorization (and not a
special temporary, experimental or developmental authorization) which is in
full force and effect, validly issued, free of conditions (except for such
conditions commonly associated with such authorizations), such authorization
for facilities having the identical parameters for Market Facilities for the
relevant Market set forth in Exhibit 1.101, except for the authorized
frequencies or as disclosed in Exhibit 1.101 or Exhibit 3.23(a), not subject
to: (a) a pending revocation proceeding; (b) a pending request for waiver of
FCC Rule 21.303; or (c) forfeiture for any failure to meet a condition of any
instrument of authorization imposed by the FCC; and each Constructed Channel is
transmitting video programming to antennas capable of receiving such
programming.
Section 1.02 Accounts. "Accounts" shall mean all accounts receivable,
notes receivable, accounts payable and associated rights owned by or
obligations of ATI or the Companies, arising in the ordinary course of the
business of the Wireless Cable Systems, and identified on the Closing Company
Statement of Assets and Assumed Liabilities.
Section 1.03 Additional Purchase Price. "Additional Purchase Price"
shall mean the additional purchase price set forth in Exhibit 1.03, to be paid
in immediately available funds pursuant to Section 2.07.
Section 1.04 Adjusted Purchase Price. "Adjusted Purchase Price" shall
mean an amount equal to the Purchase Price, reduced dollar for dollar by the
amount of any negative Working Capital.
Section 1.05 Affiliate. "Affiliate," with respect to any Person, shall
mean a Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such Person.
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Section 1.06 Annual FCC Reports. "Annual FCC Reports" shall mean those
reports, filings, notices and regulatory fees required to be filed annually
with the FCC by licensees, permittees, applicants or operators, including but
not limited to reports required by Sections 21.11(a), 21.911, 21.307(d) and
21.920 of FCC Rules.
Section 1.07 Assets. "Assets" shall mean all of the assets relating to
the Wireless Cable Systems of each of ATI and the Companies, including, without
limitation, the Accounts, Contracts, Equipment, Inventory and Real Property,
all books and records relating to the Wireless Cable Systems and all commercial
and multiple dwelling unit wireless cable service and billing agreements
(collectively, the "MDU Contracts") relating to the Wireless Cable Systems;
provided that Assets shall not include cash or cash equivalents, any
intracompany receivables or agreements, any trade names, trademarks or service
marks, corporate accounting journals, stock in the Companies, any employee
benefit plans, any records of any individual employees who are not hired by
BellSouth Sub, corporate records of the Companies, refunds pertaining to tax
obligations, or any assets of ATI not used solely for the benefit of the
Wireless Cable Systems.
Section 1.08 Assignment and Assumption Agreement. "Assignment and
Assumption Agreement" shall mean the assignment and assumption agreement,
substantially similar in form to Exhibit 1.08.
Section 1.09 Assumed Liabilities. "Assumed Liabilities" shall mean as
they relate to the Group 1 Markets the obligations under the Contracts which
arise on or after the Closing Date, customer security deposits set forth on the
Closing Company Statement of Assets and Assumed Liabilities, any unpaid
personal leave pay obligations described in Section 7.06 and set forth on the
Closing Company Statement of Assets and Assumed Liabilities, and Accounts set
forth on the Closing Company Statement of Assets and Assumed Liabilities and
excluding, without limitation, (i) any obligations, other than Accounts, as
relate to performance or non-performance prior to the Closing Date, (ii) any
liabilities, other than Accounts, under or related to any Contracts which,
whether asserted or not and whether matured or not and whether known or not,
relate to actions, performance or inaction prior to the Closing Date, (iii) any
and all liabilities related to deferred payments or consideration payable by
any of the Companies under (A) Section 2.1(a)(iii) of the Agreement and Plan of
Merger by and among People's Cable, Inc., ATI and American Telecasting of
Central Florida, Inc., dated June 17, 1994, (B) the Asset Purchase Agreement
between WJCT, Inc. and American Telecasting, Inc., dated March 2, 1992, and (C)
and any other contracts relating to the acquisition by ATI or any of the
Companies of any of the Assets related to the Wireless Cable Systems, (iv) any
liabilities for accounts payable which did not arise in the ordinary course of
business, and (v) the Videotron Liabilities.
Section 1.10 ATI. "ATI" shall mean American Telecasting, Inc., a
Delaware corporation.
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<PAGE> 14
Section 1.11 Basic Subscriber. "Basic Subscriber" means a current
subscriber to a Wireless Cable System's regular monthly basic services who has
paid for at least one full month of basic service in full without discount,
whose service rates are not lower than the rates generally charged in its
Market when that subscriber became a subscriber and whose account receivable
for such service does not include any balance due for service provided more
than 60 days before the date of determination. For bulk rate customers, an
equivalent basic unit shall be a Basic Subscriber. The number of equivalent
billing units in a Market shall be determined by dividing the total recurring
monthly amount billed by the Company in such Market to bulk rate customers by
the average monthly basic rate charged to residential customers for regular
monthly basic service.
Section 1.12 BellSouth. "BellSouth" shall mean BellSouth Corporation,
a Georgia corporation.
Section 1.13 BellSouth Material Adverse Effect. "BellSouth Material
Adverse Effect" shall have the meaning set forth in Section 4.04.
Section 1.14 BellSouth Sub. "BellSouth Sub" shall mean BellSouth
Wireless Cable, Inc., a Delaware corporation.
Section 1.15 Bill of Sale. "Bill of Sale" shall mean the bill of sale,
substantially similar in form to Exhibit 1.15.
Section 1.16 BTA. "BTA" shall have the meaning set forth in Section
3.23(b).
Section 1.17 Business Day. "Business Day" shall mean any day other
than (i) a day on which banks in the State of Georgia are authorized or
obligated to be closed or (ii) a day the NYSE is closed.
Section 1.18 Cable Systems. "Cable Systems" shall mean the hard-wire
cable systems operating in the Cities of Lakeland and Mulberry and Polk County,
Florida pursuant to authority granted by local Governmental Entities and all
associated transmission, reception and related equipment and authorizations
used or to be used to distribute television, video and other programming to
residences and other receive points and any associated interactive or other
services operated or proposed to be operated by ATI and the Companies in the
Markets.
Section 1.19 CARS. "CARS" shall mean Cable Television Relay Service as
authorized under 47 C.F.R. Section 78.1 et. seq.
Section 1.20 Capacity Lease. "Capacity Lease" shall have the meaning
set forth in Section 3.24.
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Section 1.21 Channel. "Channel" shall mean a 6 MHz wide channel
capable of carrying both audio and video signals.
Section 1.22 Closing. "Closing" shall mean the conference held at the
offices of Hunton & Williams in Atlanta, Georgia at 10:00 a.m. on such date
determined by the parties in accordance with Section 2.05. The Closing shall
be deemed to have occurred at 12:01 a.m. on the Closing Date. All transactions
occurring at the Closing shall be deemed to have occurred simultaneously, and
no one transaction shall be deemed to be complete until all transactions are
complete.
Section 1.23 Closing Company Statement of Assets and Assumed
Liabilities. "Closing Company Statement of Assets and Assumed Liabilities"
shall mean the consolidated statement prepared by ATI with respect to the
Assets and Assumed Liabilities for the Group 1 Markets in accordance with the
principles followed in the Company Statement of Assets and Assumed Liabilities
as of the Closing Date and delivered pursuant to Section 2.03; provided that
such Closing Company Statement of Assets and Assumed Liabilities shall not
include the Lakeland/Bradenton Assets and the Lakeland/Bradenton Assumed
Liabilities if such assets and assumed liabilities are not transferred to
BellSouth Sub at the Closing. The Closing Company Statement of Assets and
Assumed Liabilities shall refer to the number of Basic Subscribers as of the
Closing Date.
Section 1.24 Closing Date. "Closing Date" shall mean the date
determined by the parties in accordance with Section 2.05.
Section 1.25 Commercially Reasonable Best Efforts. "Commercially
Reasonable Best Efforts" shall mean those efforts that are commercially
reasonable under the circumstances and not inconsistent with a party's legal
obligations, but shall not entail (a) any payments (other than payments of such
fees as are expressly required to be paid in accordance with the terms of this
Agreement or any Contract) to third Persons not affiliated with a party, or (b)
the payment of fines or premiums (other than fines or premiums imposed by any
Governmental Entity).
Section 1.26 Communications Act. "Communications Act" shall mean the
federal Communications Act of 1934, as amended.
Section 1.27 Companies. "Companies" shall mean American Telecasting of
Central Florida, Inc., American Telecasting Development, Inc., American
Telecasting of Fort Myers, Inc., American Telecasting of Jacksonville, Inc.,
and American Telecasting of Louisville, Inc. and their Subsidiaries, if any.
Section 1.28 Company Benefit Plans. "Company Benefit Plans" shall have
the meaning set forth in Section 3.18.
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Section 1.29 Company BTA Authorizations. "Company BTA Authorizations"
shall have the meaning set forth in Section 3.23(b).
Section 1.30 Company Channel. "Company Channel" shall mean an ITFS or
MDS Channel in one of the Markets which,
(A) if a MDS Channel, either (i) is authorized by the FCC to ATI, the
Companies or Patrick D. McConnell and not subject to any lease to or
rights inuring in any other entity, or (ii) is leased to ATI or the
Companies by a Capacity Lease which is in full force and effect and is
enforceable in accordance with its terms, which is not subject to
termination at the option of the lessor prior to or at the Closing, the
Second Closing, or the Group 2 Markets Closing, as the case may be, and
which is not in default or, except as a result of consummation of the
transactions contemplated by this Agreement, threatened to be in
default; and
(B) if an ITFS Channel, is leased to ATI or the Companies by a Capacity
Lease which shall be in full force and effect and is enforceable in
accordance with its terms, which shall not be subject to termination at
the option of lessor prior to or at the Closing, the Second Closing, or
the Group 2 Markets Closing, as the case may be, and which is not in
default or, except as a result of consummation of the transactions
contemplated by this Agreement, threatened to be in default.
Section 1.31 Company Environmental Permits. "Company Environmental
Permits" shall have the meaning set forth in Section 3.05.
Section 1.32 Company ERISA Plan. "Company ERISA Plan" shall have the
meaning set forth in Section 3.18.
Section 1.33 Company FCC Authorizations. "Company FCC Authorizations"
shall have the meaning set forth in Section 3.23(a).
Section 1.34 Company FCC Licenses. "Company FCC Licenses" shall mean
(a) the Company FCC Authorizations identified on Exhibit 1.34 which are
licensed to or acquired by any of ATI, the Companies or Patrick D. McConnell
and relating to the Wireless Cable Systems in a Market, and (b) any other such
Company FCC Authorizations licensed to or acquired by ATI or the Companies and
relating to the Wireless Cable Systems in a Market after the date hereof and
before the Closing Date, the Lakeland/Bradenton Markets Closing Date, a Second
Closing Date, or a Group 2 Markets Closing Date, as applicable.
Section 1.35 Company Financial Statements. "Company Financial
Statements" shall mean, collectively, the unaudited balance sheets of the
Companies as of December 31, 1996 and 1995 and the related unaudited statements
of operations for each of the two years in the periods ended December 31, 1996
and 1995, which have been prepared by ATI in accordance with GAAP and copies of
which have been previously delivered to BellSouth.
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Section 1.36 Company Material Adverse Effect. "Company Material
Adverse Effect" shall have the meaning set forth in Section 3.01.
Section 1.37 Company Operating Systems. "Company Operating Systems"
shall mean all Wireless Cable Systems currently in operation and serving
subscribers.
Section 1.38 Company Permits. "Company Permits" shall have the meaning
set forth in Section 3.06(a).
Section 1.39 Company Reports. "Company Reports" shall have the meaning
set forth in Section 3.07.
Section 1.40 Company Statement of Assets and Assumed Liabilities.
"Company Statement of Assets and Assumed Liabilities" shall mean the
consolidated statement prepared by ATI with respect to the Assets and the
Assumed Liabilities as of December 31, 1996 and set forth on Exhibit 1.40. The
Company Statement of Assets and Assumed Liabilities shall refer to the number
of Basic Subscribers as of December 31, 1996.
Section 1.41 Competing Transaction. "Competing Transaction" shall have
the meaning set forth in Section 5.02.
Section 1.42 Confidentiality Agreement. "Confidentiality Agreement"
shall mean the Nondisclosure Agreement between BellSouth Sub and ATI dated
August 19, 1996.
Section 1.43 Constructed Channel. "Constructed Channel" shall have the
meaning set forth in Section 1.01.
Section 1.44 Contracts. "Contracts" shall mean all contracts,
including MDU Contracts, agreements, leases (including, without limitation, the
Capacity Leases and the Site Leases), licenses (including, without limitation,
the Company FCC Authorizations and the FCC authorizations required for
BellSouth to operate the Wireless Cable Systems), written or oral, relating to
the Wireless Cable Systems, to which ATI or any of the Companies is a party or
by which ATI or any of the Companies or any of their properties is bound;
excluding those to which ATI is a party and which are not solely for the
benefit of the Wireless Cable Systems, agreements relating to the loan dated
February 26, 1996 by Banque Indosuez to ATI, [*].
Section 1.45 Copyright Office. "Copyright Office" shall mean the
Copyright Office, the Library of Congress, the Registrar of Copyrights, the
Copyright Tribunal and any successor government agency performing functions
similar to those performed by the foregoing on the date hereof.
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Section 1.46 Current Assets. "Current Assets" shall mean items of the
type identified as current assets on the Company Statement of Assets and
Assumed Liabilities, determined in accordance with GAAP. Current Assets shall
not include any prepaid sales commissions.
Section 1.47 Current Liabilities. "Current Liabilities" shall mean
items of the type identified as current liabilities on the Company Statement of
Assets and Assumed Liabilities, determined in accordance with GAAP, and shall
also include annual personal leave pay obligations assumed by BellSouth
pursuant to Section 7.06, customer security deposits and deferred revenues.
Section 1.48 Delivered Digital-Ready Channel. "Delivered Digital-Ready
Channel" shall mean a Wireless Cable Channel subject to an Acceptable
Authorization that:
(A) if an MDS Channel, transmission capacity thereon is available full-
time to ATI or the Companies under a Capacity Lease which, in
BellSouth's reasonable judgment, allocates the full capacity of the
Channel at all times to ATI or the Companies on a non-common carrier
basis (or an application to change status to non-common carrier is
pending at the FCC), free of any rights in the lessor to recapture any
use of the Channel, except as required by FCC Rules, or, if licensed to
ATI, the Companies or Patrick D. McConnell, may be used by ATI or the
Companies full-time, in each case without violating any contractual
rights of third Persons;
(B) if an ITFS Channel, transmission capacity thereon is available to
ATI or the Companies under a Capacity Lease which allocates no more than
that amount of the transmission capacity set forth on Exhibit 1.48(B) to
the holder of the Company FCC Authorization therefor, and which, in
BellSouth's reasonable judgment, allocates all remaining transmission
capacity to ATI or the Company, free from any further contractual rights
as it relates to the Capacity Lease for such licensee to recapture
additional air time or transmission capacity, except as described in
Exhibit 1.48(B) or as required by FCC Rules;
(C) is not subject to any agreement, and was not authorized pursuant to
any existing and expressed or implied undertaking, which requires or
could require the Channel to operate with carrier offset, to time-share
with any Person other than the licensee, to cease or curtail operations,
or to accept less than a 45 dB desired-to-undesired signal ratio
anywhere within a 35 mile radius of its transmitter site, except with
regard to Company Channels between or among Group 1 Markets or as set
forth on Exhibit 1.48(C);
(D) is not required by its FCC authorization to use carrier offset; and
(E) if the Channel is made available to ATI or the Companies by a
Capacity Lease, such Capacity Lease, in BellSouth's reasonable judgment,
(i) obligates the lessor to
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seek FCC authorization of the digital emission of the Channel or to seek
any modification of its authorization necessary to improve or enhance
the Company's business or is the subject of a Pending Application
seeking digital authority or an authorization issued by the FCC that
grants digital authority, and (ii) allows ATI or the Companies to
operate the Channel for the duration of the Capacity Lease with a
digital transmission system selected by ATI or the Companies without a
material increase in the payment terms under such Capacity Lease.
Notwithstanding the foregoing, Delivered Digital-Ready Channels also
shall include any Wireless Cable Channel acquired or leased by BellSouth or any
Affiliate thereof in a Market between the date of this Agreement and the
Closing Date, the applicable Second Closing Date or the applicable Group 2
Markets Closing Date, as the case may be.
Section 1.49 Equipment. "Equipment" shall mean the equipment,
machinery, furniture, fixtures, vehicles, furnishings, parts, tools,
engineering and other items of tangible personal property owned or leased by
ATI or the Companies and relating to the Wireless Cable Systems, including the
Equipment set forth on Exhibit 1.49, which Exhibit shall be adjusted to reflect
changes in the ordinary course through the Closing Date, as permitted by
Article V.
Section 1.50 ERISA. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
Section 1.51 Escrow Agent. "Escrow Agent" shall mean Crestar Bank, a
Virginia banking corporation.
Section 1.52 Escrow Agreement. "Escrow Agreement" shall have the
meaning set forth in Section 2.04(a).
Section 1.53 Escrow Fund. "Escrow Fund" shall mean the cash in the
amount of $9,000,000 (if the Lakeland/Bradenton Closing Conditions have been
satisfied as of the Closing Date) or [*] (if the Lakeland/Bradenton Closing
Conditions have not been satisfied as of the Closing Date), as the case may be,
to be deposited by BellSouth with the Escrow Agent in accordance with Section
2.04, plus interest earned in accordance with the Escrow Agreement.
Section 1.54 Exchange Act. "Exchange Act" shall mean the Securities
and Exchange Act of 1934, as amended, and the rules and regulations as
promulgated thereunder.
Section 1.55 Expenses. "Expenses" shall have the meaning set forth in
Section 8.05(b).
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Section 1.56 FCC. "FCC" shall mean the Federal Communications
Commission or any successor governmental entity that has jurisdiction over the
matters which, as of the date hereof, are within the jurisdiction of the FCC.
Section 1.57 FCC Rules. "FCC Rules" shall mean the rules, regulations
and published policies and orders of the FCC.
Section 1.58 Final Order. "Final Order" shall mean an order or action
of the FCC which is effective, which is not subject to any timely-filed
petition for reconsideration, petition to deny, application for review, notice
of appeal, or petition for writ of certiorari, or other appeal or objection
filed within the period allowed by Section 1.117 of the FCC Rules for the FCC's
review on its own motion of the order or action and as to which such period has
expired.
Section 1.59 GAAP. "GAAP" shall mean generally accepted accounting
principles applied on a consistent basis.
Section 1.60 Governmental Entity. "Governmental Entity" shall have the
meaning set forth in Section 3.03.
Section 1.61 Group 1 Markets. "Group 1 Markets" shall mean the
Bradenton, Daytona Beach, Fort Myers, Jacksonville, Lakeland, Miami and
Orlando, Florida and Louisville, Kentucky wireless cable markets.
Section 1.62 Group 2 Markets. "Group 2 Markets" shall mean the Naples
and Sebring, Florida wireless cable markets.
Section 1.63 Group 2 Markets Call. "Group 2 Markets Call" shall have
the meaning set forth in Section 2.08(a)(i).
Section 1.64 Group 2 Markets Call Purchase Price. "Group 2 Markets
Call Purchase Price" shall mean the purchase price set forth on Exhibit 1.64,
to be paid in immediately available funds pursuant to Section 2.08.
Section 1.65 Group 2 Markets Closing. "Group 2 Markets Closing" shall
mean a conference held at the offices of Hunton & Williams in Atlanta, Georgia
at 10:00 a.m. on such date or dates determined by the parties in accordance
with Section 2.08. All transactions occurring at a Group 2 Markets Closing
shall be deemed to have occurred simultaneously, and no one transaction shall
be deemed to be complete until all transactions are complete.
Section 1.66 Group 2 Markets Closing Assets. "Group 2 Markets Closing
Assets" shall mean all Assets relating to the Wireless Cable Systems in the
Markets as to which a particular Group 2 Markets Closing relate.
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Section 1.67 Group 2 Markets Closing Assumed Liabilities. "Group 2
Markets Closing Assumed Liabilities" shall mean the obligations under the
Contracts to be assumed by BellSouth Sub relating to the applicable Group 2
Closing Assets which arise on or after the applicable Group 2 Markets Closing
Date and excluding, without limitation, (i) any obligations as relate to
performance or non-performance prior to the applicable Group 2 Markets Closing
Date, (ii) any liabilities under or related to any Contracts which, whether
asserted or not and whether matured or not and whether known or not, relate to
actions, performance or inaction prior to the applicable Group 2 Markets
Closing Date, (iii) the Videotron Liabilities, and (iv) any liabilities for the
construction of such facilities necessary to serve South Florida Community
College's receive site at the DeSoto Center in Arcadia, Florida as required by
the terms of the Capacity Lease with South Florida Community College for the
Sebring B-Group Channels.
Section 1.68 Group 2 Markets Closing Conditions. "Group 2 Markets
Closing Conditions" shall mean the following conditions as they are applicable
to the transactions contemplated by the applicable Group 2 Markets Closing
Date: with respect to the obligation of each party to consummate the
transactions contemplated to occur on the applicable Group 2 Markets Closing
Date, the conditions set forth in Section 6.01; with respect to the obligations
of ATI and the Companies to consummate the transactions contemplated on the
applicable Group 2 Markets Closing Date, the conditions set forth in Section
6.02; and with respect to the obligations of BellSouth to consummate the
transactions contemplated on the applicable Group 2 Markets Closing Date, the
conditions set forth in Section 6.03 (other than Sections 6.03(b), (h), (l) and
(n)).
Section 1.69 Group 2 Markets Closing Date. "Group 2 Markets Closing
Date" shall mean a date or dates for consummation of a transaction contemplated
by Section 2.08 determined in accordance with Section 2.08.
Section 1.70 Group 2 Markets Covenants. "Group 2 Markets Covenants"
shall have the meaning set forth in the initial sentence of Article V.
Section 1.71 [Intentionally Omitted].
Section 1.72 [Intentionally Omitted].
Section 1.73 Group 2 Markets Escrow Fund. "Group 2 Markets Escrow
Fund" shall mean cash in the amount of 10% of the applicable Group 2 Markets
Call Purchase Price, Group 2 Markets Minimum Purchase Price or Group 2 Markets
Put Purchase Price to be deposited by BellSouth with the Escrow Agent in
accordance with Section 2.08, plus interest earned in accordance with the
Escrow Agreement.
Section 1.74 Group 2 Markets Minimum Purchase Price. "Group 2 Markets
Minimum Purchase Price" shall mean [*] with respect to the Naples Market and
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[*] with respect to the Sebring Market, to be paid in immediately available
funds pursuant to Section 2.08.
Section 1.75 [Intentionally Omitted].
Section 1.76 Group 2 Markets Put. "Group 2 Markets Put" shall have the
meaning set forth in Section 2.08(a)(ii).
Section 1.77 Group 2 Markets Put Purchase Price. "Group 2 Markets Put
Purchase Price" shall have the meaning set forth in Exhibit 1.77, to be paid in
immediately available funds pursuant to Section 2.08.
Section 1.78 Group 2 Markets Termination Date. "Group 2 Markets
Termination Date" shall mean the earlier of the date this Agreement is
terminated in accordance with Section 8.01 or the 30th day after the second
anniversary date of the Closing Date.
Section 1.79 HSR Act. "HSR Act" shall mean the Hart Scott Rodino
Antitrust Improvements Act of 1976, as amended.
Section 1.80 Inventory. "Inventory" shall mean all inventories of
goods and supplies owned by ATI or the Companies and relating to the Wireless
Cable Systems as set forth on Exhibit 1.80 which Exhibit shall be adjusted to
reflect changes in the ordinary course through the Closing Date, as permitted
by Article V.
Section 1.81 ITFS. "ITFS" shall mean the Instructional Television
Fixed Service as regulated pursuant to 47 C.F.R. Section 74.901 et. seq.
Section 1.82 Knowledge of ATI. "Knowledge of ATI" shall mean the
actual knowledge, after due and reasonable inquiry, of any officer of ATI or
the Companies, including Ned A'Bell and Jon D. Brown.
Section 1.83 Lakeland/Bradenton Adjusted Purchase Price.
"Lakeland/Bradenton Adjusted Purchase Price" shall mean an amount equal to the
Lakeland/Bradenton Purchase Price, reduced dollar for dollar by the amount of
any negative Lakeland/Bradenton Working Capital.
Section 1.84 Lakeland/Bradenton Assets. "Lakeland/Bradenton Assets"
shall mean all Assets relating to the Wireless Cable Systems in both the
Bradenton Market and the Lakeland Market.
Section 1.85 Lakeland/Bradenton Assumed Liabilities.
"Lakeland/Bradenton Assumed Liabilities" shall mean the obligations under the
Contracts to be assumed by BellSouth Sub relating to the Lakeland/Bradenton
Assets which arise on or after the Lakeland/Bradenton Markets Closing Date,
customer security deposits set forth on the
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Lakeland/Bradenton Closing Company Statement of Assets and Assumed Liabilities,
any unpaid personal leave pay obligations relating to the Bradenton and
Lakeland Markets described in Section 7.06 and set forth on the
Lakeland/Bradenton Closing Company Statement of Assets and Assumed Liabilities,
and Accounts set forth on the Lakeland/Bradenton Closing Company Statement of
Assets and Assumed Liabilities, and excluding, without limitation, (i) any
obligations, other than Accounts, as relate to performance or non-performance
prior to the Lakeland/Bradenton Markets Closing Date, (ii) any liabilities,
other than Accounts, under or related to any Contracts which, whether asserted
or not and whether matured or not and whether known or not, relate to actions,
performance or inaction prior to the Lakeland/Bradenton Markets Closing Date,
(iii) any and all liabilities related to deferred payments or consideration
payable by any of the Companies under (A) Section 2.1(a)(iii) of the Agreement
and Plan of Merger by and among People's Cable, Inc., ATI and American
Telecasting of Central Florida, Inc., dated June 17, 1994, (B) the Asset
Purchase Agreement between WJCT, Inc. and American Telecasting, Inc., dated
March 2, 1992, and (C) and any other contracts relating to the acquisition by
ATI or any of the Companies of any of the Assets related to the Wireless Cable
Systems, (iv) any liabilities for accounts payable which did not arise in the
ordinary course of business, and (v) the Videotron Liabilities.
Section 1.86 Lakeland/Bradenton Closing Company Statement of Assets and
Assumed Liabilities. "Lakeland/Bradenton Closing Company Statement of Assets
and Assumed Liabilities" shall mean the consolidated statement prepared by ATI
with respect to the Lakeland/Bradenton Assets and Lakeland/Bradenton Assumed
Liabilities in accordance with the principles followed in the Company Statement
of Assets and Assumed Liabilities as of the Lakeland/Bradenton Markets Closing
Date and delivered pursuant to Section 2.06. The Lakeland/Bradenton Closing
Company Statement of Assets and Assumed Liabilities shall refer to the number
of Basic Subscribers as of the Lakeland/Bradenton Markets Closing Date.
Section 1.87 Lakeland/Bradenton Closing Conditions.
"Lakeland/Bradenton Closing Conditions" shall mean the conditions set forth in
Section 6.03(p).
Section 1.88 [Intentionally Omitted].
Section 1.89 [Intentionally Omitted].
Section 1.90 Lakeland/Bradenton Markets Closing. "Lakeland/Bradenton
Markets Closing" shall mean a conference held at the offices of Hunton &
Williams in Atlanta, Georgia at 10:00 a.m. on such date or dates determined by
the parties in accordance with Section 2.06. All transactions occurring at the
Lakeland/Bradenton Markets Closing shall be deemed to have occurred
simultaneously, and no one transaction shall be deemed to be complete until all
transactions are complete.
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Section 1.91 Lakeland/Bradenton Markets Closing Date.
"Lakeland/Bradenton Markets Closing Date" shall mean the date determined by the
parties in accordance with Section 2.06.
Section 1.92 Lakeland/Bradenton Markets Escrow Fund.
"Lakeland/Bradenton Markets Escrow Fund" shall mean cash in the amount of [*]
to be deposited by BellSouth with the Escrow Agent in accordance with Section
2.06, plus interest earned in accordance with the Escrow Agreement.
Section 1.93 Lakeland/Bradenton Preliminary Closing Company Statement
of Assets and Assumed Liabilities. "Lakeland/Bradenton Preliminary Closing
Company Statement of Assets and Assumed Liabilities" shall mean the statement
prepared by ATI with respect to the Lakeland/Bradenton Assets and the
Lakeland/Bradenton Assumed Liabilities in accordance with the principles
followed in the Company Statement of Assets and Assumed Liabilities as of the
last day of the month preceding the Lakeland/Bradenton Markets Closing Date and
delivered pursuant to Section 2.06. The Lakeland/Bradenton Preliminary Closing
Company Statement of Assets and Assumed Liabilities shall refer to the number
of Basic Subscribers as of such date.
Section 1.94 Lakeland/Bradenton Purchase Price. "Lakeland/Bradenton
Purchase Price" shall mean the purchase price for the Bradenton and Lakeland
Markets set forth in Exhibit 1.94, subject to adjustment as provided in Section
2.06(c), to be paid in immediately available funds pursuant to Section 2.06.
Section 1.95 Lakeland/Bradenton Working Capital. "Lakeland/Bradenton
Working Capital" shall mean Current Assets that are Lakeland/Bradenton Assets
less Current Liabilities that are Lakeland/Bradenton Assumed Liabilities.
Section 1.96 Law. "Law" shall have the meaning set forth in Section
3.04.
Section 1.97 Lien. "Lien" shall mean, with respect to any asset, any
mortgage, lien, pledge, charge, claim, security interest or encumbrance of any
kind in respect of such asset and, for the purposes of this Agreement, a Person
shall be deemed to own subject to a Lien any asset which it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or any other form of title retention agreement
relating to such asset.
Section 1.98 LOS Households. "LOS Households" shall mean line-of-sight
households for certain of the Markets, as set forth on Exhibit 1.98.
Section 1.99 Market Delivery Requirement. "Market Delivery
Requirement" shall mean, with respect to each Market identified on Exhibit
1.99(a), the existence of such number of Delivered Digital-Ready Channels in
such Market identified in such Exhibit 1.99(a), as of the Closing Date. The
parties hereby acknowledge and agree that, as of the
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date of this Agreement, and absent a material change to a Channel as of the
Closing Date, the authorizations and number of Channels that would constitute
Delivered Digital-Ready Channels for purposes of the Market Delivery
Requirement in each such Market are as set forth in Exhibit 1.99(b).
Section 1.100 Market Delivery Requirement--Post-Closing Date. "Market
Delivery Requirement--Post-Closing Date" shall mean, with respect to the
Daytona Beach, Fort Myers, Jacksonville, Lakeland and Louisville Markets, the
existence of such number of Delivered Digital-Ready Channels, inclusive of the
Channels delivered pursuant to the Market Delivery Requirement in such Markets,
as set forth in Exhibit 1.100, as of a date prior to one year following the
Closing Date.
Section 1.101 Market Facilities. "Market Facilities" shall mean, for an
indicated Market, those technical and operational characteristics authorized by
the FCC set forth for such Market in Exhibit 1.101.
Section 1.102 Markets. "Markets" shall mean the Group 1 Markets and the
Group 2 Markets.
Section 1.103 MDS. "MDS" shall mean the Multipoint Distribution
Service, including Multichannel Multipoint Distribution Service Channels,
consisting of the E-Group Channels, F-group Channels, H-group Channels, Channel
1, Channel 2 and Channel 2A as set forth in 47 C.F.R. Section 21.901.
Section 1.104 MDU Contracts. "MDU Contracts" shall have the meaning set
forth in Section 1.07.
Section 1.105 NYSE. "NYSE" shall mean the New York Stock Exchange.
Section 1.106 OFS. "OFS" shall mean the Private Operational Fixed
Microwave Service as set forth in 47 C.F.R. Section 94.1 et. seq.
Section 1.107 Pending Application. "Pending Application" shall have the
meaning set forth in Section 3.23(d).
Section 1.108 Permitted Liens. "Permitted Liens" shall mean those Liens
and other matters affecting the Assets, the Second Closing Assets or the Group
2 Markets Closing Assets that are specifically listed on Exhibit 1.108, and
liens for taxes not yet due.
Section 1.109 Person. "Person" shall mean an individual, corporation,
partnership, limited liability company, association, trust, unincorporated
organization, other entity or group (as determined under Section 13(d) of the
Exchange Act).
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Section 1.110 Preliminary Closing Company Statement of Assets and
Assumed Liabilities. "Preliminary Closing Company Statement of Assets and
Assumed Liabilities" shall mean the statement prepared by ATI with respect to
the Assets and the Assumed Liabilities for the Group 1 Markets in accordance
with the principles followed in the Company Statement of Assets and Assumed
Liabilities as of the last day of the month preceding the Closing Date and
delivered pursuant to Section 2.03; provided that such Preliminary Closing
Company Statement of Assets and Assumed Liabilities shall not include the
Lakeland/Bradenton Assets and the Lakeland/Bradenton Assumed Liabilities if
such assets and assumed liabilities are not transferred to BellSouth Sub at the
Closing. The Preliminary Closing Company Statement of Assets and Assumed
Liabilities shall refer to the number of Basic Subscribers as of such date.
Section 1.111 Purchase Price. "Purchase Price" shall mean the purchase
price set forth in Exhibit 1.111, subject to adjustment as provided in Section
6.01(c), to be paid in immediately available funds pursuant to Article II.
Section 1.112 Real Property. "Real Property" shall mean the real
property relating to the Wireless Cable Systems owned or leased by ATI or the
Companies as of the Closing Date, together with the improvements located
thereon, including all appurtenant rights, claims and interests, all of such
Real Property being listed on Exhibit 1.112, which Exhibit shall be adjusted to
reflect changes in the ordinary course through the Closing Date, as permitted
by Article V.
Section 1.113 Second Closing. "Second Closing" shall mean a conference
held at the offices of Hunton & Williams in Atlanta, Georgia at 10:00 a.m. on
such date or dates determined by the parties in accordance with Section 2.07.
All transactions occurring at a Second Closing shall be deemed to have occurred
simultaneously, and no one transaction shall be deemed to be complete until all
transactions are complete.
Section 1.114 Second Closing Assets. "Second Closing Assets" shall
mean, with respect to any one or more of the Group 1 Markets identified in
Exhibit 1.100, the Assets which satisfy the additional Delivered Digital-Ready
Channels required by the Market Delivery Requirement--Post-Closing Date for the
applicable Group 1 Market or Group 1 Markets.
Section 1.115 Second Closing Assumed Liabilities. "Second Closing
Assumed Liabilities" shall mean the obligations under the Contracts relating to
the applicable Second Closing Assets which arise on or after the applicable
Second Closing Date and excluding (i) any obligations as relate to performance
or non-performance prior to the applicable Second Closing Date and (ii) any
liabilities under or related to any Contracts which, whether asserted or not
and whether matured or not and whether known or not, relate to actions,
performance or inaction prior to the applicable Second Closing Date.
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Section 1.116 Second Closing Date. "Second Closing Date" shall mean a
date or dates determined by the parties in accordance with Section 2.07.
Section 1.117 Site Lease. "Site Lease" shall have the meaning set forth
in Section 3.25(a).
Section 1.118 Subsidiary or Subsidiaries. "Subsidiary" or
"Subsidiaries" of ATI, the Companies, BellSouth, BellSouth Sub, or any other
Person shall mean any corporation, partnership, limited liability company,
joint venture or other legal entity of which the Companies, BellSouth,
BellSouth Sub or such other Person, as the case may be (either alone or through
or together with any other Subsidiary), owns, directly or indirectly, 50% or
more of the stock or other equity interests.
Section 1.119 Tax or Taxes. "Tax" or "Taxes" shall mean any and all
taxes, charges, fees, levies or assessments payable to any federal, state,
local or foreign taxing authority or agency including, without limitation, (i)
income, franchise, profits, gross receipts, minimum, alternative minimum,
estimated, ad valorem, value added, sales, use, service, real or personal
property, capital stock, license, payroll, withholding, disability, employment,
social security, workers compensation, unemployment compensation, utility,
severance, excise, stamp, windfall profits, transfer and gains taxes, (ii)
customs duties, imposts, charges, levies or other similar assessments of any
kind and (iii) interest, penalties and additions to tax imposed with respect
thereto.
Section 1.120 Videotron. "Videotron" shall mean Videotron (Bay Area),
Inc. and its successors and assigns under the Videotron Agreement.
Section 1.121 Videotron Agreement. "Videotron Agreement" shall mean the
agreement between Videotron (Bay Area), Inc. and ATI, dated July 21, 1995, as
originally executed and delivered.
Section 1.122 Videotron Liabilities. "Videotron Liabilities" shall mean
any liabilities relating to the Videotron Agreement arising prior to an
assignment of the Videotron Agreement in accordance with Exhibit 6.03(p),
except that Videotron Liabilities shall not include those obligations to
perform under such agreement after the Closing or the Lakeland/Bradenton
Markets Closing, as applicable.
Section 1.123 Videotron Litigation. "Videotron Litigation" shall mean
any and all litigation against or affecting any of ATI or the Companies or any
properties or rights of ATI or the Companies and relating to the Videotron
Agreement.
Section 1.124 Wireless Cable Channels. "Wireless Cable Channels" shall
mean ITFS Channels and MDS Channels.
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Section 1.125 Wireless Cable Systems. "Wireless Cable Systems" shall
mean ITFS Channels, MDS Channels and associated transmission, reception and
related equipment and authorizations used or to be used to distribute
television, video and other programming to residences and other receive points
and any associated interactive or other services operated or proposed to be
operated by ATI and the Companies in the Markets.
Section 1.126 Working Capital. "Working Capital" for the Group 1
Markets shall mean Current Assets less Current Liabilities that are Assumed
Liabilities; provided, that Working Capital shall not include Current Assets
and Current Liabilities that are Lakeland/Bradenton Assets or
Lakeland/Bradenton Assumed Liabilities if such assets and assumed liabilities
are not transferred to BellSouth Sub at the Closing.
Section 1.127 Yuba City Sub. "Yuba City Sub" shall mean American
Telecasting of Yuba City, Inc. and its subsidiaries, if any.
ARTICLE II
PURCHASE AND SALE OF ASSETS
Section 2.01 Purchase and Sale of Assets.
(a) Subject to the terms and conditions of this Agreement, on
the Closing Date, ATI and the Companies shall sell, convey, transfer, assign
and deliver to BellSouth Sub, by deed, bill of sale, assignment or other
appropriate instrument, free and clear of all Liens, except for the Permitted
Liens, the Assets (except those MDU Contracts that are not assignable because a
necessary consent to such assignment has not been obtained) relating to the
Group 1 Markets. Subject to the terms and conditions of this Agreement, on the
Closing Date, ATI and the Companies shall assign to BellSouth Sub all of their
rights under the Contracts (except those MDU Contracts that are not assignable
because a necessary consent to such assignment has not been obtained) and the
Company FCC Licenses relating to the Group 1 Markets.
(b) Subject to the terms and conditions of this Agreement, on
the Closing Date, BellSouth shall deliver to ATI the Purchase Price, less the
amount of the Escrow Fund, in full payment for the Assets relating to the Group
1 Markets.
Section 2.02 Assumed Liabilities. Subject to the terms and conditions
of this Agreement, on the Closing Date, BellSouth Sub shall assume the Assumed
Liabilities. Except for the Assumed Liabilities, BellSouth and BellSouth Sub
do not and will not assume any liability or obligation of any kind of ATI or
the Companies, or any obligation relating to the Wireless Cable Systems or the
use of the Assets prior to the Closing, whether absolute or contingent, accrued
or unaccrued, asserted or unasserted, known or unknown, or otherwise. ATI
agrees to indemnify against and holds BellSouth and BellSouth Sub harmless as
provided
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in Section 7.01 hereof from any such liability or obligation of ATI or
Companies not specifically transferred to and assumed by BellSouth Sub.
BellSouth shall not be a successor or alter ego of or joint employer or
venturer with ATI or the Companies.
Section 2.03 Adjustments to Purchase Price.
(a) On the Closing Date, ATI shall deliver to BellSouth and
BellSouth Sub the Preliminary Closing Company Statement of Assets and Assumed
Liabilities. Such Preliminary Closing Company Statement of Assets and Assumed
Liabilities shall (i) include the amount of Working Capital and (ii) identify
the Assumed Liabilities. Within 45 days following the Closing Date, ATI shall
deliver to BellSouth and BellSouth Sub a draft Closing Company Statement of
Assets and Assumed Liabilities. Such draft Closing Company Statement of Assets
and Assumed Liabilities shall (i) include the amount of Working Capital and
(ii) identify the Assumed Liabilities, as of the Closing Date. If BellSouth
shall have any objections to the draft Closing Company Statement of Assets and
Assumed Liabilities, it will deliver a notice describing in detail its
objections to ATI within 10 Business Days after receiving the draft Closing
Company Statement of Assets and Assumed Liabilities. BellSouth and ATI will
use their Commercially Reasonable Best Efforts to resolve any such objections.
If a final resolution is not obtained within 10 Business Days after ATI has
received the notice of objections, BellSouth and ATI will select an accounting
firm mutually acceptable to them to resolve any remaining objections. ATI will
revise the draft Closing Company Statement of Assets and Assumed Liabilities as
appropriate to reflect the resolution of BellSouth's objections (as agreed upon
by the parties or as directed by such accounting firm) and deliver it to
BellSouth within five Business Days after the resolution of such objections.
Such revised Closing Company Statement of Assets and Assumed Liabilities
prepared by ATI shall constitute the Closing Company Statement of Assets and
Assumed Liabilities. To the extent that the Adjusted Purchase Price is less
than the Purchase Price, the parties agree to jointly notify the Escrow Agent
that the portion of the Escrow Fund attributable to a reduction in the Purchase
Price shall be released to BellSouth in accordance with the terms of the Escrow
Agreement.
(b) During the preparation of the Closing Company Statement of
Assets and Assumed Liabilities, BellSouth Sub shall provide ATI full access to
the books, records, facilities and employees of BellSouth Sub and shall
cooperate fully in the preparation of the Closing Company Statement of Assets
and Assumed Liabilities.
Section 2.04 Escrow.
(a) Subject to the terms and conditions of this Agreement, on
the Closing Date BellSouth will deposit the Escrow Fund with the Escrow Agent
in accordance with the terms of this Agreement and the escrow agreement,
substantially in the form attached as Exhibit 2.04 hereto (the "Escrow
Agreement").
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(b) To the extent that any indemnity amounts are to be paid
pursuant to Section 7.01 hereof, such amounts shall be payable to BellSouth
initially from the Escrow Fund, and thereafter by ATI as provided in Section
7.01. Within 12 months after the Closing Date, the Escrow Agent shall release
amounts of the Escrow Fund remaining with the Escrow Agent to ATI or BellSouth
as provided in the Escrow Agreement.
Section 2.05 Closing. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Section 8.01 and subject to the satisfaction or waiver of the conditions set
forth in Article VI, the consummation of the transactions contemplated hereby
will take place as promptly as practicable on a date mutually agreed to by ATI
and by BellSouth (and in any event within 10 Business Days) after satisfaction
or waiver of the conditions set forth in Article VI, at the offices of Hunton &
Williams, NationsBank Plaza, 600 Peachtree Street, N.E., Atlanta, Georgia
30308, but not later than September 19, 1997 or December 19, 1997 as provided
in Article VIII unless otherwise mutually agreed by the parties.
Section 2.06 Lakeland/Bradenton Markets Closing.
(a) If the Lakeland/Bradenton Closing Conditions set forth in
Exhibit 6.03(p) have not been satisfied as of the Closing Date, ATI and the
Companies shall transfer the Assets and Assumed Liabilities relating to the
Daytona Beach, Fort Myers, Jacksonville, Miami, Orlando and Louisville Markets,
but shall not transfer the Lakeland/Bradenton Assets and the Lakeland/Bradenton
Assumed Liabilities, to BellSouth Sub in accordance with Section 2.01 and
Section 2.02. In no event shall ATI and the Companies transfer any Assets or
Assumed Liabilities of the Bradenton Market or the Lakeland Market to BellSouth
Sub without transferring the Lakeland/Bradenton Assets and Lakeland/Bradenton
Assumed Liabilities for both the Bradenton Market and the Lakeland Market to
BellSouth Sub. To the extent that the Lakeland/Bradenton Closing Conditions
have been satisfied as of a date prior to 24 months following the Closing Date,
BellSouth shall pay the Lakeland/Bradenton Purchase Price. To the extent that
the Lakeland/Bradenton Closing Conditions have not been satisfied within 24
months from the Closing Date, no closing shall occur with respect to the
Bradenton Market or the Lakeland Market.
(b) Subject to the terms and conditions of this Agreement, on
the Lakeland/Bradenton Markets Closing Date, ATI and the Companies shall sell,
convey, transfer, assign and deliver to BellSouth Sub, by deed, bill of sale,
assignment or other appropriate instrument, free and clear of all Liens, except
for the Permitted Liens, the Lakeland/Bradenton Assets (except those MDU
Contracts that are not assignable because a necessary consent to such
assignment has not been obtained). Subject to the terms and conditions of this
Agreement, on the Lakeland/Bradenton Markets Closing Date, ATI and the
Companies shall assign to BellSouth Sub all of their rights under the Contracts
(except those MDU Contracts that are not assignable because a necessary consent
to such assignment has not been obtained) and the Company FCC Licenses relating
to the Lakeland/Bradenton Assets.
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(c) Subject to the terms and conditions of this Agreement, on
the Lakeland/Bradenton Markets Closing Date, BellSouth shall deliver to ATI the
Lakeland/Bradenton Purchase Price in full payment for the Lakeland/Bradenton
Assets. On the Lakeland/Bradenton Markets Closing Date, ATI shall deliver to
BellSouth and BellSouth Sub the Lakeland/Bradenton Preliminary Closing Company
Statement of Assets and Assumed Liabilities. Such Lakeland/Bradenton
Preliminary Closing Company Statement of Assets and Assumed Liabilities shall
(i) include the amount of Lakeland/Bradenton Working Capital and (ii) identify
the Lakeland/Bradenton Assumed Liabilities. Within 45 days following the
Lakeland/Bradenton Markets Closing Date, ATI shall deliver to BellSouth and
BellSouth Sub a draft Lakeland/Bradenton Closing Company Statement of Assets
and Assumed Liabilities. Such draft Lakeland/Bradenton Closing Company
Statement of Assets and Assumed Liabilities shall (i) include the amount of
Lakeland/Bradenton Working Capital and (ii) identify the Lakeland/Bradenton
Assumed Liabilities, as of the Lakeland/Bradenton Markets Closing Date. If
BellSouth shall have any objections to the draft Lakeland/Bradenton Closing
Company Statement of Assets and Assumed Liabilities, it will deliver a notice
describing in detail its objections to ATI within 10 Business Days after
receiving the draft Lakeland/Bradenton Closing Company Statement of Assets and
Assumed Liabilities. BellSouth and ATI will use their Commercially Reasonable
Best Efforts to resolve any such objections. If a final resolution is not
obtained within 10 Business Days after ATI has received the notice of
objections, BellSouth and ATI will select an accounting firm mutually
acceptable to them to resolve any remaining objections. ATI will revise the
draft Lakeland/Bradenton Closing Company Statement of Assets and Assumed
Liabilities as appropriate to reflect the resolution of BellSouth's objections
(as agreed upon by the parties or as directed by such accounting firm) and
deliver it to BellSouth within five Business Days after the resolution of such
objections. Such revised Lakeland/Bradenton Closing Company Statement of
Assets and Assumed Liabilities prepared by ATI shall constitute the Closing
Company Statement of Assets and Assumed Liabilities with respect to the
Lakeland/Bradenton Assets and Lakeland/Bradenton Assumed Liabilities. To the
extent that the Lakeland/Bradenton Adjusted Purchase Price is less than the
Lakeland/Bradenton Purchase Price, the parties agree to jointly notify the
Escrow Agent that the portion of the Lakeland/Bradenton Markets Escrow Fund
attributable to a reduction in the Lakeland/Bradenton Purchase Price shall be
released to BellSouth in accordance with the terms of the Escrow Agreement.
(d) On the Lakeland/Bradenton Markets Closing Date, BellSouth
Sub shall assume the applicable Lakeland/Bradenton Assumed Liabilities. Except
for the Assumed Liabilities, the Lakeland/Bradenton Assumed Liabilities, the
applicable Second Closing Assumed Liabilities and any Group 2 Market Assumed
Liabilities, BellSouth and BellSouth Sub do not and will not assume any
liability or obligation of any kind of ATI or the Companies, or any obligation
relating to the Lakeland/Bradenton Assets, whether absolute or contingent,
accrued or unaccrued, asserted or unasserted, known or unknown, or otherwise.
ATI agrees to indemnify against and holds BellSouth and BellSouth Sub harmless
as provided in Section 7.01 hereof from any such liability or obligation of ATI
or the Companies not specifically transferred to and assumed by BellSouth Sub.
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(e) Subject to the satisfaction or waiver of the conditions
set forth in Article VI with respect to the Bradenton and Lakeland Markets, the
consummation of the transactions contemplated by this Section 2.06 for the
Bradenton and Lakeland Markets will take place as promptly as practicable on a
date mutually agreed to by ATI and by BellSouth (and in any event within 10
Business Days) after satisfaction or waiver of the conditions set forth in
Article VI with respect to the Bradenton and Lakeland Markets, at the offices
of Hunton & Williams, NationsBank Plaza, 600 Peachtree Street, N.E., Atlanta,
Georgia 30308, but not later than 24 months after the Closing Date unless
otherwise mutually agreed by the parties.
(f) Subject to the terms and conditions of this Agreement, on
the Lakeland/Bradenton Markets Closing Date BellSouth will deposit the
Lakeland/Bradenton Markets Escrow Fund with the Escrow Agent in accordance with
the terms of this Agreement and the Escrow Agreement. To the extent that any
indemnity amounts are to be paid pursuant to Section 7.01 hereof, such amounts
shall be payable to BellSouth initially from the Lakeland/Bradenton Markets
Escrow Fund, and thereafter by ATI as provided in Section 7.01. Within 12
months after the Lakeland/Bradenton Markets Closing Date, the Escrow Agent
shall release amounts of the Lakeland/Bradenton Markets Escrow Fund remaining
with the Escrow Agent to ATI or BellSouth as provided in the Escrow Agreement.
Section 2.07 Second Closing.
(a) If the Market Delivery Requirement--Post-Closing Date in
any one or more of the Group 1 Markets identified in Exhibit 1.100 is satisfied
as of a date prior to one year following the Closing Date (or with respect to
the Lakeland Market, if a Lakeland/Bradenton Markets Closing occurs, 24 months
following the Closing Date), BellSouth shall pay the Additional Purchase Price
with respect to the applicable Group 1 Market or Group 1 Markets; provided,
that with respect to the Bradenton and Lakeland Markets the Market Delivery
Requirement--Post-Closing Date shall not be deemed to have been satisfied if no
closing has occurred on the Lakeland/Bradenton Assets. To the extent that the
Market Delivery Requirement--Post-Closing Date with respect to a particular
Group 1 Market is not satisfied within one year from the Closing Date (or with
respect to the Lakeland Market, if a Lakeland/Bradenton Markets Closing occurs,
24 months following the Closing Date), no Additional Purchase Price shall be
paid with respect to that Group 1 Market.
(b) Subject to the terms and conditions of this Agreement, on
a Second Closing Date, ATI and the Companies shall sell, convey, transfer,
assign and deliver to BellSouth Sub, by deed, bill of sale, assignment or other
appropriate instrument, free and clear of all Liens, except for the Permitted
Liens, the Second Closing Assets with respect to the particular Group 1 Market
as to which the Market Delivery Requirement--Post-Closing Date has been
satisfied. Subject to the terms and conditions of this Agreement, on the
applicable Second Closing Date, ATI and the Companies shall assign to BellSouth
Sub all of
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their rights under the Contracts and the Company FCC Licenses relating to the
applicable Second Closing Assets.
(c) Subject to the terms and conditions of this Agreement, on
the applicable Second Closing Date, BellSouth shall deliver to ATI the
Additional Purchase Price related to the applicable Group 1 Market in full
payment for the applicable Second Closing Assets being acquired on such Second
Closing Date.
(d) On the applicable Second Closing Date, BellSouth Sub shall
assume the applicable Second Closing Assumed Liabilities. Except for the
Assumed Liabilities, any Lakeland/Bradenton Assumed Liabilities, the applicable
Second Closing Assumed Liabilities and any Group 2 Market Assumed Liabilities,
BellSouth and BellSouth Sub do not and will not assume any liability or
obligation of any kind of ATI or the Companies, or any obligation relating to
the applicable Second Closing Assets, whether absolute or contingent, accrued
or unaccrued, asserted or unasserted, known or unknown, or otherwise. ATI
agrees to indemnify against and holds BellSouth and BellSouth Sub harmless as
provided in Section 7.01 hereof from any such liability or obligation of ATI or
the Companies not specifically transferred to and assumed by BellSouth Sub.
(e) Subject to the satisfaction or waiver of the conditions
set forth in Article VI with respect to a particular Group 1 Market identified
on Exhibit 1.100 as to which the Market Delivery Requirement--Post-Closing Date
has been satisfied, the consummation of the transactions contemplated by this
Section 2.07 for such Group 1 Market will take place as promptly as practicable
on a date mutually agreed to by ATI and by BellSouth (and in any event within
10 Business Days) after satisfaction or waiver of the conditions set forth in
Article VI with respect to such Group 1 Market, at the offices of Hunton &
Williams, NationsBank Plaza, 600 Peachtree Street, N.E., Atlanta, Georgia
30308, but not later than one year after the Closing Date (or with respect to
the Lakeland Market, if a Lakeland/Bradenton Markets Closing occurs, 24 months
following the Closing Date) unless otherwise mutually agreed by the parties.
Section 2.08 Group 2 Markets Closing.
(a) (i) At any time prior to the date that is 24 months
following the Closing Date, BellSouth shall have the right (the "Group 2
Markets Call") to acquire the Assets relating to any Group 2 Market in
exchange for payment of the Group 2 Markets Call Purchase Price with
respect to such Group 2 Market or Group 2 Markets.
(ii) At any time prior to the date that is 24 months
following the Closing Date, ATI shall have the right (the "Group 2
Markets Put") to require BellSouth to acquire the Assets relating to any
Group 2 Market in exchange for payment of the Group 2 Markets Put
Purchase Price with respect to such Group 2 Market or Group 2 Markets.
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A Group 2 Markets Closing shall not occur prior to the Closing. At least 30
days prior to a closing under Section 2.08(e), ATI will confirm the
representations and warranties with respect to the applicable Group 2 Market
with respect to which such Group 2 Markets Closing is intended to be held, and
provide all related exhibits.
(b) Subject to the terms and conditions of this Agreement, on
a Group 2 Markets Closing Date, ATI and the Companies shall sell, convey,
transfer, assign and deliver to BellSouth Sub, by deed, bill of sale,
assignment or other appropriate instrument, free and clear of all Liens, except
for the Permitted Liens, the Group 2 Markets Closing Assets (except those MDU
Contracts that are not assignable because a necessary consent to such
assignment has not been obtained) with respect to a particular Group 2 Market
as to which such Group 2 Markets Closing is being held. Subject to the terms
and conditions of this Agreement, on the applicable Group 2 Markets Closing
Date, ATI and the Companies shall assign to BellSouth Sub all of their rights
under the Contracts (except those MDU Contracts that are not assignable because
a necessary consent to such assignment has not been obtained) and the Company
FCC Licenses relating to the applicable Group 2 Markets Closing Assets.
(c) Subject to the terms and conditions of this Agreement, on
the applicable Group 2 Markets Closing Date, BellSouth shall deliver to ATI the
applicable Group 2 Markets Call Purchase Price, the Group 2 Markets Minimum
Purchase Price or the Group 2 Markets Put Purchase Price, as applicable, in
full payment for the applicable Group 2 Markets Closing Assets being acquired
on such Group 2 Markets Closing Date.
(d) On the applicable Group 2 Markets Closing Date, BellSouth
Sub shall assume the applicable Group 2 Closing Assumed Liabilities. Except
for the applicable Group 2 Markets Closing Assumed Liabilities, the Assumed
Liabilities, any Lakeland/Bradenton Assumed Liabilities and any Second Closing
Assumed Liabilities, BellSouth and BellSouth Sub do not and will not assume any
liability or obligation of any kind of ATI or the Companies, or any obligation
relating to the applicable Group 2 Markets Closing Assets, whether absolute or
contingent, accrued or unaccrued, asserted or unasserted, known or unknown, or
otherwise. ATI agrees to indemnify against and holds BellSouth and BellSouth
Sub harmless as provided in Section 7.01 hereof from any such liability or
obligation of ATI or the Companies not specifically transferred to and assumed
by BellSouth Sub.
(e) Subject to the satisfaction or waiver of the Group 2
Markets Closing Conditions, the consummation of the transactions contemplated
by this Section 2.08 for such Group 2 Market will take place on: (i) with
respect to a closing pursuant to Section 2.08(a)(i), the date 90 days following
BellSouth's exercise of the Group 2 Markets Call, or a date or dates, if
applicable, mutually agreed to by ATI and by BellSouth (and in any event within
10 Business Days) after satisfaction or waiver of the Group 2 Markets Closing
Conditions with respect to such Group 2 Market; or (ii) with respect to a
closing pursuant to Section 2.08(a)(ii), the date 90 days following ATI's
exercise of the Group 2 Markets Put or a date or dates, if applicable, mutually
agreed to by ATI and by BellSouth (and in any event
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within 10 Business Days) after satisfaction or waiver of the Group 2 Markets
Closing Conditions with respect to such Group 2 Market. The consummation of
the transactions contemplated by this Section 2.08 for such Group 2 Market will
take place on the applicable Group 2 Markets Closing Date, at the offices of
Hunton & Williams, NationsBank Plaza, 600 Peachtree Street, N.E., Atlanta,
Georgia 30308.
(f) Subject to the terms and conditions of this Agreement, on
the applicable Group 2 Markets Closing Date BellSouth will deposit the
applicable Group 2 Markets Escrow Fund with the Escrow Agent in accordance with
the terms of this Agreement and the Escrow Agreement. To the extent that any
indemnity amounts are to be paid pursuant to Section 7.01 hereof, such amounts
shall be payable to BellSouth initially from the Group 2 Markets Escrow Fund,
and thereafter by ATI as provided in Section 7.01. Within six months of the
last Group 2 Markets Closing Date, the Escrow Agent shall release amounts of
the Group 2 Markets Escrow Fund remaining with the Escrow Agent to ATI or
BellSouth as provided in the Escrow Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ATI AND THE COMPANIES
Each of ATI and the Companies jointly represents and warrants to
BellSouth and BellSouth Sub (such representations and warranties being made (a)
with respect to a Group 1 Market as of the date hereof and (b) with respect to
a Group 2 Market as of a date 30 days prior to the Group 2 Markets Closing Date
with respect to such Group 2 Market) that:
Section 3.01 Organization and Qualification; Subsidiaries. Each of ATI
and the Companies is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has all
requisite corporate power and authority to carry on its business as it is now
being conducted and to own, operate and hold under lease its assets and
properties as, and in the places where, such properties and assets now are
owned, operated or held. Each of the Companies is duly qualified and in good
standing to do business in each jurisdiction in which the nature of the
business conducted by it or the ownership or leasing of its properties makes
such qualification necessary, other than where the failure to be so duly
qualified and in good standing would not have a Company Material Adverse
Effect. The term "Company Material Adverse Effect" as used in this Agreement
means any change or effect that, individually or when taken together with all
other such changes or effects, could reasonably be expected to be materially
adverse to the assets, financial condition, business or operations of the
Wireless Cable Systems. Exhibit 3.01 constitutes a true, correct and complete
list of all of the Subsidiaries of the Companies.
Section 3.02 Authorization; Enforceability. Each of ATI and the
Companies has all requisite corporate power and authority to perform its
obligations hereunder and to consummate the transactions contemplated to be
consummated by it. The execution and
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delivery of this Agreement by each of ATI and the Companies and the
consummation by each of them of the transactions contemplated hereby have been
duly authorized by all necessary corporate action and no other corporate
proceedings on the part of any of ATI or the Companies are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement and all of the other documents and instruments required hereby
have been duly executed and delivered by each of ATI and the Companies and,
assuming the due authorization, execution and delivery hereof by BellSouth and
BellSouth Sub, constitute the legal, valid and binding obligations of each of
ATI and the Companies enforceable in accordance with their respective terms.
Section 3.03 Required Filings and Consents. Neither the execution and
delivery of this Agreement by ATI and the Companies, nor the performance of
this Agreement by ATI and the Companies does or will require any of ATI or the
Companies to obtain any consent, approval, authorization or permit of, or to
make any filing with or notification to any federal, state, local or foreign
government, authority, agency, department, bureau, court, commission or other
body, office or instrumentality (individually a "Governmental Entity" and
collectively, "Governmental Entities"), except for applicable requirements, if
any, of (i) the Communications Act and FCC Rules, (ii) the HSR Act, and (iii)
state securities, "Blue Sky" or takeover laws. Except as set forth on Exhibit
3.03 or with respect to MDU Contracts, there is no requirement that any party
to any Contract consent to the execution and delivery of, or the consummation
of the transactions contemplated by this Agreement. The consummation of the
transactions contemplated hereby will not result in a material change in any
rights or obligations of the parties to any Contract.
Section 3.04 No Conflict. Neither the execution and delivery of this
Agreement by ATI and the Companies nor the performance of this Agreement by ATI
and the Companies does or will (a) conflict with or violate any of the articles
of incorporation or bylaws, partnership or organizational documents, in each
case as amended or restated, of any of ATI or the Companies, (b) conflict with
or violate any federal, state, foreign or local law, statute, ordinance, rule,
treaty, published policy or guideline, regulation, order, judgment or decree
(individually a "Law" and collectively, "Laws") applicable to any of ATI or the
Companies, or by which any of the properties of any of ATI or the Companies are
bound or to which any of its properties are subject, except for those consents
and approvals set forth on Exhibit 5.05, (c) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or require payment under, or result
in the creation of a Lien on any of the properties or assets of any of ATI or
the Companies pursuant to any Contract or, any other note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which any of ATI or the Companies is a party or by
which any of ATI, the Companies or any of their respective properties are bound
or to which any of their respective properties are subject, except as set forth
in Exhibit 3.04 and for such violations, conflicts, defaults or breaches which
would not, singly or in the aggregate, have a Company Material Adverse Effect.
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Section 3.05 Environmental Matters. Each of ATI and the Companies
possesses all environmental permits, licenses, approvals and authorizations
("Company Environmental Permits") which are required under applicable
Environmental Law with respect to the conduct of the business of the Wireless
Cable Systems. Each of ATI and the Companies has conducted the business of the
Wireless Cable Systems in compliance with such Company Environmental Permits
and applicable Environmental Law. No claim has been issued, no complaint has
been filed, no penalty has been assessed and no investigation or review is
pending or threatened by (a) any Governmental Entity with respect to the
handling, treatment, use, storage, recycling, transportation, disposal or
Release of any Hazardous Materials at any location in connection with the
conduct of the business of the Wireless Cable Systems by ATI and the Companies
or (b) any third party relating to personal injuries resulting from the Release
of any Hazardous Materials by ATI or the Companies in connection with the
conduct of the Wireless Cable Systems. Except as permitted by Environmental
Law, neither ATI nor any of the Companies has used, treated, transported,
generated or handled any Hazardous Materials in connection with the conduct of
the business of the Wireless Cable Systems. For purposes of this Agreement,
(i) "Environmental Law" means all applicable current federal, state, and local,
civil and criminal laws, statutes, ordinances, codes, permits, permit
conditions, rules and regulations and common law rights of action relating to
the protection of the environment and human health and safety including,
without limitation, laws governing the handling, use, generation, treatment,
storage, transportation or disposal of Hazardous Materials including, without
limitation, the Resource Conservation and Recovery Act of 1976, the Toxic
Substances Control Act, the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, the Federal Water Pollution Control Act, the Clean
Air Act, the Hazardous Materials Transportation Act, and the Occupational
Safety and Health Act, as each of the foregoing may be amended, (ii) "Hazardous
Materials" means petroleum and petroleum products, radioactive materials,
ionizing and non-ionizing radiation including without limitation
electro-magnetic fields, pesticides, asbestos and asbestos-containing
materials, polychlorinated biphenyls, lead and products containing lead and any
materials or substances defined as or included in the definition of "hazardous
materials," "hazardous wastes," "hazardous substances," "toxic substances,"
"toxic pollutants," "pollutants," "contaminants," "solid wastes" or "regulated
substances" under any applicable Environmental Law and (iii) "Release" means
any spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping, or disposing of a Hazardous Material
into the environment.
Section 3.06 Permits; Compliance.
(a) Except [*] as set forth on Exhibit 3.06, each of ATI and
the Companies is in possession of all grants, authorizations, licenses,
permits, easements, variances, exemptions, consents, certificates, approvals,
leases, rights and orders necessary to own, lease and operate the Wireless
Cable Systems and to carry on its business as it is now being conducted
(collectively, the "Company Permits") and all of the Company Permits
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are in full force and effect and enforceable in accordance with their terms,
except for such terminations, revocations, limitations or impairments which
would not, singly or in the aggregate, have a Company Material Adverse Effect.
Except [*] the terms of such Company Permits are not subject to any
restrictions or conditions that materially limit or would materially limit the
operations of the Wireless Cable Systems as presently conducted or proposed to
be conducted, other than restrictions or conditions generally applicable to
Company Permits of that type. Except as set forth on Exhibit 3.06 [*] there is
no action, proceeding or investigation pending or, to the Knowledge of ATI,
threatened, regarding suspension, termination, revocation or cancellation of
any of the Company Permits. None of the Company Permits will terminate or
lapse by reason of the transactions contemplated by this Agreement. Neither
ATI nor any of the Companies has reason to believe that any Company Permit in
effect on the date hereof will not be renewed in the ordinary course.
(b) Exhibit 3.06 hereto sets forth a list of all material
Company Permits, except for the Capacity Leases listed in Exhibit 3.24, the
Company FCC Authorizations listed in Exhibit 3.23(a), the Site Leases listed in
Exhibit 3.25, the interference and related agreements listed in Exhibit 1.48(C)
and the MDU Contracts.
(c) Except [*] as set forth on Exhibit 3.06, neither ATI nor
any of the Companies: (i) is in material conflict with, default or violation
of the Communications Act, FCC Rules, any Company Permit or any other Laws
applicable to the Wireless Cable Systems, and there exist no conditions or
circumstances which could result in such a material conflict, default or
violation; or (ii) has received from any Governmental Entity any notification
with respect to such possible conflicts, defaults or violations of Laws.
Section 3.07 Company Reports; Financial Statements.
(a) Each of ATI and the Companies has filed in a timely manner
all forms, reports, statements and other documents required to be filed with
any Governmental Entities [*] relating to the Wireless Cable Systems (all such
forms, reports, statements and other documents being referred to herein,
collectively, the "Company Reports"), except where the failure to file such
Company Reports would not have a Company Material Adverse Effect. The Company
Reports, including all Company Reports filed after the date of this Agreement
and prior to the Closing Date, were or will be prepared in substantial
accordance with the requirements of applicable Law and did not at the time they
were filed, or will not at the time they are filed, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
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(b) The Company Financial Statements including, without
limitation, such financial statements previously delivered to BellSouth
(including, in each case, any related notes thereto) are or will be in
accordance with and have been or will be derived from the books and records of
the Companies, have been prepared in accordance with GAAP (except as may be
indicated in the notes thereto, or, in the case of unaudited financial
statements, for normal recurring year-end audit adjustments), and fairly
present or will fairly present in accordance with GAAP throughout the periods
involved (except to the extent required by changes in GAAP) the financial
position of the Companies as of the respective dates thereof and the results of
operations and cash flows for the periods set forth therein.
Section 3.08 Taxes. Except as set forth on Exhibit 3.08 hereto:
(a) each of ATI and the Companies has timely filed or caused
to be filed all Tax returns required to have been filed by or for it on or
before the Closing Date (including, without limitation, information returns and
reports) that relate to the Wireless Cable Systems, except for such returns and
reports for which the failure to so file would not singly or in the aggregate
have a Company Material Adverse Effect, and all information set forth in such
Tax returns is true, correct and complete in all material respects;
(b) each of ATI and the Companies has paid or made adequate
provision on its books and records in accordance with GAAP for (or with
respect to returns or reports not yet filed but due to be filed prior to the
Closing Date, before the Closing Date the Companies or ATI will pay or the
Companies will make adequate provision for) all Taxes covered by such Tax
returns;
(c) each of ATI and the Companies is in material compliance
with, and its records contain all information and documents (including, without
limitation, properly completed IRS Forms W-8 and Forms W-9) necessary to comply
with, all applicable information reporting and tax withholding requirements
under federal, state, local and foreign Laws, and such records identify with
specificity all accounts subject to withholding under Section 1441, 1442 or
3406 of the Code or similar provisions of state, local or foreign laws;
(d) there is not a material amount of unpaid Taxes due and
payable by ATI or the Companies or by any other person that is or could become
a lien on any asset of, or otherwise have a Company Material Adverse Effect on,
the Wireless Cable Systems or that otherwise could materially adversely affect
the ownership or use of the Assets or that could cause BellSouth to incur any
liability, and no such unpaid tax deficiency has been asserted against or with
respect to ATI or the Companies by any taxing authority;
(e) none of the Assets are subject to a "safe harbor lease"
subject to former Section 168(f)(8) of the Internal Revenue Code as in effect
before amendment by the Tax Reform Act of 1984 and the regulations thereunder;
and
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(f) none of ATI and the Companies is a "foreign person" for
purposes of Section 1445 of the Code.
Section 3.09 Litigation.
(a) Except as set forth in Exhibit 3.09 hereto, there is no
claim, action, suit, litigation, proceeding, arbitration or investigation of
any kind, at law or in equity (including, without limitation, actions or
proceedings seeking injunctive relief and any other action or proceeding of any
nature before any Governmental Entity), pending or, to the Knowledge of ATI,
threatened against or affecting any of ATI or the Companies and relating to any
of the Wireless Cable Systems, or any properties or rights of any of ATI or the
Companies and relating to any of the Wireless Cable Systems. Neither ATI nor
any of the Companies is subject to any continuing order of, consent decree,
settlement agreement or other similar written agreement with or, to the
Knowledge of ATI, investigation by, any Governmental Entity, or any judgment,
order, writ, injunction, decree or award of any Governmental Entity or
arbitrator relating to the Wireless Cable Systems including, without
limitation, cease-and-desist or other orders.
(b) Neither ATI nor any of the Companies has admitted in
writing its inability to pay its debts generally as they become due, filed or
consented to the filing against it of a petition in bankruptcy or a petition to
take advantage of any insolvency act, made an assignment for the benefit of
creditors, consented to the appointment of a receiver for itself or for the
whole or any substantial part of its property, or had a petition in bankruptcy
filed against it, been adjudicated a bankrupt, or filed a petition or answer
seeking reorganization or arrangement under the federal bankruptcy laws or any
other similar law of any jurisdiction.
Section 3.10 Absence of Changes. Except as specifically disclosed in
Exhibit 3.10 hereto, since December 31, 1995, neither ATI nor any of the
Companies has suffered any change in its business, financial condition or
results of operations that has had or will have a Company Material Adverse
Effect. Except as disclosed in Exhibit 3.10, there has not been since December
31, 1995 any damage, destruction or loss, whether covered by insurance or not,
which has had or will have a Company Material Adverse Effect.
Section 3.11 Title to and Condition of Assets. Except as stated in
either of the two disclosure letters from ATI to BellSouth dated the date
hereof, the Assets constitute all material assets necessary for each of ATI and
the Companies to own, lease and operate its properties and to carry on the
business of the Wireless Cable Systems. As of the date hereof, each of ATI and
the Companies own, and as of the Closing Date, the Lakeland/Bradenton Markets
Closing Date, the Second Closing Date or Group 2 Markets Closing Date, as
applicable, each of ATI and the Companies will own, good, valid and marketable
title to all of the Assets, the Lakeland/Bradenton Assets, the Second Closing
Assets and the Group 2 Markets Assets, as applicable (excluding, for purposes
of this sentence, assets held under leases), free and clear of any and all
Liens or other restrictions,
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except the Permitted Liens or as required by Capacity Leases or FCC Rules or as
contemplated by the loan dated February 26, 1996 by Banque Indosuez to ATI. [*]
the Assets, together with all assets held by the Companies under leases,
include all tangible and intangible assets, Contracts and rights necessary or
required for the operation of each of the Wireless Cable Systems. Except as
stated in Exhibit 1.112, neither ATI nor any of the Companies owns any right,
title or interest in any real property relating to the Wireless Cable Systems.
Upon delivery of the Assets and payment therefor pursuant hereto, good, valid
and marketable title to the Assets, free and clear of any and all Liens or
other restrictions except the Permitted Liens or as required by Capacity Leases
or FCC Rules, will pass to BellSouth Sub.
Section 3.12 Inventory. The Inventory is useable in the ordinary
course of business of ATI and the Companies as heretofore conducted. The
Inventory shall be of substantially the same quality at the Closing Date as at
November 30, 1996.
Section 3.13 Books and Records. The books and records of each of the
Wireless Cable Systems are true, correct and complete in all material respects
and each of ATI and the Companies have made available to BellSouth and
BellSouth Sub for examination the originals or true, correct and complete
copies of all documents material to the business of the Wireless Cable Systems
and all other documents that BellSouth and BellSouth Sub have requested in
connection with the transactions contemplated by this Agreement.
Section 3.14 Contracts. Exhibit 3.14 hereto lists all of the material
Contracts other than the MDU Contracts and Contracts identified in other
exhibits hereto. True, correct and complete copies of each of such Contracts
have been delivered to BellSouth. Each of the Contracts is in full force and
effect, is enforceable in accordance with its terms and is a valid, legal and
binding obligation of ATI or the Companies, as the case may be, and, to the
Knowledge of ATI, the other parties thereto. Each of ATI and the Companies has
performed in a timely manner each material term, covenant and condition of each
Contract that is to be performed by it and as of the Closing Date each of ATI
and the Companies will be current in payment of all liabilities incurred under
such Contracts, except for such breaches, violations or defaults which would
not, singly or in the aggregate, have a Company Material Adverse Effect. To
the Knowledge of ATI, no event has occurred that would, with the passage of
time or compliance with any applicable notice requirements, constitute a
default under any of such Contracts. To the Knowledge of ATI, no party to any
material Contract intends to cancel, terminate or exercise any option under any
of such Contracts. To the Knowledge of ATI, there is no matter that adversely
affects, or would adversely affect, any Contract that, individually or in the
aggregate, has had or would have a Company Material Adverse Effect.
Section 3.15 Accounts. The Accounts all have arisen from bona fide
transactions in the ordinary course of business, and there are no offsets or
credits that should have been applied against the Accounts that have not been
applied. To the Knowledge of ATI, none of
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the accounts receivable are in dispute or subject to any reduction or
counterclaim, except as may be required under FCC rate re-regulations.
Section 3.16 Real Property. Exhibit 1.112 is a true, correct and
complete list of all Real Property.
Section 3.17 Labor Matters. Except as described in Exhibit 3.17, with
respect to employees of the Companies (i) to the Knowledge of ATI, no senior
executive, key employee or group of employees has any plans to terminate
employment with any of the Companies, (ii) there is no unfair labor practice
charge or complaint against any of the Companies pending or, to the Knowledge
of ATI, threatened before the National Labor Relations Board or any other
comparable authority, (iii) no grievance or any arbitration proceeding arising
out of or under collective bargaining agreements is pending and, to the
Knowledge of ATI, no claims therefor exist or have been threatened, and (iv)
there is no litigation, arbitration proceeding, governmental investigation,
administrative charge, citation or action of any kind pending or, to the
Knowledge of ATI, proposed or threatened against any of the Companies relating
to employment, employment practices, terms and conditions of employment or
wages and hours.
None of the Companies has any collective bargaining relationship or duty
to bargain with any Labor Organization (as such term is defined in Section 2(5)
of the National Labor Relations Act, as amended), and none of the Companies has
recognized any Labor Organization as the collective bargaining representative
of any of its employees. No union representation petition is pending before
the National Labor Relations Board and, to the Knowledge of ATI, there is no
union organizing activity involving the employees of any of the Companies.
Section 3.18 Employee Benefit Plans. For purposes of this Section, the
term "Company Benefit Plans" shall mean all pension, retirement, profit-
sharing, deferred compensation, stock option, stock bonus, stock purchase,
restricted stock, stock appreciation rights, employee stock ownership,
severance pay, vacation, bonus or other incentive plans, and all other employee
programs, arrangements or agreements, whether arrived at through collective
bargaining or otherwise and whether oral or written, all medical, vision,
dental and other health plans, all disability benefits and plans, all life
insurance and death benefit plans, and all other employee benefit plans or
fringe benefit plans, whether oral or written, including, without limitation,
any "employee benefit plan," as that term is defined in Section 3(3) of ERISA,
currently or previously adopted, maintained by, sponsored in whole or in part
by, or contributed to by any of ATI or the Companies or affiliates thereof for
the benefit of employees, retirees, dependents, spouses, directors, independent
contractors or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
are eligible to participate. Any of the Company Benefit Plans which is an
"employee pension benefit plan," as that term is defined in Section 3(2) of
ERISA, is referred to herein as a "Company ERISA Plan."
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No Company Benefit Plan is or has been a multiemployer plan within the
meaning of Sections 3(37) or 4001(a)(3) of ERISA. As to each Company ERISA
Plan which is intended to be qualified (within the meaning of Sections 401(a)
and 501(a) of the Code), ATI and the Companies have either received or timely
applied for a favorable determination letter from the Internal Revenue Service
confirming the tax-qualified status of each such Plan for each year each such
Plan has been in existence, and no circumstances exist which would adversely
affect such qualification. All Company Benefit Plans are in compliance with
the applicable provisions (including, without limitation, any funding
requirements or limitations) of ERISA, the Code and any other applicable Laws,
the breach or violation of which could have a Company Material Adverse Effect.
No Company ERISA Plan which is a defined benefit pension plan has any "unfunded
current liability," as that term is defined in Section 302(d)(8)(A) of ERISA,
and the present fair market value of the assets of any such plan exceeds the
plan's "benefit liabilities," as that term is defined in Section 4001(a)(16) of
ERISA, when determined under actuarial factors that would apply if the plan
terminated in accordance with all applicable legal requirements. No prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975 of the
Code) involving any Company ERISA Plan has occurred that would subject the
Company to any penalty or tax under Section 502(i) of ERISA or Section 4975 of
the Code. ATI and the Companies will not be obligated to make any "excess
parachute payments" within the meaning of Section 280G of the Code or, except
as contemplated by Section 7.06, any severance payments as a result of the
transactions provided for in this Agreement. ATI and the Companies have never
represented, promised, or contracted (whether in oral or written form) to any
current or former employee (either individually or to employees as a group)
that such current or former employee(s) would be provided with life insurance
or employee welfare benefit plan benefits (within the meaning of Section 3(1)
of ERISA) upon retirement or termination of employment, other than continuation
coverage as required by Section 601 of ERISA, and neither ATI or the Companies
nor any Company Benefit Plans have any liability with respect to any such
benefits.
Exhibit 3.18 is a true, correct and complete list of all Company Benefit
Plans and each trust related thereto. ATI and the Companies have provided
BellSouth with access to true, correct and complete copies of each governing
document (including, if applicable, any related trust document), agreement or,
if the plan is not written, the terms of the Plan, for each Company Benefit
Plan, together with the most recent summary plan description, annual report and
audited financial statement for each such plan and the actuarial report for any
Company Benefit Plan that is a defined benefit pension plan or funded welfare
benefit plan.
Section 3.19 Fees and Expenses of Brokers and Others. Neither ATI nor
the Companies (a) has had any dealings, negotiations or communications with any
broker or other intermediary in connection with the transactions contemplated
by this Agreement, (b) is committed to any liability for any brokers' or
finders' fees or any similar fees in connection with the transactions
contemplated by this Agreement or (c) has retained any broker or other
intermediary to act on its behalf in connection with the transactions
contemplated by this Agreement, except that ATI has engaged Gerard Klauer
Mattison & Co., LLC to represent it
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in connection with such transactions, and ATI shall pay all of Gerard Klauer
Mattison & Co., LLC's fees and expenses when due, in connection with such
engagement.
Section 3.20 Accuracy of Information. Neither this Agreement nor any
other document provided by any of ATI or the Companies or their employees or
agents to BellSouth in connection with the transactions contemplated herein
contains an untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained therein not misleading.
Section 3.21 Indebtedness. None of the Wireless Cable Systems shall
have any short or long-term debt or other obligation for money borrowed as of
the Closing Date, the Lakeland/Bradenton Markets Closing Date, the applicable
Second Closing Date or the applicable Group 2 Markets Closing Date and shall
not have any liabilities, contingent or otherwise, except as set forth on the
Closing Company Statement of Assets and Assumed Liabilities.
Section 3.22 Transactions With Affiliates. The Contracts do not
include any obligation or commitment between any of the Companies or ATI and
any Affiliate; the Assets do not include any receivable or other obligation or
commitment from an Affiliate to any of the Companies or ATI; and the
liabilities reflected on the Closing Company Statement of Assets and Assumed
Liabilities do not include any obligation or commitment to any Affiliate.
Section 3.23 FCC Licenses.
(a) Set forth in Exhibit 3.23(a) hereto is a true, correct and
complete list of certain information (set forth below) for each MDS Channel
authorization, ITFS Channel authorization, CARS authorization, Company BTA
Authorization, earth station authorization, OFS authorization and any other
authorization (other than private business radio authorizations) used or useful
with respect to the Wireless Cable Systems granted and issued by the FCC to any
of ATI or the Companies or subject to a Capacity Lease (the "Company FCC
Authorizations," which term shall include all such authorizations held by any
of ATI or the Companies relating to each of the Wireless Cable Systems or which
become subject to a Capacity Lease after the date hereof). For each such
Company FCC Authorization, such exhibit sets forth the (i) name of the
authorized licensee, (ii) FCC call sign, (iii) authorized channel(s), (iv)
construction certification date (if such date has not passed), (v) date on
which the most recent certification or notification of completion of
construction, as appropriate, was filed with the FCC, (vi) license expiration
date, and (vii) if subject to a Capacity Lease, the Company which is the lessee
under such Capacity Lease. Except as set forth on Exhibit 1.101, each MDS
Channel and ITFS Channel is authorized for facilities having identical
parameters to the Market Facilities for its Markets set forth on Exhibit 1.101.
Except [*] as set forth in Exhibit 3.23(a), the grant, renewal or assignment of
each Company FCC Authorization to the existing licensee thereof was approved by
the FCC by Final Order
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and, to the Knowledge of ATI, each such Company FCC Authorization is unimpaired
by any act or omission of any such licensee or the Companies. Except as set
forth in Exhibit 3.23(a) [*] with respect to the Company FCC Licenses, there is
no complaint, inquiry, investigation or proceeding pending before the FCC or,
to the Knowledge of ATI, threatened, which, if determined as requested by the
moving party or as indicated in any document initiating any inquiry,
investigation or proceeding, could result in the revocation, modification,
restriction, cancellation, termination, non-renewal or other action which is
adverse to ATI or the Companies, or the imposition of a monetary forfeiture.
Except as set forth in Exhibit 3.23(a) [*] with respect to the Company FCC
Authorizations subject to a Capacity Lease, to the Knowledge of ATI, there is
no complaint, inquiry, investigation or proceeding pending before the FCC or
threatened, which, if determined as requested by the moving party or as
indicated in any document initiating any inquiry, investigation or proceeding,
could result in the revocation, modification, restriction, cancellation,
termination, non-renewal or other action which is adverse to ATI or the
Companies, or the imposition of a monetary forfeiture. True, correct and
complete copies of all Company FCC Authorizations, as modified, have been
provided to BellSouth.
(b) Exhibit 3.23(b) sets forth a true, correct and complete
list of certain information (set forth below) for all MDS Basic Trading Areas
("BTAs") relating to the Markets for which any of ATI or the Companies have
been granted by Final Order and issued an MDS authorization by the FCC (the
"Company BTA Authorizations"). Exhibit 3.23(b) sets forth for each BTA
Authorization (i) the name of the BTA, (ii) the build-out deadline, and (iii)
the expiration date of such Company BTA Authorization. ATI or the Companies
have made payment in full to Rand McNally & Company for use of the terms "Basic
Trading Area" and "BTA." True, correct and complete copies of all Company BTA
Authorizations have been provided to BellSouth.
(c) Except [*] or as set forth in Exhibit 3.23(a): (i) the
facilities subject to a Company FCC Authorization listed on Exhibit 3.23(a), if
a Constructed Channel, are operating and at all times since ATI or the
Companies first had use of the Channel under the Capacity Lease or held the FCC
authorization therefor have operated consistent with the FCC authorization
therefor, the Communications Act and FCC Rules, and (ii) to the Knowledge of
ATI, such Constructed Channels so operated prior to such time. Except [*] or
Exhibit 3.23(c), ATI or the Companies is not transmitting from or otherwise
operating any facility that is not the subject of a Company FCC Authorization.
Except as stated on Exhibit 3.23(c), none of the facilities subject to a
Company FCC Authorization, (i) is subject to any agreement which requires or
could require the Channel to operate with technical facilities different than
those authorized (unless such requirement is required by FCC Rules or is
typical of such agreements), to cease operation, or, other than Channel use
reserved by the lessors under the Capacity Leases, to limit the hours of
operation or to accept interference, (ii) is authorized pursuant to
authorization which is subject to challenge before the United States Court of
Appeals, or (iii) is subject to any lease, sub-lease or any
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agreement to make it available to a third party. Except as stated on Exhibit
3.23(a), to the Knowledge of ATI, no Channel listed on such exhibit is subject
to: (X) a revocation proceeding, or (Y) a pending request for waiver of Section
21.303 (if an MDS Channel). Each Constructed Channel is transmitting video
programming to antennas capable of receiving such programming. No H-group
Channel listed on such exhibit is regulated under Part 101 of the FCC Rules or
is not regulated under Part 21 of the FCC Rules.
(d) Exhibit 3.23(d) is a true, correct and complete list of
certain information (set forth below) for all pending applications (the
"Pending Applications") for new MDS and ITFS station authorizations,
modification of MDS and ITFS station authorizations, extensions of time to
construct MDS and ITFS stations and renewal of ITFS and MDS station
authorizations in a Market filed by any of ATI or the Companies or subject to
any Capacity Lease in a Market. Except as set forth on Exhibit 3.23(d), each
Pending Application, if an MDS application, complies with Sections 21.5, 21.6,
21.7 and 21.11 of FCC Rules and if an ITFS application, complies with Sections
74.911(c)(1), 73.3500, 73.3511 and 73.3513 of FCC Rules, and if a modification
application, to the Knowledge of ATI, such application represents that the
proposal is consistent with the requirement to protect adjacent and co-channel
stations and auction winners for adjacent BTAs from harmful interference as
defined by FCC Rules. Except as set forth on Exhibit 3.23(d), no such
application (i) is subject to any informal objection or petition to deny; (ii)
proposes facilities that the FCC has advised ATI or the Companies or, to the
Knowledge of ATI, the applicant, that are predicted to cause impermissible
interference as determined by FCC Rule 74.903 or 21.902, as applicable; (iii)
relies upon any consent or acceptance of the interference that would be created
by such proposed facility, except with regard to Company Channels in the Group
1 Markets; or (iv) proposes carrier offset to limit either caused or received
interference. Exhibit 3.23(d) is a true, correct and complete list for each
Pending Application of (i) the name of the applicant, (ii) the FCC file number,
(iii) the proposed channel(s), and (iv) the general purposes of such
applications. True, correct and complete copies of all Pending Applications,
as amended or supplemented, have been provided to BellSouth.
(e) Except as [*] since ATI or the Companies first had use of
the Channel under a Capacity Lease or held an FCC authorization for the
Channel: (i) each of ATI and the Companies and, to the Knowledge of ATI, each
lessor has timely filed all Annual FCC Reports relating to such Wireless Cable
Systems, except as set forth in Exhibit 3.23(e) or to the extent that the
failure to timely file such Annual FCC Reports will not have a Company Material
Adverse Effect and (ii) each such Annual FCC Report filed by ATI or the
Companies, and to the Knowledge of ATI each other Annual FCC Report, is true,
correct and complete.
Section 3.24 ITFS and MDS Lease Agreements. Exhibit 3.24 is a true,
correct and complete list of all agreements currently in force with respect to
the lease to or lease by any of ATI or the Companies of MDS or ITFS station
transmission capacity or licenses, including any such agreement with respect to
station capacity where the station has not yet
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been authorized, relating to any of the Wireless Cable Systems (the "Capacity
Leases," which term shall include each such agreement acquired by any of ATI or
the Companies, when acquired, after the date hereof). Each Capacity Lease is
in full force and effect. To the Knowledge of ATI, except as set forth on
Exhibit 3.24, each Capacity Lease meets all requirements of law and regulation,
and is enforceable in accordance with its terms except as such enforceability
may be limited by receivership, insolvency and debtor relief laws. Exhibit
3.24 sets forth for each Capacity Lease a true, correct and complete
description of: (i) the name of the lessor; (ii) the channels to which any of
ATI or the Companies has the right to use transmission capacity; and (iii) any
obligations continuing after the non-renewal, expiration or termination of such
Capacity Lease. There has been no event or circumstances which will give any
right to any party to increase, change or materially adversely modify any usage
of any Channel under any Capacity Lease, except as specifically set forth in
the terms of such Capacity Lease. Except for airtime described in the Capacity
Leases, either ATI or one of the Companies has the sole right to use the
Channels under each Capacity Lease required to conduct its business as
currently conducted. To the Knowledge of ATI, (other than the terms of each
Capacity Lease and FCC Rules limiting the duration of such Capacity Leases)
there are no facts or circumstances that might (whether with or without notice,
lapse of time or the occurrence of any other event) reasonably give rise to the
issuance of any such notice or which might preclude the renewal of such
Capacity Leases in the normal course in accordance with their terms. There is
no default, and to the Knowledge of ATI, no party has threatened default, under
any Capacity Lease and the consummation of the transactions contemplated by
this Agreement, subject to the receipt of the consents of lessors which are
listed on Exhibit 5.05, will not cause any default of any Capacity Lease.
Except as set forth on Exhibit 3.24, no party to any Capacity Lease has
claimed, and to the Knowledge of ATI, no party has threatened, in any written
or oral statement to any of ATI or the Companies that such party has a right to
terminate the Capacity Lease prior to or at the Closing, the Second Closing or
the Group 2 Markets Closing, as the case may be, or to seek damages against any
of ATI or the Companies for the violation by any of ATI or the Companies of
such lease. No party to any Capacity Lease requires the consent of any third
party (other than FCC) to make the lease binding and enforceable against such
party in accordance with its terms or to deprive such party of the right to
void the lease. True, correct and complete copies of all Capacity Leases, as
amended, have been provided to BellSouth.
Section 3.25 Site Leases and Lease Options.
(a) Set forth on Exhibit 3.25 is a true, correct and complete
list of the transmitter site leases held by each of ATI or the Companies
relating to each of the Wireless Cable Systems (a "Site Lease," which term
shall include each of ATI's and the Companies's transmitter Site Leases
acquired by any of ATI or the Companies, when acquired, after the date hereof
relating to each of the Wireless Cable Systems). Except as set forth on
Exhibit 3.25, each Site Lease is in full force and effect and is enforceable in
accordance with its terms. There is no default of any Site Lease, and no party
to any Site Lease has given the other party thereto any notice of default
thereunder, except as identified on Exhibit 3.25. Except as stated on Exhibit
3.25, the consummation of the transactions contemplated by this
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Agreement will not cause a default under any Site Lease. Exhibit 3.25
accurately sets forth, for each Site Lease, the parties, the location of the
real property subject thereto, the rental and the term. True, correct and
complete copies of all Site Leases, as amended, have been provided to
BellSouth.
(b) To the Knowledge of ATI, none of the real property subject
to any Site Lease is subject to any condemnation proceeding; no lease or use of
any such real property exists which would interfere with the use of such
property as contemplated in any Site Lease for the property; there is no
existing written notice covering future condemnation thereof; and, to the
Knowledge of ATI, no such real property will be condemned or subject to
condemnation proceedings.
(c) To the Knowledge of ATI, the real property described in
each Site Lease is of sufficient size so as to permit the erection of a guyed
tower of the size contemplated in the FCC authorizations for ITFS and MDS
stations authorized by the FCC to be built or that exist at that real property
or contemplated in pending applications to the FCC for such authorizations. To
the Knowledge of ATI, neither the erection of any such tower, nor the
construction of a utility building adjacent thereto, nor the operation of ITFS
or MDS radio stations at any such site will violate the provisions of any
applicable building codes, fire regulations, building restrictions, land use
regulations, safety regulations, environmental regulations, deed covenants,
agreement, zoning, or other governmental ordinances, orders or regulations.
(d) To the Knowledge of ATI, there are no leases, rental
agreements, option agreements, employment contracts, or contracts for service
or maintenance existing and relating to or connected with the occupancy or
operation of any of the real property subject to a Site Lease other than as
listed on Exhibit 3.25. True, correct and complete copies of all such
agreements have been provided to BellSouth. Neither ATI nor any of the
Companies has any interest, present or future, in any of such real property
except for the interest as shown in Exhibit 3.25.
(e) All of the real property subject to Site Leases is freely
accessible directly from public streets, or any use of adjoining private land
to access the same is done in accordance with valid public or private easements
which are included in the applicable Site Lease.
Section 3.26 Interference Consents. Except with respect to Company
Channels between or among Group 1 Markets or as described in Exhibit 1.48(C),
as of the date of this Agreement, there are no agreements or, to the Knowledge
of ATI, understandings (written or oral) between any of ATI or the Companies
and any present or proposed wireless cable system operator or MDS or ITFS
capacity lessor or applicant with respect to adjacent market interference
affecting the Markets, the coordination of adjacent market channel use or other
matters concerned with the operation of channels in adjacent markets or
obtaining the assistance of a party's Channel capacity lessors or agreements
for the partitioning of any
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BTA listed in Exhibit 3.23(b). The Companies have delivered to BellSouth true,
correct and complete copies of all such agreements and understandings.
Section 3.27 Operating Markets.
(a) Exhibit 3.27 sets forth true, correct and complete
information concerning the number of subscribers to each of its Wireless Cable
Systems, the subscriber rates, and the type of programming offered on each of
the channels.
(b) The Equipment used in each of the Company Operating
Systems is in normal operating condition and repair (reasonable wear and tear
excepted), does not require and is not reasonably expected to require any
special or extraordinary expenditures to remain in such condition, and can be
used for the purposes for which it is presently being used.
(c) All transmitters used in the Wireless Cable Systems meet,
in all material respects, applicable FCC type acceptance and frequency
stability requirements.
(d) Except as set forth in Exhibit 3.27, no Company Operating
System has received any complaint which has not been resolved that it, or, to
the Knowledge of ATI, any Channels used in such Company Operating System is
causing interference to any reception, transmission or detection system.
(e) Except as set forth on Exhibit 3.27 or in either of the
two disclosure letters from ATI to BellSouth dated the date hereof, no Company
Operating System requires any authorization from any Governmental Entity that
has not been obtained for any Company Operating System to operate as currently
operated.
Section 3.28 Retransmission Consent; Programming Agreements.
(a) Except as set forth on Exhibit 3.28(a), each of the
Companies has the written consent to the retransmission of each Broadcast
Station whose signal is "retransmitted" by a Company Operating System. As used
in this Section, the term "Broadcast Station" means a television broadcast
station, a television translator station, a low power television station, an
educational television broadcasting station, and includes every category of
broadcast station that may enjoy must-carry rights under FCC Rules, but does
not include a "superstation" as defined by FCC Rule 76.64(c)(2) actually
received by the Company Operating System by satellite downlink. The term
"retransmitted" means the receipt and retransmission of a signal, but does not
include the reception described in FCC Rule 76.64(e). A true, correct and
complete list of each retransmission consent agreement, including the term and
the payment terms of the agreement, is set forth as Exhibit 3.28(a). True,
correct and complete copies of all such retransmission consent agreements have
been provided to BellSouth.
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(b) Exhibit 3.28(b) is a true, correct and complete list of
all agreements for programming relating to the Company Operating Systems, and
for each such programming agreement: (i) the name of the programmer; and (ii)
the programming service.
Section 3.29 Copyright. Except as set forth in Exhibit 3.29 [*] each
of ATI and the Companies have timely filed with the Copyright Office semi-
annual statements of account for each Company Operating System for each use by
any of ATI or the Companies of MDS or ITFS Channels which require a compulsory
license for each period during which it has operated by serving subscribers.
Except as set forth in Exhibit 3.29, each such statement of account accurately
sets forth all information required to appear on such statement by the
statement and by applicable rules of the Copyright Office, and accurately
states the fees due with respect to such statement. Except as stated in either
of the two disclosure letters from ATI to BellSouth dated the date hereof, all
such fees have been timely paid or, if not timely paid in full, any such
shortfalls have been subsequently paid in full to the satisfaction of the
Copyright Office. Except as set forth in Exhibit 3.29, to the Knowledge of
ATI, neither ATI nor any of the Companies is liable to any person for copyright
infringement under the Copyright Act as a result of its business operations.
Except as set forth in Exhibit 3.29, there have been no unresolved inquiries
received from the Copyright Office or any other party which questioned such
statements of account or any copyright royalty payments made by any of ATI or
the Companies with respect to any Company Operating System, and no claim,
action or demand for copyright infringement or for non-payment of royalties is
pending or, to the Knowledge of ATI, threatened with respect to any Company
Operating System. True, correct and complete copies of such copyright
statements of account have been provided to BellSouth.
Section 3.30 Cable Systems. Except for the Cable Systems, none of the
Wireless Cable Systems, or any part thereof, is a "cable system" as that term
is defined in 47 U.S.C. Section 522(7), or has a relationship with a "cable
system" that is prohibited by FCC Rules.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BELLSOUTH
AND BELLSOUTH SUB
Each of BellSouth and BellSouth Sub jointly represents and warrants to
ATI and the Companies that:
Section 4.01 Organization and Qualification. Each of BellSouth and
BellSouth Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has all
requisite corporate power and authority to carry on its business as it is now
being conducted and to own, operate and hold under lease its assets
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and properties as, and in the places where, such properties and assets now are
owned, operated or held.
Section 4.02 Authorization; Enforceability. Each of BellSouth and
BellSouth Sub has all requisite corporate power and authority to perform its
obligations hereunder and to consummate the transactions contemplated to be
consummated by it. The execution and delivery of this Agreement by BellSouth
and BellSouth Sub and the consummation by each of them of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
and no other corporate proceedings on the part of BellSouth or BellSouth Sub
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement and all of the other documents and
instruments required hereby have been duly executed and delivered by BellSouth
and BellSouth Sub and, assuming the due authorization, execution and delivery
hereof by ATI and the Companies, constitute the legal, valid and binding
obligations of BellSouth and BellSouth Sub enforceable in accordance with their
respective terms.
Section 4.03 Required Filings and Consents. Neither the execution and
delivery of this Agreement by BellSouth and BellSouth Sub, nor the performance
of this Agreement by BellSouth and BellSouth Sub does or will require BellSouth
or BellSouth Sub to obtain any consent, approval, authorization or permit of,
or to make any filing with or notification to any Governmental Entity, except
for applicable requirements, if any, of (i) the Communications Act and FCC
Rules, and (ii) the HSR Act.
Section 4.04 No Conflict. Neither the execution and delivery of this
Agreement by BellSouth and BellSouth Sub nor the performance of this Agreement
by BellSouth and BellSouth Sub does or will (a) conflict with or violate the
articles of incorporation or bylaws, in each case as amended or restated, of
BellSouth or BellSouth Sub, (b) conflict with or violate any Laws applicable to
BellSouth or BellSouth Sub, or by which any of BellSouth's properties are bound
or to which any of its properties are subject, except for those consents and
approvals set forth on Exhibit 5.05 or (c) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or require payment under, or result
in the creation of a Lien on any of the properties or assets of BellSouth or
BellSouth Sub pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which BellSouth or BellSouth Sub is a party or by which BellSouth, BellSouth
Sub or any of their respective properties are bound or to which any of their
respective properties are subject, such that the occurrence of any of the above
events would have a BellSouth Material Adverse Effect. The term "BellSouth
Material Adverse Effect" as used in this Agreement means any change or effect
that, individually or when taken together with all other such changes or
effects, could reasonably be expected to be materially adverse to the assets,
financial condition, business or operations of BellSouth on a consolidated
basis.
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Section 4.05 Fees and Expenses of Brokers and Others. Neither
BellSouth nor BellSouth Sub (a) has had any dealings, negotiations or
communications with any broker or other intermediary in connection with the
transactions contemplated by this Agreement, (b) is committed to any liability
for any brokers' or finders' fees or any similar fees in connection with the
transactions contemplated by this Agreement or (c) has retained any broker or
other intermediary to act on its behalf in connection with the transactions
contemplated by this Agreement, except that to the extent BellSouth engages
Bear, Stearns & Co., Inc. as a financial advisor in connection with such
transaction, BellSouth shall pay all of Bear, Stearns & Co., Inc.'s fees and
expenses in connection with such engagement.
ARTICLE V
COVENANTS
From and after the date of this Agreement and until the Closing Date,
the Lakeland/Bradenton Markets Closing Date or the final Second Closing Date,
as the case may be, or with respect to Section 5.02, Section 5.03, Section
5.04, Section 5.05 and Section 5.06, as such sections relate to the Group 2
Markets (the "Group 2 Markets Covenants"), the Group 2 Markets Termination
Date:
Section 5.01 Conduct of the Businesses of the Wireless Cable Systems.
Except as otherwise expressly provided in this Agreement, with respect to the
Wireless Cable Systems, each of ATI and the Companies will, and ATI will cause
each of the Companies to, conduct its operations according to its ordinary and
usual course of business and consistent with past practice, except as otherwise
set forth herein or as reasonably requested by BellSouth, and will use its
Commercially Reasonable Best Efforts to preserve intact its business
organization, goodwill, properties and assets, to keep available the services
of its and their officers and employees and to maintain satisfactory
relationships with licensors, licensees, lessors, suppliers, contractors,
subscribers and others having material business relationships with it or them;
provided that ATI and the Companies will have no obligation with respect to
maintenance of subscriber levels except as contemplated by Section 5.12.
Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement,
(a) neither ATI nor the Companies will, without the prior
written consent of BellSouth, or as otherwise contemplated by this Agreement,
take any of the following actions which would affect the Wireless Cable
Systems, which consent shall not be unreasonably withheld, conditioned, or
delayed:
(i) enter into any Contract, or alter, amend, modify or
exercise any option under any existing Contract, other than in the
ordinary course of business or in connection with the transactions
contemplated by this Agreement;
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(ii) sell or dispose of any Asset with a value in excess
of $1,000;
(iii) make any material change to its financial
statements or take any action, other than in the ordinary course of
business and in a manner consistent with past practice or to comply with
GAAP, with respect to accounting policies or practices;
(iv) make any material Tax election or settle or
compromise any material federal, state, local or foreign income Tax
liability;
(v) take any action that would or is reasonably likely
to result in any of the conditions set forth in Article VI not being
satisfied as of the Closing Date;
(vi) sell, assign, lease, waive or grant rights with
respect to, sublease or otherwise transfer or dispose of (A) any
Capacity Lease, (B) any Site Lease, or (C) any other asset or property
of any of ATI or the Companies relating to the Wireless Cable Systems;
(vii) modify, amend, supplement or agree to a novation of
any Capacity Lease or any Site Lease;
(viii) allow, suffer or permit any default of ATI or the
Companies under any Site Lease or Capacity Lease; or
(ix) agree in writing or otherwise to take any of the
foregoing actions;
(b) each of ATI and the Companies will, and ATI will cause
each of the Companies to:
(i) use its Commercially Reasonable Best Efforts (A) to
cause to be maintained in full force and effect, and (B) to cause the
holders to renew and to extend when required to prevent their lapse, all
Company FCC Authorizations;
(ii) timely and completely perform each and every
material obligation of it in each Capacity Lease, and under each Site
Lease and Company FCC License, including but not limited to the filing
of Annual FCC Reports;
(iii) (A) prosecute and defend diligently and in good
faith each MDS and ITFS station application and authorization; (B)
request and use its Commercially Reasonable Best Efforts to cause each
of its lessors to prosecute and defend diligently and in good faith each
MDS and ITFS application and authorization subject to a Capacity Lease
and otherwise enforce all of its rights in this regard under each
Capacity Lease; (C) use Commercially Reasonable Best Efforts to prevent
any such
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lessor from entering into any agreement on or with respect to its
proposed or authorized ITFS or MDS Channel capacity for the Market to
which the Capacity Lease relates without the prior consultation with and
the prior approval of BellSouth, such approval not to be unreasonably
withheld; (D) not enter into any agreement on or with respect to its
proposed or authorized MDS Channel capacity or its leased MDS or ITFS
Channel capacity in the Market without the prior consultation with and
the prior approval of BellSouth, such approval not to be unreasonably
withheld; and (E) not enter into any agreements in the Market to accept
harmful interference as prescribed by FCC Rules and to use its
Commercially Reasonable Best Efforts prevent its lessors in the Market
from entering into any such agreements without the prior consultation
with and the prior approval of BellSouth, such approval not to be
unreasonably withheld;
(iv) use its Commercially Reasonable Best Efforts (A) to
prevent the modification of any Company FCC Authorization, except for
such modifications as are required by this Agreement, specifically
approved by BellSouth or are authorized on the date of this Agreement or
which become authorized pursuant to applications pending on the date of
this Agreement and listed in Exhibit 3.23(d); and (B) to prevent the new
application, or amendment to any pending application, to the FCC for
authorization related to any Capacity Lease except (1) as required to
comply with this Agreement, including but not limited to Section
5.01(b)(iii)(E), (2) as specifically required by the terms of the
Capacity Lease, (3) as required by the terms of an applicable FCC
license, or (4) as may be reasonably required to operate the Wireless
Cable System in accordance with the usual and ordinary course of
business consistent with past practices;
(v) cause each of the Company Operating Systems (A) not
to reduce materially the present subscriber service rates and
installation rates, (B) to adhere to the current practice with respect
to bad debt, collection of subscriber accounts and deactivation of
delinquent account service; (C) to collect accounts receivable only in
the ordinary course consistent with its past practices; and (D) to take
no action designed to accelerate or likely to accelerate the collection
of its accounts receivable;
(vi) except as otherwise set forth herein or as
requested by BellSouth, cause each of the Wireless Cable Systems to be
operated diligently in the ordinary course of business in accordance
with past practices for such operation;
(vii) at least five days prior to the applicable closing,
deliver to BellSouth a list of all material contracts entered into by
the Companies between the date of this Agreement and such closing,
together with copies of such contracts; provided, that a contract shall
be considered material if (A) it is a Capacity Lease or an amendment of
a Capacity Lease or (B) it has a term exceeding one year or obligates
the Companies to provide services or materials with a cost, or to make
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purchases for total consideration, in excess of $50,000.00 individually
and $250,000.00 in the aggregate for all Contracts;
(viii) (A) take all reasonable actions to maintain all of
the Assets in good condition (ordinary wear and tear excepted), and use,
operate, and maintain all of such Assets in a reasonable manner; (B)
maintain inventories of spare parts, subscriber reception equipment and
expendable supplies at levels consistent with past practices, except
that the Companies may transfer such inventories to other affiliates of
ATI if such inventories are not reasonably necessary to support the
operations of the Wireless Cable Systems in light of the level of Basic
Subscribers; (C) if any loss, damage, impairment, confiscation, or
condemnation of or to any of such Assets occurs, repair, replace or
restore such Assets to their prior condition as soon thereafter as
possible, and to use the proceeds of any claim under any insurance
policy to replace such Assets that are lost, damaged, impaired or
destroyed;
(ix) maintain insurance policies on each of the Wireless
Cable Systems, its equipment, the interruption of its business,
liability, workman's compensation, fire, libel and slander, and casualty
consistent with current practices;
(x) ensure that there is no material change in the
broadcast hours or in the current program lineup transmitted by the
Company Operating Systems, and that there is not any other material
change in any of the Company Operating Systems' programming policies,
other than adding programming networks under agreements entered into in
the usual and ordinary course of business and on terms and conditions
typical in the wireless cable industry and fair to ATI and the
Companies;
(xi) use its Commercially Reasonable Best Efforts to
preserve the business and organization of the Wireless Cable Systems and
use its Commercially Reasonable Best Efforts to keep available to the
Wireless Cable Systems its present employees and to preserve its present
relationships with suppliers, programmers, and others having business
relations with them;
(xii) promptly notify BellSouth as personnel vacancies
occur at the system manager or assistant system manager level in the
Company Operating Systems and consider for employment all personnel
recommended by BellSouth for such vacant positions;
(xiii) use its Commercially Reasonable Best Efforts to
obtain estoppel certificates substantially in the form of Exhibit
5.01(b)(xiii) hereto from each lessor under each Capacity Lease and
under each Site Lease;
(xiv) cooperate with BellSouth in its efforts to arrange
meetings with, and to obtain information from, the lessors and other
parties under the Capacity Leases, including without limitation causing
BellSouth representatives to attend
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meetings with such lessors and other parties; provided that BellSouth
representatives may not meet with or speak with such lessors, unless any
ATI representative has been afforded the reasonable opportunity to
participate in such meeting or conversation; and
(xv) on or prior to the Closing, take the actions set
forth in Exhibit 5.01(b)(xv) [*] with respect to the Markets identified
in such Exhibit or such letter.
Section 5.02 No Solicitation. Each of ATI and the Companies agrees
that it shall not, directly or indirectly, through any officer, director,
employee, agent, stockholder, Affiliate, or any representative of such entity
or otherwise, initiate, solicit, pursue, or continue any discussions,
negotiations, or agreements (whether preliminary or definitive) with any Person
or entity other than BellSouth contemplating or providing for any merger, share
exchange, acquisition, purchase or sale of all or (other than in the ordinary
course of business) a substantial portion of the assets of, or any equity
interest in, any of the Companies or any other change in control involving any
of the Companies (each, a "Competing Transaction") or, participate in any
negotiations regarding, or furnish to any other person any information with
respect to, or otherwise cooperate in any way with, or assist or participate
in, facilitate or encourage, any effort or attempt by any other person to do or
seek any Competing Transaction. ATI and the Companies shall promptly advise
BellSouth if any such proposal or offer, or any inquiry or contact with any
Person relating to any such proposal or offer with respect to any Competing
Transaction, is made, shall promptly inform BellSouth of all the terms and
conditions thereof, and shall furnish to BellSouth copies of any such written
proposal or offer and the contents of any communications in response thereto.
ATI and the Companies shall not waive any provisions of any "standstill"
agreements between ATI or the Companies and any party relating to the Markets.
Section 5.03 Access to Information; Confidentiality Agreement.
(a) Each of ATI and the Companies will give BellSouth,
BellSouth Sub and their authorized representatives reasonable access during
normal business hours to all offices and other facilities and to all books and
records of the Companies, will permit BellSouth and BellSouth Sub to make such
inspections as each may reasonably request and will cause their officers and
those of its Subsidiaries to furnish such financial and operating data and
other information with respect to its businesses and properties and relating to
each of the Wireless Cable Systems as may from time to time reasonably be
requested. Subject to Section 5.06 hereof, all such information shall be kept
confidential in accordance with the Confidentiality Agreement.
(b) Notwithstanding the execution of this Agreement, the
Confidentiality Agreement shall remain in full force and effect through the
last Group 2 Markets Closing Date, at which time the Confidentiality Agreement
shall terminate and be of no further force
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and effect. Each party further acknowledges that the Confidentiality Agreement
shall survive any termination of this Agreement pursuant to Section 8.01
hereof.
Section 5.04 Best Efforts. Subject to the terms and conditions herein
provided each of the parties hereto agrees to use its Commercially Reasonable
Best Efforts to take, or cause to be taken, all action, and to do, or cause to
be done, all things necessary, proper and advisable under applicable Law, to
consummate and make effective the transactions contemplated by this Agreement,
including cooperation with respect to the transactions contemplated by
Lakeland/Bradenton Markets Closing, the Second Closing(s) and the Group 2
Markets Closing(s) and performing their obligations with respect to the Miami
Market which are contemplated by paragraph A4 of Exhibit 1.111. BellSouth and
BellSouth Sub agree not to take, or cause to be taken, any action that would
hinder, delay or prevent ATI's efforts to satisfy the Market Delivery
Requirement, or the Market Delivery Requirement--Post-Closing Date, and agree
to cooperate with and assist ATI in satisfying such requirements. From and
after the date hereof BellSouth and BellSouth Sub shall use their Commercially
Reasonable Best Efforts to take all necessary actions to ensure that, at the
Closing, the Lakeland/Bradenton Markets Closing, the Second Closing, and the
Group 2 Markets Closing, as applicable, the consummation of the transactions
contemplated hereunder at such closing will not violate the FCC's "cable/MDS-
ITFS cross ownership" restrictions contained in Section 613(a)(2) of the
Communications Act and/or Sections 21.912 and 74.931(h) of FCC Rules. In case
at any time after the Closing Date, the Lakeland/Bradenton Markets Closing
Date, a Second Closing Date or a Group 2 Markets Closing Date any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of each party to this Agreement shall take
all such necessary action. BellSouth, BellSouth Sub, ATI and the Companies
will execute any additional instruments necessary to consummate the
transactions contemplated hereby.
Section 5.05 Consents. Each of ATI and the Companies will use its
Commercially Reasonable Best Efforts to obtain any and all consents of all
third parties (including, without limitation, the lessor under each Contract
and Governmental Entities (including, without limitation, the FCC)) necessary
to the consummation of the transactions contemplated by this Agreement. Such
consents, except for consents required under the MDU Contracts, shall be
identified on Exhibit 5.05. Within 10 Business Days of the date of this
Agreement, ATI and the Companies shall tender to BellSouth the assignor's
portion of one or more applications on the proper FCC forms requesting the
FCC's consent to the assignment of each Company FCC License, such applications
being executed, as appropriate, by ATI, the Companies and Patrick D. McConnell,
and the assignor's portion thereof being fully completed. BellSouth shall be
responsible for preparing the assignee's portion of such assignment
applications and for filing the applications with the FCC within 10 Business
Days of BellSouth's receipt of ATI's and the Companies's and assignor's portion
of the applications. Each party shall cooperate with the other fully in
prosecuting such applications, such cooperation including but not limited to
responding in a timely fashion to all FCC inquiries concerning such
applications, preparing suitable amendments to such applications, otherwise
taking such reasonable actions and refraining from taking such actions as best
conducive to the grant of
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such applications and joining in such appeals and requests for reconsideration
of adverse FCC orders as BellSouth may wish to appeal or to request
reconsideration.
Section 5.06 Public Announcements. The parties hereto have agreed upon
the text of a joint press release announcing, among other things, the execution
of this Agreement, which joint press release shall be disseminated promptly
following the execution hereof. Each of ATI and the Companies and BellSouth
will consult with each other before issuing any additional press release or
otherwise making any additional public statement with respect to this
Agreement, or the transactions contemplated herein and shall not issue any such
press release or make any such public statement prior to such consultation or
as to which the other party promptly and reasonably objects, except as may be
required, in the written opinion of such party's counsel, by Law or by
obligations pursuant to any listing agreement with any national securities
exchange or inter-dealer quotation system, in which case the party proposing to
issue such press release or make such public announcement shall use its
Commercially Reasonable Best Efforts to consult in good faith with, and
accommodate the reasonable comments of, the other party before issuing any such
press release or making any such public announcements.
Section 5.07 Negotiation of Capacity Leases. ATI and the Companies
shall use their Commercially Reasonable Best Efforts to enter into negotiations
for the amendment or renewal of the Capacity Leases identified on Exhibit
5.07(a) prior to the Closing Date, such amended and renewed Capacity Leases to
have the terms set forth in Section 1.48(E) and be otherwise reasonably
acceptable to BellSouth. ATI and the Companies shall use their Commercially
Reasonable Best Efforts to enter into negotiations for the Capacity Leases with
the parties identified on Exhibit 5.07(b) prior to the Closing Date, such
leases to have the terms set forth in Section 1.48(E) and be otherwise
reasonably acceptable to BellSouth.
Section 5.08 Control of Wireless Cable Systems. Prior to Closing, and
notwithstanding any other provision of this Agreement, BellSouth and BellSouth
Sub shall not directly or indirectly control, supervise or direct, or attempt
to control, supervise or direct, any activities associated with the Wireless
Cable Systems. Such activities shall be the sole responsibility of and in the
complete discretion of the holders of the Company FCC Authorizations.
Section 5.09 HSR Filings. Within 30 days of the date of this
Agreement, each of ATI and the Companies and BellSouth shall make any and all
filings that the parties determine are required under the HSR Act. In the
event a reviewing governmental agency seeks additional information, through a
second request or otherwise, each of the parties shall comply with the request
with reasonable promptness.
Section 5.10 Lakeland. ATI shall use its Commercially Reasonable Best
Efforts to cause Patrick D. McConnell to assign to BellSouth Sub as of the
Closing Date or the Lakeland/Bradenton Markets Closing Date, as applicable, the
Company FCC Licenses held by him relating to the Lakeland Market.
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Section 5.11 Programming and Billing Agreements. ATI shall use its
Commercially Reasonable Best Efforts, to cause (a) each programmer under each
agreement for programming relating to the Wireless Cable Systems to agree to
provide programming to BellSouth and (b) each billing service provider under
each agreement for billing services relating to the Wireless Cable Systems to
agree to provide billing services to BellSouth, in each case for 90 days
following the Closing Date under substantially similar terms and conditions as
programming or billing services, as applicable, are provided to ATI or the
Companies under such agreements.
Section 5.12 Maintenance of Subscriber Levels. ATI and the Company
shall use their best efforts to cause the number of Basic Subscribers in the
Group 1 Markets as of February 28, 1997, which is 35,495, not to decline in
excess of an average rate of 4% per each 30 day period between the date of this
Agreement and the Closing Date.
Section 5.13 Certain Interference Consents. ATI and the Companies and
BellSouth agree to negotiate in good faith and to use their Commercially
Reasonable Best Efforts to obtain mutually agreeable interference acceptance
consents between or among the Markets.
Section 5.14 Updating of Exhibits. Each party shall promptly notify
the other of any material changes, additions or events which shall cause any
change in or addition to any Exhibits delivered by it under this Agreement.
Ten Business Days prior to the Closing, the Lakeland/Bradenton Markets Closing
or the Second Closing, as applicable, each party shall deliver information
intended to update all such modified Exhibits. Except as permitted by the last
sentence of this Section 5.14, no notification made pursuant to this Section
5.14 shall be deemed to cure any breach of any representation, warranty or
covenant made in this Agreement or to modify any Exhibit unless the party
giving such notification specifically agrees thereto in writing nor shall any
such notification be considered to constitute or give rise to a waiver by a
party of any condition set forth in this Agreement. If any warranty or
representation made in this Agreement is determined to be incorrect prior to
the Closing Date, the Lakeland/Bradenton Markets Closing Date, or the Second
Closing Date, as applicable, or if any condition or event occurs which causes
any warranty or representation to be incorrect as of the Closing Date, the
Lakeland/Bradenton Markets Closing Date, or the Second Closing Date, as
applicable, or if any provision in this Agreement is breached before the
Closing Date, the Lakeland/Bradenton Markets Closing Date, or the Second
Closing Date, as applicable, the party making such incorrect warranty or
representation or committing such breach shall be entitled, up to the Closing
Date, the Lakeland/Bradenton Markets Closing Date, or the Second Closing Date,
as applicable, to cure such warranty or representation by doing such things as
are necessary to cause such warranty or representation as made on the date of
this Agreement to be correct or by causing the breach in any provision to be
cured prior to the Closing Date, the Lakeland/Bradenton Markets Closing Date,
or the Second Closing Date, as applicable, and in the event of such cure, if
the failure to cure would have been a reason to prevent the Closing, the
Lakeland/Bradenton Markets Closing or the Second Closing, as applicable, such
incorrections or breach shall not be deemed the failure of a condition
precedent to closing or a reason for the closing not to
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occur. Each party shall notify the other as soon as reasonably possible after
it discovers such an incorrectness or breach. The right to cure granted herein
shall not include any revision or addition to, or deletion from, any Exhibit
without the consent of the party for whose benefit the Exhibit was provided.
Notwithstanding anything to the contrary provided in this Section 5.14, a
breach of this Agreement or of any representation or warranty herein shall not
result from a party's adjusting an Exhibit to reflect changes in the ordinary
course of business through the Closing Date, the Lakeland/Bradenton Markets
Closing Date, a Second Closing Date, or a Group 2 Markets Closing Date, as the
case may be, to the extent such changes are not the result of activities
prohibited by this Article V and would not result in a failure to satisfy a
condition to closing identified in Article VI.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Conditions Precedent to Each Party's Obligation. The
respective obligation of each party to consummate the transactions contemplated
hereby is subject to the satisfaction at or prior to the Closing Date, the
Lakeland/Bradenton Markets Closing Date, the applicable Second Closing Date or
the applicable Group 2 Markets Closing Date, as applicable, of the following
conditions precedent:
(a) no order, decree or injunction shall have been enacted,
entered, promulgated or enforced by any United States court of competent
jurisdiction or any United States governmental authority which prohibits the
consummation of the transactions contemplated hereby; provided, however, that
the parties hereto shall use their Commercially Reasonable Best Efforts to have
any such order, decree or injunction vacated or reversed;
(b) any waiting period applicable to the transactions
contemplated hereby under the HSR Act shall have terminated or expired;
(c) the transactions contemplated by this Agreement shall (i)
be permitted by the applicable laws and regulations of each jurisdiction or
Governmental Entity to which any of ATI or the Companies or any of their
Affiliates are subject including, without limitation, the FCC and (ii) not
violate any applicable Law; provided, however, that if with respect to any
Company FCC License, the FCC has not granted by Final Order any assignment of a
Company FCC License to BellSouth Sub prior to September 19, 1997 (or December
19, 1997, if the second proviso of Section 8.01(e) is applicable) (or with
respect to the Lakeland/Bradenton Markets Closing, any Second Closing or any
Group 2 Markets Closing, 90 days after satisfaction of all other conditions to
such Lakeland/Bradenton Markets Closing, Second Closing or Group 2 Markets
Closing, as applicable), the receipt of such consent shall not be a condition
precedent to Closing, Lakeland/Bradenton Markets Closing, Second Closing or
Group 2 Markets Closing, as applicable, in which event (i) each such Company
FCC License shall be retained by its licensee pending the grant of FCC
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consent by Final Order, (ii) each of the parties shall continue to prosecute
the pending application(s) for such consent diligently and in good faith, (iii)
the Purchase Price, Lakeland/Bradenton Purchase Price, Additional Purchase
Price, Group 2 Markets Call Purchase Price, Group 2 Markets Minimum Purchase
Price, or Group 2 Markets Put Purchase Price, as applicable, shall be reduced
as set forth on Exhibit 6.01(c), and (iv) at Closing, Lakeland/Bradenton
Markets Closing, Second Closing or Group 2 Markets Closing, as applicable, such
licensee and BellSouth Sub shall enter into the lease agreement(s) set forth in
the form of Exhibit 6.03(k) and perform their respective obligations
thereunder.
Section 6.02 Conditions Precedent to Obligations of ATI and the
Companies. The obligations of ATI and the Companies to consummate the
transactions contemplated hereby are subject to the satisfaction or waiver at
or prior to the Closing Date, the Lakeland/Bradenton Markets Closing Date, the
applicable Second Closing Date or the applicable Group 2 Markets Closing Date,
as applicable, of the following conditions precedent:
(a) the transactions contemplated in this Agreement shall have
been approved and the Agreement adopted, by the affirmative vote of the Boards
of Directors of BellSouth and BellSouth Sub by the requisite vote in accordance
with the Georgia Business Corporation Code and the DGCL, respectively;
(b) the representations and warranties of BellSouth and
BellSouth Sub contained in Article IV shall be true and correct in all material
respects when made and at and as of the Closing Date with the same force and
effect as if those representations and warranties had been made at and as of
such time except (i) to the extent such representations and warranties speak as
of a specified earlier date, and (ii) as otherwise contemplated or permitted by
this Agreement;
(c) BellSouth shall, in all material respects, have performed
all obligations and complied with all covenants necessary to be performed or
complied with by it on or before the Closing Date, the Lakeland/Bradenton
Markets Closing Date, the applicable Second Closing Date or the applicable
Group 2 Markets Closing Date, as applicable;
(d) ATI and the Companies shall have received a certificate of
a senior officer of BellSouth, in form satisfactory to counsel for ATI and the
Companies, certifying fulfillment of the matters referred to in paragraphs (a)
through (c) of this Section 6.02;
(e) all proceedings, corporate or other, to be taken by
BellSouth in connection with the transactions contemplated by this Agreement,
and all documents incident thereto, shall be reasonably satisfactory in form
and substance to ATI and the Companies and their counsel, and BellSouth shall
have made available to ATI and the Companies for examination the originals or
true, correct and complete copies of all documents that the Companies may
reasonably request in connection with the transactions contemplated by this
Agreement;
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(f) ATI and the Companies shall have received the opinions of
Hunton & Williams, counsel for BellSouth and BellSouth Sub, and Walter H.
Alford, Esq., Executive Vice President and General Counsel of BellSouth, dated
the Closing Date, the Lakeland/Bradenton Markets Closing Date, the applicable
Second Closing Date or the applicable Group 2 Markets Closing Date, as
applicable, in substantially the form attached as Exhibit 6.02(f) hereto;
(g) at or prior to the Closing Date, BellSouth shall have
delivered the Escrow Agreement executed by the Escrow Agent;
(h) ATI and the Companies shall have received an Assignment
and Assumption Agreement executed by BellSouth Sub.
Section 6.03 Conditions Precedent to Obligations of BellSouth and
BellSouth Sub. The obligations of BellSouth and BellSouth Sub to consummate
the transactions contemplated hereby are subject to the satisfaction or waiver
at or prior to the Closing Date, the Lakeland/Bradenton Markets Closing Date,
the applicable Second Closing Date or the applicable Group 2 Markets Closing
Date, as applicable, of the following conditions precedent:
(a) the transactions contemplated in this Agreement shall have
been approved, and the Agreement adopted, by the affirmative vote of the Boards
of Directors of ATI and the Companies by the requisite vote in accordance with
the DGCL;
(b) there shall have occurred no Company Material Adverse
Effect from the date hereof to the Closing Date, the Lakeland/Bradenton Markets
Closing Date, the applicable Second Closing Date or the applicable Group 2
Markets Closing Date, as applicable;
(c) the representations and warranties of ATI and the
Companies contained in Article III shall be true and correct in all material
respects when made and at and as of the Closing Date (or with respect to
representations and warranties relating to the Lakeland/Bradenton Assets and
the Lakeland/Bradenton Assumed Liabilities, as of the Lakeland/Bradenton
Markets Closing Date, or with respect to representations and warranties
relating to the Second Closing Assets and the Second Closing Assumed
Liabilities, as of the applicable Second Closing Date, or with respect to
representations and warranties relating to the Group 2 Markets Closing Assets
and the Group 2 Markets Closing Assumed Liabilities, as of the applicable Group
2 Markets Closing Date) with the same force and effect as if those
representations and warranties had been made at and as of such time except (i)
to the extent such representations and warranties speak as of a specified
earlier date, and (ii) as otherwise contemplated or permitted by this
Agreement;
(d) ATI and the Companies shall have received all necessary
and material third party consents, licenses or approvals, except for consents
under the MDU Contracts;
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(e) ATI and the Companies shall, in all material respects,
have performed all obligations and complied with all covenants necessary to be
performed or complied with by each of them on or before the Closing Date,
Lakeland/Bradenton Markets Closing Date, the applicable Second Closing Date or
the applicable Group 2 Markets Closing Date, as applicable;
(f) BellSouth shall have received a certificate of the
Chairman, President or Senior Vice President of ATI and the Companies, in form
satisfactory to counsel for BellSouth, certifying fulfillment of the matters
referred to in paragraphs (a) through (e) of this Section 6.03;
(g) BellSouth shall have received a Bill of Sale and an
Assignment and Assumption Agreement;
(h) at or prior to the Closing Date, BellSouth shall have
received a non-competition agreement in the form attached as Exhibit 6.03(h)
hereto from ATI;
(i) all proceedings, corporate or other, to be taken by ATI or
the Companies in connection with the transactions contemplated by this
Agreement, and all documents incident thereto, shall be reasonably satisfactory
in form and substance to BellSouth and BellSouth's counsel, and ATI and the
Companies shall have made available to BellSouth for examination the originals
or true, correct and complete copies of all documents that BellSouth may
reasonably request in connection with the transactions contemplated by this
Agreement;
(j) BellSouth and BellSouth Sub shall have received (i) the
opinion of McDermott, Will & Emery, counsel for ATI and the Companies, dated
the Closing Date, the Lakeland/Bradenton Markets Closing Date, the applicable
Second Closing Date or the applicable Group 2 Markets Closing Date, as
applicable, in substantially the form attached as Exhibit 6.03(j)(i) hereto and
(ii) the opinion of Gurman, Blask & Freedman, Chartered, FCC counsel for ATI
and the Companies, dated the Closing Date, the Lakeland/Bradenton Markets
Closing Date, the applicable Second Closing Date or the applicable Group 2
Markets Closing Date, as applicable, in substantially the form attached as
Exhibit 6.03(j)(ii) hereto;
(k) the FCC shall have granted its consents by Final Order to
the assignment of the Company FCC Licenses listed on Exhibit 1.34 to BellSouth
Sub for the applicable closing, which consents shall contain only such
conditions as are ordinary for the classes of such consents or such other
conditions as BellSouth may agree to accept in its sole discretion or, as
required by Section 6.01(c), such licensees shall have entered into the lease
agreements in the form of Exhibit 6.03(k); and BellSouth shall have received
the opinion of Gurman, Blask & Freedman, Chartered, in form and substance
reasonably satisfactory to BellSouth, to the effect that FCC approval is not
required to enter into and receive the
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benefits provided for under such agreements other than FCC approval for the
assignment of the FCC License pursuant to Section 14 of each such agreement;
(l) the Market Delivery Requirement or the Market Delivery
Requirement--Post-Closing Date with respect to any of the Group 1 Markets, as
the case may be, shall be satisfied at the Closing Date, the Lakeland/Bradenton
Markets Closing Date, or the applicable Second Closing Date, as applicable;
(m) ATI and the Companies shall have delivered to BellSouth
each estoppel certificate in substantially the form of Exhibit 5.01(b)(xiii)
(which may be modified to reflect disclosures from the lessors consistent with
the Exhibits to this Agreement [*]) which is required in order to provide
BellSouth with the benefits of all material Assets, Lakeland/Bradenton Assets,
Second Closing Assets or Group 2 Markets Closing Assets, as the case may be,
conveyed hereunder; provided that if, in connection with the Closing, ATI
establishes to BellSouth's reasonable satisfaction that the failure by ATI and
the Companies to deliver an estoppel certificate with respect to a Capacity
Lease or a Site Lease is not due to the existence of a material non-compliance
by ATI or the Companies with the terms of such Capacity Lease or Site Lease,
then BellSouth shall waive the requirement to obtain such an estoppel
certificate; provided further that ATI shall indemnify BellSouth in accordance
with Section 7.01 with respect to ATI's failure to deliver an estoppel
certificate; [*];
(n) for a 45-day period following the date of this Agreement,
BellSouth shall have been afforded the opportunity to hold the meetings with
lessors referenced in Section 5.01(b)(xiv) and by the conclusion of such period
shall have reasonably determined based upon such meetings that it is likely to
receive the benefits of leasing the Company Channels held by such lessors;
(o) the loan by Banque Indosuez to the Company shall have been
repaid and Banque Indosuez shall have released its lien on the Assets; and
(p) with respect to the Bradenton and Lakeland Markets, the
conditions set forth on Exhibit 6.03(p) shall have been satisfied; provided,
that if such conditions have not been satisfied as of the Closing Date and all
other conditions precedent to the Closing have been satisfied by the parties,
ATI and the Companies shall transfer the Assets and Assumed Liabilities
relating to the Daytona Beach, Fort Myers, Jacksonville, Miami, Orlando and
Louisville Markets but no closing shall occur on the Closing Date with respect
to the Bradenton Market and the Lakeland Market, in accordance with Section
2.06.
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ARTICLE VII
INDEMNITIES AND ADDITIONAL COVENANTS
Section 7.01 Indemnification by ATI. ATI hereby indemnifies and holds
BellSouth and BellSouth Sub, and their successors and assigns, harmless from
and against, and agrees to defend promptly BellSouth and BellSouth Sub from and
reimburse BellSouth and BellSouth Sub for, any and all losses, damages, costs,
expenses, liabilities, obligations and claims of any kind, including, without
limitation, reasonable attorneys' fees and other legal costs and expenses,
(hereinafter referred to collectively as "Losses"), that BellSouth and
BellSouth Sub may at any time suffer or incur, or become subject to, as a
result of or in connection with (a) any breach or inaccuracy of the
representations, warranties or covenants made by ATI or the Companies in this
Agreement (including the Exhibits hereto), (b) the operation and ownership of
the Assets, the Lakeland/Bradenton Assets, the Second Closing Assets or the
Group 2 Markets Closing Assets by ATI and the Companies prior to the Closing
Date, the Lakeland/Bradenton Markets Closing Date, the applicable Second
Closing Date or the applicable Group 2 Markets Closing Date, as the case may
be, excluding any Assumed Liabilities, Lakeland/Bradenton Assumed Liabilities,
Second Closing Assumed Liabilities and Group 2 Markets Closing Assumed
Liabilities, (c) any liability of ATI or any of the Companies that is not an
Assumed Liability, a Lakeland/Bradenton Assumed Liability, a Second Closing
Assumed Liability or a Group 2 Markets Closing Assumed Liability, (d) any
increase in excess of 10% in rents, fees or other costs associated with the B
Group Channel Lease in the Orlando Market through the expiration of such Lease
on October 2, 2001, or (e) any losses incurred by BellSouth arising from the
failure by the Companies to deliver estoppel certificates under Section
6.03(m), or (f) Videotron Liabilities or the FTI Litigation (as defined in
Exhibit 3.09); provided, that ATI shall not be required to indemnify and hold
BellSouth and BellSouth Sub harmless pursuant to this Section 7.01 unless such
right is asserted (whether or not the Losses have actually been incurred) by
written notice to ATI within 18 months of the Closing Date (or 18 months of the
Lakeland/Bradenton Markets Closing Date with respect to the Lakeland/Bradenton
Assets and the Lakeland/Bradenton Assumed Liabilities, or 18 months of the
applicable Second Closing Date or the applicable Group 2 Markets Closing Date
with respect to the applicable Second Closing Assets and the applicable Second
Closing Assumed Liabilities or the applicable Group 2 Markets Closing Assets
and the applicable Group 2 Markets Closing Assumed Liabilities, as the case may
be) describing with specificity the facts giving rise to the asserted right
(unless such right is asserted pursuant to the representations, warranties or
covenants made by ATI or the Companies in Section 3.08 by written notice prior
to expiration of the applicable statute of limitations or pursuant to
subsection (d), (e) or (f) above, in which event there shall be no time
limitation on when such right is asserted); and provided further that ATI shall
not be required to indemnify BellSouth and BellSouth Sub pursuant to this
Section 7.01 unless and until the amount of all Losses for which
indemnification is sought (i) with respect to the Assets, the Second Closing
Assets, the Assumed Liabilities or the Second Closing Assumed Liabilities first
exceeds $225,000 after which event BellSouth and BellSouth Sub may seek
indemnification for all such Losses relating back to the first dollar and all
additional Losses
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up to $9,000,000 (or $7,000,000 if the Lakeland/Bradenton Closing Conditions
have not been satisfied as of the Closing Date) (except for any Losses incurred
by BellSouth or BellSouth Sub as a result of the breach of the representations,
warranties or covenants made by ATI or the Companies in Section 3.08 or
pursuant to subsection (d), (e) or (f) above, which Losses shall be payable
without regard to the $225,000 and $9,000,000 (or $7,000,000 if the
Lakeland/Bradenton Closing Conditions have not been satisfied as of the Closing
Date) limitations), (ii) with respect to the Lakeland/Bradenton Assets and
Lakeland/Bradenton Assumed Liabilities, first exceeds $50,000 after which event
BellSouth and BellSouth Sub may seek indemnification for all Losses relating
back to the first dollar and all additional Losses up to $2,000,000 (except for
any Losses incurred by BellSouth or BellSouth Sub as a result of the breach of
the representations, warranties or covenants made by ATI or the Companies in
Section 3.08 or pursuant to subsection (d), (e) or (f) above, which Losses
shall be payable without regard to the $50,000 and $2,000,000 limitations) and
(iii) with respect to the Group 2 Markets Closing Assets and Group 2 Markets
Closing Assumed Liabilities, first exceeds $25,000 after which event BellSouth
and BellSouth Sub may seek indemnification for all Losses relating back to the
first dollar and all additional Losses up to the amount of the Group 2 Markets
Escrow Fund (except for any Losses incurred by BellSouth or BellSouth Sub as a
result of the breach of the representations, warranties or covenants made by
ATI or the Companies in Section 3.08 or pursuant to subsection (d), (e) or (f)
above, which Losses shall be payable without regard to the $25,000 and the
amount of the Group 2 Markets Escrow Fund limitations).
In the event a claim is asserted against BellSouth or BellSouth Sub,
notice stating the provision or provisions of this Agreement under which the
liability or obligation is asserted shall be promptly given by BellSouth or
BellSouth Sub to ATI and ATI shall have the right to control all settlements
(unless BellSouth and BellSouth Sub agree to assume the cost of settlement and
to forego such indemnity) and to select lead counsel to defend any and all such
claims at the sole cost and expense of ATI; provided, however, that ATI may not
effect any settlement that could result in any cost, expense or liability to
BellSouth or BellSouth Sub unless BellSouth and BellSouth Sub consent in
writing to such settlement and ATI agrees to indemnify BellSouth and BellSouth
Sub therefore. BellSouth and BellSouth Sub may select counsel to participate
in any defense, in which event such counsel shall be at the sole cost and
expense of BellSouth and BellSouth Sub. In connection with any such claim,
action or proceeding, the parties shall cooperate with each other and provide
each other with access to relevant books and records in their possession.
Section 7.02 Indemnification by BellSouth. BellSouth hereby
indemnifies and holds ATI and the Companies, and their successors and assigns,
harmless from and against, and agrees to defend promptly ATI and the Companies
from and reimburse ATI and the Companies for, any and all Losses, that ATI and
the Companies may at any time suffer or incur, or become subject to, as a
result of or in connection with (a) any breach or inaccuracy of the
representations, warranties or covenants made by BellSouth in this Agreement,
(b) the operation and ownership of the Assets, the Lakeland/Bradenton Assets,
the Second Closing Assets or the Group 2 Markets Closing Assets by BellSouth
and BellSouth Sub on and
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following the Closing Date, the Lakeland/Bradenton Markets Closing Date, the
applicable Second Closing Date or the applicable Group 2 Closing Date, as the
case may be, and (c) any Assumed Liability, Lakeland/Bradenton Assumed
Liability, Second Closing Assumed Liability and Group 2 Markets Closing Assumed
Liability; provided, that BellSouth shall not be required to indemnify and hold
ATI and the Companies harmless pursuant to this Section 7.02 unless such right
is asserted (whether or not the Losses have actually been incurred) by written
notice to BellSouth within 18 months of the Closing Date (or 18 months of the
Lakeland/Bradenton Markets Closing Date with respect to the Lakeland/Bradenton
Assets and the Lakeland/Bradenton Assumed Liabilities, or 18 months of the
applicable Second Closing Date or the applicable Group 2 Markets Closing Date
with respect to the applicable Second Closing Assets and the applicable Second
Closing Assumed Liabilities or the applicable Group 2 Markets Closing Assets
and the applicable Group 2 Markets Closing Assumed Liabilities, as the case may
be) describing with specificity the facts giving rise to the asserted right;
and provided further that BellSouth shall not be required to indemnify ATI and
the Companies pursuant to this Section 7.02 unless and until the amount of all
Losses for which indemnification is sought (i) with respect to the Assets, the
Second Closing Assets, the Assumed Liabilities and the Second Closing Assumed
Liabilities first exceeds $225,000 after which event ATI may seek
indemnification for all such Losses relating back to the first dollar and all
additional Losses up to $9,000,000 ([*] if the Lakeland/Bradenton Closing
Conditions have not been satisfied as of the Closing Date), (ii) with respect
to the Lakeland/Bradenton Assets and Lakeland/Bradenton Assumed Liabilities,
first exceeds $50,000 after which event ATI may seek indemnification for all
Losses relating back to the first dollar and all additional Losses up to [*]
and (iii) with respect to the Group 2 Markets Closing Assets and Group 2
Markets Closing Assumed Liabilities, first exceeds $25,000 after which ATI may
seek indemnification for all Losses relating back to the first dollar and all
additional Losses up to the amount of the Group 2 Markets Escrow Fund.
In the event a claim is asserted against ATI or any of the Companies,
notice stating the provision or provisions of this Agreement under which the
liability or obligation is asserted shall be promptly given by ATI or any of
the Companies to BellSouth and BellSouth shall have the right to control all
settlements (unless ATI or any of the Companies agree to assume the cost of
settlement and to forego such indemnity) and to select lead counsel to defend
any and all such claims at the sole cost and expense of BellSouth; provided,
however, that BellSouth may not effect any settlement that could result in any
cost, expense or liability to ATI or any of the Companies unless ATI or any of
the Companies consent in writing to such settlement and BellSouth agrees to
indemnify ATI or any of the Companies therefore. ATI or any of the Companies
may select counsel to participate in any defense, in which event such counsel
shall be at the sole cost and expense of ATI or any of the Companies. In
connection with any such claim, action or proceeding, the parties shall
cooperate with each other and provide each other with access to relevant books
and records in their possession.
Section 7.03 Equitable Relief. BellSouth, ATI and the Companies each
agrees that each party shall be entitled, in addition to any other remedies it
may have under this Agreement or otherwise, to preliminary and permanent
injunctive and other equitable relief
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to prevent or curtail any breach of this Agreement; provided, however, that no
specification in this Agreement of a specific legal or equitable remedy shall
be construed as a waiver or prohibition against the pursuing of other legal or
equitable remedies in the even of such a breach.
Section 7.04 Bulk Sales Compliance. BellSouth hereby waives compliance
by ATI and the Companies with any applicable bulk sales law on the condition
that (a) ATI and the Companies shall indemnify BellSouth and BellSouth Sub as
set forth in this Section 7.04 and (b) ATI and the Companies shall waive any
rights that ATI or the Companies may have under applicable bulk sales law in
connection with this Agreement and the transactions contemplated hereby. Each
of ATI and the Companies covenants and agrees to pay and discharge when due all
claims of any Governmental Entities and creditors that could be asserted
against BellSouth or BellSouth by reason of non-compliance with the provisions
of the bulk sales and similar laws of any such jurisdiction. Each of ATI and
the Companies agrees to indemnify and hold BellSouth and BellSouth Sub harmless
from and against and shall on demand reimburse BellSouth and BellSouth Sub for
any and all Losses suffered by BellSouth or BellSouth Sub by reason of ATI or
the Companies's failure to pay and discharge any such claims.
Section 7.05 Tax Matters; Allocation of Consideration. The parties
acknowledge that the transactions contemplated by this Agreement will be
treated for federal income tax purposes as a taxable sale of assets by ATI and
the Companies to BellSouth Sub and agree to report the transaction as such on
all applicable tax returns. The amounts paid by BellSouth pursuant to Section
2.01 (as adjusted by Section 2.03), Section 2.06, Section 2.07 and Section 2.08
shall be allocated among the Assets, the Lakeland/Bradenton Assets, the Second
Closing Assets and the Group 2 Markets Closing Assets purchased, in the manner
to be set forth in a tax allocation schedule (as supplemented by BellSouth
after any Lakeland/Bradenton Markets Closing Date, Second Closing Date or Group
2 Markets Closing Date). Such tax allocation schedule shall be completed by
BellSouth and delivered to the Companies within 90 days following the Closing
Date, the Lakeland/Bradenton Markets Closing Date, the applicable Second
Closing Date or the applicable Group 2 Markets Closing Date, as the case may
be, and shall be subject to the reasonable approval of ATI. This allocation is
intended to comply with the allocation method required by Section 1060 of the
Code. The parties shall cooperate to comply with all substantive and
procedural requirements of Section 1060 and the regulations thereunder, and the
allocation shall be adjusted only if and to the extent necessary to comply with
the requirements of Section 1060. Neither BellSouth nor the Companies or ATI
will take or permit any affiliated person to take, for income tax purposes, any
position inconsistent with the allocation set forth on such tax allocation
schedule or, if applicable, such adjusted allocation.
Section 7.06 Employment Matters.
(a) ATI and the Companies shall remain responsible for all
liabilities or obligations of any kind arising before the Closing with respect
to employees of ATI and the
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Companies. Without limiting the generality of the foregoing sentence, ATI and
the Companies shall be responsible for any required compliance before or after
Closing with the Worker Adjustment, Retraining and Notification Act of 1988
("WARN"), any required compliance with the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), and all obligations arising
from or relating to any employment agreement, collective bargaining agreement
or employee benefit plans. BellSouth and BellSouth Sub shall not be obligated
under and hereby specifically disclaim any assumption or liability with respect
to any collective bargaining agreement, employment contract or employee benefit
plan to which any of ATI or the Companies is a party or under which any of
ATI's or the Companies's employees are covered.
(b) Within 30 days following the date of this Agreement,
BellSouth will identify the employees of the Companies to whom it wishes to
make an offer of employment. Ten days prior to the Closing, BellSouth Sub
shall make an offer of employment to such employees of the Companies contingent
upon the Closing occurring and subject to the satisfaction of such other
conditions that BellSouth imposes in the ordinary course in the hiring of new
employees. Upon their employment by BellSouth Sub, the initial annual base
salary levels of the Transferred Employees shall not be less than their present
salary levels. Following the date of this Agreement, each of ATI and the
Companies shall not increase in any manner the base salary level of any
Transferred Employee except where, as to timing and amount, such increase is in
the ordinary course of business and is made consistent with past practice. Any
such employee who accepts such offer of employment shall be deemed a
Transferred Employee hereunder. Subject to Section 7.07, following the
Closing, and their commencement of employment with BellSouth Sub, the
Transferred Employees shall become employees of BellSouth Sub and BellSouth Sub
shall be solely responsible for any and all payments of wages, salaries,
commissions and other employee benefit items with respect to such employment
after the Closing, and ATI and the Companies shall be solely responsible for
such liabilities and obligations with respect to employment prior to the
Closing. The employment of the Transferred Employees by BellSouth Sub
following the Closing shall be on terms and conditions determined by BellSouth
Sub except as provided in this Section 7.06(b). Following the Closing,
BellSouth Sub shall be under no obligation to continue the employment of any
such Transferred Employee. As of the Closing, BellSouth Sub shall assume the
liabilities of ATI and the Companies to pay to the Transferred Employees any
accumulated but unpaid personal leave pay of such employees as of the Closing
and BellSouth Sub shall credit each Transferred Employee with his or her
accrued but unused personal leave allowance as of the Closing. The Purchase
Price shall be reduced to reflect the amount of BellSouth Sub's assumption of
such unpaid personal leave pay liability hereunder.
(c) Concurrently with the Closing, ATI and the Companies shall
terminate all employees who have accepted BellSouth Sub's offer of employment
prior to the Closing, and shall pay each such employee any amounts owing for
the period up to the Closing.
59
<PAGE> 70
(d) ATI and the Companies shall satisfy any severance pay and
other legal obligations with respect to their employees except as set forth
herein, including any obligation of ATI or the Companies to bargain with any
union representing its employees with respect to the transaction contemplated
by this Agreement, the decision to enter into this Agreement, and the effects
thereof.
(e) No person or entity other than BellSouth, BellSouth Sub,
ATI or the Companies shall have any rights under this Section 7.06, and there
shall be no third-party beneficiaries under this Agreement.
Section 7.07 Employee Benefits Plans. ATI shall retain liability for
and continue to pay all hospital, medical, life insurance, disability and other
welfare plan benefits for each present employee of ATI or any of the Companies
and each former employee of ATI or any of the Companies entitled to benefits
under such plans with respect to claims incurred on or prior to the Closing.
Section 7.08 Transfer Taxes and Fees. ATI shall pay all transfer,
sales, recording and filing taxes and fees (not including brokerage fees)
resulting from the transfer of the Assets, the Lakeland/Bradenton Assets, the
Second Closing Assets and the Group 2 Markets Closing Assets to BellSouth Sub.
Section 7.09 Additional Instruments. At any time and from time to time
after the Closing, at BellSouth's request and without further consideration,
ATI and the Companies shall execute and deliver such other instruments of sale,
transfer, conveyance, assignment and confirmation and take such other action as
BellSouth may reasonable deem necessary or desirable in order to more
effectively transfer, convey and assign to BellSouth, and to confirm BellSouth
Sub's title to and interest in, the Assets.
Section 7.10 Certain Analog Equipment. Following the Closing Date,
BellSouth Sub shall accumulate (a) analog set-top boxes in inventory in the
event of subscriber disconnects or conversion to digital transmission in the
Group 1 Markets and (b) analog head-end or subscriber down-converter equipment
not useable by BellSouth after such conversion. BellSouth Sub will transfer to
ATI for no charge such analog set-top boxes in excess of the amount of
inventory that is appropriate for BellSouth to maintain in light of subscriber
levels, and BellSouth will transfer to ATI for no charge such analog head-end
or subscriber down-converter equipment (after accumulating a commercially
reasonable number of such excess analog set-top boxes and amount of such
equipment). Associated shipping costs will be paid by ATI (with risk of loss
during transportation to be borne by ATI).
Section 7.11 Sacramento BTA and Yuba City, California Options.
American Telecasting Development, Inc. and Yuba City Sub hereby grant to
BellSouth an exclusive option to acquire the BTA authorization (and MDS
Channels thereunder (excluding channels held or leased by ATI or any of its
Affiliates in the Sacramento Market as of the date hereof)) for the Sacramento,
California BTA and the wireless cable system owned and BTA
60
<PAGE> 71
authorization (and MDS Channels thereunder) held by Yuba City Sub for the Yuba
City, California wireless cable market, as set forth in Exhibit 7.11,
respectively.
Section 7.12 Compliance with Indenture. ATI shall comply with Section
1016 of the Indenture, dated as of June 23, 1994, between ATI and First Trust
National Association, as Trustee, with respect to application of the proceeds
from the Purchase Price, the Lakeland/Bradenton Purchase Price, the Additional
Purchase Price, the Group 2 Markets Call Purchase Price, the Group 2 Markets
Minimum Purchase Price, and the Group 2 Markets Put Purchase Price.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.01 Termination. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by mutual written consent of ATI and BellSouth;
(b) by BellSouth, upon a material breach of any
representation, warranty, covenant and agreement on the part of ATI or the
Companies set forth in this Agreement, or if any representation or warranty of
ATI or the Companies shall have become materially untrue, in either case such
that the conditions set forth in Section 6.03(c), Section 6.03(d) or Section
6.03(e) would be incapable of being satisfied by September 19, 1997 (or
December 19, 1997, if the second proviso of Section 8.01(e) is applicable);
(c) by ATI, upon a material breach of any representation,
warranty, covenant or agreement on the part of BellSouth or BellSouth Sub set
forth in this Agreement, or if any representation or warranty of BellSouth or
BellSouth Sub shall have become materially untrue, in either case such that the
conditions set forth in Section 6.02(b) or Section 6.02(c) would be incapable
of being satisfied by September 19, 1997 (or December 19, 1997, if the second
proviso of Section 8.01(e) is applicable);
(d) by either BellSouth or ATI, if any Governmental Entity or
any court of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any Law, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of
making, or any such Governmental Entity shall have commenced, or threatened to
commence, any proceeding (other than the consideration of applications for
approvals under the Communications Act) which, if adversely determined, would
have the effect of making the transactions contemplated hereby illegal or
otherwise materially restricting or prohibiting consummation of the
transactions contemplated hereby;
61
<PAGE> 72
(e) by either BellSouth or ATI, if the Closing shall not have
occurred before September 19, 1997; provided, that the right to terminate this
Agreement shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of or has resulted in the
failure of the transactions contemplated hereby to be consummated on or before
such date; and further, provided, that the right to terminate this Agreement
shall not be available to any party if (i) the failure to consummate the
transactions contemplated by this Agreement is the result of the lack of
satisfaction of the conditions set forth in Section 6.03(k) prior to September
19, 1997, (ii) the FCC has published a public notice accepting for filing the
assignment applications contemplated by this Agreement, and (iii) there does
not exist a pending petition for reconsideration, petition to deny or informal
objection, application for review, notice of appeal, request for stay, petition
for writ of certiorari, or other appeal, in which event the parties agree to
extend such date to December 19, 1997;
(f) by BellSouth on or before the 45th day following the date
of this Agreement based upon meetings with lessors pursuant to Section
5.01(b)(xiv), if BellSouth reasonably determines based upon such meetings that
it is unlikely to receive the benefits of leasing the Company Channels
controlled by such lessors.
Section 8.02 Effect of Termination. Except as provided in Section 8.05
and Section 5.03(b), in the event of the termination of this Agreement pursuant
to Section 8.01, this Agreement shall forthwith become void, there shall be no
liability on the part of BellSouth, ATI, the Companies or any of their
respective officers, directors or stockholders to the other parties hereto and
all rights and obligations of any party hereto shall cease; provided that any
such termination shall be without prejudice to the rights of any party hereto
arising out of the willful breach of any other party of any covenant or willful
misrepresentation contained in this Agreement.
Section 8.03 Amendment. This Agreement may be amended by the mutual
consent of the parties hereto at any time prior to the Closing Date. This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
Section 8.04 Waiver. At any time prior to the Closing Date, the
parties hereto may (a) extend the time for the performance of any of the
obligations or other acts of any party hereto, (b) waive any inaccuracies in
the representations and warranties of any party contained herein or in any
document delivered pursuant hereto and (c) waive compliance by any party with
any of the agreements or conditions contained herein. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed by
all of the parties hereto.
62
<PAGE> 73
Section 8.05 Expenses.
(a) All Expenses incurred by the parties hereto shall be borne
solely and entirely by the party which has incurred such Expenses; provided,
however, that BellSouth shall pay 100% of any filing fees paid under the
Communications Act and the HSR Act.
(b) "Expenses" as used in this Agreement shall include all
reasonable out-of-pocket expenses (including, without limitation, all fees and
expenses of counsel, accountants, investment bankers, experts and consultants
to a party hereto and its Affiliates) incurred by a party or on its behalf in
connection with or related to the authorization, preparation, negotiation,
execution and performance of this Agreement and all other matters related to
the closing of the transactions contemplated herein.
ARTICLE IX
GENERAL PROVISIONS
Section 9.01 Survival of Representations and Warranties and Covenants.
The representations and warranties and covenants made herein shall survive
until termination of the indemnity provided in Section 7.01 and Section 7.02
with respect to any such representation, warranty or covenant.
Section 9.02 Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date when delivered personally, mailed by registered or
certified mail (postage prepaid, return receipt requested), transmitted by
facsimile with a confirmation copy simultaneously mailed by registered or
certified mail (postage prepaid, return receipt requested), or sent by a
nationally recognized overnight courier to the recipient at the following
addresses, or at such other address as the recipient party shall have specified
by prior written notice to the sending party:
(a) If to BellSouth:
BellSouth Corporation
1155 Peachtree Street
Suite 1800
Atlanta, Georgia 30309-3610
Attention: John A. Harwood
Telephone: (404) 249-4433
Telecopier: (404) 249-5901
63
<PAGE> 74
with a copy to:
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219-4074
Attention: David M. Carter
Telephone: (804) 788-8200
Telecopier: (804) 788-8218
(b) If to ATI or the Companies:
American Telecasting, Inc.
5575 Tech Center Drive, Suite 300
Colorado Springs, Colorado 80919
Attention: Robert D. Hostetler
Telephone: (719) 260-5533
Telecopier: (719) 260-5010
with a copy to:
McDermott, Will & Emery
1850 K Street, N.W., Suite 500
Washington, D.C. 20006
Attention: Robert N. Jensen
Telephone: (202) 778-8023
Telecopier: (202) 778-8087
Section 9.03 Headings. The headings contained in this Agreement are
for convenience of reference only and shall not affect in any way the meaning
or interpretation of this Agreement.
Section 9.04 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are fulfilled to the
extent possible.
Section 9.05 Entire Agreement. This Agreement (together with the
exhibits and the two disclosure letters from ATI to BellSouth dated the date
hereof) and the Confidentiality
64
<PAGE> 75
Agreement constitute the entire agreement of the parties and supersede all
prior agreements and undertakings, both written and oral, between the parties,
or any of them, with respect to the subject matter hereof.
Section 9.06 Assignment. This Agreement shall not be assigned by
operation of law or otherwise; provided that BellSouth shall have the right to
designate another Subsidiary of BellSouth to hold certain Assets,
Lakeland/Bradenton Assets, Second Closing Assets or Group 2 Markets Closing
Assets.
Section 9.07 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
Person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
Section 9.08 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude
other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
Section 9.09 Governing Law. This Agreement and the relationship
between the parties shall be governed by, and construed in accordance with, the
laws of the State of Delaware regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
Section 9.10 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
65
<PAGE> 76
IN WITNESS WHEREOF, the undersigned or have caused this Agreement
to be duly executed on their behalf, on the day and year first hereinabove
written.
AMERICAN TELECASTING, INC.
/s/ ROBERT D. HOSTETLER
-------------------------------------
Name: Robert D. Hostetler
Title: Chief Executive Officer and
President
AMERICAN TELECASTING OF CENTRAL
FLORIDA, INC.
/s/ ROBERT D. HOSTETLER
-------------------------------------
Name: Robert D. Hostetler
Title: President
AMERICAN TELECASTING DEVELOPMENT,
INC.
/s/ ROBERT D. HOSTETLER
-------------------------------------
Name: Robert D. Hostetler
Title: President
AMERICAN TELECASTING OF FORT MYERS,
INC.
/s/ ROBERT D. HOSTETLER
-------------------------------------
Name: Robert D. Hostetler
Title: President
AMERICAN TELECASTING OF JACKSONVILLE,
INC.
/s/ ROBERT D. HOSTETLER
-------------------------------------
Name: Robert D. Hostetler
Title: President
66
<PAGE> 77
AMERICAN TELECASTING, OF LOUISVILLE,
INC.
/s/ ROBERT D. HOSTETLER
-------------------------------------
Name: Robert D. Hostetler
Title: President
AMERICAN TELECASTING OF YUBA CITY,
INC.
/s/ ROBERT D. HOSTETLER
-------------------------------------
Name: Robert D. Hostetler
Title: President
BELLSOUTH CORPORATION
/s/ JAMES W. MCCLINTOCK, IV
-------------------------------------
Name: James W. McClintock, IV
Title: Executive Director
BELLSOUTH WIRELESS CABLE, INC.
/s/ JAMES W. MCCLINTOCK, IV
-------------------------------------
Name: James W. McClintock, IV
Title: Vice President
67
<PAGE> 78
EXHIBIT 1.03
The Additional Purchase Price shall be equal to the sum of the following:
[*]
<PAGE> 79
EXHIBIT 1.64
GROUP 2 MARKETS CALL PURCHASE PRICE
The Group 2 Markets Call Purchase Price shall mean:
[*]
(1) An Owned MDS Channel is a Company Channel that is authorized by
the FCC to ATI or one of the Companies and not subject to any lease to or
rights inuring to any other entity and the assignment of which Company Channel
to BellSouth has been approved by FCC Final Order.
<PAGE> 80
EXHIBIT 1.77
GROUP 2 MARKETS PUT PURCHASE PRICE
[*]
(1) An Owned MDS Channel is a Company Channel that is authorized by
the FCC to ATI or one of the Companies and not subject to any lease to or
rights inuring to any other entity and the assignment of which Company Channel
to BellSouth has been approved by FCC Final Order.
<PAGE> 81
EXHIBIT 1.94
LAKELAND/BRADENTON PURCHASE PRICE
[*]
(1) An Owned MDS Channel is a Company Channel that is authorized by
the FCC to ATI or one of the Companies and not subject to any lease to or
rights inuring to any other entity and the assignment of which Company Channel
to BellSouth has been approved by FCC Final Order.
<PAGE> 82
EXHIBIT 1.99(a)
MARKET DELIVERY REQUIREMENT
(CLOSING DATE OR LAKELAND/BRADENTON MARKETS CLOSING DATE, AS APPLICABLE)
<TABLE>
<CAPTION>
MARKET MINIMUM NUMBER OF DELIVERED
- ------
DIGITAL-READY CHANNELS
----------------------
<S> <C>
Orlando [*]
Jacksonville [*]
Lakeland [*]
Fort Myers [*]
Daytona Beach [*]
Miami [*]
Louisville [*]
Bradenton [*]
</TABLE>
<PAGE> 83
EXHIBIT 1.99(B)
MARKET DELIVERY REQUIREMENT
(EXECUTION DATE)
<TABLE>
<CAPTION>
NO. OF DELIVERED
FORT MYERS DIGITAL-READY
CHANNEL(S) LICENSEE CALL SIGN CHANNELS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
C1-C4 University of South Florida WLX273 [*]
E1-E4 Columbia Wireless Corporation WHK973 [*](1)
F1-F4 MDS Signal Group WHK974 [*]
G1-G4 No. Amer. Catholic Educ. Programming Found. WLX354 [*]
H1 American Telecasting of Fort Myers, Inc. WMX373 [*]
H3 American Telecasting of Fort Myers, Inc. WMX338 [*]
---
TOTAL [*]
</TABLE>
<TABLE>
<CAPTION>
NO. OF DELIVERED
LAKELAND DIGITAL-READY
CHANNEL(S) LICENSEE CALL SIGN CHANNELS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
A1-A4 Polk Community College WLX275 [*](2)
B1-B4 Radio Training Network, Inc. WLX385 [*](2)
C1-C4 Diocese of Orlando WLX272 [*](2)
D1-D4 SE College of the Assemblies of God WLX270 [*](2)
F1-F4 Delta-Band Services, Ltd. WHK958 [*]
G1-G4 University of South Florida WHR943 [*](2)
H1 Patrick D. McConnell WMI397 [*]
H3 Patrick D. McConnell WMI401 [*]
---
TOTAL [*]
</TABLE>
__________________________________
(1) [*]
(2) [*]
<PAGE> 84
<TABLE>
<CAPTION>
NO. OF DELIVERED
ORLANDO DIGITAL-READY
CHANNEL(S) LICENSEE CALL SIGN CHANNELS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
B1-B4 Hispanic Info. & Telecom. Network, Inc. WLX362 [*]
C1-C4 University of Central Florida WHR493 [*] (3)
D1-D4 University of Central Florida WLX309 [*]
E1-E4 Line of Site, Inc. WHT731 [*]
F1-F4 Orlando BDC-MMDS Co. WHT732 [*]
G1-G4 Northern Arizona University Foundation WLX773 [*]
H1 American Telecasting of Central Florida, Inc. WNEY682 [*]
H2 American Telecasting of Central Florida, Inc. WNEY591 [*]
H3 American Telecasting of Central Florida, Inc. WNEZ716 [*]
----
TOTAL [*]
</TABLE>
<TABLE>
<CAPTION>
NO. OF DELIVERED
JACKSONVILLE DIGITAL-READY
CHANNEL(S) LICENSEE CALL SIGN CHANNELS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
E1-E4 American Telecasting of Jacksonville, Inc. WHT675 [*]
F1-F4 Sunbelt Entertainment Corp. WHT676 [*]
G1-G2 Jacksonville University WHR858 [*]
H1 Lynn Twedt WNTJ809 [*]
H2 American Telecasting of Jacksonville, Inc. WMX382 [*](4)
H3 American Telecasting of Jacksonville, Inc. WMX383 [*](4)
---
TOTAL [*]
</TABLE>
<TABLE>
<CAPTION>
NO. OF DELIVERED
DAYTONA BEACH DIGITAL-READY
CHANNEL(S) LICENSEE CALL SIGN CHANNELS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
E1-E4 Line of Site, Inc. WHT761 [*]
F1-F4 American Telecasting of Central Florida, Inc. WHT762 [*]
H1 American Telecasting of Central Florida, Inc. WMX941 [*]
H2 American Telecasting of Central Florida, Inc. WNEY905 [*](5)
H3 American Telecasting of Central Florida, Inc. WNEZ718 [*]
MDS-1 American Telecasting of Central Florida, Inc. WLX243 [*]
----
TOTAL [*]
</TABLE>
__________________________________
(3) [*]
(4) [*]
(5) [*]
<PAGE> 85
<TABLE>
<CAPTION>
NO. OF DELIVERED
LOUISVILLE DIGITAL-READY
CHANNEL(S) LICENSEE CALL SIGN CHANNELS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
A1-A4 Fifteen Telecommunications, Inc. WHR769 [*]
C1-C4 Kentucky Authority for Educational Television WLX337 [*]
E1-E4 American Telecasting of Louisville, Inc. WHT725 [*]
H1 American Telecasting of Louisville, Inc. WNEZ577 [*]
H2 American Telecasting of Louisville, Inc. WNEZ666 [*]
MDS-1 American Telecasting of Louisville, Inc. KOA86 [*]
----
TOTAL [*]
</TABLE>
<TABLE>
<CAPTION>
NO. OF DELIVERED
MIAMI DIGITAL-READY
CHANNEL(S) LICENSEE CALL SIGN CHANNELS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
E1-E4 Affiliated MDS Corp. WHT638 [*]
----
TOTAL [*]
</TABLE>
<TABLE>
<CAPTION>
NO. OF DELIVERED
BRADENTON DIGITAL-READY
CHANNEL(S) LICENSEE CALL SIGN CHANNELS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
D1-D4 No. Amer. Catholic Educ. Programming Found. WLX724 [*]
E1-E4 Fortuna Systems Corp. WMH513 [*]
F1-F4 MWTV, Inc. WLW830 [*]
H3 Senvista General Partnership WNTK634 [*]
----
TOTAL [*]
</TABLE>
<PAGE> 86
EXHIBIT 1.100
MARKET DELIVERY REQUIREMENT--POST-CLOSING DATE
<TABLE>
<CAPTION>
NUMBER OF DELIVERED ADDITIONAL PURCHASE
MARKET DIGITAL-READY CHANNELS PRICE TO BE PAID
---------------------------------------------------------------------------
<S> <C> <C>
Daytona Beach [*] (1)
[*] (1)
Jacksonville [*] (2)
[*] (2)
Fort Myers [*] (3)
[*] (3)
Lakeland [*] (4)
Louisville [*] (5)
[*] (5)
</TABLE>
__________________________________
(1) See Exhibit 1.03, items I and VI.
(2) See Exhibit 1.03, items II and VI.
(3) See Exhibit 1.03, items III and VI.
(4) See Exhibit 1.03, items IV and VI.
(5) See Exhibit 1.03, items V and VI.
<PAGE> 87
EXHIBIT 1.111
PURCHASE PRICE
[*]
<PAGE> 88
[*]
<PAGE> 89
EXHIBIT 5.01(b)(xv)
CERTAIN ACTIONS TO BE TAKEN PRIOR TO CLOSING
[*]
Page 1 of 5
<PAGE> 90
[*]
Page 2 of 5
<PAGE> 91
[*]
Page 3 of 5
<PAGE> 92
[*]
Page 4 of 5
<PAGE> 93
[*]
Page 5 of 5
<PAGE> 94
EXHIBIT 6.01(c)
REDUCTION OF PURCHASE PRICE FOR COMPANY
FCC LICENSES NOT ASSIGNED AT CLOSING
[*]
<PAGE> 95
EXHIBIT 6.03(h)
COVENANT NOT TO COMPETE AND RIGHT OF FIRST REFUSAL
1. Covenant Not to Compete.
(a) Subject to Paragraph 1(b) below, for the five-year period
beginning on the Closing Date, American Telecasting, Inc. ("ATI") and its
Subsidiaries, directly or indirectly, through its officers, directors and
employees shall not sell or otherwise provide a video distribution service, nor
directly or indirectly compete with BellSouth Wireless Cable, Inc. (or its
successors) (the "Company") in the video distribution business (regardless of
whether the method of transmission is wireless or hardwire), in the state of
Florida and in the geographic area of the Louisville Basic Trading Area (Market
No. B263) as defined by Rand McNally & Co. in the 1992 Commercial Atlas and
Marketing Guide, as adopted by the FCC ("Business").
(b) For purposes of Section 1(a) above, the term "video
distribution service" and "video distribution business" shall not include (i)
the hardwire cable business in the Lakeland Market as it is operated by ATI and
its affiliates as of the date hereof, or (ii) the provision of video
distribution services through the Wireless Cable Systems in the Lakeland Market
and the Bradenton Market (if the Lakeland/Bradenton Assets are not transferred
to the Company at the Closing) and any Group 2 Market to the extent and until
the Bradenton Market and the Lakeland Market or such Group 2 Market is sold to
BellSouth or the Company under the Agreement or (iii) ATI's efforts to obtain
additional Delivered Digital-Ready Channels in the Group 1 Markets, in
accordance with the Agreement, for one year following the Closing.
(c) Definition of "Compete". For the purposes of this
Exhibit, the term "compete" shall mean with respect to the Business: (i)
calling on, soliciting, taking away, accepting as a client or customer or
attempting to call on, solicit, take away or accept as a client or customer (in
each case in connection with an offer to sell or provide services or products
substantially similar to those offered or sold by BellSouth and the Company on
or prior to the date hereof) any individual, partnership, corporation or
association that was a client or customer of the Business as conducted by
BellSouth and the Company during the twelve (12) calendar month period
immediately preceding any such act; (ii) soliciting, taking away or attempting
to solicit or take away any employee of the Business previously employed by ATI
or any of its Subsidiaries who has been offered employment with BellSouth or
the Company prior to the Closing Date or who has accepted an offer of
employment from BellSouth or the Company (other than any person whose
employment was terminated), on ATI's behalf; or (iii) for the period of this
Agreement, entering into or attempting to enter into any business substantially
similar to or competing in any way with the Business, either alone or with any
individual, partnership, corporation or association.
(d) Direct or Indirect Competition. For the purposes of this
Agreement, the words "directly or indirectly" as they modify the word "compete"
shall mean (i) acting as an
<PAGE> 96
agent, representative, consultant, officer, director, independent contractor or
employee of any entity or enterprise which is competing (as defined in Section
1(c) hereof) with the Business; (ii) participating in any such competing entity
or enterprise as an owner, partner, limited partner, joint venturer, creditor
or stockholder (except as a stockholder holding less than five percent (5%)
interest in a corporation whose shares are actively traded on a regional or
national securities exchange or in the over-the-counter market); and (iii)
communicating to any such competing entity or enterprise the names or addresses
or any other information concerning any past, present, or identified
prospective client or customer of BellSouth and the Company with respect to the
Business or any entity having title to the goodwill of BellSouth and the
Company with respect to the Business.
2. Right of First Refusal
(a) For the three-year period beginning on the Closing Date,
ATI hereby grants, and it shall cause its Subsidiaries to grant, BellSouth a
right of first refusal to acquire any rights it may have to MDS Channels, ITFS
Channels or any other wireless cable assets that it owns or subsequently
develops or acquires in the states of Florida, Georgia, Alabama, Mississippi,
Louisiana, Kentucky, Tennessee, North Carolina or South Carolina (the "Other
Assets").
(b) If ATI shall have obtained a bona fide offer for the
purchase of any Other Assets that ATI desires to accept, then ATI shall give
notice to BellSouth of such proposed disposition (the "Option Notice"). The
Option Notice shall describe the proposed transferee, the Other Assets proposed
to be transferred (the "Offered Assets"), the purchase price, the proposed sale
date and all other material terms and conditions of the proposed disposition,
and also shall be accompanied by a copy of the bona fide offer.
(c) For a period of 30 consecutive days following its receipt
of such Option Notice, BellSouth shall have the irrevocable option to purchase,
at the price and on the terms set forth in the Option Notice, by written notice
to ATI, all, but not less than all, of the Offered Assets.
(d) In the event that BellSouth exercises its option to
purchase all, but not less than all, of the Offered Assets, then a closing
shall be held with respect to such purchase within 30 days after the expiration
of the option period described in subsection (c) of this Section 2, or on such
other date as ATI and BellSouth shall mutually agree. Upon such closing, ATI
shall deliver to BellSouth all of its rights, title and interest in the Offered
Assets, as described in the Option Notice, being acquired by BellSouth, against
receipt of payment, in accordance with the terms contained in the Option
Notice.
(e) In the event that BellSouth has not exercised its option
to purchase, in the aggregate, all of the Offered Assets pursuant to subsection
(c) of this Section 2, ATI shall have the right, for a period of 180 days after
the expiration of the option period, to sell up to all of the Offered Assets
not purchased by BellSouth in accordance with the terms of the bona fide offer
at the price specified in the Option Notice or a greater price, and the
purchaser thereof shall not be bound by the terms of this Agreement.
2
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EXHIBIT 6.03(p)
LAKELAND/BRADENTON MARKETS CLOSING CONDITIONS
[*]
3. The Closing shall have occurred prior to, or contemporaneously with, the
Lakeland/Bradenton Markets Closing.
6
<PAGE> 98
[Execution Copy]
OPTION AGREEMENT
among
BELLSOUTH CORPORATION,
BELLSOUTH WIRELESS CABLE, INC.,
AMERICAN TELECASTING, INC.,
AMERICAN TELECASTING DEVELOPMENT, INC.,
and
AMERICAN TELECASTING OF YUBA CITY, INC.
March 18, 1997
<PAGE> 99
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
CERTAIN DEFINITIONS
Section 1.01 Accounts . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.02 ATI . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.03 BellSouth . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.04 BellSouth Sub . . . . . . . . . . . . . . . . . . . . 2
Section 1.05 Company Material Adverse Effect . . . . . . . . . . . 2
Section 1.06 Contracts . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.07 Equipment . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.08 Inventory . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.09 Option Assets . . . . . . . . . . . . . . . . . . . . 3
Section 1.10 Option Assumed Liabilities . . . . . . . . . . . . . 3
Section 1.11 Option Closing . . . . . . . . . . . . . . . . . . . 3
Section 1.12 Option Closing Company Statement of Assets and
Assumed Liabilities . . . . . . . . . . . . . . . . . 3
Section 1.13 Option Closing Date . . . . . . . . . . . . . . . . . 3
Section 1.14 Option Company Statement of Assets and
Assumed Liabilities . . . . . . . . . . . . . . . . . 3
Section 1.15 Option Purchase Price . . . . . . . . . . . . . . . . 4
Section 1.16 Option Wireless Cable Systems . . . . . . . . . . . . 4
Section 1.17 Real Property . . . . . . . . . . . . . . . . . . . . 4
Section 1.18 Yuba City-Sacramento Interference Agreement . . . . . 4
Section 1.19 Yuba City Sub . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II
OPTION; PURCHASE AND SALE OF ASSETS; PURCHASE PRICE
Section 2.01 Option . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.02 Purchase and Sale; Purchase Price . . . . . . . . . . 5
Section 2.03 Option Assumed Liabilities . . . . . . . . . . . . . 5
Section 2.04 Adjustments to Option Purchase Price . . . . . . . . 5
Section 2.05 Option Closing . . . . . . . . . . . . . . . . . . . 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ATI AND YUBA CITY
Section 3.01 Authorization; Enforceability . . . . . . . . . . . . 6
</TABLE>
1
<PAGE> 100
<TABLE>
<S> <C> <C>
Section 3.02 No Conflict . . . . . . . . . . . . . . . . . . . . . 6
Section 3.03 Yuba City-Sacramento Interference Agreement . . . . . 7
Section 3.04 Representations and Warranties in Asset
Purchase Agreement . . . . . . . . . . . . . . . . . 7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
BELLSOUTH AND BELLSOUTH SUB
Section 4.01 Authorization; Enforceability . . . . . . . . . . . . 8
Section 4.02 No Conflict . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE V
COVENANTS
Section 5.01 Conduct of the Businesses of the Option Wireless
Cable Systems . . . . . . . . . . . . . . . . . . . . 8
Section 5.02 No Solicitation . . . . . . . . . . . . . . . . . . . 10
Section 5.03 Access to Information; Confidentiality Agreement . . 10
Section 5.04 Best Efforts . . . . . . . . . . . . . . . . . . . . 11
Section 5.05 Public Announcements . . . . . . . . . . . . . . . . 11
Section 5.06 Consents . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.07 Yuba City-Sacramento Interference Agreement . . . . . 12
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Conditions Precedent to Each Party's Obligation. . . 12
Section 6.02 Conditions Precedent to Obligations of ATI, Yuba
City Sub and Development . . . . . . . . . . . . . . 12
Section 6.03 Conditions Precedent to Obligations of BellSouth
and BellSouth Sub . . . . . . . . . . . . . . . . . . 13
ARTICLE VII
INDEMNITIES AND ADDITIONAL COVENANTS
Section 7.01 Indemnification by ATI . . . . . . . . . . . . . . . 14
Section 7.02 Indemnification by BellSouth . . . . . . . . . . . . 15
Section 7.03 Equitable Relief . . . . . . . . . . . . . . . . . . 16
Section 7.04 Bulk Sales Compliance . . . . . . . . . . . . . . . . 16
Section 7.05 Tax Matters; Allocation of Consideration . . . . . . 16
</TABLE>
2
<PAGE> 101
<TABLE>
<S> <C> <C>
Section 7.06 Transfer Taxes and Fees . . . . . . . . . . . . . . . 17
Section 7.07 Additional Instruments . . . . . . . . . . . . . . . 17
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.01 Termination . . . . . . . . . . . . . . . . . . . . . 17
Section 8.02 Effect of Termination . . . . . . . . . . . . . . . . 18
Section 8.03 Amendment . . . . . . . . . . . . . . . . . . . . . . 18
Section 8.04 Waiver . . . . . . . . . . . . . . . . . . . . . . . 18
Section 8.05 Expenses . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IX
GENERAL PROVISIONS
Section 9.01 Survival of Representations and Warranties
and Covenants . . . . . . . . . . . . . . . . . . . . 19
Section 9.02 Notices . . . . . . . . . . . . . . . . . . . . . . . 19
Section 9.03 Headings . . . . . . . . . . . . . . . . . . . . . . 20
Section 9.04 Severability . . . . . . . . . . . . . . . . . . . . 20
Section 9.05 Entire Agreement . . . . . . . . . . . . . . . . . . 20
Section 9.06 Assignment . . . . . . . . . . . . . . . . . . . . . 21
Section 9.07 Parties in Interest . . . . . . . . . . . . . . . . . 21
Section 9.08 Failure or Indulgence Not Waiver;
Remedies Cumulative . . . . . . . . . . . . . . . . . 21
Section 9.09 Governing Law . . . . . . . . . . . . . . . . . . . . 21
Section 9.10 Counterparts . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
3
<PAGE> 102
OPTION AGREEMENT
THIS OPTION AGREEMENT (this "Agreement"), dated as of March 18, 1997, is
made by and among (i) BellSouth Corporation, a Georgia corporation
("BellSouth"), (ii) BellSouth Wireless Cable, Inc., a Delaware corporation
("BellSouth Sub"), (iii) American Telecasting, Inc., a Delaware corporation
("ATI"), (iv) American Telecasting Development, Inc., a Delaware corporation
("Development"), and (v) American Telecasting of Yuba City, Inc., a Delaware
corporation ("Yuba City Sub"), recites and provides:
RECITALS
WHEREAS, BellSouth, BellSouth Sub, ATI, Yuba City Sub,
Development and certain other subsidiaries of ATI have entered into an Asset
Purchase Agreement of even date herewith (the "Asset Purchase Agreement")
relating to the purchase by BellSouth of certain assets of ATI and its
subsidiaries in Florida and Kentucky; and
WHEREAS, Development holds an authorization issued by the FCC for
the MDS Channel rights in the Sacramento, California BTA; and
WHEREAS, Yuba City Sub holds an authorization issued by the FCC
for the MDS Channel rights in the Yuba City, California BTA and owns certain
assets relating to the conduct of wireless cable television business in Yuba
City, California; and
WHEREAS, in connection with the Asset Purchase Agreement ATI,
Yuba City Sub and Development desire to grant an exclusive option (the
"Option") to BellSouth and BellSouth Sub to purchase all of ATI's and Yuba City
Sub's assets relating to the wireless cable television business in Yuba City,
California and the BTA authorizations and rights to any MDS Channels thereunder
in the Sacramento and Yuba City, California BTAs held by Development and Yuba
City Sub, respectively, excluding channels held or leased by ATI or an
Affiliate in the Sacramento Market as of the date hereof, on the terms and
conditions set forth herein; and
WHEREAS, the Boards of Directors of ATI, Yuba City Sub and
Development have determined that the Option is consistent with and in
furtherance of the long-term business strategy of ATI and is fair to and in the
best interests of ATI and have approved and adopted this Agreement and the
transactions contemplated hereby; and
WHEREAS, the Boards of Directors of BellSouth and BellSouth Sub
have approved and adopted this Agreement and the transactions contemplated
hereby;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth herein and for
other good and valuable consideration, the parties hereto agree as follows:
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<PAGE> 103
ARTICLE I
CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms shall have
the meanings assigned to them below. All other capitalized terms used but not
defined herein shall have the meanings ascribed to such terms in the Asset
Purchase Agreement.
Section 1.01 Accounts. "Accounts" shall mean all accounts receivable,
notes receivable and associated rights owned by ATI, Yuba City Sub or
Development, arising in the ordinary course of the business of the Option
Wireless Cable Systems, and identified on the Option Closing Company Statement
of Assets and Assumed Liabilities as applicable to the Option Assets, the
Option Assumed Liabilities and the Option Wireless Cable Systems.
Section 1.02 ATI. "ATI" shall mean American Telecasting, Inc., a
Delaware corporation.
Section 1.03 BellSouth. "BellSouth" shall mean BellSouth Corporation,
a Georgia corporation.
Section 1.04 BellSouth Sub. "BellSouth Sub" shall mean BellSouth
Wireless Cable, Inc., a Delaware corporation.
Section 1.05 Company Material Adverse Effect. "Company Material
Adverse Effect" shall mean any change or effect that, individually or when
taken together with all other such changes or effects, could reasonably be
expected to be materially adverse to the assets, financial condition, business
or operations of the Option Wireless Cable Systems.
Section 1.06 Contracts. "Contracts" shall mean all contracts,
agreements, leases (including, without limitation, the Capacity Leases and the
Site Leases), licenses (including, without limitation, the Company FCC
Authorizations and the FCC authorizations required for BellSouth to operate the
Option Wireless Cable Systems), written or oral, relating to the Option
Wireless Cable Systems, to which ATI, Yuba City Sub or Development is a party
or by which ATI, Yuba City Sub or Development or any of their properties is
bound; excluding those to which ATI is a party and which are not solely for the
benefit of the Option Wireless Cable Systems.
Section 1.07 Equipment. "Equipment" shall mean the equipment,
machinery, furniture, fixtures, vehicles, furnishings, parts, tools,
engineering and other items of tangible personal property owned or leased by
ATI, Yuba City Sub or Development and relating to the Option Wireless Cable
Systems.
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<PAGE> 104
Section 1.08 Inventory. "Inventory" shall mean all inventories of
goods and supplies owned by ATI, Yuba City Sub or Development and relating to
the Option Wireless Cable Systems.
Section 1.09 Option Assets. "Option Assets" shall mean all of the
assets relating to the Option Wireless Cable Systems, including, without
limitation, the Accounts, Contracts, Equipment, Inventory and Real Property,
all books and records relating to the Option Wireless Cable Systems; provided
that Option Assets shall not include cash or cash equivalents, any intracompany
receivables or agreements, any trade names, trademarks or service marks,
corporate accounting journals, stock in ATI, Yuba City Sub or Development, any
employee benefit plans, any records of any individual employees who are not
hired by BellSouth Sub, corporate records of ATI, Yuba City Sub or Development,
refunds pertaining to tax obligations, or any assets of ATI not used solely for
the benefit of the Option Wireless Cable Systems.
Section 1.10 Option Assumed Liabilities. "Option Assumed Liabilities"
shall mean obligations under the Contracts which arise on or after the Option
Closing Date, customer deposits, and Accounts identified by ATI to BellSouth at
Closing, and excluding, without limitation, (i) any obligations, other than
Accounts, as relate to performance or non-performance prior to the Option
Closing Date, and (ii) any liabilities under or related to any Contracts which,
whether asserted or not and whether matured or not and whether known or not,
relate to actions, performance or inaction prior to the Option Closing Date.
Section 1.11 Option Closing. "Closing" shall mean the conference held
at the offices of Hunton & Williams in Atlanta, Georgia at 10:00 a.m. on such
date determined by the parties in accordance with Section 2.05. The Option
Closing shall be deemed to have occurred at 12:01 a.m. on the Option Closing
Date. All transactions occurring at the Option Closing shall be deemed to have
occurred simultaneously, and no one transaction shall be deemed to be complete
until all transactions are complete.
Section 1.12 Option Closing Company Statement of Assets and Assumed
Liabilities. "Option Closing Company Statement of Assets and Assumed
Liabilities" shall mean the consolidated statement prepared by ATI with respect
to the Option Assets and Option Assumed Liabilities in accordance with the
principles followed in the Option Company Statement of Assets and Assumed
Liabilities as of the Option Closing Date and delivered pursuant to Section
2.03.
Section 1.13 Option Closing Date. "Option Closing Date" shall mean the
date determined by the parties in accordance with Section 2.05.
Section 1.14 Option Company Statement of Assets and Assumed
Liabilities. "Option Company Statement of Assets and Assumed Liabilities"
shall mean the consolidated statement prepared by ATI with respect to the
Option Assets and the Option Assumed Liabilities as of the Exercise Date. The
Option Company Statement of Assets and Assumed
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<PAGE> 105
Liabilities shall be delivered by ATI to BellSouth within 10 days following the
Option Exercise Date.
Section 1.15 Option Purchase Price. "Option Purchase Price" shall mean
$9,000,000 if the Option is exercised prior to March 18, 1998, or $10,000,000
if the Option is exercised on or after March 18, 1998 and prior to September
18, 1998, to be paid in immediately available funds pursuant to Article II.
Section 1.16 Option Wireless Cable Systems. "Option Wireless Cable
Systems" shall mean ITFS Channels, MDS Channels and associated transmission,
reception and related equipment and authorizations used or to be used to
distribute television, video and other programming to residences and other
receive points and any associated interactive or other services operated or
proposed to be operated by ATI, Yuba City Sub and Development in the Yuba City
and Sacramento, California markets, but excluding ITFS Channels and MDS
Channels held or leased by ATI or an Affiliate in the Sacramento Market as of
the date hereof.
Section 1.17 Real Property. "Real Property" shall mean the real
property relating to the Option Wireless Cable Systems owned or leased by ATI,
Yuba City Sub and Development as of the Option Closing Date, together with the
improvements located thereon, including all appurtenant rights, claims and
interests.
Section 1.18 Yuba City-Sacramento Interference Agreement. "Yuba City-
Sacramento Interference Agreement" shall mean the Agreement among Pacific West
Cable Company, People's Choice TV of Sacramento, Inc., Pacific West Cable
Television, Sutter Butte Cablevision, and Cardiff Partners II, dated March 18,
1994, and the Cooperation Agreement among ATI, Centimeter Wave Television, Inc.
and Cardiff Broadcasting Group, dated April 24, 1995.
Section 1.19 Yuba City Sub. "Yuba City Sub" shall mean American
Telecasting of Yuba City, Inc. and its subsidiaries, if any.
ARTICLE II
OPTION; PURCHASE AND SALE OF ASSETS; PURCHASE PRICE
Section 2.01 Option. ATI, Yuba City Sub and Development hereby grant
to BellSouth Sub the exclusive right and Option to purchase the Option Assets
from the date hereof, until September 18, 1998 (the "Option Period"), for the
Option Purchase Price, upon the terms and conditions hereinafter set forth.
BellSouth Sub may exercise the Option at any time during the Option Period by
giving ATI, Yuba City Sub and Development written notice thereof, at which time
this Agreement shall become a binding agreement of purchase and sale.
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<PAGE> 106
Section 2.02 Purchase and Sale; Purchase Price.
(a) Upon the date (the "Exercise Date") ATI receives notice of
exercise of the Option (the "Exercise Notice"), ATI, Yuba City Sub and
Development agree that, subject to the terms and conditions of this Agreement,
on the Option Closing Date, ATI, Yuba City Sub and Development shall sell,
convey, transfer, assign and deliver to BellSouth Sub, by deed, bill of sale,
assignment or other appropriate instrument, free and clear of all Liens, except
for the Permitted Liens, the Option Assets. Subject to the terms and
conditions of this Agreement, on the Option Closing Date, ATI, Yuba City Sub
and Development shall assign to BellSouth Sub all of their rights under the
Contracts and the Company FCC Licenses.
(b) Subject to the terms and conditions of this Agreement, on
the Option Closing Date, BellSouth shall deliver to ATI the Option Purchase
Price in full payment for the Option Assets.
Section 2.03 Option Assumed Liabilities. On the Option Closing Date,
BellSouth Sub shall assume the Option Assumed Liabilities. Except for the
Option Assumed Liabilities, BellSouth and BellSouth Sub do not and will not
assume any liability or obligation of any kind of ATI, Yuba City Sub or
Development, or any obligation relating to the Option Wireless Cable Systems or
the use of the Option Assets prior to the Option Closing, whether absolute or
contingent, accrued or unaccrued, asserted or unasserted, known or unknown, or
otherwise. ATI agrees to indemnify against and holds BellSouth and BellSouth
Sub harmless as provided in Section 7.01 hereof from any such liability or
obligation of ATI, Yuba City Sub or Development not specifically transferred to
and assumed by BellSouth Sub. BellSouth shall not be a successor or alter ego
of or joint employer or venturer with ATI or Yuba City Sub.
Section 2.04 Adjustments to Option Purchase Price.
(a) Within 30 days following the Option Closing Date, ATI
shall deliver to BellSouth and BellSouth Sub a draft Closing Company Statement
of Assets and Assumed Liabilities. Such draft Option Closing Company Statement
of Assets and Assumed Liabilities shall identify the Option Assumed Liabilities
as of the Option Closing Date. If BellSouth shall have any objections to the
draft Option Closing Company Statement of Assets and Assumed Liabilities, it
will deliver a notice describing in detail its objections to ATI within 10
Business Days after receiving the draft Option Closing Company Statement of
Assets and Assumed Liabilities. BellSouth and ATI will use their reasonable
best efforts to resolve any such objections. If a final resolution is not
obtained within 10 Business Days after ATI has received the notice of
objections, BellSouth and ATI will select an accounting firm mutually
acceptable to them to resolve any remaining objections. ATI will revise the
draft Option Closing Company Statement of Assets and Assumed Liabilities as
appropriate to reflect the resolution of BellSouth's objections (as agreed upon
by the parties or as directed by such accounting firm) and deliver it to
BellSouth within five Business Days after the resolution of
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<PAGE> 107
such objections. Such revised Option Closing Company Statement of Assets and
Assumed Liabilities prepared by ATI shall constitute the Option Closing Company
Statement of Assets and Assumed Liabilities.
(b) During the preparation of the Option Closing Company
Statement of Assets and Assumed Liabilities, BellSouth Sub shall provide ATI
full access to the books, records, facilities and employees of BellSouth Sub
and shall cooperate fully in the preparation of the Option Closing Company
Statement of Assets and Assumed Liabilities.
Section 2.05 Option Closing. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 8.01, or the Option shall have expired unexercised, and
subject to the satisfaction or waiver of the conditions set forth in Article
VI, the consummation of the transactions contemplated hereby will take place as
promptly as practicable on a date mutually agreed to by ATI and by BellSouth
(and in any event within 10 Business Days) after satisfaction or waiver of the
conditions set forth in Article VI, at the offices of Hunton & Williams,
NationsBank Plaza, 600 Peachtree Street, N.E., Atlanta, Georgia 30308.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ATI AND YUBA CITY
Each of ATI, Yuba City Sub and Development jointly represents and
warrants to BellSouth and BellSouth Sub that (the representations and
warranties set forth in Section 3.01, Section 3.02 and Section 3.03 being made
as of the date hereof and the representations and warranties in Section 3.04
being made as of the Option Closing Date):
Section 3.01 Authorization; Enforceability. Each of ATI, Yuba City Sub
and Development has all requisite corporate power and authority to perform its
obligations hereunder and to consummate the transactions contemplated to be
consummated by it. The execution and delivery of this Agreement by each of
ATI, Yuba City Sub and Development and the consummation by each of them of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action and no other corporate proceedings on the part of any of ATI,
Yuba City Sub or Development are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement and all of the
other documents and instruments required hereby have been duly executed and
delivered by each of ATI, Yuba City Sub and Development and, assuming the due
authorization, execution and delivery hereof by BellSouth and BellSouth Sub,
constitute the legal, valid and binding obligations of each of ATI, Yuba City
Sub and Development enforceable in accordance with their respective terms.
Section 3.02 No Conflict. Neither the execution and delivery of this
Agreement by ATI, Yuba City Sub and Development nor the performance of this
Agreement
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by ATI, Yuba City Sub and Development does or will (a) conflict with or violate
any of the articles of incorporation or bylaws, partnership or organizational
documents, in each case as amended or restated, of any of ATI, Yuba City Sub or
Development, (b) conflict with or violate any federal, state, foreign or local
law, statute, ordinance, rule, treaty, published policy or guideline,
regulation, order, judgment or decree (individually a "Law" and collectively,
"Laws") applicable to any of ATI, Yuba City Sub or Development, or by which any
of the properties of any of ATI, Yuba City Sub or Development are bound or to
which any of its properties are subject, (c) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or require payment under, or result
in the creation of a Lien on any of the properties or assets of any of ATI,
Yuba City Sub or Development pursuant to any Contract or, any other note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which any of ATI, Yuba City Sub or
Development is a party or by which any of ATI, Yuba City Sub or Development or
any of their respective properties are bound or to which any of their
respective properties are subject, except as set forth in Exhibit 3.02 and for
such violations, conflicts, defaults or breaches which would not, singly or in
the aggregate, have a Company Material Adverse Effect.
Section 3.03 Yuba City-Sacramento Interference Agreement. The Yuba
City-Sacramento Interference Agreement and all of the other documents and
instruments required thereby have been duly executed by ATI and, assuming the
due authorization, execution and delivery thereof by the other parties thereto,
constitute the legal, valid and binding obligations of ATI enforceable in
accordance with their respective terms.
Section 3.04 Representations and Warranties in Asset Purchase
Agreement. To the Knowledge of ATI, each of the representations and warranties
made by ATI and the Companies in the Asset Purchase Agreement, as applicable to
ATI, Yuba City Sub and Development, the Option Assets, the Option Assumed
Liabilities and the Option Wireless Cable Systems and the transactions
contemplated hereby will be true and correct in all material respects as of the
Option Closing Date as if made by ATI, Yuba City Sub and Development as of such
date. ATI shall deliver appropriate Exhibits relating to the transactions
contemplated by this Agreement and of the type contemplated by the Asset
Purchase Agreement within 30 days after the Option Exercise Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
BELLSOUTH AND BELLSOUTH SUB
Each of BellSouth and BellSouth Sub jointly represents and warrants to
ATI, Yuba City Sub and Development that:
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Section 4.01 Authorization; Enforceability. Each of BellSouth and
BellSouth Sub has all requisite corporate power and authority to perform its
obligations hereunder and to consummate the transactions contemplated to be
consummated by it. The execution and delivery of this Agreement by BellSouth
and BellSouth Sub and the consummation by each of them of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
and no other corporate proceedings on the part of BellSouth or BellSouth Sub
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement and all of the other documents and
instruments required hereby have been duly executed and delivered by BellSouth
and BellSouth Sub and, assuming the due authorization, execution and delivery
hereof by ATI, Yuba City Sub and Development, constitute the legal, valid and
binding obligations of BellSouth and BellSouth Sub enforceable in accordance
with their respective terms.
Section 4.02 No Conflict. Neither the execution and delivery of this
Agreement by BellSouth and BellSouth Sub nor the performance of this Agreement
by BellSouth and BellSouth Sub does or will (a) conflict with or violate the
articles of incorporation or bylaws, in each case as amended or restated, of
BellSouth or BellSouth Sub, (b) conflict with or violate any Laws applicable to
BellSouth or BellSouth Sub, or by which any of BellSouth's properties are bound
or to which any of its properties are subject, or (c) result in any breach of
or constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or require payment under, or result
in the creation of a Lien on any of the properties or assets of BellSouth or
BellSouth Sub pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which BellSouth or BellSouth Sub is a party or by which BellSouth, BellSouth
Sub or any of their respective properties are bound or to which any of their
respective properties are subject, such that the occurrence of any of the above
events would have a BellSouth Material Adverse Effect. The term "BellSouth
Material Adverse Effect" as used in this Agreement means any change or effect
that, individually or when taken together with all other such changes or
effects, could reasonably be expected to be materially adverse to the assets,
financial condition, business or operations of BellSouth on a consolidated
basis.
ARTICLE V
COVENANTS
Section 5.01 Conduct of the Businesses of the Option Wireless Cable
Systems. From and after the date of this Agreement, except as otherwise
expressly provided in this Agreement, with respect to the Option Wireless Cable
Systems, each of ATI, Yuba City Sub and Development will, and ATI will cause
Yuba City Sub and Development to, will use its Commercially Reasonable Best
Efforts to preserve intact its business organization, goodwill, and the
material Option Assets, to maintain satisfactory
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relationships with licensors, licensees, lessors, suppliers, contractors,
subscribers and others having material business relationships with it or them;
provided that ATI, Yuba City Sub and Development will have no obligation with
respect to maintenance of subscriber levels.
Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement, prior to the Option Closing
Date, each of ATI, Yuba City Sub and Development will use its Commercially
Reasonable Best Efforts as follows:
(a) neither ATI, Yuba City Sub nor Development will, without
the prior written consent of BellSouth, or as otherwise contemplated by this
Agreement, take any of the following actions which would affect the Option
Wireless Cable Systems, which consent shall not be unreasonably withheld,
conditioned, or delayed;
(i) take any action that would or is reasonably likely
to result in any of the conditions set forth in Article VI not being
satisfied as of the Option Closing Date;
(ii) sell, assign, lease, waive or grant rights with
respect to, sublease or otherwise transfer or dispose of (A) any
Capacity Lease, or (B) any Site Lease;
(iii) allow, suffer or permit any default of ATI, Yuba
City Sub or Development that results in the termination of any Site
Lease, Capacity Lease or Company FCC Authorization; or
(iv) agree in writing or otherwise to take any of the
foregoing actions;
(b) each of ATI, Yuba City Sub and Development will, and ATI
will cause Yuba City Sub and Development to:
(i) use its Commercially Reasonable Best Efforts (A) to
cause to be maintained in full force and effect, and (B) to cause the
holders to renew and to extend when required to prevent their lapse, all
Company FCC Authorizations;
(ii) not consent to or enter into any agreements in the
Market to accept or receive objectionable interference as prescribed by
FCC Rules, or otherwise waive interference protection rights, and use
its Commercially Reasonable Best Efforts to prevent its lessors in the
Market from consenting to or entering into any such agreements or
waiving such interference protection rights without the prior
consultation with and the prior approval of BellSouth, which approval
shall not be unreasonably withheld; and
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(iii) without the prior consultation with and prior
approval of BellSouth, which approval shall not be unreasonably
withheld, use its Commercially Reasonable Best Efforts (A) to prevent
the modification of any Company FCC Authorization, except for such
modifications as are required by this Agreement, specifically approved
by BellSouth or are authorized on the date of this Agreement or which
become authorized pursuant to applications pending on the date of this
Agreement; and (B) to prevent the new application, or amendment to any
pending application, to the FCC for authorization related to any
Capacity Lease except (1) as required to comply with this Agreement, (2)
as specifically required by the terms of the Capacity Lease, (3) as
required by the terms of an applicable FCC license, (4) applications for
MDS Channels available under the Yuba City BTA Authorization, or (5) as
may be reasonably required to operate the Option Wireless Cable Systems
in accordance with the usual and ordinary course of business consistent
with past practices.
Section 5.02 No Solicitation. From and after the date of this
Agreement, ATI shall promptly advise BellSouth if any written proposal or offer
received after the date hereof contemplating or providing for any merger, share
exchange, acquisition, purchase or sale of all or (other than in the ordinary
course of business) a substantial portion of the assets of, or any equity
interest in, Yuba City Sub or Development or any other change in control
involving Yuba City Sub or Development or the Option Wireless Cable Systems
(each, a "Competing Transaction") is made, shall promptly inform BellSouth of
all the terms and conditions thereof, and shall furnish to BellSouth copies of
any such written proposal or offer and the contents of any communications in
response thereto.
Section 5.03 Access to Information; Confidentiality Agreement. From
and after the date of this Agreement:
(a) Each of ATI, Yuba City Sub and Development will give
BellSouth, BellSouth Sub and their authorized representatives reasonable access
during normal business hours to all offices and other facilities and to all
books and records of ATI, Yuba City Sub and Development, will permit BellSouth
and BellSouth Sub to make such inspections as each may reasonably request and
will cause their officers to furnish such financial and operating data and
other information with respect to its businesses and properties and relating to
each of the Option Wireless Cable Systems as may from time to time reasonably
be requested. Subject to Section 5.05 hereof, all such information shall be
kept confidential in accordance with the Confidentiality Agreement.
(b) Notwithstanding the execution of this Agreement, the
Confidentiality Agreement shall remain in full force and effect through the
last Group 2 Markets Closing Date, at which time the Confidentiality Agreement
shall terminate and be of no further force and effect. Each party further
acknowledges that the Confidentiality Agreement shall survive any termination
of this Agreement pursuant to Section 8.01 hereof.
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Section 5.04 Best Efforts. From and after the Option Exercise Date,
subject to the terms and conditions herein provided each of the parties hereto
agrees to use its Commercially Reasonable Best Efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary, proper
and advisable under applicable Law, to consummate and make effective the
transactions contemplated by this Agreement. In case at any time after the
Option Closing Date any further action is necessary or desirable to carry out
the purposes of this Agreement, the proper officers and directors of each party
to this Agreement shall take all such necessary action. BellSouth, BellSouth
Sub, ATI, Yuba City Sub and Development will execute any additional instruments
necessary to consummate the transactions contemplated hereby.
Section 5.05 Public Announcements. From and after the date of this
Agreement, each of ATI and BellSouth will consult with each other before
issuing any additional press release or otherwise making any additional public
statement with respect to this Agreement, or the transactions contemplated
herein and shall not issue any such press release or make any such public
statement prior to such consultation or as to which the other party promptly
and reasonably objects, except as may be required, in the written opinion of
such party's counsel, by Law or by obligations pursuant to any listing
agreement with any national securities exchange or inter-dealer quotation
system, in which case the party proposing to issue such press release or make
such public announcement shall use its best efforts to consult in good faith
with, and accommodate the reasonable comments of, the other party before
issuing any such press release or making any such public announcements.
Section 5.06 Consents. From and after the Option Exercise Date, each
of ATI, Yuba City Sub and Development will use its Commercially Reasonable Best
Efforts to obtain any and all consents of all third parties (including, without
limitation, the lessor under each Contract and Governmental Entities
(including, without limitation, the FCC)) necessary to the consummation of the
transactions contemplated by this Agreement, which consents shall be identified
on Exhibit 5.06. Within 10 Business Days after the Option Exercise Date, ATI,
Yuba City Sub and Development shall tender to BellSouth the assignor's portion
of one or more applications on the proper FCC forms requesting the FCC's
consent to the assignment of each Company FCC License, such applications being
executed, as appropriate, by ATI, Yuba City Sub and Development, and the
assignor's portion thereof being fully completed. BellSouth shall be
responsible for preparing the assignee's portion of such assignment
applications and for filing the applications with the FCC within 10 Business
Days of BellSouth's receipt of ATI's, Yuba City Sub's and Development's and
assignor's portion of the applications. Each party shall cooperate with the
other fully in prosecuting such applications, such cooperation including but
not limited to responding in a timely fashion to all FCC inquiries concerning
such applications, preparing suitable amendments to such applications,
otherwise taking such reasonable actions and refraining from taking such
actions as best conducive to the grant of such applications and joining in such
appeals and requests for reconsideration of adverse FCC orders as BellSouth may
wish to appeal or to request reconsideration.
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Section 5.07 Yuba City-Sacramento Interference Agreement. From and
after the date of this Agreement, none of ATI, Yuba City Sub or Development
will (i) alter, amend, modify, exercise any option under, (ii) waive or grant
rights with respect to, or (iii) allow, suffer or permit any default of ATI,
Yuba City Sub or Development under, the Yuba City-Sacramento Interference
Agreement, without the prior written consent of BellSouth, which consent shall
not be unreasonably withheld, conditioned or delayed.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Conditions Precedent to Each Party's Obligation. The
respective obligation of each party to consummate the transactions contemplated
hereby is subject to the satisfaction at or prior to the Option Closing Date of
the following conditions precedent:
(a) no order, decree or injunction shall have been enacted,
entered, promulgated or enforced by any United States court of competent
jurisdiction or any United States governmental authority which prohibits the
consummation of the transactions contemplated hereby; provided, however, that
the parties hereto shall use their Commercially Reasonable Best Efforts to have
any such order, decree or injunction vacated or reversed;
(b) any waiting period applicable to the transactions
contemplated hereby under the HSR Act shall have terminated or expired;
(c) the transactions contemplated by this Agreement shall (i)
be permitted by the applicable laws and regulations of each jurisdiction or
Governmental Entity including, without limitation, the FCC to which any of ATI,
Yuba City Sub or Development or any of their Affiliates are subject and (ii)
not violate any applicable Law;
Section 6.02 Conditions Precedent to Obligations of ATI, Yuba City Sub
and Development. The obligations of ATI, Yuba City Sub and Development to
consummate the transactions contemplated hereby are subject to the satisfaction
or waiver at or prior to the Option Closing Date of the following conditions
precedent:
(a) the representations and warranties of BellSouth and
BellSouth Sub contained in Article IV shall be true and correct in all material
respects when made and at and as of the Option Closing Date with the same force
and effect as if those representations and warranties had been made at and as
of such time except as otherwise contemplated or permitted by this Agreement;
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(b) BellSouth shall, in all material respects, have performed
all obligations and complied with all covenants necessary to be performed or
complied with by it on or before the Option Closing Date;
(c) ATI, Yuba City Sub and Development shall have received a
certificate of a senior officer of BellSouth, in form reasonably satisfactory
to counsel for ATI and the Companies, certifying fulfillment of the matters
referred to in paragraphs (a) and (b) of this Section 6.02;
(d) all proceedings, corporate or other, to be taken by
BellSouth in connection with the transactions contemplated by this Agreement,
and all documents incident thereto, shall be reasonably satisfactory in form
and substance to ATI and their counsel, and BellSouth shall have made available
to ATI for examination the originals or true, correct and complete copies of
all documents that ATI may reasonably request in connection with the
transactions contemplated by this Agreement;
(e) ATI, Yuba City Sub and Development shall have received an
Assignment and Assumption Agreement executed by BellSouth Sub; and
(f) The Closing shall have occurred under the Asset Purchase
Agreement.
Section 6.03 Conditions Precedent to Obligations of BellSouth and
BellSouth Sub. The obligations of BellSouth and BellSouth Sub to consummate
the transactions contemplated hereby are subject to the satisfaction or waiver
at or prior to the Option Closing Date of the following conditions precedent:
(a) the transactions contemplated in this Agreement shall have
been approved, and the Agreement adopted, by the affirmative vote of the Boards
of Directors of ATI, Yuba City Sub and Development by the requisite vote in
accordance with the DGCL;
(b) the representations and warranties of ATI, Yuba City Sub
and Development contained in Article III shall be true and correct in all
material respects when made and at and as of the Option Closing Date with the
same force and effect as if those representations and warranties had been made
at and as of such time except as otherwise contemplated or permitted by this
Agreement;
(c) ATI, Yuba City Sub and Development shall have received all
necessary and material third party consents, licenses or approvals;
(d) ATI, Yuba City Sub and Development shall, in all material
respects, have performed all obligations and complied with all covenants
necessary to be performed or complied with by each of them on or before the
Option Closing Date;
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<PAGE> 115
(e) BellSouth shall have received a certificate of the
Chairman, President or Senior Vice President of ATI, in form reasonably
satisfactory to counsel for BellSouth, certifying fulfillment of the matters
referred to in paragraphs (a) through (d) of this Section 6.03;
(f) BellSouth shall have received a Bill of Sale and an
Assignment and Assumption Agreement;
(g) all proceedings, corporate or other, to be taken by ATI,
Yuba City Sub and Development in connection with the transactions contemplated
by this Agreement, and all documents incident thereto, shall be reasonably
satisfactory in form and substance to BellSouth and BellSouth's counsel, and
ATI, Yuba City Sub and Development shall have made available to BellSouth for
examination the originals or true, correct and complete copies of all documents
that BellSouth may reasonably request in connection with the transactions
contemplated by this Agreement;
(h) BellSouth and BellSouth Sub shall have received the
opinion of Gurman, Blask & Freedman, Chartered, FCC counsel for ATI, dated the
Option Closing Date, in substantially the form attached as Exhibit 6.03(j)(ii)
to the Asset Purchase Agreement;
(i) the FCC shall have granted its consents by Final Order to
the assignment of the Company FCC Licenses to BellSouth, which consents shall
contain only such conditions as are ordinary for the classes of such consents
or such other conditions as BellSouth may agree to accept in its sole
discretion; and
(j) the Companies shall have delivered to BellSouth each
estoppel certificate which is required in order to provide BellSouth with the
benefits of all material Option Assets.
ARTICLE VII
INDEMNITIES AND ADDITIONAL COVENANTS
Section 7.01 Indemnification by ATI. ATI hereby indemnifies and holds
BellSouth and BellSouth Sub, and their successors and assigns, harmless from
and against, and agrees to defend promptly BellSouth and BellSouth Sub from and
reimburse BellSouth and BellSouth Sub for, any and all losses, damages, costs,
expenses, liabilities, obligations and claims of any kind, including, without
limitation, reasonable attorneys' fees and other legal costs and expenses,
(hereinafter referred to collectively as "Losses"), that BellSouth and
BellSouth Sub may at any time suffer or incur, or become subject to, as a
result of or in connection with (a) any breach or inaccuracy of the
representations, warranties or covenants made by ATI, Yuba City Sub or
Development in this Agreement (including the Exhibits
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hereto), (b) the operation and ownership of the Option Assets by ATI, Yuba City
Sub or Development prior to the Option Closing Date, excluding any Option
Assumed Liabilities, or (c) any liability of ATI, Yuba City Sub or Development
that is not an Option Assumed Liability; provided, that ATI shall not be
required to indemnify and hold BellSouth and BellSouth Sub harmless pursuant to
this Section 7.01 unless such right is asserted (whether or not the Losses have
actually been incurred) by written notice to ATI within 18 months of the Option
Closing Date describing with specificity the facts giving rise to the asserted
right; and provided further that ATI shall not be required to indemnify
BellSouth and BellSouth Sub pursuant to this Section 7.01 unless and until the
amount of all Losses for which indemnification is sought (i) with respect to
the Option Assets or the Option Assumed Liabilities first exceeds $25,000 after
which event BellSouth and BellSouth Sub may seek indemnification for all such
Losses relating back to the first dollar and all additional Losses up to an
amount equal to 10% of the Option Purchase Price.
In the event a claim is asserted against BellSouth or BellSouth Sub,
notice stating the provision or provisions of this Agreement under which the
liability or obligation is asserted shall be promptly given by BellSouth or
BellSouth Sub to ATI and ATI shall have the right to control all settlements
(unless BellSouth and BellSouth Sub agree to assume the cost of settlement and
to forego such indemnity) and to select lead counsel to defend any and all such
claims at the sole cost and expense of ATI; provided, however, that ATI may not
effect any settlement that could result in any cost, expense or liability to
BellSouth or BellSouth Sub unless BellSouth and BellSouth Sub consent in
writing to such settlement and ATI agrees to indemnify BellSouth and BellSouth
Sub therefore. BellSouth and BellSouth Sub may select counsel to participate
in any defense, in which event such counsel shall be at the sole cost and
expense of BellSouth and BellSouth Sub. In connection with any such claim,
action or proceeding, the parties shall cooperate with each other and provide
each other with access to relevant books and records in their possession.
Section 7.02 Indemnification by BellSouth. BellSouth hereby
indemnifies and holds ATI, Yuba City Sub and Development, and their successors
and assigns, harmless from and against, and agrees to defend promptly ATI, Yuba
City Sub and Development from and reimburse ATI, Yuba City Sub and Development
for, any and all Losses, that ATI, Yuba City Sub and Development may at any
time suffer or incur, or become subject to, as a result of or in connection
with (a) any breach or inaccuracy of the representations, warranties or
covenants made by BellSouth in this Agreement, (b) the operation and ownership
of the Assets by BellSouth and BellSouth Sub on and following the Option
Closing Date, and (c) any Option Assumed Liability; provided, that BellSouth
shall not be required to indemnify and hold ATI and the Companies harmless
pursuant to this Section 7.02 unless such right is asserted (whether or not the
Losses have actually been incurred) by written notice to BellSouth within 18
months of the Option Closing Date describing with specificity the facts giving
rise to the asserted right; and provided further that BellSouth shall not be
required to indemnify ATI and the Companies pursuant to this Section 7.02
unless and until the amount of all Losses for which indemnification is sought
(i) with respect to the Option Assets or the Option Assumed Liabilities first
exceeds $25,000, after which event ATI may seek
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indemnification for all such Losses relating back to the first dollar and all
additional Losses up to an amount equal to 10% of the Option Purchase Price.
In the event a claim is asserted against ATI, Yuba City Sub or
Development, notice stating the provision or provisions of this Agreement under
which the liability or obligation is asserted shall be promptly given by ATI,
Yuba City Sub or Development to BellSouth and BellSouth shall have the right to
control all settlements (unless ATI or any of the Companies agree to assume the
cost of settlement and to forego such indemnity) and to select lead counsel to
defend any and all such claims at the sole cost and expense of BellSouth;
provided, however, that BellSouth may not effect any settlement that could
result in any cost, expense or liability to ATI, Yuba City Sub or Development
unless ATI, Yuba City Sub or Development consent in writing to such settlement
and BellSouth agrees to indemnify ATI, Yuba City Sub or Development therefore.
ATI, Yuba City Sub or Development may select counsel to participate in any
defense, in which event such counsel shall be at the sole cost and expense of
ATI, Yuba City Sub and Development. In connection with any such claim, action
or proceeding, the parties shall cooperate with each other and provide each
other with access to relevant books and records in their possession.
Section 7.03 Equitable Relief. BellSouth, ATI, Yuba City Sub and
Development each agrees that each party shall be entitled, in addition to any
other remedies it may have under this Agreement or otherwise, to preliminary
and permanent injunctive and other equitable relief to prevent or curtail any
breach of this Agreement; provided, however, that no specification in this
Agreement of a specific legal or equitable remedy shall be construed as a
waiver or prohibition against the pursuing of other legal or equitable remedies
in the even of such a breach.
Section 7.04 Bulk Sales Compliance. BellSouth hereby waives compliance
by ATI, Yuba City Sub and Development with any applicable bulk sales law on the
condition that (a) ATI, Yuba City Sub and Development shall indemnify BellSouth
and BellSouth Sub as set forth in this Section 7.04 and (b) ATI, Yuba City Sub
and Development shall waive any rights that ATI, Yuba City Sub and Development
may have under applicable bulk sales law in connection with this Agreement and
the transactions contemplated hereby. Each of ATI, Yuba City Sub and
Development covenants and agrees to pay and discharge when due all claims of
any Governmental Entities and creditors that could be asserted against
BellSouth or BellSouth Sub by reason of non-compliance with the provisions of
the bulk sales and similar laws of any such jurisdiction. Each of ATI, Yuba
City Sub and Development agrees to indemnify and hold BellSouth and BellSouth
Sub harmless from and against and shall on demand reimburse BellSouth and
BellSouth Sub for any and all Losses suffered by BellSouth or BellSouth Sub by
reason of ATI, Yuba City Sub and Development's failure to pay and discharge any
such claims.
Section 7.05 Tax Matters; Allocation of Consideration. The parties
acknowledge that the transactions contemplated by this Agreement will be
treated for federal income tax purposes as a taxable sale of assets by ATI,
Yuba City Sub and Development to
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BellSouth Sub and agree to report the transaction as such on all applicable tax
returns. The amounts paid by BellSouth pursuant to Section 2.01 shall be
allocated among the Option Assets purchased, in the manner to be set forth on
Exhibit 7.05. Exhibit 7.05 shall be completed by BellSouth and delivered to
ATI within 60 days following the Option Closing Date, and shall be subject to
the reasonable approval of ATI. This allocation is intended to comply with the
allocation method required by Section 1060 of the Code. The parties shall
cooperate to comply with all substantive and procedural requirements of Section
1060 and the regulations thereunder, and the allocation shall be adjusted only
if and to the extent necessary to comply with the requirements of Section 1060.
Neither BellSouth nor ATI will take or permit any affiliated person to take,
for income tax purposes, any position inconsistent with the allocation set
forth on Exhibit 7.05 or, if applicable, such adjusted allocation.
Section 7.06 Transfer Taxes and Fees. ATI shall pay all transfer,
sales, recording and filing taxes and fees (not including brokerage fees)
resulting from the transfer of the Option Assets to BellSouth Sub.
Section 7.07 Additional Instruments. At any time and from time to time
after the Option Closing, at BellSouth's request and without further
consideration, ATI, Yuba City Sub and Development shall execute and deliver
such other instruments of sale, transfer, conveyance, assignment and
confirmation and take such other action as BellSouth may reasonable deem
necessary or desirable in order to more effectively transfer, convey and assign
to BellSouth, and to confirm BellSouth Sub's title to and interest in, the
Option Assets.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.01 Termination. This Agreement may be terminated at any time
prior to the Option Closing Date:
(a) by mutual written consent of ATI and BellSouth;
(b) by BellSouth, upon a material breach of any
representation, warranty, covenant and agreement on the part of ATI, Yuba City
Sub or Development set forth in this Agreement, or if any representation or
warranty of ATI, Yuba City Sub or Development shall have become materially
untrue, in either case such that the conditions set forth in Section 6.03(a),
Section 6.03(b) or Section 6.03(c) would be incapable of being satisfied by the
180th day following the Option Exercise;
(c) by ATI, upon a material breach of any representation,
warranty, covenant or agreement on the part of BellSouth or BellSouth Sub set
forth in this Agreement, or if any representation or warranty of BellSouth or
BellSouth Sub shall have become materially untrue, in either case such that the
conditions set forth in Section 6.02(a) or
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Section 6.02(b) would be incapable of being satisfied by the 180th day
following the Option Exercise;
(d) by either BellSouth or ATI, if any Governmental Entity or
any court of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any Law, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of
making, or any such Governmental Entity shall have commenced, or threatened to
commence, any proceeding (other than the consideration of applications for
approvals under the Communications Act) which, if adversely determined, would
have the effect of making the transactions contemplated hereby illegal or
otherwise materially restricting or prohibiting consummation of the
transactions contemplated hereby;
(e) by either BellSouth or ATI, if the transactions
contemplated hereby shall not have been consummated before the 180th day
following the Option Exercise Date; provided, that the right to terminate this
Agreement shall not be available to any party where failure to fulfill any
obligation under this Agreement has been the cause of or has resulted in the
failure of the transactions contemplated hereby to be consummated on or before
such date; or
(f) by either ATI or BellSouth upon termination of the Asset
Purchase Agreement in accordance with its terms.
Section 8.02 Effect of Termination. Except as provided in Section 8.05
and Section 5.03(b), in the event of the termination of this Agreement pursuant
to Section 8.01, this Agreement shall forthwith become void, there shall be no
liability on the part of BellSouth, BellSouth Sub, ATI, Yuba City Sub,
Development or any of their respective officers, directors or stockholders to
the other parties hereto and all rights and obligations of any party hereto
shall cease; provided that any such termination shall be without prejudice to
the rights of any party hereto arising out of the willful breach of any other
party of any covenant or willful misrepresentation contained in this Agreement.
Section 8.03 Amendment. This Agreement may be amended by the mutual
consent of the parties hereto at any time prior to the Option Closing Date.
This Agreement may not be amended except by an instrument in writing signed by
the parties hereto.
Section 8.04 Waiver. At any time prior to the Option Closing Date, the
parties hereto may (a) extend the time for the performance of any of the
obligations or other acts of any party hereto, (b) waive any inaccuracies in
the representations and warranties of any party contained herein or in any
document delivered pursuant hereto and (c) waive compliance by any party with
any of the agreements or conditions contained herein. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed by
all of the parties hereto.
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Section 8.05 Expenses.
(a) All Expenses incurred by the parties hereto shall be borne
solely and entirely by the party which has incurred such Expenses.
(b) "Expenses" as used in this Agreement shall include all
reasonable out-of-pocket expenses (including, without limitation, all fees and
expenses of counsel, accountants, investment bankers, experts and consultants
to a party hereto and its Affiliates) incurred by a party or on its behalf in
connection with or related to the authorization, preparation, negotiation,
execution and performance of this Agreement and all other matters related to
the closing of the transactions contemplated herein.
ARTICLE IX
GENERAL PROVISIONS
Section 9.01 Survival of Representations and Warranties and Covenants.
The representations and warranties and covenants made herein shall survive
until termination of the indemnity provided in Section 7.01 and Section 7.02
with respect to any such representation, warranty or covenant.
Section 9.02 Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date when delivered personally, mailed by registered or
certified mail (postage prepaid, return receipt requested), transmitted by
facsimile with a confirmation copy simultaneously mailed by registered or
certified mail (postage prepaid, return receipt requested), or sent by a
nationally recognized overnight courier to the recipient at the following
addresses, or at such other address as the recipient party shall have specified
by prior written notice to the sending party:
(a) If to BellSouth:
BellSouth Corporation
1155 Peachtree Street
Suite 1800
Atlanta, Georgia 30309-3610
Attention: John A. Harwood
Telephone: (404) 249-4433
Telecopier: (404) 249-5901
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with a copy to:
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219-4074
Attention: David M. Carter
Telephone: (804) 788-8200
Telecopier: (804) 788-8218
(b) If to ATI:
American Telecasting, Inc.
5575 Tech Center Drive, Suite 300
Colorado Springs, Colorado 80919
Attention: Robert D. Hostetler
Telephone: (719) 260-5533
Telecopier: (719) 260-5010
with a copy to:
McDermott, Will & Emery
1850 K Street, N.W., Suite 500
Washington, D.C. 20006
Attention: Robert N. Jensen
Telephone: (202) 778-8023
Telecopier: (202) 778-8087
Section 9.03 Headings. The headings contained in this Agreement are
for convenience of reference only and shall not affect in any way the meaning
or interpretation of this Agreement.
Section 9.04 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are fulfilled to the
extent possible.
Section 9.05 Entire Agreement. This Agreement (together with the
exhibits) and the Confidentiality Agreement constitute the entire agreement of
the parties and
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supersede all prior agreements and undertakings, both written and oral, between
the parties, or any of them, with respect to the subject matter hereof.
Section 9.06 Assignment. This Agreement shall not be assigned by
operation of law or otherwise; provided that BellSouth shall have the right to
designate another Subsidiary of BellSouth to hold certain Option Assets.
Section 9.07 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
Person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
Section 9.08 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude
other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
Section 9.09 Governing Law. This Agreement and the relationship
between the parties shall be governed by, and construed in accordance with, the
laws of the State of Delaware regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
Section 9.10 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
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<PAGE> 123
IN WITNESS WHEREOF, the undersigned or have caused this Agreement
to be duly executed on their behalf, on the day and year first hereinabove
written.
AMERICAN TELECASTING, INC.
/s/ ROBERT D. HOSTETLER
---------------------------------------
Name: Robert D. Hostetler
Title: Chief Executive Officer and
President
AMERICAN TELECASTING OF YUBA CITY,
INC.
/s/ ROBERT D. HOSTETLER
---------------------------------------
Name: Robert D. Hostetler
Title: President
AMERICAN TELECASTING DEVELOPMENT, INC.
/s/ ROBERT D. HOSTETLER
---------------------------------------
Name: Robert D. Hostetler
Title: President
BELLSOUTH CORPORATION
/s/ JAMES W. MCCLINTOCK, IV
---------------------------------------
Name: James W. McClintock, IV
Title: Executive Director
BELLSOUTH WIRELESS CABLE, INC.
/s/ JAMES W. MCCLINTOCK, IV
---------------------------------------
Name: James W. McClintock, IV
Title: Executive Director
- 22 -
<PAGE> 1
EXHIBIT 11
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
Earnings Per Share
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1996 1997
------------ ------------
<S> <C> <C>
Net loss ....................................... $ (18,749) $ (22,583)
Common Stock weighted average shares ........... 16,585,638 24,586,313
Net loss per share ............................. $ (1.13) $ (.92)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 14,125
<SECURITIES> 0
<RECEIVABLES> 1,352
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,198
<PP&E> 91,147
<DEPRECIATION> 0
<TOTAL-ASSETS> 271,980
<CURRENT-LIABILITIES> 22,953
<BONDS> 261,401
0
0
<COMMON> 189,667
<OTHER-SE> (209,006)
<TOTAL-LIABILITY-AND-EQUITY> 271,980
<SALES> 0
<TOTAL-REVENUES> 16,020
<CGS> 0
<TOTAL-COSTS> 28,599
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,331
<INCOME-PRETAX> (22,583)
<INCOME-TAX> 0
<INCOME-CONTINUING> (22,583)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,583)
<EPS-PRIMARY> (.92)
<EPS-DILUTED> (.92)
</TABLE>
